How This Book Can Help You
Think back to your school days and the best teacher you ever had. The one who seemed to know everything about his or her subject and had something all the other teachers lacked: the ability to boil down the complex ideas of the discipline--whether it was psychology, economics, mathematics, or chemistry--so that you really “got it.”
Other teachers may have had a great depth of knowledge, or fancier credentials, but they couldn’t turn on the lightbulb over your head. Instead of making something complex seem simple, they did the opposite--they made it harder to understand.
I’ve been in the business world for more than fifty years, beginning when I was a child in my family’s small shoe store in India, then working as an engineer in Australia. From there, I moved to America, attended Harvard Business School, taught there and at Northwestern’s Kellogg School of Management and Boston University, and have been advising CEOs and serving on boards of directors at companies large and small around the world ever since. The one thing I’ve noticed in all that time is that the best CEOs are like the best teachers. They are able to take the complexity and mystery out of business by focusing on the moneymaking fundamentals. And they make sure that everyone in the company, not just their executive colleagues, understands those building blocks of business.
You could say that in doing so they have their self-interest at heart, since the company is more successful when everyone knows how the business works. But it’s not just the CEO who benefits. People feel more connected to their work and have greater job satisfaction when they really understand how their organization works. And as the company grows profitably year after year there are greater opportunities for them to expand their careers and make more money, and the company can make a greater contribution to the community. The same applies to a nonprofit or government agency. (See the box “Wait! This Is True of Nonprofits, NGOs, and Government Agencies, Too?”) That’s why the best CEOs everywhere work so hard to explain things. And that’s why I want to share with you, in the words of the book’s title, what the CEO wants you to know, so that you can learn, grow, and make a greater contribution to not only your organization but the world around you.
This Is Far Easier Than You Think
It turns out that business is very simple and very logical. There are universal principles that apply whether you sell fruit from a stand or run a Fortune 500 company. Every organization must serve its customers, manage its cash effectively, use its assets wisely, and constantly improve and grow.
These are the basics. This is business boiled down to its essentials. And those essentials are present in every company anywhere on the globe, despite differences of cultures, dialects, or government regulations. It’s always been this way. Think once more about your school days. Once you understood that the atom was made up of protons, electrons, and neutrons, you had the fundamentals to help you solve any chemistry problem.
Wait! This Is True of Nonprofits, NGOs, and Government Agencies, Too?
Sometimes people are surprised when I say that everyone needs to understand the fundamentals of business. They say they work for a government agency, NGO (nongovernmental organization), or nonprofit (such as a charity or volunteer group), and this discussion can’t possibly apply to them.
But it does, although some of the terminology is different.
Let’s take just one of the four key essentials of any organization--managing cash effectively. True, NGOs and government entities usually don’t sell things to generate cash, but still they must make sure they have enough money to operate both today and in the future. For a nonprofit, that money usually comes from donations; government agencies receive funding.
Similarly, just as in for-profit businesses, NGOs and government agencies need to manage their cash well. Otherwise they will cease to exist, in the case of a charity, or be reorganized or shut down, in the case of a government agency.
The takeaway is simple: all of us, no matter what we do for a living, will be better at our jobs if we learn how moneymaking tools are applied within our organizations.
I want to show you that it’s the same with business. When you know the fundamentals, you “get” the basics for how any business operates.
My goal in writing this book is to give you the benefit of my experiences observing how some of the most successful people in business think and act. You will see what they do to make their companies--and their people--world-class.
When I Wrote That This Is What the CEO Wants You to Know, I Meant It
You might be interested in the origins of the book.
Jacques Nasser, then the CEO of Ford, wanted his employees to know more than what it took to do their jobs well. He also wanted them to understand the entire business so that they could see where their contributions fit in and how they could help the whole company, not just their particular department.
He asked me to teach a course to a couple of hundred managers. On day three he sat in at the back of the room, and when we took a break he said: “This is exactly what I want, but it is going to take too long to have you teach everyone. I want you to write a simple, clear book capturing everything you are going to talk about.”
And so I did.
The best CEOs and street vendors think the same way. They know their cash situation. They know which are their most profitable items. They understand the importance of keeping their products moving off the shelves, and they know their customers because satisfying customers is what ultimately keeps you in business.
What your CEO wants you to know is how these fundamentals of business work--and work together--in your organization. By investing a couple of hours in this book, you will. Once you understand them, there is no limit on where you can go in your organization.
Before We Begin
While I wrote this book for everyone who wants and needs a greater understanding of how their organization really works, there are two groups I will be singling out for particular attention.
The first is millennials, those 83 million of you born between 1982 and 2000, the largest cohort who has ever lived. (You outnumber your baby boomer parents by more than 7 million.) Millennials are the drivers of the digital revolution and are now firmly ensconced in the workforce. Those of you who truly understand how your business works will soon be assuming top leadership positions in your organizations.
Business is always changing, but the basics remain the same.
The second is the business-to-business (B2B) salesforce. The reason for that is simple. There is an ongoing trend that is only going to accelerate. Rob Bernshteyn, CEO of Coupa--the cloud-based “spend management” software firm--calls it value-as-a-service. It’s the simple idea that every organization must deliver to the customer something that will lead to quantifiable improvement: this much in cost reductions, this much improvement in lead generation, this much of a rise in revenue, this much of an increase in employee retention, and the like.
In the coming years, every corporate purchaser will say, “You want me to buy what you are selling? Fine. Here are the very specific, quantifiable outcomes I want. Prove to me that you are going to deliver them and I’ll buy. If you can’t, I won’t.”
If you are selling or providing services to people who have this attitude, you have to understand your business and theirs in order to make the sale.
How This Book Is Organized
Let me tell you what you will see in the pages ahead.
In the first half of the book we will explain the building blocks of every business--cash, inventory turns, profitable growth, and satisfying customers--and see how all CEOs, whether they run start-ups, online companies, or large traditional ones, use each one.
Once you understand the tools, we will show you how to apply them. So in Part II we will be talking about how business gets done today.
I said “today” for a reason. When I started, business was hierarchical. Information passed up and down through a formal chain of command, and there were sign-offs and approvals at every step. Today, though, two of the key skills you need are collaboration and integration. Collaboration is necessary because more and more work is being done in teams, as organizations of every type realize that people at the top are not the sole depositary of all knowledge. That collaboration, of course, is taking place outside the company as well as inside, as organizations work with vendors, suppliers, and even customers to create new products and services.
Today, you have to be not only a team player, in the truest sense of the word, but you have to be an integrator as well.
And we will be talking about integration because increasingly that work cuts across all functions. You need to have everyone work together seamlessly in a way that creates speed, decisiveness, and value for customers, employees, and shareholders.
Think for a moment about the creation of the Amazon Echo, the voice-controlled device that can generate to-do lists, play music, set alarms, provide news and weather updates in real time, and control the smart devices in your home. It took people who knew speech recognition software, artificial intelligence, and electronics (among other skills) sharing expertise and making trade-offs and adjustments to make the product a reality. And it had to happen quickly to beat the competition to the market.
Those people understood the building blocks of the business. For example, everything about Echo was created with the customer--one of our business fundamentals--in mind. The team that created Echo knew the device had to execute every request in literally a second or less, or the consumer would be frustrated. So that became a non-negotiable objective.
From there, we will discuss how you can get things done. Working together and integration are all well and good, but you still need to accomplish things. You need to execute. We will show you how.
And finally we will talk about your part in the big picture of how your organization works and what you can do to make sure both you and the people who employ you thrive.
With that by way of background, let’s begin.
What the Best CEOs and Street Vendors Share: The Essence of Business Thinking
The language of business is the same everywhere.
It’s 11:00 a.m. on a workday in midtown Manhattan. To be exact, you’re at the corner of 48th Street and Sixth Avenue. (Only people who have never been here before call it Avenue of the Americas.) The buildings that make up Rockefeller Center surround you.
If you used your smartphone to call up an overhead shot from Google Maps, you would see you are a short walk from all the landmarks they show in the movies every time they want to establish that what is going on is taking place in New York City. Most of the theater district is to the west, and so are Times Square and the Port Authority Bus Terminal. The Museum of Modern Art is slightly north and a bit east, and almost due east is St. Patrick’s Cathedral--it is basically on the other side of the Rockefeller Center skating rink, which has the huge Christmas tree, complete with thousands of lights, in front of it every December.
From where you are you can basically throw the proverbial stone and hit countless media companies--Bloomberg Businessweek is in the building behind you, and Fox News is directly across the street with its electronic ticker running headlines twenty-four hours a day on a marquee outside. The publisher of this book is less than a ten-minute walk away on Broadway.
But what is most interesting is the number of one-person retailers--and that is what they are, CEOs of one-person companies--that line the sidewalk. There are hot dog carts on either side of the street. You’re standing next to a small food truck called Rockefeller Halal Foods, and adjacent to it is a woman selling sunglasses and scarves. Next to her is a woman who will sketch your portrait for $5.
It is even more crowded as you look up the block to 49th and Sixth. There are fifteen different food carts selling everything from coffee and Danish to Korean barbeque to Indian curry. And between here and there you’ll find a person selling secondhand paperbacks and another offering imitation designer purses.
Even if you have never been to Manhattan, you have probably encountered a similar scene where people were selling goods from tables and carts right there on the street. Anywhere you go in the world, you can find street vendors hawking their wares: Chicago, Mexico City, São Paulo, Mumbai, Barcelona, San Francisco, Tokyo, Seoul, Shanghai.
If you bought something from them, you probably made your purchase quickly and went on your way. I bet it never occurred to you to think about their business. But if you do, you will notice something surprising. No matter where in the world they are or what they sell, they talk about--and think about--their business in remarkably similar ways. They speak a universal language of business.
Perhaps even more surprising is that the street vendor’s language is the same as the language of Tim Cook (he’s the CEO of Apple), Mark Fields (CEO of Ford), Ginni Rometty (CEO of IBM), and Marillyn Hewson (CEO of Lockheed Martin). It’s the same as Akio Toyoda’s (Toyota’s president), Tadashi Yanai’s (CEO of the global retailer Uniqlo), and Rahul Bhatia’s (CEO of IndiGo, the low-cost Indian airline).
When it comes to running a business, street vendors and the CEOs of the world’s largest and most successful companies think exactly the same way. The complexities of their businesses are different; their approach is not.
You can hear it for yourself. The CEOs of publicly held companies frequently--usually quarterly--hold conference calls with stock analysts (we will talk about them later). You can listen in on those calls; the company’s website will provide a dial-in number. If you do, you will hear the CEOs talking about sales, margins, profitable growth, customers, and the like.
There are differences, of course, between running a huge corporation and a small shop, and we’ll get to those, but the basics are the same.
The people who run huge, global organizations are often referred to as managers or leaders, but the best ones think of themselves as businesspeople first. I know because I’ve been permitted to observe some of these business leaders, and others like them, firsthand. For more than five decades I have had the privilege of working one-on-one with some of the world’s most successful business leaders, including Jack Welch and Jeff Immelt of GE, Brian Moynihan of Bank of America, Andrea Jung of Avon, Robert Bradway of Amgen, and A. G. Lafley of Procter & Gamble. I’ve seen the way their minds work, the way they cut through the largest and most complex issues to the fundamentals of business.