Don't Forget The Strategy

31 March 2009

When Michael Jones met with Carol Bartz earlier this year she was executive chairman of the board of Autodesk, Inc and presiding over a 13% growth rate from the previous year for the engineering technology giant. In January she left the company to become CEO of Yahoo! Here she talks about the downturn, how to prepare for recovery and why sticking to the company strategy is crucial.

Michael Jones: In a downturn, is it a good idea to lessen the drive for innovation to save money?

Carol Bartz: It is important to invest during a downturn because your employees and management are open to change. Most will be open to trying something new because what’s happening isn’t working. As a company, you also want to be in a position where you can come out of any downturn as strong as possible. In the past, the companies that grew in market share used the downturn to transition themselves.

Does a downturn automatically mean CEOs should be cautious?

"Now is the time to be bold and show that you can be a leader."

After a downturn there will be an upturn. Once you’ve been through a few of these you have the experience and confidence to know that burying your head in the sand is the last thing you should do.

This is probably the sixth business cycle that I’ve been through. The hard ones are from your own doing as a company, when you have a bad product cycle. This downturn is about the whole business environment. As long as your strategy was working before it happened, and you’ve got an aggressive set of plans, this is the time to be a good partner to your customers.

Why is that?

Because people remember who was there for them during the bad times. Now is the time to be bold and show that you can be a leader. It’s a really exciting time.

That is a refreshingly positive attitude

It's because I get bored. When things are going well, there’s always something lurking in the back of my mind, about what can go wrong. We now have an idea what went wrong, so we can do something about it.

In a downturn, many companies instinctively look to cut the R&D budget. What is your take on this?

R&D is the last place you should make cuts. The first thing you need to look at is your own infrastructure; the overheads and waste that have grown within the system. I’m not saying you should never lose an engineer, that of course is ridiculous, but the last place you look to downsize is your development.

But that is what often happens.

If you look back, the companies that are still in business didn’t do that. There have been plenty of companies that fell by the wayside. They panicked and thought they could ride through with old products. I seriously doubt that somebody like Steve Jobs is not thinking about his next iPhone design. What you are trying to do is get people to come out and buy. If you listen to the media, you would think that there isn't any money left.

There are trillions of dollars moving through the world economy, you have just got to get your fair share of it. People are still building houses; buying clothes, food and toys; and they are still going to movies. You just have to make sure that you are working with the companies who are out there, enticing these consumers to buy the next thing. It really is an interesting time because it also helps you focus on your customers.

How do you balance short-term gain and long-term strategy against the credit crunch, rising input costs and high energy prices?

The situation we are facing is truly global, although some of it is market specific because not every country is facing the same problems. There are still parts of the world where you want to make investments.

I think one of the reasons that CEOs earn their money is because they analyse where the best place is to direct their efforts. It's pretty clear that 2009 will be a tough year, so you might as well get your company positioned correctly for it.

How has economic uncertainty affected budgeting and forecasting?

The last thing you want to do is put your company in jeopardy, which means maintaining its oxygen supply so it has good products in the market place and someone to sell them, service them and so forth.

The main thing is to not get gripped by the fear that you won’t have an ongoing business. This is a time when we see the back of a lot of pesky, weak, competitors. They got to ride the good times and didn’t really make any investments.

I feel that by the end of 2009, especially considering that we are going to have better comparisons of earning, by the time we hit Q4, it’s going to look better. The fact of the matter is that because earnings are going to be looking a lot better at the end of the year, we are all going to be feeling a lot better. There is almost a natural uplift coming to this.

Do you think that a ‘feel-good factor’ will get markets up and running again?

Absolutely. I’ll go on record to say that I think we’ll have a real feel-good factor by Q4 because we will always have a comparison against a tough 2008 Q4.

How does offshoring or outsourcing come into play?

It’s a global economy and I’m not a person who believes in tall borders. I believe that every time a consumer comes online somewhere in the world and has purchasing power then something has to be engineered, designed and manufactured for them to buy. I’m a big believer that, as CEOs and board members, we are obligated to run our businesses as effectively as possible. That isn’t about obeying some stupid rule that says you have to be ten miles from London to do that.

There are clearly business opportunities in parts of the world not (yet) affected by the credit crunch, namely Latin America and Asia.

It’s such an interesting world of goods and ‘things’. China is only going to grow between 7% and 8% this year. I don’t think the world was prepared to service 10% or 12%. It was putting a crimp on everything: copper, steel, cement. It was only six months ago that we couldn’t figure out how to service these basic materials, so a little breather on all this isn’t the end of the world.

How can CEOs best foster innovation?

"There are trillions of dollars moving through the world economy, you have just got to get your fair share of it."

I think the best way is for a CEO to create a culture that allows people to experiment and fail and not be ostracised for that. Innovation comes from experimentation, it comes from ideas, it comes from trying things and it comes from taking risks. You need a culture and environment that says taking risks is not only acceptable, but is rewarding.

A few years back, when I was CEO of Autodesk, I had a saying: "Fail, fast forward". What it meant is, try something and if you fail, figure it out as fast as you can and move forward. Rather than be afraid to try anything because you might be wrong.

There is a school of thought that says everyone can run out and fail. But people are not wired that way. You have to have an environment where you are willing to believe that you are in charge of everything.

Do you think that this is a typical West Coast business approach?

It’s funny that you should say that. I was being interviewed in the Czech Republic last spring and when I was talking about this they said it would never happen there because if you fail, you had to declare bankruptcy, which was shameful to them. That just astounded me because Americans like to talk about ‘serial entrepreneurs’. These guys have tried, failed and tried, over and over. They are almost lauded. I hadn’t thought about it until that conversation, but we almost honour people that try things. We don’t punish them if they fail.

How can a firm learn to accommodate innovation in all its forms?

In a way, it’s no different than parenting. You can excite your children while you’re saying no. Or you can scare them to death so that they don’t move again. It sounds like a funny comparison, but it’s true. I think a whole lot of it is just fostering a system where everybody’s brain is considered just as big as yours.

What do think about the lack of female CEOs in Fortune 500 companies?

It absolutely resonates. I don’t think these companies are changing at all. I think that they fall backwards every time one of us leaves the job. Meg Whitman recently left her post at eBay, Pat Russo left her post at Alcatel-Lucent. It’s still tough out there for women, because men still run the show.

Do you see this being a permanent problem or can you see it changing soon?

Because I have daughters, I’d like to think that the young men that they are going to university with and working with are much more familiar with them in the work place, so it might lighten up, but I’m not overly optimistic.

As a chief executive, what keeps you awake at night?

It depends on what night it is! Lately, my concerns have been about growth. If you had asked me this question last year, I would have said complacency, because things at Autodesk were going so well. We were always thinking about what could go wrong. You want to be doing a great job so you are always worried that there something is going to jump up and bite you.

What are your motivations?

I just love business. I like managing, I like strategy, and I like the complexity. I probably read five or six newspapers a day. You’ve got to be able to talk about more than your golf score, more than your kid or whatever. You’ve got to know what’s going on in the world. I think most CEOs are curious people and therefore they are interesting. Your learning curve should never ever flatten. If that happens, get a different job, because that is such a boring concept.