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Leading with a Higher Ambition

WHAT DOES IT TAKE to lead with a higher ambition? What are the core characteristics and capabilities of the leader who is able to build and sustain institutions that create both economic and social value? How does he or she approach the task of leadership?

Consider Doug Conant, CEO of Campbell Soup Company.

Russ Eisenstat and a colleague, Chris Richmond, met with Conant at his office in Camden, New Jersey, to discuss how, under his leadership, Campbell had returned from a near-death experience to its current position as one of the world’s most successful food companies. For Conant, a highly regarded executive with nearly thirty-five years in the food industry, the Campbell story is about strategy and performance, leadership and organization, but he never forgets that it is just as fundamentally about food and nutrition. So it was perhaps not surprising that we started with a brief discussion of his diet.

Conant stands 6'1" and carries himself like the relative of a president of Harvard, which he is. He had sprained an ankle not long before our meeting, which meant he had not been able to follow his normal workout routine and had put on a few pounds that he wanted to shed. So his lunch consisted of a Campbell’s microwavable Soup at Hand cup followed by a banana. Somebody had suggested to Conant that he call it the soup-and-fruit diet. He replied, “I said, no, my diet is Soup at Hand and a banana. That’s more memorable. And, as my wife says, it’s something so easy even a CEO can do it. I can use the microwave and I know how to peel a banana.”

A well-developed sense of humor and a willingness to poke fun at himself in this way characterized our interview with Conant. Many of the other CEOs we talked with were equally self-deprecating. Leif Johansson, CEO of Volvo, told us, for example, that being CEO “may affect you with a personality disorder by making you think you know everything. But you don’t actually.” Johansson is especially wary of this troubling syndrome because Volvo is “an institution in Swedish society,” and as a result, “when you have become the big boss, they all think: ‘If he’ll just say something, it’s so very relevant.’ But it’s by no means certain that it is.”

Johansson and Conant and the other leaders we profile in this book are refreshingly aware of the “big boss” problem, and while they understand their responsibilities and the significant influence they have on people’s lives and livelihoods, they are fundamentally healthy people.

As we’ll discuss in this chapter, these leaders:

• See the glass whole.
• Envision the potential.
• Set worthy goals.
• Don’t compromise on the things that matter.

See the Glass Whole

Some of those we interviewed were lucky enough to lead companies like H&M, IKEA, Nestlé, and Southwest Airlines that had, for decades, been high-performing enterprises that had also been creating social value. In those companies, CEOs rose from the inside, were products of the system, and could take proactive measures to renew business health and avoid getting into trouble. However, not all of our leaders were so lucky.

When Conant became CEO of Campbell Soup in January 2001, he walked into a once-great company that was in steep decline. A consultancy informed Jorma Ollila, CEO of Nokia, in 1991 that his company was not “supposed to survive.” Anand Mahindra, CEO of Mahindra & Mahindra, took over during a crisis that engulfed both the company and its home country, India. Mahindra & Mahindra made its first operating loss ever, Mahindra recalled, at the same time that the Indian economy crashed: “Because of that crisis, India opened up and liberalized.” As a result, Mahindra & Mahindra, which had grown as a monopoly, suddenly had to compete in the world marketplace.

Val Gooding, CEO of the British health-care company BUPA, told us that she only realized after she joined that the organization “was in quite such a mess.” As she put it, “The core business wasn’t making any money. The customer service was poor. In my first few weeks, three or four of the senior managers came in and said, ‘Oh, we’re glad you’ve come, because this will need sorting out. And oh, by the way, if you can’t sort it out, we’re all leaving.’”

So Conant was hardly the only one of the executives we interviewed to be dropped into a corporate landscape that had undergone great disruption. “From 1990 to 1996, Campbell Soup Company was one of the best-performing food companies in the world,” Conant told us. “Sales grew nicely. Margins went as high as 24 percent. The company had strong share, particularly in the U.S. soup market where there was little direct competition.” Then, caught up in the market’s obsession with short-term profits, but unable to substantially build its mature business by increasing sales volume, Campbell decided that its best choice was to leverage its strong U.S. market position to raise prices and achieve the profit growth that its stakeholders had come to expect. It kept raising prices until other companies, like Progresso and several private-label brands, saw an opportunity to compete more aggressively in the U.S. market where Campbell had been operating virtually unchallenged. The new brands appeared on shelves at prices sufficiently lower than those of comparable Campbell’s soups to cause consumers to consider switching. Soon the newcomers gained market share, at Campbell’s expense.

The company either could not see what was happening to it or was unable to come up with a strategy to fight back. “So essentially, they said, ‘Well, we can’t take any more on price, so we’ll have to lean on productivity,’” Conant explained. “And that’s when they started to do things like taking the chicken out of the chicken noodle soup.”

To Conant, this was a significant turning point: Campbell was actually starting to compromise on the quality of its chicken noodle soup recipe, the product it had launched in 1934 and that had become an iconic American food. Now this staple of the national pantry, and of the company’s product portfolio, was starting to be stripped of its most important asset, chicken.

“That’s when the organization entered ‘the circle of doom,’” Conant said. Prices could not be raised any higher, because that would certainly lead to a further erosion of market share. Additional gains in productivity were unrealistic. The only easy line item left to cut was the marketing budget, which they began to do. But advertising had been “propping up the brand,” as Conant put it, and when there was less of it, sales dropped even more. “Then they had no more consumer spending to cut and the business wasn’t improving,” Conant said. “So they began to fire people. Two hundred people from R&D in one day. And then there was nobody to do the work. So the whole thing just came crashing down.”

From 1997 to 2001, Campbell went from being one of the highest-performing food companies in the world to being one of the worst; the share price dropped from $60 to $30. That’s when the board recruited Conant, an industry veteran who had worked for three of the world’s leading food companies—General Mills, Inc.; Kraft Foods; and the Nabisco Foods Company, where he had achieved five consecutive years of double-digit earnings growth.

“They gave me carte blanche to look under all the rocks,” Conant said, “and challenged me to come back with a candid assessment of the situation. They weren’t looking for a quick fix. They were looking to become a sustainable, good company.”

The ability to look carefully at one’s company and see what is actually there—positive, negative, simple, complex, known, unknown—is an important characteristic of all our leaders. This is not about optimism or pessimism, seeing the glass as half-full or half-empty, but about being able to step back and see the whole glass, the entire company as it is and has been.

Envision the Potential

Another characteristic that sets our leaders apart balances that ability to see the reality of a company: the ability to envision and believe in a company’s potential and to understand, within an environment often characterized by confusion, crisis, and underperformance, the real possibilities for success. The combination is essential. On the one hand, these executives see the reality with clarity. This keeps them from being easily deluded or distracted, builds the confidence and trust of those around them that they “get it,” and motivates them to make difficult decisions about which activities to pursue and which to jettison, as well as which people to retain and which to encourage into other endeavors. But they also see the potential with real excitement and enthusiasm. As Roger Dickhout, cofounder and CEO of Pineridge Group, put it: “It’s believing in the potential of what you want to be, as opposed to describing what you are. That intention attracts opportunities to you.”

The ability to envision a company’s potential—a kind of informed faith, a hardheaded optimism—is one of the defining characteristics of the CEOs in our study. Why else would an experienced and thoughtful executive like Conant want to join a company like Campbell when it was in such distress? What made Conant think he could transform Campbell? What did he see that others did not? What intrigued and attracted him to the challenge?

The short answer is that he did his homework. Before taking over as CEO of Campbell, Conant thought deeply about how this legendary company, founded in 1860, had gotten trapped in a circle of doom, and he came to some unique insights. “They were under pressure from all sides,” Conant said. There was, at the time, an axiomatic belief in the consumer packaged goods industry that scale always brought benefits, such as the muscle needed for wide distribution and the volume required to keep prices low. Accordingly, starting in the 1980s, the U.S. industry began a period of consolidation: Kraft bought Nabisco, Unilever bought Best Foods, Kellogg bought Keebler, and General Mills bought Pillsbury.

This belief in the importance of scale came about at least partly because of the remarkable rise of Walmart, which, with its almost unimaginable scale and relentless focus on everyday low prices, was rapidly attaining the position it holds today as the largest and most powerful food retailer in the United States. Even as industry suppliers began to merge and combine, so too did the main players in the food retailing industry, Campbell’s customers. As another way to compete with Walmart and other big-box stores, the food suppliers and their retail partners stepped up their development of private-label products. And just to add to the turmoil in the food industry, consumers were getting harder and harder to connect with, largely because they had so many buying options available to them and because marketing and consumer communications had grown much more complex than ever before.

“So,” Conant said, “you had the consumers, the competition, the customers, and the suppliers all putting pressure on the portfolio. And the question was, ‘How is Campbell going to survive?’”

Certainly not by raising prices, cutting key ingredients, reducing marketing expenditure, or gutting the company of talent. During that period of due diligence, Conant and his team studied other players in the industry and came to a rather surprising conclusion: scale was not as important as it appeared. “We looked at the companies that had created the most value over the last thirty years and found that they were not the large diversified food companies with broad portfolios,” Conant said. “The names were Wrigley, Hershey, and McCormick. These companies had powerful number-one brands, were in categories that had the wind at their back, and had the financial wherewithal to support the brands. They were also companies where there was a strong, dedicated organization, where everybody knew what was expected, and there was a performance ethic.”

In other words, they were companies quite like the one that Campbell had previously been; they had not merged their way to greatness and they did not rely on massive scale to create exceptional value. They did it through category focus, key brands, and, significantly, through strong organizations. Armed with these insights, Conant became convinced of Campbell’s potential, despite the current discouraging picture on virtually all fronts.

In October 2000, while still one of several candidates for the job, Conant met with six members of the board of directors. He provided his analysis of the situation, followed by the framework of a revitalization plan. His key message was that the situation was “broken, but fixable.” What’s more, he said, “The situation is deteriorating rapidly. It demands swift, decisive action.” Conant finished off by revealing his optimistic side: he told the directors that he was “enthusiastic about the challenge” and could quickly put a superb team in place that could help him meet it.

In January, the company offered Conant the position of CEO, and he accepted. In late February, he had his first chance to share his view of the company’s potential at an industry conference organized by the Consumer Analyst Group of New York (CAGNY), a three-day meeting of analysts who convene each year in New York to hear presentations by executives from food, beverage, tobacco, and household/personal products companies. At that meeting, an analyst asked Conant what his plans were. He said, “I’ve only been here six weeks, but we have to grow this business.” How would he go about doing that? Conant’s answer was the most fundamental and, as a result, the most shocking one he could give. He said, “We will grow condensed soup.”

This caused quite a reaction. Everyone knew that condensed soup was Campbell’s signature product, that it had been in decline for twenty-five years, and that “everybody and their brother had tried to rejuvenate it,” as Conant put it. Its reputation as a mediocre product, out of step with the times, seemed irremediable. But Conant believed the potential lay in condensed soup, and that’s what he said in public. “I had to declare something that was bold,” Conant said. “And I had to believe it, because I was dead if we didn’t.”

The analysts scoffed. Wrote Louis Lavelle in BusinessWeek:

Conant needs to begin the long, hard task of fundamentally remaking the company. Slow-growing for years, Campbell has resisted change and missed opportunities. Its slavish devotion to condensed soup left faster-growing products lacking for research-and-development funds and marketing support. Without a major makeover, the core product appears destined for irrelevance. Says Prudential Securities analyst John M. McMillan: “You really have to ask yourself: ‘Is this the next buggy whip?’”¹

Reed Abelson, writing in the New York Times, also quoted McMillan, one of the industry’s best-known analysts. “And, clearly, consumer tastes have changed. ‘They basically have the Maxwell House of soup,’ said John McMillan, an analyst at Prudential Securities, referring to the once-dominant brand of coffee that fell victim to changing preferences and chains like Starbucks that spare consumers the bother of brewing their own.”²

Conant remembers the remarks vividly. “McMillan called our company, and our soup business, a buggy whip,” Conant said. “He said the soup was introduced in 1869, and it’s the same damned can of soup it was then. Now you’re going to turn that around? Well, good luck!”

Conant understood the objections, but refused to be swayed by them. “You’ve got to have fierce resolve to drive through and take the organization to higher ground,” he said. “The challenge was declaring myself, not quite knowing how we were going do it, then moving forward with determination. You have board members asking, ‘How are you going to grow condensed soup? Shouldn’t we just get out of the soup business and do something else? Shouldn’t we just stop playing around in the U.S. and go global?’ You’re getting hell from everybody. So, I just had to systematically go about putting in place the things necessary to grow the business when all the people working on it were doubtful. And ‘doubtful’ is putting it kindly.”

For Conant, the challenge was to see that, even in a product as familiar as condensed soup and a company that was more than a century old, there was still enormous potential for improved performance and even growth.

Set Worthy Goals

Early in his tenure, Conant articulated some worthy goals for Campbell Soup that were very different from those most CEOs taking charge of a troubled company would set. He introduced a paradigm that he called the “Campbell Success Model.” It had two main components, one financial and one social. “We needed to outperform our peer companies in the marketplace,” he told us. “We called that, ‘winning in the marketplace.’ And along with that—and this is the thing that had been so horribly neglected—we had to create a superior employment experience for each and every employee, relative to their other employment options. We called that ‘winning in the workplace.’ We said, ‘We have to win on both fronts.’ If you’re not winning in the workplace, you can’t win the marketplace in a sustainable way and be sustainably good company. Our goal was to increase the value of the enterprise.” Later, Conant and his top team added “contributing to the community.”

In other words, Conant declared that Campbell would henceforth be concerned with both financial success and social value, with both short-term results and long-term sustainability. There would be no more compromises on either dimension.

Dick Pettingill, who turned around Allina Hospitals & Clinics in Minneapolis, Minnesota, and made it a model of a high-performing health-care system, told us that his sense of purpose and his values were central to his identity and ambition for that organization: “It’s grounded in purpose. It’s grounded in values. It’s grounded in mission. And, at the end of the day, when I leave here, I hope I have made a significant difference in people’s lives in the state of Minnesota. It’s not more complicated than that. I counsel people that it’s not about the competition; it’s about making a difference in people’s lives. So I’m constantly taking people back to a sense of greater purpose, of the nobility of what we’re doing. If we can change the health care in that backyard, when you go out the front door here, then we have something to give back to the transformation of health care in America today.”

No story conveys how these leaders connect personal values to firm goals and how they integrate business goals with the interests of multiple constituents better than that of Narayana Murthy and India’s Infosys. In 1981, with $250 in capital that his wife had saved from her teaching job, Murthy and a small team founded Infosys. As Murthy explained to our colleague Malcolm Wolf, he and his team saw the main opportunity as “liberating the power of Indian engineering talent” to meet the burgeoning demand for large, customized software solutions, focusing first on the U.S. market, where the demand was greatest, and then expanding around the world. But Murthy also believed that, to realize the greatest potential, they would have to think about the nature and intent of the company in a new way.

Infosys got started, as so many technology companies seem to, in the founder’s apartment. Murthy and his management team got together “to discover what the objectives of the company should be.” At first, the objectives suggested were the rather obvious ones, all based on the creation of financial value. “One said we should become the largest software company in India in revenues,” Murthy recalled. “Somebody else said we should be the most profitable software company. A third person said we should be the company with the highest market capitalization in our industry.” At the end of this discussion, Murthy proposed a different objective: “I suggested to my colleagues to consider becoming the most respected company in India. Not just in our industry, but amongst all the companies in India.”

Murthy, in other words, expressed a higher ambition for his company from the very start. Yes, it should succeed by all the standard financial measures, but it should also set its sights on becoming an institution with a different and additional kind of worth.

Murthy explained to us why he believed that respect was so important:

If you want respect, then you have to do the right things. And doing the right things is entirely under your control—being honest, being ethical, being respectful of others, keeping up the dignity of other people. If you seek respect from customers, you will not shortchange them. You will satisfy them in an honest and ethical way. If you seek respect from fellow employees, you’ll be open with them, you’ll be honest with them, you’ll be fair with them, you will keep up their dignity. If you seek respect from investors, then you follow the finest principles of corporate governance, and you will operate as trustees on their behalf. If you seek respect from your vendor partners, you will be sympathetic to them, and you will come to their aid in the hour of their need, so that they will come to your need when you are in trouble. And if you seek respect from the government of the land, wherever you operate, then you will never violate any law of the land. And finally, if you seek respect from the society, wherever you operate, whether India, U.S., the U.K., or China, wherever it is, you will conduct yourself in a manner that enhances the goodwill for you from the society.

After presenting his reasoning about the value of respect, Murthy expressed a view common to our CEOs: “I said, if you did all of these things, revenues will automatically come. Profits will automatically come. And consequently, market capital additionally will come.”

That is exactly what happened. Infosys created significant financial value. From 1981 to 2010, it grew from a market capitalization of $250 million to $38 billion. And the company also gained enormous respect. Since 2000, Infosys has been voted the “Most Admired Indian Company” in the Wall Street Journal Asia 200 for ten years in a row, showing how developing a higher-ambition aspiration and vision at the start creates economic value, not just social value.

As Murthy summed it up, “I’m glad that my colleagues accepted my argument.”

Don’t Compromise on the Things That Matter

We describe Conant, Johansson, and the other leaders profiled in this book as uncompromising. This was the word we used in our 2008 article in Harvard Business Review to describe the CEOs in our research.³ As our thinking progressed, we left the word behind for a while, largely because we worried that it might bring to mind traits associated with one or more of those CEO stereotypes that we’re trying to avoid: “rigidity,” “inflexibility,” “focus on the self.”

But, as we explored further, we returned to the word uncompromising as the best and most distinctive way to describe the essential nature of the CEOs we had come to know so well. It is not that they are inflexible or rigid in their thinking—quite the contrary. But these leaders will not bend when it comes to vital issues that they deeply believe have an important impact on the company’s ability to create social or financial value.

The ability of our CEOs to stick to their guns applies not only to their company’s efforts but to their personal conduct as well. “I start out with what’s important to me,” Conant said. “And it’s a lot more than work. My work is important, but my family is important. My community is important. I’m involved in my church and my own personal well-being.” Conant pointed out a plaque that was hanging on the wall behind him. “That’s my personal mission statement,” he said. “It says that these are the five things that are important to me. This is why I’m on this earth. Every month or so, I look at that mission statement. I ask, ‘Am I hitting on all five cylinders?’ Now, am I going to go high on them every day? No. Every week? No. But if I can’t look at the list and say, ‘I’m attending to these five things, I’m living a well-rounded life,’ experience says that I won’t be operating at peak performance for very long. I’m relentless about it. I make sure there’s family time. I make sure there’s personal time. You’ve got to either take control of it or it takes control of you.”

As we said earlier, we do not assert that Conant and Murthy and the other CEOs we spoke with are superheroes, but that does not mean that they are in any way ordinary. They are smart, educated, and successful. They operate with integrity and a disciplined focus. They expect a great deal of themselves, as well as of others, and are capable of personally performing at a high level over long periods of time and through challenging episodes.

Uncompromising leaders combine immodest ambitions and modest behavior, or, as Conant put it, they are “tough on standards, but tender with people.” Conant said that if we were to survey his leadership team, “you’d probably find they think I’m a marshmallow.”

Conclusion

While envisioning the potential of their companies and setting worthy goals, the higher-ambition CEOs did not know the precise road map to get there. Conant did not know how Campbell would grow the condensed soup business. Murthy did not know how Infosys was going to become the most respected company in India. But they were committing themselves and their companies to a process of mobilization, learning, and discovery that progressively unlocked more of the company’s full potential.

What is involved, as we will see later in this book, is a flexible and iterative approach to the core disciplines of developing strategy, managing performance, building a strong culture, and developing leadership capability.

In this work, these leaders are guided by a strong sense of integrity. By integrity, we mean something that includes, but goes beyond, honesty and ethics. Certainly, our leaders work as hard as is humanly possible to integrate their decisions and actions with their values and beliefs. But they also are skilled at integrating actions in different domains of the business, ranging from strategy and finance to people management. They see actions in domains that are usually considered separately as being connected and mutually reinforcing. In the next chapter, we will describe more fully the “simultaneous solve” they achieve across these dimensions.

And higher-ambition CEOs are more likely than others to see things whole—to sense both the challenges and potential before them. It is perhaps this willingness to see their companies and themselves in full, with all their diversity and complexity, that contributes to our CEOs’ ability to achieve their higher ambition for the creation of both financial and social value.

Certainly, for Conant and Campbell Soup Company, it has paid off. In the company’s 2009 annual report, Conant wrote, “I am pleased to report that our five-year cumulative total share-owner return, including stock price appreciation and dividends, was twice that of the S&P Packaged Foods Index, at 37.3 percent versus 18.2 percent, even though our return for the rolling three-year period ending in fiscal 2009 fell modestly below the peer index.” In addition, Campbell reported world-class levels of employee engagement and was named to Corporate Responsibility magazine’s 100 Best Corporate Citizens list.

And condensed soup sales—the stodgy old product that Conant swore to revive—grew by 5 percent in 2009. The talk of buggy whips and Maxwell House coffee has faded away. Readers will also be pleased to know that chicken has been fully restored to Campbell’s chicken noodle soup.