Success Can Block Innovation and Growth

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0:37What propels you? Propel with Gatorade Electrolytes.

0:54Welcome to Harvard Business Review's The New World of Work. I'm Adi Ignatius, editor-in-chief of Harvard Business Review. And each week on this show, I interview a CEO, a thought leader, or somebody else who can inspire and educate us on the changing dynamics of the workplace. Our viewers are from all over the world, and they work at everything from Fortune 500 corporations to fledgling startups, from family businesses to nonprofits. The aim of this show is to provide insights for everyone as they navigate this transitional moment in how we organize ourselves in the business world. So on today's episode, we have another great guest, Andrew Liveris, the former CEO of Dow Chemical and the author of the new book, Leaning Through Disruption.

1:33I'm going to come back with a proper introduction for him in just a moment. But first, let's hear from our friends at KPMG, who are our sponsors for this season of The New World at Work. At KPMG, it's our people who make the difference for our clients. Talented teams leveraging the right technology to uncover insights that illuminate opportunity. Ready to make the difference together?

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2:36And remember, you can watch previous episodes of the show on YouTube or right here on LinkedIn and Facebook. All right. So my guest today is Andrew Liberus, the guy who wears a lot of hats. He is the inaugural president of the Brisbane 2032 Olympic Organizing Committee. He's the former CEO and chairman of Dow Chemical. He was CEO there from 2004 to 2018. And in that role, he won credit for pushing an ambitious sustainability agenda at one of the world's biggest chemical producers. He's also the author of the new book, Leading Through Disruption, A Changemaker's Guide to 21st Century Leadership.

3:14So, Andrew, welcome. Thank you, Ignat. Nice to see you, Adi. Yeah. So, it's good to have you here. So, I hope you don't mind, but I would love for you to give our viewers a quick sense of your own life journey from the Australian outback to leading a Fortune 100 company. It's not the typical CEO arc. No, and given the differences in continents, Australia and the U.S. were often, you know, considered the new U.S. in Australia, and the outback was always considered the part of Australia that Americans almost had a sort of a dream about, you know, the original America, the Wild West. And Australia is definitely an American lookalike, but not the same.

3:56I grew up as in an immigrant family, like an American immigrant family, first to go to university, did chemical engineering, which my poor Greek speaking mother, you know, I don't think understood until the day she died what chemical engineer did. You know, I was just the prodigal son, first in the family to go to school. And And then Jeddow hired me saying, if you join us, we'll show you the world. And they did. And, you know, 43 years later, I retired from this great American institution. I tried to bring my Australian attributes to my job at all times, which was we're a fun-loving, passionate society.

4:34We love our sports. We can probably get back to that when I talk about Olympics. But we also like adventurism and take risks.

4:45But Gemini and Chrome? That's new. It can help you with practically anything on the web. Like restoring a vintage motorcycle from a 50-page restoration block. Or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required. Compatibility and availability varies 18+. Propel Fitness Water. With Gatorade electrolytes, zero sugar, and vitamins. Propel hydrates better than water. to help you get the most out of your workout and get back to your best self. What propels you?

5:19Propel with Gatorade Electrolytes. I'm very forthright and candid. And of course, marrying that with the American entrepreneurial spirit and this great country's value system was a great combination. And I did most of that in Asia, where I also learned the power of relationships. And so along the way, I never thought I'd be CEO. I guess that's one of the tricks. Don't work to the next job. work really well in the job you're in. People noticed me in the ability I had to create change and then deal with change. And this book is written because my time as CEO was just constant change. So that's a thumbnail sketch.

5:58I could add more, but there's a few chapters in the book that deal with that. No, that's great. I think that's a good context setting for the conversation we're going to have. Now, if you're watching this, if you have questions along the way for Andrew about disruption, about leading through disruption, put them in the chat, and we'll try to get to some of those later. So let's talk about, so the very title of the book suggests that we're in a moment of, you know, where disruption has become the norm. And I want to pressure test that a little bit. I mean, is that, you know, are we truly in a more volatile world, or do we, is it possible that our media consumption is giving us a distorted impression that change is more volatile, is happening more quickly than before.

6:38I think your question frames the difference. I mean, 100 years ago, there was volatility. And 100 years ago, there were world wars. And humanity has constantly been disrupted. But the cycle of disruption is just picked up because the amplification of connectivity, the digital age, the big technology revolution that we're all experiencing is amplifying everything. It's the old Chinese adage, You know, a butterfly flapping its wings in one part of China leads to a typhoon in another part of China. It's it's really amplification by connectivity. The digital disruption, which is well and truly upon us, is creating just a sense of ongoing crisis.

7:18And I call it the new abnormal. It's constant uncertainty and the new paradigm, which is in the 21st century, our 20th century institutions were not built for that constant state of flux and uncertainty. and really fundamentally the new, I call it, disease of short-termism. Everyone wants an answer now. Everything has to be satiated now. Social media is making gratification instant. Everyone's expecting the new reality shows to show how to get to the end point without the hard work that we all had to learn in the 20th century. This is a very different model that we have to adjust to, and it's a new reality.

8:00and as the book will address and has addressed is how to actually work away from divergence where constant uncertainty is the new paradigm to convergence which is solution space how do you begin overcoming these leadership vacuums that are appearing everywhere so let's assume you know we can't put the toothpaste back in the tube that this is the new reality and we can't wish it away um you know what's some advice let's say for for for managers for executives to try to um you know succeed stay ahead of the the the wave of change the waves of change to try to manage effectively in this in this volatile world i definitely the book is written with this question in mind which is and really what i would love for the book to be is the foundation for the beginnings of some new solution sets, including new leadership models, a new contextual leadership model.

9:00And I begin to address it by saying, look, you can't therefore be the same leader all the time. You have to have a wide bandwidth. You have to be able to get a wide as well as deep. Just knowing your subject is not good enough, you have to be able to pivot and move around and hit the bandwidth of the conversations that are occurring. This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome, that's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks.

9:38Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required, compatibility and availability varies 18+. Propel Fitness Water with Gatorade electrolytes, zero sugar, and vitamins. Propel hydrates better than water to help you get the most out of your workout and get back to your best self. What propels you? Propel with Gatorade Electrolytes. In many cases, chaotically, but certainly adjacently. And I really bring forward then this notion that business, government and civil society are locked together in a triangle, an equilateral triangle.

10:16And that as a result of that, you've got to move up and down those axes constantly and reinvent yourself as a leader. And to do that, you have to actually find sources of factual information versus just opinion. I mean, opinion is valuable and you need to hear what other people, stakeholders have to say. But center it on fact and get the facts from the source and go to the sources. And in my CEO world, that meant constant travel to the regions, constant travel to the sales offices and the factories, listening to people on the shop floor, listening to people talking to customers, working with governments as partners, not as adversaries.

10:56A complete reinvention of the model of intake so you can get a better output. and then flux it fast. Embrace the reality of what you're hearing. Make a choice. Make several scenarios around those choices in case your main choice doesn't work. Absolutely lead the change yourself from the front line and then build a team around you that can deal with that change and then repeat and repeat and repeat. That model of leadership is not what's taught in the business schools. It's not what's taught. Actually, it's only taught in real life. And frankly, we've now got to impart those messages to people who aspire to be this type of leader.

11:34And it is definitely a lot of energy, a lot of passion, but a lot of judgment calls based on fact-based inputs. So you mentioned earlier, you talked about the problem with short-termism and that that's one symptom, I guess, of the volatile world we're living in now. Talk a little bit, I mean, you've always been a voice for kind of broad stakeholder, or, you know, the CEOs, the companies need to pay attention, you know, to their broad stakeholder base. On the other hand, you know, you're running Dow Chemical, you know, a company where there's pressure to deliver quarterly results. And, you know, I've heard CEOs say, yeah, you know, you can do both.

12:14And I think our audience might be skeptical that you can do both. So can you talk a little bit about how to manage that balance? It cannot be easy. Definitely not easy. And it's definitely not necessarily a new paradigm. I do think CEOs of a bygone era probably had the same version of it. But your very first question spoke to what's changed. What's changed is the speed of that and the impatience factor, in particular, the financial owner that increasingly wants the short term reward, dividend, share buyback, so that in turn they can deploy the funds in other areas and other opportunities. Or said another way, you, the leader of that enterprise, publicly owned, you, the board, aren't the best allocator of capital if all you're doing is looking at your sector.

13:04So that brings into mind the roles that we all have to play in how capital gets allocated and what's the metrics against that capital allocation. It's fine to get short-term rewards where you can allocate the capital to a sector that your enterprise is not in. That absolutely is the breakdown and the breaking up of the conglomerate model that works so effectively the last century. Totally understand that. In fact, I exercised that with the putting together of Dow DuPont to create three viable, more vertically oriented companies. No problem with that. You absolutely totally have to do that. However, what has happened is when you take money or capital allocation away from the return five years hence and 10 years hence in your sector, you're abdicating leadership in your sector.

13:50And over time, you will die in that sector. So in other words, if you don't put money against R &D and don't put money against capital that in the essence won't have a return for some time later, your portfolio allocation being so. This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome, that's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online make sense?

14:23There's no place like Chrome. Check responses set up required, compatibility and availability varies 18+. Propel Fitness Water. With Gatorade electrolytes, zero sugar, and vitamins, Propel hydrates better than water. to help you get the most out of your workout and get back to your best self. What propels you? Propel with Gatorade Electrolytes. Short term will only last as long as the decisions made by your forebearers give you a return. I inherited a Dow like that. I inherited a Dow that was making money off yesterday's inventions, but had nothing new coming. And the markets were saying, you know what, we'll rent their stock because they will eventually go private, be broken up, et cetera, et cetera.

15:07So what one has to do is to do both. You have to have a long-term strategy that shows long-term value creation viability to your owners and to your stakeholders. Put those programs in place. Put metrics in place that are one, two, three, five years, not unlike what private equity does right now, by the way, while delivering the 90-day result. Is that hard to do? Absolutely. What it means is you have to portfolio manage from within. You have to fund the businesses that can actually grow and develop the long term returns while letting the short term businesses that run for the short term bring the cash to fund for the long term, while at the same time appeasing the owner's need for return in the short term.

15:49Now, if that sounds like a lot all at once, it is. Therefore, you know, at the end of the day, this ability to actually allocate capital across the two dimensions is not every board can do that. And I then have a whole chapter dedicated to the development of boards that can actually do what I just said, including, by the way, your embedded question, which I know you're going to get to, which is how to make sustainability a core part of the agenda going forward. Yeah, well, maybe we should talk about ESG. So that's, you know, environmental social governance as a way to get to that topic. You know, ESG is such a tricky concept and such a tricky metric.

16:29And, you know, there are people in the sustainability camp who think it's it all is just a bunch of greenwashing, doesn't actually measure anything significant. You know, at least in the United States, the right is sort of attacking ESG metrics as overly woke and that they're somehow antithetical to successful business. How do we make ESG work in the long term to really measure what matters and to be an integral part of business and not a kind of sideshow to it? Yeah, I think the conversation, excuse me, of late has gotten into the people yelling at each other conversation, which is wokeism or anti-wokeism.

17:12businesses and companies like Dow that have been pushing an answer to the question you just asked for the last couple of decades, even before my time, really were at the end of the day, looking at it from the point of view that I get a license to operate. That license is given to me by society and the rules of that license are set by governments. So society elects governments, governments puts in place regulations. I, the enterprise, follow the rules that are set by government for the benefit of society. That role in environmental management, of course, really brought to the table back in the Nixon era with the Clean Air Act and the 70s and the establishment of the EPA.

17:53Dow really put together an activity that said, OK, I need to fulfill compliance, obey the regulation, but now let me be anticipatory. I know the science behind my business. How can I help the EPA and the government agencies that regulate me put in place the better regulation, the smarter regulation. That in essence became the Clinton era and the development of the sustainability agenda for the government and for companies. Sustainability, what it meant was the license to operate sustainably by putting in place the rules that had the triple bottom line in mind. And Dow was one of the authors of the triple bottom line piece of work, which was you've got to actually develop a profit, but you've got to have metrics alongside the environment pillar and the social pillar.

18:40What's happened in the OOs and now this current decade and going forward. This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome, that's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required, compatibility and availability varies 18 plus propel fitness water with gatorade electrolytes zero sugar and vitamins propel hydrates better than water to help you get the most out of your workout and get back to your best self what propels you propel with gatorade electrolytes is e s and g has hit of course the the domain of the public and everyone is looking at e s and g and should look at them as separate items, but lumps them together and then simplifies, which is the first thing I say to the book.

19:39It's the first chapter in the book. I basically say, stop the simplification by putting it together. It's not one acronym. It's three very different verticals that need regulations across each of the verticals that speak to the values of the 21st century. And the societal license to operate set by governments mean governments need to get educated on the new environmental regulations that are required, whether they be in climate change, whether they be in emissions, whether they be on the treatment of land and water and all the things that we care about with the planet. The S part, which is inclusiveness, societal justice and treating people equally and inclusiveness and the value of regulations and inclusiveness.

20:17And then governance, both big G and small G, governance from the point of view of government regulations and obeying the laws of the land. And small G, which is how boards operate with respect to shareholder and stakeholder duties. And all of those are complexities that need to be then put in place by corporations working with governments to help governments establish the right regulations in a partnership model. I see examples around the world where that works. They tend to be in more authoritarian regimes, top down, such as, say, Singapore or Korea or Germany. They don't tend to work as well in market based capitalist economies like the United States because of the trust model.

20:56The trust model is broken because people see it as interest politics, lobbying groups, paying for the right regulations by lobbying your sector and your book. Basically, in my book, I say we need to now toss that out and put in place partnership models that collaborate so we get the right regs for the 21st century on digital, on E, on S, and on G. And that builds a sustainability agenda that in turn, for every corporation that complies with it, there are new profit pools that come from it and therefore become centric to your strategy. We need the new rules for this century more than ever. And it's the lack of those rules that's creating the disharmony and almost anarchy from society saying, I just don't believe government anymore and I don't believe business leadership anymore.

21:47Yeah, well, that's really well said. I think we could maybe get an HBR article from that. So we'll talk later about that. I want to shift to talking about leadership more directly. You write in the book that in the early days at Dow Chemical, you look back and say you were too polite, too accommodating, too reverent toward the company and its long, long legacy and to your predecessor. And that probably is familiar to a lot of people who are listening, who come into challenge many executives face. So how do you balance a desire to be a change agent against respect for the traditions that have created the legacy that maybe brought you to the company in the first place?

22:30All the training one gets growing through the corporate model is not to be a disruptor. You know, corporations have become large and were at one point in time small and innovative, develop the bureaucracies that large companies bring that ultimately enter their demise because small companies in their space end up literally proverbially eating their lunch and the chemical industry was a massive innovator last century certainly in the first 50 years and then the last half of last century we stopped innovating as a sector because we made a lot of money out of the things that we had innovated and invented for modern america for the modern world and, you know, pick your favorite area from plastics to paints to, you know, the things that lead to building materials, to pharmaceutical ingredients, all the things that modern life enjoys.

23:20We were making a lot of money. And so the people in Dow and companies like Dow in the sector, I won't say got... Trying to be a bit more mindful of things you buy for you and your family? Well, when it comes to Laundry, choose All Free Clear. 100 % free from dyes and perfumes. All Free Clear uses only essential ingredients that tackle tough stains and odors. And it's gentle on the skin. It's a powerful clean you can feel good about. So go on, pick up a bottle of All Free Clear for your next laundry day. In the U.S., there's a break in every 26 seconds. But when intruders step near, SimpliSafe Home Security steps up.

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24:37We talked, you know, inside boardrooms and inside meeting rooms to ourselves. You know, what created the space to allow me to become a candidate and ultimately the CEO was I actually grew up outside of headquarters. I grew up in the Far East. I ended up becoming an entrepreneur within the big corporate bureaucracy. And when the candidacy for the CEO job came, we ended up fundamentally, you know, it was a horse race, if you like. And I got chosen because I was more of an entrepreneur than my erstwhile peers. Now, what got me the job, the need for Dow to change its model, I, unfortunately for me, when I got the model, I said, OK, I'm just going to repeat what my predecessor did and put in place the team that was around him and now me.

25:25and I ended up putting people in place that had not bought into the change that actually won me the job. I quickly corrected that mistake as I showed in the book but it was really that lesson that you know maybe maybe I should it should have been obvious but it was a very instructive lesson for me because it enabled me later when big crises came like the global financial crisis like the Kuwaitis withdrawing on us in the middle of our Roman Haas deal like the activist attack It enabled me to do something which maybe I wasn't trained to do before I became CEO, which is to move myself out of the job intellectually, emotionally, see what was needed in the job, and then change me in the job.

26:10Changing yourself in the job, especially if you're doing well, is one of the hardest things to do. And I certainly benchmark the very best people like Lou Gerstner and others that I talk about in the book. But that skill is something that I really drill down on in the book. And frankly, when I mentor younger CEOs, I really counsel them. Step out of your role. Look at your role and say what's needed to win your role, not just get comfortable in the role. Yeah, that's great. Let me I'm going to go to a couple of viewer questions now. This is from Brian in Pennsylvania in the U.S. And it's really getting back to our conversation about short termism.