#257: Klaus Kleinfeld, Former CEO of Siemens and Alcoa – Purpose channels your energy

28:09So you also have to find a skill, how to balance things and see what is there for the short term. What do I have to do midterm, long term, you know? But the core, I think at the core is what type of talent do you have and how do they work together? How can you form them as a high performance team? Do they work like this, you know? You know, I love the story you talked about how you really gave purpose to your organization by bringing that lady forward. and she talked about how she, you know, her life was changed and you brought the soul back to the company. Is there another powerful story you've had in your career that had a really profound impact on how you lead?

28:52Because that was a great one. Well, I tell you, another one was here in New York, actually, you know, and I worked for Alcor. I stayed, typically I stayed late in the office and always the cleaning crew was there cleaning the restrooms and the facility. And so typically when I went to the restroom, you know, I ran into the same individual, you know, I said, hello, hey, hey, hey. I knew that he came from Albania, lived in Queens, you know, with his family, but his parents were still over in Albania. And we always had a little chat about things, you know, so, and one night, you know, I mean, while I want to go out, he stops me in the track, reaches out his hand and says, And I didn't know what he wanted.

29:39And he said, I want to thank you. And I said, for what? And we had talked about the normal things in life. I had my mother living also back in Germany. So I knew how it is when your parents are not with you and they get old, you know. And he said, I want to thank you for talking to me. I said, well, I enjoy this. He said, yes, but you have to understand most people just look through me. and I thought that was so wow to me most people just look through me you know and it basically tells you never forget to handle whoever it is with respect and you can always and that has been my I mean my implicit mantra you can always learn something from somebody and there's no justification really to not be respectful to an individual.

30:33Wow most people just look through me. That's so compelling and so memorable. That's an amazing story. You write in your book, Leading to Thrive, that you used to treat leadership like running an ultra marathon. Just push harder, go longer. But your view changed. Explain. Yes. What happened? One day, somebody came into my office, a friend of mine who worked with me, came into my office and said, you got it all wrong. And I think David Ware is similar to that. I mean, they know how to push our buttons if somebody comes to you and says, you got your life all wrong. And he knew that. He knew that.

31:12I always would say life is like, business is like an ultra marathon. I ran marathons at that time, you know? So he pushed it. And we got into this discussion. And I said, what is it? And he said, it's all about energy. And I really owe it to him. And that also got me into looking into high performance sports, my beloved tennis, you know? And I realized there was something very odd going on. While already the tenure in business was going down, more people leaving, having shorter tenures, being younger when they leave. And tennis and in other sports, it was exactly the opposite. They stayed longer.

31:48They stayed longer in the game. The average ratio of the top went up. So I said, I have to understand what's going on there. And I looked into it and I saw that they had learned how to manage energy. They understood what energy resources are there, physical, mental, emotional, spiritual. How do I handle that? What's the point of purpose? And that's why I said Agassi before, you know, because Andrew Agassi was one of the first who showed it to the world. You know, this is how you can come from an angry young man to a sophisticated person, really winning, really winning and playing the game, you know, masterfully as long as he wanted to.

32:24Well, what kind of rhythms or habits should you put in place to keep your energy going? I mean, I'm ready to go now. I ran a marathon when I was 40, but I haven't run one in a long time. The first thing is you have to understand downtime is productive time. So the way this works is you, I mean, you burn, you wake up in the morning, you have energy, you are energized, you burn it through during the course of the day, you have to recharge it and you have to conserve it. So the question is, okay, what is there? On the physical side, very well understood. Movement, eating well, drinking, dehydration, you know, sleep, you know, those are very important things.

33:02Most people have a decent, leaders have a decent understanding of this. On the emotional side, it's already quite difficult, you know, because most people think, oh, you know, this person drains energy. This was a very, very intense discussion, negotiation, and they drained me and I couldn't stand it anymore. And finally, I gave in, they burned me out. in this, well, this is about you. And the energy, the emotion is inside of you. If you allow somebody to drain energy from you by provoking you and you take that provocation, the fault is with you. You can learn how to be calm as a cucumber and not allow this provocation to go through it.

33:40Use your breathing, breathe in, breathe out, you know, let it go in this here and that, and then get your story out, get the negotiation going, you know. So on the emotional side, and there's many other things, but just one example, on the mental side, it's really on what do you focus on? You know, you can focus on all the negative things or you can focus also on the opportunities. There's this great story about the shoemaker, the old shoemaker who has two sons, wants to pass his business on, doesn't know how to pass it on to, sends them to Africa. The one son sends a note back, he said, father, very bad news.

34:11There's no market here. They are all barefoot. The other one sends a note back, father, send me as many shoes as you can get. You know, there's a market that's endless. Everybody is barefoot, right? So this, I think, puts it together in a good way. And I think that this capability of leaders is to see not just the obvious, but also to say what is the upside in what everybody sees a downside and a great skill. Then the aspects of compartmentalization, not allow the monkeys in your brain to hop around, but compartmentalizing them. That's on the mental side. On the spiritual side, it's really just recharging, getting grounded, you know, and I think there's many, many spiritual practices.

34:56But I would also say that belief in a higher being, you should allow that in your life. Just at least test it out. There's nothing wrong with that. And then the point of purpose as the focus. around this moment, you know? You know, in addition to being a great CEO, you're an author now, but you also invest in tech and biotech companies through your firm, K2 Elevation. You know, when you're looking at a business to invest in, a lot of people just say, you know, the most important thing you can do is identify who's leading it. And if you've got that person, You know, you're going to be well on your way.

35:39Tell us a story about a leader of one of the companies that you invested on and how he impressed you and what it was that made you say, this is a company I'm going to bet on. First of all, I completely agree with what you just said. I typically bet on the leader. And in this case, it's the founder or the leader. And I also think that it is important for people on the board to remember, you know, that they are not running the operations, but their main job is to select the right leader. Right. So so what impressed me, I once invested in a company and this is this story has two sides, you know, was somebody who who very much impressed me on the intellectual rigor, the stuff that they had taken on, cracked something that I knew from old days.

36:31That's a complicated problem. And they cracked it with modern technology, basically with an AI approach already when AI wasn't even that popular, you know. And I thought this was amazing what they did. The same gentleman, then he convinced me to invest and to go on his board. The day before the board meeting happens, I get a call from his co-founder telling me that they found him unconscious in the hallway, right? Right. Because and he said he will never come back. The doctors don't allow him to even engage with us. You know, the guy is healthy back, wonderful, not as a CEO. He does something else, you know, in his life, you know.

37:10But it was absolutely fascinating to see, you know, this guy did it, push, push, push, push and didn't have the energy concept. So he didn't recharge. And he had just come through a come through a funding round, you know, very, very successful funding round and had a cold. and didn't treat his coat. And the coat went to the heart and flamed the heart and boom, you know. So, but I invested and went onto the board because of him. Then the board, most of the investors on the board, you know, were like chicken running around. So they asked me to become the chairman. And that's what I did to structure it.

37:45We found somebody else and the rest is history. And so when you find that someone else, what did that person have? Unfortunately, not exactly what we thought he had.

37:59That's a little honesty there. We don't always get it right, do we, Klaus? No, no, no, no. But the thing is, and I think that's also important for young leaders to understand, some feel, I put somebody into the job, I realize it's not the right person, but I can't take the person out. It's the opposite. You have to take the person out because the organization will say, he will not take that person out, even though the person is not great. If you basically say, I made a mistake, I take the person out, find another job or leave, you know, that is the right solution. That's the right solution for the company.

38:34It's the right solution for you to show up as a leader. We'll be back with the rest of my conversation with Klaus Kleinfeld in just a moment. You know, Klaus talks to me about the importance of getting the facts straight from the source. And it reminds me of a fantastic story from Kevin Hockman, the leader behind Chili's Red Hot Growth. I'm in a Chili's in Chicago, just outside of O 'Hare. I'll never forget this. And I'm in, we call it the heart of house. So the back of the house or the kitchen, we call the heart of the house at Brinker. And I'm in the heart of the house with a team member and she's counting shrimp.

39:08So her job for the first hour of the day was she counts eight shrimp, puts them in a little bag, twists the bag, counts eight shrimp, puts them in a little bag, twists the bag and so on. And she'll do that for probably 45 minutes. And then she'll do the same thing with brisket where she'll measure it and bag it. and then she'll do the same with the product. It's called portioning. And pretty much every concept at some point has done a lot of portioning. We did a bunch of KFC and at Pizza Hut when I was there at Yum. And the idea is, well, you can do this before service and it controls what we call AVT or a measure of waste.

39:37So you know that you're always gonna get eight shrimp because you're counting it, you know, not in the heat of the moment and it's very easier and faster service. Well, so when I asked her the question, hey, what's the one thing that you would do if you were CEO tomorrow? she'd say, I stopped counting these darn shrimp. And I said, well, what would you do if you didn't count the shrimp? And she said, when the customer orders a shrimp taco or a shrimp fajita, I'll count eight shrimp. I'll put them on the grill. You know what? Sometimes I'll count seven. Sometimes I'll count nine. But guess what?

40:05Most of the time I'm going to count eight. Right. So we took that idea back to the restaurant support center and they said, hey, we got to test this. We're going to have a bunch of shrimp waste. I don't know about this. And I said, well, what's there to test? Like, she's right. Like, once in a while, she'll get it wrong, up or down. But we're not going to have big waste issue. So we rolled it out. And guess what happened to shrimp waste? Absolutely nothing, right? Literally didn't change. Like, we measure this stuff literally every day. We get reports every day. It didn't change. And everybody laughs at that story.

40:33But you know what's interesting? If you take one hour of prep out of our restaurants every day, that's 47 years of labor that we pay for annually. That's over$6 billion of labor that's saved that we can redeploy to things like that would actually improve the guest experience or improve the food experience, right? So those are things that add up pretty quickly because when you're in a restaurant group with a lot of scale, get one hour prep out of the business has huge impacts. And then most importantly, that team member, she doesn't want to do that. She doesn't value that. To her, that thinks it's a waste of time.

41:05So that makes her job way more engaging when we're like, hey, we listened to you. We got rid of that. And go do something that you're excited about doing. When you take the time to get insights straight from the source, big things can happen. Kevin's conversation is full of aha moments like this. So give it a listen. It's episode 183 here on How Leaders Lead. You know, as you buy these companies and you mentor these CEOs and founders of companies, I'd have to imagine that AI is on everybody's radar right now. What should leaders be doing today to, first of all, A, understand it, And then B, stay ahead of it, you know, so that you can actually win in this arena versus risk falling behind.

41:50First of all, I mean, it's the highest adoption that we've seen on any technology, you know, ever. You know, when you look at chat GPT and I would go as far as if you are not engaging on the AI front, you are toast. You will be toast. Done. You know, so you have to engage. It affects everyone, affects every industry, affects literally every function. So it's not that complicated to understand. I also would say you don't have to go for the all-encompassing solutions. In fact, I would rather not go for the all-encompassing solutions, but I would say I do something here. I do, for instance, if you are on a software development side, there's a lot of tools already that are fantastic to write code.

42:34Right. If you don't, if you don't apply that, you know, wow, you're falling way behind. You know, if you're on the marketing side, you know, to basically structure, segment, segment the market, have more direct interaction with different market segments, more specific to their needs, you know, and shoot this out, you know, go do it. If you are on the analytics side and you want to do, for instance, the full analytics on your supplier side, I mean, every single thing can be improved by the use of AI. So, you know, how would you go about leading in this era of AI in the sense of how do you take your organization with you on the importance of building the muscle in this skill?

43:21I think you have to have, it goes back to who do you have in your first line team, you know? And everybody on the first-line team has to understand in whatever they are overseeing, their role is to bring AI in. Their role is to figure out how can I make this better with AI. AI is not just going to bring your cost down, it's going to bring your speed up, and it's going to bring your quality up. You know, so the first thing is you cannot afford to have anybody on your direct team who doesn't understand that AI needs to be embedded in their structures. You know, I want to shift gears for a second.

44:02And I got to ask you about this Neom project that you took on in Saudi Arabia. You know, tell us about it, number one. And then tell us, did it stretch you as a leader? and what did you learn from that whole experience? Well, I'm still on the board. It's a wonderful, fascinating initiative. It reminds me, look, I mean, it's a big piece of land the size of Pennsylvania that is in the north of Saudi Arabia. It has a long coastline, I think, in kilometers, 350 kilometers. It's probably 250 miles or something like this. and about two-thirds of this is on the Red Sea and the other part is on the sea to Sinai.

44:54And it is the vision of the Crown Prince. The Crown Prince knows the area very, very well. It's almost unpopulated. It has mountains. The highest mountain goes up to 1 ,500 feet, You know, so 2 ,500 meters, there's snow on there at times in the year, you know, about three months of the year, it has conditions where you can ski there. So great. And it also has sand, it has sandy beaches, everything, you know, mid-sized mountains, amazing, absolutely amazing. The weather is nice also, you have a bit of wind there. So, and the crown prince's point was, I want to create a land which attracts the best and brightest and allows people to live the future.

45:43I mean, his idea, and it's my words, not his words, you know, his idea is we are already living in the post-industrial world, but we haven't quite understood what all this means, right? And to live with nature, he's a big nature lover, big nature lover. So one of the things was that make sure that with many of these projects, you know, you go into it and nature gets destroyed. I mean, this concept was built like this, that over 85 % of the nature will remain untouched. And also on the urban environment, I mean, the challenge was it's not going to be about streets and cars and all that stuff. You know, you have to have a concept that makes it more livable.

46:27So basically mixed use, walking, bicycling, these type of things. How can you do that? How can you allow a life which is more living with nature at the same time being connected to the world and having the best technology on your fingertips? So we went through this. We looked at what I always looked at this as a business. And I thought we have to build it like you build a new product. You know, it's all about what sustainable competitive advantage do you have. And I was extremely happy when we saw that there were some really crazy things like energy, renewable energy. They have wind, they have solar, you know, basically at costs that are lower than the cost of gas and oil, even in Saudi Arabia.

47:13So that, and it's clean, it's clean energy, you know. So this gives you an enabler that you have at very few places. So one of the first things that we did is roll that out. And as well as the first at scale green hydrogen plan is currently getting built in NEOM. And everybody who's in the energy development wants to go there and see it and work with this. And this goes on and on and on. The question is, how do we have urban living? and what's the concept, what is the concept of transportation in this? And it was fascinating. I mean, absolutely fascinating and wonderful to see. I honestly think the last time that I've seen something with that vision, you really need somebody there who is there for a long time and stability to develop.

48:04The last time I've seen this is with St. Petersburg, when Peter of the Great, you know, basically went out and said, I want a seaport. Russia is landlocked, went into the swamps, you know, and basically said, this is where I want it. And I want a shipbuilding industry and everything else. And this, Neom, where is it at in its development for everybody to know? Well, there's a lot of, it's not, I mean, many people mistake it as saying it's one city and a lot of focus on the line. But in reality, I stopped counting. I would say it's about six, seven, eight developments that are coming at almost at the same time.

48:41The one probably that's furthest along is the mountain city, you know, which is going to be open for the Asian Winter Olympics. And there's a lot of stuff that we built there. Then there are some of the islands that are already welcoming people. The good thing is that I think we have seen that sometimes it's better to do it a little bit more staged than doing it all in parallel, right? Because, I mean, if you think about this, this is a magnitude, think about it. It's the size of Pennsylvania, you know, and if you want to build Pennsylvania in five years, that's going to be difficult. And you probably, you can do it, you know, but it's probably not going to be the best choice, you know.

49:35So what we're seeing here is going to be still very fast compared to everything that has happened so far. But it's going to go obviously in phases and it's going to be very attractive, very attractive. I mean, people ask me, so when can I see the whole thing? And I think that you can see bits of it relatively soon. but you will see it continuously evolving and it will be a success I'm 100 % convinced that it will be a success I fell in love with it the moment I saw the area, the moment I had conversations with the crown prince to understand his vision and it's really a wonderful vision for anybody I'm looking forward to having a place there and spending some time there it's great I mean where do you have that mountains snow you know great night under the skies in a desert you know you can go swimming the coral reefs this are the only in the Red Sea has the only coral reefs on this planet that are still fully healthy the only place and it's the the under and many people who are diving know this probably the best place to do diving these days is in the Red Sea.

50:51And you don't need diving equipment. You put a snorkel on, you go and watch, and you will be like art, absolutely art. So the crown prince had this incredible vision, and CEOs and leaders are expected to be big thinkers and visionary. Is this a skill that you can actually develop? I mean, what advice would you give leaders on how to improve the skill of being a visionary? Or are you born with it? No, I don't think. Well, I don't know. I'm just always telling, but a lot of things can be learned also. I think that the visionary side is to allow a little bit to be the child again. You know, we, for instance, at Neom, we did an exercise once where we said, you may remember, David, at the time when compute was very expensive, right?

51:46And when I started programming, you know, I had to manage the amount of CPU capabilities that I had and memory and write the code for that. You know, the AI algorithms were all there, but it was impossible because the compute was not there. It was unimaginable, you know. So now computers for free. Now, try to do the same exercise. And we did that at Neom. when you think, what about energy being for free without any negative consequences in the production of energy? What would that mean to the world? This was one of the most wonderful experiments that I've done. But you allow yourself a little bit to be like a child and dream.

52:31And then you also have to come from the dream phase to the reality test. And I think that, so visionary is one thing, you know, I know you are a great visionary, but you are also a very good executor. And the thing that, and you have to have both skills. The one skill alone is dangerous. I mean, I think that if you are just a visionary, people will find out this vision is not working, you know, and everybody wants to be on a winning team. They want to see success of it, you know, and they sit there and say, no, we're not going to follow this jerk. It sounds good, but in reality, just blood, sweat and tears and nothing happening for me.

53:08So that's not going to fly. At the same time, if you're just an executor and just a slave driver, people will also say, what am I doing here? What's the why? Why am I here? What do I do? So you need to be really effective as a leader. Both skills essential. Absolutely. Absolutely. And this has been so much fun, Klaus. I'm going to have a little bit more fun with you and do my lightning round of questions. So are you ready for this? Can I have a beat? What three words best describe you? uh driven um happy optimistic if you could be one person for a day beside yourself who would it be oh my god i'm pretty happy with being being be being me um i don't think i want to be somebody else to be honest no i'm happy with who i am all right what's your biggest pet peeve chocolate Chocolate.

54:05Who would play you in a movie? Robert Redford. If you could play tennis on the center court at any major venue, where would it be? And who are you playing with? Wimbledon against Boris Becker. There you go. Something you'd only know about Germany if you're from there. Grünkohl und Pinkel. And? We're going to look that up using AI. All right. We got a task to do, everybody. It's a dish. All right. There we go. What's the one thing you do just for you? Reflection. Besides your family, what's your most prized possession? Music. If I turned on the radio in your car, what would I hear? Audiobook or great music.

54:53What's something about you few people would know? Oh, that I had a business being Santa Claus. as one of my first really super profitable own enterprise. Santa Claus, Santa Claus on December 24th, unbelievably profitable. I love it. What's one of your daily rituals, something that you never miss? A workout in the morning. There you go. That's why you're in great shape. You're out of the lightning round. You did a great job there, Robert Redford. I got to ask you, How has your wife, Burgett, influenced your career? Greatly, greatly. I mean, I met her when I was 10, actually. We hated, we went to school in the same class and hated each other, fought each other violently, you know, over who was the speaker of the class.

55:48And then we were separated in the upper years. She went to a different specialization than I did. and we got to see each other in the afternoon courses at the school that we went to. And suddenly, I mean, she realized and I realized that she is a very smart person. And when we were 18, we fell in love and that has led to a wonderful life, a fulfilled life. And she definitely has been a great influence and a great advisor and a great partner. You have two grown daughters that are both in business. How did you take your leadership philosophy at home over the years, Klaus? Most difficult.

56:34And why is that? Explain. Well, I mean, how many advices did you take from your parents, you know? That kind of explains a lot.

56:47What do you see now as your unfinished business? Oh, man, so many things. I mean, the thing that I like is in our family business, we are bringing probiotic products to the U.S. We partner with one of the top companies. I believe very strongly in the body being a healing engine and that if you know how to keep it alive, you know well, then it heals by itself. And gut health, I think, is the foundation. And I believe that for 20-plus years. and that is something where I feel the US is behind compared to many, many other countries, partially also because they don't have really good products here and we've been bringing these products for different applications.

57:32Omnibiotic is the brand name. And this is something that I want more people to get this help, get the support because I mean, I know what it has done to me, how it has helped me to stay fit and stay healthy, enjoy life, have more energy. And I think many people can have that and can relieve themselves on taking tons of pills, you know, when they have a little bit of this gut support. I mean, there's this big thing about microinflammation, which is now understood being the foundation of aging. And microinflammation comes partially because the gut is slowly aging. and let stuff through and you want to stop that.

58:18Very interesting. And not surprising that your purpose is basically to help the world, you know, which is great. And, you know, last question here. What's one piece of advice you'd give to anyone who wants to be a better leader? Get as many voices, mentors as you can, you know, and listen to people. Also learn from people what you don't want to do and learn from them what you want to do. Always stay curious, always act with respect, but continue to move. Continue to move. Standing still is sliding down. Klaus, I want to thank you very much for taking the time to have this conversation. It's been great to catch up with you.

59:00And I'm excited for you because you are so alive in what you're doing and so focused on making the world a better place and continuing to do so. So thank you for that. And thank you for writing your book. It's great. Thank you, David. And it was wonderful to see you again. And when you're back here somewhere, you know, so let me know. Happy to catch up with you.

59:25You know, I keep thinking about that powerful story Klaus shared when a former patient showed him how each person's work at Siemens helped save her life. It was a turning point for that team. And it's such a great illustration of the connection between energy and purpose. Purpose channels our energy. We make smarter decisions when we know what to focus our energy on. After all, energy isn't infinite. And if we don't manage it well, we run the risk of burning out. As a leader, you manage energy, both your own and others. And it's your job to channel it towards what matters most. So before you dive into your daily to-do list, ask yourself, what's the real purpose behind what you're doing today?

1:00:14That moment of clarity might just change how you show up, both for yourself and for your team. So do you want to know how leaders lead? What we learned today is the great leaders understand that purpose channels your energy. Coming up next on How Leaders Lead, we've got Paul Brown, co-founder and CEO of Inspire Brands, which owns big restaurant names like Arby's, Buffalo Wild Wings, Dunkin' Donuts, and more. So be sure you subscribe on YouTube or wherever you get your podcasts so that you don't miss it. Thanks again for tuning in to another episode of How Leaders Lead, where every Thursday you get to listen in while I interview some of the very best leaders in the world.

1:00:52I make it a point to give you something simple on each episode that you can apply to your business so that you will become the best leader you can be.

1:01:08you