How does a global corporation keep innovating?
Honeywell International has 132,000 employees around the world and dozens of businesses in the aerospace, energy, consumer products, construction, automotive, healthcare, and other industries. How does an organization on that scale stay nimble enough to recognize opportunities and take advantage of them? CEO Dave Cote discusses the company's strategy and his own role.
Q: In an organization as large and varied as Honeywell, how do you recognize and act on opportunities?
Dave Cote: That ends up being an important question for us, because one of the themes that we use to run the company is having a diversity of opportunity and the reason that’s so important is there’s never any one thing that you can point to in Honeywell where you say, “You know, when that product takes off, that geography, that business, whatever it is, it makes Honeywell.” By the same token, there’s never any one product, geography or business where if things don’t go well, Honeywell does poorly.
So I always want enough bets in enough places where the company will always do well. The means that we need opportunity geographically, we need it in products, we need it in the businesses that we’re in and that’s why you’ve seen us structure the company so that we’re focused on macro trends that…we’re in good spots in macro trends, that we continue to become more global and we’ve made a big change there, and that we keep driving this new product side. So what that means is that we have opportunity everywhere so this ability to recognize it ends up being important.
I’d like to think I make my own contribution there—so, for example, noticing five or six years ago that there seemed to be a lot of natural gas finds, that’s helpful and helped to position us better when it comes to gas, but even more importantly is for, in every one of those of geographies, in every one of those businesses, the technology leader, the marketing leader, the business leader, all of them have to be constantly be attuned to thinking this way and having a new product onslaught that will allow us to take advantage of it. We spend a lot of time making sure we develop the right kind of culture that causes people everywhere to constantly be looking: “How are they going to grow? What are the new product trends? What are the new technologies that are coming out?” But it’s a big part of just driving the culture of the company. Because I can’t do it myself; neither can a business leader. Everybody’s constantly got to be looking and in that, hopefully, surfeit of ideas that we end up having only the best ones survive and we have thousands of them that we’re supporting.
Q: Does successful innovation usually start with a problem or a technology?
Cote: That’s one that we’ve discussed internally also, because there are people who say, “No, it’s technology forward.” Other people, “No, it starts customer back”. I’ve always thought that successful innovation requires both. You can’t just be the technology guys going forward because it’s pretty easy to develop a technology that’s exciting but that nobody wants. By the same token, if you’re just starting with the customer, you don’t always know what’s possible, right? Because technology is driving what’s possible.
It’s that intermarriage between the two and it’s why we drive— in fact, some of our businesses call it “two in a box” where the marketing guy and the technology guy are together. And they have to focus on everything together so that from marketing you’re getting that customer back. So you understand, not just expressed needs, but unexpressed needs. And from a technology forward it’s, “Hey, what’s possible? Do customers even know that this stuff exists?" How can we put some of these technologies together and drive something that can address some of those unexpressed needs that maybe even the marketing guy doesn’t know is unexpressed. So, I’ve always felt it was both. You shouldn’t just pick one or the other. You need to do both. We spend a lot of our time focused on making sure we do both.
Q: What are the leverage points where the CEO can make a difference in a large organization?
Cote: I’d probably break it into three pieces. First would be portfolio. Second would be culture. The third would be internal processes.
The CEO has a huge impact on portfolio. If you take a look at what we’ve done, 10 years ago we were a $22 billion company. This year, we’ll be almost $40 billion and that includes about $10 billion of acquisitions and about $6 billion worth of divestitures. We’ve significantly changed the mix of the portfolio consistent with macro trends and having great positions in good industries.
A second one is you have to develop a culture that allows people to do things like recognize the opportunities that we talked about, to be able to do that technology out, marketing in, to be able to say, “Here’s what I need in my global market," whether I’m in China or India or Indonesia, where ever you are. You have to develop this culture where people want to make things happen.
I oftentimes say, “The trick is in the doing.” That if you compared, we’ll say, management resource review manuals, new product introduction manuals, a commitment to customer service, most big companies, it all looks the same. Okay? Our new product introduction process is not going to be that different than somebody else’s. Our commitment to customer service: there’s no company out there that says, “Customers? Nah, we don’t really care all that much.” Everybody says, “Yeah, customers are important.” But how well do you actually do it? That’s where the trick is in the doing. Actually making this stuff happen and creating a culture where people look at it that way and say, “You know, I’m not just going to say what they want to hear, but I’m going to say what I think is true and I don’t have to worry about repercussions if they disagree with me. They want the facts. These are going to be fact-based discussions. We’re going to get something done.”
Having that kind of a culture makes a huge difference. That one Honeywell, if you take a look at where we started with three different cultures in the company basically because of big acquisitions, to where we are today with the one Honeywell culture, having that right kind of can-do culture makes a huge difference.
The third step is the internal processes which we’ve kind of alluded to before. So whether it’s the really big ones like new product introduction and order to delivery, but also how do you conduct all your staff functions, what we call functional transformation? How do you standardize processes, how do you mechanize them to the extent that you can so that you end up with better service at a lower cost?
CEO is hugely impactful on all three of those areas: portfolio, culture and internal processes. And If I’m not driving that and thinking about that every day and discussing it with my own people, then the company’s not going to do it. It’s not going to happen on its own. The CEO has a major role, it seems to me, in all three of those.