Systems Leadership 2020: Kicking it Off
Classes 1–3
Well, this year wasn’t what we expected.
In February we were beside ourselves with excitement given the amazing lineup of guests we had coming to our third year of Systems Leadership. We had both incumbents and disruptors from the transportation, healthcare, media, mobility, oil and gas, education, aerospace and financial services industries. We scheduled a group of leaders that were wrestling with the issues we had been discussing and developing over the last several years, and we couldn’t wait to get into the classroom with the students and kick things off.
And then the pandemic changed everything.
We were told the week of March 9 that all Stanford courses would be taught online the Spring quarter. This led to a two week scramble which required us to overhaul our teaching methods, to coordinate with our guests for virtual visits, and to leap into the educational unknown.
Even with these changes our visitors were amazing — every single one of them agreed to join us via video conference, and when things went from bad to worse in many of their companies, none shied away from their commitments and backed out. The class this year covered not only issues of Systems Leadership, but it was a real-time lab in leading through crisis. To that end, we took the opportunity to share our insights on crisis management in each class. It is always fun (and unique) to learn and observe issues in real-time. Jeff wrote a summary of our learnings on LinkedIn, but we wanted to drill down into the takeaways we gathered from each session via these Medium posts.
Session #1 — Drew McElroy, Chairman Transfix
April 2, 2020
The course opened with Drew McElroy, Chairman of Transfix, a company based in New York working to upend the traditional long-haul trucking industry. McElroy actually grew up in the business — his background blended a mix of both historical experience and also a vision to see what is possible and how to execute on these disruptive changes.
Our discussion dug into the tradeoff for disruptors of growth versus profitability, which had become an issue in the last several quarters for all startups and has been made even more of an issue given the global health and corresponding economic crisis. McElroy shared how the core business of Transfix serves both sides of the shipping market: makers of goods (largely CPG companies) as well as delivery companies. As designed, the company’s platform not only helps both sides take advantage of operational efficiencies, but it also enables additional services for Transfix to offer both parties beyond matching (which adds additional margin and profits for Transfix). For McElroy, his domain knowledge of the shipping industry allows him to see the many adjacent services and capabilities that Transfix can offer to parties, enabled directly through the data and software systems the company has developed. McElroy and his team have also engaged in behavior we have seen in many other successful Systems Leaders: developing partnerships with others in the value chain to find more effective arrangements for all parties.
McElroy highlighted the importance of how his company needs to be seen as an honest broker (pun intended) between manufacturers and shippers in a way that does not unfairly advantage either side. By setting up Transfix as a neutral and impartial “referee” in the ecosystem, the company is able to win the trust of all involved while bringing operational cost savings and volume advantages. McElroy and the Transfix team do so by running their business through measuring customer outcomes and enabling leadership inside of Transfix to drive change in ways that focus on serving customers better.
In the context of the crisis, McElroy acknowledged that his business is advantaged as more goods need to be shipped to new locations. While understanding how dangerous the pandemic is for individuals on the frontlines, McElroy stressed the importance of being grateful that Transfix is able to support the needs of customers in these harrowing times. As a leader, McElroy demonstrated the duality of deep domain expertise with a founder’s passion.
Crisis Lesson #1 — Get Good Intelligence: We talked about the need for leaders to get good intelligence in a crisis. There are very few “facts,” but leaders still must make decisions. In this pandemic, understanding how China and Korea reopen can be instructive (they are ahead of the United States in dealing with the pandemic). Watching the US media is not so helpful. Get good intelligence.
Session #2 — Michael Dowling, CEO Northwell Healthcare
April 7, 2020
Talk about being on the frontlines. This session was very real.
Throughout our conversation with Michael Dowling his cell phone kept ringing from the Governor of New York’s office about the healthcare catastrophe that was griping the state. As the largest provide of healthcare services in the state of New York, Dowling was literally dealing with an incredible challenge that most of us could barely imagine.
When talking about healthcare broadly, Dowling stressed the complicated nature of the industry involving multiple players with competing interests — some whose sole purpose is to serve patients, and others who are for-profit entities who do not have to deal with the reality of serving these patients. In a world of radically changing healthcare (even before the pandemic), Dowling stressed that there is not a more important business in the economy today, and that “the dabblers” (largely tech companies) have been nowhere to be found on the frontlines in this time of global crisis.
Dowling discussed the complexities of managing the various parts of healthcare that his business touches — drug development, education, and research — to name only a few. These complexities are compounded by the inefficiencies of the system; Northwell employs 3,000 people who sole purpose is to ensure that they get paid by insurance companies (over 25% of the claims they make to insurance companies are denied initially). As a leader Dowling needs to simultaneously manage across both near-term and long-term time horizons.
Perhaps the most powerful part of our discussion occurred when Dowling asserted that Northwell could be substantively more profitable if they only served the wealthy. But what kind of society would that be, he asked? Repeatedly, his empathy and understanding of what is happening on the frontlines of the business, and of the people who do the work on the frontlines, was paramount in his message to the students. Dowling demonstrated that the most tough-minded leaders can also be empathetic.
In seventeen years of teaching Dowling’s visit was one of the most powerful moments I’ve witnessed; a leader who was dealing with unimaginable horrors and death in a way that most of us will never see, and he took the time to explain his business, the need to work with a variety of parties, and the societal impact of what healthcare does in our communities and in our world.
Crisis Lesson #2 — Always Show Up: In a crisis, leaders must be present even when they don’t know the answers or they are being criticized. Canceled meetings aren’t good leadership. People are not looking for perfection; only progress. Let your team feel your presence.
Session #3 — Joe Hogan, CEO Align Technology
April 9, 2020
Align is a company that started as a disruptor by bringing clear plastic aligners into the world of teeth straightening delivered historically via brackets and wires. But after 20 years Align is now the leader in the space, with over $2B per year in sales, a market cap at one point of almost $20B, and the largest market share of any player in the space. The company brought digital innovation to the ultimate analog world — straightening one’s teeth in a completely individualized way.
In his visit Hogan demonstrated several leadership traits that stood out amongst all of our guests. As a successful leader previously of GE Healthcare and ABB, Hogan talked about coming into a company and learning a new business before making wholesale changes. Hogan stressed the fragile nature of cultures and how they evolve over time. Successful leaders often come into a company and want to make changes to put their imprint on an organization. Hogan shared his desire to learn first about Align before making any adjustments as he stepped into what had been a successful company looking to grow to the next level.
Hogan also highlighted the importance of focus; he shared that Align believes that their existing target customer base is only 10% penetrated and that there are tremendous opportunities for growth where they are playing today. When we discussed ways that the company could compete against lower-cost alternatives such as SmileDirectClub, Hogan reinforced that Align has developed best-in-class capabilities and that at this point they need not to get distracted responding to potential threats. As he said to the class, the company can continue to play offense in its existing business and channels without having to look into adjacencies given how much opportunity is in front of the company.
In a company that combines digital (mouth scans) and physical (shipping 500,000 customized aligners per day to customers), Hogan was a Systems Leader whose thoughtful and knowledgeable demeanor exuded a confidence in how he sees both the external market and his internal company dynamics — a key attribute for every great Systems Leader.
Crisis Lesson #3 — Do the Hard Jobs Yourself: In a crisis, leaders must make many difficult decisions. Maybe the worst of these are layoffs. Don’t leave this task to HR; handle it yourself. Taking on the hardest tasks builds a sense that we are all in this together.
