Hosts: Rodney Apple and Mike Ogle

In This Episode:

We speak with Neil Novich, the retired Chairman, President, and CEO of Ryerson. He is also on the board of several large companies. Neil shares his early career influences, beginning with a passion for understanding how complicated things work. He emphasizes the need to dive into operations details and to get things done. He looks for people that are curious and good problem solvers, plus good at contributing to and leading teams. For people rising up through companies, he values a breadth of experiences to enable a focus on strategy and risk, plus global awareness. He sees the pace of change increasing with hardware, software, and processes constantly morphing in response to competitive pressures. He also sees that pace of change resulting in more decentralized responsibility and decision making, making it a priority to hire and develop people that are willing to learn, innovate and take risks rather than waiting for instructions.

Who is Neil Novich?

Neil Novich is the retired Chairman, President and CEO of Ryerson. Prior to its sale to private equity, Ryerson was a Fortune 500 company with sales of $6 billion and was one of the largest global metals fabricators, processors and distributors. Prior to joining Ryerson, Novich was a partner with Bain & Co., an international management consulting firm. He has a degree in physics from Harvard University and masters’ degrees both in nuclear engineering and in management from MIT. He also has multiple certificates in Machine Learning and Analytics from IBM/eDx, as well as multiple certificates in Cyber Security from RIT/eDx.
Novich currently serves on the boards of W.W. Grainger, Inc. Hillenbrand Inc and Beacon Roofing Supply. He also served on the board of Analog Devices from 2008 to 2020 He has been the compensation chair of four public companies and the audit chair of two. He is a Trustee of the Field Museum of Natural History and advises a variety of startup companies in Chicago. He is also a member of the Economic Club of Chicago and the Commercial Club.
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Transcript:

Well, it was really three things. First, whether it was about business or engineering or technology, I always had a very intense curiosity about how things work. I always like unpacking complicated things. Secondly, always a willingness to try new things and to see what new insights or opportunities that those could bring, or even just opportunities to learn things. And lastly, looking for opportunities that stretch my capabilities and opened up possible options for the future. For example, in a new industry or a new kind of project or something unusually difficult, a new technology, I’ve always enjoyed that.

There is a fourth thing, something you don’t really have control over though, is that luck and chance always plays a role. Sometimes there are events that occur that you can take advantage of. Could be a job. It could just be a new person you’ve met, who has a particular insight on an industry or a technical area. And sometimes that just happens by chance and you just have to be aware enough to take advantage of it.

When I was a consultant, I worked for a lot of different companies, technology companies, manufacturing companies, consumer products, retail. It occurred to me that competition wasn’t just about a single company versus another single company in an industry, but it was about how a company could leverage its whole supply chain to be a better competitor. So, it was important as a consultant to not just focus on the inside of the four walls of the business, you had to look outside beyond the customer.

With respect to operations, I realized that having a great idea or a new strategy was one thing. But there was a lot of detail behind running a business successfully. The details really mattered. This wasn’t about theory. It was about the practical nature of getting things done. And I always kept that in mind. And then lastly, operational details strongly affected the quality of the product and the service that the customer received. I found that in all of my interviews of many thousands and thousands of customers, everyone’s price sensitive to a degree, but they were a lot less price sensitive if the service and quality were outstanding. So, they really valued good service and good quality. And that’s really how it all came together. What opportunities or capabilities the whole supply chain could bring.

It’s very similar to what I said just before. Companies aren’t a closed system. They depend a lot on their suppliers and frequently, if you look at a manufacturer or distributor, the value brought by the supply chain is a large fraction or even more than half of the total cost. So, you need to fully understand the supply chain and how it’s performing. And that’s just not the cost of materials you might buy. It’s poor service or innovative ideas or the lack of innovative ideas from the supply chain. It’s really understanding the entire system. The last piece is that when you’re thinking about risk management from that level of a company, the supply chain is a big part of that.

I learned from another executive years ago that you really want to try to hire people better than you are. You always have to have someone who can do the whole job or some aspect of the job better than you can, or else you really can’t make progress as a company. What I look for, are people good problem solvers? Are they curious about how things work in some detail? Do they have the ability to break down big problems into much smaller pieces? Secondly, can they go beyond their own knowledge? Nobody knows everything. And so, can they go beyond their own experience or their own personal biases either because they’re good at finding new people with different experiences or they have good connections in a variety of industries where they can bring in new experience that maybe fits the current need better than their own experience.

And lastly, are they capable of leading a complex team to deal with a complex set of issues. And within that, can they get the job done while providing a great workplace that values the needs and capabilities of all of its members. It can’t just be a forced march. It can’t just be coming into the office every day. People have to value what they do and they have to recognize that the people around them also value that.

We tend to think a lot about failure modes. So what failure might occur within the company? Like a manufacturing failure. Or compliance issues of different kinds, and also, failures that might exist outside the company, like advances in technology or changing business models in the industry or a different economic environment and what risks you look forward to depends on what level you’re playing at in the company. If you’re at a more of executive level, you’re typically spending more time thinking about risk and strategy. At a somewhat lower level, maybe you’re just trying to get your job done every day. But even so, everybody

has risks that they need to pay attention to at whatever level they work at in a company. If it’s at a high level, it could be very complex. It might be what are the risks that the customer I’m selling to is not going to be able to fulfill the terms of their agreement with the company. Everybody needs to spend a certain portion of time thinking about this.

I think working across international boundaries is really important. A lot of businesses are already global or they could be global. And even if they don’t sell internationally, their suppliers might be international, so you do have to understand how that works, or it could be the company you’re in might be able to find new markets internationally. Or even if they’re not going to sell internationally, funding new product ideas in other markets or countries, we have to look beyond our own boundaries. And also, I think it’s important to understand cultures and businesses and other countries. How do you do business outside of the US. We have a very internal view, but cultures are different, business processes may be really different, operating environments might be different. For the same product, the product features might actually be different. So, you have to be sensitive to the fact that not one size is going to fit all globally. And even if you do speak a common language, it’s not clear that if communication is going to be all that good. If you’re talking to someone who has a common language, but it’s not their first language or even if they’re quite skilled, words they use might not mean exactly the same thing here as they do there. The sooner you get familiar with that, I think that the better off you are.

I see three big changes that we’re starting to go through. The first is just the pace of change and the clock speed of change. Things are just happening faster, for a whole variety of reasons. The second thing is that we use technology a lot more. And technology isn’t just a semiconductor. It’s machine learning. It’s IOT. It’s a whole variety of new kinds of software and analytics that are helping us make decisions faster. And lastly, new competitors, either from other countries or from new technologies that are trying to disrupt more traditional industries.

And that has three implications for what executives need to do to cope with the future. One is, think about more agile organizations, ones that can deal with change faster. And that might mean simpler and faster decision processes. The second thing is better forecasting and risk management. And forecasting to me doesn’t mean necessarily trying to pinpoint a specific number. But it’s thinking a lot about how things could play out different scenarios in the short run, the medium run, and thinking about how to manage those potential changes. And

lastly, I do think we’re going to see more decisions move to the edge of the corporation. It’s because of better technology gets more information to the edge of the organization. We need to train the edge of the organization better to use information, to make better decisions and to change the responsibility and authority of different people in the company.

If the first person who gets good information about a customer or the outside world, if they have the information and training to take advantage of it, that’s the best of all worlds. We shouldn’t have to take all of that and move it into some big centralized organization to make a decision that could be made in the field. So how do we train people to do that appropriately and it’s could be things as simple as pricing, or it could be things like product innovation being moved much further away from the center of the corporation and more towards the customer.

The biggest thing is it’s all about getting the best people with diverse views and experiences. You need people who are creative, innovative, curious about potential new opportunities or new risks and people who can step outside their own experiential biases in different areas. That’s always the most important thing because you just don’t know what the world and time is going to bring you and the most flexible and innovative technology we have is always people.

That means you have to take the time to find and invest in the best people versus people who can just get the job done now. So, you can hire someone who can get today’s job done, but are they the right person to actually evolve the job in the future and not just evolve within the job, but evolve the job in the future to make better decisions. That implies two things. It implies better succession planning. Ensuring that I have multiple levels of the business focused on who the new leaders in the company are going to be over time. And secondly, it implies giving people more training, responsibility, mentoring, not an instruction set.

I’m sure you can all remember people you worked for whose management style was basically do this and do it this way. That’s fine when you just start out because everybody needs to be told how to do something the first day, but eventually it has to be something like, look, here’s what I want to accomplish. Find the best way to do that. Or if what I need to accomplish needs to change, tell me that too. We shouldn’t be in the world of just giving people instruction sets. That’s what PCs are for. We should be using people to find better processes, solutions, products, insights, than just executing instructions.

One of the big advantages we have today is you can learn almost anything you need to learn online. So, I subscribe to a lot of email lists and blogs and things. I go to a lot of webcasts with people who are experts in different areas and who will bring the latest thinking. I spend a certain proportion of my day, every day doing that. There’s a high yield loss because frequently you don’t necessarily learn anything that’s going to be useful, especially that day. But with some regularity, I’ve learned incredibly important things that I just never would’ve thought of myself, because I’m not an expert in that area. And secondly, within your own organization or if you’re in a specific industry, learn how to interact with people in other parts of the company or customers. Customers especially can bring you very different insights about what’s going on in the industry. People in the company may just be very focused on getting their jobs done every day. Might not think about what’s going on outside. The customers by their nature are always thinking about improving their own supply chains.

And I would say go beyond that, 10 things that are maybe not strictly speaking in your own lane, but have interesting people and they might have some bearing on what you’re doing or what you might do. I think those are always really great learning experiences. On a given day, the notes you take don’t necessarily apply to any problem you’re working on that week.

It’s what I mentioned before, a deep curiosity. The ability to go into the details to understand what’s actually happening, and the ability to manage complicated teams. So, the teams feel good about being a team. In terms of developing them, to me, that’s about assignments with greater and greater difficulty in responsibility in new areas. It’s showing them different parts of the company and how that part of the company works, so they can bring that knowledge back into the supply chain. It’s mentoring them as opposed to just telling them what to do and ensuring that if they need training on some specific area, they have an ability to get it.

It doesn’t mean they need to be an expert in something like machine learning, but they do need to understand how it works generally and where it might be applied. And I feel like giving people more experiences helps them draw new insights about pretty much any problem that they’re going to run into.

Well, it would be useful first if they could find a mentor, someone who knows the company who will be sensitive to what they want. They may not be able to navigate all the pieces of the company on their own, but if they work with someone, that person might be able to help. And it would be great if corporations had consistent mentoring of that type. I don’t think every company does. Frequently it’s very informal. I would get additional education if you need it, even if it’s online and bit by bit, there are some amazing online resources to educate folks in everything from machine learning or IOT, to logistics, to finance. So much of it is online. And sometimes they’re lectures by quite accomplished professionals, that can bring some new insights about parts of the business you already participate in or parts that you don’t participate in. I think LinkedIn is an awesome resource. You may be able to network with people, have experiences, where you want to learn from those experiences.

This doesn’t mean you’re using it to look for a new job, but it could just be, Hey, here’s somebody who’s already been where I am and I want to learn how they got from point A to point B, or I’m in logistics. I have a lot of experience in sales. I’d love to spend a half an hour on the phone with them and just learn something about what they do. I think as long as it’s not overdone, I think most people are very willing to spend that time because other people have done that for them.

Lastly, I would try to add other functions to what you’re doing in a small way. Maybe ask for some additional responsibility. You could do ride-alongs. To me it wouldn’t be out of place if you’re in logistics to do ride-alongs with sales reps, just to see the other side of the corporation. It could be sitting in a meeting that you wouldn’t normally go to, to give you a different perspective about what issues people are dealing with. One other possibility is if the company has hired a consultant to do something in operations or sales, you could see if you could be on their team and on at least a part-time basis, just to learn what they’re doing because they’ll go through a very intensive, analytical process on the company and you might learn a great deal, even if you participated in a small way. I’ve done that for folks and I think they learn a lot in a short period of time.

Well, I feel like to be a good senior executive, you need a lot of different experiences. It’s just not all linear. The industry is going to change, the technology changes. The job you wind up in could be one that you’re not trained for every aspect of it on that day. So, having a lot of different experiences, potentially in at least a few different companies could be really valuable. I like to talk to people who have just been around the block on things. They’ve seen a whole bunch of different issues in different industries. They understand how things work. And if they see something new, they have a mental model that helps them learn about it and deal with it.

And in a lot of areas, the other thing I want to see people have experience in different areas like sales and manufacturing or finance and marketing. So, they see the whole business and how the pieces fit together. I interviewed two folks years ago. One was a senior engineer and executive who knew more than anybody else in the world about manufacturing that part of the airframe and obviously very, very smart, but that’s what he knew about. I also interviewed somebody literally the same day, who worked for a very small manufacturer. He had been in sales, marketing, quality assurance, finance, operations, and management. So, he knew how the whole business stitched together. And they were both valuable executives, but they looked at businesses very differently and understanding how businesses are all stitched together. It is more and more important the more senior you are in a company.

And lastly, spend some time getting the perspective of the customer. It might mean just visiting the customer. It could mean traveling with the deliveries and seeing how they use the products you sell, seeing how it’s used in their factory or in their business. Seeing how they make certain decisions about who they’re buying from. What’s important to them. I think looking from the customer back, there’s a very different view than looking from the supplier forward. You pay attention to a lot of different things. And having that customer view, I think is incredibly important because if there are changes coming in your industry, to your company, they’re coming from the customer first in some form.

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