Interview with Steve Andriole, Chief Technology Officer, Safeguard Scientifics, January 24, 2000           

W = Wharton     SA =  Steve Andriole

W:  What are the three qualities that you would pick out as different from bricks and mortar businesses, leadership qualities, and how that differs from e-commerce.

SA: The kind of leadership qualities that one needs to survive in a dot com world, or the so called Internet time, is you really need to be able to think, obviously, outside the box, creatively very fast, and you need to adapt to unpredictable circumstances.  You cannot be a linear, sequential thinker in this world.  You’ve got to be a non-linear, parallel processor, otherwise you’re dead.  You’re just simply dead.  The whole idea that I’ll learn a little bit of stuff, or even a lot of stuff, and then I’ll use that as my springboard to making decisions for my business strategy, or my technology integration, or my marketing strategy, whatever it may be, that assumption is false because things are not a simple extrapolation from the past.  Rather, they’re being hit from all directions simultaneously.  You have to be able to rise above that, synthesize, and be adaptive.

W:   Do you think that might shift back as this industry becomes more mature and something else will replace it then?

SA: I don’t think we’re going to become more mature.  I think the Internet will, of course, like all innovations, be absorbed to some significant extent, and that will cause it to.. there will be less questions like I just answered.  What’s so unique about this?  It will be sort of taken for granted.  I think, though, for things to change in general..  it’s not likely to slow.  Whether that’s fueled by the Internet or something else remains to be seen, but the pace of change is not likely to slow.

W:   That was going to be my next question, then.  In addition to the need for adaptability and parallel processes for thinking in those lines, what do you think is a key leadership skill for such a fast growing environment?  Is there something else that’s specific to the speed of the change and growth in this industry?

SA: Well, I think you have to be, by definition, a centralized thinker, someone who’s capable of doing real time adaptive delegation, because the nature of change and the pace of change is such that there’s no way you can get your arms around things.  Rather, you have to be able to get your arms around who in the organization can get their arms around the pieces of the change.  That’s the real difference.  The old command and control leadership styles, they’re orthogonal to the Internet.

W:   Right, okay.  That hits really straight into the next question.  Specific individual leadership qualities that are more relevant to the e-commerce sphere than they are the old style economy.  You just said that the command and control type of leader is going to disappear in that realm.

SA: Let me try something out first before I denominate the command and control versus other styles, and it has to do with leadership capabilities.  Those capabilities in the Internet world are that people in the past could either survive by either being very deep in one particular area, like they knew distribution, or they knew manufacturing, they knew fulfillment or customer service, things of that nature, or they could survive by being a generalist.  They could be a mile wide and an inch deep.  Neither of those work in the Internet world.

W:   You need to be a mile wide and a mile deep?

SA: I wouldn’t say a mile, but you need to be at least several hundred feet deep and wide.  You really need to be much more than just a generalist was, sort of the all purpose, utility, corporate guy who may have worked his or her way up the ladder.  You need to know a lot about technology.  You need to know a lot about adaptive business models, B to B, B to C, B to G, whatever it may be.  You need to learn a lot about adaptability and interoperability, sustainability, not just in technologies but in a business model.  And you need to be able to synthesize things cost effectively so that when all is said and done we’ll eventually have a bottom line.  Right now we’re in this sort of juggling period where there’s no bottom line, but the top line is growing, the revenue line is growing.  The bottom line is sort of in question.  I won’t persist so that the leader that survives will be one who totally gets it, so to speak.  Getting it means being not a mile wide and an inch deep, but to have some depth and width that’s substantial. 

W:   How important is it to know these areas coming in, or is it more important to be..

SA: If you’re extraordinarily bright and you have the other qualities we talked about you can learn on the job and you can adapt, but you have to have certain pre-dispositions, both personality and intellectual, to be able to modify, morph, adapt – all those great words – into real time.  It’s better if you’ve already been through that.  WE certainly look at CEOs who’ve been there, done that, as a major criterion for selecting companies to acquire.

W:   Would you have a couple of specific examples of folks out there that you just think are superb leaders in this realm?

SA: Well, I think the CEO in VerticalNet, for example, Mark Walsh is....  He’s capable of tactical execution of a constantly shifting vision.  Think about that for a minute.

W:   Say that again.

SA: Tactical implementation of a constantly shifting vision.  How do you do that?  That’s an oxymoron?  How do you implement a strategy that’s always moving, a moving target, with tactics?  That’s what you have to do.

W:   It’s trying to hold onto a ghost.

SA: To some extent, but it also means you don’t make decisions that will lock you into anything.  So if you’re making technology decisions you make decisions that scale, that are secure, that can be backed up and all of the above, without committing to a particular technology that will close off options to you in the future.  In the past we never worried about those things.  You go down a particular proprietary path with one vendor in the past.  “This will work out, this will largely solve my vertical industry problem,” whatever vertical industry problem.  But today you wouldn’t do that.  Today you’d think more open, you’d think more adaptive, more flexible, because you’re going to have to respond to that strategy that keeps reinventing itself in real time.  You have to be, back to someone like Mark Walsh, you have to be someone who’s simultaneously a terrific tactician and a brilliant strategist.  Hard to find.  Most people are great at either execution operations day to day but terrible at strategy, and vice versa.  Have to be both.

W:   Yeah, sort of a secondary question just popped into my mind.  Which is more important in a leader today, understanding one’s strengths or understanding one’s weaknesses?

SA: You know what you don’t know?  First of all, I think that in general – now that we’ve crossed into the area of psycho-babble and pop psychology – people that are comfortable with things changing all the time, people that are comfortable with delegating and decentralization are not insecure people.  The man in control, to a great extent, was something that the insecure hid behind.  The old hierarchical management structures, you didn’t have to know a whole lot because things were done because you said so and you had the most stripes and the most power.  If you run your Internet business that way you’ll be crushed because every decision will have to float up hierarchically, and you’ll make decision at a rate that’s much slower than your competition.  You’ll be crushed.  Consequently, you have to be more comfortable with rapid, decentralized, fully distributed decision making, which means you better not be insecure, you better not have a need to know everything, you better not have to be the only one that can approve things or you’re dead.

W:   You better be able to sign off on decisions which you’ve trusted people to make.

SA:  Yeah, you [inaudible] 600, 700, about 1000.  You can’t go ballistic when they only hit 700.

W:   Would you say that the criteria used to define success and leadership is shifting, and if so how?

SA:  I think it [inaudible].  If somebody comes in who is the proposed CEO for an Internet company and in their background you see they worked 20 years for a Fortune 50 company, it’s a red flag.  What it signals to us is that they’re modus operandi will be probably consensus driven, probably committee driven, probably very political – that’s how you survive in those organizations – which is exactly the opposite qualities of being adaptive, creative, risk taking.   So the new criteria have to do with to what extent can someone adapt and take the risks and do all the other things.  To the extent that somebody’s spent 20 years in a Fortune 50 company, it’s probably unlikely they can do that.  Those skill sets don’t translate in the Internet business.

W:   So, I mean, then you have to look harder at that individual and what they’ve done as well, and why they’re making a transition, because after 20 years in a Fortune 50, wouldn’t that also indicate someone who wants to take on some risk?

SA: Yes, after they’ve educated their kids and made their money, bought their big house?

W:   Fair enough, fair enough.

SA: There’s no risk taking there.

W:   I was thinking more along the lines of somebody who’s 38 years old and stepping out – so they wouldn’t have been there 20 years – but stepping out of the comfortable corporate culture.

SA: It’s a question for us.  Why would somebody stay there so long, and then once they decided to leave, why are they leaving?  Then the third and final question is, if they leave are they able to kind of shake off that culture?  You have to shake that culture off.  That culture’s deadly to the Internet world. 

W:   As a leader in [inaudible] in looking at the fundraising and private equity in high tech environments, what are the three areas of greatest importance to you in your role as a leader?  Raising money, personal issues, what are the three top issues that you deal with?

SA: To some extent it depends on the nature of the company and what the objectives are.  Let’s take a common scenario, which is to take a company, grow it, convince the world that it’s great, take it public, and then sustain it over some period of time.  Well, those skills are more outward skills.  What you need to be able to do is to be able to craft the vision, communicate the vision, sell the vision, and then nurture and evolve the vision.  Those skills, you’ll spend as much time talking to Wall Street, talking to analysts, talking to money managers, obviously talking to customers.  On the other hand, if you’re building a business, the outcome of which is an acquisition, then you want to build a sound business with good technology, bullet proof technology, great internal processes.  You want to be a Chief Operating Officer, and that’s a good outcome too, but they’re two different skill sets.

W:   The time frame on both of them is different too.  It would seem to be, in this day and age, you can take more time with the second than you can with the first.

SA: I’m not sure about that.  The idea is that you’re going to build a terrific technology and grow a nice organization that will be acquired by Cisco, then you better move pretty fast because there’s lots of people out there, probably, with competing technologies and with organizations just as good.

W:   How do you decide, when you’re faced with the executive summary of a business plan that brings into it some interesting technologies, some management you trust, and looks like it might on the face of it go either way?  How do you prioritize a decision process to take it one way or the other?

SA: Well, in that case, in Safeguard’s case, it’s relative easy because we are general limited partner for a private equity venture fund, so we might share it with them, or we might give it to them which is still in our vested interest.  Or we may walk away from the deal because it doesn’t have the outcome that we’re looking for.  If we truly don’t know we’ll ask for help.  Around this campus there’s plenty of help and we’ll ask some people to look at it.  But you look at all the criteria, it’s not just can this person take the company forward, but rather Safeguard in particular takes the long view.  Is this a sustainable business model?  Will this company, after it goes public, be around for an indefinite number of years and is the management team, including, obviously, the CEO the right team to do all of those things, not just take it forward but sustain the model long term.

W:   What’s long term for Safeguard in terms of a time frame?  Does it depend?

SA: Took Cambridge public in ’93, founded in ’91, here it is year 2000.

W:   I saw the tombstone up there from taking them public.

SA: Yeah, I mean it took Sanchez, what?  Thirteen, fourteen years?  We are exactly the opposite of a VC.  We stay with the company for a long period of time.

W:   You talked about using delegation and having a certain competency in leadership abilities.  Both of those things can be used effectively to motivate people to work for you and to motivate people to catch your vision.  What else is important that you see?

SA: One of the things that we see a lot of with the Internet companies is it’s not just the qualities of the individuals but also the overall culture.  Now we all know that the quality of senior management defines the culture, but to extrapolate from this conversation, if you have it decentralized, you have a flat organization where people have a general understanding of what they’re supposed to do, they know they can take risks, they know they’ll be rewarded for taking risks even if they don’t always work out, you’re creating a culture that will be a culture that can adapt and can respond to the changes.  If you do it any other way you’ll probably constrain yourself and your ability to respond to the competition in the overall marketplace.  So we look for a management team beyond just an individual that can together can create and sustain a culture that everyone kind of feels empowered within, that has the qualities to make you successful as an internet company.  Now again, back to the same things we’re talking about:  adaptive, being able to synthesize, take risks, think outside the box.

W:   Some of the same skills you’d look for in developing leadership people on your own team as well, though, within Safeguard corporate.

SA:  Well, Safeguard corporate is a little bit different.  Our core competency is understanding which companies in which to acquire interest, versus running the companies.  Now, we provide lots of insight into running the companies because most of us worked in big companies or small companies, or founded companies at one point in our career, one time in our career or another.  So we understand that, but we don’t day to day run a company.  The skill sets here are different.  The skill sets are very different.

W:   Building a leadership team, from your standpoint, what does it take within Safeguard to build a strong leadership team to support you and senior management, and how do you integrate new people into it?

SA:  Are we talking about Safeguard now, or the companies?

W:   Safeguard right now, initially, and then beyond that because they are going to be different.

SA: Well, given again the mission of Safeguard, which is to seek out great trends and great technologies and great companies and great management teams, you look for people who understand how to do that, who can simultaneously think visionary.. what’s the next new, new thing, versus those who walked into “I want to exploit the hell out of this technology that I have some understanding of for the next 20 years.”  You look for people who can do the tactics as well, and that would be the due diligence, that would be the recreation of the business model which often is a part – not always but often.  It’s the helping with the strategic partnerships and the relationships, getting deals done.  So it’s all of those things.  Again you have visionary and you have tactics, strategy and tactics, strategy and tactics.  Just blocking and tackling those doesn’t do it.  You can sort of define yourself, any organization.  In fact, more traditional organizations define themselves as “we know how to block and tackle.”  You also need to be able to create the next offense.  So you need to be very creative about – to belabor a football metaphor – the west coast offense is pretty cool.  Tom Landry invented the shotgun.  I mean, that’s pretty cool.  So you’ve got to be able to block and tackle, but also say, “Wait a minute, wait a minute, there’s a whole new way of doing this!”  Some people can do that, some people can’t do that.  We need both, so we look at people who can do both.   There’s unusual people at Safeguard, very unusual people.

W:   Looking at the companies that Safeguard builds and grows and works with, it would seem to me that a threat you face is losing your talent.

SA:  At Safeguard?

W:   Not at Safeguard, but your companies that you’re nurturing, the vertical nets, the..  as they get more successful.

SA: Yes and no.  Look at the lifecycle for a minute.  I think that as long as the companies [inaudible].  Cisco has not had that problem.  Why not?  Because the options continue to be workable and more money keeps footing the stock, and people are getting wealth here.  Even Microsoft – although just recently, just recently it looks like they’re starting to see a little bit of a brain drain.  Just the beginnings of that.

W:   But it’s not just the options and the money.  Clearly there has to be other stuff that goes into that process.

SA: Is it still fun?  Is it still lucrative?  And do I still feel as though the organization with which I’m affiliated is having influence in the world?  The comment that Gates made was kind of interesting when they interviewed him about Palmer taking over CEO and him stepping down and becoming the Chief Software Architect – great title, especially for him.  He kept talking about this, and how do you feel about that.  He kept saying, “Well, it’s sort of fun to rethink it” – in fact [inaudible]  His comment was, “Steve Palmer and I were just talking over the weekend about this.  It’s sort of fun to have the influence over the world that we have.”  That was a curious but accurate statement.  So when he thinks about it, when Gates thinks about it, it’s like, “I changed the world.”  If you’re changing the world, and whatever world size is important to you, and you’re making money, and you’re having fun, there’s no reason to leave.  If any one of those three things – they really are three legs on a stool – if any one of those three begins to get weaker than the others the people start to rethink their decisions, especially if the other two are true.  So if you’re no longer working at a company that’s having an influence over the world, but you’re already rich, and you’re no longer having fun, you’re probably going to leave.

W:   So then the successful leader in this sphere needs to focus on that, spend a good bit of time on it.

SA: Yeah, it’s a great point, because I think a lot of good leaders – and we talk about this a lot – need to be able to externalize their visions,  communicate and articulate their visions.  But they also need to be mindful of internal bugs.  It’s not just the external bugs, but are we having fun around here?  I think that’s a challenge for a leader.

W:   To keep the people going home every night and saying, “That was a kick in the pants.  I want to come back tomorrow and keep doing it.”

SA: Right, even though you’re probably exhausted.

W:   At Safeguard do you think that culture exists?

SA: The culture of which?  Of having fun all day?

W:   Yeah.

SA: Yeah, I think most of the people have fun.

W:   And what’s the driving force behind that tone, what created that environment?

SA: That culture, which ultimately extends to _________.  No question about it.

W:   Does he do things that can be applied to other environments?

SA:  Oh, I don’t know.  Now we’re really being..  He’s Pete, I mean..  If I were to come in and say, “Okay, he’s Pete,” and you sit next to him and you talk to him all day.  You can’t just get away with saying, “It’s Pete.”  You have to quantify or you have to define it.  There’s an enormous amount of respect here for everyone.  Everyone here is really talented and Pete is a symbol for people that can go off and do pretty great things in lots of different places.  So why do they come in every morning?  Well, because the environment is one of respect, it’s one of fun.  You take yourself not too seriously, but not too seriously.  Work good on the bad days, work good on the good days.  I think it’s..  if Pete were a pro football coach he would be the best director of talent there ever was because he sees talent not just in terms of do they know the law, or technology, or money, or engineering, but will they fit into the culture, will they be good to work with, are they good people.  You put that all together and you’ve got a good team.

W:   Looking at bricks and mortar businesses that are trying to transition to some aspects of the e-commerce world, or have fought this transition, have you had experiences in your career where you dealt specifically with the management of a company that was sort of resisting that move, and if so how did you handle it?  What can you do as a leader to..?

SA: There are a lot of companies, Fortune 50 companies, Fortune 100 companies, Fortune 500 companies which, when the internet first appeared, resisted it dramatically because it changed the order of things.  Let’s face it, the internet levels the playing field.  A lot of people who have a vested interest in the playing field being stacked resisted that, fought that.  They fought it as individuals, within organizations, and they fought it as representatives of their industries.  Those who fought too hard have already lost or are about to lose because this is a scenario we’ve never seen before, at least not in my lifetime.  So, I think..  There’s all sorts of techniques people use to try to wake up these executives that the world’s about to change.  I always apply the demographic tests.   This is going to sound cold, now.

W:  To management?

SA: To management.  If somebody’s 59 years old and they’re fully vested in a great retirement program and their options are like pouring all over the room, you’re not going to change them because they don’t have any long term vested interest to change.  It’s a personal view where if I think if someone is nearing the retirement eligibility age – I’m not suggesting year of retirement – they’re getting into the age where, you know, 55, 60, they’ve worked hard their whole lives and somebody comes along and says, “You know what?  You need to turn your whole life and your whole business upside down, and you need to work 80 hours a week, and you need to distribute all of the power that you’ve accumulated throughout your entire career to people who are half your age and be happy about it.”  I don’t think so.

W:   No, there’s no incentive.

SA:  Zero.  Negative incentive.  Hugely negative.  So for some of these industries that are run by people that fit those characteristics, they have a problem.  They have a major problem.

W:   So what’s the solution?  Clearly there’s no band aide for it and time is going to..

SA: There is no all purpose solution.  There is no solution that works for everybody.  I actually think the boards of directors need to play a more active role in seeing what’s happening and causing change.

W:   Aren’t the boards often hamstrung by the same demographic factors?

SA: Yes, often, but not always.  Cambridge Technology Partners, one of our companies, has actually got a little seminar going on and what it says is, “What boards of directors need to know about information technology.”  It hits this directly.

W:   Are they listening?

SA: Yeah, they’ve got a little practice, so I guess somebody’s listening.  It’s a way of saying a wake up call to the board because you can’t always expect internal change when [inaudible]  Sort of like re-engineering, in a really terrible sense.  You know that in retrospect.  The people that are doing the re-engineering are the people that have the vested interest in the new organization after the engineering.

W:   Hey, consultants love it.

SA:  Consultants love all these.  Consultants love mayhem, they always will.

W:   What would you say, if anything, to specifically the 700 and some odd first year students at Wharton who are looking at career changes, where they want to go after this, looking at the old school banking, consulting routes versus e-commerce?  What would you tell them to look at seriously in their lives and figure out what they need to figure out to be the best leaders?

SA: There’s nothing wrong with career paths that start you out with what you just defined as a traditional company.  The advice I would give them – and I follow this in my career – is to always be thinking about the next gig.  Always be thinking about how you can leverage the experiences you’re getting in one place onto an unrelated space.  So, for example, if somebody is a consultant of some sort, let’s take I banking for example, and maybe you’re an analyst in an I banking firm.  You know a lot about what drives successful [inaudible] that company.  Well, why not take that knowledge and instead of going to work for a bigger I bank, or even starting your own I bank, start a dot com company and just apply it.  It’s an extension but it’s like “one of those” in those I bank careers.  That’s what all of us can be thinking of.  I love Tom Peter’s view of all this when he talks about “brand new”.  Whenever someone asks you to explain your career, never explain it in terms of chronology, always explain it in terms of what you did.

W:   Skill sets.

SA: Right, and as a footnote, you just happened to be at this company when this happened.  Companies hate this because it basically makes them, as an organization, unimportant.  But that is the message that Peter is now [inaudible].  Develop the skill sets that are extensible in counterintuitive ways, and then see where it takes you.

W:   And look at yourself in a counterintuitive way.  That’s all the questions I’ve got today on this.