- Center for Entrepreneurial Studies
- Center for Global Business and the Economy
- Center for Leadership Development and Research
- Center for Social Innovation
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No More Mr. Tough Guy
October 2005
STANFORD GRADUATE SCHOOL OF BUSINESS—The advertising superstar who brought us the "softer side of Sears" is now advocating that we see the softer side of the CEO.
According to Peter A. Georgescu, MBA '63, in a new global economy defined by excess supply of everything from capital to human labor, there's no longer any room for the traditional autocratic tycoon. Rather, the business world needs leaders who are supportive of creative endeavors and who foster cooperation and teamwork, and aggressively advocate for the consumer.
"Say goodbye to Mr. Tough Guy, that ugly, mean-spirited tyrant," said Georgescu, chairman emeritus of Young & Rubicam Inc., whose Oct. 25 talk at Stanford Graduate School of Business was sponsored by the School's Center for Leadership Development and Research. "The enlightened leader subscribes to the management style of ‘we'; the ‘I' word loses power, meaning, impact."
Georgescu, who served as Young & Rubicam's chairman and CEO from 1994 until January 2000, was instrumental in shaping the integrated communications strategy that has set the long-term course of the firm and become the standard for the advertising industry at large. Along the way, Georgescu helped the firm successfully transform itself from a private into a public company.
Georgescu said the world is currently experiencing the greatest business revolution of the last 50 years.
"Starting in the late 1940s and continuing throughout most of the 20th century, the demand for products and services far exceeded their supply," said Georgescu. Those with sufficient capital to produce and distribute goods had unparalleled advantages, and all the accepted business wisdom—rules, advice, and best practices—revolved around excess demand.
But in the 1990s, all that began to change. Today most businesses and industries in the developed world are in a state of excess supply: Capital is cheap and ubiquitous; raw materials—for industries as diverse as agriculture and metallurgy—are readily available; manufacturing is now clearly in an overcapacity condition; and human labor is plentiful and inexpensive.
What this means is that the "war" between providers and consumers is finally over—and that consumers have won.
"In the excess supply world, the customer, the consumer, leads the dance. No matter what business you'll be in, always start your analysis from the customer perspective. Always," he said.
Georgescu called commoditization—the condition where all products look alike, feel alike, and perform alike except for price—the "cancer of the 21st century." Ferocious price competition is the new law of the land. And while the ultimate success of China or India over the United States is not certain, it is foolhardy for America to assume otherwise.
"If you are in America, or plan to work and live in America, you will soon find this nation facing the biggest challenge to its economic leadership in over 100 years," said Georgescu. "The playing field has been leveled—permanently."
There is, however, one aspect of doing business that has not—and can never be—commoditized. And that is creativity. As exciting and robust as creativity is, it is also a fragile resource that needs to be supported, encouraged, and nurtured. "It can't be forced," said Georgescu. "It can't be motivated by fear or intimidation."
In the excess demand days—and in a manufacturing-driven universe—a tough, mean-spirited tyrant could not only survive, he—and it was usually a he—could thrive. Humans were simply productive robots: The more and faster they could produce, the better. But in the excess supply world, all that changed. The customer has become king.
As a direct result, today employees increasingly interface with customers, and those interfaces matter more. So, in effect, every employee becomes a creative contributor. The enlightened leader thus needs to know how to motivate, understand, and communicate, said Georgescu. Institutionalizing creativity becomes the first line of defense against the fierce attacks likely to come from China, India, and, later, other developing nations, he said.
"We must embrace creativity. We must learn the creative process. We must teach it at all levels in our schools and universities," he said. "In the end, those managers who understand and respect creative power, and learn how to manage and to harness its force to produce results, will become winning leaders, and their organizations, winning enterprises."
A strong leader also will embrace values as a business strategy. Georgescu pointed to the time more than 25 years ago when he was a young manager working on the Johnson & Johnson account. He witnessed Jim Burke, then CEO of the drug company, pull all the Tylenol pills off the market in response to product tampering that resulted in the deaths of seven consumers in the Chicago area. The firm lost nearly $1 billion in market capitalization in just a few days, but the Tylenol brand not only survived, it thrived. In a few short months after introducing a new safety package, sales, profits, and market capitalization reached new historic highs.
"Sadly, when other leaders faced similar choices, they flinched. They tried to fake it. They danced. They chose the wrong path," said Georgescu, pointing to Enron, Arthur Andersen, Firestone, Merck, and others.
"Values are easy to live by when the answer is obvious and you don't have much to lose by doing the right thing," he said. "Alas, real life is seldom that way."