Angel Mehta: Give me a sense for what it was like to grow up in an IBM family.
Bob Dutkowsky: I grew up in a small town in upstate New York called Endicott…which I guess as you know, was famous for being the home of IBM. It's this little town of about 20,000 and probably 75% of the people worked at IBM. My father worked for IBM for 44 years…he went to work everyday in a white shirt and tie and I thought everyone did the same because that's just how the town was.
Angel Mehta: So what kind of values did that upbringing develop in you as it applied to the kind of CEO you became later in life?
Bob Dutkowsky: Well, I will tell you that my father had a TREMENDOUS work ethic. I remember there was one summer where he worked seven days a week and the only time I would see him is at Church. My mother would bring a new suitcase to church, and he'd show up to meet us there, take the suitcase and change clothes, and then he'd go back to work for the week. This was around the time that the big IBM mainframe came out. So early on in my life I got this impression that you did what you needed to do at work and provided you took care of work, work would take care of your family.
Angel Mehta: What are some of the key talents that you think you've brought then consistently to JD Edwards or Teradyne to EMC? What's the most important thing you do as CEO of JD Edwards?
Bob Dutkowsky: I think probably the thing that I respect the most in business people and, therefore, have always tried to make it part of what I add to an organization, is the value of focus and the strength of execution. 'Focus and execution' is what business is all about. You pick out spots where you believe your company or your team has the capability to gain leadership and then you build the plan and execute against that plan. I was lucky because I learned those skills from a couple of really great mentors; Lou Gerstner at IBM and Mike Ruettgers from EMC - these were world class CEO's. Both of those executives lived and breathed focus and execution so I grew up understanding it…I got to see it early from a CEO's perspective….so focus and execution I think are the things that I've always tried to bring to whatever team I was part of.
Angel Mehta: Your background doesn't include running any significant business within the ERP software space so I'm curious about how the challenge at JD Edwards was presented to you. You say your strengths have been 'focus and execution'….so was it presented to you as a company primarily with execution problems?
Bob Dutkowsky: Well first of all, I've known JD Edwards for 20 years. When I was an IBM sales rep back in the 80's, I sold JD Edwards products to my IBM customers so it wasn't like it was completely unknown. But honestly, I lost track of the company in the ensuing years. When the headhunter called me, the first they said was, 'Don't say no' [Laughing]. They admitted that it wasn't necessarily the perfect match and I agreed to not say 'No' without looking at it first. Then they told me it was JD Edwards and I remember saying, 'Well that's a great company!'…It was one of the leaders in the software space…great products…tremendous install base of customers. The only problem is that it was in Denver, and I was living in Boston at the time. I had committed to my family that the kids would be able to graduate from high school in Boston. In my 20 years at IBM, I moved my family 13 times.
Angel Mehta: Did you end up moving them to Denver for JD Edwards?
Bob Dutkowsky: No. I commuted from Boston to Denver for the last couple of years. I kept my promise. My last child graduated from high school last month and goes off to college next month. Moving my wife and the kids so many times was tough…it's traumatic to move that much, but it's also a great developmental opportunity for kids. As I said, I grew up in a static environment…my parents still live in the same house that I grew up in. They never moved. My kids have lived all over the world - Boston to Tokyo. They've seen the world from a much different perspective than I did.
Angel Mehta: What kind of impact does that have on character?
Bob Dutkowsky: My kids are so much more adaptive and flexible then I am. I never went on an airplane until I was in college. My kids have flown all over the world….they've seen Korea, Vietnam….places that you and I see as specs on the map. They have a far different appreciation for how small the world is but also how different it is ….so they're adaptive, flexible, and very accepting of different people and cultures because they've been with so many people and they've had to adapt and adjust. But then on the other hand, my wife and I began to feel like they had no ROOTS. We wanted them to understand the virtue of long-term friendships and commitments and so when we moved to Boston the last time we just said, "We're not leaving this place until the kids graduate from high school".
Angel Mehta: So let's go back to when you were evaluating the JD Edwards opportunity. Your background doesn't appear to be overtly concentrated on applications software. Have you found it to be a disadvantage at all?
Bob Dutkowsky: Look, my skill set after 25 years in the technology industry is 'customers'. Given the choice, customers don't want to buy hardware and software and networking systems and other complimentary technology. They don't want to buy any of that. All they want is to make their business better. They want to get more competitive. The guys in the IT industry are all enamored with these technology 'things' but customers view all them as tools that make their company stronger. That's all there is to it. It just so happens that software is one of those tools. So if you can talk about the virtues of tools (technologies) that make companies stronger, it doesn't matter whether it comes from the hardware perspective or the software perspective. Now, to say that I don't know software is not fair either. As I said, 20 years ago, I sold software to my customers when I was with IBM. I understand software, I understand how to market it, how to sell it, how to position, how to make it more competitive, how to hire good people who know how to deal with software. I just don't know how to WRITE code…big deal!
Angel Mehta: Would you say that a deeply technical background is a liability, then? Do search firms like Sterling-Hoffman make too much of a big deal about wanting deep expertise in this area when searching for CEO's?
Bob Dutkowsky: I would paint the picture that if you already have a competitive set of products, the last thing you want is somebody who thinks they know a lot about software because they're going to come in and try to re-architect the software to their vision. If you have competitive products like JD Edwards had, there's no need for that. JD Edwards didn't need another software architect. They needed a business person.
Angel Mehta: But if you have a weak set of products… Bob Dutkowsky: In that case, you hire the best business person you can find, but that person won't be able to improve the product vision. But at JD Edwards, we have a 1,000 people who know how to develop great products and use our architectures and our technologies to build out world class solutions for customers. You know, one of the things did when we arrived is challenge the company to delivery more software in a 2-year period then we did in any 2-year period in our history. Remember, we're 25 years old so that's a lot of 2-year periods.
Angel Mehta: Right….so how did they respond?
Bob Dutkowsky: How did they respond? They delivered more software then we did in any 2-year period in one year.
Angel Mehta: Did you not find any pushback from inside the organization?
Bob Dutkowsky: No. People wanted to know why we weren't selling more of these great products. Particularly the guys who were working 7 days a week, 24 hours a day to build them. So where the linkage was broke was not in our ability to build the product, but it was in picking the right markets - it was about the focus. In the last six quarters the company beat Wall Street's expectations six quarters in a row … we were the only software company that GREW our revenues in 2002…or at least, the only major enterprise application player. All it took was focus and execution.
Angel Mehta: Those words again. Let's talk about focus and execution in the context of corporate culture. First, what was the JD Edwards culture like when you first started…was it necessary to try and change it in order to execute efficiently? Bob Dutkowsky: JD Edwards had and has a distinct culture - there is no question. It's very much reflective of Ed McVaney…obviously a founder - the 'Edwards' in JD Edwards. What's really interesting is that perhaps because JD Edwards grew up building products for IBM back in the 70's, it shares a lot in common with the IBM culture - though it's a much smaller version of it, you know?
Angel Mehta: Expand on that. How is it similar to IBM's organization?
Bob Dutkowsky: For example, one of the tenets of IBM is a principle that says, 'respect for the individual'. It's this notion that everybody has equal footing in the company and everybody is going to be treated the same way. It's a respectful, honest, and fair place to work. When I arrived at JD Edwards, what I found is the exact same thing….the individual is important…that the company cares about its employees…that your DOOR is always open and anytime of the day or time people are allowed to walk in and sit down and chat with you. There isn't a pretense of organizational structure or hierarchy that dominates the way the company works.
Angel Mehta: So what was it missing from the IBM culture?
Bob Dutkowsky: Well for one thing, it didn't have its bureaucracy because JD Edwards wasn't anywhere near as big. What would take a month to get decided at IBM gets decided in a 15-minute meeting at JD Edwards. You have to do that when you're as small as JD Edwards is - you can either execute, or get run over by the big guys.
Angel Mehta: Let's talk about Ed McVaney. When you were evaluating the opportunity, how much of a concern was it that you'd be stepping into the shoes of someone who had been around for so long…when founders have been with a company for so long, the business is usually merged into their personal identity…how did you deal with that?
Bob Dutkowsky: I would say it was something that I thought about, no question. I was like, am I comfortable replacing a legend? Am I comfortable replacing a guy who the company is named after? In our case, Ed personally recruited me and we spent a lot of time together before I joined the company. I spent a lot of time listening to why he wanted to step aside and why he thought the time was right…I wanted to understand what he had to see in a person that was going to come in and take his place. So I was really comfortable with what Ed wanted in terms of his involvement after I joined the company. We pre-determined how we wanted the transition to go and executed it to the minute.
Angel Mehta: I know that JD Edward is - or WAS - trying to make a push into the Fortune 500 market, and it wasn't exactly successful. Many of our clients - smaller software companies in particular - still regard that as part of their strategy - to try to go head-to-head with SAP at the Fortune 500 level. What advice would you have for them based on your experience of trying to attack that market at JD Edwards?
Bob Dutkowsky: That's a great question. JD Edwards' strength is in what we call, the mid-market - not the Fortune 500. Our products are built to be implemented and deployed very effectively in a mid-market environment…so it's back to my original point of 'focus'. You have to focus on what you're GOOD at. Don't try to throw the 50 yard bomb if all you can do is run 3 yards in a cloud of dust. You have to play to your strengths, though every once in a while you've got to throw the bomb just to keep the other team off balance - that way, you can score some quick touchdowns. For example, once in a while, we go upstream into the Fortune 1000…but we go there only because the customer brings us there. For example, we recently signed a 10 year deal with Walmart for a very specific application. We had the best solution to a very specific business problem they had. But Walmart BROUGHT US there - we didn't do it because we are wild-eyed and crazy enough to go running up into that end of the field, thinking that we can change the game. We aren't going ot go up to every Fortune 1000 company and say, '"Well Wal-Mart bought from JD Edwards so you should too".
Angel Mehta: Do you think it's a viable strategy, then, for a software start-up to try and compete at the Fortune 500 level? Let's talk specifically about applications plays…can they realistically compete against an SAP or PeopleSoft or whoever it is?
Bob Dutkowsky: If I answer the question the way I want to, you'll say that there's no point in anyone ever innovating again. But the answer to your question is 'No.' The little guy can't go up with a good idea and win in the Fortune 500 market. They want tried and tested solutions with infrastructure to support them over the long haul. However, if you're idea is to change the game…to invent a technology or architecture that changes the way business happens…well, then the Fortune 1000 guys might invest in you because they're always looking for a competitive edge. My experience with that kind of challenge is at EMC. IBM holds the patents on storage…they invested it. But EMC figured out a better way to do storage and ultimately took over and dominated the Fortune 1000 marketplace. Yes, it can be done, but you have to change the game if you're going to break upstream.
Angel Mehta: As opposed to being a 'me too' vendor….
Bob Dutkowsky: If you 'me-too' your way up, the only leverage you have is price and that isn't sustainable. There are too many software companies, I think, who have had great ideas but they try to 'me-too' their way into the market and they just don't make it.
Angel Mehta: I want to ask you a question about the importance of talent acquisition. You referred to JD Edwards as a small company, which relative to the companies you've been with, I suppose it is, but certainly JD Edwards is one of the larger enterprise software players. At the startup level, everyone acknowledges that a good portion of the CEO's time should go into recruiting. How significant a task is it for the CEO of a large software company like JD Edwards? Bob Dutkowsky: God what a great question…these are so much more fun then tender offer questions…(Everyone laughing). The short answer is, I think effective CEO's spend an awful lot of their time recruiting, to the point where recruiting is a constant process. You can't NOT recruit. You have to recruit all the time, even if you don't have actual openings. So consequently you know if you do need to hire a person you have kind of a rolodex full of people who you can COMPARE your candidates to.
Angel Mehta: How do you know if you're hiring the right person?
Bob Dutkowsky: Do your homework….and then listen to your gut. Every person that I've ever hired that's been a mistake, I knew - deep down - that they had the potential to be a mistake. The little Devil on your shoulder is whispering…saying, "I don't think so" - but you still went forward because of whatever factor…
Angel Mehta: Like how the candidate looks on paper… Bob Dutkowsky: Right. Every time I've hired a person that hasn't worked out, the little voice inside of me was saying, "I don't think so". I should have listened.
Angel Mehta: Did you ever get the urge to join a start-up? In the bubble, I mean? So many great executives did…it seemed hard to resist, given how easily so the exit seemed to be.
Bob Dutkowsky: Before I came to JD Edwards I looked very carefully at one start-up. It was privately held, no revenue…but it had a product. In the end, I turned it down. I think that's one of those things that you have to be really honest with yourself about. You have to make an honest assessment of what your strengths are. I grew up in companies of 400,000 employees and billions of dollars in revenues with tons of infrastructure. I went from an $80 billion dollar company (IBM) to EMC, which was about a $1 billion dollar company. It wasn't a startup, but there was a HUGE difference in terms of the company's capacity and delivery capabilities. And what I realized is that I liked the smaller company better…but TOO small - ie., the early stage plays you're talking about - didn't play to my strengths necessarily.
Angel Mehta: Is there really that much of a difference between EMC at a billion dollars in revenue and IBM at $80 billion in terms of the experience for you, or the infrastructure present?
Bob Dutkowsky: Oh man, you can't imagine how different it is. Let me give you an example. I think at the time I arrived, EMC had about 8,000 employees and probably the day I arrived 5,000 of them reported to me. I looked at some of the leaders inside the company and figured out that these are not the leaders that are going to take the company to the next level. So I said internally, show me the pipeline of other candidates -up and comers inside the company that can fill these gaps. Angel, if you asked that question at IBM, the next minute you get 25 resumes of internal candidates for every job you have open. And all of those candidates grew up the way you did…they were mentored and trained…you could call five layers of mentors at IBM and say, 'Tell me what this guy is good at and where he needs work." The bench is so deep in a company like IBM…but at EMC there was no bench at all! So the response at EMC is, if you want to make some changes in leadership, go find those candidates yourself. Forget mentors, forget development organization….everyone in the company at EMC was working 80 hour weeks. Nobody has time to think about things like who goes to the next level.
Angel Mehta: Let's talk about next steps for you personally. At this point, you're probably in a position where you don't need to work to live, right? [Everyone Laughing]…so what keeps you going? I mean, what are you motivated by?
Bob Dutkowsky: Did my wife ask you to ask that question? (Everyone Laughing)…Look, I love to compete - that's what keeps me going. Here's little JD Edwards, the fourth player in the game taking on Goliath…the Oracles and the SAP's of the world - and for the last couple of years, we've been beating them. By merging with PeopleSoft I think we have an even BETTER chance to compete against the big players but that's what motivates me. To build a team that's competitive, put it out into the field, tape up your ankles, play the game, and see what happens.
Angel Mehta: Let's go back to the family issue, because I think this is a huge question or personal struggle for CEO's and entrepreneurs all over the world, in every industry. What have you learned about balancing work and family? What advice would you have for entrepreneurs or CEO's that may be just about to start a family and a company at the same time?
Bob Dutkowsky: Marry the right person! (Everyone laughing). I was lucky - I married someone who understands what motivates me and is the perfect partner at figuring out how to make it work. I mean, imagine telling your wife we're going to move 13 times…in every case, I just show up ready to go - meanwhile, she has to find schools and doctors and dentists, games and teams and clubs for the kids…. all that stuff. If you're going to go the path I did, you've got to have a compatible spouse who understands the challenges.
Angel Mehta: It's something that gets decided up front?
Bob Dutkowsky: Yes. My wife and I decided back 21 years ago that I was going to work and she was going to be there for our family - and it's been the perfect partnership. It's not been without its challenges and there are always days and minutes when you question whether this is the right stuff to do….but at the end of the day, we make it work - and it's a tribute to her, more than to me. The other important thing is, my wife - I would say - barely knows what I do. I mean, she knows I'm CEO of JD Edwards and she knows JD Edwards is a software company with lots of employees, but at the end of the day, we don't talk about JD Edwards and the day to day events. I don't go home at the end of the night and have staff meetings. When I'm with my family, I'm with my family. If you get to the point where you're having staff meetings at home every night, it'll get pretty difficult to keep perspective. At the same time, as a result of that disconnect, she's a great person to bounce tough questions off every now and then because she asks all the simple questions that are so incredibly important. She really is the perfect partner.
Bob Dutkowsky is CEO and Chairman of the Board of JD Edwards and Company. He was previously President of Teradyne's Assembly Test Division, CEO of GenRad, and Executive Vice President of EMC. Earlier in his career, Bob spent over 20 years at IBM, including an assignment as executive assistant Lou Gertsner. Send Bob feedback at: bob_dutkowsky@jdedwards.com
Angel Mehta is Managing Director at Sterling-Hoffman, a retained executive search firm focused on VP Sales, VP Marketing, and CEO searches for enterprise software companies. He can be reached for feedback at: amehta@sterlinghoffman.net
