By Angel Mehta, Managing Director, Sterling-Hoffman Executive Search
Angel Mehta: I've talked to several CEO's of late that seem to have learned the ropes at IBM before jumping into the enterprise applications arena; tell me about your personal IBM experience and how it led into the role at FileNet.
Lee Roberts: I joined IBM out of grad school and spent 20 years there in a variety of jobs. My last job at IBM was a global one - I was General Manager and Vice-President in charge of worldwide marketing and sales for IBM's networking business with $4 billion dollars in revenue. I spent probably half of my time outside the United States with our European and Asian markets.
Angel Mehta: How prepared were you for the challenges of global responsibility?
Lee Roberts: Look, I grew up in New York. At its core, New York is a vibrant, high-energy community. I grew up in a very mixed neighborhood and had a lot of friends from different ethnic and religious backgrounds. I didn't appreciate it at the time, but you learn a lot of lessons without even knowing it by growing up in a diverse environment. You often don't appreciate where you came from until you get somewhere else. So the cultural aspect of global responsibility wasn't that much of a shock.
Angel Mehta: So what was the key priority at IBM when you were leading the networking business?
Lee Roberts: A big part of that was trying to rationalize IBM's networking business. IBM came from a world of proprietary systems and absolute market dominance in the high-end of the market…what we would classify as the 'data communications network'. There were really two networking environments. One was data communications, which was largely controlled by IBM, and then there was all the voice stuff that was controlled by AT&T. Then, of course, the Internet came along and disenfranchised everybody.
Angel Mehta: You mean with companies like Cisco and Bay Networks?
Lee Roberts: Yes, exactly. And quite frankly, we got caught napping. By the time I got into that job, Cisco and Bay Networks were already multi-billion dollar companies. IBM found itself in a position where it still made substantial profits by owning the proprietary network, but had a massive gap in its product line that was built by parts that come from companies like Cisco and Bay Networks.
Anyway, part of my job was to help rationalize the business strategy; make sure the operating part of IBM was stabilized and profitable. That was a tremendous learning experience for me. One, because I was not the most technical guy on earth - I grew up in sales & marketing, but was forced to learn the technology side. Two, I had the opportunity to experience a shift in thinking. IBM's view of the universe for a long time was to look at everything from the data center - from the CPU out, and that's NOT the way the world shaped up.
Angel Mehta: The paradigm shift inside IBM happened with Lou Gertsner, I assume?
Lee Roberts: Partially, yes. The Internet really dis-intermediated everything and IBM wasn't fast enough to catch that wave. The last couple of years I was there was to go in as part of a team to sort ideas, determine networking strategy and figure out how to maximize its business. IBM made the decision in roughly that timeframe to get out of the networking hardware business and give that business to Cisco. Instead, IBM focused its core competence around the software aspects of the business, which has been highly profitable for them.
Angel Mehta: From everything I've heard, you were well challenged and very successful at IBM….so why did you leave?
Lee Roberts: I loved IBM and I still do. I view IBM as our major competitor, but it's a tremendous company. IBM had multiple years in a row where it was viewed as the greatest company on earth, and then it fell from grace, but recovered again. In that same period Digital, Wang all the other guys that were "dinosaurs" got wiped out. So IBM was and is a great company.
Angel Mehta: But…
Lee Roberts: But I wanted to run a company. I was 44 years old and the odds of me becoming CEO of IBM were slim, none and non-existent. So when I got the call about FileNet, I leaped at the opportunity and have been here ever since.
Angel Mehta: Didn't it seem like a step down, given how small the company was when you joined?
Lee Roberts: For sure. At IBM, you're running a $4 billion dollar business, and have 2,000 people working for you when one day somebody calls and says, "How would you like to run FileNet that has $300 million dollars in revenue?" Your first reaction is, '$300 million dollars in revenue? My God, I can do that on a Saturday afternoon.'
But what you don't realize is that running a public company is a very complicated thing. It's very different from running a division where you have a controller. All of a sudden, you're accountable to shareholders…you're involved in different legal issues that you didn't experience before. All of a sudden, you find yourself in the chair you wanted to be in and, at times, it's lonely because there isn't anywhere to go. You've got to make the decision and you realize you don't have all the facts and data - but you've got to make the calls because people are looking at you.
Another lesson I've learned has to do with how people perceive you. I don't think of myself as any different than anybody else. Yet, when I come to work, I get different treatment because I'm the CEO - that's just the way it is. Other people look at you differently than you see yourself. So for example, I have a tendency to say things as I seem them, and sometimes people amplify what I say way more than I might expect them to. I still learn that lesson every day. You have to be very cautious about what you say and how you say it.
Angel Mehta: As I understand it the acquisitions for FileNet have been a bit tough. So tell me what your challenges were when you first got to FileNet?
Lee Roberts: You're right about the acquisitions - they went down hard, as they often do in technology markets. Culture and integration aspects were tough. But overall, my challenge was that when I came in, the stock had gone from $60 to $7 in a 9-month time frame. I'm sure you can picture that scenario, Angel.
Angel Mehta: Yeah…so what was the mandate for getting that turned around?
Lee Roberts: The bottom line is that that we've done is continue to steer the company from this notion of being a technology-based company in a niche market to more of a technology/solutions-based company in a much bigger market. Right now, we're really positioned as being a database company. Anything that you can't put into a database, we manage. We've evolved the company to a place where we focus on helping customers do something with that information once they stored it. Which gets us into the whole area of business process management.
The real challenge, however, is growing to a billion dollars in revenue from where we are. The last three years have not been kind to technology companies, as I'm sure you know, and these years have particularly been brutal to companies with failed business strategies.
Angel Mehta: Although broader lessons have come out of that for everyone, don't you think? About the value of real customers and real products…
Lee Roberts: For sure. In 2000, we were a dinosaur. We weren't a sexy dotcom. We weren't growing at 80% and making no profit and spending tons of money on Super Bowl advertising.
We were trying to figure out how to grow at 20% and return value to shareholders at a time when all Wall Street cared about was "could you grow at 300%??" - and it really didn't matter if you burned all the cash you had. We managed through that period really well. And while most companies have seen their revenues cut by 50% or 60%, I'd say 25% of the software companies have gone out of business completely. We've re-focused on a broader market; we've increased our R&D investment substantially. We've been profitable for eight quarters. We've grown our cash consistently almost every quarter through the last 3 years. The company today is better positioned then it was during the heyday of high tech.
Angel Mehta: So now that the recovery is underway, tell me what your biggest fears are about the company.
Lee Roberts: There are a lot of things. There is what I call the 'controllables' and the 'uncontrollables'.
Angel Mehta: The uncontrollables are somewhat pointless to discuss, by definition…so let's talk about the controllables…
Lee Roberts: Controllables are things that, obviously, we can manage. The key questions are:
1) Do we have the right business strategy?
2) Can we execute against that business strategy?
So for example, I'm challenging the development team to build more then they've ever built before much broader set of products then they ever had to build before…so all of a sudden someone who has been an expert in one area now has to know a lot more. Can any given development team react to get the products out? Secondly, can they get them out fast enough? Can they get them at the right quality? So I worry about whether that will happen.
On the sales side, we're going from a world where we had a relatively small sales force that knew one thing really well. Now all of a sudden, they've got to become renaissance sales people. All of a sudden we're saying, "You're not selling two levels down on the IT organization anymore. You've got to go sell to the CIO and to a senior business decision maker." That's a fundamental shift in sales strategy.
The other thing, quite frankly, is keeping everybody together and focused. We managed through some brutal times and we've had to freeze salaries because we didn't want to lay off people. So we had to ask people to just work harder - plain and simple. We thought it would only last ONE year, but it lasted three years. So all you can do is keep going to the well.
Angel Mehta: Although FileNet has approximately the same number of employees over the last several years, it's been relatively successful, hasn't it?
Lee Roberts: Yes. But it's an immense challenge for any CEO: How do you keep people motivated when times are tough? How do you get people to believe and continue to believe that you're doing the right things - even when the results aren't coming in immediately?
Angel Mehta: How does being in southern California affect the company?
Lee Roberts: I think it's probably more positive then negative. We're the biggest software company in southern California so that's a good thing. We can attract lots of people here. The downside is it's not as easy to attract people here as it might be in San Francisco just because in San Francisco if you want to change jobs, you don't have to move or relocate. Then again, there aren't a billion other software companies around here I have to deal with - so we've got a higher degree of employee loyalty. There's much more of a family feeling about the company then you might have in the Valley.
Angel Mehta: What aspects of the role do you hate the most?
Lee Roberts: The biggest challenge a CEO has is bringing everybody with him, and I think that's where I lose the most sleep. Can I get everybody to follow me, even though we haven't given them a raise in 2½ years and the stock is back to where it was? Everybody turns on the news in the morning and sees the terrorists attacked here, or unemployment there. It's depressing. So can I get everybody mobilized to climb this mountain and get the job done? Hard things are asking 10% of the workforce to leave the business. Those are probably the things I hate to do the most but those are things that come with the job. Because at the end of the day it's not a popularity contest; not everyone is going to like you, not everyone is going to think you're doing the right job. You've got to do what you think is right. If you're right about your instinct, you'll get results. If you're wrong, the board is going to tell you to take a hike.
Angel Mehta: Can you tell me whether most of your wins have been the result of luck, or planning?
Lee Roberts: I'd say that determination is the key variable. Luck just means that you happen to be in a place where the opportunity to succeed exists. We're lucky because the enterprise content management space is a real one that's going to be $10 billion in revenue. Fine. And you always have to have good planning…if you don't have a plan you can get somewhere but it may not be where you intend. So by default, you have to have planning. But really, when I look at my life - whether it's competing in the Iron Man or running FileNet - at the end of the day, it's just flat out conviction and determination to get it done.
Angel Mehta: What else besides determination, would you cite as key variables?
Lee Roberts: Well, in a company you can't do everything yourself - you need the help of others. It doesn't matter how bad I want to do it, I can't perform the work of 1800 people every day. You have to lay a path for people and say, 'This is the mountain we're going to take.' But after that, you can't second-guess yourself. You can't get up in the morning and say, "Maybe I ought to change directions and climb that other mountain…" or "Maybe instead we should go surfing today…"…You've got to basically say, 'the die is cast.' Like it or not, FileNet is in the ECM business. Like it or not we're going to be the market share leader, and like it or not, we're going to generate a billion dollars in revenue. How do we get that done?"
Lee Roberts, CEO and chairman of FileNet, continues to guide FileNet's global course. Since joining FileNet in 1997, Roberts has led the company's transformation from a leading document management supplier to the industry's top Enterprise Content Management provider. Feedback on the interview can be sent to: lroberts@filenet.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
