Welcome to Bold Agendas, a series of thought leadership podcasts dedicated to the discussion of transformation management. In each episode we address a topic of strategic interest to business leaders who are guiding their organizations through transformative change. In today's business landscape, driving sustainable success requires more than just responding to the pressures of growth and disruption. It demands a cohesive vision and disciplined execution. Leaders today face a rapidly changing environment where operational excellence, innovation, and long-term value creation are essential. Building a culture that fosters resilience and adaptability has become a fundamental leadership challenge. Technology, economic shifts, and cross-functional collaboration have created new paradigms where leaders not only are responsible for growth but for navigating their organizations through unprecedented times.
To help me explore these themes today, I'm honored to welcome Dave Cote. Dave is the former CEO of Honeywell, where he led a transformative period of growth and innovation, achieving record profitability and operational resilience. Under his leadership, Honeywell delivered total shareholder return of about 800% over his 16 years, two and a half times the S&P 500, with a market cap increase from 20 billion to 120 billion, all while maintaining financial discipline and building a performance culture that has become a model of operational excellence. Post-Honeywell, in February 2020, Dave played a pivotal role in taking Vertiv Holdings, a data center products company, public through a special purpose acquisition company (SPAC) transaction. The shares launched at $10 a share and are now $125. And in the last few months, Dave's investment firm bought a majority interest in a NASDAQ company, Compo Secure, that makes metal credit cards. Since his interest, the shares have risen from $8 a share at its purchase to about $40 a share now. Known for his focus on long-term results, innovation, and building a legacy that extends beyond numbers.
Dave's insights into leadership are both practical and inspiring. In addition to his commercial work, Dave is the author of two books, Winning Now, Winning Later, and Being a Leader, and he's an industry speaker and advisor sharing his expertise on operational excellence, technology strategy, and the importance of financial discipline. He brings a wealth of knowledge on how to lead through economic cycles, build resilient teams, and create a leadership legacy that endures. This promises to be an insightful discussion, and I'm beyond grateful to have Dave here to share his philosophy and experience. My name is Mimi Brooks. I'm the CEO of Logical Design Solutions, a business strategy and transformation consultancy, and I'm a leadership coach. And today we're going to explore the issues of running a conservatively bold agenda, the art of industrial innovation, and the enduring lessons from Dave's transformative leadership journey. Let's get started.
Welcome, Dave. Thank you so much for your time and for joining us today. It's really quite a pleasure and honor to have you here.
You're very kind. It's appreciated.
I have to thank our mutual friend Brian Marott for introducing us and making the request to have you come on. So I'll do a little plug for Brian, and I appreciate you taking his email on it. Well, you know Dave, I thought maybe I could start there, before I jump into our idea of how you balance operational excellence with a growth strategy, because that's really the epicenter of what I wanted to talk to you about today. But in order to get a little prep for this, I looked you up on ChatGPT to see what does it say about you. I just want to tell you this because you might not know it.
No, I don't. That's why I'm curious.
Okay, so let me tell you. It says that Dave's a remarkable leader, an icon CEO in US industry. By the way, I want to tell you I think that's true. But here's an interesting thing, it said that your leadership style is characterized by integrity, strategic vision, operational excellence, and people development, including workforce and leader development. So my question is...
Nice. I'm surprised they didn't say I was demanding also, because I think most people would, most people who've ever worked with me would say I can be pretty demanding.
I don't think that mines Glassdoor, so I think that was out. Anybody who said it, I think it was out. But my question is, you know what's funny, there isn't a lot about your background and history on a personal note, and I'm not asking that. What I am asking though is what business or life experiences, Dave, in retrospect, gave you some of these leadership qualities and persona that you have today?
Well, I guess one of the ways to think about it, I've been asked in the past about who are the leaders who most inspired me or who I felt I got the most lessons from, and I've always said the same thing. The first time I was ever asked, I still say the same, my biggest role models for me in leadership were my mom and dad. They only had eighth-grade educations. I mean, my dad had six months, my mom had like two days of high school. But they were really pretty, let's say, thoughtful about life and how you had to handle adversity and what it took to be successful. And not because they'd seen a lot of success, because we lived in a small town, there weren't a lot of people to look at, but it's just stuff like developing independent thinking, which you've probably seen I talk about a lot. They say independent thinking is a lot more rare than being smart. I mean, my dad used to always say, 'Be a leader, not a follower.' My mom used to always say, 'Just because your friends jump off a bridge, you're going to jump off a bridge? Think for yourself.'
I can tell you as a kid it is really irritating to keep hearing that, but by golly it does stick with you as you see your own parents doing it, thinking for themselves, because they encourage it so much. And by God, you find out that, geez, you can think independently too, and I always have. And I think it's really, really helped in terms of one of the things that you want to see in a leader. Another one was just having respect for everybody, being honest about everything, admitting when you did something wrong and just speaking up and saying it. Having respect for everybody and how you behave, no matter how far you go up. I remember my dad always used to say, 'Remember, the higher up the flagpole you go, the more they can see your ass, so always keep that in mind.'
And I mean just colorful ways of thinking about it. My dad, I mean, I tell the story, I can remember being 12 years old and I worked in his garage for the princely sum of zero per day, which is the way things kind of worked back then. And we were sitting on the curb of the garage, which was highly unusual because that meant there was absolutely nothing else he could think of for me to do, because he was always thinking of something that needed to be cleaned or washed, and so he kept me very busy. And we were just sitting there, all of a sudden this car comes in, and my dad got up with his normal cheery greeting for the customer. And this guy gets out of his car, older guy, and he just starts yelling at my dad. And I'm looking at my dad. My dad was a tough guy, World War II vet, wounded, he was a tough guy. And I remember looking at it saying, 'Oh my God, I'm going to watch my dad pop this guy, he's just going to let him have it.' And instead, my dad just kept saying, 'I'm sorry, I'll make it right, I'll take care of it, I'm sorry.' And I could remember just sitting there, I didn't move, I just watched the whole thing. My dad comes back, sits on the curb, and at this point, as you might imagine, I'm not saying a word because my dad was kind of like, you kept your mouth shut generally. And I still remember, he just kind of looked off wistfully and said, 'You know, Dave, sometimes in life and in business, you got to put your pride in your back pocket.' And that's all he said. Wow, man, that, I mean, here I sit 60 years later, that story still sticks with me. And you know, there are those times in life where you just got to make the smart decision and say, okay, I got to eat crow or I got to swallow this even though I don't want to and I don't like it, but I think about my dad, oh man. It's a lesson in humility. It really was, and he was, this did not come easy.
You know, I really didn't know anything about your background in terms of where you grew up and everything, Dave, or your folks. I wouldn't have known that. But I did know that you went to the University of New Hampshire. So did you work when you went through college? Did you work? Because I feel like you would have worked through school then. Is that true?
Yeah, I didn't so much the first two years, and instead I just didn't spend any money. I didn't have any money, so I just had enough to go to school working summers and savings and what my parents were able to help with. And then the last two years, I was actually kicked off campus. I was not allowed to live on campus any longer. I was called to the Assistant Dean of Students office at the end of my sophomore year and told I wouldn't be allowed to live on campus any longer. And I said, 'Why? Why? What did I do?' I still remember, she said, 'It's no one thing. It just seems like wherever you are, there's trouble. You are just a general troublemaker.' And I'm still kind of proud of that. Unfairly tried and convicted. I mean, you could tell I'm still kind of proud of that. Now, interestingly, she ended up, I actually connected with her like 40 years later. She was the chief of staff for Senator Judd Gregg from New Hampshire. And I mean it was just kind of this funny connection to make. And she didn't remember me, I of course remembered. I didn't remember her name, but I remembered what had happened. So from that point on, I just said, well, this is ridiculous, I'm just going to work nights and go to school days, and that's what I did for the next two years, including taking a year off. I quit to be a commercial fisherman with a buddy, which was a whole other story.
Oh my gosh, you were too funny!
Well, let me tell you, like I said, I was pretty much a screw up for most of my early days.
So, you know, I think sometimes it's really not that unusual when you see these really great Ops CEOs that know how stuff works, know how to get things done, blah blah blah. They're not always the Ivy League school people too. At the same time, I'm kind of interested, you ran a strategy that I think is hard for a lot of people to do, one that balanced operational excellence with innovation. I mean, it's a lot harder to do than to say it, right, Dave? Like, how do those really, I see leadership teams struggle with it all the time, especially now with some of the investment choices that need to be made. So what's essential to success? What have you learned in being able to run a strategy that balances that?
Yeah, I think probably the difference is I've never viewed it as a balance. And I can remember being asked by investors when I first got to Honeywell, 'So are you going to be a growth company or a productivity company?' And I would tell them, 'Yes.' The two go together. Yes, I am. The two go together. If you grow, you become more productive, and the more productive you are, the more you grow. And so the two go together. And there's this, the premise of my book, Winning Now, Winning Later, was this whole idea that success comes from accomplishing two seemingly conflicting things at the same time. And everybody always wants to know, outside, inside a company, 'All right, what's the one thing you want me to do?' It's kind of like that old Billy Crystal movie with Jack Palance, if you remember, where he used to say, 'It's just one thing. Figure out that one thing.' Well, it's never just one thing. It's simple movie stuff, but the reality is it's always two seemingly conflicting things.
So think of it this way: do you want low inventory or do you want great customer delivery? Do you want people closest to the action empowered to make quick decisions, or do you want to have good control so nothing bad happens? Do you want to hire people for open positions quickly, or do you want to have the absolute best person for the job? Do you want to have growth in your company, or do you want to have high productivity? It's always the same thing. You got to figure out a way to do both. And do you want good short-term results or do you want good long-term results? The premise for the book, you always got to figure out how to do both. And that's the approach that I took with Honeywell, was we were going to grow and we were going to focus on productivity, and the two went together. And I think we kind of proved over 16, 17 years that they did.
So Dave, is that a lot of balls to put up in the air for some leaders who might have been on your team? In other words, is it a strategy that some leaders struggle with, working for someone like you who runs an aggressive strategy on all cylinders? How did you experience that in terms of leadership team adaptability, and what made a great team working around you?
Well, I mean going back to the beginning, like I said, I was surprised that ChatGPT didn't say I was demanding, because that's the phrase that gets put in there and kind of the comments that I would make to people, they would think were just impossible. But I was always kind of struck by this old line, it's got to be at least 50 years old, that says, 'Progress is made through the irrational demands of general management.' And the scary part about that is, it's said in a silly way, but it's true. And you've just got to be able to say, this is the way we're going to think about things. And getting back to, we've talked about incremental boldness, you've got to be able, if you just say, 'Hey, we need to be 10% better,' everybody figures out how to make the gerbil just run faster on the wheel, and that's a big stress creator. But if you say something like, 'No, it needs to be 50% better, product cost needs to be 50% of what it was, cycle time needs to be 50% less,' you can't accomplish that unless people totally rethink their world, rethink their processes. And I call that the white sheet of paper exercise. Now, the interesting part is once people start to do that, they find it fun, because it's remarkable how they can transform their own business, their organization. They end up with something that they're extremely proud to talk about. I'd say the second piece of that is you have to find people who want to do that. And I always said I want the people who want to go home at night bragging to their spouse and kids about what they got done that day. I don't want them going home and bitching about the benefits or 'my boss is a twit' or, you know. I want them going home and saying, 'Oh man, you won't believe what I did today or what I accomplished.' And that's true for our employees, this is across the organization. Those are the kind of people that I wanted, and we actually hired for them, including our hourly folks.
So you're saying, Dave, that if we run aggressive strategies like that and we engage people to be a part of it, because that's a big idea, right, to get them to co-create against seemingly difficult, if not impossible-to-achieve outcomes, but they're in the soup, right, they're in the soup along with the leadership team. And in fact you feel that with the right people, it was both positively challenging and empowering, maybe?
Oh, absolutely. And I think most people, so we didn't have to have huge turnover in the organization to find people like this. They're generally there, they're just not asked to do it. They're not really asked to engage their brain power thinking about how a process can be better. And I'm a big process guy, as you know, I devote a whole chapter to talking about process. If you start with the premise that every process can be made more efficient, more effective, which by the way is true, and that any business or organization is just a collection of processes, most of them crossing functional silos, and you tell people you're going to have the opportunity to improve your work lives and make things better, it's really surprising how much engagement you get. They really just, they can't stand sometimes the stupidity of the processes they have to work with and feel like management, leadership are idiots for doing things the way they do. You give them the opportunity to fix it and to come up with a better way to do things, it's really surprising what kind of creativity flows from that.
Can I riff off of that for a minute and see if you think we're talking about the same thing too, or how you think about this? You know, Dave, sometimes these themes of simplification, let's simplify the question, let's simplify our approach, makes me a little nutty to tell you the truth. Because I feel like there's a lot of complexity, inherent, necessary, unnecessary, whatever, in organizations today, particularly those that have a strong operational core, if you will. And I feel like one of the difficult relationship problems that we create with the front line is by not recognizing the complexity of the processes that they manage for us in running the business. As the point of rationalization sometimes, the only point of rationalization, are the people that have the tribal knowledge to do what we need to have done, even to the bewilderment of some of the people that they work for. So just knitting together the idea of people being involved in process redesign, managers' perspectives at times that it's a simplification game as opposed to taking the complexity head on, so that we can really redesign the work in a way that it works for the front line and we don't once again have stuff roll downhill to them.
You are, you've got it exactly right. And this chart I include in my book, I didn't make it up, but I've always liked it, that showed process how we think it works, five steps. Process how we'd like it to work, it's three steps. Process how it actually works is 11 steps. And nobody really knows the 11 steps overall, because people doing the work are doing something and passing it on and nobody talks to each other. There's nobody in charge of all 11 steps until you get up high enough where they no longer understand all 11 steps. And that's why I'm a big believer in process mapping. You just map the process and find out what happens, and then where does it go, and what happens there, and then where does it go, whether tedious as it might be.
Right, Dave, tedious as it might be to discover it, right? And all the variabilities of it, etc. But it is what it is, whether you want to face it or not.
Yep. And when you get the people doing the work involved with it, it's really impressive the creativity that comes out of that. With, 'Well, wait a minute, I don't know why, why do we do this step five instead of doing it step two, and we could save a bunch on quality issues?' And, 'Huh, gee, never thought about that, didn't realize it worked that way.' You make the change, now you have. And I guess the other way I've described it is, if you have 10 people thinking about something versus 100 people thinking about something, you're more likely to make progress if you have 100 people thinking about how to make things better instead of just delegating responsibility for making things better to just these 10 people. You're just not going to get as many ideas. So if you can engage everybody in your company thinking every day about how to make things better, you just end up in a better place. It's just math.
So but Dave, isn't that, I love that you said this, isn't that really the essence of digital transformation? That by connecting the organization exponentially, everybody learning, everybody problem solving, reducing the degree of separation between people to other people, to ideas, to resources, etc., you have the whole organization, or parts of it anyways, thinking about the problems that are the most compelling to our growth, success, whatever the issue might be. And if we can harness that learning on multiple time scales, I'll call it, people and machine learning, isn't that accelerated decision making really the promise of digital transformation?
I would say yes, with a significant caveat. And that is, every IT system that anybody's ever put in place has been with that same kind of aim, that this is going to make everybody's lives easier. But the problem with every IT system that's ever put in place is that they start doing work and typing into the machine before they've done all the process work that we just talked about. Every IT system I've ever seen has been screwed up on implementation. And ERPs get screwed up everywhere, largely because they don't go through the simplify the process, standardize the process, then mechanize the process. Absolutely, they don't do it. AI has that same kind of vulnerability, and everybody just starts AI-ing stuff because it's AI. We're just going to get the same kind of mess we always did with IT. So it requires some thought. I do believe it's there. By the way, I'm a big believer in AI. I think it's just the next step in the digital roadmap of this digital age that we're in for at least the next 50, 60 years, and until something new comes along. So it's going to be big, despite what a lot of naysayers say. It's going to be big.
You know, but the lesson to your point, Dave, if I'm characterizing what you're saying correctly, is that the lesson that we should have learned by now, even with the technology that we've been bringing in as core capability, is that it never was about the tech. It was always about the people. It was always about relationships and process, right? People.
Process. I always put those two together. And I always say, almost anything you're dealing with, it comes down to people and process. You focus on people and process and understanding that, and you're generally going to end up in a better place.
Dave, can I just hang for one minute before I move on? I actually have two questions, but one, just staying with this cultural idea for just a minute. When you're running aggressive strategies like you've run, and you do run, what have you learned engages people and what have you learned turns them off? How do you think about culture change, engagement, beyond what we've talked about so far? Any other things that you think are important?
