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 / Summer 2013 / Issue 71(originally published by Booz & Company)


The Wise Leader

To see the world more clearly, leaders need to become aware of, and then set aside, their perceptual filters. This type of reflection doesn’t always come by choice—it is typically forced upon people. Bill Gates didn’t wake up one morning and say, “I want to become a wise leader.” He must have been compelled, by the lawsuit and other factors, to reconsider his leadership style. Gates, who had been known for his intensely competitive personality and take-no-prisoners strategies, made a major course correction. In early 2000, while awaiting the antitrust court decision, he stepped down as Microsoft’s chief executive. He took on the role of chief software architect, which emphasized functional smartness. In the same year, he embraced a higher purpose by establishing, with his wife, the Bill & Melinda Gates Foundation. Although some people initially accused Gates of using his charitable activities to sugarcoat his image, his foundation is today respected and appreciated for its highly effective approaches to combating global challenges. Gates, the successful but polarizing figure, has become more righteous and moral in the eyes of many people.

Tim Cook was driven by Steve Jobs’s advancing illness to change his leadership style. He moved from a narrow form of smartness to a more opportunity-oriented perspective, turning his attention to the big picture and becoming sensitive to the changing context in the world around him. When the factory scandal broke, Cook went to Chinato inspect working conditions firsthand, and he is now striving to improve conditions there and elsewhere. He also started matching employee contributions to nonprofits, encouraging commitment to the greater good. Although he has not fully emulated Steve Jobs’s agenda or style—for example, he pays dividends, which Jobs avoided—Cook has adopted some important business-smart approaches. He discusses strategy with investors, reaches out to developers, focuses on top-line growth, and has defended Apple’s position as a leading innovator by winning a patent infringement case against rival Samsung.

A balanced approach also enables leaders to lead their companies to sustained growth, even through trying times. Here we can look to Ford CEO Alan Mulally as a model of wise leadership. Long before coming to Ford, Alan Mulally was a general manager at Boeing in charge of developing the 777 passenger aircraft. Even at that time, he deliberately cultivated a mix of business-smart and functional-smart actions. Traditionally, Boeing teams operated in silos with little collaboration, leading to project delays and higher costs. Mulally’s job was to coordinate multiple teams and integrate their efforts. In every project review meeting, he began by reminding all teams that they had to factor in the larger system, the whole plane, when making narrow decisions; then he moved to intensive, detailed review of the technical and design issues.

Mulally took the same decision logic to Ford. When he arrived in 2006, the company was losing market share and brand equity. Mulally mortgaged all of Ford’s assets to secure a $23.6 billion loan, which he said was needed to invest in R&D and serve as “a cushion to protect from a recession or other unexpected event.” This decision, made at a time when the economy seemed healthy, was widely criticized. But Mulally defended it on the grounds that “we have to control our own destiny.” Two years later, this business-smart decision allowed Ford, unlike GM and Chrysler, to avoid government-funded restructuring.

Around the same time, Mulally also made a critical functional-smart decision. Walking through the parking lot at Ford headquarters in Detroit, he noticed the plethora of Ford brands, with no common attributes in shape or style. He set about pruning the Ford model portfolio. This allowed Ford to concentrate on improving the engineering quality of a smaller roster of models, to make life easier for Ford distributors and dealers, and to reuse components across brands, reaping big savings on supply chain costs.

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