Is Your CEO A Computer Geek?

In Steel City, where service and entertainment firms vie with manufacturers to lead the region's growth, old-economy executives are learning new-economy tricks. The Pittsburgh campus of Carnegie Mellon University has emerged as a high-tech center for teaching CEOs and other manufacturing leaders about digital strategy, e-competition, and key aspects of the Internet. By 2002 some 200 senior and midlevel managers at medical-equipment maker Medrad Inc., a $160 million subsidiary of Schering AG, will attend the university's executive education segment on e commerce, predicts John P. Friel, Medrad's CEO. "We're trying to get them all to speak the same language," explains Friel, who himself attended a Carnegie Mellon e-commerce session last year. Friel, 47, is one of many CEOs in manufacturing who are hurrying to learn the Internet's tools, techniques, and possibilities. They are benchmarking digital leaders such as Cisco Systems Inc. and turning to consultants, executive-education camps, junior staff, and even their children for information. Homework helps. In their free time enterprising CEOs buy flowers, pursue hobbies, check stocks, and communicate with family living overseas via the Web. Learning the ins and outs of e-commerce is not always easy for executives in midlife, especially those with children who know more about computers than they do. Arrogance and conservative traditions prevent a few from experimenting. But veteran managers who fail to learn enough to lead Internet strategies may find themselves with limited job prospects in the next few years. Worse, the corporations they lead will be left behind. "Companies will be looking for candidates who understand how digital technology will affect their business," predicts Robert J. Gariano, head of recruiting firm Russell Reynolds Associates' global industrial manufacturing and distribution practice. Gariano, who recently helped to recruit Robert J. Keegan, 53, as president and COO of Goodyear Tire & Rubber Co., believes Keegan's experience leading major digital changes as executive vice president of Eastman Kodak Co. made him especially attractive to the Akron, Ohio, tire maker. "There's no bigger Internet revolution going on than at Kodak. It's going from chemical processes to digital processes, and Bob [Keegan] brings an understanding of those changes," points out Gariano. To teach its executives about electronic commerce General Electric Co. last June implemented a reverse mentoring program. Corporate veterans are paired with Internet experts in the junior ranks of GE. At other corporations, learning is more informal. When Barry B. Donnell, chairman of $588 million Cavalier Homes Inc., Addison, Ala., took over as CEO 14 years ago, neither computer skills nor the Internet came up during the time he was being interviewed for the position. Now the manufacturer of small houses runs a Web site and is working with certain suppliers over the Internet, but Donnell expresses disappointment with the results. "What's stressful to me is to be spending as much money as we are, and not getting any material results," says the 61-year-old executive. Donnell, who started using the Internet in 1999, acknowledges that communicating with his daughter in Australia forced him to pick up e-mail skills. He relies on members of Cavalier's IT department to bolster his knowledge of the Web. At Terex Corp., Westport, Conn., 48-year-old CEO Ronald M. DeFeo recognizes the Internet will upend the way the manufacturer of earth-moving and lifting machines conducts business. In hopes of leading the technology's inevitable changes, Terex formed the EarthKing Internet marketplace (www.earthking.com) in June 2000 to provide heavy-machinery owners with information to improve the profitability of their equipment. "E-business for me is a little bit like jumping into a stream and not knowing where its current will take us, but I know we have to jump in," the CEO admits. DeFeo likes to use the Web to conduct research on potential acquisitions. When he needs help on the latest Web research techniques, he turns to a surprising source: his children. "They're more fluent; it's more a part of their lives. It's just like me knowing how to use the phone a lot better than my parents did," he explains. Software sellers offer an array of Internet education courses for high-level executives. Computer Associates International Inc., Islandia, N.Y., has held retreats on Internet technology for CEOs. SAP AG, Walldorf, Germany, which recently unveiled its development center outside Philadelphia, plans to offer executive-education sessions on e-commerce and other digitaltechnologies beginning in April. Tuck Vosburg, 59, president and CEO of Pacific Steel & Recycling, Great Falls, Mont., often uses the Internet to check e-mail and stock tips. Pacific Steel & Recycling's 37 branches in seven states are linked through J. D. Edwards & Co. supply-chain software that enables employees to offer standardized pricing to customers in different locations. Vosburg relies on J. D. Edwards technical experts to elaborate on the latest Internet technologies and techniques. The need among Vosburg and other executives to know more about the Web has spawned a range of executive-education programs at leading universities that focus on the technology. Each touts its own specialty. Stanford Business School, for instance, offers an annual e-commerce camp for top executives and concentrates on Silicon Valley case studies and approaches. Last December the Wharton School at the University of Pennsylvania introduced its Fellows in E-Business Program in which some 40 executives began three and a half weeks of study designed to help them work e-business into traditional business models. For each week-long session being held through March, participants meet in different high-tech centers in Israel, Europe, and the U.S. The cost is $49,000 per student. In February 2000 Carnegie Mellon introduced a three-day, e-commerce executive education program covering topics such as e-competitors, supply-chain management, and successes and failures in the new economy. It sold out quickly. Due to the popularity of the first session, the university decided to offer the program every six weeks. Students who have participated point out that instruction is most effective when a group of executives from the same company attend. Otherwise, firms run the risk of sending a manager who returns excited with new-found knowledge, but finds colleagues who don't share the enthusiasm. More than 500 managers from the U.S., Germany, Korea, and Romania have cycled through the program, some with trepidation. "We had one group from Mellon Bank who asked if they could just pay to hang out. 'We're not really e-commerce types,' they said," remembers Robert Culbertson, a former software CEO who now teaches executive education in e-commerce at Carnegie Mellon. Culbertson convinced the bankers to take part instead of just observing. "Executives need to be on top of this, they need to know whom they're hiring and what they're buying when they purchase . . . software," he insists. In fact, veteran managers have made poor investments in Internet technology because they bought software before realizing how it would fit into their existing business strategy. Even technically trained executives admit that learning about e-commerce provokes angst. Richard O. Martin, president of Medtronic Physio-Control Inc., the $179 million subsidiary of Medtronic Inc., Minneapolis, studied engineering in college and began writing computer programs in the 1960s. Last year he bought most of his Christmas presents over the Web, but he admits managing an e-commerce strategy can be as stressful as raising a teenage daughter. The Medtronic unit, which makes cardiac defibrillators and other medical devices, is implementing a global health-care exchange that will allow customers to order products over the Web, and Medtronic to fulfill them using the technology. "These activities are part of a major change going on in our business and change is tough for everyone," Martin explains. Another techie CEO, Edward Muoz, also is wrestling with change and is studying hard. In 2000 Celanese AG, the Frankfurt, Germany, global chemical manufacturer, spent $30 million developing its e-business resources. Muoz, CEO of Celanese's U.S. unit Ticona, is responsible for the entire German corporation's Internet initiatives. Muoz, 56, is leading investments in independent chemical exchanges, an order-entry-and-tracking system, and a culture change. Muoz developed an expertise in digital technology in the mid-1980s while he worked for Baxter International Inc., which was installing electronic digital information systems between the corporation and hospitals. Then as a plant manager for Celanese he transformed the process controls at a large U.S. factory from analog to digital technology. When he was chosen to lead the $4.3 billion corporation's e-business initiative, Muoz quickly turned to a consulting firm to learn about the latest in everything from Web-site development to customer service to encryption technology. As part of a corporate assessment, Muoz learned that those employees who were weakest in their understanding of Internet technology tended to be plant-floor workers and senior executives. As a result, each of the eight members of Celanese's corporate steering committee on e-commerce committed to online training. KPMG Consulting Inc. came up with a series of modules, and Muoz and his seven colleagues now spend between six and seven hours a week learning about everything digital. But with their newfound knowledge, CEOs are realizing that the In-ternet is not a panacea for all that ails business today. Alan G. Hassenfeld, 52, chairman and CEO of $4.2 billion Hasbro Inc., one of the world's giant game makers, must understand digital technology because so many of his company's products, such as Pac-Man: Adventures in Time, are played online. Its eSpecially My Barney toy can be programmed through a Hasbro Web site to remember and call out birth dates and favorite songs. Hassenfeld started using a computer four years ago, and e-mail followed. He relied on Hasbro's technology staffers to teach him different Internet techniques and to sort out the most important developments. But even experts can fail to see the future of technology. "One person comes to you with the greatest thing since sliced bread, and two months later someone else comes to you having obviated that technology," complains Hassenfeld. The CEO has actually backed away from popular Web technologies. In December the company announced it was selling its Hasbro Interactive and Games.com units to Infogrames Entertainment SA, Lyon, France. Hassenfeld's assistant screens his e-mail because he became overwhelmed at the number of messages he was receiving. At two large strategy meetings late last year Hassenfeld implored his staff to use personal contacts before technology. "I begged them to begin to communicate better as human beings and less through e-mail. For that, they gave me a standing ovation," he says.