Leading U. S. Steel in challenging times
CEO Mario Longhi
discusses leading the company through a difficult period, its search for
growth, and what constitutes success.
Now more than a
century old, United States Steel
was at one point not only the world’s largest steel manufacturer but the
world’s largest company. Yet it has struggled in recent years: global
overcapacity in the steel industry has led to a significant rise in steel
imports to the United States, while the drop in oil prices has reduced demand
for steel, particularly in the energy industry. Now, president and chief
executive officer Mario Longhi is working to turn the tide. After more than two
decades at Alcoa and then five years as CEO of Gerdau Ameristeel, Longhi joined
U. S. Steel in July 2012 and was named president and chief executive officer in
September 2013. In this interview with McKinsey’s Rik Kirkland, Longhi
discusses the challenge of growing in a difficult and evolving market, the need
for being innovative, and his definition of success. An extended and edited
transcript of his remarks follows.
Interview transcript
Creating the conditions
to grow
The company has been losing money for five
years in a row. You can only endure so much of that if you’re going to stay
alive. But life is bigger than staying alive—people have a right to thrive, and
companies have a right to thrive. For that, you need to focus: What is it that
we do, and how do we do it? We need to have a customer focus, to really
understand what solutions they’re looking for so that we can apply our science
and our capabilities to help them and create value for both, including
ourselves. And we have to do this in businesses that are very cyclical. But we
will not remain victims of the markets. We’re going to deliver economic profit
through the cycle.
Of course, there’s not a simple answer. It’s a
lot of hard work in a very organized manner, and intense focus on our
customers. Because we are in automotive, we are in energy, we’re in
construction, industrials—we’re everywhere. Each and every one of those
segments has its own idiosyncratic ways in which things work. So we’ve
refocused the organization starting with the customer, we’re translating the
opportunities into how we run the business, how the operations go, and we’re
boosting research and development to a significant level.
Driving growth through
innovation
We’re keeping our minds open to where the
growth opportunities are. Of course, we’re based in steel, but we’re going to
understand a lot better where we should be going. And, you know, even though we
articulate it, it’s a two-step approach: earn the right to grow, and then grow
profitably. These things don’t happen necessarily in two separate moments.
We’re going to be ready to seize that opportunity once we better understand it.
In automotive, for example, it’s wonderful
what’s happening. Innovation is thriving in there, because of the new
regulations that we need to improve miles per gallon and all that. And alternative
materials have been making quite significant inroads in it. I think steel, to a
degree, has been asleep at the wheel. But I don’t think steel really believed
that alternative materials could come in and penetrate as fast as they are
doing. We’re sort of catching up.
People think of steel and the steel people
think of themselves—and portray themselves, if you look at pictures—as if
there’s always this crucible spitting fire. In reality, this is a profoundly
scientific organization. You look at the mathematical models that are required
for you to deal with a blast furnace, and the rolling, the fineness that needs
to be in a controlled process for it to be perfect—it’s phenomenal. So we
really are creating those conditions in order to innovate with the customers.
Harnessing digitization
Let me mention digitization in two terms. The
first one is simulation: the importance of you being able to simulate processes
with as much accuracy as you can. It’s going to save time on the development of
new things, and it’s going to eliminate a lot of waste that goes on as we’re
trying to come up with a new way of doing that stuff. The other one is the
learning of deposition of metal on something else, and we have done a lot of
coatings on our products. So I think it’s opening up an arena where, you know,
printing, 3-D printing and all of that, may add a new dimension to business
that we have never touched before.
I was actually researching a very young tech
company. They created some chips that are like a speck of dust. And those
sensors, if you can embed them into any material, are going to be able to
capture temperatures, pressures, torsion—all sorts of information. That can be
transmitted through the part and feed information to whatever it is that you’re
doing—in a car, on a ship, or whatever. We are in an era of exponential
evolution, given the nature of the scientific evolution that technology has
delivered. Having the ability to have people dedicated to learning and
researching these things is going to help us cope with the speed today’s world
requires and how we innovate.
Being an engaged leader
I’m a very curious person. I’m a farm boy; I
always had a lot of curiosity. And from my parents’ being farmers, you see
everything’s possible. I grew up with that.
In my professional career, I’ve had the
pleasure and the privilege of having gone through so many different
environments where change was always there. So that change became part of me.
And you only have two options in life: you’re going to change because you’re
forced to, or you’re going to change because you create value by doing it in a
controlled and forward manner. In that regard, it’s easy for me to engage with
the organization and begin a discussion around where success lies. What does
success look like? You start from there.
One of the key elements is making sure that
you have decisions made at the right level. In today’s world, you can die just
by the amount of data that gets dumped on you. You have to have an ability to
prioritize and to separate what’s really crucial and important from everything
else. And then you apply judgment to how you go about doing it.
One thing is that e-mails do not run my life.
We have a strategy, we have a cadence to it, and I try to be observant of all
the nuances that go on every single day. But you have to make sure that the
rest of the organization does the same. The secret is a lot of good
prioritization so that you never lose focus on the essential things. But it’s
intense.
Finding the path to
success
If people can’t explain what they have with
some facts in front of you and get to the gist of it pretty quickly, I don’t
think they fully understand what they’re talking about. They need an intense,
objective view of, “This is the problem that we have and the root cause of it.”
Don’t just deal with symptoms; don’t waste time with a lot of information that
really doesn’t add a lot of value. As you go down into the organization, people
need to learn: decisions should be made at this level, not be passed up here
and not be passed up there.
We’re pushing it down. It’s about having
people commit, but with authority to make the decisions that need to be made.
You can’t succeed in a transformational effort of this magnitude if you don’t
have people really good at getting to root cause, finding solutions, and making
a decision at the right level.
I don’t think you arrive at “success.” You
achieve a status of performance that gives you what you need to aspire to and
be capable of doing next. That is the definition of success in my view. You
create it every single day, you push the envelope every single day, and you
should aim very, very high because people are incredibly capable of achieving
things that sometimes seem a little difficult.
http://www.mckinsey.com/insights/leading_in_the_21st_century/Leading_US_Steel_in_challenging_times?cid=ceointerview-eml-alt-mip-mck-oth-1508
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