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#257: Klaus Kleinfeld, Former CEO of Siemens and Alcoa – Purpose channels your energy
01:01:10
Listen to this leadership podcast with Klaus Kleinfeld, former CEO of Siemens and Alcoa, and discover the power of purpose, both for yourself and your team.
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- [00:00]
Klaus Kleinfeld
Go for something that gives you energy. Purpose does to energy what a laser does to light. It focuses the energy around one point that highly motivates you.
- [00:11]
David Novak
Every leader wants to bring more energy to the table, but does that have to mean pushing harder and working longer? Or is there a better way? Welcome to How Leaders Lead. I'm David Novak and every week I have conversations with the very best leaders in the world to help you become the best leader that you can be. Now, my guest today is Klaus Kleinfeld, the former CEO of both Siemens and Alcoa, which makes him one of the only people who's led a Fortune 500 company on two different continents. These days he's helping tech and biotech companies through his firm, K2 Elevation. I love how passionate Klaus is about leadership development. He's out to help leaders avoid burnout by tapping into their purpose and managing their energy. He's even written a whole book about it. It's called Leading to Thrive. And let me tell you, it is an excellent read. Our conversation today is going to show you how to unlock that connection between purpose and energy, both in your own leadership and on your team, so you can drive real change without burning out. Here's my conversation with my good friend and soon to be yours, Klaus Kleinfeld. You know, I know you're a big tennis player and I've kind of gotten back into the game. So maybe, maybe once I practice a little bit we can play and I can build your confidence because I'm sure you'll probably kick my butt.
- [01:43]
Klaus Kleinfeld
I'm not so sure about that.
- [01:47]
David Novak
When you think about tennis, I mean, who's your favorite tennis player and why these.
- [01:52]
Klaus Kleinfeld
In life, in life, I would probably say Agassi.
- [01:56]
David Novak
And why would, why would he, why was he your favorite?
- [01:58]
Klaus Kleinfeld
Because he was one who made it like a star very, very quickly, then crashed and then came back. And frankly, that connects very much to what I have been writing about because he was one of the first to learn about energy management and learned how to deal with his own demons and manage those and turn those partially self, self destructive things that were going on inside of him into a real powerful energy source and came out in his tennis play as well as in his life in a very amazing way.
- [02:38]
David Novak
You know, you and I go way back because we were both in the American Society for Corporate Executives and it was a great, it was a group of, of CEOs category exclusive. We'd get together once a quarter and share insights that we had in the roles that we were in. So that learning mentality has always been something that's really been important to you.
- [03:02]
Klaus Kleinfeld
Always been. And the sharing and also the interaction with others. I mean, I think this has always been a wonderfully selected group of individuals. I mean, a lot of trust. We never had a situation as what I remember that anything even that was critical information went out, you know, so I think that spoke for it. I enjoyed it tremendously, you know, and it's also with the spouses. So it was great to have an event where, where you got to know the whole person. And also a bit of the family life I really enjoyed.
- [03:34]
David Novak
I agree. I think that this is one meeting where everybody showed up, all the partners showed up, because everybody loved learning, which was, which was really key. And you know, I usually don't really go into a lot about books and this because I really want to learn about you and your journey as a leader. But, but your, your book is, is. Has been written because I know you're passionate about leadership. That's something that you and I both shared as CEOs. We always talked about developing leaders. You know, tell us why you, you really, you started out talking a little bit about the book, but why'd you write this book?
- [04:08]
Klaus Kleinfeld
I wrote the book because I, I saw that also in the young generation. I saw some people burning out even when. And I realized. And I saw that before in the older generations, but there I thought it might be an issue of life. But here I felt like they have not been provided a concept on how to be a good leader and how to sustainably be a good leader. So I wrote it because I wanted to give them this framework and divided this into the inner game as well as the outer game. The inner game basically being how do you sustain your energy, how do you get energy, how does that concept working? Because this is the foundation of whatever you want to do with your life, whether it is in business, business, or whether it's a private. And then also have a long chapter on how do you build teams, how do you lead, what's the options, how do you build a vision, how do you execute and those type of things?
- [05:00]
David Novak
Yeah, well, we're going to get into some of that. And you know, I want to start just by asking you this question here. You know, you've led two major global companies, Siemens in Germany and then Alcoa here in the United States. What's something that's uniquely German you've always carried with you when you show up at work?
- [05:17]
Klaus Kleinfeld
I think in the end it's a time discipline. Time discipline is still, I mean, I appreciate to be on time, very much so that I carried with me, I think.
- [05:29]
David Novak
And I want to take you back to your childhood and really kind of go back to the beginning here. What's the story from the early days that shaped the kind of leader that you are today?
- [05:39]
Klaus Kleinfeld
There was a lot of stuff going on in my early life that shaped me as a human and also as a leader. The one thing is my parents were refugees from East Germany, you know, and they started afresh in the West. Then once my father made it, he became one of the first aerospace engineers that Germany had again after the Second World War, he died. I was just 10 and I sat next to his deathbed and without understanding that he is dying, nobody understood he had an aneurysm and he was bleeding out from the inside. That was wow, you know, so. And then my mother went back to work and as we didn't have any relatives in the west, she decided during vacation to send me back to the east to my relatives. So I had the pleasure of growing up into, in two systems. One, the West, a free democracy, and one, what was called a socialistic environment. And seeing an oppressive system and learn, seeing how people behave there, what they have to stand, I mean, gave me a very strong understanding of personal liberties, freedom, appreciation for this, and also of courage. And those were the two things that have influenced me greatly. And the first thing of having the father die, I mean, pushed me into growing up very, very quickly. I had my first paying job when I was 12. I was fortunately looking a little older, being tall, and I've never stopped working, you know, so those, those shaped me still today is the core of, of what, what I stand for.
- [07:10]
David Novak
And in speaking of working, you, as I understand you started your career as a, as a consultant, you know, what did that teach you about leadership?
- [07:19]
Klaus Kleinfeld
That was really accidental, but at the time, the consultant industry was not even really invented. What it taught me is that I wanted to crack complicated problems. And I was kind of bored when I saw what some of my friends from business school were thrown into that led me to consulting. And trust me, I was confronted with a lot of really complex problems. And at the time also I loved math. And at the time we did a lot of things also with quite good quantitative models already. I loved it. And the thing that I got all these complicated things, I had really great resources and I was working for a variety of companies. One of my clients was Siemens. And then I also had a lot of other clients also in the consumer industry. I found that fascinating, engaging. It was just made for me, to be honest.
- [08:12]
David Novak
You know, a lot of leaders use consultants. You know, what did you learn as a consultant that leaders need to understand when they hire a consultant. How do you get the most out of someone like yourself when you're a consultant in the company that you represent?
- [08:27]
Klaus Kleinfeld
I think first you have to frame the problem and really say, what is it that you want to get out? You still, even once you frame that, have to be open. If the consultant comes back and say, well, from our experience, you probably have to reframe it if you really want to crack what. What you want to do. In most cases, it's performance. You. And there's not that many parameters that people are interested in. It's where can you get the revenues up, can you get the cost down, can you get the cash? You know, that's it. And I would say it's like the choice of a doctor, because the variety is huge, Absolutely huge. I mean, you have some brands that guarantee that you have intelligent people, that they only hire intelligent people. But in the end, it is all about people. And I would look at, who do you have, who is your doctor really? Who are they sending as the key doctor, and who's the junior doctor? How do they compose the team? And to not be shy if you feel that the doctor is super, but already the next level down is probably not at par at all. So the composition of the whole team. And really engage, really engage, have an open mind. I've seen many, many times that the study was very, very good, but the team didn't do a good job in communicating this well to leaders, or leaders were not open.
- [09:47]
David Novak
You know, you have a distinguished career as a CEO. You've built, you know, two great companies and, you know, made some big, big moves. You know, who was the first person? Tell us the story of that first person that really kind of took you under their wing and said, hey, you know, Klaus, I think you can be the CEO.
- [10:07]
Klaus Kleinfeld
That's not how it worked for me. I never, if you would have asked me, almost throughout my life, until I was a candidate for a CEO, it was never my desire to become a ce. My desire was that I wanted to do a good job. And what I noticed, much to my surprise, shock, that I worked for bosses. And I had the impression the bosses were just not good. And I thought, well, I mean, if I were to do that job, I could do it better. And they didn't listen well. They sometimes shied away from doing the right decisions, were not courageous enough to. So. And we're suppressing the right things. So that motivated me to say, well, the only thing I can move on here is because I live by the mantra I love it, change it or leave it is to either I change it or I become the boss, you know, so that drove me, that, that really drove me to say, well, you know what, I can do this better, you know, so. And I suffer from seeing that the wrong decisions are made and other people who are working in this division suffering too. So this person should not be in that role. That drove me, that drove me up and I rather, I mean, there were some people who took me under the wing, but it was rather a different story. There were a lot of people who were opposed to this. So I had constantly. In large organizations, you know, David, you know, when you want to move in large, many large organizations have a lot of bureaucracies coming with it. And I think it was more the struggle also against this. And there were many, many times when I had decided to leave, to leave the organization, and then the organization somehow turned around, gave me some great opportunity and made me continue to grow.
- [11:52]
David Novak
When you had this burning desire to really fix what you thought others weren't fixing, did you have any skills that you felt you needed to develop to really, once you got in that seat, you knew you'd be successful and how'd you go about going after them?
- [12:08]
Klaus Kleinfeld
No, I developed them. I mean, there, the consulting side helped because you learn certain transferable skills that you apply everywhere. I always thought that in the end you have to have a deep understanding, the deepest understanding of what creates value for the customers. You know, that was always a guiding principle. The second thing was I strongly believed in the team and the people. I always thought that people are the biggest, my biggest asset. Talent, as well as how people work together is the only sustainable competitive advantage. I believe that from long ago, you know, so almost childhood, to be honest, you know, so. And I, I, I've been addicted to building high performance teams. And then the rest is I, I love learning. And I realized that the big conundrum is how can you go from a consultant to somebody who executes, you know, it helps if you understand the customer side. It also helps if you understand how to build teams. But then you still have to have a mechanism how to move large organizations. So learning this, you know, how to mot, how to also work with people who are, who might not be having the highest IQ and they don't even need it, but how to move then how to motivate them, how to give them A purpose. I mean, these type of things I learned, and many of those are transferable.
- [13:31]
David Novak
When you finally got your first CEO position and you got that chance to change things, what kind of culture did you inherit and how did you try to evolve it?
- [13:40]
Klaus Kleinfeld
Well, I would say the first leadership position, and probably one of the one that I still enjoy thinking of, was when I ran a large business, the angiography and X ray business for Siemens, and obviously because I was very young at that point in time and for Siemens standards, so they gave me something that other people had tried to turn around. It was not profitable. It was making losses, was the birth point of the medical business, but was doing badly. My colleagues refer to me as, hey, here comes the guy who runs on rusty nuts and bolts business. And every person who was some way capable, if they got an offer from the computer tomography guys or the MRI guys, they left. So I had a real problem. And they were all like, oh, downtrodden. So the biggest problem I had there is how do I bring motivation back? And what I did there is I basically I asked Siemens because I had not worked in the division that before I go in, I want to be at two hospitals, one in the US and one in Germany, where I spend some time as an undercover boss, you know, as a doctor. So to see how is the equipment used was a wise decision, was more a gut decision. And I saw that our equipment is doing a lot of things that other things don't do. But I realized that the people inside of our facilities did not understand that. So I invited a patient, a young patient, to come to an all hands meeting. I established an all hands meeting, which I didn't have before, had an all hands meeting. At the end of it, I brought this young lady on, had her talk about her life. She talked about her life, how it went south and how it came back through diagnostics and intervention. And then people realized, oh, this was all our equipment. In the medical industry, as you know, David, I mean, you have to write down who worked on what. I gave her a list of all the names of the people. She had this list. She called them to come on stage. You know, this is in the northern part of Bavaria, you know, so people are not easily moved. They are really tough, tough individuals, you know, but they had tears in their eyes because they realized what good they are doing in this young woman, she was in her mid-20s, you know, the evening it was unionized, the evening the union leader came to me and said, hey, Dr. Kleinfeld, I want to thank you. I said, what do you want to thank me for? And he said, you gave us our soul back. You made us understand why we are here and what we are doing. And that was the moment when the whole organization. I didn't. I mean, we did a lot of other things, but. But this was the moment when the switch flipped, because suddenly they had a why to go back in, and they had forgotten it. They had forgotten it. The why that was there from the day when the X ray tube was invented was too long ago. They now realize we can do interventions, minimally invasive intervention. We can save lives. They had in mind this young woman with 25 standing there telling them that at 16, 17, she was a vegetable, you know, so. So those. Those are things that. That. That I've used. So it wasn't so much what I inherited. I mean, I inherited a situation where they had given up. They had given up, you know, and other people had tried it with program, 20% cost reduction. You know, you don't. You can't motivate anybody where you just say, I have a 20% cost reduction. I always do the Saturday morning breakfast test. You know, what do your children. What do you tell your children why you weren't there the whole week? You'll say, oh, I'm working on this corporate program. We're cutting 30% of ourselves. They look at their devices these days and say, what a jerk is that. If you tell them, I saved this young woman, and there's plenty of those everywhere around the world, you know, I'm saving them, you know, that's what makes a big, big difference, is that when.
- [17:21]
David Novak
You first discovered the power of purpose.
- [17:23]
Klaus Kleinfeld
Well, the power of purpose, frankly, on a personal level, I discovered when my father died, you know, that was very, very difficult. Difficult. And that's when the question. When you're 10 years old, and the question come, why me? Why this? Why that world? You know, So I really realized that life has an end, you know, and a beginning and an end at a very young age. And I think that's when this realization came for me. And the other thing I learned is the same thing is true in transformations, because not only do you need this for yourself, but you also, when you go into a job and give your time, you want to know, why do I do with us?
- [18:05]
Kula
Hey, everyone, it's Kula from How Leaders Lead. And if you've watched our podcast for any number of episodes, you probably know that a common theme from all of the great leaders we interview is that they are active learners. They have this commitment to continuing to learn and grow so that they don't stay stagnant and so that they continue to see success in their leadership and in their life. This theme of active learning is so important, and it's what David's latest book, How Leaders Learn, is all about. It's all about helping you develop that skill of active learning so that you too can continue to see success in your leadership and in your life. The book is really entertaining. It pulls stories from some of our greatest podcast guests and pairs those stories with insights that you can incorporate into your leadership and into your life right away. Grab How Leaders Learn on Amazon or wherever books are sold and I think you're really going to love it. You feel David's personality feels through the pages and through his storytelling, and it's a really powerful way to level up your leadership.
- [19:03]
David Novak
Young people today in particular are really looking for that purpose. So if you're a leader in this environment now where young people and people in your organization want to have a more noble cause, what advice would you give on the process of how you should, what you should go through to develop a purpose for your team or your company?
- [19:26]
Klaus Kleinfeld
First of all, I think this is exactly the right question you have to ask yourself. By the way, I used writing the book to sort this out. Also, because it's a concept that's very old. As long as mankind exists, people have been asking about purpose. So there is a lot of answers available in space and time, and I basically cover that so that I give a choice menu. But nothing replaces the point that it's your decision. You have to literally sit down with yourself and ask yourself, on my last day on this planet, if I want to look back into a fulfilled life, what is it that would make this a fulfilled life? And I think many people get stuck in this. I did too, at times when they think it has to be one purpose and that is cast in stone and I can never deviate from it. That's not the way it is. You actually have multiple roles in your life. You run a business, you have a family, you have. You do something in your private life, work in a club or so. You can have multiple purposes, but the point is. And they can change over time because your life changes over time. But sort it out. Sort it out. And some things you achieve and then you move on. You get another one. But go for something that gives you energy. Purpose does to energy what a laser does to light. It focuses the energy around one point that highly motivates you. My test on purpose, people say, how do I know that it's good purpose. It's really not that difficult. In the morning you should wake up being reasonably refreshed. And then when the alarm clock wakes you up, you say, okay, what's up today? Do I want to get out of bed or do I want to stay in? And if what the first thought is, oh my God, I have this amazing opportunity to come closer to my purpose and that's what I want to want to get done today. You get out of bed, you have a smile on your face. That's a good purpose test. You know, another purpose test is if you think this is the last day of my life and if it were the last day of my life, how would I look back on my life? Would I see it as the fulfilled life or would I see it as a slog and I was running after something that really did not give me a fulfilled light?
- [21:45]
David Novak
You've had so much success growing companies at Siemens. I know you doubled the market cap 45 to 90 billion dollars. You had to make a lot of really, you know, very good strategic decisions. What do you think was the single biggest decision you made then to transform Siemens?
- [22:06]
Klaus Kleinfeld
Well, when I got into the CEO role, Siemens had a large problem. More than a third of the company losing money. The whole telecom and IT business was in a dire problem and it was, the telecom business was the birthplace of seaman. So there were a lot of emotions in it, but it was losing money and it was actually losing money, very, a lot of money and going faster and faster and faster and starting to drain cash that we could have used much, much better to build on the great businesses that that Siemens had. So I felt I had to act. I mean the company was over 200 years old, you know, so I felt I had to act on it. And I finally, as we sorted through it and thought about what strategic options do we have and I finally decided to present to the board a plan how to chop off certain things and sell certain things. Partner. We did the partnership with Nokia, you know, and, and change the structure in an environment where you have co determined, co determined board, 22 people on the board, you, 11 being employee representatives, 11 being shareholder representatives. The employee representatives are all only from Germany. Right. So. And you're talking about a company that Is represented in 130 countries or so, you know, so very difficult and frankly and the emotions were extremely high. But, but I decided, I mean, how would I look at, at this as, as my leadership if I were not to do it and the risk to basically sink the whole Ship and, and not allow it to have enough resources to go forward in rapid speed was high. So I decided I do it and we go forward with this. And then in addition to this, I put a program together how we could revitalize the whole company and with targets, we put a three year program out which had never in this case been done before and committed to those targets, growth as well as profitability targets. And we did it in three years and, and all divisions were profitable, which had never happened before in the company. But you have probably some idea on how the response, not just internally, including some of the colleagues, including some of the board members also on the capital side was in a German environment and certainly the environment on the labor side. I mean you have to live with getting death threats delivered to your doorsteps, demonstration in front of your house, you know, not being allowed to leave, to leave your family being under protection the whole time. I mean, in the end there's a high price you pay. If I had to do it again, I would do it in the same way. I think it was. If you look at the company capabilities today, I think it was exactly the right, exactly the right thing to do and somebody had to do it. And that's what leadership is about.
- [25:09]
David Novak
And you obviously have in your mind you have a process for making really good decisions. If you had to simplify what that process is, what would you tell us?
- [25:20]
Klaus Kleinfeld
Depends on. First of all, I believe in intellectual rigor. I don't believe that I have all the knowledge. So I try to get as many facts as possible. I also try to go down to the source of where the information is. So for instance, if I deal with a situation with a customer or a field issue, I typically wouldn't, would not just rely on what my team would give me. I would call the person down in the pits, you know, or go there, travel there, you know, and find out what is really going on there. And almost always did I learn an important fact that was really important for getting a better quality decision. And in the end, I mean one of my biggest guiding post was is how, how, how do I feel about this? If I were to. I always looked also thought of the people and, and I always thought that even if I had to let go people, how do I. How can I do this in the best, in the respect for best respectful way we did when we did the telecom thing, we did a partnership in the end with, with the unions to do a requalification of the employees which worked magically well really than partnership with the labor union. Very well and became a model for many others to go after this. But in the end, I have to measure it. I mean, how would I get judged by not the papers, by the higher authority that will one day judge us all and live with that? That's the leader. I felt that that's the leadership principle. And part of it is also because I saw in my youth what people did in a suppressive system like East Germany and how they stood for their own values even though they knew that they would have negative consequences to live with.
- [27:17]
David Novak
When you run a public company and you ran two very large public companies, you get into this rat a tat tat of having to beat every quarter, every quarter, Every quarter, you know, I mean, you know, what did that rhythm, that's just natural in terms of companies. You got to make your numbers. What did that teach you on how to drive results through others?
- [27:39]
Klaus Kleinfeld
Well, I mean, in the end you have to know how to motivate people and build a very, very good high performance team. I mean, the quarterly results have some good things that you don't, that you are not allowed to slack. At the same time. If you just run for the quarter in companies that have longer term business cycles, then you would not be able to, to build, to build the company. So you also have to find a skill, how to balance things and see what, what, what is there for the short term, what do I have to do midterm, long term, you know, but the core, I, I think at the core is what type of talent do you have and how do they work together? How can you form them as a high performance team? Do they, do they work like this?
- [28:32]
David Novak
You know, you know, I, I love the story you talked about how you really gave purpose to your organization by bringing that lady forward and she, she, you know, her life was changed and you brought the soul back to the company. Is there another powerful story you've had in your career that had a really profound impact on how you lead? Because that was a great one.
- [28:54]
Klaus Kleinfeld
Well, I tell you, another one was here in New York actually, you know, and I worked for Alcor. I stayed typically, I stayed late in the office and always the cleaning crew was there cleaning the restrooms and the facility. And so, so typically when I went to the restroom, you know, I ran into the same individual. You know, I said, hello, hey, hey, hey. I knew that he came from Albania, lived in Queens, you know, with his family, but his parents were still over in Albania. And we always had a little chat about things, you know, so. And one night, you Know, I mean, while I want to go out, he stops me in the track, reaches out his hand and says, and I didn't know what you wanted. And he said, I want to thank you. And I said, for what? And we had talked about the normal things in life. I had my mother living also back in Germany. So I know how it is when your parents are not with you and they get old. And he said, I want to thank you for talking to me. I said, well, I enjoy this. He said, yes, but you have to understand, most people just look through me. And I thought that was so wow to me, most people just look through me, you know, and it basically tells you, never forget to handle whoever it is with respect. And you can always. And that has been my. I mean, my implicit mantra. You can always learn something from somebody. And there's no justification really, to not be respectful to an individual. Individual.
- [30:34]
David Novak
Wow. Most people just look through me. That's so compelling and so memorable. That's an amazing story you write in your book Leading to Thrive that you used to treat leadership like running an ultramarathon. Just push harder, go longer. But your view changed. Explain.
- [30:56]
Klaus Kleinfeld
Yes. What happened? One day somebody came into my office. A friend of mine who worked with me came into my office and said, you got it all wrong. And I think David Weir is similar to that. I mean, they know how to push our buttons. If somebody comes to, you see, you got your life all wrong. And he knew that. He knew that I always would say, life is like business, is like an ultra marathon. I ran marathons at that time, you know, so he pushed it. And we got into this discussion. He said. And I said, what is it? And he said, it's all about energy. And I really owe it to him. And that also got me into looking into high performance sports, my beloved tennis, you know, and. And I realized there was something very odd going on while already the tenure in business was going down. More people leaving, having shorter tenures, being younger when they leave in tennis and in other sports, it was exactly the opposite. They stayed longer. They stayed longer in the game. The average range of the top went up. So I said, I have to understand what's going on there. And I looked into it and I saw that they had learned how to manage energy. They understood what energy resources are there. Physical, mental, emotional, spiritual. How do I handle that? What's the point of purpose? And that's why I said Agassiz before, you know, because Andrew Agassi was one of the first who showed it to the world. You Know, this is how you can come from an angry young man to a sophisticated person, really winning, really winning and playing the game, you know, masterfully, as long as he wants, wanted to.
- [32:25]
David Novak
Well, what kind of rhythms or habits should you put in place to, to, to keep your energy going? I mean, I'm ready to go now. I ran a marathon when I was 40, but I haven't run one in a long time.
- [32:38]
Klaus Kleinfeld
So the first thing is you have to understand downtime as productive time. So the way this works is you, I mean, you burn, you. You wake up in the morning, you have energy, you are energized, you burn it through during the course of the day, you have to recharge it and you have to conserve it. So the question is, okay, what do you there on the physical side, very well understood movement, eating well, drinking, dehydration, you know, sleep, you know, those are very important things. Most people have a decent leaders have decent understanding of this. On the emotional side, it's already quite difficult, you know, because most people think, oh, you know, this person drains energy. This was a very, very intense discussion, negotiation. And they drained me and I couldn't stand it anymore. And finally I gave in. They burned me out. And they this, well, this is about you. The energy, the emotion is inside of you. If you allow somebody to drain energy from you by provoking you and you take that provocation, the fault is with you. You can learn how to be calm as a cucumber and not allow this provocations. Go through it, use your breathing, breathe in, breathe out, you know, let it go in this ear and that and then get your story out, get the negotiation going. You know, so on the emotional side, and there's many other things, but just one example, on the mental side, it's really. On what do you focus on? You know, you can focus on all the negative things or you can focus also on the opportunities. There's this great story about the shoemaker. The old shoemaker who has two sons, wants to pass his business on, doesn't know how to pass it on to sends them to Africa. The one son sends a note back, said, father, very bad news, there's no market here. They are all barefoot. The other one sends a note back, father sent me as many shoes as you can get. You know, there's a market that's endless. Everybody's barefoot, right? So this, I think puts it together in a good way. And I think that this, this capability of, of leaders is to see not just the obvious, but also to say what's the what is the upside in what everybody sees a downside and a great skill. Then the aspects of compartmentalization, not allow the monkeys in your brain to hop around down, but compartmentalizing them, that's on the mental side, on the spiritual side, it's really just recharging, getting grounded, you know, and, and I think there's many, many spiritual practices, but I would also say that belief in a higher being, you should allow, I mean that, that in, in your life, just at least test it out. And there's nothing wrong with that. And then the point of purpose as the focus around this bomb, you know.
- [35:11]
David Novak
You know, in addition to being a great CEO, you're an author now, but you also invest in tech and biotech companies through your firm, K2 Elevation. You know, when you're looking at a business to invest in, a lot of people just say, you know, one of the most important thing you can do is identify who's leading it. And if you've got that person, you know, you're going to be well on your way. Tell us a story about a leader of one of the companies that you invested on and how he impressed you and what it was that made you say, this is a company I'm going to bet on.
- [35:52]
Klaus Kleinfeld
First of all, I completely agree with what you just said. I typically bet on the leader and in this case it's the founder or the leader. And I also think that it is important for people on the board to remember that they are not running the operations, but their main job is to select the right leader. Right. So what impressed me, I once invested in a company and this story has two sides, was somebody who very much impressed me on the intellectual rigor. The stuff that they had taken on cracked something that I knew from old days. That's a complicated problem. And they cracked it with modern, modern technology, basically with an AI approach already when AI wasn't even that popular. And I thought this was amazing what they did. The same gentleman then he convinced me to invest and to go on his board. The day before the board meeting happens, I get a call from his co founder telling me that they found him unconscious in the hallway and he said he will never come back. The doctors don't allow him to even engage with us. You know, the guy is healthy, back, wonderful. Not as a CEO, he does something else, you know, in, in his life, you know, but it was absolutely fascinating to see, you know, this guy did it pushed, pushed, pushed, pushed, and didn't have the energy concept. So he didn't recharge and he had just come through. Come through a funding round, you know, very, very successful funding round, and had a cold and didn't treat his cold. And the cold went to the heart, inflamed the heart, and, you know, so. But I invested and went onto the board because of him. Then the board, most of it, investors on the board, you know, were like chicken running around. They asked me to become the chairman, and that's what I did to structure it. We found somebody else, and the rest is history.
- [37:49]
David Novak
And so when you find that someone else, what did that person have?
- [37:53]
Klaus Kleinfeld
Unfortunately, not exactly what we thought he had.
- [38:00]
David Novak
That's a little honesty there. We don't get. Always get it right, do we, class?
- [38:03]
Klaus Kleinfeld
No, no, no, no, no. But the thing is, and I think that's also important for. For young leaders to understand. Some. Some feel I put somebody into the job. I realize it's not the right person, but I can't take the person out. It's the opposite. You have to take the person out because the organization will say he will not take that person out, even though the person is not great. If you basically say, I made a mistake, I take the person out, find another job, or leave, you know, that is the right solution. That's the right solution for the company, and it's the right solution for you to show up as a leader.
- [38:38]
David Novak
We'll be back with the rest of my conversation with Klaus Kleinfeld in just a moment. You know, Klaus talks to me about the importance of getting the facts straight from the source. And it reminds me of a fantastic story from Kevin Hockman, the leader behind Chili's Red Hot Growth.
- [38:54]
Kevin Hockman
I'm in a Chili's in Chicago just outside of o'. Hare. I'll never forget this. And I'm in. We call it the heart of house. So the back of the house of the kitchen, we call the heart of the house at Brinker. And I'm in the heart of the house with a team member, and she's counting shrimp. So her job for the first hour of the day was she counts eight shrimp, puts them in a little bag, twists the bag, counts eight shrimp, puts them in a little bag, twists the bag, and so on. And she'll do that for probably 45 minutes. And then she'll do the same thing with brisket, where she'll measure it and bag it, and then she'll do the same with the broccoli. It's called portioning. And pretty much every concept at some point has done a lot of portioning. We did a bunch of KFC and at Pizza Hut when I was there at Yum. And the idea is, well, you could do this before service. And it controls what we call AVT or a measure of waste. So you know that you're always gonna get eight shrimp because you're counting it, you know, not in the heat of the moment. And it's theory, easier and faster service. Well, so when I asked her the question, hey, what's the one thing that you would do if you were CEO tomorrow? She'd say, I stopped counting these darn shrimp. And I said, well, what would you do if you didn't count the shrimp? And she said, when the customer orders a shrimp taco or a shrimp fajita, I'll count eight shrimp. I'll put them on the grill. You know what? Sometimes I'll count seven, sometimes I'll count nine. But guess what? Most of the time, I'm gonna count eight, right? So we took that idea back to the restaurant support center and they said, hey, we gotta test this. We're gonna have a bunch of shrimp waste. I don't know about this. And I said, well, what's there to test? Like, she's right. Like, once in a while she'll get it wrong up or down, but we're not going to have big waste issue. So we rolled it out and guess what happened to shrimp waste? Absolutely nothing, right? Literally didn't change. Like, we, we measure this stuff literally every day. We get reports every day. It didn't change. And everybody laughs at that story. But you know what's interesting? If you take one hour of prep out of our restaurants every day, that's 47 years of labor that we pay for annually. That's over $6 billion of labor that's saved that we could redeploy to. Things that like, that would actually improve the guest experience or improve the food experience, right? So those are things that add up pretty quickly. Because when you're in a restaurant group with a lot of scale, getting one hour prep out of the business has huge impacts. And then most importantly, that team member, she doesn't want to do that. She doesn't value that. To her, that thinks it's a waste of time. So that makes her job way more engaging. When we're like, hey, we listen to you, we got rid of that, and go do something that you're excited about out to.
- [41:12]
David Novak
When you take the time to get insights straight from the source, big things can happen. Kevin's conversation is full of aha moments like this. So give it a listen. It's episode 183 here on how leaders lead. You know, as you buy these companies and you mentor these CEOs and founders of companies, I'd have to imagine that AI is on everybody's radar right now. What should leaders be doing today to first of all A, understand it and then B, stay ahead of it, you know, so that you can actually win in this, this arena. Risk versus risk falling behind.
- [41:51]
Klaus Kleinfeld
First of all, I mean it's the highest adoption that we've seen on any technology, you know, ever. You know, when you look at ChatGPT and I would go as far as if you are not engaging on the AI front, you are toast. You will be toast, done. You know, so, so you have to engage. It affects everyone, affects every industry, it affects literally every function. So it's not that complicated to understand. I also would say you don't have to go for the all encompassing solutions. In fact, I would rather not go for the all encompassing solution, but would say I do something here. I do. For instance, if you are on a software development side, there's a lot of tools already that are fantastic to write code, code, right? If you don't, if you don't apply that, you know, wow, you, you, you are falling way behind. You know, if you're on the marketing side, you know, to basically structure segment, segment the market, have more direct interaction with different market segments, more specific to their needs, you know, and, and shoot this out, you know, go do it. If you are on the analytics side and you want to do for instance the full analytics on your supplier side side, I mean every single thing you can be improved by the use of AI.
- [43:10]
David Novak
So you know, how would you go about leading in this era of AI in the sense of how do you take your organization with you on the importance of building the muscle in this.
- [43:21]
Klaus Kleinfeld
Skill, I think you have to have, it goes back to who do you have in your first line team? And everybody on the first line team has to understand in whatever they are overseeing, seeing their role is to bring AI in, their role is to figure out how can I make this better with AI. AI is not just going to bring your cost down, it's going to bring your speed up and it's going to bring your quality up. You know, so, so the first thing is you cannot afford to have anybody on your direct team who doesn't understand that AI needs to be embedded in their structure.
- [43:59]
David Novak
You know, I want to shift gears for a second and I got to ask you about this NEOM project that you took on In Saudi Arabia. You know, tell us about it, number one. And then tell us, did it stretch you as a leader and what did you learn from that whole experience?
- [44:17]
Klaus Kleinfeld
Well, it was, it's still, I'm still on the board. It's a wonderful, fascinating initiative. It reminds me me, it's look, I mean it's a big piece of land the size of Pennsylvania that is in the north of Saudi Arabia. It has a long coastline, I think in kilometers, 350 kilometers. It's probably 250 miles or something like this. And about two thirds of this is on the Red Sea and the other part is on the sea to Sinai. So. And it is a vision of the Crown Prince. The Crown Prince knows the area very, very well. It's almost unpopulated. It has mountains, the highest mountain, it goes up to 1,500ft, so 2,500 meters. There's snow on there at times in the year, about three months of the year. It has conditions where you can ski there so great. And it also has, has sand, it has sandy beaches, everything. You know, mid sized mountain is amazing, absolutely amazing. The weather is nice. Also you have a bit of wind there. And the Crown Prince's point was I want to create a land which attracts the best and brightest and allows people to live the future. I mean his idea is my words, not his words. You know, his idea is we are already living in the post industrial world, but we haven't quite understood what all this means. Right. And to live with nature. He's a big nature lover, big nature lover. So one of the things was that make sure that with many of these projects, you know, you go into it and nature gets destroyed. I mean this concept was built like this, that over 85% of the nature will remain untouched. And also on the urban environment, I mean the challenge was, was it's not going to be about streets and cars and all that stuff. You know, you have to have a concept that makes it more livable. So basically mixed use, walking, bicycling, these type of things. How can you do that? How can you allow a life which is more living with nature at the same time being connected to the world and having the best technology on your fingertips. So we went through this, we looked at, at what, I always looked at this as a business and I thought we have to build it like you build a new product. It's all about what sustainable competitive advantage do you have. And I was extremely happy when we saw that there was some really crazy things like energy, renewable energy, they have wind they have solar basically at costs that are lower than the cost of gas and oil even in Saudi Arabia. So that, and it's clean, it's clean energy, you know. So this gives you an enabler that you have at very few places. So one of the first things that we did is roll that out. And as well as the first at scale green hydrogen plan is currently getting built in Neom and everybody who's in the, in the energy development wants to go there and see it and work with this. So and this goes on and on. The question is how do we have urban living, you know, and, and what's the concept, what is the concept of transportation in this? And it was fascinating, I mean absolutely fascinating and wonderful to see. I honestly think the last time that I've seen something with that vision, you really need somebody there who is there for a long time and stability to develop. I, I, I've seen this is with St. Petersburg when Peter the Great, you know, basically went out and said I want a seaport, Russia is landlocked, went into the swamps, you know, and basically said this is where I want it and I want a shipbuilding industry and everything else.
- [48:20]
David Novak
And this, this Neom is where is it at in its development for everybody to know?
- [48:26]
Klaus Kleinfeld
Well, there's a lot of, it's not many, many people mistake it as saying it's one city and a lot of focus on, on the line. But in reality it is. I stopped counting. I would say it's about 6, 7, 8 developments that are coming at almost at the same time. The one probably that's furthest along as the mountain city, you know, which, which is going to be open for the Asian Winter Olympics and there's a lot of stuff that we built there. Then there are some of the, some of the islands that are already, well, welcoming, welcoming people. The good thing is that I think we have seen that sometimes it's better to do it a little bit more staged than doing it all in parallel. Right? Because I mean if you think about this is a magnitude, think about it, it's the size of Pennsylvania, you know, and if you want to build Pennsylvania in five years, years, that's going to be difficult and you probably, you can do it, you know, but it's probably not going to be the best choice, you know, so, so what, what we're seeing here is going to be still very fast compared to everything that has happened so far. But it's going to go obviously in, in phases and it's going to be very attractive, very, very attractive. I, I Mean, I, People ask me, so when can I see the whole thing? And I think that you can see bits of it relatively soon, continuously involving. And it will be a success. I'm 100% convinced that it will be a success. I fell in love with it the moment I saw the area, the moment I had conversations with the Crown Prince to understand his, his vision. And it's a, it's really a wonderful vision of. For anybody, you know, I'm, I'm looking forward to having a place there and spending some time there. It's. It's great. I, I mean, where do you have that? Mountains, snow, you know, great night under the skies in a desert, you know, you can go swimming. The coral reefs, these are the only in the Red Sea has the only coral reefs on this planet that are still fully healthy. The only place. And it's the, the under. And many people who are diving know this. Probably the best place to do diving these days is in the Red Sea. And you don't even need diving equipment. You put a snorkel on, you go, you go and watch and you will be like art. Absolutely odd.
- [50:59]
David Novak
So the Crown Prince had this Incredible vision and CEOs and leaders are, are expected to be big thinkers and visionary. Is this a skill that you can actually develop? I mean, what, what advice would you give leaders on how to improve the skill of being a visionary? Or, or are you born with it?
- [51:19]
Klaus Kleinfeld
No, I don't think I. Well, I don't know. There's always talent, but a lot of things can be learned also. I think that the visionary side is to allow a little bit to be the child again. We, for instance, at neom, we did an exercise once where we said, you may remember, David, at the time when compute was very expensive, right? And when I started programming, you know, I had to manage the amount of CPU capabilities that I had and memory and write the code for that. You know, the AI algorithms were all there, but it was impossible because the compute was not there. It was unimaginable, you know, so now computers for free now try to do the same exercise. And we did that at neom. When you think, what about energy being for free without any negative consequences in the production of energy, what would that mean to the world? This was one of the most wonderful experiments that I've done. But you allow yourself a little bit to be like a child and dream, and then you also have to come from the dream phase to the reality test. And I think that so visionary is one thing. You know, I know you, you are A great visionary, but you are also a very good executor. And the thing that. And you have to have both skills. Skills. The one skill alone is dangerous. I mean, I think that if you are just a visionary, people will find out this vision is not. Is not working. You know, and. And everybody wants to be on a winning team. They want to see success of it, you know, and they sit there and say, no, we're not going to follow this jerk. Sounds good. But in reality, just blood, sweat and tears and nothing happening for me. So that's not going to fly. At the same time, if you're just an executor and just a slave driver, people also say, what am I doing? What's the why? Why am I here? What do I do? So you need to be really effective as a leader. Both skills essential.
- [53:23]
David Novak
Absolutely. Absolutely. And this has been so much fun, Klaus. I'm going to have a little bit more fun with you and do my lightning round of questions. So are you ready for this?
- [53:32]
Klaus Kleinfeld
Can I have a beat?
- [53:34]
David Novak
What three words best describe you?
- [53:37]
Klaus Kleinfeld
Driven. Happy. Optimistic.
- [53:44]
David Novak
If you could be one person for a day besides yourself, who would it be?
- [53:48]
Klaus Kleinfeld
Oh my God. I'm pretty happy with being me. I don't think I want to be somebody else, to be honest. No, I'm happy with who I am.
- [54:00]
David Novak
All right, what's your biggest pet peeve?
- [54:03]
Klaus Kleinfeld
Dark chocolate.
- [54:06]
David Novak
Who would play you in a movie?
- [54:08]
Klaus Kleinfeld
Robert Redford.
- [54:09]
David Novak
If you could play tennis on the center court at, at. At any major venue, where would it be? And who are you playing with?
- [54:17]
Klaus Kleinfeld
Wimbledon against Boris Becker.
- [54:20]
David Novak
There you go. Something you'd only know about Germany if you're from there.
- [54:25]
Klaus Kleinfeld
Grunkol on Pinkel.
- [54:27]
David Novak
And we're gonna look that up using AI. All right, we got a task to do, everybody.
- [54:35]
Klaus Kleinfeld
It's a dish.
- [54:36]
David Novak
All right, there we go. What's the one thing you do just for you reflection. Besides your family, what's your most prized possession?
- [54:44]
Klaus Kleinfeld
Music.
- [54:45]
David Novak
If I turned on the radio in your car, what would I hear?
- [54:49]
Klaus Kleinfeld
Audiobook or great music?
- [54:53]
David Novak
What's something about you? Few people would know.
- [54:56]
Klaus Kleinfeld
Oh, that I had a business being Santa Claus. As one of my first really super profitable own enterprise. Santa Claus. Santa Claus on December 24th. Unbelievably profitable.
- [55:13]
David Novak
I love it. What's one of your daily rituals?
- [55:16]
Klaus Kleinfeld
Something that you never miss workout in the morning.
- [55:20]
David Novak
There you go. That's why you're in great shape. You're out of the lightning round. You did a great job there. Robert Redford. I got to ask you, how's Your wife, wife Burgett influenced your career?
- [55:34]
Klaus Kleinfeld
Greatly. Greatly. I mean, I met her when I was 10 actually. We hated, we went to school in the same class and hated each other, fought each other violently over who was the speaker of the class. And then we were separated in the upper years. She went to a different specialization than I did it and we got to see each other in the afternoon courses at the school that we went to. And suddenly, I mean she realized and I realized that she is a very smart person. And when we were 18 we fell in love. And that has led to a wonderful life, fulfilled life. And she definitely has been a great influence and a great advisor and a great partner.
- [56:21]
David Novak
You have two grown daughters that are both in business. How did you lead? Take your leadership philosophy at home over the years, Klaus.
- [56:30]
Klaus Kleinfeld
Most difficult.
- [56:35]
David Novak
And why is that?
- [56:36]
Klaus Kleinfeld
Explain. Well, I mean how many advices did you take from your parents?
- [56:40]
David Novak
You know, that kind of explains a lot. What do you see now as your unfinished business?
- [56:51]
Klaus Kleinfeld
Business? Oh man, so many things. I mean the thing that, that I, I like is in our family business, we, we, we are bringing Probiotic products to, to, to the U.S. we partner with one of the top companies. I believe very strongly in the body being a healing engine and that if you know how to keep it alive, you know, well then it heals by itself. And gut health I think is the foundation. And I believe that for 20 plus years. And, and that is something behind compared to many, many other countries partially also because they don't have really good products here and we've been bringing these products for different applications. Omnibiotic is the brand name, you know, so, and this is something that I want more people to get this help, get the support because I mean, I know what it has done to me, how it has helped me to stay fit and stay healthy, enjoy life, have more energy. And I think many people can have that and can relieve themselves on taking tons of pills when they have a little bit of this gut support. I mean there's this big thing about micro inflammation which is now understood being the foundation of aging. And micro inflammation comes partially because the gut is slowly aging and lets stuff through and you want to stop that.
- [58:19]
David Novak
Very interesting and not surprising that your, your purpose is to basically to help the world, you know, which is great. And you know, last question here. What's one piece of advice you'd give to anyone who wants to be a better leader?
- [58:34]
Klaus Kleinfeld
Get as many voices, mentors as you can, you know, and listen to people also learn from people what you don't want to do and learn from them what you want to do. Always stay curious, always act with respect and but continue to move. Continue to move. Standing still is sliding down.
- [58:55]
David Novak
Klaus, I want to thank you very much for taking the time to have this conversation. It's been great to catch up with you and I'm excited for you because you are so alive in what you're doing and so focused on making the world a better place and continuing to do so. Thank you for that and thank you for writing your book. It's great.
- [59:13]
Klaus Kleinfeld
Thank you David. And it was wonderful to see you again. And when you're back, you here somewhere, you know, so let me know. Happy to catch up with you.
- [59:25]
David Novak
You know, I keep thinking about that powerful story Klaus shared when a former patient showed him how each person's work at Siemens helped save her life. It was a turning point for that team and it's such a great illustration of the connection between inner energy and purpose. Purpose channels our energy. We make smarter decisions when we know what to focus our energy on. After all, energy isn't infinite, and if we don't manage it well, we run the risk of burning out. As a leader, you manage energy, both your own and others, and it's your job to channel it towards what matters most. So before you dive into your daily to do list list, ask yourself, what's the real purpose behind what you're doing today? That moment of clarity might just change how you show up, both for yourself and for your team. So do you want to know how leaders lead? What we learned today is the great leaders understand that purpose channels your energy. Coming up next on Hal Leaders Lead, we've got Paul Brown, co founder and CEO of Inspire Brands, which owns big restaurant names like Art, Buffalo Wild Wings, Dunkin Donuts and more. So be sure you subscribe on YouTube or wherever you get your podcasts so that you don't miss it. Thanks again for tuning in to another episode of How Leaders Lead, where every Thursday you get to listen in while I interview some of the very best.
- [60:52]
Klaus Kleinfeld
Leaders in the world.
- [60:53]
David Novak
I make it a point to give you something simple on each episode that you can apply to your business so that you will become the best leader you can ding sa.