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EPISODE 210

ServiceNow CEO Bill McDermott’s Mission to Make Work Work Better

59 minutes · November 16, 2020

Digital transformation is the generational opportunity that Bill McDermott has been preparing a lifetime for. Bill was named CEO of ServiceNow, Inc. (NYSE:NOW) in 2019 with the expectation that his track record of successful growth at Xerox and SAP would lead the SaaS company to new heights. A year into his newest chapter, ServiceNow’s plan to revolutionize workflows is still the plan as the company expands its offering in response to COVID-19 and shoots for Bill’s ambitious $10 Billion Goal.

Audio (00:03):

From the library of the New York Stock Exchange, at the corner of Wall and Broad Streets in New York City, you're inside the ICE House, our podcast from Intercontinental Exchange on markets, leadership and vision, and global business. The dream drivers that have made the NYSE, an indispensable institution of global growth for over 225 years. Each week we feature stories of those who has plans, create jobs, and harness the engine of capitalism right here, right now at the NYSE and at [inaudible 00:00:33] exchanges and clearing houses around the world. And now welcome inside the ICE House. Here's your host, Josh King of Intercontinental Exchange.

Josh King (00:46):

The company I work for, Intercontinental Exchange, runs trading venues for the largest community of market participants in the world. There's no room for error in our business with all the moving parts and technologies required to run global markets, clearing houses, and data offerings, not to mention our growing mortgage technology business. A single system change unaccounted for, and IT requests not responded to, or even a visit not approved for a valuable client, would have a cascade effect. Solving difficult problems has always been an ICE specialty. But when we're looking at a complex topic that falls outside our wheelhouse of markets, data, and hedging, sometimes it's better to look to the industry expert. In 2009, that's exactly what the New York Stock Exchange did when it implemented the first deployment of ServiceNow, a platform now used across ICE. In 2019, ICE used ServiceNow to generate and track over 4 million tickets that were handled by both our support teams and increasingly by automation. The platform serves as our IT teams, development environment, manages compliance case logging and reporting, and dozens of other digital workflows.

Josh King (01:56):

And since the onset of the COVID-19 pandemic, its use has become even more core as our teams remain spread apart, and each employee has needed special software, hardware, and access to continue to do their jobs. All these tickets tracked, solved, and logged by ServiceNow. And clearly, it isn't just ICE that's depending on expanding upon digital workflows to keep business operations humming and employees safe in 2020. During a recent earnings call, our guest today, ServiceNow's president and CEO, Bill McDermott, announced the company's revenues in the third quarter had topped $1 billion, a 31% growth over last year. What did Bill have to say about it? He said simply, "We're driving sustainable growth, well, on our way to 10 billion and beyond." The company's reporting the biggest quarter in its history. And Bill is focused on a 250% increase in the quarters ahead.

Josh King (02:54):

Surprising? Not really. Not if you know anything about Bill McDermott since the days he made sandwiches on the South Shore. Our conversation with ServiceNow president and CEO, Bill McDermott, on his first year at ServiceNow, his career from a paper boy to CEO, and what the future is for digital workflows and offices. It all comes right after this. And I should give you a little heads up. We caught up with Bill in the middle of some fairly persistent construction work, where he did his interview from. So please don't mind the minor rattle. The conversation is well worth the little extra ambient noise. That all comes right after this.

Audio (03:33):

Hi, I'm Axios business editor, Dan Primack, host of Axios Re:Cap, a new weekday podcast featuring interviews that gets straight to the point. My guests are business leaders, politicians, and reporters driving the day's biggest stories. We're joined now by Jalen Rose.

Audio (03:51):

[Ben Chiarot 00:03:51].

Audio (03:51):

Bill Ackman.

Audio (03:52):

Thank you so much.

Audio (03:53):

Senator Amy Klobuchar.

Audio (03:54):

Thank you, Dan.

Audio (03:55):

Steven Soderbergh.

Audio (03:56):

Thanks for having me.

Audio (03:57):

Andrew Yang.

Audio (03:58):

Thank you. It's a pleasure.

Audio (03:59):

You can find Axios Re:Cap on Apple or Spotify or wherever you like to listen to podcasts.

Josh King (04:05):

Our guest today, Bill McDermott, is the president and CEO of ServiceNow, Inc, that's NYSE, ticker symbol, NOW, N-O-W. Prior to his current role, Bill led SAP, and that's of course, NYSE, ticker symbol, SAP. He began his career moving up the ranks of Xerox. Yeah, that's NYSE, ticker symbol, XRX. And over that career arc, Bill's earned a reputation for steady growth of the businesses he leads and exemplary people management. He wrote a memoir a few years back called Winners Dream: A Journey from the Corner Store to the Corner Office. And today we're honored to have him inside the ICE House. Welcome Bill.

Bill McDermott (04:45):

Thank you for having me, Josh. Great to be with you.

Josh King (04:48):

I listened to your third quarter earnings call and heard you and your CFO mention this $10 billion number several times. Curious Bill, why that number and how did your hallmark of taking on a new business endeavor by setting an aggressive business goal like that come about?

Bill McDermott (05:04):

Well, the 10 billion is simply confirmation that ServiceNow is well on its way to being the defining enterprise software company of the 21st century. Once you get a cloud business in the 10 billion category, it's probably a lot easier to go from 10 to 20 billion than it was from zero to 10. So it's just a very nice milestone. It's something that's pleasing to the capital markets and it validates our place in the hierarchy of serious cloud leaders in the world. So it's an exciting time at ServiceNow.

Josh King (05:39):

I touched Bill on how ServiceNow is ingrained in the day-to-day functioning of Intercontinental Exchange. But for our audience who may not be familiar with it that much, how would you describe what ServiceNow does and its potential for transforming digital workloads?

Bill McDermott (05:53):

ServiceNow makes the world of work, work better for people. There once was a time where IT supported the business, but now digital transformation is the business. So whether you're a CEO rethinking a business model, for example, in the case of like Disney, they went with Disney Plus to go direct to consumer, a completely new digital business model, or you're simply a CEO that acknowledges the future of work is going to include a distributed workforce where people are going to be working from everywhere. Many people are hiring thousands of new employees that they've never even met. They're doing this on the Now Platform. ServiceNow enables you to onboard work from anywhere. So think of ServiceNow as that digital platform for business. And that is really enabling people to do amazing things, get their job done, help their companies grow, and provide incredible experiences for their customers.

Josh King (06:58):

The use cases of ServiceNow are endless, but I want to highlight one that you spoke about during the earnings call. Many of us watched LeBron lead the LA Lakers to grabbing their 17th NBA title down in the Orlando Bubble all together in one place, but it wouldn't have been possible without your platform. What role did ServiceNow play in making sure that the Bubble was secure?

Bill McDermott (07:18):

We put a great emphasis on the COVID response. I was in a strategy session in March with my leaders and we looked around the room and said, "Look, there may not be a blue sky if we don't get after this COVID issue." And we developed a workflow solution to essentially respond to the emergency, but then also automate the workflows in companies all over the world so they could properly handle the COVID environment. Are people ready to come back to work mentally, physically? Are testing protocols and procedures adequately in place? Is inventory management of PPE gear ready to roll? Do people have visibility? And are they managing things in a contactless way to keep people very safe? And fortunately with the great leadership of Adam Silver and the NBA and the WNBA, they adopted ServiceNow as the workflow platform for the whole endeavor of bringing the sport back, entertaining the fans, and keeping the players safe. And we're just so honored to have teamed up with them and had such a great success with the WNBA and the NBA.

Josh King (08:30):

Commissioner Silver garnered a lot of praise for pulling that season off, Bill, but he's also a sharp businessman with a flare for detailing stagecraft that a guy like me can really appreciate. He once surprised you on stage with a special basketball card. What was on it?

Bill McDermott (08:45):

Well, that was my grandfather, Bobby McDermott, Josh. He played in the early part of basketball in the 1930s and 40s. And that particular card is his hall of fame basketball card through the first half century. I'm very proud to say that my grandfather was picked as the greatest basketball player of all time through 1950 by the coaches and the players. And Adam gave me one of his hall of fame cards. And it was really truly an honor to receive that from Adam. And I'm so proud of my grandfather because he's always given me a dream to chase. He was a winner, and he was a champion, and he loved building great teams. And that's what I love to do too.

Josh King (09:25):

Bobby McDermott was a man ahead of his time in so many ways. For one, he had this head eye shooter in the vein of Kobe Bryant at a time when most of the game involved sharp elbows under the basket. And he played long before the contracts matched the physical toll on athlete's bodies. How did his legacy and life impact both your father and also you?

Bill McDermott (09:47):

Well, I say in my book, one is dream. My mom, I owe so much to her. Everything I was, I'm, and ever will be, I owe to my mom, who I lost too early in 2010. But also so much to my dad, because my dad is a great storyteller. And my grandfather died too young, at 49, in a car accident. And my dad told me so many stories of his playing days. He was also a player coach. Not too many people were the star player plus the coach of championship teams, but he was. And I really think just hearing the stories, he was such a fighter, he was such a competitor, and he just loved to win so much. And I just feel like all of that somehow got embedded into me as a young person who just really wanted to be the best that I could possibly be.

Josh King (10:36):

To stick on the generations of the McDermotts, Bill, your dad spent a lot of his career with ConEd, and that's NYSE, ticker symbol, ED, which has been listed on our exchange at the NYSE for almost 200 years. What impact did his example have on the approach that you take to work?

Bill McDermott (10:56):

So much. My dad was a hard worker. They used to call him the spider because he would work in the manholes of New York City. And he would solder the cables that kept the electric system of New York up and running. And that art of soldering really required tremendous skill. You heat up copper until it turned into almost liquid, and then you would insert the pipes, and he had a great skill of doing that. And that earned him the title of the spider. And he was a trouble man for Con Edison.

Bill McDermott (11:28):

And what I'll never forget is those cold winter mornings. My dad getting up at 4:00 in the morning, scraping the ice off of his windshield so he could make it into work. Or there were other times where he was working the midnight shift and would leave the house at 11:00 at night only to return again the next morning until at 9:00 in the morning, sometimes after we even gone to school. And I just remember what a work ethic, what a man, providing for your family, working as hard as you possibly can, taking every ounce of overtime so you can give your family a better life. He's a great role model and a great friend. And I'm just so honored by my father.

Josh King (12:09):

In addition to all the time on the job that the Spider had, he was also a great basketball coach. He taught you about business, but also taught you on the hardwood how to coach, which you've done for your own kids' teams. Did the skill conversion work the other way so that through your work experience, bringing teams together in the boardroom, you became a better coach as well?

Bill McDermott (12:29):

I absolutely believe that my dad was so kind to me in the sense that as a kid, 10, 11, 12 years old, he would let me be his assistant coach. And by the time I was a teenager, I was a co head coach with him. And I'll never forget dressing up for the games, taking it super serious, preparing the players, really thinking about the science of the game of basketball, and using every player to their best advantage. My dad had a tremendous focus on the people and what they did really well. And we had a saying that we choose to do what we do well often, and we don't do what we don't do so well at all. So we play with players real strengths and then make sure the combinations of players were there to execute and get the job done when it was game time.

Bill McDermott (13:22):

But I really do think those early days of leadership, living the adult leadership life as a very young guy really helped me get my start. And my dad was a big believer in team, and no one individual could ever be a champion. It really took a team to do it. And that's why I love the game of basketball so much because I truly believe that together, everyone does achieve more. And again, I couldn't have been here without my dad.

Josh King (13:54):

I guess Bill, if something becomes a cliche, it's because there's a lot of truth behind it. And you, like so many of the CEOs we've talked to on this show, picked up a paper route as one of your first forays into business. Do you think that the young Bill McDermott, the neighborhood newspaper boy would have had a use for ServiceNow's platform to organize to maximize tips and keep accounts from getting into arrears?

Bill McDermott (14:18):

Josh, I can tell you I certainly would. I only had a little green book with a pencil back then and keeping track of what people owed me and making sure I collected on collection day. And I could adequately keep records of my tips. Wasn't that easy for a young guy. And I wasn't even a teenager then. So I could tell you I really would have benefited from the workflow, probably taking better routes, and certainly working better on financial management. No question. But the other thing that I've thought a lot about is, once I had many part-time jobs before I became a teenage entrepreneur, I always thought about if I had something like ServiceNow running a small company, could I have made a franchise out of it and would I have chosen that? Because so many of the manual tasks would have been eliminated and so many business ideas could have been scaled. So you never know, but I'm certainly happy with the way things have progressed.

Josh King (15:17):

Our records of the NYSE show that your first official visit wasn't until June, 2000 as the president of Gartner Group. When were you first aware of the markets and the long history of not just the New York Stock Exchange, but the City of New York supporting budding entrepreneurs like yourself?

Bill McDermott (15:36):

Well, it was interesting because when I had my own business as a teenager, running a delicate test in Long Island, and I was very aware of what was going on in the world then, because I would serve some of the folks that were going into Manhattan on trains. And I'd serve them their coffee, or their breakfast, or in that case pack of cigarettes in the morning, lots of people smoked back then. And we would have conversations about their day, their company, their business, and what they were doing. And I got super excited myself about someday making my foray into Manhattan. So I always had an awareness of what was going on and always try to put myself, even when I was a young person, in adult situations. I somehow felt more comfortable with people that were my mom and dad's age than my own, because I was more interested in what they were talking about.

Josh King (16:30):

Talking about your mom, Bill, she was a valued employee of yours for short time at least at that deli that you owned. I'm curious, who sells a deli to a teenager like you, and how did you make it a family affair?

Bill McDermott (16:43):

Well, the main thing was nobody wanted it. I had worked there as an employee, and when the business was sold, it turns out that the person that bought the business really bought it for the gas station part not the deli part. And it was only a one-year lease, meaning he didn't really own the building, he didn't own the property. You only own a lease with the right to do business for only a year. So a lot of people don't feel very comfortable with that, they think that's a very risky endeavors, especially since it was a large oil company that owned it, and they could decide you're out any time. But in my case, I finally got my break and I bought the business for 5,500 nodes, 7,000 with interest. And the deal was simple. If you pay me in 12 installments and you make your payments, it's yours. If you don't, we take everything away from you instantaneously.

Bill McDermott (17:35):

So the urgency to perform was there very early on. And that's what drove me. But the big idea and what I carried forward was customers and really thinking about my competition, because I was a little store between two giant conglomerates. And what I learned is, the little one has to do what the big one is either structurally unable to do or simply unwilling to do. So you have to find your market. And I targeted my market to senior citizens because they didn't deliver, we did. blue-collar workers because they didn't give credit, we could. And they always paid me back. And then ultimately high school kids because I had to get them to walk a block and a half past 711 in my store.

Bill McDermott (18:21):

And one day I went down to 711 to see what was going on, and was 40 kids waiting on line outside to get in. And only four were inside. And I'm like, "Why are you all waiting out here? There's a big store in there." And they said, "Well, they think we're going to take things." I said, "Don't worry about all that. Come down to my store." And at that time, I built a video game room to attract young people to play Asteroids and Pac-Man, and of course I let them in 40 at a time. And to underscore this strategy, at the end of a long day, one of the young people said to me, "Bill, when we want to have good food and be treated with respect, we come to your store. And when we want to steal stuff, we go to 711." So it was understanding your customer, treat them with the ultimate dignity and respect, and you'll get the same in return. And I always did.

Josh King (19:08):

Bill, to paraphrase the guy who went for it on Long Island as well, Billy Joel, why was living in Amityville tending deli instead of tickling a piano not ultimately the right ending for you?

Bill McDermott (19:22):

Well, that's interesting because Billy and I have become very good friends. And I can remember being a teenage entrepreneur. And in those days in Long Island, you could get into any lounge you wanted to once you were 18 years old. And I can remember listening to Billy Joel singing the Piano Man and many other great hits, and always thinking Billy is pure Long Island and so am I. And later on, I met Billy and we became incredibly good friends. And I think we're a lot alike in the sense that Billy did what he was really good at and he pursued his dream and he made a masterpiece of his professional career.

Bill McDermott (20:01):

I'll never forget being with him in the Madison Square Garden with Michael Dell, Susan, his wife, my wife, Julie and I, along with Andrew Cuomo and others when Billy played his hundreds straight sell out at the Madison Square Garden, and just realizing that the arc of our life, while we chose different paths, got to cross, and we got to be great friends. And just my lesson on this is, do what you really love to do and you'll never work a day in your life. And I feel that Billy's never worked a day in his life. And certainly I won't say I've never worked a day in my life, but I've enjoyed the journey so much, and so has Billy.

Josh King (20:43):

I mean, I'm looking at my little memento shelf over here trying to find that trading card that they gave me when I went to Billy's concert on his 70th birthday a couple of years ago. I mean an amazing show and amazing showman. Your big break was literally getting a Mr. Fullwood of Xerox, and that's NYSE, ticker symbol, XRX to break corporate policy and hire you the same date as your interview. It wasn't the first time you used your enthusiasm to remove such arbitrary rules. Is that a tendency that you appreciate now that you're on the other side of the policy-making wall?

Bill McDermott (21:20):

Absolutely. I can still remember being 21 years old and taking the line on that road into Manhattan. My dad dropped me off and I said, "Dad, I'm coming home tonight with my employee badge in my pocket." And my dad said, "Bill, just do the best you can. Don't put all that pressure on yourself." And I get to Manhattan after many interviews that day. I end up in The Corner Office with Emerson Fullwood, who has stayed friendly with me all these years. And it's one of the great laughs that we still have together to this day. I love Emerson and I wouldn't be where I am without him.

Bill McDermott (21:53):

But in the interview, we get to the end and there's that crucible moment, like, "What's going to happen now?" And he said, "Well, Bill, the HR department will get in touch with you within the next few weeks." And I said, "Mr. Fullwood, I don't think you completely understand the situation sir." And the room goes silent. He looks at me like, "What's this kid up to?" And I said, "I haven't broken a promise to my father in 21 years. And I guaranteed him I'll come home tonight to Amityville Island with my employee badge in my pocket." I didn't say anything. He looked at me with a tilted head and he said, "Bill McDermott, as long as you haven't committed any crimes, you're hired." And I said, "Well, I certainly haven't committed any crime, so are you sure that means I'm hired?" And he said, "Yeah."

Bill McDermott (22:34):

Of course I go around, I give him a little bit of a bear hug, and I run to the elevator down 38 floors, go to bun and burger on the corner of 57th and six, putting quarters in the phone to call my mom and dad up. And I said, "Break out the core bell. We got the job." And that was one of the greatest moments of my life. I think getting that opportunity meant everything to me because I felt that I was now in control of my own destiny. I could be what I wanted to be. I had a chance. And I think everybody deserves a chance, but you got to earn your chances in this world. No one's going to give you anything. And I never wanted them to give me anything. And I still don't. So when someone comes to me with that attitude that they want it and they want it more than anyone else, that's what I really appreciate, admire, and respect. And that's the person I want to hire every time.

Josh King (23:24):

When you were at Xerox, what was the best lesson you learned at that first sales job schlepping up flights of stairs to set up equipment demos?

Bill McDermott (23:32):

Well, the first thing is you made a very interesting point there. I really think young people should live a life of consequence, and that life of consequence has to start when you're young. And don't forget the things that you do when you're young will follow you everywhere around. So do the right thing. In terms of schlepping the copiers upstairs and so on, I'll never forget, Josh, getting this lead. I was a trainee right out, a freshly minted trainee at a training class, which was a big deal at Xerox. And I got out on top of the class, which was such an honor, and that means I got a chance to start selling as long as I was with the senior guy and I didn't get myself into too much trouble.

Bill McDermott (24:10):

So we get a lead, it's August, the humidity level is on a 20%, it was unbelievable, and we couldn't get a cab. So I'm carrying this copier on my back, a big typewriter in one hand, a briefcase in the other. We get to a brownstone, I go up several flights of stairs. I get to the top. I could see the CEO, this woman, [inaudible 00:24:31], very sharp, and all of a sudden this giant cat jumps on my shoulder and promptly proceeds to stick its claws through my $99 suit. So I gradually dropped the briefcase and the typewriter and hold the cat. So I knew the skin would heal, but it wasn't too sure about that suit when the claws came back out the other side. And I petted the cat and into a little conversation about the cat with the CEO of the company. And she says, "You really love animals, don't you?" And I said, "Especially cat." And Garfield does nothing on this cat. And she starts to laugh and we start talking about everything except copiers.

Bill McDermott (25:12):

We get to the end of the discussion. The senior guy says to me "Kid, aren't you ready to take out the machine and do the demo?" And I said to her, "Well, do you need to see a demo? You plug it in into a wall, the green button says start, and makes a copy. You plug in the typewriter, it's electronic, so it types faster than the one that isn't electronic." She said, "Oh honey, I'll take two." So we get down to the bottom of the stairs and the guy who I was traveling with that day said, "Bill, you're either going to be the CEO of Xerox or you are going to jail." I said, "You guys have a hangup with jail and this company." That was the whole thing as long as you haven't committed any crimes in the first interview.

Josh King (25:53):

This conversation we've been having so far, Bill, has followed this linear track along the LIRR between Manhattan and Long Island. But it must've felt a world away from the deli even when you were at Xerox. And then, you really had the chance to get away when you took over the Puerto Rico region of the business. How did that opportunity come about?

Bill McDermott (26:12):

Yeah, well, I was newly married and we were expecting our first child. So I moved from Amityville into New York so my wife wouldn't have to be commuting on trains and we've got a great apartment in New York City. I was loving New York, really loved being the king of New York in my own mind anyway. And they told me, "You're going to get to run New York City, just wait it out." But then the big boss said, "Bill, we need you to go take care of Puerto Rico because it was ranked dead last, at a 67 districts, and we need to turn it around." So I said, "My goodness, I just had a newborn baby. Everything is great. But let me go fly to Puerto Rico and meet folks." We had this great lunch in this Argentinian steakhouse. Little sangria with the partners there. Really loved the people, and they wanted me to come, and I could feel it.

Bill McDermott (27:07):

And I call up my wife and I said, "Honey, we're packing up. We're going to Puerto Rico." And we went, everything went into container ship, we moved into a condo in Puerto Rico. And the lesson there was, why are they last? I basically got in front of the whole company and said, "You guys have taken being last to an art form. You do it every year. How are you so good at it?" And then I just listened to the people. And they basically always know the answer. Leaders just have to listen and ask the questions, why, why, why.

Bill McDermott (27:39):

And it turns out they wanted motivation, they wanted a vision, and they wanted their Christmas party back. And all those three things, Josh, what do you think they wanted more? Of course the Christmas party, right? And I said, "Okay, let's go into pageantry mode here. What would you want the Christmas party to be?" "Well, we'd like Gilberto Santa Rosa, the number one salsa singer in Puerto Rico. We'd like to do it at the El San Juan hotel. Here's what the men and women would wear. And we'll party to 3:00 in the morning."

Bill McDermott (28:08):

So I said, "Okay, let me think about it." I come back the next day I had signed Gilberto and laid out the vision that we will do it. Gilberto is signed, everything good, but I said, "There's only one catch." Now they're listening. Silence hits the room. "And the one catch is, there's nothing noble about dancing to Gilberto or anyone else as 67. We're going to be number one and we're going to do it this year." And that's when silence hit. And I said, "Look, I get it. Trust is the ultimate human currency. You earn it in drops, you lose it in buckets. Every day we're going to put a drop in the bucket and we're not going to let any fall out the other side. And we're going to build trust and I'm going to be with you every step of the way."

Bill McDermott (28:52):

Well, it turns out they did an unbelievable job. And by the third quarter of that year, we were rounding the turn like Seabiscuit on our way to the finish line. And we finished number one anywhere. And I was just so proud of the great women and men of Puerto Rico, and the beauty of Puerto Rico, and how kind Puerto Rico was to my family. And it was just such an honor to achieve a number one status for the people because they deserved it. Hardworking, wonderful place, and just one of the great memories of my life.

Josh King (29:24):

I mean, I suppose that with the challenge of signing up Gilberto and renting out the El San Juan hotel, you're beginning to get the sense of what a big event can do to motivate people. And when you were at Xerox and then also later at SAP, Bill, you are responsible for creating these gargantuan events, both for your top employees and also your customers. And I imagine with the timing of you taking on the ServiceNow role, that hasn't been possible to do. That playbook hasn't been able to go back to the way it has been in the past. Do you think that post COVID these big sales events and destination meetings are going to return or do you have to rethink the need to actually meet in person?

Bill McDermott (30:06):

Well, I think back then, I followed Robert Kennedy's motto, which is, some men see things as they are and say why I dream things that never were and say why not. And I believe that pageantry and dreams play a unique role in redefining what's possible. And I still believe that. As it relates to the COVID environment, there's a lot of things about COVID that have been brutal on people. And it is a dreadful virus. There's no question about it. But it has also taught us to do things differently. And this idea of big events with thousands and thousands of people will be morphed into more of a hybrid experience where I think people will be more conscious of digital content, digital experiences, simulating a live event using the techniques of technology without necessarily filling up huge convention centers.

Bill McDermott (31:01):

There will be a time and place for these huge convention centers. They will come back, but they will have to be choreographed in very different ways than they were in the past. And it will take some time. One of the things also is, we knock COVID for all the reasons we should, but we should also acknowledge that we've learned some things.

Josh King (31:20):

Yeah.

Bill McDermott (31:21):

And one of the things is, how do you defeat the physics of time and travel? I mean, I can be in four continents in a day on Zoom, whereas in the past, no matter how hard I worked or how many planes I could catch, I just couldn't be in that many places in one day. So I think people are learning to work from anywhere. I think the millennial generation, considering 75% of the workforce by 2025 will be millennial generation people, they will insist on flexibility, and really smart employers will lean into that and have digital transformation platforms like ServiceNow to give experiences to employees and customers that enable things to happen in new and highly productive innovative ways that enable new dreams, better dreams, and higher dreams to come true. And that's what I'm working on now.

Josh King (32:15):

You left Xerox shortly after Richard Thoman became the first outsider to head the company. And two decades later, Bill, you found yourself in a similar position with ServiceNow. What did you lean on from the Xerox experience watching this interplay between the existing executive team and Rick, that episode leading to the return of Paul Alair?

Bill McDermott (32:37):

Well, I think the first thing is I love Xerox, and Xerox will always be family to me. And I've learned so much from great leaders like David Kerns. He was one of the real great marketing leaders, Barry Rand, who took me under his wing at a very young age and told me I would be somebody someday in that company, and Mulcahy, Tom Dolan, just great human beings, [inaudible 00:33:04], that really looked after me and mentored me. And I thanked them all. And of course we already mentioned Emerson, without him I probably wouldn't be here today. So all honor to that. With Rick, he came in from the outside from IBM. He's a very smart man, a very fine man, and did a great job. We had a great partnership with Lou Gerstner at IBM and Nabisco, I think also at American Express.

Bill McDermott (33:30):

So, he had a great pedigree, but what works in one company doesn't necessarily automatically work in another, and culture is actually determined whether leaders make it or break it. And I always feel like in a culture, I've tried to create cultures where we're the last to accept the status quo and we're the first to change it. Sometimes leaders can come in to very resistant cultures, not read the tea leaves properly, and the cultures reject their transition or the change that they're proposing. So you have to get in with the people. And I think one of the great things about the learnings that I've had along the way is to truly understand that the people always know. And even though you might have an idea about where things should go and strategically have a vision, you have to first respect what came before you.

Bill McDermott (34:24):

And ServiceNow, Fred Luddy, is a great founder with a great heart. And he gave this company an unbelievable purpose and a heartbeat that still rings true today. Frank Slootman did a great job getting into a billion fast, and John Donahoe, who's one of the world's greatest CEOs of all time really did a super job bringing development, inclusion, belonging, and brand to the company. So I truly stand on the shoulder of those giants and I'm proud of that. And I really am proud of the heritage of great leaders at ServiceNow. They all did it right. So I had a wonderful fast start. And I think with my experience in scaling large organizations, respecting what other people have invented, and my ability to take those ideas and make them bigger is really what makes it work. And I really have worked with some great founders and appreciated what they have done. And hopefully they've appreciated that I could scale their idea.

Bill McDermott (35:26):

This goes back to Xerox in many ways. When you think about Chester Carlson inventing xerography, and Joe Wilson, a businessman taking that idea and scaling it as, Hey Lloyd Xerox, which later became Xerox, Joe didn't invent xerography, but he knew how to make that business scale across the economies of the world and become the first billion dollar company. So I think every inventor needs a business mind that can truly lead cultures, scale human capital, and drive customers towards a greater good on your products, your solutions, and your services. And I've been very fortunate that way. And it certainly rings true here at ServiceNow today.

Josh King (36:09):

And after the break, Bill McDermott, CEO of ServiceNow, and I'll turn our attention to his arrival at the company and how 2020 is going to transform workflows and working. And that's all right after this.

Audio (36:24):

Board diversity is important.

Audio (36:27):

Board diversity is important.

Audio (36:28):

Board diversity is important.

Audio (36:29):

Board diversity is very important.

Audio (36:29):

Not just because it's the right thing to do, but because diverse leadership at companies creates better companies.

Audio (36:36):

This is about value, not values.

Audio (36:39):

With board diversity, you built better companies.

Audio (36:41):

Diversity of thought, diversity of perspective.

Audio (36:43):

Different perspectives often yield better outcomes.

Audio (36:46):

We need to have different perspectives with different backgrounds to really inform and find the best solutions for our organizations.

Audio (36:52):

Companies that have more diverse boards perform better.

Audio (36:55):

Diverse teams are better performers. That is absolutely true in the boardroom as well.

Audio (36:59):

It makes a difference to the employees who work for companies. It makes a big difference for the communities in which they work.

Audio (37:05):

This is about building leaders for the future.

Audio (37:08):

And that talent cannot be only half the population of the world.

Audio (37:11):

What are you waiting for?

Audio (37:12):

50% of the population, for some reason, isn't qualified. Let's put the smartest people we can in the boardroom. And why ignore people or exclude people for any reason other than that they're not qualified?

Josh King (37:28):

Welcome back. Before the break, Bill McDermott, the CEO of ServiceNow, and I were discussing ServiceNow recent success and Bill's early career. Between Xerox and SAP, you had several stops, including Gartner, a company that you had experience with earlier in your career. And despite financial success and a good life for you and your family, when you sat down and reviewed your life goals, you chose to face the first period of unemployment in your life rather than continue down the path that you're on. Why was that?

Bill McDermott (37:59):

Well, I thought at the point I left Xerox... And first of all, David Kern said this in his book, and I really lived the experience. He left IBM after 17 years. And I left Xerox after 17 years. And the idea of leaving Xerox, just like Kern's leaving IBM, we said it was like going through a divorce. Neither one of us have ever been divorced, but we both felt that same pain. And I think that's because we truly loved the company and had so many dreams there, but there comes a time where you have to make a decision to move on, to learn new things, to explore new frontiers. And I believe that Gartner, as the voice of IT, was going to give me a whole different understanding of the technology industry, really working with the best analysts in the world on research and what was moving the economy on a technical level. And that was very important. And that experience was huge going from Gartner to Siebel Systems.

Bill McDermott (39:00):

I wanted to be back in a big tech company again, and I really thought the future of the world was software, and I still do. And CRM at that time was the hottest software there was and Siebel was the absolute market leader. So again, it's all part of experiencing new frontiers, learning new skills, adapting to new ways of working in areas that you are completely new and uncomfortable. And that level of discomfort is what's building the strength in your mind and in your soul to take change on and become better. And that was really the most important thing I did instead of settling for the status quo and being comfortable for the rest of my life.

Bill McDermott (39:46):

As a corporate officer of Xerox, which I was, you essentially... we used to say you're a main person for life, because if you just stay there, you get the average of your top five years of earnings in perpetuity for the rest of your life. And just giving that up for change and pursuing new dreams is something that somebody who comes from reasonably humble beginnings has to think twice about. But honestly, I really felt that there was something more for me. And when you stop learning, you need to move on.

Josh King (40:18):

So that risk of giving up, being a made man at Xerox really paid off, and you just literally found yourself back east embedded on the SAP campus in Pennsylvania. Why was SAP, this German tech conglomerate, that in 1998 filled Broad Street with sand to hold a beach party to celebrate its NYSE listing slumbering on a campus in the sprawling meadows outside of Philadelphia?

Bill McDermott (40:44):

Well, I think what happened with SAP at the time, if you think about Y2K, SAP had a great ERP system, and the run-up to Y2K gave SAP some of its greatest years as the ERP market leader. But shortly thereafter, as you know, you had the whole internet boom. And there were many companies, especially in Silicon Valley, that were small companies that were getting big fast and creating tremendous shareholder value. And they were also taking a lot of talent away from companies like SAP, because people that were talented and skilled were getting pulled away to greener pastures on the West Coast. So there was a little bit of a talent drain. The market had changed a lot, because the market was not just going to be about financials and supply chains, it was going to be about human capital, it was going to be about customer relationships, it was going to be about the internet.

Bill McDermott (41:42):

So SAP needed a new vision, they needed a new leader, and they needed to build a great team. And I was very fortunate to have been selected to run SAP America as the CEO of SAP America. And fortunately, our team did a really wonderful job. I work with wonderful people in America at SAP. I consider them my friends for life. And then I was given more responsibility along the way, but it all started with performance. I mean, I always tell people, performance is the price of freedom. You want to do great things with your life? Perform. So I went in, making change, having a bold vision to do in three years. What it took the other one's 25 or 26 years to do, we were going to do in three years. So at the same time, we were revamping the way the world had to think differently. We were also putting numbers on the scoreboard. And you really have to do both to be a leader of consequence.

Josh King (42:45):

I mean, your legacy at SAP is now chiseled in stone and you are made person there as well in a manner of speaking. So got to ask again, Bill, what led you to ServiceNow? And did you walk in on day one with a hundred day plan, something that you've used effectively since you first took over the team at Xerox?

Bill McDermott (43:06):

Yeah, it's amazing, Josh. I think in a lot of ways, the 17 year each is something that I must have in my DNA because I loved Xerox and I also loved SAP and I left them both after 17 years at the absolute pinnacle of my career in both places. At SAP, I was about to sign a contract through 2026. But again, there comes a time when opportunity rings, it knocks on your door. And when I was recruited to ServiceNow, I realized that ServiceNow with the right leadership had the platform of all platforms to lead the 21st century digital transformation movement. And it was taking that transition into the cloud, into the digital business era, with things that I know how to do that I felt made us a perfect match. And I really wanted to do something different.

Bill McDermott (44:07):

To me, change is good, Josh. I think once you get to the point where you're a little restless and you feel like I'm ready to take on a new challenge, a new frontier, I think it keeps you intellectually young, it's a renewal process, I think it keeps you physically exuberant about life, and I think emotionally that energy then gets transferred to thousands and thousands of people in a super positive way when you do what I do for a living. So all that came together in one gorgeous mosaic.

Bill McDermott (44:38):

And I must say, I am really fired up about this opportunity. I've loved every company I've worked for because I've been associated with wonderful people. And it's those friendships I look back on my life and I say, "I hope I built it all with enough care that all the people that I ran into along the way would be super happy I was there." And I only stay as long as I know my heart and my soul and everything I can bring every day is on the line and I bring it to it every day. I don't take a day off mentally, physically, or emotionally from the mission.

Josh King (45:13):

About the time that your first 100 days were wrapping up at ServiceNow, Bill, everything changes with the onset of COVID. How did you then make adjustments at halftime to the plan and pivot the company to react to the unexpected, not only operating in a remote environment with these thousands of people who are looking for leadership, but also supporting your clients through what had to have been an avalanche of new needs?

Bill McDermott (45:39):

Yeah, I mean, I think the 100 day plan is really important to reference here, because I put incredible thought into the first 100 days of my assignment at ServiceNow. And I presented that plan and got complete buy-in on that plan from the board of directors before I would have done ServiceNow. So everybody understands that we're on the same sheet of music in terms of what needs to be done to make ServiceNow the defining enterprise software company in the 21st century. So that was set in stone and it was very meticulously cared for. I came into the company, the first 100 days I traveled the entire world. I met all the employees in-person, I met the top customers around the world in-person, and then I could set the anchor for trust. But keep in mind, as we're meeting people, as we're setting our sail out for new frontiers, we're also performing very well.

Bill McDermott (46:36):

And the first six months of my tenure in the company, you have to perform. I always remind people you have to perform at a peak level to have any credibility whatsoever in business. When COVID hit, we were going into a management meeting on a Monday morning, Josh. I looked around the room and this meeting was designed to do some blue sky thinking and think about what we were going to be when we grow up. And I said, "Look, folks, let's just put down the ideas on blue sky for a day, because if we don't help the world solve this COVID problem, there may not be a blue sky."

Bill McDermott (47:10):

So we dedicated ourselves as a management team to getting behind our great engineering team and building an emergency response management system for COVID, which has now morphed into this whole return to work safely suite of applications, which is a sensation taking the world by storm. Great companies like Uber and many others have access to our services, which is exciting. Thousands of companies around the world. It's like no other. And this has now not only given us a tailwind on the growth side, but it showed the world that we are a serious brand, that we have a purpose to make the world will work better for people, and that we are in service to our customers when they need us most. And I believe that that on a brand level, on a purpose level, on an emotional level, for our customers and employees was a rallying cry that scaled the globe very quickly.

Bill McDermott (48:07):

And it really did enable the baseline of all other digital transformation conversations to take place, because our customers right now are realizing that COVID simply exacerbated the issues that existed before. Digital transformation was a generational opportunity. But when people have to work from everywhere, it now sets a new anchor on what companies have to do and the timeframe in which they can do it. Similarly, when customers aren't coming to stores they used to because the stores are closed or the restaurants are closed, you have to rethink the business model and get digitally in front of your customer and in a contact with society. And you have to build innovation on the fly. It could be leave requests, it could be many different things around workflow automation, getting teams to work together. That's being done on ServiceNow.

Bill McDermott (48:59):

And all of this was happening anyway, but now it validated it, it accelerated it, and it made ServiceNow one of the premier brands in digital transformation in the global economy, and there's no looking back. Once that sail is set, you have a chance to really take over as not only the fastest growing one, but we have the highest net promoter score, customer satisfaction, and loyalty in the industry, and employee engagement and loyalty. And that to me is the combination for great companies.

Josh King (49:29):

I mean, on a personal level, you and I were talking a little bit before we started recording. And I mentioned that I had seen one of your major events when you were at SAP. And I know what it's like to watch a leader address a large group on stage and motivate people and give the pitch on stage. But I'm curious, when you, like so many other people, are forced into your home and sitting in front of a screen and really needing to do things differently, I'm wondering how you found a different gear to adapt and what advice do you give to anyone managing a team in 2020.

Bill McDermott (50:02):

Well, it's a great question, Josh. And I have a philosophy that anything worth communicating is almost always undercommunicated. So now I have a chance on Zoom to communicate with 13,000 of my closest friends anytime I want. So anytime I want, I can hold an all hands meeting with the entire company. And instead of doing that on a quarterly basis, I can do that on a monthly basis, a semi-monthly basis. We have constant communications. We were in a world where not only was the economy under pressure with COVID, but we have lots of racial injustice issues, we had lots of political strife, we had lots of global economic dislocations.

Bill McDermott (50:45):

All of these scenarios need to be meticulously managed. And the only way to do that is to overcommunicate the plan. And I explained to people the whole time that the plan is still the plan. The way we might execute the plan has been slightly modified, but the eye is still on the prize. The manner in which we will get the job done is obviously based upon the workflow revolution, which is taking the world by storm. And our team has to come together with our partners to redefine the landscape of enterprise software. And that's basically what we are continuing to do day in and day out.

Josh King (51:25):

Talking about working with your partners, Bill, this year, you've been able to announce several partnerships, including expanding your strategic relationship with IBM. How ServiceNow and IBM are working together to help businesses incorporate artificial intelligence into their operation?

Bill McDermott (51:40):

IBM has an IT service management install base, that is a legacy install base, it's on-premise, it's not in the cloud. And Arvin saw an opportunity to move that to ServiceNow in the cloud. So we can truly automate the IT service management functions of the IBM install base, get them converted to a modern platform. IBM builds a service practice around that. And also Watson and their AI ops ambitions could compliment that very nicely. So we have a go to market strategy now to address this and address this head on with literally hundreds of customers all over the world that could be new logos for ServiceNow, but also new practice opportunities for IBM. So truly a win-win. And you're seeing this with Accenture and others, where Julie and I teamed up at Accenture, and there's many industries where Accenture is like, "Hey, if we could go to market with the ServiceNow platform on the basis of re-inventing IT employee and customer experiences, we could truly help you transform customer relationships globally," to which we wholeheartedly agree.

Bill McDermott (52:51):

And this is happening with KPMG, Ernst & Young, Deloitte, and so many other outstanding partners that are recognizing that ServiceNow is a mission critical platform. As the platform of all platforms for digital transformation, we can make every other platform that companies invested in work better, or we can simply reinvent the employee customer and IT experiences for people and make work work better for them everywhere. And that's what I'm so proud of because the tailwind from literally hundreds of thousands of partners around the world now deeply caring about the customer through the prism of the ServiceNow platform is an inspiring thought and something we're very proud of and honored by as a company.

Josh King (53:43):

You recently appeared on CNBC where you predicted companies are going to remain remote until 2021. What are your plans for ServiceNow? And is the horse out of the barn for bringing a hundred percent of employees back into an office environment even past that?

Bill McDermott (53:56):

What's really exciting to me is we don't have any pressure in terms of where people are domiciled and where they're doing their work from, because they're all working on the Now Platform, which is ServiceNow's digital transformation platform. So we realized quickly in March that we took all of our employees, immediately had them work from home so we could keep them safe. We've hired thousands of employees since then. We onboard them seamlessly. They've got their phone, they've got their computer, they've got their training materials, they have all the self-service needs met in terms of their employee experience, their compensation, the logistics around their work life, all the cases that they need to manage, and they can do all of those on the Now Platform themselves. And also we're very good with AI where we can predict the next question that's likely to come, because we keep track of what everybody is asking, what everybody is doing.

Bill McDermott (54:52):

So the system in and of itself predicts the future, which is really great for people. They appreciate that. So whether they come into an office all the time, or some of the time, or we use the office as a place where people can be really safe and thoughtful about their work, some of them have childcare issues, elderly care issues, they need an environment where they can team up and innovate with other workers, we all have worked with the ServiceNow returning to work safely application suite. So when they do come into the office, which the offices are open where they can be, they weren't there. Where they need to be home because it's more efficient to do that, they can work from home. In some cases from California, they went to Colorado or Montana or places like Utah, we have no quarrel with that. They're obviously doing their job because we've released two major product releases this year on time and on quality. We're writing more code than we ever wrote before, and sales are sensational.

Bill McDermott (55:55):

So, we've proven that we can do it this way. And that's the big thing, because we have the Now Platform. And companies that are not digital, that do not have a digital platform in this environment, are really struggling and they have to change quickly to adapt to this new reality because, Josh, the future of work is now.

Josh King (56:15):

Bill, you've now got a full year behind you and you're marching toward that $10 billion mark. Of everything that you and I have talked about in this conversation today, what makes you most excited to get out of the bed each morning as ServiceNow CEO and continue to help the world invest in digital transformation?

Bill McDermott (56:32):

I believe that my purpose in life is to be a leader of consequence. I believe that that is my profession and I believe that serving other people is a blessing that comes to very few people the way that it has come to me. And I will run to give my absolute best, intellect, vision, experience, and true love to the ServiceNow colleagues all over the world. And I want to do amazing things for our customers so they can digitally transform their businesses and achieve unbelievable success. And I want to do this in a way that's truly open to the ecosystem, in a win-win that really takes the mentality that together everyone does truly achieve more, and we're better together. So it scales. So I'm in here to be the scale guy to take ServiceNow to 10 billion and way beyond. I believe 10 billion is only the starting point for ServiceNow, and I truly believe that you'll look back on this interview and two or three years down the road, we'll look at ServiceNow and say, "Wow, what a dream can do."

Josh King (57:46):

Two or three years down the road, Bill, would love to have you back on the podcast and see where we are after 10 billion. It's been great to have you. Truly a leader of consequence inside the ICE House.

Bill McDermott (57:55):

Thank you so much, Josh. And honored to be with you. Great interview.

Josh King (57:59):

That's our conversation for this week. Our guest was Bill McDermott, CEO of ServiceNow, NYSE, ticker symbol, NOW. If you like what you heard, please rate us on iTunes so other folks know where to find us. And if you've got a comment or a question, you'd like one of our experts to tackle on a future show, email us at [email protected] or tweet at us @ICEHousePodcast. Our show was produced by Pete Asch with production assistance from Steven Rumancik, Kent Abel, and Ian Wolff. I'm Josh king, your host signing off from the library of the New York Stock Exchange. Thanks for listening, and we'll talk to you next week.

Audio (58:35):

The information contained in this podcast was obtained in part from publicly available sources and not independently verified. Neither ICE nor it's affiliates make any representations or warranties express or implied as to the accuracy or completeness of the information. And do not sponsor, approve, or endorse any of the content here in. All of which is presented solely for informational and educational purposes. Nothing here in constitutes an offer to sell or a solicitation of an offer to buy any security or a recommendation of any security or trading practice. Some portions of the proceeding conversation may have been edited for the purpose of [inaudible 00:59:08] clarity.

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Information contained in this podcast was obtained in part from publicly available sources, and not independently verified. Neither ICE nor its affiliates make any representations or warranties, express or implied, as to the accuracy or completeness of the information and do not sponsor, approve, or endorse any of the content herein, all of which is presented solely for informational and educational purposes. Nothing herein constitutes an offer to sell, a solicitation of an offer to buy any security, or a recommendation of any security or trading practice.