Long before he was named CEO of SAP, a global enterprise software solutions company with 75,000 employees and a market cap of $90.2 billion, Bill McDermott bought a deli in his hometown of Amityville, New York at age 16.
At the time, he worked for the deli’s owner, but after a devastating robbery, the owner was looking to sell. Though he didn’t have the money, McDermott made a handshake deal to buy the deli for $5,500, assuring the owner he would be paid in full, plus $1,500 interest, by year’s end.
Fast forward to 34 years later–in 2010, McDermott was named co-CEO of SAP, a global brand in decline. Software sales had slipped 28% the previous year, and overall revenue was down 9%. By that point, McDermott was well practiced at turning around a failing enterprise.
“You have to get very composed and slow things down when you’re in a state of transition, and the most important thing is to develop a strategy,” says McDermott, reflecting on the similarities between the two experiences.
“Every business has problems; everything’s got challenges.What you’ve got to spend your time on is not so much denying that they’re there, but you can’t obsess about every single challenge and difficulty,” he adds. “Every challenge and every difficulty has to be an inspiration for change.”
To restock the looted shelves of the Amityville Country Delicatessen after the robbery, the young entrepreneur convinced his vendors to provide their first shipment on consignment.
“Trust is the ultimate human currency; that’s why every single human relationship is based on trust, and being able to believe on someone’s word,” said McDermott, 54. “I know my word is good, and that’s the key. It was when I was 16, and it never changed.”
To make matters more difficult, the young entrepreneur was competing with a 7-Eleven located down the block, as well as a Finast supermarket. Both offered similar goods at lower prices. His first instinct was to lower his own prices on staples like milk, in hopes it would draw more customers into the store.
“When you compete on price, they’ll just come up with a lower price, and now nobody’s happy,” he says. “I learned a lot on the fly in that little store.”
One of those lessons, which McDermott has carried with him from the corner store to the corner office, is how to create a customer-focused enterprise.
“I knew if that customer didn’t come through the door, I couldn’t pay the notes; I couldn’t pay my workers; I couldn’t pay my vendors; I couldn’t be viable,” he says.
McDermott found a strategy to cater to his core customers at the deli–blue-collar workers who were paid on Fridays and near broke by Sundays, retirees from the nearby facility for senior citizens who preferred not to walk long distances, and high school students whom the 7-Eleven limited to four patrons at one time. He allowed the blue-collar workers to pay on credit until payday, made free home deliveries to the elderly, and built an arcade to encourage high school students to spend more time at his store.
McDermott would deploy a similar, customer-focused strategy at SAP 34 years later.
“Both at the deli and when I became CEO, we worked very hard on the strategy, and in both cases we were determined to create a customer-driven culture,” he says. “The customer will always determine whether you win or lose.”
Today, McDermott continues to push for a customer-focused culture, understanding that the complexity of SAP’s offerings must be presented with a level of simplicity his customers can easily understand.
“We do sophisticated, complex things,” he says. “It’s hard, but that level of sophistication has to be delivered so simply, so consumable, so beautiful, that it gives you a consumer-grade feeling for the company, and that’s the bridge we’re going over now.”
But McDermott now has other challenges to consider. While SAP is a market leader, it largely operates behind the scenes. A lack of brand recognition presents a hurdle when competing for young talent against tech giants like Facebook, Twitter, and Google, whom consumers interact with directly on a regular basis.
“[Young people] don’t think of SAP as a modern cloud company,” he says, acknowledging millennials are now the largest generation in the American workforce. “The social network is absolutely fantastic, but I also think the business network is even more interesting in some ways, because it has social aspects to it . . . It can change the way companies in the private and the public sector run all over the world.”
McDermott adds that SAP has trained more than a million post-secondary students last year. He is actively searching for young people who demonstrate some of the key virtues he learned himself behind the counter of a small deli in Amityville.
“Courage is one of the real great virtues of leadership–always seeing the immense opportunity instead of the downside,” he says. “What you repeatedly do when things get tough is who you really are. The grit to see the opportunity, and the grit to blow right past things that can take you down the drain, that’s formed in a person very early on.”