SAP CEO: Go young or go home

Bill McDermott, co-CEO of SAP AG, urges companies that want to survive the next decade to embrace their young workers because ignoring their talents, ambitions and needs will only doom you to failure.

Bill McDermott, co-CEO of SAP AG, still has his Long Island accent, and it thickens a bit when he tells the story of buying a delicatessen when he was still a sophomore in high school.

He uses the accent to draw laughs when he talks about “Tony Somebody from New York,” who controlled the arcade games he wanted in his store. Pac-Man and Asteroids were a key to his early success because the games lured in high school students.

“I had to appeal to my base,” he said last night during his keynote address at the Northern Virginia Technology Council’s Tech Celebration banquet.

He proudly told the story of his $99 suit from the mall that he wore to his job interview with Xerox. The first floor of his family’s home had been flooded, and his brother carried him from the second floor to dry ground so he wouldn’t ruin the suit.

He promised his dad that he’d come home with a Xerox employee badge. “I guarantee it,” he said told his father. He got the job and worked there for 17 years.

While stories of his youth drew plenty of chuckles, McDermott delivered a serious message and a warning to businesses that don’t embrace the under-30 set as employees and customers: Ignore their talents, ambitions and needs, and you are doomed to fail in the next 10 years.

“They are not Me Me Me; they are not narcissistic,” he said. “There is a new generation out there that sees the world in a new way.”

They are mobile, social and purpose driven. “Eighty-four percent would rather work for a company with a purpose, that does something that matters, than get a raise or a promotion,” McDermott said.

SAP lets employees dedicate one day a month to community service, and the company’s retention rate has improved by 5 percent.

“For us, 1 percent of retention is worth $80 million,” McDermott said.

McDermott became co-CEO of SAP in 2010, and the company was No. 1 in many of its markets.

Despite its strong position, “we knew that if we didn’t change, we’d be dead in five years,” he said.

The company is now focused on mobility, the cloud and in-memory databases. “Disk storage is dead,” he said.

“Today, 80 percent of new revenue comes from businesses we were not in three years ago,” he said.

Throughout his talk, McDermott returned to the need to harness the energy and enthusiasm of younger workers.

“You need to build career platforms because they really care and they’ll leave companies that don’t take the long view,” he said.

He urged business leaders to embrace intellectual curiosity, which too often is stifled.

“We have a curiosity deficiency,” he said. In grade school, students ask thousands of questions, but by high school “you’ve been beaten down, and ask just a few.”

By the time you are working in the business world, “you don’t ask questions because that’s how you get fired,” he said.

At SAP, the company conducts “jam sessions, where we invent the future,” he said. “If it fails, kill it, but you have to create a culture where failure is acceptable.”

Leaders need to challenge younger workers with big, important projects and responsibilities. McDermott told the story of President Kennedy’s 1961 pledge to put a man on the moon by the end of the decade.

The average age of the engineers working on the Apollo project was 26, and the team was led by a 31-year-old, he said.

“What we have to do is wake up and get the younger ones to do big things,” McDermott said.

And don’t let this age of austerity scare you away. When SAP needed to contain costs, a 23-year-old at the company suggested putting a thermometer on the company portal so employees could track SAPs progress.

“For the first time, we didn’t have people complaining and we exceeded our goals,” he said.

The simple idea of a thermometer engaged the employees, and gave them a stake in what the company was trying to accomplish.

After his speech, I talked with a few people around the dessert bar. Some felt he overstated his argument; others thought he was spot on.

My only criticism is that the principles he talked about, particularly around engagement and fostering a culture that creates room for failure, should be applied to all generations.

Perhaps the message resonates strongest with those under 30, but even a 50-year-old like me wants to have a sense of purpose and mission.