Welcome to Leadership Next, the podcast about the changing rules of business leadership. I’m Diane Brady.
Everyone talks about digital transformation, but how does a company that enables transformation in others transform itself, especially if you’re a European giant that has to navigate a shifting regulatory climate, geopolitical risk, multiple cultures, and of course, an ever more competitive landscape? I spoke to Christian Klein, the CEO of SAP, about what he’s done in the past five years, what he sees ahead, and how he’s trying to shift the culture as one of the youngest CEOs of the Fortune 500. Take a listen.
[Interview begins.]
Christian, thanks for joining us.
Christian Klein: Yes, thanks for having me.
Brady: So you are now more than five years into this job. So let’s walk back a little bit and start by telling people where is SAP today versus where it was when you came in. When you came into the CEO role, what did you want to do?
Klein: I mean, when you look at the brand of SAP, looking where the business was five years back. Indeed, I mean, SAP was probably known for developing great EIPs [enterprise integration patterns],supply chains, HR, finance, but also SAP was a little bit known like, Oh, I have to install this software and I hope nothing breaks when I install it. It’s complex. It’s also complex business, which we run. I mean, supply chain, manufacturing. And of course I felt, yeah, also by working with customers and also the good piece is I also worked with our own software. That helps. So my job before was as the chief operating officer to transform SAP. I said, Hey, there’s something right with cloud. And I see, you know, you can have faster speed of innovation, you have more agility to consume new innovations. So I thought, Hey, coming in, it’s time to change the strategy, to change our business model. And here we are, I guess, you know, five years later. I mean, there were big question marks. Will SAP make it? There was a share price drop when I took some profit away because the change of the business model means you need to change the financials of the company. But here we are. And I would say today there is a lot of confidence. Rightfully, customers are happy. Still of course, for the people, change always means uncertainty. I don’t want to underplay that. I mean, there’s a lot of over-communication you have to do. But so far so good. So I’m very happy how it turned out.
Brady: Well, and we’ll talk about cloud AI transformation. I want to start with that piece of transformation because it’s one of those terms that everybody’s using right now. It can mean a lot of things. It could mean laying off a lot of people. It can mean digitizing your operations. What did it mean for you when you were in that role basically spearheading transformation?
Klein: I mean, look, on the one hand side, with our technology, we are helping customers to transform. I mean, I was just in Houston talking about renewable energy and how to transform oil and gas. When you’re working in retail, it’s about omnichannel and resiliency and supply chains and technology is key to that. But what you have to admit, even as a technology CEO, is you cannot transform a company just, you know, by implementing new technology. This is key. But what you also have to do is, you have to change how oftentimes how people work, how we code software, how we deliver software, how we sell. And the same is true for all of the industries in some shape or form. And then it’s a cultural change. It’s also about the openness to mindset and to really do things differently. And that is what you should not underestimate. So also what SAP is doing, we are not only selling anymore, you know, our technology, which is great. We are having an offering where we say, Hey, we help you, we help you in, changing your business model. We have 400,000 customers. We’re going to tell you what worked really well in your industry and we tell you what didn’t really work and we give you this insights into how others did this transformation. You know, from a business perspective, from a people perspective, from a change management perspective, and then we implement, create technology. And I guess this was very key for me always. And actually I have to say, I learned a lot on this, on this journey, and that’s also what I share with our customers. I look at it holistically. You cannot solve everything with technology. Technology is key, but not everything.
Brady: You know, one thing that people who are listening would not realize is you are relatively young for the role. You’re like an older millennial. Is that the right way to put it?
Klein: That’s the right way to put it, yeah.
Brady: And so coming in really in your late thirties to this, do you think that made any difference?
Klein: I mean, look, people, especially in Germany, sometimes they said, it’s just a good thing that Christian always was with SAP. I started as an intern carrying monitors and not a flat screen. So, I mean, the heavy ones in the basement of our headquarter from one room to another. That’s how I started my career. And then I have seen the company from all facets. I was here in New York as as a student. New world for me coming from Heidelberg to New York. I mean, but I learned a lot. I learned how to [do] marketing. Then I moved on to SuccessFactors, cloud. I was in finance. I was in development. And I have to say, while, you know, some people maybe criticized it, that I only have seen SAP, I have seen it from so many ways, from so many perspectives, I know the culture, I know the people, and I’d say it would help, it’s helped me tremendously. And look at just what happened at Nike. I heard, you know, the new CEO also started as an intern.
Brady: Didn’t Satya, Satya Nadella…
Klein: Satya, yeah, and…
Brady: But that’s not an age issue. That’s a familiarity issue. I think almost generationally as well, though you come from a different mindset.
Klein: Yeah, it could be. And but of course I was pretty young. I have to, I’m still, I guess, the youngest one in the decks. But, you know, of course I get at a lot of experience. And I guess what you always need to understand as a CEO, when I would come to the office this morning, I would say, Hey, I’ve known everything I have seen everything. I was saying that would actually be my biggest failure. So I guess, you know, just eagerness to learn new things no matter what age, I guess is super important. And then, of course, I collected a lot of experiences over my years, 24 years at SAP. This is not nothing. And then it’s also about staying a little bit humble and also ask yourself or ask the team, how was this podcast? How did I do this keynote? Was this the right pitch on the strategy? Asking my product engineers are we on the right track? Give me some feedback. I guess, you know, having this humbleness and also learn every day also makes you stay young in in another way and yeah, yeah.
Brady: Look I some of the youngest people I know are CEOs in their sixties and seventies, so age is definitely a mindset. So Christian, SAP is the largest European software company. Talk about the context of being in Europe and the European business climate. You’ve worked in the U.S., you’ve worked in Europe. Obviously, this is a global company. What’s different?
Klein: Yeah, I mean, first talking about U.S. and Europe. I mean, when we talk about EU union and I guess that what’s many of my peers in Europe also criticizing, we call ourselves union, but then in every country you feel there are different data privacy rules, there are different banking regulations, that it’s not really a union when it comes to our energy grids and Europe. So that’s what we are pushing a lot on the economy side to say, Hey, we need to become a union and every membership country needs to give up a bit now to create a benefit for our European Union. And then the second piece is I also feel the cultural differences. Yeah. So in Europe we have very fast in regulations. We love to regulate, especially Germany we have not a lack of bureaucracy. The point is, I’m not saying that regulations are necessarily bad. It’s just a matter of, you know, don’t overregulate. And I guess the best example is AI. I mean, before we actually created, you know, the first fantastic use cases on how our businesses, our customers to want better. I mean, there was always this question around regulation. And I said, hey, hey, hey, let’s also not regulate to technology, because when you regulate technology and you do something which is not yet done also in the U.S. or in other parts, you actually, you know, kill innovation in Europe. And then the second part I’m all in for regulations, but on the business side, the outcome. We have our values. We want to understand what kind of impact has AI on on our social community, on our workers, on our customers. But let’s talk about that. But don’t don’t regulate to technology because that really hinders the innovation in Europe, which we are anyway lacking, to be honest.
Brady: Yeah, well, I want to double down on that for a second, because I remember when the privacy legislation came out, GDPR, there was a lot of concern about what would that do for especially for the consumer facing businesses. Have you seen regulation have a negative impact on innovation? Is that what you think is…
Klein: Yes.
Brady: …the challenge?
Klein: Yeah. I mean, look, just right now, when you look at all of the startups in the AI space in Europe, like Mistral, we have all of Alpha, we have some others. I mean, for them it’s not like withSAP. I mean we code software, we research everywhere in the world. Actually we have more people in the U.S. than in Europe. We have a big lab in India. So for us, it’s not that punishing, but for young startups where really speed matters, where you need a market to scale, where you need access to data. For them, it’s of course a big blocking issue. If you then regulate, you know, from day one on to technology itself or how to train your algorithms. Or take the GDPR you mentioned. GDPR was actually well intended. The issue is that there was always large gray zones and every data protection officer had a different understanding. And when everyone has a different understanding, you can do nothing anymore because, you know, sometimes people tend, especially in Germany, to be very conservative and then you, you know, you kill again, innovation because data is key for so many things, not only for AI. And that’s you know what I mean with regulation is not bad if you do it in the right way, if there’s some consistency and if there is not an overregulation for sure not on the technology side.
Brady: Let’s talk about some of the advantages of being a European leader, a European leader of an international business. I’ve lived in different countries myself. I grew up in Scotland. I’m always aware that we in the states don’t get out much sometimes. In Europe you do, simply by virtue of being European and a global business. How do you think you view the landscape maybe a bit differently from some of your U.S. peers?
Klein: I mean, indeed. I mean, when you start with the geopolitical tensions, they are there for sure and when you then, you know, visiting customers in Asia, all when you also talk to multinationals here in the U.S. who are having a business in China. I mean, they actually ask us, Hey, we are wanting with our supply chain in China, give us the certainty that no matter what is happening, that we can still continue to run our business. And that’s mission critical business if my factories are down in China, it doesn’t help. It’s actually disrupting the whole company. And that I would say from a European perspective, it helps because we need to find solutions. And somehow, you feel a little bit like, you know, stuck in the middle. But on the other hand, yeah, we need to find and we can find solutions. Of course, also talking to our governments, but also then with technology to build those pressures. And then when you are visiting, you know, countries in Southeast Asia, for example, I was just in Kuala Lumpur and others. You see this incredible closed markets and then, you know, but you cannot cover just closed markets only with Christian Kleins and others. So you need to also attract the right people. And I guess there it’s a big plus if you are early, if you also understand the culture, if you can attract the people not only by offering them a great job and a great salary, but also giving them something where they feel okay SAP has somehow an identity in this country that helps a lot. And then the second part what we do is especially well, I would say, is also attracting universities. I mean, here we have great, you know, collaboration and research projects going on with Berkeley or Stanford. But the same we do also in Asia and that also helps to attract talent on a global scale, which is super important for us.
Brady: So can I dial back even further on your background? I noticed that you have a degree in international business administration, and from that, should I presume that you wanted to be in a leadership role early on in your career? What was your ambition when you were just getting out of school?
Klein: Out of school I have to say, I didn’t have always the best grades. I mean, as every German kid, probably I wanted to become a famous soccer player. That didn’t work out. And I realized that, during my time at the university, and then suddenly I realized, Oh my God, this passion for how business is won. The passion for to understand how [unintelligible], how supply chains are connected, how finance works, how you do analytics, and that really caught my attention. And then I was really fired up to really understand this better and better and better. And then there was a company in the neighborhood called SAP and, Oh, now you can go combine that technology to it. And I said, always to my developers, we are not coding technology for the sake of technology. We are coding technology for our customers, for these businesses. And that really excited me. Don’t ask me why, but I somehow find it super interesting to connect the dots and how the world economy works. Yeah. And then I built my career step by step. And I have to say, this vocational program what we have to spend four months here in the U.S. working for marketing and you go back to university and back and forth, back and forth. It really helped to also shape my network and to apply what I learned at the university in the practical world of SAP. So when I was ready, I said, here I am. I know how to run our systems. You know me. I know how this company works. So this already gives you actually a good start. And when I come here today to New York, I still have friends in Hoboken, which I met, you know, 23 years ago. Yeah.
Brady: It’s so it’s actually nice. It’s like the British system, that ability to create a Renaissance leader early on. American companies don’t do that necessarily the way they used to.
Klein: Yeah and look, I feel as a CEO, I always tell people about what is super important. You know next to it helps when you understand your business and your products and so on. What is incredibly important for my eyes is a bridge builder and a problem solver. I mean, every day something pops up differently. And then to understand which people now need to come together to solve that problem. And that’s not only CEO, that’s also for our executives super important. And then to have a network to see how we can solve certain things. And I guess this is what you learn, what I learned very early and it helped me to quote my network. And even today, I sometimes don’t not only know my board and I know is some of the experts everywhere, and that helps me also to solve challenges, but also to get always valuable feedback.
