Throughout this book, we have met leaders who made collaboration happen …
Doug Hull rescued some broken-down desktop computers bound for scrap, linked them together through two schools, and gave Canada its first move to the Internet.
Claudia Costin brought tens of thousands of teachers, students, and parents into collaboration for Rio de Janeiro’s schools, starting with her personal Twitter account.
Dee Hock’s vision of a global payment platform created Visa.
Rudy Crew gave principals the power to make decisions about money; Beverly Donohue hardwired it into a computer platform that shaped the schooling of children for a decade.
Paul O’Neill of Alcoa saw that with the right business discipline, safety and financial success could both soar.
William Brownfield kept the collaboration between Colombians and Americans within the headlights of political support from both nations’ militaries, intelligence organizations, and foreign services.
Leadership of collaboration demands seeing above the fray to victory—and then returning with that vision to create a plan that helps everyone feel as if they are bound for success, holding one another to account and garnering support to the finish line.
Not everything will happen on time or according to plan. Leaders must be resilient so that in times of crisis the balance in the trust bank is high. Chances are, you’ll need to make a withdrawal.
Even when collaboration appears headed for the rocks, true leaders do not abandon their core values. Secure in their vision, buttressed by plans, people, and support, they derive strength from those values, confident that, especially on the most difficult days, collaboration is not just the better way—it’s the only way.
MacArthur Park is one of LA’s oldest parks, and probably its best known. Right in the heart of the city, adjacent to downtown, MacArthur Park has been featured in practically every movie and television show ever made about Los Angeles. Iconic in stature, it is also extremely visible. Leaving or getting to downtown on the freeways, you use Wilshire Boulevard. Thousands of Angelenos passing through see this area every day.
By the time I arrived in LA as chief in 2002, the area around MacArthur Park had become one of the poorest, most densely populated of the city—largely immigrant, El Salvadoran, and home to several of the worst gangs: 18th Street, the Mexican Mafia, and MS-13. The park itself was still beautiful but neglected. It was widely perceived to be under the gangs’ control, overrun by drug dealers, people selling counterfeit licenses, illegal peddlers of all stripes.
The park had symbolic imagery as well. It was the epicenter of the Rampart Police District and thus of the Rampart scandal, in which a number of officers in the Rampart antigang unit had been implicated in crimes ranging from drug dealing and framing suspects to bank robberies and shootings. That had been the final straw in bringing about the federal consent decree under which the department operated when I came on as chief.
Less than three blocks away was the resurgent downtown business district. Money was coming free to restore many of the great old buildings; people were moving in. Development was starting to leap across the freeway, moving toward MacArthur Park.
On the other side of the park, moving out on Wilshire Boulevard toward Beverly Hills, after a couple of blocks, the same thing was happening: it was getting cleaner. MacArthur Park was a troubled spot in what was becoming a revitalized area.
Even in the midst of the turbulence in and around the park, there were positive elements: a heavily used subway stop; a vibrant street economy that made you feel like you were walking around in a Latin American city. On its periphery was the Mexican Consulate; Loyola University still had a campus there; a couple of businesses were still surviving. Several restaurants, including Langer’s Delicatessen, had been there for years.
And there were plans. When I came on as chief, the city councillor for the Rampart neighborhood, Ed Reyes, took me on a ride through his district. A number of investments were being planned for the park, he said. New lighting, refurbishing of the concert stand; maybe even a new artificial turf soccer field. A grand vision, considering the dilapidated state of the park we were riding through.
The investments were important—but could they turn around the park? MacArthur Park had become a platform for drug dealing, disorder, and crime. Our idea was that it would become a platform for collaboration around community renewal, a highly visible place where we could make change happen fast. Like Hollywood, Skid Row, Baldwin Village, and the Mission Area in the San Fernando Valley, MacArthur Park would become one of our five Safer City initiatives, pilot programs that would use our minimal resources in partnership to maximize the benefits and make the case for growing the department.
We couldn’t be everywhere at once. But we could showcase what more cops and more partnerships could achieve. We would prove that even in the midst of a gang-controlled area, with all its serious crime and quality-of-life issues, you could use the police as a catalyst to bring it back.
But we had a problem. Our potential partners were distrustful of us. The business community had lost faith in the police; even the political community and city council had not had much luck with the police in addressing these issues. The media had spent years reporting on the Rampart police scandals, and now the LAPD was under the watchful oversight of the federal government and its consent decree.
We would have to build trust fast with short-terms gains and long-term plans. You buy trust with wins; trust buys you time, and more support. But as we set out, trust was hard to find: after years of conflict, no one trusted anyone.
Trust that we’re going to be there over the long haul. We would stay long after the cameras had gone. This would persist.
Trust that even as we’re working on those longer-range plans we’re doing something together now, creating value fast.
Trust that this was possible. We’ve done this before wherever I’ve led departments: coming together, we could make this happen.
The beauty of MacArthur Park was that there was something in it for everyone. It was so far gone it wouldn’t take much to get a sense that something was changing.
One of the things that would give that sense was energetic and responsive police presence. Because of his successes on Skid Row, I moved Charlie Beck to the area. Beck was great with the community. He was very good with the cops. He proved that collaboration was good for communities—and good for careers. Charlie is now chief of the LAPD.
We gave Charlie a few extra bodies, not a lot. But he also went across boundaries, reaching out to the business community and neighborhood residents, gaining their support for putting cameras into the park. The cameras were monitored live back at the police station; officers in and around the park could be directed to activity identified through the cameras.
The cameras had a psychological and practical, force-multiplying effect. But they also introduced the idea that in the neglected park the LAPD was going to embrace technology and leverage every asset we could in trying to secure the city’s public spaces. It was going to become a city priority, not a liability.
The cameras showed, further, that nothing on this platform could work without political support. To have the cameras work effectively at night there had to be enhanced streetlighting. That’s where the mayor, through his ability to influence the Water and Power Department, the city council member who used some of his funds to help pay for some of the cameras, and Motorola all got involved.
It was a matter of building alliances.
Alliances
I wasn’t tied down by the controversies that had diminished the creativity and success of my predecessors.
For years LAPD’s chiefs had had endless wars with mayors and the city council, and been unable to increase the number of police officers. LA was huge—nearly five hundred square miles. If you were an officer responding to a call you could be alone for an extended period of time. You had to be able to control a situation and the threat of force had to be credible.
For the most part, white Angelenos had little interest in supporting more policing. So long as they were safe in their homes, what happened thirty miles across town was not of strong interest.
That created the “go it alone” LAPD culture that permeated the organization in the 1960s, ’70s, and ’80s. “If the political leadership leaves me alone,” Chief Bill Parker would say, “I’ll take care of business.” He used a term that became very popular, “the thin blue line.” Many thought that meant a few police trying to keep the forces of anarchy at bay, to keep the law-abiding community safe. It really meant “a thin blue line to keep whites separate from blacks, to keep the poor separate from the rich.” Taking care of business in the LAPD really meant controlling the poor and the racial minority groups.
Policing, meanwhile, had become much more difficult in every American city. There was more drug-related violence, more social disorder and breakdown, and a growth in racial tension even as the civil rights movement brought an end to segregation.
Rather than trying to adapt to a changing world, the LAPD was becoming increasingly driven by a culture of control and separation—from the community, political support, and business leadership.
The LAPD was changing, but it was moving in the wrong direction. With the city and the country becoming more violent, the police became aggressive, and in some neighborhoods more abusive. And you could understand that. With ninety-three hundred cops for five hundred square miles and four million residents, with the country’s worst gang problem, in LA cops had to go without—without support, without backup. They felt threatened. LA had starved its police force. In New York, I had had thirty-eight thousand cops. On a comparative basis, LA was understaffed by half: it was like working New York with nineteen thousand cops.
The “go it alone” culture fed on itself. Police conduct was constantly an issue. Daryl Gates, chief of police in the 1980s and early 1990s, wasn’t speaking to the mayor, Tom Bradley. The department wasn’t getting any resources. Cops were angry at the community. “You’re not giving us anything. We ride around in six-year-old cars. The police stations are a mess. There are not enough of us. You don’t care about us, so why should we care about you?”
“Go it alone” and a “culture of control”—in the hands of individual police officers, that’s a potent brew.
Now, as a leader, you want pride in your organization. You want a culture of confidence. You want a culture of optimism. You want a culture of can-do. You want a culture that stresses partnerships: there’s no way in LA, pressed as cops are, you can “go it alone” and succeed.
But you don’t want to be in an emperor-has-no-clothes situation. And that is exactly what happened, finally, during the Rodney King verdict riots in 1992. The LAPD, which had prided itself on never giving up, never backing down, on its competence to handle any situation, effectively abandoned motorists to the mob at Florence and Normandie in South Central Los Angeles. Literally retreated. First time in its history. This shook the department to its core. And it ultimately led to Gates finally being forced to resign.
Reform chiefs followed. Willie Williams came in after Gates with a great burst of energy, hope, and optimism. He captured the community’s interest and brought crime down by working with cops and neighborhoods in community-policing initiatives.
But Williams never was able to get a hold on the department. It’s almost as if nobody, cops included, could understand why crime was going down—or that it was because of what they were doing. He was the LAPD’s first outside police chief. The cops didn’t like or respect him. Eventually he lost the support of his mayor and police commission, and the Los Angeles Times.
At the same time the drumbeat of criticism against the LAPD was incessant. The old guard used the drumbeat as a rallying cry, safe in their silo fortresses and resistant to the best efforts of chiefs to reach in and change. Patrol, detective, narcotics, administration, and special operations were all under independent command by and large. SWAT, Metropolitan Division, and Helicopter/Aviation were the iconic LAPD units, smaller entities within the larger organizations, highly resistant to change, with influence well beyond their numbers. They demanded and received prideful allegiance. They accepted advice or guidance from no one. They epitomized the old philosophy: “The LA way is the only way,” everybody else be damned.
Despite all the books that have been written about change and leadership, the reality is that most organizations are still locked into the old silo overconfidence: “We don’t need to change really. We’ll continue to do more of the same thing.”
Arrogance—“nobody does it better”; pessimism—“it doesn’t get any better than this.” Those attitudes ensure that an organization stands still while the world moves forward around it.
The LAPD was operating without sharing, without transparency, without inclusiveness. It was operating on a structure of exclusiveness, resenting anybody, whether outside or inside the organization, who questioned what they were doing. The whole structure was weakened; there was nothing but vertical beams running deep into the organization, rising high, with nothing connecting them, no interactions, joined only at the top at the chief’s office. The situation was completely unstable.
Chief Bernard Parks came after Williams and undid his community policing work, losing public support in turn. He uncovered the Rampart scandal but then was consumed by it—and by his poor relations with the police union. His style of leadership just wasn’t getting anything done. The union spent almost $1 million in an advertising campaign tearing him down, helping to drive him from office. Unfortunately for him, he provided them with a lot of fodder.
I came in as the LAPD was entering a very difficult period—operating under a federal consent decree that mandated certain reforms as a result of the Rampart scandal, which had caused grave damage with the Latino community. The African American community was incensed that it had lost its second African American chief. Each of my three predecessors had been forced from office, and crime was back up. And still the LAPD was starved for resources.
At the same time, I was able to use the consent decree, which had been seen as a negative by my predecessor and by the union—by just about everybody—as a positive. It required change, and it funded the change.
What was new about this was that, unlike in Chief Bill Parker’s time, where the ideal was “Leave us alone and we’ll take care of your business,” we were saying that we recognized we could not do this alone. That even if you resource us with more cops, etc., we still need partnerships. We need collaboration. We need to be working with the city attorney’s office, the district attorney, the city council, the mayor, the Feds, the immigrant community, the gay community—entities many of my predecessors were constantly ignoring or fighting.
I had a unique opportunity to open the tent and welcome people who had not been allowed in before. Citizens more used to clashing with the police than cooperating with them welcomed the invitation to collaborate. Many came forward, and we were able to take advantage of that.
In MacArthur Park, for example, we worked with an ambitious city attorney who saw the park as an opportunity for visibility and press conferences about the successes. One of the issues in the park was the sale of counterfeit licenses and documentation. Those were misdemeanor offenses, something his office had jurisdiction over. We needed that enforcement. He wanted publicity. We both wanted success. There was something in it for everybody—most important, the public.
I worked with the union, instead of against it. Union support was absolutely critical. I wrote a regular column for its newspaper. We fought, but we agreed on more than we disagreed about even in the midst of the consent decree, which was widely unpopular with the rank and file.
There had been historical tension with the civilian bosses—the mayor and the police commission. The commissioners had seen their powers increased again and again over the years to the extent that they now had an inspector general. My predecessor wouldn’t let the inspector general into meetings. Basically, I opened up everything to them. The police commission and the inspector general were actually empowered during my time. The department and I benefited from the support and guidance they provided.
Same for the federal monitor. The consent decree was thought by many to be an albatross around our neck. I saw it as an opportunity to build a collaboration with the federal monitor. Instead of fighting him, we worked with him and his people. I’d been part of the federal monitoring team for the year before my appointment; we understood each other.
I had the benefit of partnerships with two great mayors. Jim Hahn brought me on, at great political risk; Antonio Villaraigosa reappointed me. Both were strong advocates for a strong LAPD.
Now, I had my share of fights. Working with the mayors, we constantly fought with the city council to grow the police department. But you choose your battles; you don’t fight with everybody at the same time; and you don’t quarrel to the extent that you break off the relationship so you can’t come together and find common ground when the tides shift. Councillors came around when they started hearing from the media and constituencies: “We want more cops.” That was the idea.
Success stories helped: “Look at what we did with these fifty extra cops and Skid Row. See what we did with the new police station out in Mission—how that turned that area around. Look at what we did with these eighteen extra cops down at the Baldwin Village. Just think what we could do with fifty extra cops up in Hollywood.”
I understood that I needed to market smaller successes as we built toward the ultimate accomplishment: citywide crime reduction and national attention for the achievement.
Without tabloids like the New York Post, the New York Daily News, or Newsday, the media in LA were not anywhere near as pervasive as in New York, particularly in covering crime, especially in the minority neighborhoods. Baldwin Village, which had extremely high levels of crime and serious gang violence, got little media attention. There was plenty of other crime around the city to cover: being far away in South Los Angeles, Baldwin Village was off the radar; television stations didn’t like sending camera crews down there unless it was a true “bleed to lead” incident. The half-dozen shootings a day or the hundreds of murders a year, largely of blacks and Latinos, just didn’t draw the media in.
We attempted to attract attention to the crime problem. My leadership team and I made ourselves very available to the media. We talked constantly about the gang and crime problem, what we were doing about it, and the help we needed. We acknowledged the truth everyone in the black and Latino communities knew.
We investigated officer-involved shootings so thoroughly and reported them so openly to the police commission that you have to go back to 2005 for the last time there was any significant, widespread community outrage over a police officer taking a life. This transparency was unheard of in a city with a fifty-year history of hostilities between black and Latino communities and the LAPD.
We didn’t run from incidents. The idea was to get the information out; if we were wrong, we were wrong—admit it, fix it, move on.
As a result, people eventually got the sense that (1) we’re focused on these incidents; (2) we’re not trying to hide anything; (3) we’re not going away. And hey—crime is going down. Things are getting better and they’re getting better throughout the city. No one could miss 50 to 60 percent crime reductions.
These were collaborations that I would describe as the spokes of the wheel. The Safer City initiatives were five spokes that helped to strengthen the wheel. For each of these initiatives—the pilots, reaching out to the union, the police commissioners, and the inspector general, even dealing openly with LAPD critics like the ACLU in terms of attending their meetings—each of these spokes of the wheel was strengthening the department by improving its image and its working relationships.
With widespread media reporting and documentation from ourselves, the civilian police commission, the Los Angeles Times, and our federal monitors, we showed that the department—when properly resourced, properly led, properly focused, and properly partnered—had the capability to do very good things.
By 2005, the turnaround in MacArthur Park was so significant that the owner of Langer’s Delicatessen would tell you that the park was safer than it had ever been—and he’d been in the area for over forty years. The owners of Mama’s Hot Tamales said the same thing. For the past few summers, there’s been a concert series at the park that attracts eight hundred to a thousand people a night. That series has never had an incident. They refurbished the bandstand and stored tens of thousands of dollars of equipment there—none of it was ever stolen, and the bandstand itself has never been vandalized. That is reflective of the community watching out for this thing they all value.
The city put in artificial turf for the soccer field and the park is used day and night. You won’t find drug dealing, the homeless hanging out, gangs, illegal licenses being sold. The cameras are still up and running. The real estate push from downtown has been stalled somewhat by the recession. But the mix of people in that area is changing also to include more dog walkers. That’s always a good sign.
Fifteen years ago, when Jeff O’Brien moved to MacArthur Park, near the city’s downtown district, the neighborhood was run-down and notorious for crime, drugs and poverty.
At the time, though, it was all that he could afford. He was making a living as a messenger and a part-time bass player and sharing an apartment with a group of art students.
Although he left the neighborhood many years ago, he decided to return three months ago.
“If you told me 15 years ago that I would be living in this neighborhood now, I never would have believed you,” said Mr. O’Brien, a prop-master in the film industry. Two women joggers passed by. “A few years ago jogging around the park at night would have been suicide. That’s not the case anymore. ”
With increased police patrols, the crime rate in the park and the surrounding area has dropped dramatically. Homicides in the Rampart Division, the police district that includes the MacArthur Park area, have declined from about 140 in 1994 to 27 last year, according to police statistics.
The park itself has been revitalized, and the surrounding historic buildings are being restored, mirroring the renaissance in the park.
—From the New York Times, April 17, 2005
By 2005, the transformation of MacArthur Park was a powerful symbol of what collaboration could achieve. Two years later, that same park would be the site of a crisis that could have either destroyed that collaboration or helped it become stronger. Once again, leadership would make the difference.
The MacArthur Park May Day Confrontation Begins: LAPD Report, October 9, 2007
During the spring of 2006, immigrants’ rights groups across the nation called for protests to take place on May 1. In Los Angeles 500,000 took part. Participants marched and rallied in Central Area during the first half of the day, and then marched into Rampart Area for the final rally at MacArthur Park.
The May 1, 2007 marches and rallies were expected to be similar [but smaller]; a morning march and rally in Central Area, and a final rally at MacArthur Park.
[On the day of the march,] the crowd, estimated at between 15,000 and 25,000 people, was peaceful. While a small group of individuals described by officers as “anarchists” were spotted that morning, they were contacted by officers during the event to ensure they understood the police were aware of their presence.
The May Day events in Central Area occurred without incident.
As the crowd dwindled, [LAPD chiefs on the scene,] comfortable with the success of the morning events, decided to [release] three of the four Metropolitan Division Platoons that had been on standby for the Central Area event to other duties.
By 5:00 p.m., the majority of the demonstrators, estimated at 6,000 to 7,000, had reached MacArthur Park and were entering. With no officers or sound truck in place to guide the marchers into the park, however, many individuals marched onto Wilshire Boulevard. The crowd that gathered on Wilshire Boulevard soon grew to approximately 300; officers were faced with an impromptu march, heading westbound.
Police employed several strategies to encourage the crowd to move into the park. First, a skirmish line of officers deployed to stop the crowd from crossing [streets] and to direct people into a park entrance. Then, event organizers were asked to use the Department sound truck to ask the crowd, in Spanish, to move into the park. Finally, a team of Motorcycle officers drove the crowd eastbound on Wilshire, compressing the crowd.
As events unfolded in the park, a group of 20 to 30 individuals, whose intent appeared to be to provoke a confrontation, threw objects at police, including wooden sticks, water bottles filled with water, ice and gravel, and pieces of cement.
At 6:17 p.m., Metropolitan Division B-Platoon formed a skirmish line on 7th Street, and without a dispersal order being given, moved the crowd northbound, pushing and striking some individuals in the crowd, including some members of the media, and firing less-lethal impact munitions. As officers continued to report objects being thrown by individuals in the crowd, the skirmish line continued north across Wilshire, driving the small group of disruptive individuals from the south side of the park into the thousands of peaceful demonstrators gathered in the north side of the park for a rally.*
From the Los Angeles Times (October 10, 2007):
The melee left 246 journalists and protesters as well as 18 officers with injuries, and more than 250 legal claims have been filed against the city. Los Angeles County prosecutors and the FBI are continuing to investigate the case.
Officers shot 146 less-than-lethal rounds, including foam projectiles that were fired directly into the crowd rather than at the ground as LAPD policy mandates.
Police also used batons to strike protesters and journalists more than 100 times. Many of the baton strikes were inflicted on peaceful demonstrators.
Gerald Chaleff, LAPD Special Assistant for Constitutional Policing, at LAPD Police Headquarters, Tuesday Night, May 1, 2007
We were at the Parker Center. It was late; people were very unhappy. About 20 commanders, the deputy chief who had been in charge of the command, captains. People from Metro, people from the media. The inspector general. All LAPD executives and officers, except for the inspector general.
The gravity of the event was not yet fully absorbed. I think Bratton certainly understood it as did I and some others. When he’d gotten to the park there were rubber rounds all around; nobody could tell how many were really fired.
Bill was outraged. He immediately realized what had happened and the problems created. We’d spent almost five years building up trust in the community and the police department. That was all at risk.
As Bratton has always said, “You know police work isn’t pretty. It’s never going to look pretty.” But the appearance of what happened and the reaction of the community? Some of the events that we saw that night were far beyond the pale of what’s “pretty” or not. Pushing TV cameramen over, things like that.…
For Bill, the next steps were to get out there. Talk to the community. Do as much of the stuff that he’s really good at, which is getting out in front of stories. We started arranging meetings with the immigrant community, the communities that people represented, particular areas of Los Angeles, the news media, police union, and the rank and file cops.
But the deputy chief in command that afternoon? He didn’t seem to get it still—the gravity of what happened. The next day he got on a plane to go to some memorial ceremony somewhere, leaving the rest of us still dealing with this mess—as we would be for months.
Deputy Chief Mike Hillmann in Bill Bratton’s Office, Wednesday, May 2, 2007
The next day, Wednesday, Chief Bratton summoned me to his office. “I want you to look at something,” he said. He showed me some of the video footage. “What do you think of it?”
He was animated. So was I. “I’m pretty ashamed of what we did,” I said. “I’m disappointed with the response of Metropolitan Division.”
“What do we have to do to fix it?” he asked. I said, “Well, I have to think about it. There’s a lot of things here that I think are in question.”
Chief Bratton was pissed, to say the least. Extremely hot.
“Whatever you need—I want you to stand up a new command. Figure it out, name it, build it, shape it, put it in place, and tell me what you need to do with training.”
“Okay, ” I said. “I’ll figure it out.”
Jerry Chaleff was sent off writing the reports—and I was sent off to stand up a new command for crowd events.
Press Reports from May 1 to May 20, 2007*:
Late Tuesday, Police Chief William J. Bratton, speaking at a hastily arranged news conference at MacArthur Park, promised a department review “to determine if the use of force was appropriate.”
He said police responded after “certain elements of the crowd … began to create a series of disturbances.” During that activity, Bratton said, “Missiles were being thrown at the officers, and officers [were] responding.” Still, Bratton said, the demonstrators creating problems were few and “that the vast, vast majority of the people who were here were behaving appropriately.”
It was hard for Bratton—who expressed “grave concern”—to see why it was appropriate for officers to fire 240 times while arresting none of their targets.
…
Police Chief William J. Bratton, who promised an investigation, said at a news conference Wednesday that a key part of the inquiry into the officers’ actions would focus on why they used force against members of the media. “We should never be engaged in attacking anyone in the media,” Bratton said.
“The treatment you received yesterday from some Los Angeles police officers … we can’t tolerate and won’t tolerate,” Bratton told reporters at a City Hall news conference, extending his remarks to members of the public also caught up in the incident.
…
Three Los Angeles Police Department and Police Commission investigations have been launched. Bratton’s decision Thursday to ask the FBI to launch an independent investigation comes as a needed reminder that cops should be held accountable.
…
Police Chief William J. Bratton escalated his criticism of the officers’ tactics and said the department’s three investigations would focus on the actions not only of line officers but also of the top brass who gave the orders.
“There were mistakes made here all the way up and down the line. I want to make that clear,” Bratton said. “Was there lack of supervision? Was there lack of leadership? What were [the line officers] directed to do?”
…
Telemundo anchor Pedro Sevcec, who was broadcasting from under a canopy, was pushed to the ground while on live television as police shoved through. “Here you have a tent clearly [for the] news media,” Bratton said. The anchor “wears a suit and tie and there [are] clearly cameras … and the knocking over of cameras in the tent—that behavior is not under any circumstances justified.”
Bratton said he was troubled by reports that police used force on women and children who had gone to the park to play. “The idea that officers would be firing—some of these devices send out five or six projectiles with one shot—that is a concern,” Bratton said.
…
On Friday, after meeting with the mayor and other community leaders, Bratton continued to criticize the police actions, in which officers in riot gear fired foam bullets and used batons on demonstrators and reporters during the May Day immigrant rights march at MacArthur Park.
“A lot went wrong,” he said. “I’m embarrassed for this department.”
…
[With] City Councilman Ed P. Reyes, who represents the district that includes MacArthur Park, and Police Chief William J. Bratton, the mayor promised a full investigation into Tuesday’s altercation involving police, protesters and the news media.
“The events of May 1 should not be seen as any reason not to come back to the park,” Bratton said. “I don’t want the events of one day to take away from the successes we’ve had at this park.”
For his part, Reyes indicated that crowds have remained. “They’re still here. For the most part the feeling was what happened here last week was an anomaly,” he said.
…
Los Angeles Police Chief William J. Bratton on Sunday offered his strongest apology yet for the actions of an elite platoon of Metropolitan Division officers who swarmed a May Day immigration rally in MacArthur Park, and said that those officers are off the streets until he finds out what went wrong.
“I feel comfortable apologizing.… Things were done that shouldn’t have been done,” Bratton told a group of journalists who gathered at the KTLA-TV Channel 5 studios in Hollywood. “I’m not seeking to excuse it.… As one human being to another, there were things that shouldn’t have been done.”
Bratton said the 60 or so members of the Metropolitan Division’s Platoon B have been “stood down” and won’t return to active street duties until they have undergone retraining that meets his level of comfort.
The chief made it clear that incident commanders would be just as accountable.
He said the officers in the Metro unit, an elite corps of men and women trained in various crises including crowd disturbances, had 15 to 25 years on the force and are among the most highly trained of the LAPD’s 9,500 officers. “This was my best, and that was what was extraordinarily disturbing about this,” Bratton said.
…
Bratton said commanders know they must keep order among the officers. “One thing I know about them [police] is you have to control them, because they go out of control faster than any human being in the world” because of the traumatic circumstances of the work, he said.
…
On Monday, Bratton announced that he had demoted and reassigned the head of the Operations Central Bureau, Deputy Chief Cayler “Lee” Carter, who was the highest-ranking officer in MacArthur Park during the melee. He also reassigned the bureau’s No. 2, Cmdr. Louis Gray. On Tuesday, Bratton announced that he had promoted Cmdr. Sergio Diaz to the rank of deputy chief and asked him to take over for Carter.
…
“I think most police officers who look at those images are concerned they were disturbing,” Bratton said. “At the same time, what I am committed to is that there is not a rush to judgment as it relates to the actions of the officers and the use of force.”
On the “out of control” comment, Bratton said it reflected a reality for police organizations, that strong supervision and management were essential when employees have the power to use deadly force.
“I’m a cop. I love being a cop. I enjoy working with cops and I think after all this time I understand them. I understand as a police leader you have to control them,” he said.
That said, Bratton plans next week to attend roll calls at various police stations so he can talk directly to concerned members of the rank and file.
“Cops are hurting. They are wondering, ‘Why isn’t the chief defending us?’ ” Bratton said. “I have to be frank about it. There are certain things I can’t defend. Where I can defend officers, I will.”
A Crisis of Confidence, an Opening for Reform
MacArthur Park created a crisis of confidence not only on the part of the city’s huge legal and illegal immigrant population, the media, the political leadership, and the public, but also among the men and women of the Los Angeles Police Department. It was an “Oh, no, here we go again” type of situation.
The Metropolitan platoons were the most involved in the incident, seemingly out of control and indifferent to people’s rights. This gave us an opening to move on the Metropolitan Division and break apart the silos even further. Metro was the last remaining vestige of the old go-it-alone LAPD. Operating under the consent decree and the Board of Inquiry we had already made progress on SWAT in the Suzie Pena case. Now, for the Metropolitan Division, MacArthur Park was the tipping point.
In a crisis, the division’s leadership looked around and saw that in their isolation they had lost all support, including from the LAPD rank-and-file officers. I had to capitalize on that fact, and very quickly share a vision that all who wanted change could rally around—that we could turn this crisis into a positive experience.
I’m a great believer that crisis is opportunity and accelerates change. There’s something wrong in what used to be a comfort zone, and it can be a jumping-off point to make real progress. You have to move quickly to find people who will see the need for change, show the way, and then go for it. It’s that search for common ground that John Linder talks about—underactivated values—that you can tap into and rally around together to get out of crisis and into a better place.
I had to find allies quickly. I was out there, going to different people, enlisting their support, getting them to buy in. We’d earned their trust; now we were going to spend some of that trust capital.
For the inside work, which was critical, I turned to Jerry Chaleff and Mike Hillmann.
Chaleff, as a leading civil rights attorney, had been the conscience of the city. But as part of the department, he appreciated and understood the organization. He believed that this could be used as a positive experience.
Mike Hillmann was a forty-year veteran of the LAPD. On critical incident management and crowd-control issues he was one of the best. He understood how badly the department had screwed up. Its leadership had screwed up. Hillmann loved the LAPD. We used to joke that like the LAPD cruisers even his underwear was “black and white.” But he was horrified by what he saw, because it was not his LAPD that day.
As pitiless as Chaleff was in his overall assessment, Hillmann was even more brutal in his. He was scathing in his self-criticism because he had commanded the Metropolitan Division for so many years. He had now become a believer in the need to reform the division.
So I had an opportunity to engage all of those people in the LAPD and the community in creating the changes they had been demanding: turn this crisis into a positive, tip the organization, change the last vestiges of the old LAPD culture and operations, and move forward.
And the buy-in after the May Day melee was extraordinary; at the outset it was almost impossible, if you think of it. The media had been attacked by the police, so they weren’t looking too kindly on us. The immigrant and Latino communities were not looking too kindly on us. Political leaders were beside themselves: “Here we go again with the lawsuits.”
The report that we wrote—it was one of four investigations we initiated—went beyond questioning skills and capabilities or the ways we had always done things. Hillmann came out of this with a totally new Incident Command and Control System that we used to retrain the whole department: each commander and officer of every command within the Metropolitan Division. Train, retrain, refresh, clarify—and resolve policy conflicts we had never fully addressed.
To ensure that the department would never forget these lessons, and to emphasize that we would train, and retrain, on how to handle such matters, I created a new bureau to deal with nothing but incident policy, training, and liaison, and put Mike Hillmann in charge.
The new ways that were being proposed turned out to be much better. In the old silo structure, the commanding officer of the area—a captain—was the incident commander, and his bureau chief was the overall commander.
As we had seen, that captain might not be our best person for that particular event. He might be a brand-new captain. He might never have worked an event like that before. That was part of the MacArthur Park problem: we had deployed a number of people who had never worked such large rallies.
Hillmann designed a system that defined all the positions that had to be filled in an incident command. He trained teams of six or seven to work together. An incident command would then be filled from those teams drawn from across the department.
The next year at MacArthur Park, the bureau chief and the captain of the area in which the event was going to be held were not in the incident command. We brought another team in that worked with them. This helped us bring in a fresh perspective or a more seasoned perspective.
Since that time, we have never had an incident involving loss of control or command of the situation.
By holding to our values, and never losing sight of the vision that drove us in the first place, by tapping into that trust account we’d built up and turning to the allies we’d made before the crisis, we emerged from the potentially disastrous MacArthur Park incident with an even more powerful collaboration.
The Metropolitan Division remains smaller, wiser, more capable. But having failed to embrace collaboration, it had already lost support; isolated, arrogant, and not nearly as capable as it thought, it had no idea that the LAPD had moved past it. When crisis hit, Metro could easily have perished.
The LAPD as a whole had the same experience—in reverse. MacArthur Park could have undone all the years of hard work and reform. Without the trust and support of our partners and critics alike, it would have been impossible for us to have survived the MacArthur Park confrontation. Instead our response and that of the city reaffirmed the direction we had taken—partnership and collaboration. Collaboration created a great resiliency to deal with crisis—not just the LAPD’s, but the city’s. Everyone was in this together.
As the mayor, Councillor Reyes, and I strolled through the once-again crowded park the next Sunday, even with the memories fresh, it was clear that the city was getting on with its life, resilient through crisis, confident that its police department, which had stumbled badly, was picking itself up, dusting itself off, and getting back on track.
The LAPD finally came out from under almost all components of the consent decree by 2008, when it was lifted by the federal court. I don’t think most people fully appreciated what this meant for Los Angeles and the LAPD until it finally did happen. The city was almost like a person who’s been struggling to catch his breath, gasping for air, and finally breathes freely again.
When you are leading a collaboration, you are dealing with hierarchies, crossing boundaries, and making common cause with leaders who have their own agendas, issues, and baggage.
To deliver on the promise, leadership of collaboration requires single-minded pursuit. But if it’s “all about me,” a crisis will bring out the worst in everyone.
On the other hand, leaders who are single-minded about making the pie bigger for everyone create a “yes we can, together” attitude. This kind of single-mindedness can lead collaboration out of crisis; these leaders touch those whose faith in change is rattled. They reassure partners who have stuck their necks out that it is still safe. They assure all: we are who we said we were.
But what about a collaboration that straddles two worlds—the brick-and-mortar bureaucracy and the new digital world of bits and bytes? It is one thing to lead men and women across the boundaries of an institution in the name of some greater good; it is another to lead men, women, and machines in a global collaboration.
In the age of the Internet, successful leadership of a collaboration relies on successfully navigating both the brick-and-mortar world of bureaucracy and the digital world that is in our pockets and on our desks.
Not many of us care much about our bankers. We’ve come to love direct deposits, electronic transfers, and ATM withdrawals. The banker and the branch have become superfluous, and for many of us who prefer our banking online, that’s just fine.
But there exists a world of banking few of us see, where the relationship between bankers and their customers is positively existential; bankers grease the cogs of billions of transactions between companies, moving hundreds of trillions of dollars every year. It is the world of the small-business owner buying and selling goods, of a corporate treasurer making payroll, of the chief financial officer of a Fortune 10 titan wondering about her cash position in a hundred different checking accounts around the world.
Banks pump data like blood through the veins and arteries of these businesses. And in recent years, practically every piece of that data, every binary 0 and 1, every single byte has come to be the digital representation of money. The better, faster, and cheaper a bank can pump money-as-data into the corporate tank, make it visible and usable anywhere, anytime, keeping it utterly secure at rest or in transit, the faster corporations can move in the marketplace, lower their cost of business, and satisfy customers and shareholders.
Monte dei Paschi of Siena, Italy, the earliest chartered bank still in existence, opened its doors in 1472. Today, digital technologies and the Internet have transformed the Florentine banca—the medieval banker’s countertop—into a global digital platform supporting millions, billions, and trillions of transactions and dollars daily. Data is money. And today wholesale banking, as it is known, resembles its antecedents of just a decade ago about as much as an iPhone looks like a corded wall phone.
Getting from 1472 to 2012 in the space of a decade or so has been an exercise in collaboration between customer and bank that has straddled two worlds: the staid world of risk-shy bankers, operating on timeless banking principles, and the wild west of twenty-first-century Silicon Valley, where the “first one in the valley gets the best view”—and the billions. All of this is complicated by the fact that just as banks finally adjust to some new technology, it all changes again.
“Technology,” Sun Microsystems’s Scott McNealy once said, “has the shelf life of a banana.”
At the epicenter of this collaboration has been Wells Fargo Bank of San Francisco, neighbor to Silicon Valley. Ground zero at Wells Fargo has been the Wells wholesale banking shop and its executive vice president, Steve Ellis. If you had to pick a date and place when Silicon Valley turned global corporate banking on its head, it would be April 12, 1999, at a bank industry session in Atlanta that Steve Ellis attended. That was the day Scott McNealy, then CEO of Sun Microsystems, framed the position of banks as nothing short of collaborate or perish.
Wells Fargo built its fortunes in a mad dash to service the unbanked settlers and farmers of California’s Santa Clara Valley, and soon the miners of the California gold rush. Since 1852, Wells has forged its reputation on hard-won security and trust, deepened relationships and lured customers with new products and services, and built all on a foundation of the latest technologies. Before Wells Fargo’s stagecoach carried its first gold coin, dust, and bullion overland from San Francisco to St. Louis, for example, money and gold were shipped by river and sea. That took six months. Wells covered that same distance by stagecoach in four weeks.
But by 1998, when Richard Kovacevich came on as Wells Fargo’s CEO, Wells was behind the times. It was missing in action on the Internet. Not on the consumer, or “retail” side—where individuals and small businesses could use a dial-up service—but on the “wholesale” side, where industry banked.
Wells moved cosmically huge sums for its fifteen thousand largest business customers—as much as $650 million at a pop. Small as this customer segment was, it brought in 30 percent of Wells’s revenue.
“Everybody in the business world had access to the Internet,” Kovacevich mused. “But not every consumer, by any means. A lot of people didn’t even have computers.”
What was Wells doing?
With twelve years at Wells and roots in Philadelphia, Portland, and now San Francisco, Steve Ellis, an executive vice president in the Wells wholesale shop, was wondering the same thing. Ellis could see and feel Silicon Valley all around him—perhaps better than most bankers. At a personal and professional level Ellis was used to operating in suited banking worlds, but seeing things differently. Happiest surfing and snowboarding, Ellis, at age forty-six, stood out dressed in a suit and Birkenstocks and sporting shoulder-length hair and an earring. But he was successful wherever he went, from San Francisco to Tahoe to Maui, in operations centers, office cubicles, and company boardrooms.
Scott McNealy, a giant of the digital age (Fortune magazine once likened McNealy’s appearances at industry gatherings to “Jesus showing up at a tent revival”), had the stage in Atlanta at a banking industry function and Ellis’s attention. These were Ellis’s people, after all: payment systems specialists, mostly back office “ops and sys” guys, the pocket protector crew. But McNealy was Ellis’s kind of guy. (“Am I a computer scientist?” McNealy once replied to a reporter’s question. “No, I’m a golf major.”) And Ellis listened.
You’ve made progress, McNealy told the bankers. You’re dealing with e-commerce and servicing customers. That’s good. But make no mistake—Internet banking is not just another ATM or telephone call center. The Internet channel is potent stuff and you need to attack it differently.
“I will tell you,” McNealy said, “that I’ve explained to every telco that either they become a destination site, or the destination sites will become a telco. And I will tell you that either you become a destination site, or the destination sites will become a bank.”
Banks worried. What if some Internet-only bank or brokerage raided Wells’s best customers? On the wholesale side alone, Wells figured it had a billion dollars a year exposed. That “click click click” from a desktop mouse might be the “tick tick tick” of a time bomb.
Wells Fargo wholesale needed to get with both clicks, and bricks, fast.
Back in San Francisco, Steve Ellis took five people off projects and said, “Go find out everything we know about the Internet and figure out how we approach this thing, alright?”
A few months later, in June 1999, Ellis had enough of a vision and a plan that he was ready. Standing before a Wells wholesale unit strategy session in Phoenix, Steve Ellis made it as simple as he could in a presentation that influences Wells’s strategy to this day.
We’re under attack, Ellis said. The threat is real. But our brand is strong. Our customer base is loyal. They are ready for the Internet. But we are not ready for them—yet.
But we know how to do this. We’ve offered the Internet to consumers since 1995. Now it’s wholesale’s time. Either we get the Internet to our wholesale customers first—like we got the stagecoach to the California gold rush—or others will.
It was McNealy’s Law: “Eat lunch, or be lunch.” Collaborate, or perish.
THE CUSTOMER. Ellis’s presentation lit the path with vision and a plan. Our customers have done business the same way for decades—maybe even centuries, he said. Now, the digital world is in their face. They want what it promises. But with all the choices, they’re confused.
That’s good for us, Ellis said. We can take the complexity out and put the risk on us. We’ve always done that.
By helping our customers, we’ll help ourselves. Wholesale is challenged to deliver over 10 percent earnings growth annually. With a single sign-on for the entire wholesale side, we can cross-sell every unit’s products. Just by cross-selling better into current customers we’ll hit those numbers. There’s something in this for everyone.
It’s about a portal, Ellis said, where everything Wells has comes together for its wholesale customers. They’ll have everything they need here; they can do everything here. Real transactions, Ellis said. Trades. They can see cash position. They can execute payment instructions. They can move balances. Let them do it on their schedule without having to call Wells Fargo every five minutes.
“Wait,” someone in the room said. “We’re going to let them move money? We’re just going to give them information, right?”
There was no turning back. If people are just going to look at things, Ellis said, if they can’t do things, there’s no value there. They won’t come back.
“The portal,” Ellis began, “is built the way the customer does business.”
Ellis called it “A Day in the Life”—a concept that helped doubters understand his vision. “The first thing a cash manager, a payroll clerk, or a chief financial officer likes to check in the morning, that’s the first screen that comes up. Easy, intuitive access.”
A single sign-on. A dozen products from across Wells appearing with the same interface, the same navigation. We’ll rinse complexity from the user’s world. No matter how fractured we are, the customer signs on once, and sees one cohesive bank.
Data will be precise, exact to the minute, as close to “real time” as bank data gets. The treasurer can see it formatted as he or she prefers, over whatever channel the treasurer prefers. That’s value and comfort, trust and security. That’s banking on the Internet.
THE BANK AND THE INTERNET. McNealy had said of the big software shops, “Our vision couldn’t be more different. Theirs is to put a mainframe on everybody’s desktop. We want to provide dial tone for the Internet.”
That’s how Ellis saw it. If Wells could provide a “dial tone” for global banking—a browser-based portal—all a customer needed was web access and an Internet jack. The key here, Ellis said, is building the connections end-to-end from the customer into bank systems, then back to the customer. That’s heavy lifting for us.
But for the customer, Ellis said, it will be light. No loading up Wells’s software on customers’ machines. The Internet lets Wells build “once for all”—a common infrastructure, then customize exactly to the business and the customer. On the Internet, that happens fast.
We’ll create and put new services on the web as quickly as a customer needs them. Even before they are needed, as technology shifts. They don’t need a manual. When was the last time anyone used a manual for Google or Yahoo?
Lightness. Quickness. Exactitude. That was the vision. Visibility. Multiplicity. Consistency. This was the Internet world Wells would have to build to.*
There was only one small problem: Steve Ellis worked for a bank.
THE REAL BRICK AND MORTAR. A rule of thumb from software developers—dubbed Conway’s Law—says that the architecture of any system will mirror the architecture of the organization that built it. That meant a bank would design its Internet presence to look like … a bank: stovepiped, name-plaqued, and bureaucratic.
Ellis figured it had to be just the opposite. He wasn’t sure what Wells’s corporate customers wanted on the Internet—but he was pretty sure it wasn’t a bank bank. They wanted information and action. They’d want a button that said “Transfer Now.” They would want transactions, not just staring—the same experience they had when surfing the net at home.
Ellis was also pretty sure that whatever Wells customers wanted today, with fast-changing technology in everyone’s hands, it would likely change tomorrow. No way around it: Wells would have to ask the customer, “How are we doing?” With the world changing so much so fast, Wells would have to keep asking the customer. “That’s now how the game is played,” Ellis would later say. “It’s about how people are doing things, and that evolves very quickly from what I see.”
“The Internet,” he would say, “is about customers, not products.”
The solution? Conway’s Law. If customers were involved in design, then the Internet bank would be all about customers.
A network to design a network, a collaboration to design a collaboration. Customers collaborating with web designers collaborating with bank operations—forging a new platform, with Wells as its steward.
That’s how Ellis intended to play the Wells game—with one foot in Wells’s brick-and-mortar culture, the other in Silicon Valley, a foundation of bank systems as secure as Fort Knox beneath a Christmas-in-July portal for digital banking that would make every corporate customer’s wish come true.
THE GENERAL ON THE MOUNTAIN. Five minutes before Steve Ellis presented at the June 1999 Phoenix session the new Wells Fargo CEO, Richard Kovacevich, dropped in unannounced. At his side was Dave Hoyt, head of wholesale, and Steve Ellis’s boss.
The CEO was in the house.
Ellis kept stride. “Whether they bought into it or not,” he said, “what I said was just obvious. Hopefully, it would become obvious to other people.”
Dick Kovacevich, it turns out, had already parsed the Wells position and was ready to move. Kovacevich didn’t know much about the Internet. But he was used to dialing up the big picture, making bold bets, and winning.
He saw his business customers using the web for personal needs. But their companies had to e-mail Wells, or phone the bank, use paper reports, and operate on bankers’ time. As consumers his customers managed their accounts directly, 24/7. This should work on the business side for corporate accounts, too.
Kovacevich saw Wells, heavily invested through its venture capital companies, making a ton of money on Internet start-ups—a hundred times revenue. Was everybody dreaming the same Internet-Gone-Wild fantasy? Not likely. There would be winners and losers, to be sure. But if worst comes to worst and the whole bubble bursts, Kovacevich reasoned, Wells will be selling its investments on the one side and funding a move of wholesale to the Internet on the other. All bets are covered.
He saw a management plan, a path forward: bring all of Wells’s Internet operations under one roof and put one person—the trusted and proven Clyde Ostler—in charge. Give the consumer, small business, brokerage, and wholesale businesses their own Internet heads, but make sure all the architectures were seamless, there was no duplication in infrastructure, and the platform was developed once for all four units. That was savings.
Kovacevich saw customers loving the cost-cutting and convenience ahead, just as they loved the move to ATMs. For the bank, applications were cheap to develop; branches and call centers were expensive to staff. Customers taking care of their own business would think they were getting a better deal—and the bank knew it was. “We could just see how important we could become to that treasurer with a gazillion accounts scattered around the country,” he said. “The ability to move money and work with it? They never had that before.”
Kovacevich saw huge cross-selling opportunities. Add wholesale products to the mix, get exactly the right ones in front of customers who were already using the Internet for their personal banking, and let the cross-selling begin. “I was convinced that the stickiness of the Internet and our ability to cross-sell would absolutely be a terrific combination.”
Kovacevich knew these would be great customers: anyone with an Internet account carried 20 to 30 percent higher balances, used 30 percent more products, would stay two and a half times longer, and had 30 percent lower attrition. “This had to result in either getting more business with that customer or tying them to the company,” Kovacevich said. “They couldn’t do without us.”
“When you think about how uncertain this was, I can’t think of ever spending a billion dollars without calculating,” Kovacevich said. “But all these things convinced me that at least we’d break even just on the selfservice side of things. It was just obviously the right thing to do. I considered it just as important as putting ATMs out there.”
Analytically, it all worked for Kovacevich. But it was what Kovacevich heard that clinched it.
He heard Steve Ellis.
TRUSTING THE SIGNAL. “Steve Ellis was a technologist who grabbed that it’s all about the customer,” Kovacevich said. “And he knew the wholesale business. Here he is, very enthusiastic, really believing this is something the customers are going to want. ‘We can do it for them. It’s the right thing to do. We will gain business.’ There was never a doubt in his mind that we should move forward. I found his relentless customer focus in everything he and his team did just very reassuring.
“Steve’s influence was therefore much greater than just the Wholesale side, at least from my perspective as the ultimate decision maker,” Kovacevich said. If this was as good as Ellis believed for Wholesale, Kovacevich reasoned, the same should hold for all Wells’s corporate banking.
The consumer side of Wells Fargo was in. Wholesale was in. Kovacevich next turned the screws on small business, the lone holdout.
“Put them all together to allow the seamless transfer from their business needs to their personal needs to their investment needs,” Kovacevich said. “It just makes all the sense in the world.”
There was push back from some Wells business heads, each of whom would have to contribute. Clyde Ostler was predicting a $1 billion price tag—$250 million a year for four years.
“ ‘We don’t know what the savings are,’ ” Kovacevich heard. “ ‘We don’t know what we’re gaining from this. There’s no profitability plan. How much do we spend here?’ ”
The CEO had a “penguin problem.” His answer: “We’ll all jump together—it’s the only way.
“Each agreed they would do their part, they would give people to Clyde from their various businesses, they would pay for it, and there would be give and take where Clyde would interact with the businesses, set goals and budgets.”
A month after Phoenix, Clyde Ostler offered Steve Ellis the reins of wholesale Internet, a step down in grade but a chance to soar. It was 1999, the Internet boom was on, and this would be Steve Ellis’s start-up: he’d bet his career on it.
“Not that either of us knew what the hell that meant, of course.… ‘Do you want to run this Wholesale Internet stuff?’ ” Ellis said.
“People said, ‘Why would you take that job?’ I had four or five hundred people reporting to me, and here I was starting this little thing.”
“I said, ‘Wow! That sounds like fun.’ Failing never entered my thinking,” Ellis said. “Honestly, not once did it cross my mind. It was so obvious that it was going to be fun, to me.”
Kovacevich, too, made his move. Knowing little of the Internet, he stayed close to Ellis. “He’s just a very interesting guy,” Kovacevich said. “I had a great respect for him and his thought process.” And with the voice of the customer soon streaming in from Ellis’s initial forays—“seeing the first functionality come in,” as Kovacevich put it—he knew the call was right and put his money down.
“Whatever it took,” Kovacevich said, “we were going to do it.”
A billion-dollar bet.
The vision was aligned. The plan was clear enough that people could move against it, even though no one was quite sure “what the hell that meant.” A billion dollars invested over four years to cover—and then riches.
It was “a big, hairy, audacious goal,” according to Danny Peltz (quoting Jim Collins’s phrase from his book Good to Great). Ellis would soon bring Peltz and Debbie Ball on as his top consiglieri.
“We had the keys to the Porsche, but no Porsche—yet,” Danny Peltz said.
The people—Kovacevich, Ostler, Hoyt, Ellis—were Wells Fargo’s biggest guns. And they had all the latitude of a dot-com in the heart of San Francisco in 1999 backed by one of the most powerful financial services brands in America with plenty of funding and a huge embedded customer base.
Steve Ellis was soon to have the best time of his life.
THE PLATFORM IS THE STRATEGY. But soon wasn’t fast enough. Something had to happen tomorrow—which was not exactly at bank speed. With Wells’s customers ready and dot-coms moving at Internet speed, waiting for “perfect” was not an option. Start small, go large, Ellis figured.
“Functionality soft—deadlines hard”: that became Ellis’s Law. Get value in the hands of users fast. As customers adopt and adapt, get the feedback loops going. Do it again.
“We figured with that approach whatever we built, even if we built half of what we wanted, it would be twice as much as what anyone else had,” Ellis said.
He pulled his team together and moved out of Wells’s downtown headquarters to a hipper San Francisco neighborhood that was teaming with dot-coms. Wells had no trouble attracting top talent: web developers, product specialists, operations gurus, risk management, services professionals.
“There was no real playbook; we built our own, which we wanted to do anyhow,” Ellis said. “We couldn’t be the way the bank was, take two, three years, go through all these steps to get big projects done.
“The world was different—customers changing all the time. You have to start thinking differently.” Think like a dot-com.
“That’s why we built the open space,” Ellis said. “That’s why we didn’t have offices; that’s why we let people dress however they wanted to. Why we started with small boutique vendors and we stuck with them. It was much more of building a culture, and a concept, trying to make it feel real where you were working.
“This entrepreneurial stuff is not that easy in a big company—it’s a whole different world than the space I’m in—getting people to act in concert together around a common goal—especially a goal that was very hard to articulate.”
The Commercial Electronic Office platform, or CEO, was where it would happen. With money now data, Wells’s systems and its customers could easily cross each other’s boundaries thousands of times a minute. Together, Wells and its customers could design new, digitally powered work flows; kill paper; speed processes; and converge on Wells’s product mix. That was the idea; design with customers right from the start, innovate faster, cross-sell products, and deepen dependencies.
“Our core organizing principle around treasury management,” Ellis said, “is that we want to get everybody we can in front of the customer. Not just Sales. Not just us, in Services. It’s product management, it’s our systems people, it’s ops, it’s our risk management people. It’s everybody.
“The more we know about the customer and we get it in our DNA, the better we are going to be able to unlock the value of what we can do,” Ellis emphasized. “As customers adopt, they will adapt.” And create the greatest of opportunities for Wells.
“If that’s the guiding principle,” said Ellis, “then you can never sit still.”
One year from the Phoenix off-site, on June 24, 2000, Wells Fargo rolled out version 1 of the Commercial Electronic Office, a portal for Wells Fargo’s industrial and commercial customers. Within the decade, the Wells wholesale platform went from boundaried, cylindered, and stovepiped to practically seamless. By 2010, “customers are now accessing our core systems directly,” Danny Peltz explained. “It’s difficult to see where our bank systems and business processes end and where theirs begin.”
VERSION X.X. Getting there was half the fun. Ellis led the version 1 CEO build in 2000 with a team of seventy. It was a total custom job—nothing canned, off the shelf, proprietary, or generic. Built from scratch. But in that first design, the “voice of the customer” could hardly be heard.
“Customers could not see how this would change their lives yet,” Danny Peltz said. Wells was actually ahead of its corporate customers. After all, only 3 percent banked online.
When version 1 hit the street, with three services offered, customers gawked, laughed—and then oohed. They began talking to their bankers about it, building buzz within the organization.
“Wells folks started saying, ‘Hey, what’s this CEO thing?’ ” Ellis said.
In year one, two thousand firms enrolled. With Wells’s customer antennae raised and feedback pouring in, version 2 followed, then version 3 … a new version every sixty to ninety days, getting value in the hands of users fast, adding services, streamlining clicks, building, and customizing.
By 2001, forty-three hundred firms were enrolled; by 2002, thirteen thousand. From 2002 to 2003, revenue on the channel leapt by 54 percent. The average number of products per company doubled.
“The longer a customer has been online,” Danny Peltz said, “the more of our products he is likely to have.”
Wells was feeling on top of its game—even while the post-9/11 recession hammered other big banks and corporations. CEO was tapping into a marketplace filled with anxious, overworked treasury and finance shops desperate for what Wells was selling: simplicity and efficiency. Most had ten or fewer full-time staff. Each was handling billions of dollars in revenues.
By 2004, Wells wholesale was handling $5.9 trillion in payments online, up from $930 billion in all channels in 2000. Ellis and his team had rolled out seventeen CEO versions. Eighteen thousand firms now used CEO, and it was tied in with thirty-five Wells products.
The customer tide was pulling powerfully—and Ellis made sure Wells felt every tug. He scrapped early plans to create Internet marketplaces. Instead, his ethnography teams made forays to customers’ sides, watched them at work, helped redesign work flows, rinsed out handoffs and sign-offs, and substituted clicks for bricks.
“We spent a lot of time and built up a lot of processes and feedback loops to get the voice of the customer inside our heads,” Ellis said. “With the right feedback loops you figure out a lot faster that you don’t have a good decision. You get twenty people in the room: if they’re saying, ‘Gee, what am I going to do with this?’ and they’re confused versus, ‘How am I going to use it to get things done?’ you know right away.
“People think that Internet banking makes customer relationships less personal,” Danny Peltz said. “That’s not the case at all. By making so many more services accessible to customers, we’re actually increasing our interaction with customers.”
There was that day in September 2001, for example, when terrorists leveled the World Trade Center in New York, and the FAA grounded all planes for days. Forty-seven billion dollars’ worth of paper checks lay in hangars waiting for clearance to fly—signed, sealed, but not delivered.
The financial industry was grounded. Congress changed the law to let banks exchange check images, not just paper. No planes flying into towers would ever grind image exchange to a halt.
Although some banks had for years wanted to get rid of paper and exchange only check images, several years passed before all the big systems began converting. In the meantime Wells saw how it could seize the day for its customers and its bottom line.
In came Wells with a little scanner box that sat on a customer’s desk. Plug it in, power it up, log on to CEO, download a driver, and you’d be scanning checks—payments to you—into your corporate account ten minutes later.
Competitors offered products that came with all sorts of third-party software to run—the bane of corporate information security folks, as we’ve seen. Updates required more downloads, further complicating life for treasurers. Wells handled its scanner updates online. That made life simple for the treasurer—and for her corporate information security officer.
For Wells’s treasury customers that desktop scanner was a godsend. They could deposit checks from their offices—skipping the dreaded run to the bank—even after the local branch closed, and still get same-day credit. A customer who had twenty business sites could image all checks and deposit to a single Wells account online—instead of running to twenty branches—or paying an aggregator to do the same. If you were 7-Eleven you could set up kiosks in 1,050 stores, cash payroll checks 24/7, and ship the images to Wells for processing.
Wells’s desktop scanner made every clerk’s desk a teller’s window. It blew away the boundary between bank and office. Wells Fargo could be everywhere and anywhere there was a customer with an office and an Internet connection.
The platform was the strategy; every customer a branch. Wells built infrastructure and processes so adaptive that Wells could turn on a dime to meet customers’ business needs, seize opportunities, grab fast-changing technology, and anchor it all to solid, secure, dependable bank systems.
By 2005, five hundred firms had signed up for DesktopDeposit® Service Release 1.0—and scanned 1.4 million checks. By 2010 the scanner had became an award-winning beachhead of remote capture for Wells, with 13,000 firms signed up, 306 million checks scanned, and over $1 trillion deposited.
“Fastest uptake I ever saw,” Ellis said.
Wells pushed out more innovations, collaborating with customers on design and development, with benefits to all. At every turn—every law change, every advance in computing and communications—Wells was ready to push the technology to its limits, faster, better, cheaper. It understood its customers’ processes. It stewarded the shared platform to include the latest technologies.
In mid-decade, for example, Wells made the move to “web services” technology. That enabled Wells to unbundle its applications, and let customers pick and choose whichever ones they wanted.
Then came mobile. “In ’06, I went to my boss,” Ellis said, “and said, ‘This mobile thing is a big deal. Everyone’s got a phone, devices are more intelligent, people are more connected, they want better information.’ I said, ‘We’ve got to get really focused here.’
“He said, ‘What are people going to do with it?’
“I said, ‘I don’t know but I just think it’s really big.’
“He said, ‘Well go do it.’
“I get room to move,” Ellis said. “But I don’t ask my people to build me really complicated business cases. We sit down and we work it through.”
A year later Wells offered CEO Mobile, a mobile-ready version of desktop CEO. Wells was the first major US bank to provide browser-based mobile banking for its commercial customers.
“Our customers told us they wanted to handle wires and check exceptions without being at their desks,” a Wells wholesale spokesperson said. “And when our customers give us feedback, we act.”
By 2010, customers looked forward to being part of the Wells development cycle. Two dozen advisory councils met several times each year, each comprising ten to twelve customers from different industries. Thousands of customer suggestions came in. Ellis himself spoke with five thousand customers every year.
“The world ahead? It’s like mobile,” Ellis said. “Who knew what it was really going to be? Or even today, what it’s really going to be?
“I have no idea,” he admitted. “But I can create a process that lets us grow. We get our customers involved early. ‘You have this phone, you’ll be walking around with this phone. How would you use it?’ People spit out ideas, ideas we never thought of. That’s what we build. Eighty percent of things we built, the ideas are our customers’; twenty percent are ours.”
Today, Wells is prospering. Its site has four million log-ins a month. CEO, which started with three products, now offers eighty. Wholesale customers of Wells, which is now merged with Wachovia, move $11 trillion online per year.
“When you think about what we were spending on an unknown technology, I guess you would say we were pretty lucky,” Dick Kovacevich said. “We did pretty well. I guess you would say, in hindsight, we probably did about as well as any mere mortals would do.”
LAST WORD. In Steve Ellis’s world, the platform is the strategy.
The Wells wholesale platform is where banking meets the digital world: safe and available for transactions anytime, anywhere, by anyone authorized. Individuals can find and come onto the platform with ease. It makes the world of accounts wonderfully visible to those authorized to see it. They can move, shape, and fix their financial positions as needed. Power shifts to the edges. Hundreds and thousands of data points are brought together—a huge multiplicity, consistent across channels, with astounding exactitude.
It is perfect Internet fare built upon a traditional foundation of brick and mortar.
Leadership of such collaborations has special obligations and opportunities: Ensure that collaboration forms up to design the collaboration. Protect that enterprise at its fragile start by removing it—physically if need be—to a walled garden where it can move fast and light, just like the platform it is designing. Early collaborations of new ventures need that, whether Beverly Donohue’s Galaxy at the New York City Board of Education, or Steve Ellis’s CEO at Wells Fargo. Flatten decision making for quickness and simplicity; keep the bureaucracy outside the wall, if at all possible.
As always, get value into the hands of users fast. Start showing doubters and partisans alike how “this works.” That keeps you and the platform squarely on the good side of your sponsor’s support.
Once the platform is operating, keep it safe, available, and trusted. Probe, test for, and fix problems that keep the right people out, or that let the wrong people in. Make sure everyone understands the rules of the road.
Most important, leadership of collaboration ensures platform readiness for a world of constant change. That’s the world customers live in, and the world technology makes inevitable. Ellis’s leadership across the CEO platform engaged customers as a new way of doing business, not just once but continually. The platform kept Wells, the bosses, Ellis, the troops—and the customers—happy and competitive.
Customers could always leave. Most never did.
As a leader Ellis relinquished power: he let Wells became the “mere” vehicle of the customer. As the DNA of bank and customers melded, Wells’s systems, the CEO platform, and the customers’ own business processes became extensions of each other, indispensable to each other, almost at times indistinguishable. It is collaboration for a networked world, reaching across boundaries at its best.