Honeywell CEO: ‘I want to become the Apple of the industrial sector’

Are conglomerates impossible to manage and therefore bad investments? You could make that argument by looking at GE (GE) and United Technologies (UTX), both of which have underperformed. But if that’s the case, then what to make of Honeywell International (HON), which owns over 65 different brands with products ranging from rubber, boots for firemen to Wi-Fi systems for corporate jets? The Morristown, N.J.-based company has been rocking not only as of late but also over the past decade as well. Question: Could management make the difference? You could make a strong case.
In an interview with Yahoo Finance, Honeywell CEO David Cote explains that being systematic and disciplined is the key: “You need to have a unifying approach, which is what we have with our business model. I’ve always looked at it this way and I think we’ve done a better job of communicating it over the last few years. Our business model comprises three parts: the first is to have the right kind of portfolio, the second is to have a focus on internal processes, and then the third is a culture that applies to both.”
Cote who has been CEO since February 2002, explains that first having the right businesses is key: “On the portfolio side, you hear me talk a lot about having great positions in good industries and differentiating with technology, and not technology that changes so rapidly that somebody else can subvert me six months from now with something that I never imagined, but rather technology that’s defensible.”

Investors, at least, seem to be pleased with Cote’s strategy. Honeywell’s stock has notched a 123% gain over the past five years and 190% over the past 10 years, compared with 72% and 63% for the SP 500 index, respectively.

As for the actual workings of the company, as in processes and culture, Cote is relentless.
“The focus on internal processes I also think is a big deal, and that’s why you’ve seen us do things like the Honeywell operating system, which is really the Toyota production system ‘Honeywell-ized.’ How we do velocity product development, the focus that we’ve had with what we call the Honeywell user experience, where I want to become the Apple of the industrial sector. We really spend a lot of time on saying, ‘how do you become better and better with all your processes?’ because everything always comes down to people and process,” Cote says.
No question Cote is a competitive sort. The CEO, who grew up in New Hampshire, is a huge Boston sports fan, so you may not be surprised that he doesn’t think Tom Brady and the Patriots got a fair shake in the Deflategate scandal. “I’m not saying this as a partisan, even though you may think I am. I think the Krafts, the Patriots, and Tom Brady were wronged in this process. They’re really isn’t a lot of evidence there. If you look at how cold that day was, if you had inflated a ball to the lowest permissible level and you just leave ‘em out in the cold, you are going to get that effect. I think the judge came to the same conclusion.”

No matter how you feel about Tom Brady et al, you have to admit that the Pats—and Team Honeywell for that matter—are formidable competitors these days.

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