Honeywell is going digital.
As chairman and CEO, Darius Adamczyk is trying to remake the 134-year-old behemoth into a modern-day tech company. Having taken the torch in 2017 from Dave Cote—who whipped the underdog into shape over his 15-year tenure—Adamczyk is now doubling down on Honeywell’s future as a “software industrial” company. He seeks to prove Honeywell can compete on turf dominated by Google, Microsoft, SAP, and Oracle.
But just as Honeywell, No. 92 on this year’s Fortune 500 list, was hitting its stride, calamity struck. A pandemic. Shutdowns. Oil and gas market mayhem. All of it comes as a perilous reality check on Honeywell’s ambitions. “We were starting to see real signs that the software transformation was working,” Scott Davis, CEO of financial analysis firm Melius Research, tells me. But that’s been “overshadowed” by the recent chaos, he says. Now it’s about “just trying to survive.”
Adamczyk sat for a (virtual) interview with Fortune at the end of April. Covering everything from the CEO’s rise to the top job to his playbook for the tumultuous months ahead, the conversation below has been edited for length and clarity.
Fortune: Give me the condensed version of how you came to Honeywell.
Adamczyk: Initially, I thought I was going be a heavy-duty engineer. I started at GE. Five years in, I thought, “Actually, I don’t know that I want to be an engineer for the rest of my life.” So I went to Harvard and got an MBA. After that, I joined Booz Allen and later, Ingersoll Rand. In 2007, I joined a company called Metrologic as CEO. A year and a half later Honeywell came along—right when Metrologic was going public—and bought the company.
I heard you wanted out at first.
Honeywell said, “If you don’t stay, then your equity doesn’t vest.” It was a financial decision. I said, “Well, I’m not particularly thrilled about this, but I’ll stay on for 12 months and help them out.” As I stayed on, I started to like it a lot more.
What did you not like about Honeywell?
There were too many people telling me what to do. I had been a CEO. I knew what I was doing. I generally don’t thrive when people micromanage me. But I understand now. In a big company like Honeywell, you can’t just have little kingdoms all over the place running independently. Still, going from calling all the shots, and then not making those calls, that’s challenging.
How did you come to the attention of Honeywell’s former CEO Dave Cote?
I was Dave’s mentee for a year. That’s how I first got to know him. In 2012, I had an opportunity to become CEO at another company. I went to see Dave for a three-hour career chat. It convinced me to stay longer. I thought, “Hey, maybe, there is a path for me here.” I also got a promotion to run something bigger and far more complex.
What were you put in charge of?
Honeywell Process Solutions [which makes industrial plant control systems]. I told Dave, “Give me the most broken business you have in the portfolio, and I’ll see if I can fix it.” Boy, did he oblige me. It was a mess, a total mess. I’ve never been more stressed than I was running that business. Even now, right now, it’s not exactly a fun time given the crisis we’re all in. Most of the decisions I have to make today are painful. But running that business was even worse.
After process solutions, you led Honeywell’s petrochemical business through a downturn. When did it become clear you were going to become CEO?
I didn’t feel like I had a chance. My unit was falling apart, and I was trying to take out costs. But Dave and the board knew the markets were falling off a cliff. They seemed to think I was doing a reasonable job of running the business even in those times, rather than panicking. I give them a lot of credit for that.
That kind of training must be extremely useful today.
This is my fourth dance, or black swan event, or whatever you want to call it. Maybe it’s not officially a recession yet, but it’s pretty clear it’s going to be one. A lot of people can tell you what to do, but unless you’ve been through a crisis or two, it’s a tough lesson to learn.
Beyond the pandemic, there’s an oil and gas crisis. That affects two major Honeywell businesses. How are you steering the ship when everything is falling apart?
You have to find those pockets of business where customers are still active, areas where there’s still demand. You can’t give up on growth, ever. Adjusting costs is the least fun part of my job. But we’re fortunate because we have a very strong balance sheet—$9 billion of cash—going into this.
How do you plan to spend the money?
We haven’t done as many acquisitions as, frankly, I would have liked. Prices were so inflated. As we start to emerge from this crisis—and we will emerge from it—we’re going to do transactions. I insist on thinking about the long term, about the next person who will run this business five or 10 years from now. You can’t shortchange those investments.
What would you like to buy, software companies?
It fits our journey to become a software-industrial company. But those generally are at the top of the premium valuation pool, so you have to be thoughtful and selective. It’s probably not a huge software company we would buy. It’s probably more of the “bolt-on” variety.
Now seems like a good time to acquire.
Maybe. The market may flip from sellers to buyers. But even this has to sink in. Sometimes people think they’re worth what they were worth in 2019. The world has changed dramatically since then.
Some people say air travel won’t return to the same levels. What do you think?
If we go back to 9/11, people thought the same thing. In my opinion, people will fly. They absolutely will. The best thing we can do is work with the airlines to help potential passengers feel comfortable and safe. We already have come up with some solutions involving PPE, hygiene, air quality, and so on.
You’re working on a number of ambitious “breakthrough initiatives” too. Which is your favorite?
I am extraordinarily pleased with quantum computing. We’re convinced that this thing works, and that we can make it much more powerful—an order of magnitude improvement every single year. We get called an industrial company, but I don’t think that’s totally fair. We’re a technology company.
Are you planning to become the next SAP?
I never see us becoming purely a software company. It will always be a hybrid of software and hardware. But obviously, the software part of our business has to grow bigger.
