Ep. 12: Courage Of Convictions

It’s one thing for CEOs to make “difficult decisions” when their own skin is on the line. Some may argue those aren’t difficult for many CEOs as many CEOs put “self” first when it is their own weakness or blind spots that led to circumstances around the difficult decision. • For example, having to reduce employee headcount because a large customer announced they will no longer use your under-invested in product or service. • Heavy employee cuts due to mass customer defections because your product or service is no longer relevant in a dynamic market. How many times have we seen that? • I would argue those employee layoffs are easy decisions for most CEOs because if those actions aren’t taken companies will disappoint investor expectations and if that were to happen once or twice investors would clamor for a CEO change. • IBM under CEO Ginni Rometty and Microsoft under former CEO Steve Ballmer are two examples of the above where customer markets moved away from IBM (Saas/Cloud) and Microsoft (mobile, search, cloud). Each company was slow to react had multiple restructurings and continue to pay the consequences for decisions made and note made. years ago. More difficult decisions for CEOs - ones that take real courage of conviction - are the decisions that won’t be popular with investors in the near-term. However, as CEO you believe those decisions will pay significant dividends in the long-term. Remember in years past when investors would complain about Jeff Bezos/ Amazon investing in distribution centers and fulfillment capability? Investors were angry because near term profits were going to be swapped for near-term investments and future growth & profitability. Bezos took the long view – something that investors of all shapes and sizes rarely do – and was right. Today the Company can do no wrong - whether it’s producing original content; creating Amazon Web Services (“AWS”)- which is the largest and fastest-growing service of its kind; acquiring Whole Foods. Bezos/ Amazon made decisions prior to the Company becoming a Wall Street darling that pay off enormously today. I recall that Amazon’s push into content wasn’t hugely popular with investors early on and today Amazon is a leader in OTT content and I believe AMZN will distance itself from Netflix and others over time. See our earlier podcast about the subject of original content. So, there’s a reason why Jeff Bezos has a 100% CRScore over at CEORater. Speaking of Netflix, founder CEO Reed Hastings and the Company have done a great job of not caving to investor short-term demands. Recall when Hastings and the Company faced investor pressure when Netflix wanted to push into digital content, believing it to be the future and to not invest in its DVD business. “Why”? investors asked. The DVD business is profitable… Hastings of course was right, OTT was the future and is the “here and now” today. There was pressure at the time from Carl Icahn’s group who owned a large stake to sell the company to Microsoft or some other larger tech company believing Netflix to be to small to pursue its OTT strategy. Hastings of course was correct. These are but two examples of CEOs who had the courage of their convictions to not cave to short-term pressures. There are many other examples on a smaller scale, inside and outside of the technology industry where founders and CEOs had the courage of their convictions to do what they believed was best for their Company in the long-run, despite that path running in the opposite direction of the investor community and occasionally other stakeholder groups.