Summary
Dan Schulman, former PayPal CEO, discusses his turnaround strategy at Verizon, emphasizing the primacy of culture over strategy. He explains the need to shift from an engineering-centric, risk-averse organization to a customer-obsessed, agile one. Schulman highlights initiatives like 'Every Customer Has a Name' and investing in AI reskilling, while acknowledging the disruptive potential of AI and the necessity of leadership humility, authenticity, and decisive action. The goal is to transform Verizon into an AI-native company by year three, focusing on metrics like customer satisfaction and employee engagement to gauge success.
Key Insights
Effective leadership requires radical honesty about the company's situation and a clear vision for winning.
Schulman believes leaders must tell the truth without sugarcoating it, acknowledging that employees likely already know the issues. He communicates directly, without slides or notes, admitting the company is 'losing' and needs a 'full-scale internal revolution' to 'play to win'. This is defined as a way of life, not just a slogan.
Verizon aims to evolve beyond a connectivity provider to an AI-native company integrating AI fabric into its network.
Schulman envisions Verizon playing an integral role in how consumers use AI, proposing an 'AI fabric' over its network. This could involve cost-optimizing AI token usage for consumers, providing secure environments for AI agents, and acting as part of the AI infrastructure by connecting data centers and enabling edge computing for low-latency applications.
Proactive scenario planning and investment in AI reskilling are critical to mitigate AI's disruptive impact.
Schulman advocates for scenario planning to prepare for AI's uncertain future. Verizon has committed $20 million to AI reskilling and training, with plans to potentially double or triple this amount. This effort extends beyond Verizon's employees to support communities and small businesses in adopting AI, fulfilling a leadership responsibility to prevent widespread unemployment.
Cultural adaptation to AI is the biggest challenge, requiring companies to embrace change and mitigate fear.
While technology like AGI and quantum computing will be available, the success of companies will depend on their cultural ability to adopt AI. Schulman believes overcoming fear of AI's impact on jobs is paramount. He sees AI's potential to improve networks, cybersecurity, and overall company performance, highlighting human adaptability in navigating disruption.
Sections
Introduction to Verizon's Challenge
Verizon faced declining market share, a plummeting stock price, and low morale, necessitating a significant reset.
Verizon, a large U.S. company, was experiencing a decline in market share for five years, had the lowest Price-to-Earnings multiple, indicating a lack of market confidence in future growth, and suffered from rising churn rates and decreasing customer satisfaction.
Dan Schulman, a former PayPal CEO, reluctantly took on the Verizon CEO role to lead its turnaround.
Schulman initially refused the Verizon CEO position multiple times as he was happily retired. However, his sense of loyalty to the company, recognizing its potential and strong assets, eventually persuaded him to take on the challenge after discussions with his wife. He has been in the role for nine months and expresses enjoyment.
The company's previous focus on engineering and network, rather than the customer, contributed to its decline.
Verizon had long relied on its engineering prowess and prioritized the network above all else. This approach was no longer sufficient in the current era of accelerating change, leading the company to fall behind its competitors.
A historically proud and risk-averse culture hindered adaptation to rapidly changing external conditions.
The proud culture of Verizon, while having reasons to be so, also fostered resistance to change and a tendency to look backward. In an environment where external change outpaces internal change, the company was falling behind. It was hierarchical, process-oriented, and not imaginative enough about its future role, particularly in the age of AI.
Shifting to Customer Obsession
Verizon's customer-centric initiative is named 'Every Customer Has a Name'.
This initiative emphasizes treating customers as individuals, not just accounts or lines. It involves improving the in-store experience, simplifying complex plans to avoid preying on confusion for profitability, and ensuring customer service interactions are respectful and empathetic. Customers often leave due to feeling disrespected or finding processes too difficult.
Customer-centricity aims to drive revenue growth by reducing churn and increasing loyalty, not by sacrificing fiscal responsibility.
Schulman argues that being customer-centric does not mean being less fiscally responsible. Previously, rising prices and confusing plans led to customer unhappiness and increased churn. The new approach involves investing in customer experience and simplifying plans to reward loyalty, aiming for revenue increases through customer growth and reduced churn, while maintaining efficiency.
Simplified pricing and rewarding loyalty are key to making customers excited about their Verizon relationship.
Verizon has launched new initiatives including simplified pricing plans and loyalty rewards for long-term customers. The company also sees AI as a crucial future service area, offering value in connectivity, AI advancements, security, and guiding customers on appropriate AI usage.
Leading Cultural Transformation and Change
Effective leadership requires radical honesty about the company's situation and a clear vision for winning.
Schulman believes leaders must tell the truth without sugarcoating it, acknowledging that employees likely already know the issues. He communicates directly, without slides or notes, admitting the company is 'losing' and needs a 'full-scale internal revolution' to 'play to win'. This is defined as a way of life, not just a slogan.
Shifting from risk aversion to embracing calculated risks is crucial for innovation and growth.
Verizon's traditional culture was highly risk-averse (rated a 2 out of 10). Schulman contrasts this with his personal risk tolerance for trying new things and learning from failures (rated an 8 or 9). He emphasizes that employees need to feel it's okay to take risks and learn, as people want to play for a winning team.
A significant layoff of 13,000 employees was necessary to fund customer experience investments and operational savings.
Schulman made the difficult decision to lay off 13,000 people within the second month to create a 'war chest' for investing in the customer experience. This was part of a larger $5 billion operational expense savings plan, aimed at reclaiming market leadership and becoming the most trusted company, despite the initial pain and disruption.
Early successes, like regaining subscribers, are vital to galvanize employees and demonstrate the turnaround is working.
Schulman reports that in the first quarter after his arrival, Verizon gained approximately 650,000 subscribers, reversing a long-term trend of losses. This success, coupled with a significant stock price increase, demonstrates that 'winning is contagious' and validates the 'play to win' strategy, inspiring employees who yearn to be part of a successful team.
The ideal employee environment fosters permission to be one's best self within an intense, winning culture.
Schulman contrasts this with bureaucratic or hierarchical organizations. He emphasizes that every day matters and seeks daily improvement, creating an intense but rewarding environment ('heaven'). This attracts and retains employees inspired to continuously improve the company.
Navigating the AI Era
Honest communication about AI's impact, including potential job displacement, is essential.
Schulman stresses the importance of being authentic and honest about the future of AI. He acknowledges that AI will profoundly impact jobs and life, leading to the implementation of extensive training and reskilling programs for employees who might be displaced. The goal is to equip them for their next career chapter.
Verizon aims to evolve beyond a connectivity provider to an AI-native company integrating AI fabric into its network.
Schulman envisions Verizon playing an integral role in how consumers use AI, proposing an 'AI fabric' over its network. This could involve cost-optimizing AI token usage for consumers, providing secure environments for AI agents, and acting as part of the AI infrastructure by connecting data centers and enabling edge computing for low-latency applications.
AI offers opportunities to enhance customer value propositions and operational productivity, but requires careful navigation.
AI can radically shape the value offered to consumers and businesses, increasing productivity and customer satisfaction. However, Schulman also acknowledges the potential 'darker scenarios' due to AI's rapid development, including recursive self-learning and quantum computing, which could lead to significant disruption and job losses.
Proactive scenario planning and investment in AI reskilling are critical to mitigate AI's disruptive impact.
Schulman advocates for scenario planning to prepare for AI's uncertain future. Verizon has committed $20 million to AI reskilling and training, with plans to potentially double or triple this amount. This effort extends beyond Verizon's employees to support communities and small businesses in adopting AI, fulfilling a leadership responsibility to prevent widespread unemployment.
Leadership Principles for Turnarounds
Humility and continuous learning are non-negotiable for leaders in rapidly changing environments.
Schulman emphasizes that leaders must not assume they know everything and should avoid being the 'smartest person in the room'. Continuous learning and challenging one's own assumptions are vital, as standing still means falling behind rapidly.
Authenticity and transparency build trust and approachability, allowing leaders to communicate honestly about challenges.
Being authentic and avoiding corporate jargon makes leaders approachable and relatable. This allows for truthful communication about the company's direction and acknowledging when the future is uncertain, which fosters respect from employees.
Inspiring teams, admitting mistakes, and being decisive are foundational leadership skills for transformation.
Beyond humility and authenticity, leaders must inspire, admit errors, and course-correct. This involves working at an intense level, setting high expectations, making difficult decisions, and maintaining composure during high-stress situations, akin to disciplines like mixed martial arts.
A successful turnaround requires a multi-year strategic plan involving comprehensive transformation, institutionalization, and AI nativity.
Schulman outlines a three-year plan for Verizon: Year 1 focuses on admitting issues and implementing a comprehensive transformation program with 10 workstreams and 400 initiatives. Year 2 is about institutionalizing the changes and course-correcting based on results. Year 3 aims to transform Verizon into an AI-native company, integrated into the AI infrastructure.
Cultural adaptation to AI is the biggest challenge, requiring companies to embrace change and mitigate fear.
While technology like AGI and quantum computing will be available, the success of companies will depend on their cultural ability to adopt AI. Schulman believes overcoming fear of AI's impact on jobs is paramount. He sees AI's potential to improve networks, cybersecurity, and overall company performance, highlighting human adaptability in navigating disruption.
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