Why Great Turnarounds Start with Culture, Not Strategy

0:00This episode is brought to you by Palmolive. Family time isn't just the big moments. It's weeknight dinners, sitting around the table, everyone talking all at once. So when the plates are empty and the sink is full, use Palmolive Ultra. Palmolive's most powerful formula removes up to 99.9 % of grease, leaving your dishes sparkling clean. And the new convenient pump makes cleaning even easier, so you can spend less time tackling dishes and more time together. Shop now at palmolive.com. When you need to build up your team to handle the growing chaos at work, use Indeed Sponsored Jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications, and more.

0:42Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a$75 sponsored job credit at Indeed.com slash podcast. That's Indeed.com slash podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed Sponsored Jobs. I think most people say that they want to put the customer front and center, but it's not easy to go and do that. The initiative we have inside the company is entitled Every Customer Has a Name.

1:13Dan Schulman:It means we treat you as a person, not as an account, not as a line. Almost like, you know, if one of my family members had a problem, how would I want the company to treat them? And so there are tons of small things that basically assure that we're putting a customer front and center. And my view is that customers fire companies all the time in quiet ways because they feel disrespected.

1:55So, Dan, thanks for sitting down with HBR. It's a pleasure, Adi. All right, so I want to ask you, you're at Verizon. You turned down the job, as I understand it, twice, maybe more than twice, before you agreed to take it. What made you want to get back in the game? Well, I turned it down because I was very happily retired. I was living on our ranch in Montana with my beautiful wife, who I love very much. Yeah, I noticed the cowboy boots. Yeah, yeah, always with me. I wasn't looking to come back into corporate life, but I was on the board. I was the lead director. We needed to make a change. I felt a keen sense of loyalty to the company, and I felt like the company had a tremendous amount of assets that we could leverage and that there was a real opportunity to take an iconic American company and at least have the shot at turning it around.

2:52And so after a lot of discussions with my wife, I agreed reluctantly to go do it. But here I am nine months into the job and I'm loving it. But what was wrong? At a high level, what was wrong with the company? You know, we had been losing market share for five years. We went from having the largest market cap in the industry to having the lowest. We had the lowest PE multiple, which, you know, is the market's way of saying that they don't really believe in your growth going forward. Our churn rates were going up. Our customer satisfaction results were going down. So, you know, there's just a ton of things.

3:41And I think inside the company, really importantly, we were willing to be prey. We were willing to gently seed market share to our competitors. We weren't playing to win. It was obvious we needed to make a change. I think the company for a long time had relied on its engineering prowess and it's not enough anymore. And we had put the network at the center of everything that we do as opposed to the customer. And then I also think culturally, you know, it's a proud company. It has a lot to be proud of.

4:21Dan Schulman:But that also means that you're resistant to change. that you look back at what you did and you want to repeat it. And in the era that we live in right now where change is accelerating at an increasingly hard-to-imagine pace, we were falling behind. I always say at almost every company meeting, when the pace of change external to a company is faster than the change of pace internal, You're falling behind. And we were falling behind because we were. This episode is brought to you by Palmolive. Family time isn't just the big moments. It's weeknight dinners, sitting around the table, everyone talking all at once.

5:09So when the plates are empty and the sink is full, use Palmolive Ultra. Palmolive's most powerful formula removes up to 99.9 % of grease, leaving your dishes sparkling clean. And the new convenient pump makes cleaning even easier. so you can spend less time tackling dishes and more time together. Shop now at palmolive.com. When you need to build up your team to handle the growing chaos at work, use Indeed Sponsored Jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications, and more. Spend less time searching and more time actually interviewing candidates who check all your boxes.

5:47Listeners of this show will get a$75 sponsored job credit at indeed.com slash podcast. That's indeed.com slash podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed Sponsored Jobs. Risk averse. We were hierarchical. We love our process. You know, we love to show our work, but really, you know, I'm very much like, I trust that you're doing good work, but I want to see the outcomes and I want to know when those outcomes are coming. I think we're not imagining enough, like, what kind of role can we play in the age of technology, in the age of AI, and looking backwards to previous success we had as opposed to what success we might have in the future.

6:38So, you know, companies talk all the time about wanting to be customer obsessed. For Verizon in particular, which, you know, probably a lot of customers view as a utility. They just want it to work. You know, they're not sure they want a relationship with you, but they want it to work. What does customer obsession mean for you in this context? Yeah, I think most people say that they want to put the customer front and center. But it's not easy to go and do that. Inside the company right now, we don't say, you know, customer centricity or customer obsessed. the initiative we have inside the company is entitled every customer has a name it means we treat you as a person not as an account not as a line almost like you know if one of my family

7:30Dan Schulman:members had a problem how would I want the company to treat them and that is hundreds of things it's when you come into the store how quickly do we start to serve you do you understand the plans that we have in front of you? Are they too complex for you to understand? Are we trying to prey on complexity to drive profitability? Or can we make them simple and easy to understand? When you call our customer service centers, do we treat you with respect and empathy? Customers fire companies all the time in quiet ways because they feel disrespected. They feel like there's got to be a better way than this.

8:18Dan Schulman:You know, it's too hard to be a part of your company. And we have to have a great network. I want us to have the best network in the country. We are part of the critical infrastructure for America, and we take that very, very seriously. But it's not enough to be fully differentiated. You know, we just launched a whole host of new things where we've simplified our pricing plans. We've put loyalty. So like if you've been a customer for a long time, we want to reward you for that. We want you to be excited about being a customer every day. We're moving into an AI world right now. and our service is going to be more important than ever in terms of connectivity, AI, advancements, how you use AI, what's the right way for you to use AI, how you gin up agents in a safe way.

9:18Dan Schulman:We can be a part of that new infrastructure going forward, and that's an exciting part and a different way of thinking about Verizon going forward and a place where I think we can add a lot more value to customers around security, other things like that. Are you essentially accepting lower revenue temporarily to kind of build longer-term loyalty? Is that what that means with simplified plans that give people only what they want and need? No, I don't think that being customer-centric means being less than fiscally responsible back to your shareholders. In fact, I think it can be the opposite. This episode is brought to you by Palmolive.

10:03Family time isn't just the big moments. It's weeknight dinners, sitting around the table, everyone talking all at once. So when the plates are empty and the sink is full, use Palmolive Ultra. Palmolive's most powerful formula removes up to 99.9 % of grease, leaving your dishes sparkling clean. And the new convenient pump makes cleaning even easier, so you can spend less time tackling dishes and more time together. Shop now at palmolive.com. When you need to build up your team to handle the growing chaos at work, use Indeed Sponsored Jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications, and more.

10:42Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a$75 sponsored job credit at Indeed.com slash podcast. That's Indeed.com slash podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed sponsored jobs. You know, what was happening to us before was our churn rate was going up because people were unhappy with us. We were raising prices. We weren't treating them with the respect they wanted. you know plans were confusing to them and you know the first thing I did when I came in is I said we're not going to raise prices without real value and we're going to invest in the customer experience and we're going to create a war chest to go and do that and we're going to start growing our customers.

11:42Because if you start to grow your customers because churn starts to come down, then actually your revenues start to increase. And if you can be efficient in the way that you do business, your top and bottom line and your customer satisfaction can all move in the same

12:00Dan Schulman:direction. Now, that's not an easy equation to go and do. And you have to be willing to take difficult decisions early on to make that happen. So I think if you do the right things, make the difficult decisions, challenge the culture, inspire people to do great things, that you can satisfy customers, you can inspire employees. and you can inspire your shareholders at the same time. So it's never easy to come in. I mean, you were on the board, but essentially came in as an outsider. And even though you've had a great track record at PayPal and elsewhere, people are resistant to change, right? So it's never you just come in and say, we're going to do this, and everybody says, hooray.

12:56Talk about the bumps along the way to get the team, the staff, the company excited in these ideas or willing to explore these ideas? I'd love to hear what's worked and what hasn't. Yeah. Well, first of all, you're exactly right. People are resistant to change. It's ironic that the one constant in our universe is change. And change is happening at an accelerating rate right now. But for whatever reason, humans hate change. You know, people who win the lottery, which you have to admit is a good change, right?

13:40Dan Schulman:You've just won the lottery, often suffer divorces, lose friends, because it's such a big change in their life. I think as a leader, you need to do three things simultaneously, and you need to do them particularly well. The first thing is you need to tell it like it is. I mean, without sugarcoating it at all, my view is every employee is an adult. They probably already know what's going on. They're just waiting for leadership to admit it. And, you know, my first all-employee meeting, actually every single all-employee meeting, I have no slides. I have no notes. I want to come to those meetings.

14:26Yeah, they're good. They're good. I have a cup of coffee in my hand, and I basically just talk from the heart, just like this is what I see. And I said, look, I know we have a lot to be proud of as a company, but the fact of the matter is we are losing.

14:49Dan Schulman:And I know that's actually really hard to hear, that we're losing. And that just does not work for me. And I know it does not work for you either.

15:26time together. Shop now at palmolive.com. When you need to build up your team to handle the growing chaos at work, use Indeed Sponsored Jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications, and more. Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a$75 sponsored job credit at indeed.com slash podcast. That's indeed.com slash podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed Sponsored Jobs. But we need to play to win.

16:03Dan Schulman:Like, we need a full-scale internal kind of revolution and cultural reshift where we play to win. And that's not a marketing slogan. That is a way of life inside the company. And I talked about what's getting in the way of that. what's happening in our culture to get away from that. On a scale from one to 10, this company is traditionally like a two in terms of being risk averse. I'm a one when it comes to the integrity of our financial results, cybersecurity. I have no tolerance for any risk in that. But trying new things, failing, learning from them, moving forward, I'm probably an eight or a nine on that.

16:52Dan Schulman:And so the company just needs to, it needs to feel like it can take risks, that it can fail, that it's okay to go do that. We're going to learn from it. Everybody wants to play for a winning team. Nobody wants to be on a losing team. So that's the first thing you need to do. We also need to invest in the customer. Like we need money to go and do that. I talked about the need to create that war chest, and that was going to result in layoffs. I made the hard decision, and it was my decision. I worked with my team on it, but I take the responsibility for it. We laid off 13 ,000 people in month two, and that was as and I was in front of the whole company talking about that saying that laying off even one person one person because it affects their family their friends colleagues who have worked for them is painful but our job is to make sure that we are as efficient as we can be that we create this war chest.

18:09And I said, like, we're going to do this layoff, but we're going to take most of those dollars. And we talked about$5 billion of OPEX savings we're going to do and invest it back in the customer

18:22Dan Schulman:so that we could be a great company going forward so that we could reclaim our market leadership, become one of the most trusted companies in the industry. and when we started going through that, that would feel great, you know, that it would feel difficult and disruptive at first, but like I'm playing for like what are we trying to accomplish, like what is our vision going forward, because people need to be inspired as well. So what are they, like what are your employees thinking about? Yeah. I think what they are really motivated about right now is that we are playing to win, you know, that we are trying to be a trusted company and that they see that we can do that.

19:15Like early successes are really important in these things because once people start to see success happening, they really rally around that. Like the first quarter, you know, I came in in October. We had been losing subscribers for a long time. We put on something like 650 ,000 subscribers that first quarter because I was like, we are going to play to win. like we're going to do what we need to go do. We'll be fiscally responsible, but we're going to win. And our stock went up, you know, that day by the most that had gone up in 18 years.

19:57Dan Schulman:And winning is contagious. This episode is brought to you by Palmolive. Family time isn't just the big moments. It's weeknight dinners, sitting around the table, everyone talking all at once. So when the plates are empty and the sink is full, use Palmolive Ultra. Palmolive's most powerful formula removes up to 99.9 % of grease, leaving your dishes sparkling clean. And the new convenient pump makes cleaning even easier, so you can spend less time tackling dishes and more time together. Shop now at palmolive.com. When you need to build up your team to handle the growing chaos at work, use Indeed Sponsored Jobs.

20:37It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications, and more. Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a$75 sponsored job credit at Indeed.com slash podcast. That's Indeed.com slash podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed sponsored jobs. I have to see that. And I think people also, they were yearning to play for a winning team. Nobody wants to be in a bureaucratic organization. Nobody wants to be in a hierarchical organization.

21:18They want to have permission to be their best selves going forward.

21:24Dan Schulman:And, you know, we also push them hard. One of my sayings is that every single day matters here. I want to see improvement every single day. And there's an intensity about that. And there's a saying that heaven and hell are the same place. It's just heaven for some and hell for others. And, you know, for me, like working hard, being disruptive in the market, putting customers at the center, being on a winning team, being available anytime to go make these decisions. To me, that's like heaven. And I love that. Some people don't like that. And that's okay as well. But we are not the company for that right now.

22:16And so I think we're getting the people who are now inspired to be here, who want to make us better and better and better. And we have not just kind of defined what reality is and created the vision of where we want to go to, but we have a roadmap on exactly how we're going to get there. And I think everybody understands that they're bought in. We have a ton to execute against still, obviously, Adi, but we're making good progress. I'm really proud of the team. Yep. You talked about trying to be a truth teller and you've developed a reputation, maybe cultivated a reputation about being a truth teller about AI.

23:01What is the truth about AI in business?

23:04Dan Schulman:Truth is a subjective thing often. It's, you know, your set of circumstances, how you see things, and I may see them differently. So I don't think there's any absolutes in that. And especially when you're thinking about the future as well, because the future is an uncertain place. And so what I do try to be is as authentic and honest as I can be about how I see the future playing out. And what I've said is that AI is going to be a part of our future. and that every single one of us needs to know how to use the tools of our time. And you will be better at your job. You will be better in life if you understand how to use and capture the benefits of AI.

24:14Dan Schulman:So we've put in place gigantic training programs, full week-long training programs on using AI for all employees. I've also put into place extensive kind of re-skilling programs for employees who might be affected by AI going forward. In other words, you know, they're displaced by AI. I want to make sure that they have all of the tool sets and access to be successful in whatever their next chapter might be. But I don't think we should underestimate the impact of AI. And I want to be. Propel Fitness Water with Gatorade electrolytes, zero sugar, and vitamins. Propel hydrates better than water to help you get the most out of your workout and get back to your best self.

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25:42Dan Schulman:As honest about that as I possibly can, I don't know what the future is going to hold. I think we all need to be quite humble about that because things are changing so quickly. But I do know that technology and successive waves of technology, whether it be AI, then quantum, then robotics, are going to radically change the way we work and the way we live. And I want to have that conversation as transparently and as honestly as I possibly can. Obviously, we don't know the future, but maybe what are some of the early use cases that tell you, yeah, we could accelerate here, here, here, and be a very different company?

26:29Well, first of all, I think the value that we offer to consumers is going to be radically shipped, reshipped by AI. I don't think we'll just be a connectivity company going forward offering wireless and broadband.

26:47Dan Schulman:Ben, I think will be an integral part of how consumers use AI. I think we can put an AI fabric over our network. I think we can do things that enable consumers and small businesses to take full advantage of AI in their lives. That could be things like token packages where people buy tokens from us and we're an orchestration layer on top of the network where we cost optimize the use of those tokens for you. Because as a consumer, there are certain LLMs that are good for certain jobs, but they may cost more. And there are certain jobs that you may want to use where you can go to a different LLM that costs less.

27:34Dan Schulman:But you as a consumer may not know that. But we as a network will know that. And so we could cost optimize the use of tokens. And I think that tokens are going to be the coin of the realm going forward. We could offer a safe place in our network because, you know, we have 95 million people in the country that use us, where if you want to utilize an agent, you can utilize it in the context of our network, not get a Mac Mini on the side to hook up to. And we could provide that secure environment for that. So I think what we offer going forward could be very different than what we offer today on top of the connectivity.