We seem to have a lot of problems with corporate governance at the moment, ranging from the lack of experience at the top of the country to revolving disasters at firms like Uber and Yahoo, all showcasing a fundamental lack of experience or maturity or both. It has fascinated me that even after we saw Steve Jobs take Apple off life support and turn it into the most successful company in the world, few boards seem to get the importance of selecting people who have been trained both as CEOs and in the industry in which the firm operates. Jobs is no longer with us but with AMD’s Financial Analyst Day coming up tomorrow, and having gone through at least some of IBM’s Executive Resources program myself, I figured it was a good time to point to AMD CEO Lisa Su’s success, as connected to her unique background and training.
Let’s recap AMD’s progress and then talk a bit about the program that helped make Su one of the uniquely successful turnaround CEOs currently in the tech market.
AMD’s 2015 FAD
I went back to the presentations that I was given back in 2015, only seven months after Su took over as CEO of AMD. She made a number of what seemed like almost impossible promises at the time. Though, perhaps these were less so, once she tripled AMD’s stock price in five months.https://o1.qnsr.com/log/p.gif?;n=203;c=204663295;s=11915;x=7936;f=201904081034270;u=j;z=TIMESTAMP;a=20410779;e=i
First, she said she would stabilize the AMD PC business. At the time, this seemed very unlikely. Back then, the market was falling like a rock, largely due to things outside of AMD’s control, but prior decisions in AMD hadn’t helped. Largely due to neglect, branding that removed demand based on obsolescence, and operating mistakes, the PC market in 2015 was in bad shape. On top of this, AMD had flipped like much of the market to the idea that everyone was going to mobile platforms and AMD had defunded its efforts with desktop systems even though Intel was vulnerable.
Second, knowing you couldn’t cut out of problems like the ones hurting AMD’s performance, Su promised to focus AMD’s remaining limited resources on enterprise sales and expanding existing embedded and semi-custom business. This had a lot of greenfield opportunity in it, representing a lot of risk, given that ARM in particular was also targeting some of these areas, sales cycles are long, and margins are tight.
Third, she promised to improve liquidity, which would require a set of financial skills often not seen in many CEOs with technical backgrounds. In fact, one of the big problems with technical CEOs is that they often fail because they run out of resources to carry out an aggressive agenda.
Fourth, she aimed to build a foundation that supports the firm’s growth and assures profitability. If any of the foundational elements above failed, the chance of reaching this last goal would have been very difficult. If more than one failed, it would have been impossible.
2017 AMD Accomplishments
With the last set of financial results, AMD has reported (by percentage) four quarters of double-digit growth and continued to report major sales wins in 2015 and 2016. It launched Ryzen, its first truly new processor in years. Coverage, so far, has suggested the market was unusually excited about what was a desktop PC processor initially. Revenue increased from $532M to $593M over the time period, and it is currently setting up for the release of Vega, a new PC GPU.
As promised, AMD increased its investment in the enterprise and semi-custom business, though, because enterprise is a very long lead, that hasn’t paid financial dividends yet. Still, AMD’s “Naples” high-performance processor does have the OEMs excited, but we won’t know until later in the year whether that excitement leads to success. Refreshes on the Xbox and PlayStation around AMD’s technology and the coming Microsoft “Project Scorpio” showcase that the AMD Semi-Custom business has also become more successful.
On liquidity, AMD’s cash position has improved and it has dropped its debt significantly from $2.27B to $1.4B. This improvement in income statement and balance sheet is unusual, as many CEOs tend to favor income statements and forget the balance sheet.
With the exception of enterprise, which is still setting a foundation for recovery but not yet a financial benefit, Su has fully executed on all her promises. Her success largely helped her become one of the 50 most powerful women in technology this year. We should have seen this coming, given that MIT recognized Su as one of the top innovators back in 2002 while she was at IBM.
IBM Executive Resources
One of the things that the Watsons put in place at IBM was a process to assure its survival. Part of that process is to identify potential early in a person’s career and then set them up with mentors so that there is a deep pool of experience underneath each of the eventual CEO candidates. With one exception, IBM has always promoted from inside, and the combination of this mentoring and training has allowed IBM to not only survive for over a century but often dominate the markets it is in. Now, not all IBM executives make it through all parts of the program, but when executed well, they receive training from the best in the business, serve as aides to the CEO (Su served as an aide to Louis Gerstner, the only outside hired CEO and also a turnaround expert), and gain the breadth that most CEO candidates lack when they first become CEO.
It is interesting to note that many of the positions Su held were strategic positions. This is because one of the biggest problems with current CEOs is their tendency to focus excessively on tactical quarterly goals. Even Su’s CEO mentor Louis Gerstner, had issues with the idea of a “vision,” something that Su learned needed to be addressed, and did address early on (likely because she saw how that lack of “vision” hurt Gerstner’s execution). It isn’t either-or in terms of execution and vision; you need both. The vision tells you where you need to go, and the execution gets you there. It is like having a map; without it, driving faster can take you farther from your destination.
Wrapping Up: The Value of Training and Experience
One of the big problems with companies and turnaround CEOs is that the CEOs tend to lack depth and breadth of experience. This tends to force them down a tactical path where they mostly use executive decisions to artificially raise stock price as they kill the firm’s revenue stream and run up debt or equity, eventually screwing the stockholders.
Su is one of the exceptions we should learn from to help build a better pool of CEOs. Her background, training and mentoring created the foundation for how she laid out her plan “vision” and how she executed against it. She was also able to maintain staff stability and loyalty because unlike many new CEOs, she knew it wasn’t all about her and gave her team the credit and support they needed as well. (It continues to surprise me how many CEOs think the job is mostly about self-aggrandizement and fail because they didn’t build staff loyalty and support.)
In the end, in the face of a lot of bad examples, it is nice to have a good one stand out. Su is one of the good ones, but we should never forget that this wasn’t a lucky accident. She, as with most successful CEOs, is the result of a program that assured her own quality and taught her to assure the quality of her people and firm.
Rob Enderle is President and Principal Analyst of the Enderle Group, a forward-looking emerging technology advisory firm. With over 30 years’ experience in emerging technologies, he has provided regional and global companies with guidance in how to better target customer needs; create new business opportunities; anticipate technology changes; select vendors and products; and present their products in the best possible light. Rob covers the technology industry broadly. Before founding the Enderle Group, Rob was the Senior Research Fellow for Forrester Research and the Giga Information Group, and held senior positions at IBM and ROLM. Follow Rob on Twitter @enderle, on Facebook and on Google+