Right now, BlackBerry CEO John Chen is not only ahead of Steve Jobs in terms of turnaround speed, he has done something that both HP and Sun failed at: turned a hardware company into a software and services company, arguably something Jobs couldn’t have done. I had a chance to ask him about that this week and I’ll close with his fascinating response, but first I want to document how he was able to do what so many have failed at: Successfully doing a turnaround.
Given how many jobs and companies are lost in these efforts, let’s look at the key elements I think were evident in Chen’s effort and what he felt was the most important part.
One of the first things I look for when an external CEO is hired is how well he or she creates and maintains personal loyalty. One of the big indicators is whether the CEO brings a critical mass of known executives into the firm. Initially, loyalty is more important than skill set because if you trust your team and they trust you, there is less likelihood they will misrepresent the problems they have. Many of the early turnaround failures I’ve observed were due to people covering up problems until they became so pronounced that they could neither be covered up nor corrected. That is what I think happened at Yahoo with the mega breaches; there was a decision in the company to cover the breaches up because the executives didn’t trust their CEO to not overreact when it happened. We’ll see if this week’s litigation there proves me out.
At the BlackBerry briefing, there were a significant number of executives whom Chen had brought with him into BlackBerry, and while he joked about the fact that they had yet to execute sharply on the strategy for third parties to license BlackBerry’s phone platform, they’ve executed impossibly well on almost everything else.
Understanding Deeply Origin, Destination and Transition Process
This is why, I think, both Sun’s and HP’s efforts to transition from hardware to software and services failed. Both of the CEOs who were hired to make the move didn’t understand enough about the hardware business to recognize what was needed to transition it to software and services. With their skillset, they should have simply built a new software and services company from scratch and then shut down the legacy hardware business, but you can’t possible communicate that without going out of business. This is because you have to sustain the legacy business, which generally is failing anyway, long enough to finish the transition, and not prematurely kill the revenue stream.
Another thing that made Chen unique is that while his prior CEO experience included Sybase, a software company, he also was chief executive at Siemens Nixdorf, a hardware company, prior to that. Having done both gave him the breadth he needed to transition the firm.
This is why Jobs smartly decided to kill the process at Apple to transition that company to software and services. Jobs didn’t understand how to do that and would have likely failed because he was just a hardware guy.
John Chen’s Secret Sauce
Now, when I asked Chen what he thought was the defining factor of why he was successful and others failed, he responded that he made hard decisions quickly. If it was painful but the right thing to do, his view was to get it done and he drove his loyal executives to execute. Deciding to get out of the phone manufacturing business was likely the most difficult, but had the company not removed the burden of that effort, something Palm didn’t do, it would likely be just a dead as Palm is.
I’ve observed this in successful CEOs overall, from Michael Dell to Steve Jobs. If it needs to get done, they don’t put it off due to difficulty. They drive it through. As another example, this is something clearly obviously being done by U.S. President Donald Trump at the moment, showcasing how painful this path can be, but why it is critical to the success of the effort.
Wrapping Up: The Set of Key Turnaround Elements
A corporate turnaround has a lot of moving parts, particularly with a multinational. But Chen, with the fastest turnaround I have ever seen for a company of this scale, has shown that the key elements are team loyalty; understanding how to fully navigate from where the company is to where the company needs to go; and recognizing that for your team to execute sharply, you can’t put off the hard decisions because of politics, your own job risk, or just because they’ll be painful. In short, the successful executive knows where they are, where they are going, how to get there, and how to build an army of dedicated folks who will follow their lead. The elements seem like they should be obvious. The question in my head as I leave you is why is someone like Chen is an exception rather than the rule?
Oh, one more thing. For a turnaround executive to be successful long term, he or she needs to transition the company into something optimized around their skill set. This, I think, is why Steve Ballmer failed and why Satya Nadella is succeeding at Microsoft. Ballmer tried to run Bill Gates’ company. Nadella has transitioned Microsoft into a cloud-forward firm, better mirroring Nadella’s skillset. In the end, that is what Chen has also done with BlackBerry. To paraphrase Trump, that’s “huuuuge.”
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+