I watched with interest this week an interview with Bob Swan, Intel’s latest CEO by Fortune’s Aaron Pressman. Pressman did a reasonable job getting Swan to answer difficult questions and Swan was quickly able to move from being CFO and acting CEO to full CEO. This isn’t such a bad way to get the job because the Intel board was able to see how Swan actually performed in the job before officially giving him the role.
I typically prefer subject matter experts in CEO roles because they tend to perform better, but a CFO does generally know where the bodies are buried and from day one can generally determine where his effort, and the company’s money, needs to be spent.
The first major turnaround I participated in was at IBM, and while Louis Gerstner got the credit, it was Jerome York, the CFO hired before him, that did the heavy lifting. Gerstner did an excellent job of restoring IBM’s image and restoring trust, but York made sure the firm could execute and fixed the internal problems that were killing the company. And when York left in a failed attempt to take Chrysler back over with Lee Iacocca, much of the progress me made at IBM stopped like it hit a wall.
On paper, Bob Swan (due to his VC background), may have the skillset that Intel needs to turn itself around. And, once turned around, they should be more successful on bringing on a subject matter expert if they feel one’s still needed. Swan was an impressive chief architect out of Qualcomm under Dr. Venkata (Murthy) Renduchintala. And there is a school of thought that suggests the CEO isn’t as important as the team…and with folks like Murthy at the top, Intel has the skill set to execute strongly again.
There’s an old joke about three envelopes that plays out in the real world when it comes to turnovers. It goes like this:
A new CEO meets with his predecessor, who gives him three envelopes and tells him, “When things get bad open the first envelope. When things don’t get better, open the second. And when things really go south open the third.” So, after a few months, things aren’t going very well, and the new CEO opens the first envelope out of curiosity and it says, “blame your predecessor.” So the new CEO points out that the last guy created all the problems he’s desperately trying to fix. That takes the pressure off for a while, but things are still looking pretty bad, so he opens the second envelope, which says “reorganize.” So he does, coming up with a new company structure and downsizing the firm significantly. But things continue to go badly, and pressure is mounting again so he opens the last envelope and it says, “prepare three envelopes…”
Sadly, I can point to a lot of attempted turnarounds using this strategy, usually employed by a new CEO out of his or her depth. What becomes rapidly clear is they just don’t have any idea what they need to do and so spend lots or resources spinning their wheels until the board loses confidence and replaces them.
What you learn to look for are proof points. One example, for instance, is Swan has staffed the chief diversity officer position and, at the top of the company, they have six women senior executives. Intel was traditionally an almost all-male company with around three women in top positions. You want to see this kind of progress at the top, otherwise an all- or mostly male executive team will block women from advancing. If the team is already diverse, women can move upward more easily.
As noted, Swan was previously the CFO, so he really does know the problems in the firm and has done a decent job of articulating them. And if you know of a problem, you should be able to adequately resource correcting it.
Areas to watch are their GPU effort, which has been an ongoing nightmare for the company with repetitive failures over several decades. They have a team experienced with GPUs and well compensated for once, but their competition has a massive lead…so Intel will need to pivot the market to succeed. If they try to do this linearly it’s doubtful they’ll be able to adequately close the gap.
Another area is automotive, where Swan’s predecessor bought a camera company instead of an AI firm to address the growing need for autonomous car technology. We want to see them moving to the brain of the car and advancing with in-car systems. Intel has technology in their labs that could revolutionize cars but plans to implement these technologies under brands like Jaguar never bore fruit. So actual progress on the AI side of the car will be critical to showing progress.
Computing is the core of Intel and they have slipped badly with PCs and servers. We need to see behavior that suggests they’ll now be timely regarding security alerts and patches and can execute their advanced manufacturing processes, which have badly lagged expectations. More important, they need to again show leadership here, not just rely on market dominance and the entrenched nature of their products to move sales.
Marketing has been a black hole at Intel for several decades due to a combination of unqualified CMOs and marketing programs that were underfunded and poorly executed. Marketing controls both Intel’s image and demand for their parts. Executing here will be critical to the impression that Intel and its products are improving. They can make progress everyplace else and still lag expectations if they can’t communicate these changes.
They have a new CCO (Chief Communications Officer) in Claire E. Dixon out of VMware which, on paper, is a massive improvement over their prior CMO who was out of Staples (I kid you not). But they still need a CMO and marketing parts is a special skill known to very few. Here we are looking for a strong CMO hire with strong executive support and well-executed campaigns. Historically the Intel field has been the death of Intel CMOs – even good ones – so top-level support from Swan will be critical to the as-yet-to-be-hired CMO’s success.
Doing marketing right was one of the most impressive things Gerstner did at IBM. He created a team that, to this day, is unmatched in the industry. Sadly Sam Palmisano, his successor, not understanding the massive benefit, dismantled Gerstner’s marketing team. This is not an uncommon problem in tech firms; the CEOs just don’t take marketing seriously. Something I’m hoping Swan, Dixon and the new CMO will get right this time.
I think this Intel “Fortune” interview showcases a new CEO who both knows where Intel’s critical problems are and has a team that can fix them (on paper, at least). The question is, can they execute? They start off better than a lot of companies do with a CEO who knows the company and a team capable of executing…but the proof is in the pudding and it will be actual execution that will prove whether they have this sorted.
I’ve highlighted several proof points to watch for and it isn’t critical they hit all of them, but each miss will lower the probability of their eventual success. Fortunately, the firm is profitable, and they have substantial cash reserves, so they have plenty of time. But their competitors are moving on their weakness so that time isn’t unlimited.
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