TEK2day Podcast

It’s one thing for CEOs to make “difficult decisions” when their own skin is on the line. Some may argue those aren’t difficult for many CEOs as many CEOs put “self” first when it is their own weakness or blind spots that led to circumstances around the difficult decision.

• For example, having to reduce employee headcount because a large customer announced they will no longer use your under-invested in product or service.

• Heavy employee cuts due to mass customer defections because your product or service is no longer relevant in a dynamic market. How many times have we seen that?

• I would argue those employee layoffs are easy decisions for most CEOs because if those actions aren’t taken companies will disappoint investor expectations and if that were to happen once or twice investors would clamor for a CEO change.

• IBM under CEO Ginni Rometty and Microsoft under former CEO Steve Ballmer are two examples of the above where customer markets moved away from IBM (Saas/Cloud) and Microsoft (mobile, search, cloud). Each company was slow to react had multiple restructurings and continue to pay the consequences for decisions made and note made. years ago.

More difficult decisions for CEOs - ones that take real courage of conviction - are the decisions that won’t be popular with investors in the near-term. However, as CEO you believe those decisions will pay significant dividends in the long-term.

Remember in years past when investors would complain about Jeff Bezos/ Amazon investing in distribution centers and fulfillment capability? Investors were angry because near term profits were going to be swapped for near-term investments and future growth & profitability. Bezos took the long view – something that investors of all shapes and sizes rarely do – and was right. Today the Company can do no wrong - whether it’s producing original content; creating Amazon Web Services (“AWS”)- which is the largest and fastest-growing service of its kind; acquiring Whole Foods. Bezos/ Amazon made decisions prior to the Company becoming a Wall Street darling that pay off enormously today. I recall that Amazon’s push into content wasn’t hugely popular with investors early on and today Amazon is a leader in OTT content and I believe AMZN will distance itself from Netflix and others over time. See our earlier podcast about the subject of original content. So, there’s a reason why Jeff Bezos has a 100% CRScore over at CEORater.

Speaking of Netflix, founder CEO Reed Hastings and the Company have done a great job of not caving to investor short-term demands. Recall when Hastings and the Company faced investor pressure when Netflix wanted to push into digital content, believing it to be the future and to not invest in its DVD business. “Why”? investors asked. The DVD business is profitable… Hastings of course was right, OTT was the future and is the “here and now” today. There was pressure at the time from Carl Icahn’s group who owned a large stake to sell the company to Microsoft or some other larger tech company believing Netflix to be to small to pursue its OTT strategy. Hastings of course was correct.

These are but two examples of CEOs who had the courage of their convictions to not cave to short-term pressures. There are many other examples on a smaller scale, inside and outside of the technology industry where founders and CEOs had the courage of their convictions to do what they believed was best for their Company in the long-run, despite that path running in the opposite direction of the investor community and occasionally other stakeholder groups.

It’s one thing for CEOs to make “difficult decisions” when their own skin is on the line. Some may argue those aren’t difficult for many CEOs as many CEOs put “self” first when it is their own weakness or blind spots that led to circumstances around the difficult decision.

• For example, having to reduce employee headcount because a large customer announced they will no longer use your under-invested in product or service.

• Heavy employee cuts due to mass customer defections because your product or service is no longer relevant in a dynamic market. How many times have we seen that?

• I would argue those employee layoffs are easy decisions for most CEOs because if those actions aren’t taken companies will disappoint investor expectations and if that were to happen once or twice investors would clamor for a CEO change.

• IBM under CEO Ginni Rometty and Microsoft under former CEO Steve Ballmer are two examples of the above where customer markets moved away from IBM (Saas/Cloud) and Microsoft (mobile, search, cloud). Each company was slow to react had multiple restructurings and continue to pay the consequences for decisions made and note made. years ago.

More difficult decisions for CEOs - ones that take real courage of conviction - are the decisions that won’t be popular with investors in the near-term. However, as CEO you believe those decisions will pay significant dividends in the long-term.

Remember in years past when investors would complain about Jeff Bezos/ Amazon investing in distribution centers and fulfillment capability? Investors were angry because near term profits were going to be swapped for near-term investments and future growth & profitability. Bezos took the long view – something that investors of all shapes and sizes rarely do – and was right. Today the Company can do no wrong - whether it’s producing original content; creating Amazon Web Services (“AWS”)- which is the largest and fastest-growing service of its kind; acquiring Whole Foods. Bezos/ Amazon made decisions prior to the Company becoming a Wall Street darling that pay off enormously today. I recall that Amazon’s push into content wasn’t hugely popular with investors early on and today Amazon is a leader in OTT content and I believe AMZN will distance itself from Netflix and others over time. See our earlier podcast about the subject of original content. So, there’s a reason why Jeff Bezos has a 100% CRScore over at CEORater.

Speaking of Netflix, founder CEO Reed Hastings and the Company have done a great job of not caving to investor short-term demands. Recall when Hastings and the Company faced investor pressure when Netflix wanted to push into digital content, believing it to be the future and to not invest in its DVD business. “Why”? investors asked. The DVD business is profitable… Hastings of course was right, OTT was the future and is the “here and now” today. There was pressure at the time from Carl Icahn’s group who owned a large stake to sell the company to Microsoft or some other larger tech company believing Netflix to be to small to pursue its OTT strategy. Hastings of course was correct.

These are but two examples of CEOs who had the courage of their convictions to not cave to short-term pressures. There are many other examples on a smaller scale, inside and outside of the technology industry where founders and CEOs had the courage of their convictions to do what they believed was best for their Company in the long-run, despite that path running in the opposite direction of the investor community and occasionally other stakeholder groups.

It’s one thing for CEOs to make “difficult decisions” when their own skin is on the line. Some may argue those aren’t difficult for many CEOs as many CEOs put “self” first when it is their own weakness or blind spots that led to circumstances around the difficult decision.

• For example, having to reduce employee headcount because a large customer announced they will no longer use your under-invested in product or service.

• Heavy employee cuts due to mass customer defections because your product or service is no longer relevant in a dynamic market. How many times have we seen that?

• I would argue those employee layoffs are easy decisions for most CEOs because if those actions aren’t taken companies will disappoint investor expectations and if that were to happen once or twice investors would clamor for a CEO change.

• IBM under CEO Ginni Rometty and Microsoft under former CEO Steve Ballmer are two examples of the above where customer markets moved away from IBM (Saas/Cloud) and Microsoft (mobile, search, cloud). Each company was slow to react had multiple restructurings and continue to pay the consequences for decisions made and note made. years ago.

More difficult decisions for CEOs - ones that take real courage of conviction - are the decisions that won’t be popular with investors in the near-term. However, as CEO you believe those decisions will pay significant dividends in the long-term.

Remember in years past when investors would complain about Jeff Bezos/ Amazon investing in distribution centers and fulfillment capability? Investors were angry because near term profits were going to be swapped for near-term investments and future growth & profitability. Bezos took the long view – something that investors of all shapes and sizes rarely do – and was right. Today the Company can do no wrong - whether it’s producing original content; creating Amazon Web Services (“AWS”)- which is the largest and fastest-growing service of its kind; acquiring Whole Foods. Bezos/ Amazon made decisions prior to the Company becoming a Wall Street darling that pay off enormously today. I recall that Amazon’s push into content wasn’t hugely popular with investors early on and today Amazon is a leader in OTT content and I believe AMZN will distance itself from Netflix and others over time. See our earlier podcast about the subject of original content. So, there’s a reason why Jeff Bezos has a 100% CRScore over at CEORater.

Speaking of Netflix, founder CEO Reed Hastings and the Company have done a great job of not caving to investor short-term demands. Recall when Hastings and the Company faced investor pressure when Netflix wanted to push into digital content, believing it to be the future and to not invest in its DVD business. “Why”? investors asked. The DVD business is profitable… Hastings of course was right, OTT was the future and is the “here and now” today. There was pressure at the time from Carl Icahn’s group who owned a large stake to sell the company to Microsoft or some other larger tech company believing Netflix to be to small to pursue its OTT strategy. Hastings of course was correct.

These are but two examples of CEOs who had the courage of their convictions to not cave to short-term pressures. There are many other examples on a smaller scale, inside and outside of the technology industry where founders and CEOs had the courage of their convictions to do what they believed was best for their Company in the long-run, despite that path running in the opposite direction of the investor community and occasionally other stakeholder groups.

It’s one thing for CEOs to make “difficult decisions” when their own skin is on the line. Some may argue those aren’t difficult for many CEOs as many CEOs put “self” first when it is their own weakness or blind spots that led to circumstances around the difficult decision.

• For example, having to reduce employee headcount because a large customer announced they will no longer use your under-invested in product or service.

• Heavy employee cuts due to mass customer defections because your product or service is no longer relevant in a dynamic market. How many times have we seen that?

• I would argue those employee layoffs are easy decisions for most CEOs because if those actions aren’t taken companies will disappoint investor expectations and if that were to happen once or twice investors would clamor for a CEO change.

• IBM under CEO Ginni Rometty and Microsoft under former CEO Steve Ballmer are two examples of the above where customer markets moved away from IBM (Saas/Cloud) and Microsoft (mobile, search, cloud). Each company was slow to react had multiple restructurings and continue to pay the consequences for decisions made and note made. years ago.

More difficult decisions for CEOs - ones that take real courage of conviction - are the decisions that won’t be popular with investors in the near-term. However, as CEO you believe those decisions will pay significant dividends in the long-term.

Remember in years past when investors would complain about Jeff Bezos/ Amazon investing in distribution centers and fulfillment capability? Investors were angry because near term profits were going to be swapped for near-term investments and future growth & profitability. Bezos took the long view – something that investors of all shapes and sizes rarely do – and was right. Today the Company can do no wrong - whether it’s producing original content; creating Amazon Web Services (“AWS”)- which is the largest and fastest-growing service of its kind; acquiring Whole Foods. Bezos/ Amazon made decisions prior to the Company becoming a Wall Street darling that pay off enormously today. I recall that Amazon’s push into content wasn’t hugely popular with investors early on and today Amazon is a leader in OTT content and I believe AMZN will distance itself from Netflix and others over time. See our earlier podcast about the subject of original content. So, there’s a reason why Jeff Bezos has a 100% CRScore over at CEORater.

Speaking of Netflix, founder CEO Reed Hastings and the Company have done a great job of not caving to investor short-term demands. Recall when Hastings and the Company faced investor pressure when Netflix wanted to push into digital content, believing it to be the future and to not invest in its DVD business. “Why”? investors asked. The DVD business is profitable… Hastings of course was right, OTT was the future and is the “here and now” today. There was pressure at the time from Carl Icahn’s group who owned a large stake to sell the company to Microsoft or some other larger tech company believing Netflix to be to small to pursue its OTT strategy. Hastings of course was correct.

These are but two examples of CEOs who had the courage of their convictions to not cave to short-term pressures. There are many other examples on a smaller scale, inside and outside of the technology industry where founders and CEOs had the courage of their convictions to do what they believed was best for their Company in the long-run, despite that path running in the opposite direction of the investor community and occasionally other stakeholder groups.

Cintas does not know how to organically grow its business and therefore cheats by over-charging customers.

Cintas does not know how to organically grow its business and therefore cheats by over-charging customers.

Cintas does not know how to organically grow its business and therefore cheats by over-charging customers.

Cintas does not know how to organically grow its business and therefore cheats by over-charging customers.

Netflix (NFLX)

Apple (AAPL)

Disney (DIS)

Amazon (AMZN)

Facebook (FB)

Google/YouTube (GOOG)

AT&T (T)

Verizon (VZ)

Microsoft (MSFT)

Twitter (TWTR)

Samsung

The name of the game is original content. It’s more profitable than third party content and nobody can threaten to “pull” it from your platform if you are the creator (i.e. Disney and Netflix)

Amazon and Apple have an advantage over other players in the original content game primarily because of their size and the fact that they are either already producing their own original content (AMZN) or are about to be (AAPL).

Apple has a potentially unique advantage in that it could integrate advanced technologies such as AR/VR into the iPhone creating unique viewing experiences. Should the iPhone incorporate AR/VR it would likely accelerate the democratization of content creation/production, potentially positioning Apple as the device make of choice for amateur content creators. This won’t necessarily help “Apple Studios”, but it will help Apple in its mobile device business vs. competitors such as Samsung and Google.

DIS pulling its content from NFLX effectively puts NFLX in play. Long-term I don’t believe that DIS is large enough to compete with AAPL, AMZN, FB and GOOG and ultimately will be acquired, most likely Apple given that the two companies have a history (originally nurtured by Disney CEO Bob Iger and the late Steve Jobs).

NFLX doesn’t have the capital structure to compete with the big boys. If content providers continue to pull content from the Netflix platform, and given competition from others such as Amazon’s “Channels” effort, Netflix will face an increasingly uphill battle in terms of producing quality original content at an accelerated rate. Accelerated rate because Netflix must offset the loss and potential loss of third party content.

Content production is a commodity. AAPL, AMZN, FB and GOOG all have the balance sheet to effectively compete in the original content production space (short, medium and long-form content). Further, because of their robust balance sheets, each of AAPL, AMZN, FB and GOOG all better positioned to pursue and incorporate advanced technologies into their content offerings. AR/VR are examples.

We give AMZN the edge over AAPL, GOOG and FB in the near-term as AMZN has been in the original content production game for some years.

AAPL could potentially leapfrog the competition if they are able to incorporate AR/VR and other advanced viewing technologies into their original content production capability by integrating the experience into iOS and Apple TV.

NFLX in our view will have to rely on old-fashioned quality writing for their original programming. This is the best way to stay relevant in the face of an inferior balance sheet.

TWTR the dark horse. In our view the company should continue to work to secure original programming rights, sports in particular so long as Twitter is an independent company.

MSFT always a threat given the strength of its balance sheet.

T, VZ, CMCSA: the largest of the traditional content providers, dwarfed by the largest tech co’s. We expect AT&T’s WB unit will be poached for talent by AAPL in particular as Apple ramps its original programming effort.

Netflix (NFLX)

Apple (AAPL)

Disney (DIS)

Amazon (AMZN)

Facebook (FB)

Google/YouTube (GOOG)

AT&T (T)

Verizon (VZ)

Microsoft (MSFT)

Twitter (TWTR)

Samsung

The name of the game is original content. It’s more profitable than third party content and nobody can threaten to “pull” it from your platform if you are the creator (i.e. Disney and Netflix)

Amazon and Apple have an advantage over other players in the original content game primarily because of their size and the fact that they are either already producing their own original content (AMZN) or are about to be (AAPL).

Apple has a potentially unique advantage in that it could integrate advanced technologies such as AR/VR into the iPhone creating unique viewing experiences. Should the iPhone incorporate AR/VR it would likely accelerate the democratization of content creation/production, potentially positioning Apple as the device make of choice for amateur content creators. This won’t necessarily help “Apple Studios”, but it will help Apple in its mobile device business vs. competitors such as Samsung and Google.

DIS pulling its content from NFLX effectively puts NFLX in play. Long-term I don’t believe that DIS is large enough to compete with AAPL, AMZN, FB and GOOG and ultimately will be acquired, most likely Apple given that the two companies have a history (originally nurtured by Disney CEO Bob Iger and the late Steve Jobs).

NFLX doesn’t have the capital structure to compete with the big boys. If content providers continue to pull content from the Netflix platform, and given competition from others such as Amazon’s “Channels” effort, Netflix will face an increasingly uphill battle in terms of producing quality original content at an accelerated rate. Accelerated rate because Netflix must offset the loss and potential loss of third party content.

Content production is a commodity. AAPL, AMZN, FB and GOOG all have the balance sheet to effectively compete in the original content production space (short, medium and long-form content). Further, because of their robust balance sheets, each of AAPL, AMZN, FB and GOOG all better positioned to pursue and incorporate advanced technologies into their content offerings. AR/VR are examples.

We give AMZN the edge over AAPL, GOOG and FB in the near-term as AMZN has been in the original content production game for some years.

AAPL could potentially leapfrog the competition if they are able to incorporate AR/VR and other advanced viewing technologies into their original content production capability by integrating the experience into iOS and Apple TV.

NFLX in our view will have to rely on old-fashioned quality writing for their original programming. This is the best way to stay relevant in the face of an inferior balance sheet.

TWTR the dark horse. In our view the company should continue to work to secure original programming rights, sports in particular so long as Twitter is an independent company.

MSFT always a threat given the strength of its balance sheet.

T, VZ, CMCSA: the largest of the traditional content providers, dwarfed by the largest tech co’s. We expect AT&T’s WB unit will be poached for talent by AAPL in particular as Apple ramps its original programming effort.