- In today’s CEO Daily: Twilio’s CEO on how he brought the company out of a “time of real peril”
- The big leadership story: Why the U.S. cares about Panama, Gibraltar, and Malacca
- The markets: A stellar day on the markets as semiconductor and AI stocks surge
- Plus: All the news and watercooler chat from Fortune.
Good morning. Maybe AI and software can be friends. Twilio CEO Khozema Shipchandler just delivered robust Q1 earnings that made his stock jump almost 25% on Friday—and plans to reveal a big initiative for the customer engagement platform’s next stage of growth at its annual conference this week. What a difference from early 2024, when he stepped up to lead Twilio, which lets users integrate voice, video, text, email and other communication channels. “That was a time of real peril,” he told me late last week. “Our growth had stalled out, we were burning through cash, we were not profitable, and we had a lot of pressure from activist investors.”
I’m thinking about that as I’m in Los Angeles today for the annual Milken Institute Global Conference. Just like fear of an AI-driven SaaSpocalypse can shift in a matter of weeks, the business landscape is ever changing, whether it’s the impact of war in the Middle East or the impact of AI in health outcomes. More on that in the coming days.
I was curious to hear Shipchandler’s take on what he needed to fix in stepping into the top job. Like many leaders coming into the CEO role these days, he knew Twilio well, having served in finance and operational roles since 2018.
First was a failure of focus as cheap capital had fostered a lack of discipline in making choices: “We would throw effort and resources and money at 100 projects, all at the same time, with equal intensity, and then we’d sort of look at what stuck to the wall,” said Shipchandler, who cut the list to no more than nine bets, knowing that only one to three would become $500 million businesses. “For those that don’t turn out, we’re very, very quick to shut those down.”
Second was a failure of integration on the $3.2 billion acquisition of customer-data platform Segment in 2020, which some shareholders wanted gone. “We didn’t integrate the engineering, we didn’t integrate the commercial offering, let alone integrating the products,” he says, which meant customers needed to buy separate offerings to consume communications and then enrich it with data. “We made it super hard for them to have context-rich, real-time customer interactions … If you don’t have context, you have a lot more cost and you have a lot more noise.”
And the third key factor is leadership. Shipchandler replaced 60% of his direct reports and up 40% of those at the VP level. “Companies just outgrow their prior teams. We’re a $5 billion company trying to become a $10 billion company,” he said. But it’s not enough to have the old guard leave. What matters now is creating a structure for the next rung to step up with rotational programs, training and a cultural shift around talent. “A big part of it is grabbing someone by the shoulders and saying, ‘Hey, in 10 or 15 years, you’re going to be the CEO of this company.'”
Adds Shipchandler: “The best thing that could happen is, when the time comes, we turn the company over to them, and they feel completely comfortable saying, ‘I got a good hand—but now it’s my turn to change up the place all over again.’ That would be the most amazing thing.”
Contact CEO Daily via Diane Brady at diane.brady@fortune.com
Top leadership news
U.S. seeks to box out China
The Strait of Hormuz is just one part of a global chessboard in a “cold war” against China, geopolitical experts and economists say. The U.S. is quickly moving to cement influence over the world’s other shipping and strategic military arteries from the Panama Canal, Greenland, the Strait of Gibraltar between Europe and Africa, and Asia’s Strait of Malacca.
‘Tank bottoms’ vs. ‘tank tops’
Oil inventories among top consuming countries are rapidly disappearing, and markets could effectively run out of stockpiles and hit “tank bottoms” in a month. At the same time, the U.S. naval blockade has bottled up Iran’s oil exports, sending its own inventories higher as supplies have nowhere to go. If Iran's storage is maxed out and the industry hits “tank tops,” producers will have to drastically slash output, risking permanent damage to oilfields.
Huang says CEOs have a ‘God complex’
Nvidia CEO Jensen Huang is pushing back against the popular narrative that AI will wipe out huge swaths of the workforce, but he's also placing some blame on overly confident CEOs. “They’re made by people who are like me, CEOs, and somehow because they became CEOs you adopt a God complex, and before you know it, you know everything. And so I think we have to be careful and really ground ourselves to talking about the facts.”
The markets
S&P 500 futures are up 0.1% this morning, following a 0.3% increase before the weekend. South Korea's KOSPI is up 5.1% to hit a new record high. Taiwan's TAIEX rose 4.6%, while Hong Kong's Hang Seng Index is up 1.2%. India's Nifty 50 is rising 0.3%, while the Europe STOXX 600 is down 0.3% in early trading. Korea's SK Hynix, a major supplier of memory to companies like Nvidia, surged 12.5%; TSMC is up 6.6%. Bitcoin jumps to over $79,500.
Around the watercooler
America’s twin scarcities: The 4-million-unit shortage in both housing and childcare is breaking families by Sydney Lake
America got rich and got sad. A top economist says 2020 broke something that hasn’t healed by Nick Lichtenberg
Trump picked a fight with the Pope: The one person he can’t fire, can’t outbid, and can’t outlast by Catherina Gioino
One economist’s ‘radical idea’ to solve the biggest energy crisis in history: a reverse OPEC by Sasha Rogelberg
CEO Daily is curated and edited by Andrew Wyrich, Jason Ma, Nicholas Gordon, and Lee Clifford.
