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By James Keyes '80
In early 2009, in the midst of a global financial crisis, I attended a Microsoft CEO Summit in Seattle. One evening, while enjoying a reception at Bill Gate's home, I found myself standing next to Warren Buffet in line for dinner. I hadn't met him in person, but we had corresponded previously during my tenure at 7-Eleven. I introduced myself, and to my surprise he knew my name and asked what I was doing after the successful sale of 7-Eleven. I told him that I had taken on the challenge of transforming Blockbuster, but with the financial markets’ collapse, I was struggling to keep the company alive. I was almost apologetic and clearly a bit battle worn. He paused for a moment, looked me in the eye, and asked if I would rather be sitting on the bench or in the game with a chance to make it work. His advice was to dust myself off, stand up to the plate, and give it my best shot. He was right—rather than bail on the company, I stayed and led it through a successful restructuring.
Warren gave me some simple yet impactful advice, and now I hope to pay it forward and do the same as we deal with uncertainty and collective fear in these challenging times.
Today, the world is seeing change and crisis it has seldom, if ever, seen before. Businesses are shuttered and leaders are under siege. It could be a time for despair, but a true leader is born for this. As the former CEO of 7-Eleven, and later as Chairman & CEO of Blockbuster, I've seen my share of adversity, and somewhere along life's journey, I learned to recognize adversity as strength. I realized that the challenges I have faced have helped me develop the leadership skills that I'm able to employ today. Often those learnings and resulting leadership skills came from the most turbulent times.
I like to evoke Nelson Mandela in saying that "I never fail, I either win or learn," and I've certainly had my share of both.
Lesson 1: Embrace Change
As a newly minted MBA, I accepted a role at 7-Eleven with confidence that a position with the successful NYSE company was a good career choice. In 1987 the company announced a leveraged buyout and was on its roadshow during the October 1987 market collapse. They funded nearly $4 billion in debt at more than 16% interest and the rest was history. The company was forced to file for Chapter 11 bankruptcy protection by 1991. This crisis, I learned, was the best thing that could have happened for the company and for me professionally. While it didn't seem like it at the time, the restructuring forced necessary change. It forced the company to adapt our business model to a constantly changing customer, to embrace technology, and to transform our product assortment. Adaptation to change was the critical ingredient for 7-Eleven's success as a retailer.
The crisis also required me to adapt as a leader. My willingness to embrace change provided an opportunity to step into leadership roles in both operations and finance and ultimately led to the role of chief executive. The ability to adapt to change during those hard times led to a ten-fold increase in equity value during my tenure as CEO and positioned the company to continue to expand to more than 70,000 locations worldwide.
Lesson 2: Lead and Learn with Confidence
When taking on the challenge of transforming Blockbuster in early 2007, I was acutely aware of the high degree of difficulty that lay before me—the company had violated a bank covenant during my first week on the job and Netflix was wreaking havoc with their by-mail subscription model. I was up to the challenge and knew that we had a long-term advantage as the aggregator of content (new releases, old movies, tv shows, etc). That same in-store experience and breadth of content availability could translate nicely into a digital offering. My first step was to acquire a digital streaming company called MovieLink that would complement our Total Access for Blockbuster content in store, by mail, or online. The ability to offer the simplicity of a one-stop shop in either physical (DVD) or digital (streaming) would position Blockbuster to compete effectively into the future. Just as the company had previously evolved from VHS to DVD, we hoped to complete the transformation to digital. Still, nothing could prepare me for the economic tsunami that was about to hit. In late 2008, even after gaining a two-notch improvement in our debt rating, Moody's declared us a liquidity risk because a third of our $1.3 billion in debt would mature in early 2009 and the debt markets were virtually closed.
The state of the economy coupled with fast-advancing technology from competitors could have caused me to raise the white flag, walk away and let the company slide into liquidation. Instead, I stayed and fought. Given our balance sheet needs, completing the investment needed for a digital transformation could not be accomplished by Blockbuster alone, so I worked to find a strategic partner. After negotiations with partners as diverse as Google and Korea Telecom, we were ultimately able to restructure the company and completed a sale to Dish Networks. While I would have preferred a different outcome, my learnings were far greater during that experience than in other more successful ventures. Even in the face of adversity, one will find that confidence can lead to competence if one is constantly learning and modifying leadership practices in real time.
Lesson 3: Communicate Effectively
During trying times, the greatest threat to most companies is fear and uncertainty. Fear, of course, can cause irrational behavior to the detriment of the enterprise. Customers, employees, and investors are all afraid of the unknown, which makes information the single greatest antidote to fear. Effective communication, therefore, becomes an essential component to leadership success in a time of crisis. At the turn of the millennium, with the fear of Y2K and widespread computer failures looming, 7-Eleven put together a worldwide telecommunications web to provide timely communication to every 7-Eleven operator. Our objective was to build real-time communications in the event of a problem when the clock struck midnight. Thankfully none occurred that night, but the system would prove invaluable on September 11, 2001. When the tragic events of that day started to come into focus, we were able to utilize the system to invoke communication protocols, which would allow us to communicate with each store directly. This kept our employees and customers safe amidst the uncertainty and fear.
Since that fateful day, the company has improved upon the communication system to set up weekly updates that have led to more efficiency and improved results for almost two decades.
We found that speaking directly to every district or even every store at least once per week produced measurable improvement in store level execution. Often, communications across a large organization can be like the game of “telephone” we played as children as we whispered a secret to the next person at the campfire. The resulting misinterpretation of the original secret always made us laugh. In a corporation with multiple layers of management, specific strategies or priorities can suffer the same misinterpretation as the message becomes reinterpreted at each point in the management chain, resulting in poor execution.
We discovered dramatic improvement in operating results by using this new technology to communicate directly to each store in the system with two or three priorities for execution. Today's technology gives us the unprecedented ability to communicate even more effectively and economically with video communications tools. The result has been significant and sustained improvement in understanding and execution of the company’s management priorities.
Leadership is a dynamic skill set that must adapt constantly to deal with unique and evolving circumstances. If you are willing to be a leader who embraces change, has the confidence to deal with that change, and communicates clearly with your team, then I believe you will be one step ahead in seeing a more favorable result on the other side of this, or any, crisis situation.