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
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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.
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CEO Daily is curated and edited by Andrew Wyrich, Jason Ma, Nicholas Gordon, and Lee Clifford.
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