The challenge of steering a company in a new direction

Driving change is a crucial part of a chief executive's role

EBay chief executive John Donahoe knew something was up when his firm's security team advised him not to attend a conference for sellers on safety grounds.

A cursory search on YouTube showed him the reason for their concern.

A doctored clip of Holocaust film Schindler's List called "What John Donahoe's doing to eBay" had superimposed his name on to a Nazi guard shooting a Jewish prisoner. The prisoner had been labelled as an eBay seller.

This incident happened in 2008, just a few months after he'd taken the helm and announced dramatic changes to both the charges the online auction site made for listing items and its feedback system for customers and sellers.

"I thought, 'Oh my god this is personal.' That was like one of those gut check moments - is this worth it? It wasn't perfectly obvious at that moment."

John Donahoe John Donahoe was shocked at the reaction to his changes
Constant change

Six years on it's easy to say it was worth it. The changes Mr Donahoe made have shifted eBay from being an online auction marketplace to a full blown e-commerce operation.

Last year 73% of the items on its website were sold at a fixed price, rather than via auction.

And over the past five years, its shares have surged by 441%, compared with the Nasdaq's 213% rise over the same period.

Mr Donahoe says if he could go back to 2008, he would have tried to communicate his vision more clearly, but he would still make those changes because that was his job.

"There is always a new normal because the pace of technology innovation is changing and consumer behaviour is changing. So our leaders have to be comfortable that their job is to continuously drive change."

Difficult sell
eBay sponsored car eBay's John Donahoe says chief executives should be the driving force behind change

It is not only tech firm bosses that face this reality. The biggest part of any chief executive's role is to ensure that their firm is able to thrive or at least survive, regardless of external circumstances.

Any change, such as a downturn in the economy or a structural change in the industry in which it operates, means the firm will have to respond and perhaps shift, at least to some degree, how it operates.

In the case of US healthcare services firm Cardinal Health, the entire industry was changing due to a significant demographic shift with the older population expanding rapidly, and sharp growth in some health issues such as obesity.

Five years ago, the firm decided to sell off a significant and lucrative part of its medical products business, leaving it with what at the time was perceived as the less profitable parts of the business - largely medical services and some products.

older people Cardinal Health has had to react to an expanding older population

Chief executive George Barrett was brought in to lead the firm just ahead of the sale, and had to drive the shift which he admits was "difficult".

"We had to reinvent our perspective and say look, this service business can be innovative, can drive high growth and can be extraordinarily valuable in a system going through a big change."

But it also had to tell investors that as a result of the change, profits would be down in the first year, before growing again.

Despite a tough initial period, Mr Barrett says being so upfront about the changes and communicating their impact clearly helped.

"Getting through that difficult time was easier because people felt that we were taking the actions we needed to take, we weren't going to wait... we were going to move aggressively."

Four years of consistent profits growth and shareholder returns have also helped appease investors.

Wang Chuanfu Wang Chuanfu has made dramatic changes at BYD
Steady pace

At Cardinal Health, making such a dramatic change obviously paid off, but it can be hard to judge how quickly to implement change.

After listing on the stock market, Chinese entrepreneur Wang Chuanfu decided to make a dramatic change to BYD (short for Build Your Dreams) - the firm he founded originally to make batteries for mobile phones. He used the funds from going public to expand its remit to making electric cars.

Suddenly instead of selling to companies, it had to start selling to consumers - a completely different proposition.

Mr Wang said initially he moved too fast, opening too many distribution centres, many of which made a loss.

Getting its rate of expansion right took three years to fix, but the firm, which now counts Warren Buffett as an investor, has continued to grow and says it plans to bring four of its models to the US by the end of 2015.

"It was a good path, [I] just had to persevere through it," he says.

This feature is based on interviews by leadership expert Steve Tappin for the BBC's CEO Guru series, produced by Neil Koenig and Evy Barry.

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    Get in touch via email bizlivepage@bbc.co.uk or on twitter @BBCBusiness

     
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