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.

More on This Story

The BBC is not responsible for the content of external Internet sites

More Business stories

RSS

BBC Business Live

  1.  
    AUSTRALIA BANK RATE 08:03:

    Australia's central bank kept its interest rate at a record low of 2.5% for a 12th consecutive policy meeting. The economy is growing sluggishly, initial data suggest.

     
  2.  
    BORIS ISLAND Adam Parsons Business Correspondent

    tweets: Davies says Boris Island project would be "reckless" and unlikely to appeal to government "of any political colour"

     
  3.  
    REDROW RESULTS 07:35:
    Redrow houses

    Redrow says a large number of its Help to Buy clients were first time buyers and over half were in the north of England. It says its order book is looking plump - up 85% on last year. Business Live has been debating Redrow's building style. Ease of upkeep of the wooden bits has excited debate.

     
  4.  
    REDROW RESULTS 07:21:

    Housebuilder Redrow's results are here. The usual tale of rising prices and the government's Help to Buy scheme. Redrow reports a 13% increase in the average selling price to £239,500, record group revenues and record pre-tax profits (almost doubling). Help To Buy provided 35% of private completions.

     
  5.  
  6.  
    BORIS ISLAND 07:07:

    Sir Howard Davis, chairman of the commission, said it had come down against Boris's island airport plan because: "The economic disruption would be huge and there are environmental hurdles which it may prove impossible, or very time-consuming to surmount." Even the least-ambitious version of the scheme would cost £70-90bn."

     
  7.  
    BORIS ISLAND 07:04:

    "The Airports Commission has today (2 September 2014) announced its decision not to add the inner Thames estuary airport proposal to its shortlist of options for providing new airport capacity by 2030. Following detailed further study into the feasibility of an inner Thames estuary airport the commission has concluded that the proposal has substantial disadvantages that collectively outweigh its potential benefits." A firm no, as expected.

     
  8.  
    MARKETS 06:56: BBC Radio 4

    BlackRock is the world's largest asset manager with more than $4.5 trillion under management. Its investment boss Ewen Cameron Watt, discussing why markets are so steady in the face of so much global tension tells Today: "Volatility is exceptionally low by historical standards and there's too much money chasing too few assets."

     
  9.  
    HSBC SHARES 06:42: Radio 5 live
    hsbc

    Ewen Cameron Watt, Chief Investment Strategist of the BlackRock Investment Institute, is now on 5 live talking about the news Neil Woodford, the fund manager, flogged his HSBC shares. "Neil bought HSBC because it was one of the few banks where he thought there was some dividend growth," he says. However, fines in the sector are likely to drain that prospect, he says. It's fines "more than anything that's sapping bank's willingness too lend, or ability to lend".

     
  10.  
    MARKETS 06:27: BBC Radio 4

    Today is looking at why stock markets are at a 52-week high when the political situation around the world is so dire - there's the threat of war in Europe and conflict in the key oil producer Iraq. Ewen Cameron Watt, chief investment strategist at Investment Institute of giant asset manager BlackRock says: "At this stage in the summer months the thought that Russia might affect sending gas to Europe is not a worry. [Energy stocks] are about 90% of capacity."

     
  11.  
    BANKING COMPLAINTS 06:12: Radio 5 live

    More from the Financial Ombudsman's Caroline Wayman. Fee-paying bank accounts are the cause of the increase in complaints about banking, she says. "People are getting in touch saying they didn't know they had a fee paying account or want one." People are "more aware but we see a lot of people who are reluctant to raise concerns," when coming forward to the service, she says. There are also more complaints about payday loans, but from a low starting point she says.

     
  12.  
    BANKING COMPLAINTS 06:02: Radio 5 live

    Caroline Wayman, chief executive of the Financial Ombudsman Service is on Wake Up to Money talking about complaints about banks. Complaints about payment protection insurance have fallen by almost a third, but complaints about other things in banking are up: "Still a lot of people get in touch, more than 1,000 people a day," she says. "We've had to expand a lot."

     
  13.  
    06:01: Howard Mustoe Business reporter

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

     
  14.  
    06:00: Rebecca Marston Business reporter, BBC News

    Good morning and welcome to Tuesday's Business Live. Stick with us for the pick of the morning's news.

     

Features

  • Ernest Hemingway, as war correspondent, travelling with US soldiers to Normandy for the D-Day landingsAbandoned hero

    Why Paris is forgetting Ernest Hemingway


  • Women doing ice bucket challengeChill factor

    How much has the Ice Bucket Challenge achieved?


  • Members of staff at James Stevenson Flags hold a Union Jack and Saltire flag UK minus Scotland

    Does the rest of the UK care if the Scots become independent?


  • Women in front of Windows XP posterUpgrade angst

    Readers share their experiences of replacing their operating system


From BBC Capital

Programmes

  • Art installationClick Watch

    How one artist is using computer code to turn internet radio into a unique piece of music

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.