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Randall Stephenson, Chairman and CEO of AT&T, welcome to Stanford,
nice to have you here in the Industrialist's Dilemma.
>> Thanks Rob, good to be here.
>> So one of the questions that we're wondering in our class is tell us
a bit about how you think about where to vertically integrate
where you wannna make acquisitions like with Time Warner.
And how do you think about a large company like AT&T and how you choose to partner?
>> Okay, when you think of vertical integration think of an industry that's
fast moving, where tightly integrating services together is critical to
being successful in the market place.
And when we think about vertical integration, what are those areas where we
need to bring two products or two capabilities together?
Where we can iterate really,
really quickly, where partnerships won't work, partnerships will put you behind?
When we did Time Warner and we acquired Time Warner,
that's exactly what drove us there is the industry was moving so fast.
You see what Netflix is doing, you see what Amazon is doing and how they're
moving things around, how they're changing how content is distributed.
And you see how the consumer is changing how they are consuming content.
And the idea that you could compete and succeed in that kind of ecosystem without
actually owning the content to integrate with your distribution,
seems like it is a heavy lift.
It seems like it would take a long time or we're going to fall behind, and so
that's why vertical integration was important to us there.
Where you don't have that requirement for
quick moving tight integration of the product, then you partner.
And you find good partners who are like-motivated with you.
But when you have to move fast, integration and ownership,
we think it's very important.
>> So when you think about a company like Time Warner and
AT&T where you're bringing this all together.
How do you think about how data allows you to serve the customer better, and
at the same time, make sure that you respect privacy and
other things that consumers are concerned about?
>> It's a great question, data is going to be reach pint making this work.
Because as you think about having a large distribution company,
we have 170 million direct to consumer relationships.
These are consumers are giving us permission,
the appropriate permission to use their information, what are they viewing?
Where are they when they are viewing content,
on what device are they watching content, even what room are they watching content?
You can begin to then tailor not only what type of content you would want to deliver
to them, but you can also tailor advertising to be hyper-targeted,
very targeted to them.
Never to an individual, to audiences, so
we use the data to identify audiences of common interest and common likes.
Our advertisers love this and our customers like it because they're no
longer seeing ads that aren't relevant to them.
My wife will no longer see a Ford F150 commercial,
even though she likes football.
She will see commercials and ads that are relevant to her, so
data's critical to making all of this happen.
Privacy, this is an area that I think is probably one of the issues of our time.
Here in Silicon Valley it's obviously a major issue, and
we are strong believers that Congress needs to act here.
Congress needs to act to say what are the rules of the road, and the rules of
the road are to apply to everybody who's participating in this ecosystem.
The rules of the road ought to require transparency,
the rules of the road ought to make the customer in control of their data.
And the rules of the road ought to say everybody’s abiding by the same rules and
the same principles, so we're encouraging Congress to act and pass legislation.
>> So let's assume you get those rules of the road set,
you try to serve the customers the best.
How do you get a culture of a creative institution like Time Warner to work with
a network operator like AT&T when the cultures are so diametrically opposed and
different, hiring different people, different backgrounds, etc?
>> Yeah so as we were putting these two companies together and doing the planning.
[LAUGH] Well, it was a long time of planning because we were going
through a lawsuit, as you know.
This was the issue that I thought the most important, and that is,
how do you preserve the cultures of each?
Because you have, one, the communication company, this is a technical organization,
it's an organization that is a great logistics machine.
They know how to build things, we know how to sell things,
we know how to sell subscription services to customers.
Over here, you have a very creative organization and
every night every single asset drives home from work.
>> Right.
>> And so how do you preserve the best of both?
And we believe, and I believe,
that it was very important that you kept these companies autonomous.
But you'll establish right at the very beginning,
what are the values that everybody lives by.
The cultures could be different and should be different,
creative culture versus a logistics technical culture.
But what are the values that really guide how we behave,
how we treat each other, how we treat the public, and how we treat the consumer.
So we set those values, but turned everything lose.
Now there are some things we have to do to bring these two together.
And so we have to build the connective tissue that allows us to bring the two
together, but not pollute the cultures of each other, that's the art to this.
And so we built some organizations and some processes, to make sure that we
are building these two companies to accomplish a single objective.
And that is to deliver great content to our customers in very easy access
distribution platforms.
>> Okay, so you bring these two cultures together you're trying to deliver a better
experience and now the customers are changing about how they consume
the products- >> Right.
>> And services you sell.
You and I are about to be in font of a 100 somewhat Stanford students who probably
don't subscribe to cable or to Direct TV, they want to get everything over the top.
What does AT&T need to do to change to make sure that you're relevant for
them on a go forward basis?
>> Well, you just said it, as you think about different audiences and
different customer bases, they have different desires and different interests.
A lot of people in my industry talk about, we need to deliver skinny bundles.
And I say, I don't think I've ever heard a customer say, give me less content.
But the customer has said, I don't want to pay for
all that content that I'm not consuming, give me content that is relevant to me.
That's where we have to become very, very good at what we do.
This is where Time Warner, now WarnerMedia comes into play.
Can we use the information, what we know about how our audiences are consuming
content, to tailor content that is unique to various audiences, and
deliver that to those audiences?
Not bundles of 500 channels of content that only 10 or 12 will even be watched.
We're going to have to get very targeted, very specific,
deliver content that they find relevant in the format
they find relevant on the devices they find relevant and anywhere they are.
>> Okay, so one of the things we've seen in the industrials dilemma from
incumbants.
Is that, sometimes there's a challenge of being an incumbent and in particular
trying to go through transformational change when you're a public company.
>> Right. >> Some of the private companies don't
have the quarterly pressures, they don't have to be reporting to Wall Street.
What are the opportunities and challenges for you as a very,
very large public company?
>> Well you just identified it, it's how do you run these big transitions.
I've always said that the more successful you are at anything you do,
the more it kind of put you in prison in terms of being able to make changes.
And so think about where we used to be a big telephone company, we sold POTS,
Plain Old Telephone Service, it generated a lot of cash flow.
Along came wireless, and the faster we invested in wireless,
what did it do to the old telephone service?
It cannibalized it, but you have to commit,
you have to commit that this is where the customer is going,
this is where the technology is going, and commit and go to it.
And you have to migrate these transitions, we've done this transition through
broadband, fixed broadband to wireless broadband,
we're going to see that exact same thing happen.
We're watching it now from traditional streamed video over satellite and
cable to over the top, very targeted content to our customers.
We're going to have manage that migration as well, it's hard,
it's interesting, we've been around 140 years.
We've managed through so many of these, I actually believe managing through these
migrations is a core competency of ours, we actually do it quite well as a rule.
>> All right, last question for you.
What do you think are going to be the attributes required of leaders at AT&T
over the next decade to be successful as you go through this newest transition?
>> So as you think about a large company and you asked about the cultural
differences and how do you organize around cultural differences.
And I said you're going to have to keep these companies somewhat independent and
let them do what they do best.
As we talked about, you're not going to have a single culture,
what you have to have are managers who hold your values so.
So these values of transparency, these values of honesty and
integrity, you start there.
If you don't have that, you're not even qualified to be a participant.
The other thing, this is kind of the entry is really smart people,
you have to have people who are really smart, but combined with something else.
In this world, as fast as things change, being smart isn't enough,
you have to have the courage to use smart.
So people who have a high courage quotient if you will or a high quotient for
risk but managed and smart risk.
Because if you're really intelligent but you don't have the courage to kind of
pull the trigger on some significant and game changing moves.
You will get left behind in this day and age so, integrity,
intelligence and courage, those are the three I'm always looking for.
>> Randall Stevenson, CEO of AT&T, thank you so much for coming to Stanford and
the Industrialist's Dilemma.
>> Thank you Rob.
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