Michael White

Michael White
Chairman, President and CEO

DIRECTV

Michael White is the Chairman, President and CEO of DIRECTV. Prior to joining the Company in 2009, he served on the Board of Directors and as Vice Chairman of PepsiCo from 2006 and as Chairman and CEO of PepsiCo International. He was the President and CEO of Frito- Lay’s Europe/ Africa/ Middle East division. He is also a director of Whirlpool Corporation.

 

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A view from the top

In this short video, Michael White shares his view on today's key business issues: risk, volatility, innovation, talent, and growth

 

Quotes

Michael White

Michael White

Chairman, President and CEO, DIRECTV

When markets mature you tend to see heightened competition. Therefore, we have to get market share. And to gain share, it’s a combination of being price competitive and having a more differentiated service and entertainment product than the competition. But competition is fierce in every industry, not just ours. I don’t see that getting any easier in 2012. If anything, we’re all going to have to run faster and harder.

Michael White

Michael White

Chairman, President and CEO, DIRECTV

Our industry has seen everything changing. I feel some days like the walls are moving, the floor’s moving, and the ceiling’s moving. So strategy doesn’t necessarily stay still.

Michael White

Michael White

Chairman, President and CEO, DIRECTV

We’re having to think more about connecting the television to the Internet in order to expand our video-on-demand service and compete with players like Netflix, Google, Amazon, Yahoo!, and Apple. Thinking beyond the living room is a pretty fundamental change to our business.

Michael White

Michael White

Chairman, President and CEO, DIRECTV

We’re also looking for new revenue opportunities anywhere we can find them, because every incremental revenue dollar I can find is one less price increase.

Michael White

Michael White

Chairman, President and CEO, DIRECTV

Our Latin American business is booming. One of the fundamental elements there was to think about a more affordable price point with more affordable programming for the market’s middle class.

Michael White

Michael White

Chairman, President and CEO, DIRECTV

[The] real prize in any emerging market is getting at the base of the pyramid, the B minus and the C customer who has income in that $8,000–$12,000 range. So we’ve changed our product offerings, our approach, and our business model to be able to target a more affordable offering for that consumer, and that has unlocked an enormous amount of growth for us in Latin America.

Michael White

Michael White

Chairman, President and CEO, DIRECTV

Colombia represents our biggest opportunity in Latin America, so we’re putting a particular focus in 2012 on how to take advantage of the opportunity we see in that country.

Michael White

Michael White

Chairman, President and CEO, DIRECTV

Four or five years ago we might not have thought as much about that. Now we do. With our audit committee, we do an enterprise-wide risk assessment, where we talk about the big risks, what could go wrong, and have taken steps to provide additional safety. For example, what if there’s a big earthquake in Southern California that knocks out our broadcast centre? What do we do?

Michael White

Michael White

Chairman, President and CEO, DIRECTV

A lot of the risks you tend to look at on risk maps are less of the traditional, financial risks, the control risks – albeit I strongly believe that internal audit ought to continue to focus on those. But there is much more risk around changes in competition or your consumers and how you’re trying to accommodate those in your business strategy.

Michael White

Michael White

Chairman, President and CEO, DIRECTV

But you can’t just innovate on the product and the technology. You’ve got to innovate the service, to innovate across every part of your supply chain in your value proposition with consumers.

Michael White

Michael White

Chairman, President and CEO, DIRECTV

The second thing that we’ve done differently is to increase the resources around innovation. We substantially upped our capital spend in both IT and in engineering this year to get at some critically important strategic innovations. Nomad, our “TV Everywhere” product, is one example that’s driven by innovation.

Michael White

Michael White

Chairman, President and CEO, DIRECTV

You need diversity so that you get ideas from all walks of life – from customers, employees, Millennials, women, men, different races. Having a diversity of experiences to me is the essential part of getting the best ideas. You’ve got to fish in all the ponds.

Michael White

Michael White

Chairman, President and CEO, DIRECTV

Clearly in this country we have a shortage of science and engineering graduates, which is a challenge for our company. As a country, we have to do more to encourage kids to get an education in science and technology.

 

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What is your outlook for both the US and the global economy in 2012?

Every day I look at the newspaper, I think I know less about the future. It’s getting harder and harder to predict. If you looked at consumer confidence in August, it was at an all-time low. If you look at it here in November, it’s had the highest monthly increase in 20 years. So we’re taking a prudent and cautious approach to the economic outlook for next year, assuming US GDP is only going to grow by low single digits.

Europe has way too much debt, therefore there is huge risk on the overall system. You can’t plan for that, although we don’t have big operations in Europe. Our business in Latin America is growing quite well, and we’re expecting continued growth there.

In terms of tightening spending, it’s a combination of two things. One is, frankly, our content costs—the fees we pay for the entertainment products on our system—which are growing at a very high rate, much faster than what we can price them at. Therefore, we have to get more productivity out of the rest of the enterprise. In this volatile environment, we’re trying to be prudent in getting a reasonable balance between continuing to grow our top line and having stable or improving margins.

How will the prospect of economic growth impact DIRECTV and the industry as a whole, considering your dependence on consumer confidence and spending, as well as operating in such a competitive environment?

It is exactly the competitive-environment challenge. When markets mature, everybody’s fighting for the same scraps on the table, and therefore you tend to see heightened competition. We’ve seen that in our industry, where housing—which we’re very dependent on—is still in the doldrums and there is very little household-formation growth. Eventually that has to change, but it still looks like it might be a couple more years before we work our way through the housing inventory.

Therefore, we have to get market share. And to gain share, it’s a combination of being price competitive and having a more differentiated service and entertainment product than the competition. But competition is fierce in every industry, not just ours. I don’t see that getting any easier in 2012. If anything, we’re all going to have to run faster and harder.

In what ways have you reshaped DIRECTV’s strategy in the US over the past year, in terms of customer service, new products and technologies, and competition?

Our industry has seen everything changing. I feel some days like the walls are moving, the floor’s moving, and the ceiling’s moving. So strategy doesn’t necessarily stay still. On the other hand, a lot of the basics of trying to be the low-cost producer, and trying to differentiate our product and provide the best customer service, are not changing. But a lot is happening in terms of the pace of change.

If we look at our strategy, certainly we’re having to spend more time thinking about mobile, wireless, out-of-home entertainment experiences—smartphones and tablets—and how we compete with those. In the home we’re having to think more about connecting the television to the Internet in order to expand our video-on-demand service and compete with players like Netflix, Google, Amazon, Yahoo!, and Apple. Thinking beyond the living room is a pretty fundamental change to our business.

You also have to think in terms of the customer experience, not just customer service. In our business the customer experience is made up of both the entertainment experience—which is the functionality of what you watch on the screen, the user interface, the remote and how easy it is to use—as well as the variety of content options and the service experience itself, whether it’s the installation experience or when customers call our call centres. We need to take our game to a whole other level on both of those fronts. To me that is part of the core, basic business.

We’re also looking for new revenue opportunities anywhere we can find them, because every incremental revenue dollar I can find is one less price increase our customers have to incur. For example, we are aggressively looking at how to make our advertising business more competitive with local ads. We’ve also put much more emphasis on movies, pay-per-view, and video-on-demand options for our customers in order to drive that source of revenue, as well as our commercial businesses that serve hotels, sports bars, and other commercial establishments. Commercial has been a big growth driver for us this year. Basically, we have to address enterprise-wide productivity and get smarter at doing more with less.

Are there strategic changes being made in your distinct and burgeoning Latin American markets?

Our Latin American business is booming. One of the fundamental elements there was to think about a more affordable price point with more affordable programming for the market’s middle class, which in Latin America earns about $8,000–$12,000 a year. To put that in historical context, a couple of years ago we were the premier product for Latin America’s “A-B” consumer—the top of the pyramid, the most wealthy consumers—and that remains a growing business for us as incomes increase in those countries.

But the real prize in any emerging market is getting at the base of the pyramid, the B-minus and the C customer who has income in that $8,000–$12,000 range. So we’ve changed our product offerings, our approach, and our business model to be able to target a more affordable offering for that consumer, and that has unlocked an enormous amount of growth for us in Latin America.

In Brazil, we’re also launching a product that has movies and pay-per-view that you can watch on the Internet. We’ve also been doing some things in Argentina with Internet service to the home and are now expanding that into Brazil. Finally, I think Colombia represents our biggest opportunity in Latin America, so we’re putting a particular focus in 2012 on how to take advantage of the opportunity we see in that country.

Looking more broadly at your strategy, how do you approach this sort of digital divide between Baby Boomers who stay at home and watch on giant HDTVs and the Millennials who are on the go and want to view content on their phones, tablets, and other mobile devices?

The first thing is, you’ve got to harness the Millennial talent in your organisation and ensure that they are empowered to be part and parcel of defining the product experience, and in some cases even reverse-mentoring “old guys” like me. At DIRECTV, that’s been a critically important thing. Both in engineering and IT in particular we’ve got lots of Millennials, and ensuring that they have a voice in product development is crucial.

As I said earlier, we’re looking to provide more options outside the living room, particularly on mobile devices, because Millennials want those options. Secondly, they want a more realistic experience, so how do you take HD to a whole other level? How do you offer 3D without glasses?

The third thing in terms of Millennials is, many of them are living at home right now, and affordability is a challenge in this economy. Ensuring that we have smaller, more affordable packages for them is critical. Also, Millennials are on Twitter, Facebook and other social networks. We have spent time thinking about ways to link our products to those websites, so they can let their friends know what they’re watching. It’s seamless and easy to do.

How is your approach to managing enterprise-level risk changing?

We’re all more cognisant of asking, first and foremost, what are the downside risks that we face? Then how do you get more transparent about those risks on an enterprise-wide basis? And what are the key things that you can do to manage them? In our case, you could say, “Well, a satellite could fall out of the sky. Have you thought about that?” Four or five years ago we might not have thought as much about that. Now we do. With our audit committee, we do an enterprise-wide risk assessment, where we talk about the big risks, what could go wrong, and have taken steps to provide additional safety. For example, what if there’s a big earthquake in Southern California that knocks out our broadcast centre? What do we do?

So we’ve done much more holistic thinking about the big stuff that could go wrong and building protections around that. You get to a point where there certainly are risks that you just accept if you’re going to be in business today. Particularly in a technology-dependent business like ours, there are certain risks that go with the territory—that those satellites continue to operate up in the sky, because I can’t send a truck to fix one if it goes out.

More and more, though, I find the real risks are either market changes or competitive changes, and that gets back into your core strategy. At DIRECTV, if the consumer wants a bundle with both broadband and a video product, how do we make sure we can provide that as the industry evolves? If the consumer wants to watch outside the home, how do we provide that opportunity?

A lot of the risks you tend to look at on risk maps are less of the traditional, financial risks, the control risks—albeit I strongly believe that internal audit ought to continue to focus on those. But there is much more risk around changes in competition or your consumers and how you’re trying to accommodate those in your business strategy.

How is your approach to innovation changing?

Innovation is the lifeblood of any consumer-product or service company. Consumers are changing, so you’ve got to be changing. And competition only gets tougher. So at the end of the day you’ve got to continue to differentiate your product, and that means innovation.

Fortunately we’ve had a heritage of innovation, but you can’t just innovate on the product and the technology. You’ve got to innovate the service, to innovate across every part of your supply chain in your value proposition with consumers. For us, the changes that we’ve taken to innovation are a little more subtle.

First of all, we’re trying to do a better job on consumer research, to better understand the consumers’ needs and how those needs are changing. It’s the old “skate to where the puck is,” as Wayne Gretzky used to do, rather than “where are we today?” How do I look around the corner and anticipate not 2020, because our business changes too fast, but 2014 or 2015? Where can I ensure that we’re going to be well-positioned, not just for next year, but at least for the next three or four years with the bets that we’re making?

The second thing that we’ve done differently is to increase the resources around innovation. We substantially upped our capital spend in both IT and in engineering this year to get at some critically important strategic innovations. Nomad, our “TV Everywhere” product, is one example that’s driven by innovation.

Third, we’ve changed some things organisationally. We’ve created a Product Management Group, which is working together with engineering to improve product experiences. That’s more of a cross-functional effort in thinking about innovation. We’ve also created a Product Steering Committee to look at innovative products and ensure that we’re allocating our resources according to the right priorities.

Innovation continues to be critically important to us, and more and more, it’s cross-functional. You can’t get anything done in any one siloed function. Anything we bring to market is complex and relies on our entire set of functions working together as a team. So we’ve also spent a lot of time culturally talking about the importance of teamwork at DIRECTV.

Does innovation mean different things in your US and Latin American operations?

Yes. In the US, because it’s such a mature, highly competitive market, we’re working much more on TV Everywhere, product differentiation, mobility, and other initiatives. Whereas in Latin America, having a more affordable product is still a big innovation in and of itself. And we learn from each other. For example, our Brazil business is much better than our US business on customer service and being customer-centric as an organisation, in the way they’ve designed their products and run their business model. The trick is to make sure that both organisations get to see what the other is doing, take the best, and then adapt it.

Are innovations coming from different places within DIRECTV?

I’m a big believer that, if you want to be an innovative company, you can’t be a closed shop. You have to have an open, transparent culture, and you have to empower people. They have to feel free to speak their mind. That means you’ve got to have a diverse organisation and an inclusive culture. They go hand in hand.

You need diversity so that you get ideas from all walks of life—from customers, employees, Millennials, women, men, different races. Having a diversity of experiences to me is the essential part of getting the best ideas. You’ve got to fish in all the ponds.

But then you need an inclusive culture that fosters teamwork so that people are comfortable speaking their mind, that they can speak with truth and candor, that they’re not afraid of, “Oh, I’d better not say this.” At the same time, there must be mutual respect within the organisation. At the end of the day, we’ve all got to line up as a team to get things done.

For innovation to thrive, you also need world-class experts like we have—everyone from rocket scientists to direct marketers, from call agents to technicians in the field. The combination of all that talent is what makes us successful.

Consumers have become a driving force behind new product and service development. They’re self-organising and innovating in new and unexpected ways, making it harder to predict their tastes, preferences, and choices at any time. How is such open innovation and customer co-creation changing your industry, and what are some of the strategies you’re adopting to change this transformation in consumerism?

When I was on the television show Undercover Boss, I had to deal with a shortage of set-top boxes, which was upsetting a number of our customers and created a little chaos on the show and with my management team. The reason for the shortage was that we had just launched a brand-new box which was much faster than the old box. The blogs got a hold of it—the ones that really love our product—and started blogging about it and saying, “Call in and get the newest box.” Our supply chain got inundated with requests, and we ended up with a shortage.

That was a good wakeup call for us, that we have to think about the customer differently, particularly the passionate, loyal customer, who is leading edge and always trying new things. We need to make sure we take their views into consideration in designing new products.

Ensuring that we’re getting the best ideas from our customers is absolutely critical. We learn from them. They’re out there playing around with our products and teaching us what absolutely needs to be built in. Having a two-way dialogue with your best customers, to me, is essential if you’re going to be customer-centric as an organisation.

How is your approach to talent changing, and has talent become a more strategic issue for you?

Absolutely. When I was named CEO in 2009, one of the first things I committed to was to take our human resources function to a whole other strategic level and capability to impact the business. I firmly believe that we’re a people business, that while we have brands and satellites in the sky, the only reason they’re there is because of the expertise and the capabilities of this organisation and the talented people who work here.

That’s one of the most valuable assets not on the balance sheet—our talent. So how are we building and nurturing that talent? We brought in a world-class head of Human Resources, Joseph Bosch, who reports directly to me, and he’s brought in some other talented HR folks. We’ve created an agenda for development, starting with defining what we mean by excellence at DIRECTV and what we expect out of a DIRECTV leader, such as strategic thought leadership, self awareness and savvy, good team player, able to bring people with you, values-based leader. We now have a way of defining and communicating to folks what we expect as we develop them as leaders.

We’ve already built some development programs around that, and we have another set that will focus on our front line next year. For example, we’re building wholly new screening tools using the Internet to better assess talent—particularly technicians and call agents—when trying to hire them. We want to hire ones who will stay and not churn out prematurely.

One of our most important strategies is how we nurture and develop that next generation of talent. Let’s face it. There are 80 million Baby Boomers who are going to retire over the next five to seven years, and they’re going to be replaced by 40 million Gen Xers. That’s two to one, so you’d better be developing your next generation now if you’re going to be ready for that transition.

How did your experience on Undercover Boss affect your view of the company’s talent base, and what initiatives have you put in place since then in response?

My experience on Undercover Boss was humbling. First of all, you’ve got to walk a mile in the shoes of your frontline workforce—climbing ladders, getting on roofs, installing a satellite dish, answering phones with upset customers in the call center. It was an invaluable experience for me. It taught me a lot about, number one, the complexity of our business and how challenging it is for our frontline workforce.

Number two, I was just amazed at the quality of our people, their passion for DIRECTV and for customer service. We have some amazing folks, some of whom we showcased on the show itself. Coming out of that, we did a number of things. We’ve adjusted compensation levels for frontline employees; I felt that we were maybe being a little penny-wise, pound-foolish, so we’ve actually taken up compensation. We’ve increased what we’re doing in employee recognition. We’ve also increased our investment in developing talent. Next year, for instance, we’re rolling out some training for frontline supervisors to try and take their capabilities to another level. Finally, we’re more active in our college-scholarship program for the kids of our workforce, and it’s been fun to see that grow.

Are you confident that you will have the talent needed to deliver your strategy over the next few years, both in the US and in Latin America?

I’m confident we’ll have the talent…because if we don’t, I think the board will find a different CEO. As a CEO, one of my most important responsibilities is ensuring that the company is developing our talent base. Clearly in this country we have a shortage of science and engineering graduates, which is a challenge for our company. As a country, we have to do more to encourage kids to get an education in science and technology.

We’re trying to do that with our corporate citizenship work as well. This is a great country. We have some of the best educational institutions, particularly at the university level, in the world. It is our job as managers and leaders at DIRECTV to ensure that we’re continuing to fill the pipeline with bright, young, talented folks, and nurturing and developing them so they can have not just a job, but a career here.

In nurturing your talent, are you moving personnel across departments or offering international assignments? How actively are you recruiting high school and college students?

We’ve done a number of things. For example, we moved a US senior executive into our Latin American business, and we’ve moved some Latin American folks into our US business. We’ve moved people cross-functionally, too. We took someone out of operations and put him in sales and marketing. That’s sent the message that you can’t just grow up in your own functional silo. You’ve got to learn more about the business across the organisation. That’s been a big change.

Second, we’re trying to be more coordinated in the way we do on-campus recruiting. We have a tremendous summer internship program, and we’re trying to do a better job of turning those interns into full-time, long time employees.

Working together with our head of HR, Joe Bosch, we have developed a one week leadership-development program for our most high-potential executives, which I teach. It covers areas such as strategic thinking, self-awareness and savvy to taking others with you to values-based leadership. It’s something I’m pretty passionate about as well.

Given those efforts, have the requirements for your senior leadership positions changed?

Absolutely. We have put together a framework we call our Formula for Leadership, which describes what we expect of them as strategic thinkers. Strategy isn’t just for the CEO. The world is changing all the time. Everybody’s got to think more strategically.

In what ways have the allocation of your time and attention changed in the past year, and will that return to ‘normal,’ if there is such a thing anymore?

There is no going back to an old normal for any CEO. As I look forward, my sense is I want to spend more time on the customer and how we’re serving the customer cross-functionally. This is a very complex business, and so you do an awful lot of things with each function, because the metrics are different by function. But it seems to me that my job is to focus on the longer-term and to make sure that we are taking the steps today to ensure that we’re as successful five years from now as we were over the last five years in growing our business and improving our profitability and cash flow.

I fully expect that I’m going to be spending a lot more time on building a better customer experience over the next three or four years. That’s probably the biggest change.