How AMD is Faring 2 Years Into Its Turnaround
Faced with the daunting prospect of competing with Intel and ARM, new AMD CEO Rory Read followed the standard operating procedure for a successful tech company turnaround: Hire dedicated, loyal executives and build a business strategy that makes other firms depend on you. So far, so good--but can AMD keep it up?
Fri, August 23, 2013
CIO — Corporate turnaround efforts are interesting to watch; those that succeed usually take five to seven years to complete, but firms follow very different paths to get there. BMC, BlackBerry, Nokia, Hewlett-Packard, Dell and AMD are currently in different phases of turnaround paths. Dell—and now, it appears, BlackBerry—are following BMC's example to going private to facilitate their turnaround efforts. AMD, Nokia and HP are following Apple and IBM by remaining public companies.
This has been a tough market to try a turnaround, as huge shifts in the tech scene are happening. At the back end, on-premises services are shifting to the cloud. On the client side, the emergence of both smartphones and tablets as PC alternatives make users increasingly dependent on those cloud services.
AMD is one company tied tightly to the way things were—and we're coming up on Rory Read's two-year anniversary as AMD's turnaround CEO.
The economic improvements that indicate a company's turnaround unfortunately come at the end of the process. The turnaround efforts that enable this improvement have to come first. Few corporate leaders are trained to be CEOs, let along CEOs of a company that needs turning around, so it's worth looking at AMD's progress in the last two years.
There are two critical steps of any turnaround: Building a team and setting a strategy. Both present a real cart-and-horse issue. Until you have a strategy, you really don't know who you want on the team—and until you have a team, you don't know for sure what you can execute. You therefore have to be flexible and build both at the same time. That's what Rory Read did at AMD.
How to Build a Turnaround Team
Turnaround CEOs typically replace most top executives because they want people who are both loyal and, if the new strategy dictates, willing to make major changes. Long-time employees, no matter how talented, tend to resist change and fall back on things they know. That can severely hamper the effort. The successful turnaround CEO's selection process favors also loyal people over superstars, who often obtained their star status by stepping on their peers, not collaborating with them.
Read replaced virtually all of his senior staff. Lisa Su, senior vice president and general manager of global business units, was recognized as one of the most capable women at IBM, a firm that aggressive helps women advance in a male-dominated field and is currently run by a woman, Ginni Rometty, who rose through IBM's ranks. Su was a cornerstone hire, well-regarded and incredibly competent, and an excellent early choice.