My Breakdown of Elon Musk’s Strategy for Twitter

Elon Musk had an all hands meeting and Q&A at Twitter this week. It was in the?Verge. That transcript, plus his frequent comments on Twitter, give a pretty solid picture of his priorities for Twitter right now.

Based on this, I have put together a breakdown of his strategy. I think it fits well with standard strategy thinking and everything he has said so far. I’ve broken it into Twitter 1.0, 2.0 and 3.0.

Twitter 1.0: Supercharge the Operating Performance

In the short-term (i.e., 6-12 months), I think he is very focused on making significant improvements in the operating performance of the company. And that’s great. Twitter is a social media company that has not increased in share price in a decade. Even thought its staff has ballooned in size. And it has become famous for taking years to do even the simplest things. He is focusing on fixing the operating performance first. And he has being very aggressive about it.

Note: In my 6 levels, I have always used Elon Musk as the symbol for superior operating performance in digital businesses. He is famous for being a hard-charging, aggressive innovator. I have summarized superior operating performance as being “smarter, faster, better”.

It looks to me like he is making big changes in the?Digital Operating Basics. Specifically in DOB1, DOB2, DOB5, DOB6, and DOB7. I do like that this framework captures most of what he has been talking about so far.

DOB5: Leadership and Management

On October 27, Elon took over Twitter by arriving with a sink in the lobby. It was a silly joke about “let this sink in”.

He then went upstairs and fired the CEO and the senior management team. This included the censorship heads who famously deleted President Trump and thousands of others. They all left and some were escorted out of the building. Musk had brought in his people from Tesla and SpaceX and they immediately took over most of the key senior management roles.

This really was job #1. Twitter has had weak management for years (including Jack Dorsey).

DOB6: People, Culture and Teams.

Within one week of taking over, he fired about half of the company’s 7,500 employees. That is pretty stunning. And he immediately began performing shock therapy on the culture of the company. No more wine bars. No more bean bag chairs and meditation rooms. This company was no longer going to function like an adult daycare.

The media reports are that staff were asked to show what code they had written in the past 3-6 months. Anyone who couldn’t show significant work was terminated. I don’t know if that is true but it’s a pretty clever method of figuring out who is actually doing the work at a software company.

Here are his comments at the Q&A about the firings and the culture of Twitter:

“I’m not trying to increase attrition, but I think we are not understaffed. I think we are overstaffed. That is my opinion, which you’re welcome to disagree with.”

“I’m a big believer that a small number of exceptional people can be highly motivated and can do better than a large number of people who are pretty good and moderately motivated. That’s my philosophy.”

“And those who go hardcore and play to win, Twitter is a good place. And those who are not, totally understand. But then Twitter is not for you.”

He was also asked about Twitter’s policy of working from home, which he is canceling.

“Let me be crystal clear. If people do not return to the office when they are able to return to the office, they cannot remain at the company. End of story.”

“Now, if somebody’s contribution is so significant that they can overcome the communication difficulties of being remote, then they should absolutely remain at Twitter. But it will be a higher bar. They have to be that much better to overcome the communication issues of being remote. There are plenty of people at Tesla and SpaceX that do work remotely, but it is on an exception basis for exceptional people. And I totally understand if that doesn’t work for some people. That’s the new philosophy at Twitter.”

“Basically, if you can show up in an office and you do not show up at the office: resignation accepted. End of story.”

That’s really shock therapy for this company.

But I think his most important change in the culture is creating a sense of urgency in a lazy, bloated company.

“Let’s take action. I’m a big believer in having just a maniacal sense of urgency. So if you can do it after this meeting, I would do it after this meeting. Just a maniacal sense of urgency. Like, if you want to get stuff done, maniacal sense of urgency. Just go “aah!” Hardcore!”

A pretty great example of DOB6.

DOB2: Never-Ending Personalization and Customer Improvements

In the past week, Elon has been announcing change after change. And he has been floating lots of ideas. If you follow him on Twitter, it is absolutely fascinating. All day long, he is proposing new changes and asking for feedback on how to improve Twitter. He even changed his title to Complaint Service Officer and asked for people to tell him their problems.

He is hunting for how to improve the product and the customer experience. And he is doing it in public, which is fascinating. This all goes under DOB2. Just continually improve. Doing rapid fire customer improvements is a never-ending process for a data-driven digital business. And he is moving really fast.

And he’s not just talking. Within days of taking over he announced a plan to let people subscribe and get a blue check mark. The idea was to decrease the power of bots and spam, to generate some non-advertising revenue and offer new features to the most dedicated users. But the important part was that he launched the subscription in about 10 days. Twitter has not moved at this type of speed ever. I signed up for $8 and got my blue check on the first day.

Here are some of his comments about this:

“Just try weird stuff. It’s nothing ventured, nothing gained. If we’re too cautious, then how do we make revolutionary improvements? Revolutions are not done with caution. So we want to try things, ideally things that don’t break the whole system, but I think as long as we’re agile and we react quickly to improve things and correct mistakes, I think it’ll be fine.”

“Right now, the onramp to Twitter is too complicated, especially via the app. This is for sure a case where TikTok is much better. It’s like, buttery smooth to onramp to TikTok, to download the app.”

“on the advertising front, I don’t think we should have a separate ad engine and tweet recommendation engine because we really want to actually show people ads that are as accurate as possible to their interests.”

“I’d love to see ads for gizmos. If I saw ads for gizmos, I love gizmos, of course, I’d buy them all in a click. Even if they’re not that great,?“

“I very rapidly want to improve every aspect of Twitter.”

This is what I mean when I say superior operating performance in digital is about being “smarter, faster, better”.

Ok. Two other activities that are important in Twitter 1.0.

DOB1: Rapid Growth at Small Incremental Cost – and Without Constraints

Elon is clearly going to for big scale. What’s the point of being a software business if you can’t take advantage of the low cost and speed of growth? He wants Twitter to be a global platform. And Twitter currently only has +200M DAU.

“I think Twitter can perform an incredibly valuable service to the world and be the public town square where people exchange ideas and where, once in a while, they change their mind.”

“There are 8 billion humans. If we don’t have at least a billion humans on the system, then we have a very small percentage of humans. So we want to have, you know, a reasonable percentage of humans.”

“YouTube has 2.6 billion users? Oh man, we’re nothing!”

DOB7: Sustainable Cash Engine that Scales

This is the part I think is not being appreciated. If you are going to build a digital business, it has to throw off operating cash flow. And this cash engine has to scale. That way you get stronger and stronger as you go to global scale. Google Search is a global cash machine. So is YouTube.

Elon is very focused on getting Twitter operating cash flow. Maybe that is because of the price he is paying for the company. But I think that is mostly the way he operates. And because he has been on the verge of bankruptcy so many times. At the recent company Q&A, he talked a lot about operating cash flow.

“We just definitely need to bring in more cash than we spend. If we don’t do that and there’s a massive negative cash flow, then bankruptcy is not out of the question. That is a priority. We can’t scale to 1 billion users and take massive losses along the way. That’s not feasible.”

He also talked a lot about the upcoming anticipated recession.

“I’ve been through the recession of 2000 and 2001 and 2008–9, and I’m somewhat paranoid about dying in recessions. I have recession PTSD from keeping X and PayPal alive through the 2000 recession, keeping Tesla alive in the 2009 recession. It’s worth remembering that, in 2009, General Motors and Chrysler both went bankrupt. Tesla did not, despite being a startup electric vehicle company. It was excruciatingly difficult to keep us alive in 2009. And the reason we were able to keep alive is partly by just being paranoid. It’s like Andy Gross’ famous statement: “Only the paranoid survive.” Well then, we are going to be paranoid, and we’re going to survive.”

“It’s difficult to say what our runway, our cash runway, is because I don’t know what the revenue shortfall will be next year. But I think it is possible that we could see a net negative cash flow of several billion dollars. It’s impossible to predict the actual severity of a recession or the length of it. But we do not want to have a situation where we’re betting on the recession being shallow and short if, in fact, it ends up being a deep recession that is long. We need to make sure we can survive a deep recession that is long.”

That’s it for Twitter 1.0 and Part 1. I think that is really a great plan for dramatically improving the operating performance.

However, he is also clearly focused on making bigger strategic moves. That’s Twitter 2.0 and 3.0. I’ll talk about that in Part 2, but take a look at some of his comments on bigger strategic moves. Notice his use of the phrase “high priority”.

“I think there’s a lot that is very, very obvious that we need to do. Like video content and compensating content creators in order to get content on Twitter…That’s a no-brainer. High priority. Improving search: high priority.”

“We are obviously going to add payments capability to Twitter. That’s also a high priority.”

I’ll break this down in?Part 2.

Cheers, jeff