Alan Masarek 00:00
They closed on a $600 million new piece of money they realized they had missed the June quarter by our walk those lenders and investors were a pretty upset group.
The Detective 00:11
Imagine you're the CEO of Avaya, a global leader in enterprise communications, via specializes in connecting businesses with their teams and customers using innovative digital solutions like voice, video, chat, and other communication platforms. But as CEO, you're facing a maelstrom of challenges, we were
Alan Masarek 00:38
grossly over levered, didn't have a lot of cash and the company was not generating free cash flow. First,
The Detective 00:45
there's the aftermath of the chapter 11 announcement in which a company can continue its operations while restructuring its finances to better manage its debts. This, of course, shakes the confidence of your customers and investors alike, very
Alan Masarek 01:02
scared customer because you're going into a chapter 11 situation,
The Detective 01:06
you will tasked with managing a staggering $600 million investment that's gone awry. And confronting a dramatic miss in quarterly earnings. How do you restore trust and prevent a mass exodus of clients?
Alan Masarek 01:21
We weren't delivering the products to customers, they were making decisions to leave us to go to competitors, then
The Detective 01:27
there's the daunting debt of nearly $4 billion. If that wasn't enough, the shift in the industry towards cloud based solutions looms large. How do you pivot the company's strategy to not only catch up, but lead in this new era? And how do you navigate this financial tightrope while ensuring the company's survival and growth? I've
Alan Masarek 01:51
done these large scale transformations, but not via Chapter 11. This
The Detective 01:56
is the story of Alan Masarek, CEO of Avaya. And this is The Resurgence.
Ben Kaplan 02:06
Alan, when you get a phone call, usually because you're great at turning around companies in the enterprise communication space, usually something not so good as happened if you're getting the call. And what was the situation for Avaya were a very precarious situation where there was a restructuring of debt they've taken on money. And quarterly results are about to come out. Take us back to what the situation was.
Alan Masarek 02:34
So this story begins 18 months ago, I had been in discussions about coming back from retirement to affect, hopefully a turnaround of Avaya. One of the things that they were in midst of doing during my discussions was raising a new round of financing because they had to they had a near term maturity in 23. And so they closed on a $600 million new piece of money literally July 12 of 22. The problem was that very quickly, after taking that money, they realized they had missed the then ended June quarter by a lot. And so you can just imagine those lenders and investors who extended $600 million, were a pretty upset group, when all this came to light. This was sort of the circumstances that I came into. And so ultimately, it became pretty clear that if I was going to come in to sort of tackle this turnaround opportunity, there was going to be a great deal of collateral damage from all the concerns about this kind of blown financing. So they actually announced the results of the June quarter on July 28 at 5pm and announced me as the new CEO at five minutes later, that's the situation that sets up and the view that there was going to be a lot of collateral damage a lot of shrapnel there certainly was so
Ben Kaplan 03:55
what happens how do you approach that? Did you have your bulletproof vest on are you just prepared to you know have people yell at you? Or is it the fact that you're new and you're fresh and they know you're starting protects you from that because they say like okay you're the person brought in to address the situation we're in or do you just have to like take a lot of incoming fire to begin with on your first day
Alan Masarek 04:16
so actually it's the latter I don't take the incoming fire I'm the guy comes in to fix it and everybody understood that now there's some things that you have to do which are you know, tough there you know, we you know, we had to you had to right size the cost structure and exit a lot of people but it was clear to me I mean sort of take a step back on this story. Let's think about a via real quickly. So a via has its lineage in enterprise communications all the way back to AT and T and Lucent that we were part of a TNT you know, 30 years ago, when a TNT was busted up. And Lucent was a piece of Ace at&t. Avaya was the enterprise communications piece of Lucet. But its lineage had been at&t. We were then spun out of Lucent back in 2000. Less than one as a pure play enterprise communications player. And were the biggest in the world in that when I mean enterprise communications, you think about what began, you know, as a phone system in an enterprise for the, you know, the knowledge worker sitting at a desk, and the contact center system for the agent that is largely Avaya throughout the world. Now, there's an opportunity that we saw, which is the world is evolving beyond just communication solutions, voice, video, chat, social web, into customer experience, meaning brands are trying to make sure they serve their customers well, and provide a great customer experience, because that's the way they differentiate themselves, that total addressable market is going to be huge. spected be close to $50 billion by the end of the decade. And if you look at Avaya as a set of assets, it was pretty clear to me and to the investors that we could take that asset base and play it into that TAM around CX around customer experience, and create a successful outcome,
Ben Kaplan 06:08
meaning that you're evaluating the business opportunity, saying if all of these problems did not exist, if we could take them away by being smart, and strategic, and making some tough decisions, we have a actually great business opportunity before us, which is worth pursuing.
Alan Masarek 06:26
That's exactly right. And to me going into this, that's the thesis that I had coming in. But it was abundantly clear that you had to do both a financial restructuring and a business restructuring in order to get there. The financial restructuring, what I mean by that is we were grossly over levered, didn't have a lot of cash, and the company was not generating free cash flow.
Ben Kaplan 06:48
And what was the cause of that? Is that death by 1000 cuts, like lots of little decisions that over time you just get in a bad situation? Or was there a fundamental miss in missing an opportunity, a product, a market, investing too much in r&d? What caused that? I
Alan Masarek 07:03
think generally, it's a death of 1000 cuts, but it's rooted in the fact that we weren't delivering the products to customers that they needed properly, that they needed to modernize with, so they were making decisions to leave us to go to competitors. And this is in the world where premise architected solutions we're giving away to cloud architected solutions. And a via going back many years was slow to that game. That I think is the sort of, you know, genesis of the problems. And then it just began to erode over time, with a series of, in hindsight, challenging decisions. What became clear is, you had to fix the financial structure first, while in parallel, doing a business restructuring, the financial restructuring, we had nearly $4 billion in debt, and very little cash, and we're not generating free cash flow. So what we did is we threw a chapter 11, a prepackaged chapter 11, we got the lenders to agree to affect me right off virtually all the debt, and the same group invested $650 million in fresh capital into the company. So now we sit here with modest gross debt, very little net debt, and over $650 million in cash. And along the way, we right size, the cost structure and a whole bunch of other operational decisions and restored free cash flow. So you can put a big green check on the financial restructuring.
Ben Kaplan 08:28
For those who probably a lot of people who haven't been through something like a chapter 11, how hard is it to get everyone on board? When you say it's prepackaged? You sort of mean like everyone agrees before you do it. This is what we're doing. So there's no question marks, no one's taken by surprise. You might not do it. Unless everyone agrees. How long does that process? Take? Take us through that? Before you get to I know you want to get to business restructuring.
Alan Masarek 08:49
So it took about six months? And in your question, you described it exactly. So a prepackaged means it's a descriptive term, it means it's pre negotiated, pre established, fully preset, so any lender who is going to be impacted by the chapter 11 signs up to the restructuring support agreement called the RS A. So because they've already signed off on everything, all that has to happen is get it codified by the court by the bankruptcy court. Now had we been a private company that would have taken one day because it was fully prepackaged. Now we were a public company, we emerged as a private company, but the actual bankruptcy process took 36 days we went in Valentine's Day, February 14, and the plan got confirmed March 22. There's some statutory waiting periods as a public company, and we actually formally emerged as nothing to do with the bankruptcy on May one, and while that was going on, we took out about 500 plus million dollars of costs out of the business and a bunch of other operating subtle changes to restore free cash flow. So when when I sit back and say that financial restructuring put a big green check as you sit back now you have a company that has a very, very strong capital structure and is generating free cash flow. Was
Ben Kaplan 10:14
there any pushback from the lenders or everything else? Or was everyone on the same page because it was clear something had to be done or was there a lot of politics you had to play and getting everyone on because not everyone agrees with that plan. That's
Alan Masarek 10:28
why it took six months, trying to navigate the process is a bit like playing three dimensional chess really, really difficult because the lenders have different rights. You know, there's sort of pockets of of loans, some are secured, some are convertibles. Some were at a Holdco level and unsecure, and based upon their rights and how they would be impacted the negotiation and trying to get things worked out, took a great deal of time, that was the six months. Once we finally got it inked the RSA, the restructuring support agreement, the bankruptcy process actually was easy, very quick. But all the pain was the six months leading up to it. During that time period, we also did that meaningful right sizing of the business to restore free cash flow, while concurrently doing the business restructuring. The business restructuring the key about that was, remember, we had been a business that had been slow to the cloud. So you had to reset your product strategy around cloud delivered solutions. We then built our strategy from a go to market perspective around the nature of our customers, we have the largest customers on the planet. Again, it goes back to our lineage all the way back to the AT and T days. So we have super large enterprises are our standard customers, super large government agencies throughout the world, those types of customers we've built our strategy around is something we refer to as innovation without disruption. What that means is, these customers have had our solutions for two decades, and they've been bespoked into the workflows and their environment, the last thing they want to do is to rip out all that voice plumbing. But at the same time, the world's moving beyond voice, it's chat and social and digital and the implications of AI is huge in our segment. And so we have effectively a hybrid strategy. We're bringing you the innovation via the cloud without disrupting what's underneath that has been built into your environment over a couple of decades. And among those very large, complex, often highly regulated or sensitive industries or in sensitive geographies of the world. That strategy has resonated really, really well.
The Detective 12:50
Ellen Mezrich faces a CEOs Ultimate Challenge at Avaya thrust into a financial storm. With a $600 million dollar investment mishap and a shocking earnings shortfall. He stands at a pivotal moment. Mavericks response, a bold leap into the fray announced just minutes after our Vyas financial turmoil hits the airwaves. Now he's staring through treacherous waters, a massive $4 billion debt, a crucial shift towards a $50 billion market opportunity and the daunting task of transforming a legacy company with strategic fondness he navigates a pre packaged chapter 11 and kickstarts a radical restructuring when his bold vision and decisive actions be enough to revive a Vyas fortunes? How will he balance innovation? With the weight of a storied past? The answer lies ahead.
Ben Kaplan 13:58
First of all, when all this is happening, and it's in the news that there's a chapter 11. How do you prevent even more customers fleeing? I mean, is that they're locked in contracts. And if you're in an industry where you can't just like switch tomorrow, that sort of helps you in this case, or what do you do before you make the case that like, Hey, we've got a new strategy, we've got a new focus in the cloud, you're gonna like it just even get there when people see chapter 11. And they're like, do I need to jump ship to a competitor right away?
Alan Masarek 14:25
That is absolutely a concern. One of the things that I tried to do was, I've traveled throughout the world personally met with customers and partners throughout the world, trying to avoid what you're describing Ben, which is the falling knife, you know, it's like Pete, we scare that you scale up, you scare a partner, you scare scare a customer, because you're going into a chapter 11 situation. So how do you go through and comfort them and create you know, it's personal relationships and direct communication and I've done that throughout the globe. On top of that, in my view, you had to culturally Change meeting, we started going out and being super transparent on our roadmaps around this new product strategy. And the cultural change we made inside was not only were we going to be transparent, we were going to be reliable. So I said 10 features were coming in, in that quarter, you could take that to the bank, and then demonstrate that quarter after quarter to try to restore confidence and credibility, the same time over communicating like mad that this balance sheet restructuring was going to happen quickly, was going to be behind us. And we were going to be a very different place. In terms of our financial strength. I think we did that about as effectively as we could, it certainly hurt, but as about as effectively as we could, but in my view, it's the only way to restore confidence in your customer. Given the history that we have, what I say all the time, is I can't fix the past, I can only fix the future. And that's precisely what we're focused on something
Ben Kaplan 15:58
just to point out that I think was subtle that you said, which was very interesting. It wasn't just hitting your 10 features, it was that you said you were going to have 10 features, and then you hit your 10 features, meaning it wasn't just that you were doing reliable progress, but you were trying to give your word and your trust value again, which means it's not just like you make the shot, you were going to call it this is the shot I'm going to take and then you make it that was sort of embedded, I think what you're saying, that's
Alan Masarek 16:27
exactly right, because you don't fix this in one quarter, or even in one year, it's a longer journey. And so you got to go back and build credibility with the customer and said, I said, you're gonna have 10 features that quarter and 11, the next and nine, the neck, whatever it was, and I hit it. And so when I come to you today and say, This is what the next four quarters look like, I've developed a trust basis for you to rely on me. And again, there's because of the nature of our customers, so large, very complex deployments, they don't want to leave because it's incredibly disruptive. So the idea is, I'm now financially secure, I'm transparent about the roadmap I'm delivering on it got some more work to do. Stay with me because being intra Avaya will take you to the modernization that you need in your business. That's the story we tell over and over and over again. And along the way, we also relaunched the brand, which is very important around, the tagline is choose your journey. And what's really important about that is in enterprise communications, the world has all been about cloud cloud cloud cloud. For the largest companies, that is not where everybody's going immediately, by any stretch. I think there's an inevitability over many years, but it's not like some tiny SMB is going to pop to the cloud right now. It's a much more gradual approach. And one size does not fit all, a Department of Defense is going to do something very different than a manufacturer somebody in the Middle East and do something very different than somebody in South America. It's just different. And so we've said to them, Look, we're here to support your journey, whether it's all prem and no cloud, or no Bremen, all cloud, you know, whatever, we're equally delighted, we can support that journey throughout in this gradual migration so that we're always innovating you without disrupting you. That's what's resonated. And what's so different versus our cloud competitors, is they're saying, we got all this cool stuff we can deliver on the cloud, but you got to rip out everything to get to it. And I'm saying, No, I can give you all the cloud, you know, the sexy stuff on AI and chat and social and digital. But don't rip that stuff out until such time as it makes sense for your business. Because it's your journey to do that among the large end of our customer base that's resonated really well, in
Ben Kaplan 18:55
it. How do you do that? Because now we're getting into the kind of the business restructuring side? How do you validate that you have the right strategy with this one, there's a lot of I mean, difficult for a whole business to like, let's articulate a new vision of what we're doing just a business that isn't going through chapter 11, isn't doing financial restructuring doesn't have all these other issues. And to your point earlier, you have to start getting things right on a schedule. So you don't have really much leeway, I'm guessing to say, You know what we thought it was this and that vision wasn't you know, it was a little bit not quite right, we're tweaking it a little bit, right, you kind of have to be pretty much perfect at that point of you're going to restore trust. So how did you validate this as the path? How do you do it really fast when there's a lot of other things kind of going on at the same time? So
Alan Masarek 19:39
there's something that I've brought to bear in companies I've started or run or been through, you know, transformations like this. My whole belief is about go fast, be agile, be open, honest, direct and transparent and then be agile. So the strategy that exists today is not identical to what it was 18 months ago, we've made changes but at every step along the way, we've been super open about it, we've been super communicative about it, and you're going out front facing those customers and partners throughout the world and talking about why staying with us makes sense for them. Everything we try to do is start from a customer in approach some guys, you know, some companies have banks and I got some cool software, I'm gonna jam it to you I'm we're coming at this the exact opposite. This is your needs, you express to me, I can fulfill those needs. It's your journey. And you just gotta rinse
Ben Kaplan 20:28
and repeat on that. And it sounds like the strategy was, you were trying to leverage the advantage you had. And the advantage you have is even providing the plumbing for maybe the not sexy thing for a while. And so you know, someone else that doesn't have all that plumbing in there, they're gonna say I rip it out. But your your competitive advantage was let's you know, you don't have to. So it sounds like that was just like, let's evaluate the what's the asset of the company. This is the existing asset, let's build on it and bring our competitive advantage from that.
Alan Masarek 20:59
Exactly right. Because what's happening there's two trends that are not there undeniable premise, architected solutions are giving way to cloud over time, but it doesn't move monolithically by industry size, level of regulation, you know, whether your critical care hospital whatever, Prem, the cloud does not happen, monolithically, it goes back to them to the customer choosing their journey. And the other is voice is giving way to digital. And what I mean digital, I'm short digital writ large chat, social web, and the utility of AI in a big way, you want to give the customer an opportunity that ride those two trends in SRE via that they never have to face the disruption, that going to a rip and replace would create. That's the promise of it. And again, there is great power in incumbency, because they've had that plumbing for 20 years. And it's not just the features, the enterprise communication features. It's how it's built into all their workflows. I always give a good example, I think a good example, one of the largest law firms in the world, we do all their voice communications, other companies can do the voice communications. So it's not that which is differentiating, it's the fact that our stuff has been built into their workflows. So when the attorney hangs the phone up after a 17 minute phone call with the client, it dumps directly into the billing system, the call is either recorded and transcribed, or specifically not recorded and transcribed, or stored for a certain length of time, or what have you, based upon how the client is coded. So my point being is it goes well, beyond just the voice communication features, it's how it fundamentally supports the workflow. In this instance, of a law firm, they make their money by selling time, they have to capture that time. So that's where this stuff gets so bespoke, that's the thing people don't want to move away from. And so when we talk about innovation, you can get you can augment voice with other channels of communication without disrupting the plumbing. The one
Ben Kaplan 23:12
complication you have at this moment in time is you have another set of stakeholders who are very interested in what's going on. And I mean, that is like all the lenders, right? The people who have like skin in the game, how do you communicate the product or the business strategy to them, because they may not be experts in this field. They want to know that their investment is safe, and they want to know that your your ladder is up against the right wall. But how do you think about that process, because that's a very unique process, maybe not a lot of people have gone through, because these kinds of stakes. First
Alan Masarek 23:44
of all, from a governance point of view, we have a normal board. Those lenders now have become the equity owners of the business. So they did all this work in exchange for 90% of the equity of the business, the other 10% stayed with the team so that I could, you know, hire a new team, and then reward equity down to the to more rank and file within the organization. Now, most restructurings end up a company is gets less leverage, but still too much. That's the way most of these turnout. The old adage I've heard, it's like the mule can carry 10 pounds or rocks, if the rocks were your debt, and you get saddled with 9.9 pounds or rocks. The mule can still walk but barely. That's the way most of these things work out. We got basically one pound or rocks I mean, we got we got they completely delivered the company. Why? Why would they do that? And these are huge firms like Apollo on the private equity side or Invesco, or Naveen or Voya. Huge lenders out there now are equity holders. Why would they do that? These are very rational, sophisticated investors. The only reason is they see the equity opportunity on that 90% that they own to make a return Because the business strategy is so compelling going after this macro trend, where communications is moving into customer experience solutions with a $50 billion tam at the end of the decade, that's why they left us the way we are. It's very, very unusual in a good way, in a good way. But it's rational, it's rational. And that's the situation.
Ben Kaplan 25:25
If you enjoy this show, you'll love TOP CMO with me, Ben Kaplan, has never been a better chance and opportunity to do that. I
25:34
would definitely encourage marketers to be engaged in the product development process, because you're banking,
25:39
your brands, great moments, but it's the great brands that create movements. And that's the spirit of justice. Of course,
Ben Kaplan 25:47
this is the podcast where we go around the globe to interview marketing leaders from the world's biggest brands, fastest growing companies, and most disruptive startups available wherever you get your podcasts. I should mentioned that this wasn't your first major restructuring in the space. So one, you had been CEO of Vonage, that really shifted from a focus on residential communications to more enterprise communications. He had started companies sold them to sold the company to Google been internal at Google as well. How did those experiences shape? What happened at Avaya? Were you able to take anything from those that you might have otherwise missed or not seen and applied them to to get a better
Alan Masarek 26:35
outcome? Yeah, they made that experience made a great deal of helped a great deal. You know, it's interesting, we're such the, you know, we're such the collection of our experiences going back. While I've been in the company has sold a Google was in a mobile applications, I understood sort of the mobile market very well, was different, again, than what we did advantage moving from residential communications and enterprise communications. But it helped me really learn the industry really, really well in enterprise communications. So when I came to Avaya, that playbook in my own mind was very clear that thesis of how do I play these assets into that huge emerging customer experience trend, this huge tam was very clear. Now, the one thing I've learned throughout my career is a benefit of focus. And many of the steps that we've taken at Avaya, were all about focus. So we weren't four weeks into this role. I brought all the team together to spend a full week, actually, in our engineer, one of our engineering centers in Ireland, doing nothing but product, we came out of that. And we set our Northstar where we're going on the cloud. So the Cloud Platform, in the same time, we made decisions to rationalize more than half of the old product line. Because well, we have a big engineering group, it's 1700 people, it's a very big engineering group. It doesn't matter how big it is, if you're trying to chase too many initiatives. So by virtue of focus, and then going back to his shared before about being transparent about roadmap, and reliable now we're burning roadmap in a hurry. Those are some of the lessons I've learned through this career. And I know that gives me a sense of confidence of what will work and has enabled us to go very quickly. The other side is we manage the whole company with just three objectives that just three objectives, which is the first is something the acronym is D PTW. D btw destination place to work, meaning how do I make the culture of Avaya, something that employees do as a destination place to work I want to be here. Remember, I came out of Google, Google clearly has carved that out for themselves as a destination place to work among the very large tech companies. And so we have operationalize that ambition, about turning Avaya into that destination place to work with a great deal of resources and a great deal of intentionality starting from the very first day. The second objective is about the product, which is we have to deliver the product on time and of high quality of the customers need. Otherwise, doesn't matter how strong our capital structure is today, over time, the customers are gonna leave us and we're gonna be back, you know, in the soup at some point in the future, so you got to deliver the product. And the third is about delivering legendary customer service. And you know, everybody in their brothers talks about legendary customer service. What's so critical here is the trend we're playing into is that our customers, those brands want to differentiate themselves based upon the customer experience, they provide their downstream client, think how incongruent it would be if we weren't ourselves a terrific customer service company. So we drive those three objects gives over and over and over again. And so that focus makes a great deal of sense. And you know, so now you take a step back and look at sort of today's poker hand, in a sense, you have a very strong balance sheet, you got plenty of cash, we ended the year at $650 million in cash, you're generating free cash flow today, for your strong financially, you're deeper into this product strategy reset around a go to market we refer to as innovation without disruption, which is resonating, particularly with the large base where they don't want it to afford to jump to the public cloud. You know, today, we've launched the brand around choose your journey, it's unique to us, it's a swim lane for us. And then we've begun that deep btw destination place to work in earnest in a big way. So we've completely rehired the C suite, because unfortunately, given the situation that we found ourselves in when it got here, we had to exit most of that. So we've replenished the C suite. And then we have hired a great deal of talent within those functional organizations. The way I describe it, is the whole transformation is an eighth quarter endeavor. And here we are, as the you know, New Year's came, we're in the sixth quarter of an eighth quarter endeavor. That doesn't mean that the end of eight quarters, we don't have a whole bunch of work to do. Of course we do. Of course we did. We got we always got to execute. But in terms of all the structural things that I've described, those will be fully understood and in place by the end of our fiscal which is September 30. So that's the end of the eighth quarter. And so like I do a global all hands, we have over 6000 employees, once a month, I'm doing my next one, Dan, for tomorrow. And the message is now that we're in January, is we're no longer in the fifth quarter, we're in the sixth quarter of the eighth quarter transformation, the eight quarters hadn't changed. So when I'm saying to my team, is we need to make that. So it has to be authentic and true. That come the end of this process. People are working in an organization with a strategy that they believe they can win with in a culture they can be proud of, and the rewards will extend to them as well, then it's about just doing your job. I mean, you got to come in and execute. Because I'm a believer that people will walk the way I describe it as you sort of these transformations are tough, you're kind of walking across the desert, people will do that if they believe in what's on the other side. And so now we're saying we are fewer than three quarters away from the other side, hang in there, we're gonna get to that together. That's what we're driving. Now. We got challenges, but I feel
Ben Kaplan 32:37
pretty good about where does the eight quarters or the two years? Where does that come from? Were you confident in that the plan like it has to be this is that what the you know, the lenders signed up for that they're now equity owners in the company? How certain were you that you could deliver that? Because a lot of faith is put in that and you can't miss those targets? either?
Alan Masarek 32:55
Well, it's I'm glad you asked that question. Because in the spirit of being open, honest, direct and transparent, which culturally I'm all about, I initially thought it was gonna be four quarters, and I was couple quarters into it. When I started describing it as eight quarters. And I look back, we all learn. We're all learning. I know the industry. Well. I've done these large scale transformations. We're all learning, but I have not been through a specific restructuring done via Chapter 11. Myself, we all learned so probably my own naivete. At the time, I said, we can get this thing whipped. You know, we can get it turned around in four quarters. I look back and I say that was a mistake by me. Once I realized that I went out the organization said no, I'm wrong. It's a course people appreciate that honesty, I don't have all the answers, I really don't I get a lot of experience. I try to be as open as I can. And delivering I try to make the right decisions for the organization. I don't bat 1000. And I think people appreciate that authenticity as you move forward. But now that I've had the benefit of you know, a bit of time here, pushing 18 months. Got here, first of August, I started the clock at the end of fiscal September 30 of 22. So October one, I gave myself the eight quarters, I feel very good that the eight quarters is the right time. I really do and will be on the other side of this in a big hurry. And again, go back to when I was sort of recapping on what the poker hand looks like today. It's hard to dispute that the juice is worth the squeeze. I mean, it really really is it's it's huge Tam and we've got this huge asset base. We've got to play that poker and better than we've done in the past. That's hopefully what we're trying to do right now. And
Ben Kaplan 34:33
how much of this is your skill as a CEO with experience in the sector? And how much of this is do you have lieutenants, other leaders, other people in the C suite? I don't know if you'd work with them before where you need them to do your part. Like how much of this is the captain of the ship? How much of this is a lot of other people that big organization that that have very important roles to do. It's all
Alan Masarek 34:56
the above candidly, I mean of all the Leadership I have brought in about half our followership people who are with me at Vonage going through a transformation, their other half came through search. So it is certainly not one person. But like most things, I think the leader has to be resolute that we're going this way. Because when things aren't working, and they weren't, that's why a transformation is required, things are not working, when things aren't working, you got like, you know, everybody has a grenade coming in from the outside, you know, this suggestion or that. And at some point, you got to sort of put your kind of blinders on and be resolute as a leader, say we're going this way. There's an old saying that I've heard, I don't know who to attribute it to that say, we ask people to achieve what they can't imagine. We ask people to achieve what they can't imagine, I look at the responsibility of the CEO is to help you imagine it. Remember I said the quarter transformation that's like you'll walk through a desert for a finite period of time, if I can show you what the other side looks like. And you'll be playing in a company with a strategy you can believe in, in a culture in which you can be proud. My job is to help you imagine that to see it, and then direct the organization so they can achieve it. All too often we sit back and say in our personal lives or our business lives, we ask people to achieve what they can't even imagine. They can't even see it. And I think the job of the leader is to help you see it. And it's very different what the company is today. But it's not such a ambitious elite, that people say oh, it's never gonna happen. You got to be able to be authentic and true about it. You got to believe it yourself. And I genuinely do to show that people get the other side and being resolute about that is super important.
36:45
There's some news out today that Avaya is very close to filing for Chapter 11 bankruptcy is filed for bankruptcy
36:50
in a mood to show up. After facing financial challenges and bankruptcy for the second time, the company's future seemed a little bit uncertain recently.
The Detective 37:00
In the face of chapter 11, Elon takes the helm and Avaya tackling the threat of customer loss head on his tactic, a mix of global personal outreach and a commitment to personal and reliable product delivery. Mazzer ik strategy hinges on direct reassuring communication with customers and partners. Each promise kept is a step towards rebuilding trust and confidence in a Vyas future. His leadership, shaped by experience and clarity of vision boldly navigates him via through transformative times. But how does this story end for Avaya? And what of the future?
Ben Kaplan 37:50
Is that your superpower? Is it the projecting of the vision? Is it the instilling belief is it being being resolute? You mentioned focus another way you describe it as putting on blinders, which just means being able to focus on the signal and separate out the noise? Is it all of that? What is your superpower as CEO?
Alan Masarek 38:09
I laugh because people asked me that question all the time, I would say my best superpower is sleep. Because I actually am a very good sleeper. So that the blast do I spend a lot of time mentoring young people. And I always talk about their careers. They always asked me well how the hell you ended up here? And the way I describe and I'll come to your answer, I'll come to the question in a moment. I've seen careers like building a big skyscraper. And the skyscraper is gonna have a big Foundation, you're not building the Big Sky, you know, skyscraper on top of a narrow foundation. So I tell young people all the time, build that foundation, I look back in terms of how I got here. And the level of success I've been able to accomplish or to achieve is I was fortunate enough to build a big foundation that I can bring to bear in these situations. I'm perfectly willing to say, I screwed up, I'm wrong. I've yet no ego in it. But I think I bet with a high batting average, based upon my experiences, the accumulation of the those experiences, I enjoy communicating, I think I am authentic. I wouldn't say something I didn't believe it. I think people gravitate to it. But these are tough situations. And so you got to tell people, you know, we had to exit a couple 1000 colleagues through this process. So it's like, how do you attack this thing saying, Look, this is gonna be hard. We're gonna lose some fingers and toes along the way. But we're trying to save the body. And I just approach it, you know, in as open, honest, direct and transparent way as I can, with as much good sense as I can over communicate like crazy. One other quick adage I read a book by Larry Page, you know, from, you know, from Google and, and, and John Doerr, from Kleiner Perkins and in the book, it struck me as a as a leader when you started to say the same things so many times that hurt your own ears coming out of your own mouth. Now, the audience is just starting to get it. So it's like the rinsing, you know, figuring out the answer and the in the strategy and where we're going to go, rinse and repeat on the message and make sure everybody's singing off the same song sheet is not easy. The bigger the organization, it's tough. The more volatile the situation, the more globally distributed we are. It's tough Oza type things we tried to do to
Ben Kaplan 40:20
bring this full circle, you're in quarter six of the eight quarter plan, originally for quarter plan, realize might need a bit more time. What are the things that in six, seven and eight quarter 678 that have to happen? What are the things that could still you've made great progress, but could still trip you up? That could still hold things up could reverse or undo the progress you've made? How do you evaluate the situation in a transparent way now for what you have in this next nine months,
Alan Masarek 40:47
there's two things that I worry about. One is transformations are about recovering from the sins of the past can remember can't fix the past when we fix the future. So what I worry about as a customer that made it a leave decision some time ago that I don't yet know about that will reveal itself at contract renewal. So we are incredibly intentional. Our base, remember guys said we plan for 2024. I go it's an easy business to plan for our fiscal 24. I got one word base base retention base renewal base upsell, so you got to make sure that your base is going to be there with us. And so we're super intentional about it a formalized win room going after our base to make sure that we have not only logo renewal, but good revenue retention going forward. Very important. I worry that stuff I don't there's bad news, a decision that was made a long time ago that it hadn't sort of made its way yet through us that we're going to wake up to, I think we got our arms around it, I still worry about that event. The second is this focus on the large end of our base, we have 90,000 customers, the top couple 1000 Drive 85 plus percent of the revenue. So we're very intentionally focusing on the large, larger end of that base, the top couple 1000 doesn't mean we're walking away from the other, you know, 88,000 by any stretch, it just means the focus, the approach is very specific in terms of how you deliver that legendary customer service, so that it's a competitive moat, to those large customers that you organize your roadmap. So you're delivering the product focused first on the top couple 1000, etc, etc, etc. That your Monday btw point of view destination place to work at the profile, the people that you hire, the people understand how to serve gigantic enterprises, and large governmental agencies. So that has to percolate through the organization, a lot of work to do to take that strategy about focusing on the top end and turn into real action at the organize. How do you function that way? What are all the tactical decisions you make in support of it, that is all going to be figured out? While we're right in the thick of it now, but I think come the end of our fiscal September 30, that will all be done. And now it's just executing that's just going to be the you know, what we do who we are
Ben Kaplan 43:03
to wrap up looking back on your journey to this point now and that the other five quarters you did? What did you learn from that? Are there mistakes you've made along the way that you course corrected on? How are you a different CEO now than when I should mention you really signed up for this job and wanted it because you were contacted about a different CEO job? He said, No, no, no, I want this one. Why did you want this one? And what have you learned in the past five quarters, I wanted
Alan Masarek 43:29
to come to a via because I certainly understand the market. This is the granddaddy brand. And to me what a great challenge, almost like a capstone in my career, that if we can turn this around what a cool journey that would be. That's what I wanted to do it. And we have a lot of work to do. We've made a great deal of progress. But I feel like we're really on the on the right side of this thing in the sixth quarter. Now that a quarter transformation, I feel very good about it. You know, you learn a great deal going through this process. This is a complex organization. And you know, I'm somebody that will dive into the detail trying to understand, and at some point, though, that's not scalable, you can't do it, you just can't remember, this is a time where we had to rip the kind of sea layer off the organization elevate folks from within those functions to leadership roles. And now once we emerge from the Chapter 11 On May one, we then had an equity plan so that you go out and hire the new C suite, which we've done. Everybody's in share now. So a CEO, in my view, who's doing their job well, you need to work on the business. And in the business. When you're in the midst of this transformation and grenades are flying everywhere. You're doing both 24 hours a day, but it's not scalable. And so what I'm my own sort of new learnings is now that I've hired this super competent team, about half of which are followership, folks, now I gotta move away and now I need to work on the business, not in the business. That actually is a change. I'm sort of, you know, as we kicked off the new year, my own team, when we did our ELT last winter executive leadership team meeting, we do them on Wednesdays, and we did it this past Wednesday, that was the conversation we had about, I need to pull back and you all need to drive the in the business so I can work on the business. So it's just changes it just evolutions, you need to make sure that you're clearly seeing the situation at the time and changing appropriately. There's no perfect answer.
Ben Kaplan 45:28
Well, it's interesting, because it almost parallels when you see the journeys of startup companies that become really big. And sometimes for the CEO, the skills that make you great, whether you're small, are exactly the things that limit you when you become bigger. And it seems like this transformation. And restructuring is like a microcosm of a whole, you know, lifecycle of a company all comprised into one and interesting that maybe Alan the skills that make you great at the beginning of a transformation to get through quarters, one through four may be a different set of skills than you need in quarters five through eight, if I'm hearing you, right, like that's right,
Alan Masarek 46:04
I think that's right. I mean, you know, there's not many, you know, Jeff Bezos is out there, or Zuckerberg, who took it from nothing to huge, there's not many, most the startup skill set is just different. It's just different. And I think the transformation skill set is different. I would say I would not be the person you'd want to bring into a kind of a maintenance situation, I would find that kind of boring myself. It's not my master. That's where the, you know, kind of best highest and best use of my time is, well, we got plenty of work to do here. I'm not going anywhere. So it's like, you know, there's a lot more to do. Final
Ben Kaplan 46:36
question of the day is just what is your advice? Aside from a transformation for other CEOs facing difficult situations, difficult decisions, just the CEO job? What do you do when you're getting conflicting advice, hard decisions, maybe people have to be let go, maybe huge changes, pivots have to be made, maybe you've got to talk to investors who won't be happy with you have some different conversations. But aside from the specifics of restructuring, what is your advice for CEOs who are listening now just facing worry and difficult decisions? And maybe a tough 2024? Ahead? What is your advice to them?
Alan Masarek 47:14
Again, I think in every situation, I approach it the same way, be open, honest, direct and transparent. You're in that role, because you've got a skill set, you're familiar with that industry, you know how to manage people, you know, you know, evaluate talent, nothing goes in a straight line, we all know that there's going to be the punch in the stomach is going to happen, something's gonna blow up on you, it always happens. And so you know, you're going to be called on the carpet by the investor or the employee, or the competitor, or the customer, whatever, all those things are going to sort of, you know, come and hit you. And I think you have to have a plan, be resolute about the plan, try to stay as focused as you can, even when the grenades are flowing in and at all times. Go back and never try to round the edges of the problem. Do I like telling one of my equity holders, you know, something? I thought with his transformation, we happen in four quarters gonna happen that happened in eight? No, but I do. What do I like, tell the employee that you know, have to exit that? I beg them? No, but I do. And the point is always go through, in my opinion, and be open, honest, direct and transparent in life and in business, and the chips are gonna fall when they do and you're doing the best you can. It's not like that person at the board or this or that are gonna sit back and say, oh, and I can do it differently. I can do it better. You know, maybe they can and that's why you know, CEOs get changed all the time. But that's my attitude and you know, control the things you can control and don't get upset by the things you can't control.
The Detective 48:46
faced with the daunting aftermath of a chapter 11 announcement, Avaya teetered on the brink, they grappled with the enormity of customer tension challenges a mountainous debt burden, and the dire need for a strategic pivot. Alan's resolution strategy was built on pillars of direct transparent communication, a relentless commitment to delivering on promises and a focus on customer centric innovation. This was a test of resilience, a crucible not just for Maduro, but for the entire Avaya team. So what's the answer? The undeniable power of transparent communication, the importance of building a strong foundational strategy and the necessity of adapting leadership styles to the ever evolving needs of business. And with that, it's case closed
The Detective 49:56
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