Cold Call / Episode 207

Elon Musk’s Twitter Takeover: Lessons in Strategic Change

Listen | 31:45

How should Elon Musk approach long-term strategy to turn around Twitter?

June 20, 2023

In late October 2022, Elon Musk officially took Twitter private and became the company’s majority shareholder, finally ending a months-long acquisition saga. He appointed himself CEO and brought in his own team to clean house.

Musk needed to take decisive steps to succeed against the major opposition to his leadership from both inside and outside the company. Twitter employees circulated an open letter protesting expected layoffs, advertising agencies advised their clients to pause spending on Twitter, and EU officials considered a broader Twitter ban. What short-term actions should Musk take to stabilize the situation, and how should he approach long-term strategy to turn around Twitter?

Harvard Business School assistant professor Andy Wu and co-author Goran Calic, associate professor at McMaster University’s DeGroote School of Business, discuss Twitter as a microcosm for the future of media and information in their case, “Twitter Turnaround and Elon Musk.”

BRIAN KENNY: On March 10, 1874, Alexander Graham Bell launched a new era in communications with the memorable but mundane phrase, “Mr. Watson, come here, I want you.” 132 years later, in March of 2006, Jack Dorsey launched another communications revolution with the uninspiring and perhaps even less memorable phrase, “just set up my twitter.” All lowercase. By the way, that first-ever tweet sold at auction for 2.5 million in 2021, proving that someone was in fact inspired. Few would’ve predicted in 2006 the impact that this clunky social platform with 140-character limit would have in the world. And looking back, no one can deny how profoundly it has altered the media landscape and public discourse. But in the public square that Twitter aspires to be, everyone has a megaphone, including those who seek to spread disinformation. These days, Twitter finds itself on both sides of the battle between free speech and censorship, all while trying to sustain a profitable business model. Which begs the question, who on earth would want to manage that? Today, on Cold Call, we welcome Professor Andy Wu and his co-author, Goran Calic, to discuss their case entitled, “Twitter Turnaround and Elon Musk.” I’m your host, Brian Kenny and you’re listening to Cold Call on the HBR Podcast Network. Andy Wu’s research focuses on how technology entrepreneurs organize and mobilize resources to achieve scale for competitive advantage. Goran Calic teaches at the DeGroote School of Business at McMaster University, and his research focuses on understanding why some individuals are more creative and some organizations are more innovative than others. And you both wrote this case together. Thanks for joining me.

ANDY WU: Thanks for having us, Brian.

GORAN CALIC: Yeah, it’s great to be here.

BRIAN KENNY: Great to have you on Cold Call. Andy, you’re a repeat customer, so thanks for coming back. Obviously, this case is somewhat ripped from the headlines. I mean, these are all recent developments and I think all of our listeners have probably been following the story and there’s been salacious details and who knows what Elon Musk is up to. So the case really delves into some of why he chose to do this and what are some of the options that he has in terms of trying to turn Twitter around. So why don’t we just dig right in and start with telling us what the central issue is in the case and what the cold call is that you use to start the discussion in class.

ANDY WU: So, the central issue of this case is managing strategic change in a technology company with network effects. And given the current economic environment, there’s a lot of technology companies out there that are in a situation like Twitter that really need to transform themselves and find profitability or find a new direction for the company. And I like to start this class with the very basic question of: If you were Elon Musk, would you have acquired Twitter for 44 billion dollars? Yes or no? And we dive right in.

BRIAN KENNY: I bet that there’s probably a lot of interesting perspectives on that one. Why was it important to you to write the case?

ANDY WU: So, first is that we want to make sure that students understand that we are in a phase of technology where businesses need to transform themselves oftentimes into a more profitable mode from the growth phase that they’re previously in. And then that process is very, very difficult. There’s issues of culture, there’s issues of technology, and we want students to explore those kinds of issues. Second, I think that the Twitter case is a real microcosm for understanding the future of the media and information environment. I think watching what’s happening here can tell us a lot about the future of social media, the future of mainstream media, and so forth.

BRIAN KENNY: Do you guys both tweet, I’m curious?

GORAN CALIC: Very rarely, but yes. Browse more than tweet.

ANDY WU: Yeah, I tweet occasionally, but not enough.

BRIAN KENNY: I joined the platform in 2008, so shortly after it launched, and like everybody else, I was trying to figure out what is this thing all about, how is it going to be used. And I was thinking about it more from a branding perspective. I represent the HBS brand and how should HBS responsibly use it. And I guess my question is, why would Elon Musk care so much about this, enough to buy it for 44 billion dollars?

ANDY WU: Well, we can only speculate what’s going on in his mind here, but I think the situation here does have some clear interest to Musk. First, just to set the baseline, I think the reason you’re asking the question is that the reality is that very few people actually use Twitter. There’s more people that use Snapchat than Twitter, and there’s 10 social media platforms younger than Twitter that have more users than Twitter now. So why do we care here? Well, if you look at Twitter, in fact, there’s definitely segments of elite users that very, very intensely use Twitter. I’m thinking about academia, I’m thinking about finance. But for your interest, Brian, I think we should talk about journalists. And so what was amazing about the data here is just the contrast. 13% of the regular US population uses Twitter to get news. 69% of journalists use Twitter as their top one or two social media platform for their job. And 83% of journalists between 18 and 29 use Twitter as their top one or two social media platform for their job.

BRIAN KENNY: So that’s pretty remarkable. And that does speak to the way it’s sort of recreated the media landscape. I mean, that’s the channel that they’re using now to get their news out there.

ANDY WU: Absolutely. Yeah. And so you can think about politicians and business leaders that want to communicate with journalists and journalists that want to communicate with each other– Twitter is where that happens.

BRIAN KENNY: Yeah. I mentioned Jack Dorsey’s opening tweet; uninspiring opening tweet (all in lower case). Can we talk a little bit about the history of Twitter? Because I’m sure for a lot of our listeners, they just assume it’s always been around and it started in 2006, so it’s not that old.

GORAN CALIC: No, it’s not. And as you correctly mentioned, it happened in 2006 and it was quite informal. Like a lot of tech startups, if you can imagine, Jack Dorsey had no idea what it would eventually develop into, and he initially didn’t develop it as a startup in its own right. So Twitter was originally developed as a messaging service for a podcasting startup that Jack Dorsey was only a part of, eventually grew quite a lot more successful. And between 2006 and 2012, there were dozens of other third-party developers and startups using Twitter data for their own purposes for different startups. So it had actually grown quite a bit larger than Jack Dorsey and the other founders had initially expected.

BRIAN KENNY: And there were a lot of third party apps that were developed to make Twitter more usable and more effective in some ways. Can you describe a few of those?

GORAN CALIC: Yes. So this is part of the history of Twitter that most people are not familiar with. So most people don’t know that the Twitter bird was not invented by Twitter. The term “tweeting” was not invented by Twitter. Both of these were invented by Twitterrific, and at some point in time, so let’s say pre-2010, most of the innovations that we’re familiar with in 2022 and 2023 were developed by these third-party apps. Just to give you one other example, some eyes invented search. So a lot of the initial innovation and changes in things that we find familiar with Twitter were not developed by Twitter itself. So the innovation happened outside Twitter.

BRIAN KENNY: Which is really interesting because if you think about that as being contributing in some way to their growth and the way that they scaled, they eventually turned to that spick it off. They shut those third parties out. Why would they do that?

GORAN CALIC: So 2010 again to 2012, Twitter decided they wanted to make money from tweeting, and they thought the best way to do this was through advertising, which we just briefly discussed. The problem was that most people that access Twitter data through Twitter itself did it online through twitter.com. Initially. When the iPhone was released and smartphones more generally, people started moving their usage of Twitter to mobile applications. Most people then started moving to third party app developers, which meant that control over the revenue model was outside Twitter. So what Twitter, in order to capture most of this revenue did was acquire the most successful third-party app developer, which was Tweetie. However, they still face a lot of competition. You had all these Twitter applications which were capturing users, and then Twitter started doing something which was very interesting. First, they limited the number of users that could be acquired by these third party apps to about a hundred thousand people. And then they started closing access to some of these third party apps for dubious terms of service violations. Until eventually, most third party app developers decided, well, we can’t really reliably make money from the Twitter database, and they just started shutting down, and the rest is history. Twitter now has a monopoly in how everybody accesses the Twitter database, whether you’re doing it through twitter.com or through a mobile application.

BRIAN KENNY: And that could be good or bad as we’ll talk about a little bit further on in the discussion. You pointed out something really interesting there, Goran, which is that the release of Twitter predated the release of the iPhone. So I didn’t even think about that before, but that’s the way that we all access our social networks and our social apps these days, which I guess leads me to the question about how have they grown in comparison to some of the other social networks that are out there and that are active these days?

ANDY WU: So Twitter certainly had a burst of growth in its very early days, but since the mid 2000 tens, Twitter has certainly had very slow growth compared to most of the competition in social media. Now, this I would say comes down to two things. One is that to Twitter’s positive benefit, they actually have heavily dominated the segments that they do well in. So for example, journalism and finance. But at the same time, the lack of innovation has limited their ability to appeal to the broader population. So as we know from Instagram and TikTok video and photos are quite important to the general population, and Twitter’s been held back on that.

BRIAN KENNY: I can remember on many occasions, particularly as we were trying to figure out as a brand how to use Twitter, we would oftentimes go to log in and it would be shut down. You’d get that little … they had the icon of the sad bird, I think it was shut down. So they had a lot of technical issues early on. They had a pretty unstable platform. What were some of the things that were plaguing them as they tried to scale?

ANDY WU: Absolutely. So there’s both organizational and technical challenges here. So organizationally, they’ve had a lot of leadership turnover through the years, and that’s been made it difficult to be consistent about the company. I think on the technological front that you pointed out … so internally and publicly, people refer to this as the fail whale. And so we have to keep in mind that the original base Twitter infrastructure, database and all those systems actually date back to the early 2010s. And so they’re using actually quite even today, quite antiquated and fragile infrastructure that doesn’t scale well as opposed to technologies that are built cloud-native for today.

BRIAN KENNY: So, the case goes into some detail about the risk averse nature of the way they operate. But it seems like in the space that they’re in, that is not necessarily always the best approach and it may have hindered their ability to succeed a little bit. Can you talk about what was at the root of some of that risk-averse culture?

ANDY WU: So, I think we can look at the risk aversion both from the perspective of the employees as well as at the level the board of the directors. And so for the employees, I think there’s two things driving the risk aversion. The first is that the employees were inspired by the outsized role that Twitter had in the world at large, and they didn’t want to take any chances breaking that system. They just wanted to keep it functioning as is. And a core characteristic of, at least in the early and middle days of the company, of what they believed made that work was the simplicity of the product and simplicity of the business, which is to say that any innovation, any risk-taking are things that make the business less simple. And so, these are things that we would naturally want to work against. And then if we turn now to the board of directors, I think this is a really interesting situation where the board, looking at it now, seems particularly risk-averse because they are very, very scared of public backlash from any kinds of changes they can make to the business. And here’s one way to think about it, Twitter is where investors go to complain about public companies. And so if you make a change that impairs that experience, you’re going to get directly complained at on your own business, on your own platform.

BRIAN KENNY: Yeah. But is that a way to run a social media network? You think about fast-moving industries. I mean, I think this is one of the fastest out there.

ANDY WU: Absolutely. And I think that we would probably advise against doing that. Look, we’re sympathetic to the employees and to the board about why they were in that situation. But certainly, there’s plenty of innovation opportunities that are pretty obvious in retrospect that they actually tried. So many things like podcasting and video and everything. They actually either acquired companies or tried building these themselves and they just wouldn’t bring it to market. Looking back now, I think it’s clear they should have done that.

BRIAN KENNY: Yeah, you talked about the leadership changes and Jack Dorsey came and went already, so he’s been there twice in a leadership role. And it reminded me a little bit of when Steve Jobs came back to save Apple, it was sort of riding in. And even Dorsey I think at some point thought, “This isn’t working. I can’t fix this.” So they’ve got a CEO in there now, Agarwal, I forget his first name.

ANDY WU: Parag Agarwal.

BRIAN KENNY: Yeah. Thank you. I guess what kind of condition was the firm in when he stepped in to take the role and what were some of the things that he’s tried to do to get it unstuck?

GORAN CALIC: Yeah, so I think it’s important to remember that at this point in time, Twitter had been underperforming, not just the competition and not just traditional competition, the New York Times, but the S&P 500 for very many years. And you had large investors like Elliot Management who were obviously very unhappy with this. You have this money stuck in a company you expect will do extremely well, and it’s not even performing as well as a diverse portfolio of firms. So, they were agitating for change. And having brought Jack Dorsey in a second time, they realized he wasn’t really the change they were looking for. Jack Dorsey was spending a lot of time on his other startups or just away from the firm, and it looks like they were looking for a much more hands-on manager. And this is where Agarwal comes in. So he replaces Jack Dorsey, end of 2021, and starts quite radical changes for Twitter at the beginning of 2022. And it’s important to keep in mind at this point that he isn’t the first to try this. Others have tried and failed. So just to give you kind of an impression of what he tried to do is he started with a really broad reorganization of Twitter by restructuring it in a way where he removed the chief design officer, head of security, chief information officer, head of engineering, head of communications, head of HR.

GORAN CALIC: So he comes in, makes these drastic changes, and he explicitly says, “My vision for Twitter is a bold one.” And what does that mean? So it means he wants to make Twitter open for development again. Like we mentioned early on, a lot of initial innovation came to these third party apps, which we’re were competing to capture users– doesn’t exist anymore. Twitter’s the only one. So he wants to open it up for development and more innovation. He also wants to integrate crypto. A lot of people are doing tipping on or through Twitter. He wants this now to be done through Twitter itself to capture some of these exchanges. He also is thinking about creating an open protocol where Twitter could connect more seamlessly to LinkedIn, to Facebook, to Instagram. And he doesn’t have very much time to implement this. So he’s not CEO for very long, but he had a bold vision for the company.

BRIAN KENNY: Yeah. What was the firm’s business model at that time? What were some of the things that they were doing to generate revenue?

ANDY WU: Twitter’s primary business is selling advertising. So that’s about 89% of the revenue. And then it also makes some amount of revenue from selling its data. So let’s start with the advertising. So the advertising business is been a challenge for Twitter, even though it is its primary revenue source. And it’s a challenge because Twitter just cannot, or will not have some of the same advantages that say Facebook and Meta have in advertising, which is to say Facebook and Meta is a leader in what we call direct response advertising, which is to say you can use data to directly target a specific customer and then get that customer to immediately buy a pair of shoes or download an application. In contrast, Twitter has primarily been relying on brand advertising. And so this is companies like Nestle, Unilever, Verizon, who want to generally put out a brand image, but there’s not an obvious return on that investment, I mean as the challenge with general marketing would always be. But the problem is that that is a less valuable form of advertisement than direct response advertising. I should also mention there is a business here in selling data. This is quite a high-margin business. So what Twitter did and still does is license data to hedge funds and market analytics firms for supporting their research and their investment activities.

BRIAN KENNY: One of the moves that Agarwal made that, I don’t know if he ended up regretting it, was that he invited Elon Musk to be on the board of Twitter. How did that play out?

GORAN CALIC: So, he had some private conversations which eventually became public through this messaging app, Signal, with Elon Musk. I think the frustration that a lot of people have had with Twitter was that it wasn’t very innovative. And the idea was if we bring on Elon Musk, if we placate him, maybe even to some extent, he might bring some innovation to the firm, some change, but he also won’t be entirely destructive. Now, Agarwal had invited Elon Musk to the board, an invitation Elon Musk had first implied he would take, and then literally over that weekend he decided against it and on Monday had filed an amendment to his 9% acquisition of Twitter, stating that he was interested in acquiring a much larger strategic stake in the company. So it seems that over the weekend, he had made the change from 9% ownership to “it’s possible that I want buy the entire company.”

BRIAN KENNY: Which sounds perfectly on brand for Elon Musk as we’ve now come to know him.

ANDY WU: Yes, very much Elon.

BRIAN KENNY: One thing that we did not touch on were some of the content management issues that not just Twitter is dealing with Facebook and other platforms are dealing with them as well, but content moderation has become increasingly important, particularly as we look at some of the misinformation that’s been spread on a lot of these platforms. How was Twitter managing the content moderation part of what they do?

GORAN CALIC: So, Brian, I think it’s important at this point to really emphasize how extremely difficult content moderation is. So Jack Dorsey is on record along with a number of people to say that content moderation at scale, which is really what Twitter is doing, is literally impossible. And the reason for that is setting any kind of hard and fast rule, let’s say automation, which is required when you have hundreds of millions of monthly active users is difficult when those content moderation rules are applied not just within a heterogeneous country like the United States, which has a lot of different and diverse views, but also across countries. We have to remember that 75% of Twitter users are outside America. So, content moderation is hard. So how does Twitter do it? Generally speaking, Twitter along with Facebook, and other social media platform, start with some form of automation where either an algorithm or an AI will flag content and then the flagged content, if it’s egregious enough, could be removed immediately by this algorithm. But most of the time that doesn’t happen. That flagged content then reaches the eyes and ears of actual human beings who look through it, read through it, and in circumstances of where it clearly violates the terms of service, that content is removed. But unfortunately, there is a portion of content that fits in this gray zone where really people are not that sure whether to remove it or not. So, then you have these live discussions where decisions to moderate content happen in real time. And generally speaking, Twitter wasn’t great at doing this in a sense that on the one hand, there were people asking for much more moderation to remove much more content. And on the other hand, there were people saying that, look, we want more stuff kept on, we’re being banned and we don’t even know why. And the reason is, like I explained, sometimes content moderation happens in real time and people make decisions in real time, which are sometimes opaque and not quite clear.

BRIAN KENNY: And there’s subjectivity involved there obviously.

GORAN CALIC: That’s right.

BRIAN KENNY: And that’s AI is not infallible as we’ve come to realize with ChatGPT.

ANDY WU: Absolutely.

BRIAN KENNY: So, that’s got a long way to go before you can completely rely on that. As we think about the board itself with the invitation out to Elon to join them, how was the board composed and what was the composition of the salary structure of some of the senior executives at Twitter?

GORAN CALIC: So, a couple of interesting things about the board’s composition is the board didn’t have as large of an equity stake in Twitter as we would normally expect, and probably even more surprisingly, at the time of case writing. This would be several months after Elon Musk’s acquisition, remember people started speaking up, there was pushback from the board itself, we found that the Twitter board did not use Twitter very much. And we would’ve expected that the Twitter board would be very active. I mean, there are board members that have tweeted zero times to the point of case writing. Now, when it comes to compensation, I think an interesting thing to highlight is that Twitter used stock-based compensation, the short form, which is SBC for many of their employees. And what this really means is compensating people not with a direct salary, but with ownership in the firm. And as we discussed earlier, Twitter’s value kept declining, which in practice meant that people had to be incentivized, be issued more stock, which then continued to decline. So, more than other firms in tech industry, which granted do use stock-based compensation to a large extent, Twitter relative to them used it quite a bit more. So employees relied heavily on stock ownership for compensation at Twitter.

BRIAN KENNY: Which you think would be a motivating force, but in this case it doesn’t sound like it necessarily was with that entrenched culture of risk aversion. Musk used Twitter, though, he used it a lot, he was a pretty active voice on Twitter. Is that fair to say?

ANDY WU: Definitely fair to say, he might even be the most active person in terms of what he is willing to say out there among the top people on Twitter.

BRIAN KENNY: At one point, the case alludes to the fact that Musk thought about starting his own social platform like, “I’m done with Twitter, I’m just going to create something from scratch.” And he talked to Jack Dorsey and I thought it was interesting what Jack’s advice was on starting a social platform. What did he advise him?

ANDY WU: So, we have to remember here that through Dorsey’s leadership and his departure from the firm, I think there’s a real sense of regret on Dorsey’s part, and he really, I think takes a lot of time to reflect on what could have gone differently at Twitter. And so as a result of that, Dorsey’s advice to Musk is actually that Twitter shouldn’t even really be a business. What we really need out there is an open source protocol similar to the messaging app, Signal where we just have a protocol for information transfer. And from Dorsey’s perspective, the key advantage of that is that is the kind of protocol and platform that can’t be controlled by advertisers and can’t be controlled by governments. And that’s something that I think Dorsey looks really regretfully upon about where Twitter has gone.

BRIAN KENNY: That also poses all kinds of complications from a business perspective because how do you make that a revenue generating enterprise, right?

ANDY WU: Absolutely. The open source, of course is difficult to monetize. And on top of that, the truth is free speech is actually difficult to monetize. So we have the most free speech today in, for example, if you’re on a message group in WhatsApp with your friends or you’re on the forum, 4chan. However, advertisers and a whole bunch of other parties don’t want anything to do with that. And it’s hard to bring that money in.

BRIAN KENNY: So how did the board react to Musk’s takeover bid?

ANDY WU: So, the board definitely resisted the takeover bid at first. I think some people have thought there was a better valuation out there, and I think they didn’t quite say this publicly, but I would suspect that some of them also thought it would not be a good future for humanity for Musk to be owning Twitter. Now after that point, a couple different things happened. I mean, the first is that the company and the board did go out to shop the company around to other possible acquirers, and they ended up being declined by Disney, Google and Microsoft.

BRIAN KENNY: They did have an opportunity at one point though to probably walk away from Musk because he was really equivocating about his decision. I always wondered why they didn’t take that if they were so concerned about him stepping in and taking over.

ANDY WU: And Brian, this is I think a real quirk of history here, as you know and we all know that beginning in that time period, there’s a real decline in the technology stock market valuations for Twitter and all kinds of technology companies. And it became clear at that point in the time period that, in the summer of 2022, that in reality Twitter’s valuation was much lower in the public markets than it would be for the acquisition price that Elon Musk had probably overbid on earlier that spring. And so this became financially the right decision, I think for the shareholders. And it’s a really funny situation to see Musk and the board switching their own positions on whether or not they want to do this. And I think it’s pretty clear from what happened in that summer of 2022 that Musk knew he had overpaid and was trying to dig himself out of it.

BRIAN KENNY: So here he is walking in with the kitchen sink into the lobby last summer of with that sort of obscure reference to let this sink in. I think that was what he was trying to get across with people. And he finds himself in a situation, what are some of the options that he has to think about as he looks at the situation he’s inherited here?

ANDY WU: And so as Musk has taken over the company, he had to borrow a lot of money in order to do so. So, the cloud that is hanging over him right now is over a billion dollars in interest payments a year. And so we have to do something to make sure the business can make those interest payments. And of course, we have to think about revenue options. And there’s at least three revenue options that we know Musk and his team have been debating. And so, the first option is to maintain or improve the advertising business. And again, this is something that Twitter has struggled with in the past, but there’s definitely possibilities in how do they can do it better. But at the same time, as we know from Musk’s personal interest, he’s not particularly interested in having advertising be his big segment of the revenue. One, because it conflicts with his notion of free speech. The advertisers do want a safe environment of content. The second is that it also conflicts with his ability to self-aggrandize on the platform. And so advertising is important, but I think they want to get out of it. The second revenue opportunity that Musk is particularly excited about is the notion of premium user memberships. And there’s different ways this could be structured, but you can imagine the idea here is that users would pay $8 a month or more and get a set of premium features. I think one of the hallmarks of that our listeners might be aware of is the famed-up blue check-mark and the idea that we could sell people verification in the blue check-mark as part of that premium membership. I think there’s other possibilities of really making a premium membership stand out. For example, if you have a premium membership, they might be able to boost your tweets above other people that don’t. And you could imagine what else they’d do. But again, in the past, in other businesses and for Twitter itself, getting people to pay for a social media account is not something that historically works. And again, it directly works against the network effects you need to make the business work. Third, and again, another thing Musk is particularly excited about is the notion of turning Twitter into an everything app. And you can use, for example, WeChat in China as a model, but the idea here is Twitter could, for example, go into financial services, peer-to-peer payments and monetize in that direction. The interesting part of the history here for that option is that remember that Musk was a founder of x.com, which was joined up with PayPal, and remember that Musk was actually an executive that was fired from PayPal. And so, this is a chance if he could do the financial services thing, this is a chance for him to achieve what he had failed to do at the very, very beginning of his career. There’s one fourth option I want to mention here, Brian, and this is not something Elon Musk says, but it’s something that we ask our students about as a possibility. The final possibility here is to break up the company. And so the idea here is that you would separate the social graph and database part of the business from the front-end user-facing advertising-facing application. And so, the idea is that the API would be provided by the backend business to the front-end business and the front end business would pay for the right to use that API and maintain ongoing application activity. Now, the reason this is interesting and we want students to debate about it, is that this opens up the possibility that backend social graph business could actually re-license the API to other new third-party applications. And really this is the idea of taking Twitter back to the pre-2010, the pre-Tweetie days.

BRIAN KENNY: Yeah, back in the good old days as it were. It seems also just to the casual observer of which we’ll call myself, that Elon has taken a step backwards in terms of being so forthright about his ideas for the company. I think he was waffling on the blue check-mark thing, and I think he was making people nervous, frankly, and he seems to have recognized that and sort of taken a step back and is allowing others to come forward as the sort of business minds around where he’s taking Twitter. Is that fair to say?

ANDY WU: I think that the early days of what we’ve seen in Musk leadership here are kind of symbolic of the broader leadership style he has, which is one definitely of risk taking. And I just want to remind our listeners here that Musk comes from a culture say of SpaceX where they can blow up a hundred million dollar rockets and you just move on with your life and it’s fine. So I have to imagine from his perspective, messing up the blue check-mark is not that big a deal.

BRIAN KENNY: Not a big deal.

ANDY WU: That’s right. It’s a risk he can take. And so I think they’re ready to take risks, but I do think he has recognized progressively that he really needs to be conscious of the stakeholders. I think in his early days he was much more antagonistic to advertisers, but once he took over, he reached out to the advertisers saying, look, I want to keep you guys along, we’ll keep things safe around here.

BRIAN KENNY: And pretty antagonistic to his employee base too. I mean that it has not been a comfortable place to be an employee for the last year or so.

ANDY WU: Certainly not from the perspective of the people that used to work at Twitter. And so he’s been very aggressive about imposing in terms of what he calls an extremely hardcore culture, and that is unusual to how Twitter operates, that’s unusual also to how say Google operates, but that is actually how he operates Tesla and SpaceX and that kind of very, very intense environment. And it seems to work okay there. Although again, lots and lots of turnover in those companies as well.

BRIAN KENNY: Right. So you’ve got probably one of the biggest risk-takers in business taking over one of the most risk-averse companies in tech. Interesting.

GORAN CALIC: That’s exactly right.

ANDY WU: Yeah, it could work. It could be destructive.

BRIAN KENNY: Hey, this has been a great conversation. I have one more question and I’ll let each of you respond to it in your own way, but I’m wondering if there’s one thing you want listeners to remember about the Twitter case, what would it be?

ANDY WU: Many technology companies today, Twitter especially, but there’s others too, need to go through serious strategic change in order to make those businesses work, both in terms of reigniting growth or in terms of shifting to profitability. We want our students and our listeners here to look at this Twitter situation as an opportunity to learn about the right and possibly wrong way of managing strategic change. And so what we advise people to do is to start by looking forward at a vision. So where do you want the company to go? And then to reason back to the things you want to preserve in the business and the things you want to change and how quickly you want make those changes.

BRIAN KENNY: Yeah, Goran.

GORAN CALIC: I think the big takeaway that Andy had mentioned this is thinking about the speed of change. So one thing Elon Musk clearly highlighted, the moment he took the company over and fired half the employees was he wants to move really fast. And I think the initial reaction is “that was way too fast.” He could have taken longer. He potentially had to rehire some of the people he’d let go. But I think the question we’d like students to think about is: what is the right speed? We know that his resources are limited. We know he has a billion-dollar interest payment to do. We know the company probably has more employees than it can handle at the moment. We see Meta is now letting people go; same with Amazon. So the question is, if you don’t want to fire people, where will the revenue come from? And if you do, how long does it take? Is it 90 days? Is it 30 days? Is it a hundred days? It probably isn’t on the first day. So I think the speed of change really is an interesting takeaway from this case.

BRIAN KENNY: Well, it’s a great case. It’s been a great conversation. Andy Wu, Goran Calic, thank you for joining me on Cold Call.

GORAN CALIC: Great.

ANDY WU: Thank you, Brian.

BRIAN KENNY: It was a pleasure. If you enjoy Cold Call, you might like our other podcasts, After Hours, Climate Rising, Deep Purpose, IdeaCast, Managing the Future of Work, Skydeck, and Women at Work. Find them on Apple, Spotify, or wherever you listen, and if you could take a minute to rate and review us, we’d be grateful. If you have any suggestions or just want to say hello, we want to hear from you. Email us at [email protected]. Thanks again for joining us. I’m your host, Brian Kenny, and you’ve been listening to Cold Call, an official podcast of Harvard Business School and part of the HBR Podcast Network.