With news today that Dan Hesse is being replaced as CEO of Sprint by Marcelo Claure , I thought it would be worth looking back at Hesse’s tenure as CEO.

An early opinion, from 2008

I dug out an old blog post from 2008 from a now-defunct blog I used to maintain, and it’s worth revisiting. This was just a few months into Hesse’s time as CEO of Sprint, and probably my first close-up encounter with him ¹. I quote from that post:

Just got back from [a group] dinner with Dan Hesse, Sprint CEO, at CTIA here in Vegas… My first question was what he had learned about what had gone wrong at Sprint which had led it to the predicament it’s in today.

His main answer was that it ultimately all comes down to the merger with Nextel… The main issues stemmed from the fact that the merger was ultimately billed as, and contracted as, a “merger of equals” because the market valuations of the two companies were similar. This created huge problems, both in terms of the price paid and in terms of the structures and policies which flowed from that decision.

Firstly, in terms of the price paid, this led to massive synergy requirements to provide a return on investment. These synergy targets were overly ambitious and became the driving force for all the other targets at the company. The focus was therefore on massive cost-cutting, was very internal, and ignored external considerations, and especially considerations of customer care, churn and customer service, all of which suffered as a direct result.

The second problem was that the “merger of equals” narrative required an equitable distribution of various goodies after the merger concluded. This included seats on the board and in the senior management roles at the company, which were distributed equally between Sprint and Nextel. The split headquarters between Reston and Overland Park also resulted from this mentality. And it meant that no single unifying strategy led the company during that time, but rather it was constantly torn between the competing visions and philosophies of the people who had brought the two companies together.

From all this flowed the lack of focus on the important things, the over-focus on secondary considerations, and the mess Sprint is in today. Hesse is quickly changing all of this – one of his first moves was instituting greater accountability throughout the business (Gary Forsee had been the only person in the company with P&L responsibility before he left). And he has also made customer care, churn and other external metrics key to incentive structures and reporting throughout the business.

There is still a massive mountain to climb at Sprint, but Hesse certainly seems to have grasped the essential issues and made quick changes which should lead to the kind of turnaround that’s required. It remains to be seen whether the rest of the company can execute on his vision, but it certainly appears to be the right vision in many respects.

Consistent strategic priorities

To an extent that would become even clearer during the course of 2008, Hesse’s hands were tied to a great extent by the mistakes made by his predecessor. But he did the best he could with what he had to work with, and did an amazing job of turning the company around over the next few months and years. He established three key priorities for the company in those first few months, which he outlined at an analyst event I attended in May 2008 (again, quoting from that earlier blog):

Sprint has three clear strategic priorities: fixing the customer experience, establishing a clear brand in the market, and focusing on profitability. This clarity of purpose and focus on fundamentals is a good thing, and the key will be to execute on it without adding a raft of additional initiatives and programs over the coming months. Sprint needs to get the basics right before it gets distracted again.

One of the most impressive things about Hesse’s tenure is that he stuck to these three strategic priorities throughout it, and he reiterated these at the analyst event Sprint held in June this year. Fixing the customer experience, which had become so broken in the time after the Nextel merger, was priority number one, and Hesse made very rapid progress here, by looking at root causes of dissatisfaction and solving those one by one, leading both to increased satisfaction and a smaller call center footprint and staff. By October that year, Sprint was coming first in customer service surveys, a huge turnaround from last place two and a half years earlier. Under Hesse, Sprint transformed its customer experience and customer service, and this helped hugely in returning the company to growth and repairing a damaged brand.

Hesse also worked to personally fix the brand, appearing in commercials for the company to personalize his message of fixing the company and making Sprint great again. I’d argue that advertising was some of the most effective of any ads run by major US wireless companies over the last several years, and certainly Sprint’s most effective ad campaign of Hesse’s tenure. It led with Sprint’s new Simply Everything plan, which offered unlimited voice and data for $99.99, and was emblematic of a theme of simplification across Sprint’s business. Many calls to care involved questions about bills and overages, so Sprint simply moved to plans that were priced simply and didn’t incur overages. This built on Hesse’s history with price plan innovation, which he liked to point out started much earlier at AT&T, with the first 800 numbers, and later with the Digital One Rate plan at AT&T Wireless.

WiMAX – another albatross around Hesse’s neck

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