John Stankey has led AT&T as CEO since July 2020 and was elected chairman of the board in February this year. Over his 40-year tenure, Stankey has held senior leadership roles across the breadth of AT&T’s businesses. These include turns as chief strategy officer and chief technology officer. In this episode of the Inside the Strategy Room podcast, Stankey talks with McKinsey Senior Partner and North America Chair Eric Kutcher on pivoting the portfolio, trusting in long-term “big bets” amid the current economic reordering, and what leaving a legacy means when the company you lead has 150 years of history. This is an edited transcript of their conversation.
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Eric Kutcher: This is an unusual moment we are facing, with geopolitics and policy overlaying “business as usual.” As a CEO, how do you think about this?
John Stankey: I think one of the challenges right now is that capital markets like good information and a degree of predictability. We’re sitting in a moment where that predictability isn’t at its peak. And while I’m a small part of global capital markets—we allocate probably somewhere between $22 billion and $25 billion of capital a year in our business—I’ve got to make the same decisions that other investors make around deploying that against the opportunities. I think this moment is one where we have to step back and say, “We’ve been around for 150 years. We’ve been through a lot of different administrations, and we’ve been through a lot of policy shifts. This one is big, but it’s one that will not be the be-all and end-all in the context of broader time. It will just be a moment that we have to adjust to.”
Our goal right now is to be deliberate and judicious, continue to press the bets we can control that we think sustain, irrespective of where this policy goes and what changes. Then, it’s about optionality or degrees of freedom to react as we get better visibility on the future, which I think will come in the coming months.
Eric Kutcher: You’re retiring all your copper lines, which you might argue have at least a 20-year time horizon. That decision will likely have a payback that is measured for your grandkids as much as it is for your kids. How do you think about that decision?
John Stankey: As you think about what’s occurring with AI, the demand for high-performance networking, and the ability to move massive amounts of data through AI, fiber is the infrastructure. It’s a massive civil engineering project, and it will take some time for that infrastructure to pay off. But when I talk about wanting to invest in our business, I talk about investing for durability. And I can think of nothing more durable than building a technology that’s going to be foundational to how people live, play, work, and run their businesses. That technology is fiber. And so that’s the impetus behind it.
And if we do it better and faster than anybody else, and have the most diverse and the broadest network, I think there’s going to be an opportunity for those who sit in my chair in the future to figure out how to continue to earn returns at AT&T.
Eric Kutcher: How do you think about energy and sustainability?
John Stankey: We run a massive amount of infrastructure, but by retiring our copper-based infrastructure and disparate networks, we can become a more effective consumer of electricity and, in some cases, reduce our workload requirements by 70 percent. The beauty of fiber is that it’s a much lower-power technology to deploy, and we can gain some great efficiencies out of it.
We’re also doing a lot in how we run our business. We’ve been moving to a sustainable fleet for many years, and we’re now moving to electric vehicles. We’re working in our cell sites to deploy as much alternative energy as possible, including capturing solar where it makes sense, messing around with fuel cells in some of our larger installations, buying renewable energies wherever we can, and getting more in tune with shuttering parts of our network at times of day when demand isn’t as high. We’ll continue to reduce our carbon footprint and ultimately get ourselves to neutrality, probably in the 2035 time frame, and we’ve been committed to doing that for a long time.
Eric Kutcher: Where are you in your journey from an AI perspective?
John Stankey: We are very early in that journey, and there are things that we can do operationally to get more effective with AI. One great example is that we’re far more efficient at writing code today. We’re approaching 30 percent effectiveness and efficiency improvement in our yields on code development, and we’ll probably be closer to 40 percent by the end of the year. That could translate into cost savings, but instead, we’ve elected to write more code to get more projects done and do more for our customers.
We’re accelerating the digitization of our experiences and life cycles with our customers. We’ve been able to dramatically improve some of our customer support capabilities, call centers, and online digital, using AI agents to bring intelligence into those interactions and using natural language in ways that we’ve not been able to do before.
These are some of the things that bring a much more satisfying experience to our customers, and our competitors can probably do these things equally well. Where I think we really need to up our game is using data that’s specific to AT&T for our strategic advantage. I think there are unique opportunities for us to use our data around pricing, our knowledge of markets, our awareness of what infrastructure is in place, and so on.
I think we also need to rethink our business. Many of our structures are traditionally born out of “What capability could a human manage?” or “In how big of a domain could they carry the expertise to be really good at something?” In the realm of AI-enabled capabilities, we can redesign organizations from the ground floor up without being restricted in how we doing things by human capacity.
I can think of nothing more durable than building a technology that’s going to be foundational to how people live, play, work, and run their businesses. That technology is fiber.
Eric Kutcher: You have probably taken on one of the more difficult transformations of AT&T because it included both strategic portfolio choices and real operational choices. What has it been like to face these “bet the company” level decisions, especially right as you stepped into the role?
John Stankey: To walk in on the early days of the job in the middle of a pandemic was probably not what I initially thought I’d be stepping into. But you walk into the room that you walk into. I just said, “We’re going to have to be really good at whatever we’re doing. We can’t just be average.”
That was important for our company because, given the nature of infrastructure and how communications technologies were deployed over the years, there had been fairly high barriers to entry. Regulatory, capital, rights of way—things like that are largely gone now, and as a result, customers have what they want in competitive markets: a lot of choice. They have incredible choices today in this software-driven world, and business models have become inherently more flexible and customized to the consumer.
Our business was off that mark by quite a way. So I felt like we had to establish a path for the company, to say, “Let’s put something in a box that we think we can achieve with the skills and the abilities we have as a management team, within our employee base, and within our asset base. If we execute well and achieve operational excellence, we can be a preferred product.” But when I looked at the portfolio of what the business had in front of it, I didn’t feel we were set up for success in that regard. That was the fundamental starting point I had in deciding to reposition the company’s assets. Other reasons supported it, but I felt like we had to get the right balance sheet, financial resources, management skills, and management disciplines to get really good at being a communications company.
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Once you get clear-eyed on something as straightforward as that, you tend to have the resolve to say, “I have no choice but to move forward.” And I think in that regard, the bets have paid off—we’re so much better at what we’re doing today than we were five years ago because we have the luxury of spending the time on things at a level that we did not have before.
Eric Kutcher: How do you get 130,000 employees to understand the why of this degree of change and then follow you on the effort?
John Stankey: Some people get it, but there are those others who say, “Well, we did this before. You’re saying we have to undo this. Why should I now believe this is the right direction?” We have to be very clear about our purpose as a company, our strategy and direction as a business, and how we’re investing. I believe we’ve done a good job articulating this, and we’ve done everything we needed to do to line up incentives and a variety of other things around it. But there’s no guarantee you’ll get everybody to say, “Yes, I’m behind that.”
Additionally, as a company, we always talked about change but were afraid to say, “What is the company we really want? If we were starting the company today, how would we operate it? Where would everybody work? What would our benefit plans be?” We had 150 years of proud history but also 150 years of things that were never quite addressed. It was time to rip off the Band-Aid. Just like it’s hard to sell assets, we have to make those hard decisions in how we operate the business to have the agile, capable, fully engaged workforce that we know we’re going to need to be successful. We can make all the right decisions about putting assets in the ground, investing in technology, and trying to drive the right regulatory policies, but if I can’t bring 130,000 people with me who are all the right folks for the job, we won’t finish the work.
Eric Kutcher: In February, you gained another title as chairman of the board. How do you think about doing two very significant jobs at once?
John Stankey: The board and I had worked together to set the direction of the business, to recalibrate our strategy to get ourselves in a position where we had the latitude and the flexibility to return to shareholders in the way we wanted to. We felt like we had arrived at a milestone in December last year and communicated a three-year direction to the shareholder community. The board and the board chair at the time said, “We’re looking at how we’re operating from a governance perspective right now … why don’t we just formalize this structure?”
If anything, it actually saves us some time. There are a few check steps and meetings or coordination steps that go away now, allowing us to be more agile in our governance and decision-making. So, I probably bought a little time back in my day, as opposed to having to invest more time in doing another job.
I don’t mean to suggest in any way that there isn’t independence between the board and management at AT&T. It’s quite the opposite. I think the board has been operating with its responsibilities as a representative of the shareholders in a very aggressive stance, certainly for my entire tenure while I’ve been sitting in the chair as CEO. That discipline remains in place under the consolidated titles.
Eric Kutcher: You’ve been at AT&T for nearly 40 years. How has the way you approach leadership changed?
John Stankey: It’s still changing, and maybe it’s partly the job, partly the environment that we’re in that continues to push the envelope on everybody’s capability, and partly technology.
My job is to put the right people in the right jobs so that they can go out and be effective. I use the analogy with our leadership of the general manager of a sports franchise. You have to be clinical and use data to inform your decisions on what parts of the team you need for what reason. Everybody has a season when they’re at their peak around certain things. And when they’re not, your job is to make sure that you have people who are—that’s what championship teams do.
To do that at the front end of a pandemic, where people weren’t present with each other and were going through a lot in their personal lives, I had to build a whole new bag of tricks. I think some of those survived the pandemic, and we’re better for it. We make better decisions. We communicate more effectively. We have more velocity in how we operate the business. But if you’re a peer of mine who’s running a legacy company with a proud history that didn’t grow up as a digital native on low-cost capital, you’re living my life. You’re going through a workforce transition, with people hired under a different kind of deal than today’s deals. Trying to get engagement or the followership that you want from today’s evolving employee base—that’s a whole new chapter in the book of leadership that is being written right now.
Eric Kutcher: If there were one or two things you wish you had known before you took this job that you could pass along, what would they be?
John Stankey: One of the big lessons I’ve learned in my career is that I can count on one hand the number of times I think I’ve made a decision too quickly, or when I did something on gut and ultimately was proved wrong about it. Boy, I’ve got a long, long list of times when I took too much time to make a decision that I kind of knew early on needed to be made. Especially when it comes to personnel and people, I’ve talked myself into delaying hard decisions by saying, “I’m such a good leader; I’m going to figure out how to fix the shortcomings I see in that individual.” And meanwhile, they’re taking my time away from other important things that the organization needs my energy on, or the care and feeding of other people. Then a year goes by, and it’s still a problem. So I think having the fortitude to make calls early, to make them on the right amount of data, which isn’t necessarily perfect data, but to move through those things swiftly, is something that I think is really important for any leader.
Second, I think a deeper appreciation of the adage “Trust is hard to earn, and easy to destroy.” How long it takes to rebuild trust, how many proof points you need, and how consistent something needs to be—I probably wish I had understood how long that cycle was. It might’ve prepared me better mentally for the road I’d been on over the past four or five years.
Eric Kutcher: As you enter your sixth year, how do you think about the legacy you want to leave behind as you steward this incredibly iconic institution?
John Stankey: It’s a little bit of a stretch to call it a legacy when you think about the continuum of a 150-year-old company. But I think I embraced fairly early on that my chapter of those 150 years is going to be a chapter of repositioning. If there was ever any musing 15 years ago around “Gee, what would I do if I was CEO of AT&T?” you naturally go to the very sexy, interesting, “I would change this, and I would take the business off in this direction, and we would innovate doing these unique, very different things.”
You don’t go, “Well, what I’m going to do is sell a bunch of assets, make the company a third smaller, and shutter most of the products that we’ve built this business on over the last 40 years.” But nonetheless, that’s the moment I came into this job. If my legacy is that I pivoted the business in a way that gave it another decade of growth and sustainability—where 130,000 individuals can deploy their talent and feel like they’re getting challenging work and fair compensation while helping society by allowing people to communicate better and driving commerce—I’ll be very satisfied with that reality.
