When Khozema Shipchandler was head of FP&A at GE’s aviation business in 2006, he was asked to become CFO of a spinoff that had just acquired a rival. By the time he had moved on from that role a year later, he had reduced the workforce by 2,000 people and endured threats to his safety and still the new company wasn’t producing the results GE had hoped.
“I think we should not have bought it with the benefit of hindsight,” Shipchandler, today CFO of cloud communications platform company Twilio, said in an Airbase webcast. “It just wasn’t additive to what we were trying to do and in fact turned out to be revenue growth destructive, dilutive.”
GE Aviation’s main business at the time was competing with Rolls Royce and Pratt & Whitney for contracts selling airplane engines to the big commercial airlines. The spinoff was intended to move the company into landing gears and avionics, but although the businesses were adjacent to one another, they proved to be more different than the company’s leadership expected.
“The entire management team that we were buying was ex-Rolls Royce,” said Shipchandler. “These are two cultures and companies [GE and Rolls Royce] effectively bred to hate each other.”
More than the cultural clash, the businesses were just very different, he said.
“Our customer we knew clearly was airlines and all of a sudden we were thrust in the position of selling to air framers [who had] effectively unlimited change-order contracts,” he said. “That puts you in a pretty tough spot when it comes to costs if you don’t underwrite the plan appropriately.”
The company emerged stronger despite the rocky restructuring and it gave Shipchandler the kind of experience he benefited from throughout his 22-year career at GE, first in the company’s internal audit program, then in its aviation business and then in its digital business, where he served as CFO and then chief commercial officer.
“GE grew finance leaders to be strong operating leaders,” he said. “As long as you had a point of view and were willing to do the work, those opportunities were given to you.”
Shipchandler credited GE’s internal audit program, widely regarded as one of the best financial training programs in business, for giving him the tools to become a leader.
The program moves business school graduates through different finance roles in different types of businesses and in different geographic areas every four months over a two-year period. By the time they’re done, participants have the ability to adapt to novel environments quickly.
“The idea was, in four-month bursts, how do we change every variable that was present in the first four months, and then change them again in that third four-month period, so the individuals in the program became deeply familiar with ambiguity?” he said. “There’s a certain fortitude, grit, if you will, that you develop in going through experiences like that.”
At Twilio, a $52-billion company with $1.6 billion in annual revenue that enables developers to use application programming interfaces (APIs) to make programmatic cloud-based calls and send texts, Shipchandler is bringing his big-company experience to a hot technology company.
“The metrics are different, obviously, and the products are different, but the language of business is the same,” he said. “I actually found it to be not a large transition.”
The main shortcoming he brought to Twilio, when he was hired as CFO, is with investor relations (IR) — one area he had no exposure to at GE.
“I knew that for areas like tax and treasury I’d be okay because I would hire experts,” he said. “These tend to be high expertise jobs, so as long as you know which questions to ask, you’re okay. But IR, until you’re faced with buy-side investors, who own your company, and you’re on the firing line, you really don’t know what that experience is like.”
The IR function also comes with its own vernacular, which isn’t shared by the rest of the company, he said.
“There’s just, like, a certain language to IR that’s quite different from just normal business language, or even normal day-to-day language, and you have to learn it,” he said.
Shipchandler’s other focus has been on strategy, with the goal of using finance as a lens through which he can help the CEO make decisions.
“I wanted to be his trusted advisor, not his CFO,” Shipchandler said of his relationship with the company’s co-founder and CEO, Jeff Lawson. “I started from a position I thought I would have strength, ie., finance, and better help him understand just the economics of the business.”
As he gained confidence and learned more about go-to market and product strategies, he pivoted to corporate development as another area where he thought he could drive additional value.
“I was never shy about sharing my opinions, good, bad or ugly,” he said. “I wouldn’t undervalue the basics of having lunch or dinner or a beer because it does take the temperature down sometimes when you have to have a tougher professional conversation.”
Shipchandler called Twilio a really good company that can grow into one of the world’s great companies if it can learn to focus on execution as much as innovation.
“The difference between being a really good company and an actual great company is execution,” he said. “What are the things from an operational execution perspective that we absolutely need to nail at our size today so when we imagine ourselves to be multiple billions of dollars larger down the road it’s just easy to do business with us, easy for employees to work here, and easy for us to run the business day-to-day. Sometimes it feels like we’re all making diving catches.”
It’s that gap between where the company is and where it could be that’s the biggest challenge for him as he looks ahead at Twilio.
“When you showed up to work every day [at GE] things just worked,” he said. “With a lot of us at high-growth tech companies, when you show up to work, you’re like, ‘Man, why doesn’t this work? It should work. I know it can work.’”
Making things work is the operational task he’s embarking on. “The substance of my job I enjoy tremendously,” he said. “The organizations within my remit I enjoy tremendously. It’s just the annoyance of knowing how it could be and if we could just get there faster.”