Dan Hesse, Sprint Nextel CEO, shares some of his valuable strategies for choosing consumer products, evaluating early adopter/consumer demand and his philosophy on managing the budget for Sprint... and the US.  Sprint Nextel has revenues of $36 billion and Dan's successful track record with the company certainly makes him someone I love to get advice from.

It is my pleasure to welcome Dan Hesse back for Part 2 of our interview (Part 1  of our interview focuses on leadership and Part 3 focuses on parenting/teaching children to excel.)

Gabrielle Reilly:  Now that technology changes so rapidly, how does a CEO today make a decision on which new consumer product to offer given the initial expense to develop a product and anticipating consumer demand for the product?

Dan Hesse:  I think the most important thing is you have to know what you and your company stand for. Call it your brand principles.

I encourage our people to come to me with innovative ideas around the basic foundation of what the Sprint brand stands for: simplicity.  Internally, we call these innovative concepts "nukes."

Simplicity means using wireless technology to make customer's lives simpler. Just a few examples: three years ago we came out with "Simply Everything" which was the wireless industry's first rate plan that included "everything."  $100 a month included unlimited data, unlimited text and unlimited voice.  You can't make it any simpler than that, so Simply Everything became the first "proof point" of the new Sprint brand.

Later, we introduced "Ready Now", which offered the industry's first thorough retail one-on-one smart phone education and set up.  Smart phones have been getting more and more complex.  You could argue that once you get to know how to use a smart phone, they make your life simpler, but learning how to use one the first time can be complicated.  At a Sprint store, we can set up your phone, even pair your Bluetooth ear bud with your phone, teach you how to use the phone's features, and customize your home screen.  This was another innovation to make a customer's life simpler.

Our brand also stands for Open.  We are the only carrier to offer Google Voice, which offers simplicity with your calling and voice mail setup.  Google Wallet allows a phone with an NFC chip to become your credit card. Only Sprint offers Google Wallet.  Software is an important area in the wireless value chain, so we decided to be uniquely open and allow our software partners, like Google, to help us simplify the customer experience. 

Social responsibility is also an element of our brand.  We worked with hardware manufacturer Samsung to develop the industry's first green, energy-efficient phone made of recycled and recyclable materials. 

These are all examples of innovation, but each reinforces brand principles.  

Gabrielle Reilly:  How do you balance early adopter risks versus consumer demand?

Dan Hesse:  Compared to the Twin Bells, we're relatively small, even though we produce $36 billion in revenues and have over 50 million customers.  We need to innovate and be first, to stand out and to lead because of our relatively small size, which includes taking the additional risk which comes with being a "first mover."

We don't try to anticipate demand.  Take Apple for example.  Customers weren't demanding an ipod, an iphone, or an ipad.  I believe the most successful products and offers are based upon vision and innovation, not market research.  Market research might help with the other 3 "P's":  price, promotion or place, but doesn't play a key role in creating a breakthrough "product" (the 4th "P" from Philip Kotler's famous Marketing books).  Customers often don't know what they want, but they'll recognize the utility of something new when they see it.

Gabrielle Reilly:  With the great debate raging in Washington on whether to cut spending or cut costs and invest in the future... how do you weigh-in philosophically and practically on this topic?

Dan Hesse:  I believe very strongly in investment, but you can't invest money you don't have.  When I arrived at Sprint, it was clear we needed to invest in a number of areas to stay competitive, but we needed to cut expenses so that we had money to invest.  Sprint can't print money.

So we prioritized and cut expenses radically.  We cut our labor costs by more than 1/3 so that we could buy a prepaid company and put the most advanced wireless technology into our network. It's easier said than done, but you have to make choices. 

So looking at the U.S. economy, we need to make choices, no matter how difficult this may be.  For example, we need to prioritize and choose:  What is more important, the elderly or our youth, entitlements versus infrastructure investments, etc.?  To re-state the obvious:  you can't invest what you don't have.