Jack Dorsey has big plans for Twitter. Source: Flickr/TechCrunch.

The board of Twitter (NYSE:TWTR) made it official last week, announcing that co-founder Jack Dorsey will take on the role of CEO on a permanent basis. After three months serving as interim CEO, Dorsey impressed the board enough while still holding down his second job as CEO of Square, the $6 billion digital-payments company he co-founded in 2009.

The Twitter board originally dismissed the idea of hiring Dorsey permanently because of his commitment to Square, claiming that running Twitter is a full-time job. To be fair, Twitter has a lot of problems to tackle, and it won't be an easy job. But Dorsey was always the best person for the job (who also wanted it) and is best-suited to solve those problems even while bringing another company to the public markets.

Dorsey is not just a product guy
Dorsey is the guy who created the product.

As one of the co-founders of Twitter, Dorsey brings a deep understanding of what Twitter is and what it can be. His status as a creator instantly brings credibility to any product changes necessary to bring Twitter to a mass audience.

And that's the real challenge for Twitter's CEO -- expanding the product to appeal to a broader audience. Monetizing the audience it does have is going relatively well. Newly appointed COO Adam Bain -- former head of revenue and partnerships -- has done an excellent job selling ads and increasing licensing partnerships.

For Twitter to engage a much larger audience -- a goal both Dorsey and CFO Anthony Noto made clear on the company's second-quarter earnings call -- it needs to make product changes. The first one will be released this fall in the form of Project Lightning. Dorsey and Noto both talked about it on the company's conference call announcing the new management changes and Twitter's most recent earnings call.

Project Lightning aims to appeal to a broader audience by curating content around trending events and topics. This makes content easily accessible and digestible, bringing the best of Twitter to users with just a couple of taps. Twitter also plans to launch its first major advertising campaign with a focus on Project Lightning.

Project Lightning was conceived and tested during former CEO Dick Costolo's tenure. Dorsey will have to continue to simplify the product to make it more appealing to the average smartphone or Internet user. At the same time, he must ensure the real-time network that draws millions of power users to the platform every day stays intact.

He already knows how Twitter works
A surprising number of Twitter executives have made mistakes when using Twitter, including Noto, who famously tweeted plans for an acquisition offer instead of using a direct message. But beyond understanding how Twitter's product works, Dorsey already knows how Twitter the company works.

Dorsey served as the first CEO of Twitter until he was ousted in 2008. He returned to Twitter in 2011 to serve as executive chairman after Costolo became CEO. As a result, Dorsey understands what exactly people do and can manage the company more efficiently than an outsider who would have to evaluate everyone's roles.

Many noted that Bain has the insider experience necessary to make a smooth transition. Indeed, Bain's experience at Twitter will help immensely as he takes on the yet-to-be-determined additional responsibilities of COO.

Ideally, Bain will be taking care of the day-to-day management tasks that the CEO is typically responsible for. That will allow Dorsey to focus on the bigger picture and determine the direction he wants to take the company. The new management setup allows Dorsey to take advantage of his time working on Twitter. Dorsey says he has a similar support team at Square to help bring the company public.

Twitter investors couldn't have hoped for a better result from Twitter's board. The market rewarded the company by pushing the share price up more than 5% last Monday following the announcement. But the potential Dorsey brings to the table as the new permanent CEO could be even more rewarding for long-term investors.

Adam Levy has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Twitter. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.