Down To Business: Why The Tech Industry Needs Founder-CEOs

Those leaders adept at keeping costs down, M&As in motion, and regulators in check will always be valuable, but they usually don't build great companies.
Conventional wisdom has it that company founders don't usually make great CEOs, even if the IT industry has more than its fair share of them. They're gifted at conceiving and creating products and setting a vision, we're told, but most founders don't have the management chops or operational patience to steward their companies much past the start-up stage.

The recent leadership retrenchment at two of the technology industry's most successful companies, Google and Apple, should have everyone reconsidering whether that old saw still has teeth. Especially as consumer technologies and notions pervade the enterprise, there's now a higher premium on CEOs who can grab customers' attention with exciting new products and inspire a loyal following.

"Professional CEOs" -- those adept at keeping costs down, market share on track, M&As in motion, and the regulators in check -- will always be valuable, but more often than not they don't build truly great companies. Think Jeffrey Immelt at GE or Mark Hurd when he ran HP: first rate executives who get the house in order but who don't rally the troops or enthrall the customer base over the long haul.

As most are aware, Google announced last month that co-founder Larry Page will be taking over as CEO, replacing Eric Schmidt, the exec Page and Google's other co-founder, Sergey Brin, hired a decade ago to lead the company beyond its blockbuster startup phase. Effective April 4, Page will oversee day-to-day operations as well as product development and technology strategy, while Schmidt, bumped up to executive chairman, will by his own account focus on "customers and broader business relationships, government outreach and technology thought leadership," while Brin will focus on "strategic projects, in particular working on new products."

Schmidt, the professional executive and respected technologist, served Google well during his decade as CEO. But with Google facing cutthroat competition from the likes of Facebook, Apple, and even Microsoft, the company decided it's time to bring the product vision and inspiration back to the CEO office.

The news out of Google came a week after Apple announced that founder-CEO Steve Jobs would be stepping aside for the second time in as many years for unspecified medical reasons, though Apple hasn't named a permanent or even interim replacement. Having sampled professional management in the 1980s, Apple isn't keen on handing the reins over to COO Tim Cook, an omnicompetent exec but no Steve Jobs when it comes to understanding what will wow customers.

My colleague Paul McDougall argued in a recent column that Apple doesn't need another "rock star CEO." No, it doesn't need a showman, but it does need a star performer in the business sense of the term: someone who gets results with novel, innovative new products and business models. I'm not convinced that Apple needs a CEO who will make its products more "open" or enterprise-ready or price competitive -- and thus more like every other company's computers and devices.

What Page and Jobs bring to Google and Apple, and what exceptional founder-CEOs like Larry Ellison, Marc Benioff, and Jim Goodnight have brought to their companies, are exceptional, often contrarian instincts. When the conventional wisdom said enterprise software companies have no business getting into hardware, Ellison tacked Oracle in the opposite direction, acquiring Sun and rallying the company around "optimized systems." When the pundits sloughed off software as a service as a nice little segment for SMBs, Benioff created a enterprise ecosystem around that model. When Wall Street said analytics software vendors couldn't stand on their own amid industry consolidation, Goodnight kept SAS Institute private and independent and doubled down on the core business he built.

In a famous 2001 Harvard Business Review article, management expert Jim Collins argued that the key element in turning good companies into great ones is "Level 5" leadership: CEOs with a paradoxical mix of personal modesty and "professional will." His Exhibit A was Darwin E. Smith, a low-key lawyer who transformed Kimberly-Clark into an industry leader in the 1970s and ‘80s. A rung lower in Collins' leadership hierarchy were the Level 4 types: those who "catalyze commitment to and vigorous pursuit of a clear and compelling vision" -- the profile of most enduring technology industry founder-CEOs.

While company needs will vary, there's a strong case for why the visionary variety of CEO still matters in technology more than any other industry. Innovation in the paper industry can mean a softer ply of bathroom tissue. IT companies must reinvent themselves every three to five years amid the ever-accelerating pace of technological change -- and their leaders had better be up to that challenge.

Rob Preston,
VP and Editor in Chief, InformationWeek
[email protected]

To find out more about Rob Preston, please visit his page.

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