What Got You Here Won't Get You There

Michael Cunningham, October 27, 2016

Lonergan Partners is proud to release the 2016 edition of “Who Run’s Silicon Valley” focusing on the topic of CEO power in the Silicon Valley 150 (SV150). In this report we examine the ways in which CEOs have influence both inside and outside of their organizations.

Founder CEOs like Zuckerberg and Musk, and even multi-time CEO non-founders like Reed Hastings from Netflix, may wield substantial power with their constituents. But that’s not so easy for first-timers, especially CEOs who are recruited from the outside. In examining the concept of the Power Quotient from our report, it is evident that non-founder, first-time CEOs are systematically the least “powerful” in the SV150. They typically have lower stock ownership, less structural influence at the board level, less prestige with the Street and less expertise with products and customers than founder-CEOs and those with prior CEO experience.

This dichotomy of power begs the questions: what are the benefits of hiring first-time CEOs, particularly those brought in from outside a company? How can these first-timers be influential in driving success with a more limited base?

CEO transitions are always tricky, especially inside of established public companies. However, it is inevitable that companies reach inflexion points where organizations and strategies must transform to stay competitive. Over time, established operational tactics can become stale and cultural tendencies may orient themselves towards the status quo instead of growth and innovation.

We use a popular saying in our business: “what got you here won’t get you there.” First-time CEOs can bring a wave of fresh energy to help transform a company. They likely come from a hands-on operating role and display a willingness to roll-up their sleeves and understand the details of the business.

For outsiders recruited in, they have the benefit of diagnosing problems through a third-party lens which has not been biased by years of working inside of a company. They also bring the perspective of adjacent markets, competitors and/or customers which parties inside the company may not understand as well.

Once appointed, newly hired CEOs must promptly begin adding to their power reserves. Gaining influence starts with building rapport with the people inside the organization. Big changes may need to happen to achieve success, but a “diagnose before prescribe” approach is the recommended route. It takes understanding the perspective of many to know what’s working and where the gaps are. I am not suggesting leadership by consensus, rather gathering input and understanding internal pain points so that strategy can be shifted appropriately to deliver results. Simply put, it is not the dictatorial CEO who earns more “power” over time; it is the one who values teamwork, and understands that personal accolades come as a byproduct of value delivered to customers and shareholders.