What Got You Here Won't Get You There

Michael Cunningham, October 27th, 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.

"First-time CEOs can bring a wave of fresh energy to help transform a company."

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.

Michael Cunningham

Partner, Lonergan Partners

Specialties: Big Data, Cloud, IoT and Health-Tech

650-413-6008

michael@lonerganpartners.com

Michael Cunningham Portrait