The role of the CEO in a technology company is highly challenging. Four situations are especially difficult. Fortunately, they can be changed.
A High Profile Job
At the top of every telecommunications, IT services or software company there is only one individual: The tech CEO.
Much is expected of any company's CEO, and it is no different within the fast-paced and competitive technology sector. The "buck stops" with the CEO, and she or he is relied upon as the ultimate decision maker and individual responsible for the success and/or failure of the company's strategy and corporate culture.
Whether the CEO is a business generalist or specialised in the company's technology products, there are a lot of challenges ahead. We have worked with many CEOs from large multinational tech organisations with great success. We have also worked in tech firms where the newly arriving CEO failed to maintain their job in the first 6 months. Only 60% of incoming CEOs attain or exceed financial projections within the first year and a half of their arrival.
The increasing qualifications needed and the rivalry present for the top job at many tech organisations means that the median tenure of a CEO is in gradual decline. There are several factors, both internal and external to the organisation, that lead to the early departure of a tech CEO. One of these factors is the mismatch between the CEO's professional profile and their fit with the tech organisation's work culture.
Four Situations Especially Difficult for the Tech CEO
Many tech CEOs are highly qualified and tend to come from a business or technology background. The organisations they lead tend to be both accountable and transparent, with a culture defined by collaboration and autonomy. Exhibit 1 showcases the spectrum of the tech CEO's profile and the organisation's culture, including four difficult situations that may arise due to the mismatch.
Exhibit 1: Four difficult situations: Tech CEO's acumen and the culture of the organisation; Source: Oleto Associates experience
Any CEO will have a combination of business and tech skills. The business skills would entail commercial and customer-centricity, and the tech skills tend to focus on solutions and technical flare.
Likewise, the culture of the organisation ranges between one in which its employees seek direction to move forward and the other aiming to attain independence. Companies with employees who have a tendency to require direction are more likely to be collaborative, transparent, and are looking to follow a leader. Conversely, the independence seeking organisational culture tends to produce teams that are more likely to be autonomous, accountable, and are looking to drive to a solution with little direction.
Based on our experience, there are 4 situations that tech CEO's should avoid. These are situations the CEO's were either hired into or evolved into. They place the CEO in roles where it can be difficult to add value and where the CEO immediately needs to focus on changing the situation to get into the "Success Zone":
The Lonely Marketeer
- A strong commercial/customer-oriented profile but detached from a highly independent tech organisation
The situation: The CEO that is susceptible to this particular difficult situation tends to possess a similar leadership profile to the lost shepherd, the difference is the organisational culture that the leader is surrounded by. With an organisation that seeks total independence through driving their own projects and autonomy over their deliverables, the result is a CEO that is poised to move the organisation towards customer centricity and shareholder value, but an organisation that is not willing to follow the directions of its leader. Much like the other pitfalls, it is unlikely that the tenure of this CEO will be very long unless changes are made to the organisation and to the leader's competencies.
Changing the situation: In addition to educating themselves in the technical products their company produces, this leader desperately needs to produce strategic wins in order to show the organisation that his or her focus on customer centricity and shareholder value can lead to development of innovative solutions. Conversely, the organisation needs to be more flexible in their structured approach to work and be open to collaborating outside of their comfort zone.
Example: A new CEO with a strong business background, but limited technical experience, was hired into a large IT services company struggling to retain its market position. The organisation was characterised by technical managers who had worked at the company for a very long time, and each had created "small kingdoms" they individually controlled. The CEO focused on attracting new customers while overlooking serious cost and delivery problems in the organisation, leading to poor financial results and loss of customers.
The Lost Shepherd
- A strong commercial/customer oriented profile struggling to provide the organisation the guidance it seeks
The situation: This business leader focuses exclusively on the needs of the customer and believes that the success of the organisation relies on increasing revenue and decreasing cost. When such a leadership profile is matched with an extreme direction seeking organisational culture, the result is a company consisting of individuals who are willing to allow the CEO to lead them in any direction. This combination can lead to an organisation that is standing still, or worst, moving away from its competitive advantage.
Changing the situation: This situation is not sustainable in the long run. The CEO needs to grasp the technical nature of the organisation and understand the language and products that she or he is surrounded with. This can be done through educating themselves in the technology segment their company works within. Additionally, the CEO also has to take the lead on changing the overall culture of the organisation, from one that is almost exclusively looking to follow, to one that is comfortable at driving the agenda when needed.
Example: A telecommunications company internally promoted a business generalist to CEO in a highly fragmented organisation consisting of deep technical experts. A new overall strategy was developed, and the organisation asked to break it down further and start execution. After six months, the company was behind plan and the CEO needed to interfere hands-on in the execution, but found it very challenging due to a lack of technical knowledge.
The Over Engineer
- A strong technology profile guiding the organisation away from what the market wants
The situation: Similar to the overlooked architect, this difficult situation has, behind the wheel of the organisation, a CEO who predominately possesses technology acumen. Yet, in this difficult situation, the organisation is looking to follow a leader and is likely to do so without much objections. This combination could lead to a company that focuses far too much on innovations and solutions, developing products with all the latest technical "bells and whistles", without due consideration of the customer's needs and the organisation's bottom line. In the end, this can lead to innovative engineering solutions which have little to no market demand.
Changing the situation: Business education and a better understanding of the market and customer demands is crucial in order for the CEO to escape this difficult situation. The organisation must also be willing to develop internal leaders who can be a guide to future CEOs and help drive the organisation forward, while holding relevant parties accountable in order to succeed.
Example: A software company hired a new CEO with an impressive technical background to take the company into the age of cloud computing. The organisation admired the CEO's technical abilities and executed his vision loyally. However, the problem was that the CEO's new vision was detached from what the market was demanding and also turned out to be more costly due to its technical complexity. The CEO was laid off for "gold plating" the future product portfolio.
The Overlooked Architect
- A strong technology profile that is being overruled by a highly independent tech organisation
The situation: Organisationally similar to the lonely marketeer, the company culture values independence highly. In this scenario, the CEO of the company possesses mostly technology acumen, meaning that the leader likely has many innovative ideas that they wish to move forward with. Though the leader might understand the technical nature of the company's products, the culture and teams within the organisation is uninterested in following the directions of the CEO. The overlooked architect pitfall can result in a scenario where the CEO's ideas and vision for the future of the organisation are disregarded.
Changing the situation: Although this CEO profile may comprehend the technology and products produced by their company, they nonetheless lack the business acumen required to communicate their opinion regarding the future strategic direction of the organisation. Additionally, like the lonely marketeer, the organisation in this difficult situation can benefit from becoming more flexible with the solutions and innovations that they choose to produce.
Example: A successful startup had grown substantially and was now entering the scaleup phase, needing to both develop both its customer and solution portfolio. The Founder became the Chairman and an external tech savvy CEO was hired. Unfortunately, the CEO clashed with the development teams and disagreed on such fundamental issues as, technology choices, development methodologies, and system architecture. The company lost 6 to 12 months in market momentum by being slowed down by internal "tech religious" discussions.
Staying in the Success Zone
No matter which situation the CEO finds him or herself in, there is hope for everyone involved. There are several approaches and steps the organisation and its leaders can take to change their predicament, some of which have been highlighted here.
Whilst most tech CEO’s out there are doing a great job, if one should find themselves in a tricky situation then they should reflect on the fit between their leadership profiles and their organisation's culture, and work consciously on improving their positions, as well as changing the culture of the organisation. The key focus for any organisation that finds themselves in this challenging predicament is to improve existing capabilities, create transparency, and develop accountability.
About the authors: This article was written by a team of consultants from Oleto Associates, a strategy consulting firm based in Denmark. For more information please visit www.oleto.com.
March 2020