CEOs of large companies are usually only appointed after a comprehensive global research process. The eventual choice can devastate a business or create enormous value. After such research, it is generally assumed that the winning candidate knows what a CEO does, especially since the winner is often already a CEO.
In his landmark Harvard business review “Secrets to Great CEO Selection” Ram Charan shared four key “secrets” to great CEO selection. First, the breeders “pick two or three skills required for the new leader to be successful in this business.” Second, they strive to be objective when evaluating candidates. Third, they choose “not the best leader but the best adjust.” Finally, they “take into account the imperfections of the chosen candidate”.
What is missing from the list of milestones is an agreed description of the job the CEO will actually do. Now you might think, especially after an exhausting research process, that surely everyone knows what a CEO does.
Yet, as the industrial age transitions to the digital age, two very different conceptions of what a CEO does are emerging.
Two different concepts of what a CEO does
Consider the CEOs of the three most valuable companies today, all digital, and each worth more than $ 2,000 billion: Amazon, Apple and Microsoft. In a previous article, I noted how Microsoft CEO Satya Nadella acts very differently from his predecessor, Steve Ballmer. Elsewhere, I wrote how Jeff Bezos at Amazon acted very differently from the typical CEO. Likewise, Apple CEO Tim Cook says he doesn’t focus, like most CEOs, on stock prices. “The share price, revenue and profit are the result of doing things right on the innovation side, on the creativity side, focusing on the right products, treating customers like jewels and focusing on the user experience. And so this is where we put our energies.
What typical CEOs do is very different from this behavior. We know this from a Harvard Business School survey conducted by two management icons, Michael Porter and Nitin Nohria, who took an in-depth look at CEO time use in large, complex companies over an extended period of time. He tracked the time allocated to 27 CEOs, or nearly 60,000 CEO hours.
The jobs performed by digital CEOs and those of industrial era CEOs both bear the same label, “CEO”. But what they do is as different as day and night.
a. The stark contrast between the behavior of a CEO in the digital age and that of CEOs in the industrial age begins with the purpose of the company. The digital CEO has a customer-centric mindset. In contrast, the HBS survey shows that for CEOs in the industrial age, customers are almost an afterthought. CEOs only spend 3% of their time with customers, which they themselves didn’t know. “Most CEOs were dismayed to find out how little time they spent with their clients,” the survey notes.
b. The main task of the digital CEO is the road map for the future. So, for Bezos, it was “pretty much everything” he worked on, delegating day-to-day business operations to others. His job was to think long term. A very different picture of CEOs in the industrial age emerges from the HBS CEO survey: the word “innovation” is not used once in the HBS survey of what CEOs do. Instead, these CEOs are concerned with the administration of current business operations. CEOs have “large encompassing functional programs, business unit programs, multiple organizational levels, and a myriad of external issues… Unlike any other senior executive, the CEO must engage with them all.
The frequent defense of CEOs that this failure to approach innovation is the fault of stock market pressure to meet quarterly profit targets is undermined by the high valuations given to digital giants who focus on the future.
vs. The third dimension is the continuous creation of new businesses. A constant maxim of Bezos, for example, is that “we are still on the ‘first day’ of the Internet. Indeed, in Bezos’ eyes, “Amazon is just getting started,” Bezos has repeatedly led Amazon into new large-scale ventures. A very different picture of CEOs emerges from the HBS survey. These CEOs seem to live in a pre-digital world, with no sign of interest in starting new businesses. This is in part because they have a “grueling schedule” to run the existing business. “Why such an exhausting schedule? Because it’s essential to the role, ”Porter and Nohria explain. “Every constituency associated with a company wants direct contact with the person at the top. “
D. The digital CEO create multiple paths to yes. For Bezos, “the most important word at Amazon is yes. Bezos explains that “in a traditional corporate hierarchy… a junior executive comes up with a new idea that he wants to try. They have to convince their boss, their boss’s boss, their boss’s boss and so on – any “no” in that chain can kill the whole idea.
Here again, a radically different picture emerges in the HBS survey of industrial-age CEOs. There is no hint of effort to create “multiple paths to yes”. According to the survey, these CEOs are concerned about internal issues such as whether “spending too much time with their colleagues will make them appear isolated and out of touch.” Indeed, these CEOs are act as of the CEO, rather than being the CEO.
e. The fifth aspect of the digital CEO is to be “The director of the slowdown” for the big bets. At Amazon, there are “many paths to yes” for small improvements. But when it came to larger ideas that could change the direction of the entire company, Bezos saw himself as acting as “the boss of the downturn.” Here again, a radically different picture emerges with the CEOs of the HBS survey. There is no hint of a start-up playbook for major changes in the direction of the business. Instead, CEOs seem so busy administering the existing business and meeting short-term profit goals, they have little time to think about these issues.
How to solve the problem of the failure of “digital transformations”
The overall picture is therefore one of striking contrasts. A digital CEO is an entrepreneur passionate about creating new value for customers and concerned with strategic agility. CEOs in the industrial age act like cautious administrators, overseeing the existing business, anxious to satisfy the multiple constituencies that have demands on their time.
Many companies in the industrial age are attempting “digital transformation” but have little success. A key aspect of the problem is simple: The CEOs of these companies do not act like the CEOs of the digital age.
Boards have one simple corrective action at their fingertips: create and monitor a CEO job description in the digital age.
And read also:
Why digital transformations fail
The Seven Things a Highly Agile CEO Does