Replacing a CEO is the board of directors' most important and most conflicted responsibility. For mature companies, replacement often comes too late – sometimes delayed because directors have become captive to their board positions and/or a charismatic CEO. Wait too long and the company may go into a downdraft, causing a powerful CEO to insist on more time to right the business in order to preserve his or her reputation. But undue delay greatly increases the chance of a slipshod choice that will itself require rectification.
For start-ups, replacement of a founder/CEO often comes too early. Venture capitalists routinely oust the founders of fledgling companies as soon as the employee count crosses some arbitrary number like 100 or 1000. But that abstraction ignores the countervailing truth: the most successful IT companies, with the greatest return to shareholders, were built by their founders: Steve Jobs at Apple, Jeff Bezos at Amazon, Larry Ellison at Oracle, Bill Gates at Microsoft, and Larry Page and Sergey Brin at Google. In many cases, the young founders were given early support by more experienced chairpersons or coaches, notably Mike Markkula from Intel at Apple, and Eric Schmidt from Sun and Novell at Google. But in both cases, ultimately, the founders carried the day.
CEO replacement is akin to brain surgery. Frequently it’s necessary and often delayed. And there’s a high rate of patient or company fatality.
The IT sector is at another turning point as mobile devices dampen the demand for PCs – just as PCs formerly dampened and then buried the demand for minicomputers. Simultaneously, the purchase of new on-premise servers and licensed software is being displaced by public cloud infrastructure and software services. Add cybersecurity as another question mark for the next decade. In sum, this transformation points to an era of “creative destruction,” in the phrase coined by the Austrian economist on entrepreneurship Joseph Schumpeter. As agile and often new firms will produce creative new solutions, slow-footed companies will be destroyed.
These two prospects will require special assessment: the new companies rising to these opportunities and the old companies threatened by impending change. What lessons can be learned from the histories of corporate rises and falls during equally ferocious transformations of the past?