Musings on Entrepreneurship and Innovation
Tuesday, September 07, 2004
The Problem with Rock Star CEOs
Some very good insights by Bob Stearns of Sternhill Partners to the AlwaysOn Network:
Past success is not necessarily an indication of future success. There's some truth to the old adage claiming that lightning doesn't strike twice in the same place. Specifically, it's hard to separate the person from the previous success: What part was luck, other members of the team, or just the right moment in time for that particular product or service? Additionally, given how quickly high-tech markets and technologies change, yesterday's winning strategies may simply no longer apply. Worse, faced with real adversity, a Rock Star, used to winning, may find it hard to adapt and forge ahead.
Stearns' observations echo those made by a couple of other smart guys. Theoretical physicist and science writer Mark Buchanan noted:
So while great characters are at the center of great happenings, they do not supply the forces that drive them. Instead, the role is more important than the person who occupies it...
That's not to say that the person filling the CEO role is unimportant. To the contrary, great CEOs demonstrate their greatness by filling the role in an exemplary fashion. Even so, extraordinary performance is, to a significant degree, a function of extraordinary circumstances. Nevertheless, fundamental attribution error is common. Bill Reichert at Garage Technology Ventures, however, is clear on the subject: "Venture investors want a value proposition that is extraordinary, and a team that is competent."
Chris Argyris, who authored the classic Harvard Business Review article, Teaching Smart People How to Learn, wrote:
Any company that aspires to succeed...must first resolve a basic dilemma: success in the marketplace increasingly depends on learning, yet most people don't know how to learn. What's more, those members of the organization that many assume to be the best at learning are, in fact, not very good at it. I am talking about the well-educated, high-powered, high-commitment professionals who occupy key leadership positions in the modern corporation...
Put simply, because many professionals are almost always successful at what they do, they rarely experience failure. And because they have rarely failed, they have never learned how to learn from failure.
I'm not alone in believing that the ability to adapt is a function of the ability to learn. A VC-backed venture is very likely to face significant failure. The historical success that, through the amplifying effects of attribution error, makes a Rock Star CEO can, indeed, inhibit learning, adaptation, and future success.
The standard of competence suggested by Reichert can be very high, indeed. The role of CEO of a rapidly growing company is extremely demanding. But, I believe that Reichert and Stearns are right: I'd throw my lot in with the competent CEO who can learn and adapt over the Rock Star every time.