Archive for March 2014

Telephone Switchboard Operators - a vintage circa 1914 photoA well-regarded company today usually has a CEO succession strategy. It may be an explicit successor — a “number 2” — or it may be a “pool” of executives running different businesses. Either way, the fatal assumptions are that 1) only the CEO is temporary and 2) the company is permanent. But there really is no reason to believe this.

Everyone knows that the CEO won’t be CEO forever, but more often than not, the CEO is replaced because the company needs to change. Companies should instead plan for changes to themselves rather than just the next CEO.

CEOs should create a company succession strategy. In other words, the CEO should create new companies authorized to cannibalize the existing business or better yet disrupt its industry or adjacent ones. Of course, well run companies can have competitive advantages that keep them going a long time, but it is foolish to think that any company in its current form lasts forever.

If you assume that your current business is going to die, you are forced to innovate to find the next growth opportunity. I don’t know if this is how their chief executives think, but look at Amazon, Google, and Facebook. Jeff Bezos keeps entering and challenging new industries and is now far from only managing an online bookstore. Larry Page is investing in self-driving cars, robotics, and smart glasses. Mark Zuckerberg paid $19 billion for WhatsApp. These CEOs are investing in or buying into their futures while their current businesses are still strong.

To be sure, it’s a delicate balancing act. But if the internal startup does a good job of thrashing the mothership, you don’t need a CEO succession plan. The new CEO — and the new business itself — will be obvious to everyone.

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Photo credit: “Telephone Switchboard Operators” photo by Royce Bair is licensed under CC BY NC ND 2.0