Advantage – the CEO with Digital Competencies

Frequently companies look to Business Executives to become the next CEO – where over the past 20 years, 85 % of new S&P 500 company CEOs came from four roles : Chief Operating Officer, Divisional CEO, Chief Financial Officer, or a second-layer management position leading a large business unit.

However, recent CEO appointments at Weber, XPO Logistics, Twitter, Intel, Microsoft, IBM, etc. show more companies are seeing value in having a leader with a technology background.

This is occurring because of the increasing need for the CEO to have digital competencies and experiences to effectively contribute to –

A. The creation, scaling / pivoting / killing projects – which frequently are technology based
B. The evolution of the organization’s digital services / capabilities
C. Digital / Technology / Business corporate strategy
D. Increase the rewards and reduce the risks association with disruptive Business Innovation
E. Better lead and navigate change through business transformation and new strategic initiatives
F. Improve at managing the changing nature of risk with higher awareness and better look ahead skills
G. Meaningfully improving outcomes by successfully creating new value, expanding opportunities, increasing relevance and revenue, etc.

These competencies in the CEO are now essential as organizations rely more on technology to build brand value, differentiate themselves in the market, be better positioned to successfully make or enter a new market, to grow the business, etc.

Examples of people with a technology background becoming CEO are –

1.  Parag Agrawal – who was Twitter’s CTO prior to succeeding founder Jack Dorsey as CEO in November 2021.  As Dorsey indicated, Agrawal was involved in every critical decision and led the company’s technical strategy that guided the development of Twitter’s A.I. and machine learning initiatives.

2.   Microsoft CEO Satya Nadella was previously the EVP of the company’s cloud and enterprise group – that is responsible for building and running its computing platform.

3.   Intel CEO Pat Gelsinger, who had been CTO of Intel before leaving to become EMC COO and later VMWare CEO.

4.  Arvind Krishna, the CEO of IBM spent nearly 30 years in various tech leadership positions at the company and most recently oversaw the company’s cloud and cognitive software business before being named CEO in April 2020.

5.  An example of the increasing number of traditional companies recognizing technology as a main business driver going forward is Weber, the grill manufacturer, appointing Alan Matula, the Chief Technology Officer, as CEO after Chris Scherzinger stepped down.  Matula, became CTO after being Weber’s CIO since 2015 and previously was with Shell in various technology-focused roles, including as CIO from 2006 to 2015. This change as CEO is a reflection of how Weber, a company mostly known for metal kettle grills, is leaning into technology for growth.  With recently launched Weber Connect Grilling Hub temperature probes (that you push into whatever you’re cooking on the grill) that interface to their app on your phone provides step-by-step cooking preparation, directions and notifications when the meat needs to be flipped, is done, etc.  Weber has also been active in M&A in the tech space, acquiring smart appliance and technology company June in 2021 after previously leading the start-up’s Series C funding round and partnering on products. Weber also acquired iGrill in 2016, a company that made connected thermometers. “ We believe that the connected capabilities offered by our technology-enabled products will enable a closer relationship with our consumers and usher in a new generation of enthusiasts who will join our global community of Weber loyalists. ” as indicated in Weber’s S-1 filing leading up to its summer 2021 IPO. Matula has been credited for leading the company’s R&D organization, as well as its Internet of Things and digital initiatives. He said the company will remain focused on “ driving product innovation ”  that leverages his experience with global business transformation, cost management, and leading the business through an unprecedented change.

6.  Freight transportation services company XPO Logistics announced recently that Mario Harik would be taking over from Brad Jacobs after the company’s spin-off of its high-tech truck brokerage business.  While Harik had been serving as acting president of XPO’s less-than-truckload (LTL) business, he had been the company’s Chief Information Officer. On XPO’s second quarter earnings call, Jacobs said that Harik has been “ hands-on with LTL as CIO for seven years and that as soon as we acquired the network we started developing technology where he spearheaded countless innovations that has given us a tremendous commercial advantage.”

Recognizing if the company is already tech-centric, it’s an easier choice to transition leadership to a person with a technology background. In contrast, a financial, healthcare or manufacturing company, or other established company in a mature industry, historically a person was selected from finance, engineering, or business development to be the new CEO.  However, this is changing because all companies in all industries need to become tech-centric to be better positioned to leverage technology to –

A. Satisfy increasing expectations – frequently with new digital services
B. Improve operational efficiencies
C. Better manage the business
D. Move to a new business model
E. Improve decision making
F. Become a more entrepreneurial organization
G. Attract and retain top talent

Based on these insights, success going forward is highly dependent on the CEO having high digital competencies to –

  1. Lead in an increasingly digital world
  2. Satisfy the rising demands for new digital services – externally, internally, ESG, regulatory, etc.
  3. Deliver high value and a great User experience
  4. Provide superior convenience and quick gratification for Customers
  5. Grow and add revenue streams – with products and services having high stickiness and margin

For this to occur, the need is for the new CEO to be a person with a well-rounded skillset having high competencies and ambitions who is able to build on their background as follows –

A. With a Technology Background – gain business and operational experiences, get an executive MBA, lead a non-tech group in the organization, be involved in business reviews / strategy / planning, etc.

B. With a Business Background –  develop technical / technology competencies / skills, gain digital and innovation experiences, lead a tech group in the organization, be involved in technology reviews / strategy / planning, etc.

+  Expand Awareness by networking with people having other skills / capabilities, different backgrounds, etc. – to fast-track learning and improve decision making  

Having a High Curiosity and good at – asking questions, discussing new topics, showing insight, identifying opportunities, communicating, engaging with people, etc.  

This is especially relevant now with the rising need for strategic, thoughtful leadership with a CEO who appreciates where opportunity and value is going to be – and has the insight and ability to move the business forward by evolving the culture and merging the digital and business worlds.   

Aug 30, 2022     CAIL  Innovation and Business Strategy commentary         www.cail.com         info@cail.com