Do CEOs Read History?
June 8 2011 by Bob Donnelly
There is a familiar pattern of CEOs becoming enamored with their brand to the point that they lose the ability to be creative and innovative. It was this creativity and innovation that proved successful to launching the brand in the first place. This behavior is dramatically on display in “The Problem With Microsoft” by Gary Rivlin in the current issue of Fortune.
History is a great teacher, or it could be if anyone bothered to study past mistakes. However, one CEO after another appears to be oblivious. The leaders at Microsoft are not the first to mismanage their responsibilities as their brands age. In my MBA courses and my writings I have frequently commented on the relationship between the human cycle and the brand/product life cycle. We begin life as small wrinkled little people and most of us end up the same way. The path we take from one to the other is quite predictable given life’s circumstances. The same holds true for brand life cycles.
Companies follow a similar path from entrepreneurial concept (embryonic), into adolescence (growth), adulthood (maturity), and eventually senior citizenship (aging), as we do. If you compare the ages of CEOs to the age of their brands there is an uncanny relationship between the way they age and behave, and the way they manage the brand they are responsible for to their shareholders.
Microsoft CEO Steve Ballmer, 55, is managing the Microsoft brand the same way he managed it when he was 45 with Bill Gates. Both were mired in the technology of providing software to business, but were giving little attention to the innovations required to reinvent the brand.
The telltale symptoms are always apparent, but typically ignored by the aging CEO. In Ballmer’s case the indicators are: a stagnant share price (Microsoft has been stuck at $25/share since 2001), disenchanted senior executives leaving the firm (Ray Ozzie, Michael Cusumano, and Rob Sanfilippo), entrepreneurs whose technology was acquired for their know-how and experience shunted aside after the acquisition, and, new product failures (Kin smart phones for teens, a $1 to $2 billion investment discontinued after only 48 days on the market? And, the Zune music player, which is floundering).
It is a familiar pattern of aging executives put in charge of growing a new business. In the 1980s Exxon mismanaged its digression from the gas tank to the office with their ill fated Exxon Office Systems venture.
In the case of EOS, engineers who had spent their entire careers in the oil patch were put in charge of stitching together emerging office technologies (QYX, QWIP, and VYDEC), of which they had no knowledge whatsoever, into an operating unit to compete with the likes of IBM, Xerox, H-P, and others. At the apex, EOS had the third largest sales force in the market with the smallest share of market.
What was needed then was an entrepreneurial CEO with a team with skills capable of dealing with the requirements of the growth phase. Instead, EOS was just an interim resting place for some good ole boys while they waited to retire. And they managed it that way.
The business press had a field day with EOS during those years. Exxon’s leadership and senior management team didn’t give it much thought until one day in 1984 the company woke up and realized that Exxon Office Systems lost $150 million, which at the time was real money. With little notice, Exxon shut EOS down, much like Microsoft did recently with their Kin phone after only 48 days on the market.
At least once a month there is a news story similar to Gary Rivlin’s about the mismanagement of a brand. I have written about Saturn, Saab, and most recently Borders Books. We have the long documented saga of GM, and even a new book by Howard Schultz outlining what happened to the Starbuck’s brand after he turned it over to his management team, and then had to return to arrest the brand’s declining cycle.
How can the same story be told and retold so many times with CEOs not learning from it? What are they reading? What can they be thinking?