CEOs need to set a clear strategic direction and work to get everyone in a company to support it. At the same time, they must be flexible enough to change their course rapidly based on business conditions. Somewhere between the cult leader CEO who is too dogmatic in his or her beliefs and the mayhem CEO who shifts direction with the wind lies the balance that leaders need to strike.
The cult leader CEO indoctrinates employees with a vision that's almost spiritual in nature. Questioning this vision is not allowed. Any doubts are treated as disloyalty and a failure to get with the program. Companies run by a cult leader CEO can be quite successful until they encounter an issue.Then they might fail spectacularly because no one in the organization considered other possibilities or challenged fundamental assumptions. Study the rise and fall of Research in Motion, the creator of the BlackBerry, for an example of this failure mode.
The mayhem CEO starts new projects and redirects resources constantly, creating an environment of chaos. These high-energy CEOs have had success early in their careers because of their willingness to change rapidly and take on new initiatives. But this “idea of the day” approach often drives employees crazy. Most people aren’t that fond of change and can't adapt to a new direction every day or even every week or month. Mayhem CEOs usually fail before achieving any renown.
Clearly, the key to striking this balance is having a clear strategic direction but being open to new information. The best CEOs know their company and market well enough to recognize when it’s time to make a change. The irony is that the better a CEO communicates the mission, vision and values internally, the less employees will challenge the company’s direction. Because of this, CEOs should constantly seek external sources of objective data and opinions, especially the following three:
Competitors are an outstanding source of outside intelligence. By going to trade shows and being active in their industry, CEOs can closely follow their key competitors and look for objective information that may indicate the need for a change.
CEOs should always examine questions such as “Is our win rate in competitive deals going down? Are competitors’ growth rates increasing faster than ours?” Conversations with former employees of these competitors or even current ones looking for a new job can shed new light on how rival firms operate and perceive the CEO’s organization.
Customers can provide a wealth of information on products, services and competitors to help CEOs figure out if their company is on the right track. One key is asking the right questions. Simply asking customers what product they want to buy often yields no answer. The correct questions prompt customers to reveal their biggest problems. Then it’s up to the CEO’s organization to figure out the best product to solve those problems.
Customers didn’t tell Chrysler CEO Lee Iacocca they wanted a minivan. They told him how they wanted the doors of station wagons to open more easily when they tried to load bags of groceries and hold a baby at the same time. The engineers at Chrysler took that problem and the minivan became the solution.
3. New executives.
Adding a new executive to the team every year or two can pay big dividends. After running a company for several years, CEOs can run out of innovative ideas. A new executive with novel ideas can be a breath of fresh air for a team and create new opportunities for growth. On most executive teams, a healthy level of turnover can be a good thing.
The value of a business model is that it provides a framework for constantly testing and refine a CEO’s assumptions as new data is presented. CEOs need to be courageous and humble enough to analyze this data and make changes as needed instead of being rigid about a business model or wasting time chasing every new shiny object.