Wednesday, November 14, 2012

Leaders That Succeed and Leaders That Fail

In the reading “Do you have the right leaders for your growth strategies,” the author analyzes the links between certain leadership traits and the growth of a company. Using information provided from McKinsey’s company database and Egon Zehnder’s huge database of performance appraisals for 10,000 different senior executives, the conclusion that leadership quality is critical to growth, that most companies don’t have enough high- quality executives, and that certain competencies are more important to some growth strategies than to others.”

Currently, I work for a Pittsburgh-based non-profit organization, whose aim is to bring forth ideas and transform them into viable and sustainable companies. The single most vital step involved in this transformation process is the identification of an adept leader who can maneuver his or her way through a complex market and take the newly formed company to a higher more financed and more attractive level. Numerous startups with brilliant and innovative ideas have failed due to the poor quality in leadership exhibited in the growth process. Especially in the biotechnology industry we see this time and time again. An inventor forms an idea. He wants to turn it into a product. He forms a company. He gets investors. The company burns through cash. The company fails. The value of a bright idea cannot be appreciated if the execution into a formed company is not properly conducted. A large reason for this lays in the hands of the CEO, the man in charge of taking the company from the ground upwards. The inventor of the product often does not have the qualifications to actually run the company especially since that man has a proclivity towards pushing his product to succeed insofar that the product fails. His bias might often lead to the downfall of the company. This is not always the case, but regardless one must be wary of whom to select as the lead man when trying to get any firm up and running.

As the article states based on data, those executive who scored highly on the criteria of delivering customer impact, in other words the capacity to understand customers’ evolving needs, saw superior growth in their respective companies through organic means and acquisitions.

Probably the most obvious example of this would be Yahoo’s transition to the new CEO Marissa Mayer, originally a key leader at Google. Although there is no hard data on Yahoo’s current growth given that she just joined a few months back, we can expect a directional change in the way Yahoo perceives their customers’ needs and how Mayer will strive to achieve them.

Mayer gave some insight into her strategy for Yahoo: “My focus at Google has been to deliver great end-user experiences, to delight and inspire our end users. That is what I plan to do at Yahoo, give the end user something valuable and delightful that makes them want to come to Yahoo every day.”

Her work at Google paved the way for a whole population of people to integrate the functions into their daily lives with many of the Google products she personally impacted throughout development. We can agree that her work progressing to her executive position at Google contributed largely to the revenues that Google experienced throughout its growth into the Internet giant. So we can expect that her focus on the user experience, the customer, will complement her other qualifications, hopefully leading to a whole new and successful growth strategy at Yahoo.

The second quality exhibited by a leader that has been shown to positively correlated with the growth of the company would be that leader’s market insight into the current trends of the industry his or her company falls under.

A prime example of this is reflected in the struggle for Netflix, the movie streaming and DVD renting giant, to maintain revenue after the company’s decision to split their two businesses. While I really like the separation of their video streaming business and DVD business since much of my TV show watching is done on the internet, I don’t think it hit home with the marketplace, where much of the trends are moving towards online streaming. As a result, Netflix lost a solid number of their DVD customers resulting in a net loss in profit for the company in the past two years. Having the two business bundled would allow for benefits for both sets of customers Netflix was targeting. While the CEO did take a risk at this venture and accepted the fact that in fact it had hurt their customer base, had he been more wary about the trends leading to video streaming and the needs of his own customers, he might have been able to better salvage the declining revenues of late. As a result, investors of Netflix are now considering 

Through these examples and the information from the article, we can clearly relate the need for strong leadership in certain core competencies in order to successfully carry out a growth strategy for the future. Stepping aside, what examples of companies have you seen fail due largely in part to leadership struggle and what qualities do you find should be exemplified in these leaders to strive for higher growth margins? 

"Do you have the right leaders for your growth strategies?" Katharina Herrmann, Asmus Komm, and Sven Smit. Mckinsey Quarterly.  July 2011

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