Joel Vincent

Technology. Wine. Family. (maybe not in that order)

Changing CEOs is a Saavy Business Move

When I read Inertia Beverage’s announcement of a change of CEO it was not only interesting but actually a very wise move by the current CEO and a friend of mine Paul Mabray.  I don’t want to get into a long post on my business philosophy but I thought I should post a short commentary as I saw some conversation breaking out that made it seem as if this was a negative thing.

I know many times press releases put alot of spin on a bad situation to make it seem like a good one.  I know because part of my role in various marketing jobs had been to do just that and I always put out the story before someone makes a “scoop” and spins it negatively first.  Thats just good PR.

But I view Paul’s announcement differently.  I’ve been in High-Tech since the 1980’s even before I was in college (when I was working for a software retail company).  But more importantly, my view is shaped by something my mentor, Don McKinney, imparted on me when I first moved to Silicon Valley.  Basically, if you want your company to really succeed you first have to recognize that the company will require different CEOs and RARELY does the same person have the personality to be all of these.

  1. the “$0 to $10M” CEO – this CEO thrives on the startup situation.  Risk taker, entrepreneurial, big-game hunter, and business developer (as well as visionary and marketeer), this CEO is usually one for the founders.  The key here is to have a sales person in this role and drive the initial products to be customer-oriented with a saavy product team.  This CEO recognizes that getting A+ players on the team is more important then having the right structure or hierarchy.
  2. the “$10M to $100M” CEO – This CEO can take those first few BIG customers and nourish them such that they can be cash cows for the company.  At the same time he/she starts to pull in trusted sales and business development folks as well as marketing folks to compliment development and empowers them to do their job.  What can happen to a company that may cause it to fail is if CEO #1 thinks he/she is CEO #2 but isn’t really and has trouble either getting help to create new business, create a polished brand, or both because he/she still thinks he/she has all the best ideas and no one else can do it for them.  Its the beginning of scaling the company.
  3. the “$100M to $1B” CEO – This CEO recognizes that the company is going to go BIG TIME and needs processes that allow the organization to scale.  Oh the dreaded “P” word, but its true.  At this point, customer care is still job #1, but setting up the structure to scale operations is becoming more and more important and this CEO needs to allow that to go to a professional A+ COO type.  Again, failure can happen here when a CEO doesn’t appreciate what an operationally oriented person’s value is (i.e. can make the organization scale in ways the CEO never dreamed up).  This CEO also has to be able to attract the investment levels that typically the founding CEO doesn’t have access to.  This is usually when you see a CEO finally step aside but it can be too late.
  4. the “$1B to $10B” CEO – Now your talking about the professional CEO that you see at the top of Cisco, GE, and companies like that.  Charismatic and oozing leadership that can rival Bill Clinton in his prime.  This CEO still focuses on his top customers but there usually are so many that the top 10 are likely the only he/she gets to visit.  This CEO could be very very smart but is really removed from day-to-day so is fed development information and status from a staff of A+ lieutenants but likely has a big company filled almost 50% with B players (inevitable at this size).  The hope is that CEO #3 created solid enough processes that the company will thrive and compensate for some incompetence that has inevitably creeped into the the ranks of the company.

Thats the idea in a nutshell.  You can move the revenue bands up and down a little but this is generally true.  I had this wisdom passed on to me in the early 1990s and I’ve seen it proven out time and time again.  What I see in the Inertia announcement is a smart man that wants to see his company do great things.  But I say “smart man” because from my conversations with him, he intuitively sensed he wasn’t CEO #2 or #3, checked his ego at the door, and did the right thing.  He’s still working in there directing strategy and given his history in the wine business thats probably a good move.

The employees of Inertia should be excited.  As a Silicon Valley veteran, I can tell you more often then not that a move like this initiated by the CEO prevented this from happening later in your lives when the Board of Directors forces this decision (and they always do) because the CEO isn’t scaling the company for the big time.

Cheers!

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1 Comment»

  Anonymous wrote @

Joel,
Thank you for the great description of company growth and your objective analysis of CEO transition. I think one note to add is that the great companies (almost to a tee) have the founder become a key contributor and partner with the new CEO to ensure the success (look at google with the two founders or many, many other examples). I plan to be a key supporter to Ted and one of his most powerful contributors to help make this company great. He now rounds out my new executive team to help us migrate to #3 on your list and I am blessed to have such a great team help us change the way wine is bought and sold in the US.

Inertia – Powering the Wine Revolution

—Paul Mabray – Chief Strategy Officer


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