As Lord MacLaurin, a former Tesco CEO, put it: “Bright business people will always thrive wherever they go.” Specialist skills are widely seen as critical for middle managers, but how much do they matter at the top?
Specialist skills, we find, are clearly important for CEOs. However, you can’t simply equate having the right specialist skills with having experience working in the industry. In 2005, Nokia appointed Olli-Pekka Kallasvuo as CEO. He had been with the company since 1987. So he had plenty of experience in the telecommunications industry and more narrowly working for a company producing mobile phones. But he had studied law at University and his Nokia background was first in the legal department and then in finance.
At the time, Apple had Steve Jobs at the helm. In 2005 Apple and Jobs had never produced a phone. But Jobs had a history of personally leading successful hi-tech product developments.
At that phase in the life of the mobile phone industry, the future was all about successful new product launches and phones were becoming more like computers. You would have been right to back Apple and Jobs over Nokia and Kallasvuo. Jobs’ skills in hi-tech product development trumped Kallasvuo’s industry experience.
More generally, in hi-tech, where you are often betting the company on the success of a few new product developments, CEOs with a technical background and hands on experience in new product development do indeed, on the whole, demonstrably create more shareholder value than those without. And in fashion retailing, you will probably prefer a CEO with experience of product design, buying and sourcing. Those skills are more important and more difficult to learn than store management.
It isn’t always obvious what specialist skills you want the CEO and top team to have. Tesco, you might argue, is now more a multinational conglomerate than a UK food retailer. Nevertheless, most analysts would still suggest the main issue for the company is improving its deteriorating performance in UK food retailing.
But, even then, what is the key to success there? What you believe matters most for a company’s success influences the skills you would like its CEO to have.
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