Can Any Executive Lead Disruptive Growth?


Can Any Executive Lead Disruptive Growth?

Because the processes and values of the mainstream business by their very nature are geared to manage sustaining innovation, there is no alternative at the outset to the CEO or someone with comparable power assuming oversight responsibility for disruptive growth. Can only certain of these executives exercise this oversight effectively, or is it possible for any senior person to succeed? We noted in chapter 2 that most of the companies whose stock we wish we had owned in the past fifty years took root with a disruptive strategy. A fewóbut not manyóof these companies subsequently caught or created other waves of disruption that kept the parent corporation growing at a robust pace for a time.

One of our most sobering realizations is that within the population of companies that successfully caught a subsequent wave of disruption and stayed atop their industries, the vast majority were still being run by the companyís founder at the time they tackled the disruption. Only a few companies that were run by professional (nonfounder) managers have succeeded in creating new disruptive growth businesses. Table 10-1, although not exhaustive, illustrates what we have sensed.[9]

Table 10-1: Founder-Led Companies That Launched New Disruptive Businesses

Company

Disruptive Growth Business

CEO/Founder

Bank One

Monoline credit cards (purchase of First USA)

John McCoyaa

Charles Schwab

Online brokerage

Charles Schwabbb

Dayton Hudson

Discount retailing (Target Stores)

The Dayton family

Hewlett-Packard

Microprocessor-based computers

David Packard

IBM

Minicomputers

Thomas Watson Jr. c

Intel

Low-end microprocessors (Celeron chip)

Andrew Grove

Intuit

QuickBooks small business accounting software; TurboTax personal tax assistance software; putting Quicken money management software online

Scott Cook

Microsoft

Internet-based computing; SQL and Access database software; Great Plains business solutions software

Bill Gates

Oracle

Centrally served software (applications service provider)

Larry Ellison

Quantum

3.5-inch disk drives

Dave Brown/Steve Berkley

Sony

Transistor-based consumer electronics

Akio Morita

Teradyne

Integrated circuit testers based on CMOS processors

Alex díArbeloff

The Gap

Old Navy low-price-point casual clothing

Mickey Wexler

Wal-Mart

Samís Club

Sam Walton

aMcCoy was not the founder, but was the primary architect of the acquisition strategy that drove Bank One to its prominence.

bThe companyís co-CEO, David Pottruck, strongly assisted Charles Schwab in this effort.

cAgain, Watson was the son of the founder, but was the primary driver of IBMís success in mainframe digital computing.

Itís worth noting that these founder-led organizations were also essentially single-industry firms (that is, relatively undiversified when they faced the disruption), which, as chapter 9 noted, can make creating a new disruptive business even harder. We suspect that founders have an advantage in tackling disruption because they not only wield the requisite political clout but also have the self-confidence to override established processes in the interests of pursuing disruptive opportunities. Professional managers, on the other hand, often seem to find it difficult to push in disruptive directions that seem counterintuitive to most other people in the organization.

Table 10-2 shows, however, that there are some exceptions to the principle that only founders seem able to drive disruption. We know of five major companies that were run by professional managers at the time they launched successful disruptions. Of these, Johnson & Johnson, Procter & Gamble, and General Electric are all icons of diversification. IBM and Hewlett-Packard were relatively undiversified when their founders launched those companiesí first successful disruptive businesses; hence, they are listed in table 10-1. Later, when professional managers were running the show, these two firms launched or acquired additional disruptive businesses, but did so when the firms had become much more broadly diversified.

We suspect that because the professional managers of the companies listed in table 10-2 undertook their new disruptions in the context of a diversified, multibusiness corporation, it was easier for them to succeed. Although their capabilities as managerial resources were undoubtedly important in these actions, there were precedents and processes for creating or acquiring new businesses and managing them appropriately that assisted the professional CEOs in creating disruptive growth.[10]

Table 10-2: Professionally Managed Companies That Launched New Disruptive Businesses

Company

Disruptive Growth Business

General Electric

GE Capital

Hewlett-Packard

Ink-jet printers

IBM

Personal computers

Johnson & Johnson

Glucose monitors, disposable contact lenses, equipment for endoscopic surgery and angioplasty

Procter & Gamble

Dryel home dry cleaning, inexpensive power toothbrushes, Crest brand tooth-whitening strips

[9]The nature of these companiesí disruptions is analyzed in figure 2-4 and the appendix to chapter 2.

[10]Something else worth noting is that we have not studied the relative success rates of founder-led versus agent-led disruptive initiatives. All we can say on the basis of the analysis we have done so far is that the relative incidence of successful founder-led disruption is higher than for agent-led disruption. Just who has a better batting average we canít yet say. For unfortunate but understandable reasons, data on failed business creation efforts are hard to come by.