Steve Jobs vs. Tim Cook – Innovator vs. Operator – It’s In Their DNA

Personality Analytics Holds the Key as to Why Apple Was More Innovative Under Steve Jobs than Tim Cook

Apple has lost its creative mojo under Tim Cook. Incremental product enhancements have become the norm, replacing a time when revolutionary new products, space age design and landmark advertising was the standard. What changed? Look no further than the CEO chair. Apple founder, CEO and creative genius Steve Jobs prematurely passed away in October 2011. Jobs’ hand-picked successor, Tim Cook, is by experience an operator with a background steeped in supply chain experience. Cook could not be more different from Jobs from a personality standpoint (see our table below).

The importance of assessing a CEO’s personality when conducting a CEO selection process (corporate boards, executive recruiters), or investment due diligence process can not be overstated. This is especially true of industry verticals marked by rapid change where the cost of having an ineffective CEO can be extremely high. It is not so rare to find a situation where a CEO, Board and institutional investor base were slow to realize that a given company’s customers were migrating elsewhere due to product obsolescence or other factors that ought to have been recognized. Few participants want to acknowledge this type of deterioration early or mid-cycle and only do so when it’s too late.

CEOs that create “adaptable” corporate cultures are less likely to lead companies that suffer irreparable declines due to product under-investment or other negligent factors. Adaptable cultures are less likely to be caught off guard and instead lead market change.

Corporate cultures are often an extension of the CEO’s personality. Yes, CEOs influence culture and corporate strategy even in mega-cap companies. Look no further than Microsoft (MSFT) during Steve Ballmer’s tenure as compared to Satya Nadella‘s time as CEO. MSFT’s product & services strategy is dramatically different as is the firm’s approach to competing and partnering with other technology companies.

We highly value the personality trait “openness” in large part because of its relationship to adaptable cultures. Steve Jobs and Tim Cook score similarly on the openness scale – 92nd percentile and 94th percentile respectively. However, looking at the personality sub-traits under openness, Jobs scores far higher than Cook in the two most creative personality sub-traits: “artistic interests” and “imagination”.

Given that Cook lags in these areas, one would need to get comfortable with the idea that a non-creative personality like his (32nd percentile and 14th percentile as detailed below) is capable of generating massive creative output from Apple’s 120,000-plus employees. This is asking too much of Tim Cook in our view. What doesn’t come naturally doesn’t come easily and may not come at all.

Our May 2018 CEO personality analytics research piece may be found here: Personality Analytics: Technology CEOs Analyzed

Our recent podcast on the subject:

Technology News from the Week: June 18th 2018

Technology news items that caught our attention this week:

Google’s AI can now lip read better than humans after watching thousands of hours of TV: Link

Instagram takes a shot at YouTube, further distances itself from other social media platforms by rolling out long-form video: Link

One million people use Bank of America’s AI-powered virtual assistant “Erica”: Link

GM is considering an IPO for autonomous driving unit Cruise Automation: Link

Amazon faces push back related to its facial recognition platform “Rekognition”: Link

AT&T launches new streaming service – “WatchTV” – $15 per month for 30 channels: Link

Disney is willing to divest more Fox assets for deal clearance: Link

U.S. venture capitalists didn’t fund this Duke professor’s powerful facial recognition platform, so the Chinese government did: Link

Gamers rule the world. Now they have their own stadiums: Link

Twitter finds new life with young people. On Instagram: Link

Using CEO Personality Types to Identify Risk

We extracted data from our recent CEORater CEO Personality Analytics research findings. We have focused on the personality trait “Openness” for the purpose of this note.

Recall that CEO’s who score high along the “Openness” spectrum tend to be more adaptable and are better at navigating through changing customer markets, particularly those that may be experiencing disruption from new market entrants, changes in technology, etc.

CEO’s who score low on Openness are less adaptable and less effective in navigating choppy waters, less effective in driving growth during periods of change. Note that ACIW CEO Phil Heasley scores low on Openness (75th percentile) and how this score compares to ACIW’s financial and operational performance.

For the record we are not long or short any of the stocks mentioned in our research.

Humans Will Lead The Machine Age

Machines don’t complain. Machines don’t get sick. Machines don’t ask for a raise. Machines don’t get tired. Machines don’t take lunch. Machines can perform complex tasks – including surgical operations and making investment decisions.

Perhaps most importantly – with the advent of machine learning – machines perpetually remain on the learning curve. The old axiom “you can’t teach an old dog new tricks” does not apply to machines.

Many tasks lend themselves well to “machine-led” environments (by “machine-led” we refer to discrete tasks and complex workflows that have or could have machine learning and/or artificial intelligence as a core underpinning). For these tasks, humans will add value by providing machines with access to data sets that machines could not acquire on their own. The saying “feed the beast” will have never been truer.

However, there are instances where machine-led processes are not optimal. For example: great works of art, music and other forms of inspired creativity and original thinking where the outcome isn’t clear.

Top left: da Vinci’s Mona Lisa; Stanley Kubrick; Tesla roadster; composer Wolfgang Amadeus Mozart

We are inspired to create when we are inspired to create. Would a sentient machine be inspired to create the Mona Lisa? Would a sentient machine be inspired to put people on Mars as Elon Musk wishes to do? (more likely that a machine would only pursue colonization of Mars when it would be practical to pursue that outcome as a result of an event or series of events here on earth). Would a sentient machine have been motivated to create electric vehicles?

Count me an optimist in that I believe that the most strategic, creative endeavors will always benefit greatly from human participation and leadership.

Ferruccio Lamborghini – A Leadership Model Built On Trust & Creativity

Ferruccio Lamborghini

For the Lamborghini Countach – the successor to the revolutionary Miura (our header image) – Ferruccio Lamborghini chose three of Lamborghini’s best and brightest. Then he did something revolutionary – he left them alone.

Openness and Adaptability

Elements of Lamborghini’s leadership style – openness and creativity – are congruent with our recent CEO personality research, particularly as it relates to dynamic, fluid segments of the technology industry (think Artificial Intelligence and Autonomous Driving) where creative approaches to problem-solving and adaptability are key success factors.

The Wall Street Journal recently published an article detailing the process by which Lamborghini brought the Countach to life. To access the article as it appeared in the WSJ CLICK HERE

Our recent CEORater Podcast on the subject is below.

Even more on the Miura (we all have favorites) courtesy of Petrolicious – “The Lamborghini Miura Is Still Untamed”

Ferruccio Lamborghini with his tractor, Countach (L) and Miura (R).

3 Rules for Tech CEOs

1.) Be Bold:

Similar to VCs, public investors want to invest in a bold vision. (See Tesla). Why does TSLA enjoy a premium valuation to other Auto OEMs? Answer: Musk’s vision and spin.

2.) Don’t Be Bullied by Investors – Dictate Your Story:

Tell the Street you plan to take margins down temporarily to pursue “X” initiative. Investors will cut you slack so long as you explain the rationale, the execution and the intended outcome.

3.) Balance Execution Today with Investment for Tomorrow:

Don’t fall into the short-term EPS growth trap at the expense of new product development, keeping your products fresh and building a culture of innovation.
If you pursue the short-term – investors will love you in the short-term (fleeting). The key is to build long-term value over years and decades (see AMZN, CSGP and SSNC as examples of the latter).

Personality Analytics: Technology CEOs Analyzed: Part Deux

Some have asked the question regarding our most recent article: Personality Analytics: Technology CEOs Analyzed – “what does it mean?”

Let’s contemplate one example as depicted in the enclosed picture which plots the 56 Mid-Cap Software CEOs we reviewed against the personality trait “Openness“. The output is that the two CEOs who scored in the 99th percentile (Ryu of Guidewire Software, “GWRE” and Marr of Tyler Technologies, “TYL”) are:

1.) less likely to suffer stalled revenue growth on their watch;

2.) less likely to allow their products and services to become stale;

3.) less likely to be disrupted by a competitor or new market entrant;

4.) less likely to see their respective customers move elsewhere and/or become disintermediated from customers;

5.) more likely to adopt new technology to deliver their respective products and services;

6.) more likely to identify adjacent market opportunities..

..as compared to the Mid-Cap Software CEO universe we analyzed (56 CEOs in total), all else held equal.

Personality Analytics: Technology CEOs Analyzed

As a follow-up to our recent article Your CEO’s Personality Influences His/Her Ability to Scale, we analyzed a group of public company Technology CEOs by applying the Big 5 Personality Traits model. Access our presentation here: TECHNOLOGY CEOs: BIG 5 PERSONALITY ANALYSIS

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Your CEO’s Personality Influences His/Her Ability to ScalePremium

It is true. Your CEO’s personality influences his/her ability to scale (among other things). It may seem self-evident. One’s intuition may suggest such a relationship between personality traits and workplace effectiveness. Well, it is more than a hunch. Published research demonstrates a relationship between CEO personality traits and company performance. Gow, Kaplan, Larcker and Zakolyukina…

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Content Is King – Or – The Rate of Decline Is Always Underestimated

Viacom founder Sumner Redstone once said that “content is king”. The time was the 1990s. Whether to own content assets or distribution assets was the question of the day. Technology, Media and Telecom (“TMT”) companies were positioning themselves for the “information superhighway”.

Today, content assets enjoy premium valuations. Look no further than Netflix (although the book of Netflix has yet to be written. Let’s see how the world views the company when Disney begins to pull content from Netflix in 2019), which is up 62% YTD, while Charter, Comcast and AT&T are down 22%, 22% and 16% respectively over the same period as consumers opt for OTT streaming services over cable bundles.

“Cord-Cutting” and “Cord-Nevers” are hardly new phenomenons. Cracks in the cable bundle began to appear years ago. Companies and analysts have modeled cable subscriber declines for multiple quarters. What is surprising is that companies and analysts are surprised by the rate of decline. Within the Technology sector history has taught us that the rate of decline is always greater than one initially estimates. When things “go south” they tend to go south quickly.

Perhaps it is human nature that companies tend to not position themselves for change fast enough. Change is difficult to accept. Thus, companies underestimate the rate of change. They are slow to on-board new DNA and new ways of thinking that may help them build muscle within the “new discipline”. As a result, disruption tends to come from new market entrants rather than from incumbents. Incumbents become observers rather than change agents. It is only logical that capital would flow toward the disruptors and away from those disrupted.