Category: Technology

Boards: Perform Due Diligence on CEO Candidates Upfront. GE Is Still Cleaning Up Its Mess.

Boards: Perform Due Diligence on CEO Candidates Upfront. GE Is Still Cleaning Up Its Mess.

I’m puzzled by the mess that is GE. The Company recently removed former CEO John Flannery after only 14 months at the helm only to replace him with a Board member (Larry Culp). I was a fan of Flannery’s effort to decentralize operations and to divest non-strategic businesses. However, I did not agree with all of his choices. Perhaps GE’s Board did not either. It is clear that the Board and Flannery did not operate in lockstep. Therefore, it would seem that GE’s Board performed little due diligence prior to promoting Flannery to CEO. Here are a few thoughts for corporate boards to contemplate prior to hiring a CEO.

1.) Executive Recruiters are there to get a deal done. Executive recruiters exist to get paid. Too often recruiters rush to fill vacant CEO posts with acceptable candidates in order to quickly realize their fees. The proper approach is to invest the time required to ensure CEO candidate fit. To this point, I’ve yet to see an executive recruiter publish statistics about median CEO tenure for assignments they’ve filled.

2.) Corporate Boards ought to adopt a more data-driven approach to ensuring CEO fit.

a.) Relationships are only the tip of the spear. Relationships are great to leverage when initially casting a wide net to identify CEO candidates. However, that is only the beginning of the process. Simply because “Person A” knows “Person B” does not qualify Person B for the CEO job. Consider GE for example. Flannery was hired by the company in 1987 and held a number of senior posts before becoming CEO in August 2017. I assume plenty of people knew him at a superficial level, but did anyone at the Board level “know” him at a substantive level?

b.) Candidate due diligence is often overlooked or an afterthought. Due diligence consists of more than talking with a few people and conducting a background check.

c.) Collect candidate data that matters. In the case of GE – why didn’t the Board ask Flannery to submit a plan for fixing GE as part of the recruiting/ diligence process? Instead, the company promoted Flannery to CEO where he then embarked on a 100-day tour to inform his grand strategy for repairing GE. This should have been part of diligence. Do not pass go, do not collect $200 until you show me something as a Board member that I can hang my hat on.

 

Facebook – Things Will Get Worse Before They Get Better<span class="badge-status" style="background:red">Premium</span> 

Facebook – Things Will Get Worse Before They Get BetterPremium 

Things Will Get Worse for Facebook Before They Get Better. A Second Act Is Required. Our thesis is simple. User growth has slowed and in the recent June quarter declined. We expect this trend to continue in the near-term as the following factors negatively impact Facebook’s business. Declines in User Trust and Engagement: The Cambridge…

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CEORater Technology Founder CEO Index Continues to Outperform

CEORater Technology Founder CEO Index Continues to Outperform

The CEORater Technology Founder CEO Index outperformed its peer group Year-to-Date through September 18th 2018.

The CEORater Technology Founder CEO Index returned 32.3% and 28.5% on a Weighted and Unweighted Stock Price Return basis respectively (click here for detail) during the January 2nd 2018 – September 18th 2018 period.

The S&P 500 Information Technology (TKR: S5INFT) returned 16.0% on a Weighted basis over the same period.

The Powershares S&P 500® Equal Weight Technology ETF (TKR: RYT) returned 16.6% on an Unweighted basis over the same period.

Don’t Believe The Hype

Don’t Believe The Hype

Cryptocurrency firms fell from grace (Chain and Lightyear merged to form Interstellar) as valuations and expectations got too far ahead of themselves for both the various “coin” firms as well as for blockchain – the distributed database technology that enables digital currency transactions. We are long-term bullish on each – particularly blockchain.

The crypto space isn’t the only sector that grew overheated as reality has set in to the autonomous vehicle space. Apparently robot cars won’t be shuttling all of humanity to and fro by 2025. We expect that autonomous vehicle startups will suffer a materially adverse impact to their respective valuations.

The two technology hype scenarios got us thinking about previous technology hype cycles. Thus, we created the TEK2day, CEORater “Technology Hype Curve” to visually represent an all too familiar pattern as it relates to hyping new technologies. Click HERE to download the Technology Hype Curve graphic.

Don’t Be Disintermediated<span class="badge-status" style="background:red">Premium</span> 

Don’t Be DisintermediatedPremium 

Disintermediation Defined Disintermediation is when one party inserts itself between an interested party and its customers (see below table of “disintermediators” and “disintermediatees”).  Ironically, parties that suffer disintermediation often invite it upon themselves. Google Disintermediates Yelp and OpenTable For the past several years Yelp restaurant reviews appeared on Google business listings (this appears to have…

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Founder CEOs: Creators vs. Builders<span class="badge-status" style="background:red">Premium</span> 

Founder CEOs: Creators vs. BuildersPremium 

Every founder CEO begins as a “creator”. Not every founder CEO graduates from “creator” to “builder”.  Creators eventually self-implode (Elon Musk, Tesla and Travis Kalanick, Uber) whereas other founders are able to scale over the long-term. For example, Microsoft founder Bill Gates and Amazon’s Jeff Bezos are builders (We provide a list of Builder CEOs…

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SaaS Companies and Subscription Revenue Models Every company can learn from SaaS (“Software-as-a-Service”), companies. My first exposure to SaaS companies was the first self-proclaimed “SaaS” company – Salesforce.com. This was early in my banking career around the time of Salesforce’s 2004 IPO. Today, Salesforce is a $110 Billion-plus market cap behemoth. Every company – regardless…

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The Next Great Tech CEO – Michael Jordan or LeBron James?Premium 

We are keeping our content light during the dog days of August. Perhaps you have seen our previous posts regarding CEO personalities? Our Mid-Cap Software CEO Personality Analysis made the rounds this spring (access HERE). For fun we thought we would put a new spin on the debate that has dominated NBA circles this offseason…

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Content Is King Content is King to quote Sumner Redstone. At CEORater we spend a fair amount of time thinking about content. Over the past 24 months we have considered the following for our platform: 1.) video streaming of earnings calls with associated analytics 2.) employee video reviews 3.) business news (original and third-party) and…

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Successful CEOs Share These Six Attributes (hint: Communication is Key)<span class="badge-status" style="background:red">Premium</span> 

Successful CEOs Share These Six Attributes (hint: Communication is Key)Premium 

Successful CEOs possess each of the attributes described below. This is an unscientific analysis based upon my prior experience covering and acquiring companies (equity research analyst; M&A executive) as well as my current role as founder of CEORater. It is important to recognize that while these attributes are qualitative in nature they do impact the…

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