Steven Blank, a keen observer of startup culture and methods, has written an article in the Harvard Business Review and an extended disco version on his blog, arguing that a focus on “execution” is leading Apple down the wrong path. Blank argues forcefully that visionary CEOs like Steve Jobs and Bill Gates often make the tragic mistake of hiring a successors who are not visionaries. These execution-oriented executives focus on expanding the business they have, but miss the boat on new trends, leaving the companies as solid financial performers but seriously weakened.
In my view, Blank can be considered representative of Silicon Valley thinking, and the comments on his articles indicate that many fellow travelers agree with him. But, in thinking about Blank’s argument and reading comments on the article, it became clear to me there are many weak points in Blank’s thesis that deserve scrutiny and reveal some ways that the prevailing assumptions of Silicon Valley thinking are unbalanced. So, let’s have some fun.
Blank’s Thesis on Microsoft
First of all, Blank praises the results of execution under both Ballmer and Cook, pointing out that both revenues and profits grew substantially under their stewardship. But in Ballmer's reign, Blank argues that this focus on execution ignored many key trends. Blank writes:
"Despite Microsoft’s remarkable financial performance, as Microsoft CEO Ballmer failed to understand and execute on the five most important technology trends of the 21st century: in search – losing to Google; in smartphones – losing to Apple; in mobile operating systems – losing to Google/Apple; in media – losing to Apple/Netflix; and in the cloud – losing to Amazon. Microsoft left the 20th century owning over 95% of the operating systems that ran on computers (almost all on desktops). Fifteen years and 2 billion smartphones shipped in the 21st century and Microsoft’s mobile OS share is 1%. These misses weren’t in some tangential markets – missing search, mobile and the cloud were directly where Microsoft users were heading. Yet a very smart CEO missed all of these. Why?"
Ballmer, Blank explains, did have teams working on all these trends, but not the A-players and not with the right amount of passion. After Ballmer retired, the new Microsoft CEO Satya Nadella reorganized around these trends, especially mobile and the cloud, and also has focused serious energy on augmented reality and conversational AI. Blank concludes:
"While they’ll likely never regain the market dominance they had in the 20th century, (their business model continues to be extremely profitable) Nadella likely saved Microsoft from irrelevance."
Why Cook is another Balmer
In Blank’s view, Apple is tragically headed toward a similar fate, incredible growth and amazing financial performance, but with a weakening foundation that threatens irrelevance. In the five years since Tim Cook took over Apple here’s what has happened:
"Tim Cook has now run Apple for five years, long enough for this to be his company rather than Steve Jobs’. The parallel between Gates and Ballmer and Jobs and Cook is eerie. Apple under Cook has doubled its revenues to $200 billion while doubling profit and tripling the amount of cash it has in the bank (now a quarter of trillion dollars). The iPhone continues its annual upgrades of incremental improvements. Yet in five years the only new thing that managed to get out the door is the Apple Watch. With 115,000 employees Apple can barely get annual updates out for their laptops and desktop computers."
So, it is clear to Blank that this financial performance is a smokescreen for big trouble because:
"…the world is about to disrupt Apple in the same way that Microsoft under Ballmer faced disruption. Apple brilliantly mastered User Interface and product design to power the iPhone to dominance. But Google and Amazon are betting that the next of wave of computing products will be AI-directed services – machine intelligence driving apps and hardware. Think of Amazon Alexa, Google Home and Assistant directed by voice recognition that’s powered by smart, conversational Artificial Intelligence – and most of these will be a new class of devices scattered around your house, not just on your phone. It’s possible that betting on the phone as the platform for conversational AI may not be the winning hand."
Cook’s weakness is that he doesn’t have story, a vision that gets ahead of these trends and shows how Apple can still be champion of the “new, new thing” not just better versions of existing products.
"The problem is that a supply chain CEO who lacks a passion for products and has yet to articulate a personal vision of where to Apple will go is ill equipped to make the right organizational, business model and product bets to bring those to market,” Blank argues.
Why this always happens and what boards should do
Blank then explains that this always happens because visionary CEOs surround themselves with executives like Cook and Balmer who are great at execution, which brings the vision to life. But when the visionary leaves, the execution executive steps in, reduces the energy and turbulence, makes a ton of money, but doesn’t find the new, new thing. Here’s how companies lose their creativity, according to Blank, because the stability of the execution executives is "great for predictability, but it often starts a creative death spiral – creative people start to leave, and other executors (without the innovation talent of the old leader) are put into more senior roles – hiring more process people, which in turn forces out the remaining creative talent."
Boards of directors, Blank argues, face tough choices. They don’t want to lose the talented execution executives who expect the top job, but Blank suggests that they should because that is a better way to ensure long term survival. The shadow of the visionary often effects decision making for many years. Boards also may be happy with the results of the execution executive because it provides short term financial benefits.
What’s Wrong with Blank’s Thinking
The shape of Blank’s argument seems attractive. Don’t sacrifice long term vision for execution. Keep expanding with the best innovative new products that stay ahead of the curve. Don’t fall prey to the Innovator’s Dilemma or Wall Street short term-ism.
But how? Blank admits that visionaries create tension. He should also admit that view of the impact of a visionary has a strong survivor bias. We all know Steve Jobs was fired, perhaps incorrectly, but not without cause. Sean Parker, founder of Napster, who hung around Facebook as it grew and hasn’t had a big hit since, never seems to come up in Blank’s list of visionaries. Nolan Bushnell killed it early, and then faded. Visionaries are often people who fail spectacularly and cause lots of problems. Their big wins can come early or late in their careers. Visionaries with consecutive victories like Jobs are the rarest of the rare.
For a board to follow Blank’s advice they would not only have to anger and potentially lose the execution executives, they would have to make the right choice of a visionary. Blank sure doesn’t know how to do this, or he would be getting mega-rich identifying the next visionary. I will provide my thinking on this later, but Blank should admit this is the key problem and suggest a solution. Otherwise, it doesn’t seem so obvious that choosing execution is such a bad choice. How would Apple’s board be seen now if it fired it’s choice for visionary for being wrong while its execution suffered? Selecting a visionary to lead your company is a massive risk, before or after proven success of the visionary.
Blank also downplays the role that execution plays in the success of the visionary. The visionary correctly hires execution executives to create a balanced team. But in addition, the vision is adjusted and guided by what the execution executives make possible. Apple wouldn’t have been able to become the world’s most valuable company without the brutally efficient supply chain that Cook created. In all of the books I’ve read about Jobs, it is clear that the fabulous product development at Apple was a conversation, one that Jobs led, but one in which he listened as well.
Blank should also recognize that Cook and Ballmer are virtuosos in their domains. It is no small trick to focus and run mega-scale companies. Cook and Balmer are exceptional executives even if they focus on execution. One get’s the impression that the visionary just pick up the phone and hired brilliant execution executives. We know this is not the case. I would argue they are just as rare as visionaries.
Here’s an excellent defense of the performance of Cook and Balmer from Miljenko Horvat, who commented on Roman Stanek’s share of Blank’s article on Facebook.
"So this guy's point is that the CEO who doubled a company's revenues over 5 years and tripled its market value is somehow a disappointment? Because some as of yet unseen disruption is about to take place?
"Who do CEO's answer to - shareholders or some priests of technological vision. If his point is that he wants to bet against AAPL, I will take that bet any time.
"And his example or so it seems of a company which has "underperformed" (according to him) is MSFT. Seriously, last time I looked, MSFT was still among the 3 most valuable companies in the world and has been a massive force in the world of technology for a couple of decades.
"Sure, MSFT has "allowed" some upstarts like Google to grow up to be big (and APPL to come back from a near death experience) but in which sense is that a bad thing? Are shareholders of MSFT complaining - maybe, but not too loudly. Would it have been better for the world at large if MSFT remained as dominant as it was 20 years ago? Would that have been best for the consumers? How so?."
In the end, Blank’s advice is empty because he has no guidance to provide about how it can be executed. You can describe how to be successful as a financial trader by explaining you should buy low and sell high. We know that advice will work. We don't know how to do it. Blank’s advice is even more fuzzy. Don’t pick an execution executive as a successor. Instead find a visionary who will make the right decisions about which trends should guide innovation and product development.
Blank’s analysis would be more complete if he admitted finding a visionary is hard and risky.
What then must we do?
Blank’s thinking is representative of the Silicon Valley bias toward the new, but that doesn’t mean there isn’t a way to act on his ideas.
In my view, a board like Apple’s or Microsoft’s should recognize the impossibility of replacing a visionary and the imprudence of attempting to do so.
But our hearts, I think we all know that Blank is right that a successful visionary who really understands the market and the spirit of a company, surrounded by the right execution executives is the best situation.
We must acknowledge there is no clear path to such a situation. So, choosing an execution executive to succeed the visionary is the right way to go.
But then the board should go on a search for a visionary and attempt to find evidence that they can succeed. Where will such visionaries be found? Perhaps from startups that could be acquired. Perhaps from the ashes of companies that were good ideas but failed for one reason or another.
Such visionaries should be invited into the company and trained in the arts of execution and in the culture of the place. Make them Visionaries in Residence and give them promising but not mission critical projects to work on. Maybe they leave, fail or succeed, and then come back. In this way, perhaps you will create a bench of visionaries, get more evidence, and maybe someone excellent will emerge.
Then perhaps the board can gradually re-balance execution and vision, but with some evidence and experience to guide the choice.
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