Few if any attributes of an emerging growth or middle market company are more important than the credentials and capabilities of its founder or CEO. For example, imagine an investment banker considering whether to take on an early stage company as a client he will try to raise capital for. Or a venture capital or private equity professional considering whether to invest in such a company. To be sure these transaction and investment professionals will look closely at the company’s positioning, its strategy to win market share, the attractiveness of its products and services, the skills of its organization. But it is their assessment of the CEO’s track record and abilities and the management team he or she has assembled that may lead them to take a chance on the company. As one partner in a private equity fund that was considering an investment put it: “If it’s a “B” plan but an “A” team, I’ll take that deal every time.”
A Taxonomy of CEO Skills
Newport Board Group has had a unique opportunity to look rigorously at CEO experience and skills. As a new category of professional services firm of CEOs and senior executives who serve entrepreneurial and middle market companies and private equity firms, we set out four years ago to categorize our partners’ expertise. We closely scrutinize their experience and capabilities—so we can match them against opportunities to serve clients. What is the “big picture” that emerges from the detailed catalogue of CEO expertise we have built?
CEOs Set Strategy
To be sure, a good deal of our CEO expertise taxonomy addresses the dominant view of a CEO as an industry expert and strategist, the “public face” of the company. So part of our taxonomy addresses our CEOs’ ability to:
- See opportunities in market landscapes and trends.
- Create strategy aimed at these opportunities--relative to the company’s strengths and weaknesses and the threats to its position.
- Be seen as credible by customers and industry players.
- Raise capital and drive M&A transactions.
CEOs Execute Strategy
But we have also focused a considerable portion of our taxonomy on the CEO role that sometimes gets less attention: execution experience and capabilities. We recognize that this part of the CEO’s role is, for many people, less impressive than creating and communicating strategy. That’s why execution is often seen as a matter of mere “tactics”, by definition distinctly secondary to strategy.
Our experience as CEOs says otherwise. So does a seminal business book: Execution by Larry Bossidy and Ram Charan. A major theme of the book is that when companies fail to deliver on their promises, “the strategy by itself is not often the cause. Strategies most often fail because they aren’t executed well.” The authors go on to say: “execution is a systematic process of rigorously discussing hows and whats, questioning, tenaciously following through, and ensuring accountability.” They emphasize that successful strategy execution requires both determination and flexibility. A good CEO is able to pivot and change direction in response to rapidly evolving industry trends.
A case in point: we were re-engaged by a client we had served several years previously. The client happily reported that in the intervening period they had achieved the strategy we laid out for them. Upon closer examination, we found that the company had indeed achieved their financial goals. But almost none of the specific strategic initiatives had unfolded “according to plan.” The CEO had in fact executed--by adapting, pivoting and changing to meet the needs of their changing industry and client base.
Execution: General Parameters
To us, execution means when a company grapples with such challenges as:
- Assessing potential directions and strategies based on the organization’s ability to execute them in a fast changing marketplace.
- Creating and executing action plans for the company to confront reality, overcome obstacles and get things done.
- Evaluating and building a company’s intangibles and culture, its informal structures and processes.
- Holding people accountable for results.
- Capturing the upside that results when fully engaged employees start to bring their best efforts to work.
Execution: Specific Skills
Within the above parameters, the Newport taxonomy identifies a wide range of our partners’ specific execution experiences and skills, including, for example:
- Breaking a strategy down into doable initiatives.
- Addressing the gap between the board’s expectations and management’s performance.
- Detecting that a key initiative is faltering—and responding by either restoring its momentum or changing direction.
- Creating a company culture that “everyone sells.”
- Getting engineers and marketers to work together on R&D that generates competitive products, without product development becoming a “science project.”
- Elevating conversations with customers to the strategic level, leading to opportunities to co-develop products with them.
An Edge on the Competition
Newport Board Group plans to continue to hone our taxonomy of CEO expertise and share it with clients and industry partners. As the pace of change in the middle market and entrepreneurial sector accelerates, powered by disruptive technology and innovative business models, companies that get operating experience-based assistance in executing their strategies will have an advantage in attaining growth and profitability.
Mark Rosenman contributed to this article.
About the Experts
Mark Rosenman has deep experience developing processes, systems and content to create value from intellectual capital. Serving as the Chief Knowledge Officer at Tatum, he successfully drove strategies to develop, capture, share and deploy the knowledge and experience of the firm's professionals. He was instrumental in creating Tatum's first formalized, national subject matter expert network to drive business development and service delivery. More background on Mark’s experience as a business leader and advisor and information about how to contact him is available here.
Fred has been successful both as an executive and an entrepreneur. As founder and CEO of Optical Resources Group, a consolidator in the wholesale optical laboratory industry, Fred led completion of 12 acquisitions in 18 months and was responsible for raising $30 million in equity capital and $55 million in senior debt. The company was sold in an all cash deal for over 14 times pro forma EBITDA. More background on Fred's experience as a business leader and advisor and information about how to contact him is available here.
