Features
Jo Owen 7 Mar 2018 12:43pm

Top in tech

Seeking to uncover what makes a technology megacorp, Jo Owen weighs up management strengths among the leaders of the world’s IT giants

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Caption: Photography: Eyevine/Getty Images

Last year, economia assessed the leaders of the main UK political parties. Using the same criteria – vision, motivation, honesty and integrity, and decisiveness – we are now rating the leadership qualities of the global tech titans. These criteria represent what employees expect of a leader. You can use them to rate yourself, if you’re brave enough...

Vision

Setting a direction is not just about allocating resources and fine-tuning the machine. Leaders take people to where they would not have got to on their own. The vision should convey hope, clarity and certainty. All of which makes this a high bar to jump.

Honesty and integrity

This is much more than morality. It is about building trust with your team. A leader who has no trust has no team and probably has no business. Trust is hard to earn but extremely easy to lose.

Motivation

The good news is that 70% of leaders rate themselves well on motivation. The less good news is that only 34% of their followers rate their leaders well on motivation. Although there is an entire industry devoted to motivation, it is as elusive as ever.

Decisiveness

A good way to demoralise staff is to make decisions slowly and then change your mind. The best leaders have a clear direction that lets them make quick and cogent decisions. Crises and scandals are a wonderful opportunity for the best leaders to step up and show what they are made of – can they act decisively or not?

Having established the rules of the game, it is time to introduce the runners and riders in the 2018 tech titans leadership race – the CEOs of five of the largest global technology firms

The race could be total chaos: it is not entirely clear who the runners are or should be. Samsung wreaks havoc by having three (newish)co-riders or co-CEOs, divisional heads Kinam Kim, HS Kim, and Dongjin Koh. The previous big boss, Jay Y Lee, was sent to prison for five years on bribery and corruption charges. So anything could happen.

The Alphabet runner is slightly clearer. Larry Page is CEO of Alphabet, but 99% of Alphabet’s revenues come from Google, where the CEO is Sundar Pichai. Page can only succeed if Pichai succeeds, so either could claim to be the rider.

Behind the chaos at the starting line, there is a clear theme. The original founders are making way for the next generation of leaders.

If the race had focused on the founders, it would have been a battle of planet-sized egos and ambitions. Steve Jobs and Bill Gates are still better known than Pichai, Nadella and Rometty, let alone
the Samsung Three. This means the nature of the competition is changing. It is not about evaluating the genius of individual leaders who bend the world to their will; it is about evaluating the leadership capability of both the individual and the firm in which they operate. This competition is no longer an individual endeavour, it is a team sport. That changes everything, and it reflects leadership as it now stands. Increasingly, leadership is about teams, not characters.

With the rules clear(ish) and the riders clear(ish), let the race commence. There are four stages before the tape is crossed.

Vision

The first part of the race is to see if the riders can set a direction, preferably one which goes the right way. It is possible that each of the leaders believe that they are setting an exciting new direction for their firms. But from the outside, none of them seem to pass this test. They are not taking their firms where they would not have got by themselves. Instead, they are all continuing along a legacy path they inherited or following the market.

Alphabet

At least 99% of Alphabet continues to do what it has done very well for the past 20 years. Google “organises the world’s information and makes it universally accessible and useful” and monetises the proceeds through paid search. Larry Page wants to change this mission statement to reflect his desire to use information to change the world

Apple

Steve Jobs was said to have a reality distortion field: he changed reality within Apple and beyond. Apple blossomed from PCs to tablets to phones to its walled garden of
apps, software and music. Tim Cook has essentially maintained that heritage: part of the heritage includes the much-hyped events when the latest gadget is unveiled. Both the direction and the innovation cycle remain the same.

Microsoft

Microsoft is still doing what it has traditionally done – dominating the world of desktop operating systems. Three-quarters of its profits still come from Windows and Office. Just before Nadella became CEO in 2014, his predecessor Steve Ballmer launched Azure, Microsoft’s entry into cloud computing. Nadella continues to push this. He follows the direction he inherited.

IBM

Last year Ginni Rometty, who is not only CEO but chair and president, announced: “The IBM Cloud is the platform for the next era of business.” This is not quite revolutionary: Microsoft and Google are also betting on the cloud, but all three are way behind Amazon.

IBM is not making the market, it is following. Elsewhere, Rometty continues with IBM’s long standing push into AI (Watson division) and professional services (PwC acquisition). Follower, not leader.

Samsung

Samsung is the best argument you can find against having a vision. Despite the chaos of leadership changes over the past year, the Samsung machine continues to motor along nicely; it continues to innovate and maintain strong positions in phones, chips and consumer electronics. Last year its share price doubled. Who needs leadership or vision when you have a machine that runs itself and the chip cycle is in your favour?

Honesty and integrity

At first sight, this race stage divides cleanly between winners and losers. Samsung managed to lose their CEO to a five-year prison term: fail.

In contrast, Tim Cook had the integrity and courage to come out as one of the first gay CEOs. Ginni Rometty is a frequent and powerful advocate for career women. Google’s code of conduct under Page has long been “don’t be evil”, which is a good start. So that would seem to sort the field into demons (Samsung) and angels (IBM, Apple and Google) with Microsoft somewhere in the middle.

But honesty and integrity is not just about your external face. It is about how far your team trusts
you and wants to work with you. Normally, low executive turnover is a good sign of a team committed to working well together. In the tech industry, low executive turnover could be a sign of ambitious individuals who are determined to stay and cash in their stock options. It is hard to abandon
a $20m payout.

Given the opacity of this challenge, we will let them all pass the team trust test.

Motivation

Fortunately, there is data for how motivated people are at the tech titans. Unfortunately, it is contradictory. Payscale surveys of staff for job satisfaction should correlate broadly with motivation. As an acid test, the research also measures average job tenure, therefore people who enjoy their job should be less likely to leave.

An impressive 89% of Google staff report high job satisfaction, but average job tenure is only two years. At the other end of the scale, just 59% of IBM staff report high job satisfaction, but their average job tenure is six years, despite reporting far higher job stress levels than at Google. Apple and Microsoft sit between these two extremes – the passion of Apple fanboys is not universally reflected by Apple staff.

The reality may be that Google employees have more marketable skills, are younger and considerably more willing to progress their career by moving.

Once again, the outlier is Samsung. It has a job resignation rate among Korean staff of just 5%. When Koreans join Samsung they stay, and that is no accident. Samsung is proud of its “hybrid” management system, which mixes Japanese and Western management approaches, and it works hard to foster deep loyalty within the firm.

The motivation leg of the leadership race teaches us that motivation is not just about the charisma of the leader. It is about creating a system that fosters both job satisfaction and loyalty. The machine is more powerful than one person, even the leader.

Decisiveness

Crises are a great opportunity for leaders to show that they are decisive. As Tim Cook learned from the Apple Maps fiasco, decisiveness is a real test, and led him to ask: “Do you have the courage to admit that you’re wrong?” Decisiveness requires bravery.

Samsung showed how to be decisive in a crisis when its Galaxy Note 7 battery started catching fire: it issued an immediate recall costing $5.3bn and set up a lab with 500 staff to work out what caused the problem. That is painful decisiveness.

Google and Alphabet make a virtue out of making mistakes: they believe the mantra of “move fast and break things”. That speaks to highly decisive cultures. But it also speaks to an arrogant “change the world” culture, which is surprised when it is fined $2.7bn by the EU anti-trust authorities.

Rometty has shown decisiveness in reducing headcount by 50,000 under her tenure, but against 22 quarters of declining earnings, that may be less about leadership and more about survival.

Microsoft probably lags on this leg. It has a history of missteps: Vista, Zune, Nokia, slow into search engines. It may not move fast or well, but it has all the determination of a three-legged donkey in pursuit of a carrot. Or as Nadella put it: “To be a leader in this company, your job is to find the rose petals in a pile of shit.” Microsoft finds the former, but only after wading through the latter, much of which is self-made.

Conclusions

All the tech titans had charismatic leaders who changed the course of their industry when they started. Samsung flourished under its highly charismatic leader, group chairman Lee Kun-Hee. But success no longer resides with the genius of the founder: success resides in the business model their founders created. That explains the success of Samsung in the absence of a clear leader. A weak business model explains why IBM has languished under Rometty: its share price has stagnated since she was appointed in 2012, while the S&P has doubled. Legendary investor Warren Buffet once said: “I try to buy stock in businesses that are so wonderful that an idiot can run them. Because sooner or later, one will.” A good business model makes an average leader look great; a poor model humbles the best.

Looking at the tech titans here, it is hard to escape the conclusion that they have all reached middle age. The dynamic leadership of the founders has been replaced by the steady management of the legacy they created. So the winner is… steady management of a good business model, which beats a charismatic leader on most days.


Alphabet Inc, which includes Google, posted revenues of $32.3bn for 2017 Q4. CEO Larry Page says: “In the technology industry you need to be a bit uncomfortable to stay relevant”

Apple’s 2018 Q1record-breaking $88.3bn revenue proves consumers remain loyal to the brand, particularly its iPhone. CEO Tim Cook says: “iPhone X surpassed our expectations since it shipped in November”

IBM’s 2017 Q4 revenue of $22.5bn strengthens its position as the world’s leading enterprise cloud provider, says Ginni Rometty, IBM chairman, president and chief executive officer

Microsoft Corp announced $28.9bn revenue (a 12% increase) for the quarter ended 31 December 2017. CEO Satya Nadella says “investments in IoT, data, and AI services across
the cloud” will help to accelerate growth

Despite leadership issues and the fire-prone Galaxy Note 7 smartphone, Samsung Electronics posted KRW65.98trn ($61.54bn) in consolidated revenue driven by the components business

Alphabet Inc, which includes Google, posted revenues of $32.3bn for 2017 Q4. CEO Larry Page says: “In the technology industry you need to be a bit uncomfortable to stay relevant”

Apple’s 2018 Q1record-breaking $88.3bn revenue proves consumers remain loyal to the brand, particularly its iPhone. CEO Tim Cook says: “iPhone X surpassed our expectations since it shipped in November”

IBM’s 2017 Q4 revenue of $22.5bn strengthens its position as the world’s leading enterprise cloud provider, says Ginni Rometty, IBM chairman, president and chief executive officer

Microsoft Corp announced $28.9bn revenue (a 12% increase) for the quarter ended 31 December 2017. CEO Satya Nadella says “investments in IoT, data, and AI services across
the cloud” will help to accelerate growth

Despite leadership issues and the fire-prone Galaxy Note 7 smartphone, Samsung Electronics posted KRW65.98trn ($61.54bn) in consolidated revenue driven by the components business




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