When A Startup Founder Hires A Professional CEO Does He Need To Have An Industry Background?
A good question, and one most professionals get wrong. Even professional recruiters. Although this can depend on many factors, generally speaking the CEO does not need to come from the industry.
The existing employees and team should bring the industry and domain expertise. If it is a raw startup with no staff, that is really a co-founder, not a “CEO hire”. And no good CEO is going to work for a founder that has little experience. Most experienced CEOs do not want to take raw startup risk, they come in later when the risk is fleshed out and scaling up is the challenge. The founder better bring large industry experience and/or management experience and a killer business plan, having completed deep market research, competitive intelligence, and other development work. A company is worth zero dollars until this is done.
It is often better if the CEO is not buried in the industry standard belief systems, as then they can go beyond it. Any company does well only by having a differentiated, innovative (new) offering not offered by anyone else. No startup should have any competitors on day #1 in their (narrow) target market.
Being a CEO is “Industry Agnostic” because it is about leadership, vision, team building, operations, finance, sales and product development (only industry specific skill).
I have worked in 40+ industries and can pick up a new one and go beyond it in one month as an interim CEO or fractional CEO. Few industries are so complex that you cannot understand the competitive dynamics, value chain and landscape quickly.
Unfortunately, most people hiring (recruiting, boards and owners) do not understand this fact. The result is they limit their pool of people to maybe 1% or less of what it should be. What do you think the odds are of finding a better CEO in a pile that is 100X bigger?
There are many good examples of CEOs coming from other industries and being very successful, like Lou Gerstner in the 1990s who was hired with mainly packaged goods experience to run IBM. That was a turnaround of sorts, as IBM was struggling to move away from its mainframe business into services and PCs. The company was shifting from a technical lead company to a marketing and sales led company. Apple tried to do this too when it hired John Scully from Pepsi. That one did not work out as well.
A CEO’s job is team building 50%+, developing a vision for the future and some customer interaction as input into the vision. And overseeing operations and the development of the systems required to run and scale.
It is hilarious watching all the “studios” and “incubators” that run ads for CEOs and want to offer them 10% or 20% of a company that they could just found themselves and start at 100% equity and control. Some even run an ad, hire a “CEO cofounder” without any capital investment or core idea or business plan. Basically, this is saying you do the hard work, figure out the business and take all the risk, and we keep 80% to start. Only people who have little business experience would expect such a scenario to work. And only idiots without real CEO chops would apply.
See my free course for Entrepreneurs and any founder here
Bob Norton is a long-time Serial Entrepreneur, CEO and investor who founded six companies with four exits that returned over $1 billion to investors for a 25X ROI. Two others are still in development. He has trained, consulted and advised thousands of Entrepreneurs, CEOs and boards since 2002. Mr. Norton works with companies to 2X to 10X growth rates and valuation using AirTight Management™, the world’s most comprehensive Leadership Operating System. He also helps companies raise capital to fund growth. He is also the Founder of The CEO Boot Camp™ and Entrepreneurship University™ for early-stage companies that have not reached product-market fit and $1M ARR.
What can we help you with today? Scaling, training, consulting, coaching?
Call (619) SCALE06 or (619) 722-5306 9am-6pm CT
Or Schedule a free 30-minute strategy session by clicking here.