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 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 (the 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.
