Simon’s Blog

With the departure of Yahoo! CEO, Terry Semel yesterday, there has been lots of speculation about the type of person Yahoo! should hire as a new permanent CEO (people have assumed the co-founder Jerry Yang is an interim chief). An advertising executive? A media guru? I think the answer is pretty simple. However, executive hiring is a strange business where strange decisions are the norm, rather than the exception. So, I won’t be surprised if they make a bad choice.

Before I ran my own companies, my job was to be in charge of IT strategy at a public company, reporting in to the main Board. Over the years, I read quite a few surveys in publications such as the Financial Times; surveys that asked senior IT executives various questions about what skills they thought were important in their roles. And there was something in those surveys that amazed me: knowledge of IT came way down on the list of key skills. At first, I was shocked, but then I understood: if people don’t have a particular skill, they tend to undervalue that skill. And of course, most people like to believe they’re pretty good at their job. It’s a bit much to expect a bunch of people without a particular skill to say that missing skill is critically important to doing their job well.

So it turns out that many CIOs don’t actually understand IT because they don’t have IT backgrounds; and because they don’t understand it, they don’t think it’s important. They view it as simply a “technical detail” that others in their team can deal with, while they focus on strategy. You know - set up some committees that have the responsibility to figure out the needs of the organisation and the responsibility to understand IT and the responsibility to put it all together. If a CIO reported to me and said that’s what they’d done, I’d ask - “And exactly what is it that you do then?”. I think the truth is that, for lots of reasons, it’s pretty difficult to be a great CIO if you don’t understand IT.

Then, I started looking at other executive roles, in particular CEO roles. And the same story held true. It might seem obvious that a deep understanding of the core business would be important for a CEO. However the truth is that because many CEOs don’t understand the core business (e.g. they might come from finance backgrounds), they don’t think it’s important. I think they’re wrong.

My view is this. For small companies, having a CEO that doesn’t understand the core business isn’t even an option. The company will simply not succeed to its maximum potential without a deep domain expert in charge. In fact, it might be worse than that; it might fail altogether. Large corporations can get away without a domain expert in charge - they’re a bit more robust than small companies; but it’s still optimal to have someone that truly understands the business they’re running.

So, to figure out what type of person Yahoo! should hire as a CEO, then, we simply need to ask - what type of company is Yahoo!? Is it an advertising company? After all, that’s where its revenues come from. Or a media company? Well, the way to figure that out is to look at its competitors. If you do that, everything becomes clear. Yahoo!’s competitors are Google and Microsoft. Yahoo! is a software company.

Yahoo! needs to hire a CEO with a deep understanding of software. Someone who can understand why Yahoo!’s key software platforms like “search” and “advertising” are so far behind Google’s. Someone who knows themselves what it takes to fix these core business problems; not someone that has to simply take on trust what other people in the organisation tell them are the answers.

It will be interesting to see who the Yahoo! Board hires as a permanent CEO… but don’t be surprised if they don’t hire a software guy (they could do worse than keep Jerry in charge). Don’t be surprised if they ignore the fact that Bill Gates is a software guy. And that Eric Schmidt is a software guy. In other words, don’t be surprised if they ignore what what’s technically known as the “fucking obvious!” As I said, the world of executive hiring is a strange business…