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Silicon Valley CEO Failure: Seven CEO Lessons for 2006
By Steve Martin, Author,
Silicon Valley is littered with far more failure than success. At first glance, you wouldn't think former Hewlett Packard CEO Carly Fiorina and ex-Informix Software CEO Phil White have much in common. However, there are striking similarities between these infamous Silicon Valley leaders and their failures provide seven important lessons for software CEOs for the new year.
At the beginning of their reigns both were hailed by the press as business heroes. Fiorina had battled the odds to become one of the few female CEO's of a Fortune 100 company. Meanwhile, the press proclaimed White to be the man who single-handedly turned Informix Software into a billion dollar technology giant.
Fiorina and White were each the driving force behind a mega-merger which ultimately caused their own demise. Hewlett Packard's ill-fated merger with Compaq would lead to the palace coup that cost Fiorina her job. Fortune magazine called it "A big bet that didn't pay off…a huge error." Meanwhile, Informix's acquisition of Illustra Software sapped the company's momentum just as it was entering its prime. White would not only go on to lose his job, but his freedom as well after he was sentenced to prison for securities fraud.
Finally, the same members of the media that had built Fiorina and White up were just as eager to tear them down. Following Fiorina's firing, articles referred to her as a "Disgrace" and a "Token bimbo." Meanwhile, the media that once proclaimed White a genius anointed him the poster boy for Silicon Valley greed.
However, the press missed the real story and there are important business lessons that went unnoticed beyond the sensationalized headlines. Below, are seven CEO lessons for the new year from the fall of former CEO's Fiorina and White.
Even given the notoriety of their failures, I still suspect we have not heard the last of Fiorina and White. I expect the press to once again print stories about how Fiorina and White are reinvigorating their careers and mending their reputations because failure is never final. It just means you have learned something new, must do things differently, and work harder to succeed.
- Even the greatest leaders are nowhere near as great as their press clippings make them out to be.
The trophy cases of Fiorina and White over-filled with so many industry awards and accolades that it would have been humanly impossible for the fame not to have gone to their heads. Once arrogance sets in, the truth is obscured, judgment is clouded, and greatness is lost.
- The omnipotent leader sets a deluded company course.
Once CEOs become all-powerful, their executive staff is reluctant to challenge them. Instead, the natural tendency is for these dominant leaders to become cocooned from reality. They are told only what they want to hear and hear only what they want to be told. Sequestered from the rest of the company, they lose the pulse of the business and what made it successful in the first place.
- Minding the company's culture is one of the CEO's most important responsibilities.
The quickest way to ruin a great company culture is through a major acquisition. Fiorina rationalized there were huge cost-savings to be gained through the Compaq merger and that profits would increase because of their combined synergies. In reality, the merger was a clash of cultures that caused company-wide chaos. White thought Illustra would open up an entirely new marketplace when it disastrously defocused Informix from its core business and eventually tore the company apart.
- Even the "friendliest" board of directors will eventually turn on their superstar CEO.
Fiorina won early praise from Wall Street and HP's board of directors alike. However, the same board that hired her would sack her in a surprise move 5 ˝ years later. White considered keeping board members happy one of his primary duties. Every year he took the board members on an all-expenses paid trip to a five-star international resort. However, he was forced to resign when the board's doubts about his abilities eclipsed eight years worth of personal relationships he had built.
- The sales and marketing oriented CEO needs a COO.
Both Fiorina and White were sales and marketing superstars, not operational experts. A BusinessWeek article reported, "For years, Fiorina steadfastly refused to even consider hiring a COO, questioning why her critics wanted her to have one while male CEOs at other big tech companies didn't. It was a convenient defense. Unfortunately it belied the evidence: HP had recurrent operational problems, and those other companies did not." White commented in an interview that one of the lessons learned from his ordeal was, "When you start to get bigger, bring in a COO, someone you can test, and start the progression of offloading some of the business areas."
- Your biggest enemy is not your true enemy.
Both Fiorina and White set out to destroy their respective archenemies: IBM and Oracle. While each experienced short-term victories, wars of this nature are fought over the long term. It takes more than a few quarters to win a war; it takes years. Beside, IBM and Oracle weren't even the real enemy. In reality, the ultimate enemy of every company is time. It's the fight against missing new product release dates and the ongoing battle to reach revenue targets every ninety days. A company's goals and strategy should be focused on the fight against time, not solely competitors.
- Failure is never final.
In an informal survey on the worst hi-tech CEO's, a USA Today article labeled Fiorina one of the worst noting that, "She destroyed half the wealth of her investors and yet still earned almost $100 million in total payments for this destructive reign of terror." The press said Phil White's name is synonymous with "Silicon Valley greed."
In the era of reality TV shows today, personal failure has become prime time entertainment. We take even more devilish delight watching the rich and powerful fall, as in the cases of Carly Fiorina and Phil White. However, every career experiences periods of success and failure. Understanding your past failures can be the key to achieving future success. In the words of 19th century newspaperman Samuel Smiles, "We learn wisdom from failure much more than from success. We often discover what will do by finding out what will not do; and probably he who never made a mistake, never made a discovery."
Steve W. Martin began his career programming computers as a teenager in the late 70s. For the following 20 years he worked for leading-edge Silicon Valley companies in roles ranging from salesperson to vice president. He is author of "The Real Story of Informix Software and Phil White: Lessons in Business and Leadership for the Executive Team" and the critically acclaimed book about enterprise sales, "Heavy Hitter Selling - How Successful Salespeople Use Language and Intuition to Persuade Customers to Buy." For article feedback, contact Steve at firstname.lastname@example.org