Technophilia is the answer, but what’s the question?

Continuing on the topic of leadership I covered in part in my last post, like many observers and aficionados of the tech landscape, I have been struck by the recent trend of appointing leaders with strong technology credentials as the CEOs of leading tech companies – particularly by the most successful webscale players.?This has led to a new narrative that ‘high tech companies should be led by highly technical people’. ?And, for those with strong technical backgrounds with war stories of business leaders making seemingly uninformed and uninspired decisions, this is a seductive narrative.?

Elon Musk recently jumped into this arena with the following tweet:

Although he is clearly referring to the direct managers of technical people, this could reasonably be extended to include the managers of those managers, which might very well be the executive leadership of the company.?In fact, he addresses this topic in part in this interview, in which he laments that there are too many MBAs running companies, with excessive focus on spreadsheets, presentations and meetings, rather than trying to make the company’s products as good as they can be.

As a technical person and former tech manager/executive, I am susceptible to this argument that strong tech leadership is the answer to value creation, but I am also naturally skeptical of arguments that are self-serving, or self-validating. So, I decided to look at this question in a more quantitative way, by using publicly available data on the market value of select high technology companies over the last 30 years, compared to the tech credentials of their CEOs over this time frame.?The market value metric I selected was simply the market capitalization of the respective companies over this period.

The companies I considered in the analysis were:

Amazon, AMD, Apple, Cisco, Ericsson, Google, HP, IBM, Intel, Juniper, Microsoft, Nokia, Oracle, and Qualcomm

They were selected based on the fact that they were ‘high tech’ companies that had existed for all, or the majority, of the period of interest, and had multiple CEOs during the different phases of their existence.

I divided the company CEOs into two essential categories:

Technologists: People with a strong science or engineering education (Bachelor’s degree and/or post graduate degree) and a significant work history in R&D or as strong advocates for new technologies

Business Managers: People with no advanced technical education (even if they had some technical education at the bachelor’s degree level) and with no work history in R&D; these individuals had almost exclusively product and business management experience

I then computed the change in the market cap that occurred from the beginning to the end of each CEO’s tenure at each company, as long as they had at least 3 years of tenure – an adequate period to show impact.?And the essential result is shown in the plot below:

By eye, there appears to be a higher proportion of Technologist CEOs at the higher end of the growth scale and, conversely, a higher proportion of Business Manager CEOs at the lower and negative end of the growth scale.?But, when a Fisher test is performed to evaluate the probability of the two distributions being the same, a p value of 0.95 is obtained, meaning that there is a 95% probability that these distributions are actually statistically indistinguishable. ??

The conclusion must be that there is no evidence from this limited sample that Technologist CEOs outperform Business Manager CEOs in terms of their ability to drive corporate growth.

So, is there any merit to this thesis??Well, coming back to the Musk tweet, I think it is inherently valid to argue that technical expertise and knowledge is fundamentally important to be able to directly manage technical roles, in order to understand the relative difficulty and uncertainty of the work being undertaken and also to provide guidance on the potential solutions (an important attribute of good management), and the associated risks and consequences.?And this is Musk’s primary point.

But surely the same must also be somewhat true for the managers of those (technical) managers, for the same reasons.?And so-on up the ladder to the executive team and the CEO.?An essential technical appreciation must surely be part of the management equation??The primary difference is the amount of technical detail or specific knowledge, which becomes higher order with a more general understanding, which is complemented by the increased level of business experience and expertise.?

I would extend this tech-appreciation argument further and posit that the most successful tech executives/teams must actually be technophiliacs – they must have a genuine affinity for technology which, when combined with an appreciation of the technical challenges and great business acumen, makes for an optimum combination that will allow the right bets to be made for the near term (sustaining innovations) and the longer term (disruptive innovations), with the right risk versus opportunity analyses for increasing customer and shareholder value.

So, back to my analysis above, why doesn’t this technophilia show up as a difference in the two distributions??I think the answer is because both Business Manager CEOs and Technologist CEOs can be technophiliacs independent of their education or career background. ?In both cases they need to surround themselves with a team of strong tech-savvy leaders who they trust to create and manage the technical roadmap and strategy as well as the critical business needs.?The primary difference between the two types of leaders is that the supporting team tech-credentials are even more critical for Business Manager CEOs than for Technologist CEOs.?And, in my experience, this is where some Business Manager CEOs fail – they either view such skills and knowledge as less vital to run a business, i.e. they view the world through an MBA lens as Musk observes, or worse, they feel threatened by technical discussions in which they feel unable to participate or drive in the same way as business discussions.?

This internal team and CEO dynamic is clearly difficult to quantify and obviously not captured in the preceding analysis. ?However, I would argue that if we recategorized tech company CEOs and leadership teams as ‘Technophiliacs’ and ‘Technophobics’ and could accurately measure these attributes for each individual, a clear difference in business growth would be found.??

One canonical example of this phenomenon would be Steve Jobs; he was by no means a technologist by education or work experience but partnered with Steve Wozniak (who was/is the quintessence of a technologist-engineer), and other tech and design geniuses to create and grow Apple.?Tim Cook has done a good job of sustaining this growth, by retaining a top technical team, so he exhibits technophilia (by my definition) as well, which is likely why Jobs was willing to hand the reins to him. Elon Musk himself has a ‘dual persona’ – with degrees in both economics and physics – essentially allowing him to hybridize across both worlds. ?I would be interested to hear of other examples or counter-examples that people have experienced either first-hand or by association.

In the absence of additional perspectives and quantification, and coming back to the Musk tweet, my summary thesis is that technical people must indeed be managed by technically savvy people, and I would extend this to say that technical businesses must be managed by technophiliacs to achieve their full potential.