To Innovate, the Leader You Think You Want Is Probably Not the Leader You Need

When organizations decide they need to transform, they usually start looking for experience.

Twenty years in the industry. A long record running similar organizations. Deep institutional knowledge. Someone who has "seen it before."

It sounds logical.

It may also be exactly the wrong way to think about leadership when an organization needs to innovate.

The academic research on executive leadership presents a much more complicated relationship between experience and performance. Leaders clearly matter. Quigley and Hambrick studied 18,467 firm-years across 1,015 firms from 1950 through 2009 and found that the proportion of variance in firm performance attributable to individual CEOs increased substantially over time. Leadership is not incidental to organizational performance. It matters. (Quigley & Hambrick, 2015)

But that does not mean the most experienced leader is necessarily the best leader.

In fact, when an organization's environment is changing rapidly, experience can become both an asset and a liability.

Experience works best when tomorrow looks like yesterday

One of the most interesting studies on this question comes from Andrew Henderson, Danny Miller, and Donald Hambrick.

They compared CEO tenure and company performance in two very different industries: branded foods, which was relatively stable, and computers, which was highly dynamic.

In the stable industry, performance generally improved as CEOs accumulated experience. Only after very long tenures, roughly 10 to 15 years, did performance begin to deteriorate.

In the rapidly changing computer industry, the pattern was dramatically different.

The authors argue that CEOs often enter organizations with relatively established paradigms for understanding their businesses. In highly dynamic industries, those paradigms can begin becoming obsolete almost immediately. Rather than leaders first learning and then later stagnating, the problem may be that their existing mental models progressively lose relevance as the environment changes around them. (Henderson, Miller, & Hambrick, 2006)

That finding should get the attention of any organization facing technological disruption.

Experience is incredibly valuable when the lessons of the past continue to predict the future.

But what happens when they do not?

The very knowledge that once made a leader effective can become a constraint.

Experience creates both capability and risk

A broad review of the CEO tenure literature reinforces this tension.

Darouichi, Kunisch, Menz, and Cannella reviewed 113 publications examining CEO tenure and concluded that tenure can create valuable human capital, social capital, organizational knowledge, legitimacy, and power.

At the same time, longer tenure can contribute to rigidity, entrenchment, narrower information processing, commitment to established strategies, and resistance to change.

In other words, experience is not inherently good or bad.

Its value depends partly on whether leaders continue updating how they understand the world around them. (Darouichi et al., 2021)

That distinction becomes especially important in organizations undergoing transformation.

There is more than one way experienced leaders can get stuck

Another important study reaches a related conclusion through a somewhat different mechanism.

Danny Miller and Jamal Shamsie studied Hollywood studio executives and found an inverse U-shaped relationship between tenure and performance.

Early in their tenure, leaders experimented extensively. As they learned the business, experimentation became more focused and performance improved.

Eventually, however, experimentation declined too far and performance began to fall. (Miller & Shamsie, 2001)

This is different from the mechanism Henderson and his colleagues identified.

In Henderson's dynamic-industry model, the problem is that a relatively established executive paradigm becomes obsolete as the environment changes.

In Miller and Shamsie's work, the problem is that leaders increasingly reduce experimentation over time.

Both paths can lead to the same place:

A successful leader becomes progressively less capable of responding to a changing environment.

The danger is not experience itself.

The danger is allowing experience to harden into certainty.

Having done the job before is not the guarantee we think it is

Organizations often treat prior executive experience as a form of risk reduction.

If someone has already been a CEO, surely they are less risky than someone doing it for the first time.

The evidence does not consistently support that assumption.

Monika Hamori and Burak Koyuncu studied CEOs of S&P 500 companies and found that prior CEO experience was associated with lower post-succession firm performance.

More strikingly, prior CEO experience in the same industry or a related industry was also associated with significantly lower post-succession performance in their analysis. (Hamori & Koyuncu, 2015)

That does not mean experienced CEOs are destined to underperform.

It does mean that prior experience should not automatically be treated as evidence of future success.

Nathan Bragaw and Vilmos Misangyi reached a similarly uncomfortable conclusion in their analysis of 654 CEO succession events.

Prior CEO experience tended to benefit the executive through higher compensation, but did not generally produce a corresponding performance advantage for shareholders. The value of prior experience depended heavily on the context in which that experience had been developed. (Bragaw & Misangyi, 2017)

That should make us question a common assumption embedded in executive recruiting:

More experience equals less risk.

Sometimes it may.

Sometimes we may simply be paying a premium for familiarity.

Innovation requires a different leadership profile

If your organization's primary objective is optimizing a relatively stable operation, deep experience can be enormously valuable.

You want leaders who understand the system, recognize recurring patterns, know where the risks are, and can drive consistency and efficiency.

But if the organization needs to fundamentally change, I would look for something different.

I would prioritize leaders who demonstrate:

• Learning velocity. They absorb new information quickly and change their conclusions when the evidence changes.
• Intellectual humility. Experience gives them hypotheses, not unquestionable answers.
• Strategic flexibility. They can change resource allocation, organizational structure, and strategy as circumstances change.

Research by Nadkarni and Herrmann illustrates why the details matter here. Studying 195 firms in the Indian business-process-outsourcing industry, they examined the relationship between CEO Big Five personality traits, strategic flexibility, and firm performance.

Extraversion, openness, and emotional stability were positively associated with strategic flexibility, while conscientiousness was negatively associated with it. Strategic flexibility, in turn, played an important mediating role between CEO personality and firm performance. (Nadkarni & Herrmann, 2010)

That is useful precisely because it complicates an easy leadership narrative.

Traits that may be highly valuable for operational reliability do not necessarily produce the same advantages when adaptability becomes the central requirement.

• Comfort with experimentation. They would rather run a controlled experiment than spend six months debating a PowerPoint presentation about what might happen.
• Tolerance for dissent. They deliberately create environments where people with less seniority can challenge established assumptions.
• Ability to abandon successful practices. This may be the hardest one. Great innovators are sometimes required to dismantle processes they personally helped create.
• Ability to build learning organizations. The goal is not to personally generate every great idea. It is to create an organization capable of continuously generating, testing, evaluating, and scaling ideas.

This is fundamentally different from simply asking whether someone has done the job before.

Organizations often promote exactly the wrong person for transformation

There is another uncomfortable implication.

The leader who is best at running today's organization may not be the leader best equipped to build tomorrow's organization.

Traditional organizations tend to reward executives for delivering predictable results, reducing variance, mastering existing processes, accumulating institutional knowledge, and successfully operating the current business model.

Those are valuable capabilities.

But innovation requires something additional.

James March's classic work on organizational learning described the tension between exploitation and exploration.

Exploitation involves refinement, efficiency, execution, and improving what the organization already knows how to do.

Exploration involves experimentation, search, discovery, risk taking, and finding what the organization should do next.

Organizations naturally gravitate toward exploitation because its benefits are usually more immediate and measurable. March warned that organizations can become very effective in the short run while undermining their long-term adaptability if exploitation crowds out exploration. (March, 1991)

This creates a leadership paradox.

We frequently select our transformation leaders based on how successfully they managed the system that now needs to be transformed.

Then we wonder why transformation becomes incremental improvement.

Experience should be an input, not a veto

None of this means institutional knowledge should be discarded.

Quite the opposite.

Organizations undergoing transformation need experienced operators who understand how the business actually works. They need people who understand customers, regulations, operations, finances, organizational history, and the unintended consequences of seemingly simple changes.

But experience cannot be allowed to become veto power.

A healthy innovation organization needs productive tension between experienced operators, adaptive transformation leaders, and people willing to question assumptions that insiders no longer notice.

This is closely related to what Michael Tushman and Charles O'Reilly described as the ambidextrous organization, one capable of simultaneously managing its existing business while developing fundamentally new capabilities. (Tushman & O'Reilly, 1996)

That requires leadership capable of protecting today's operations without allowing today's operations to dictate tomorrow's possibilities.

Maybe we should change how we interview leaders

Instead of primarily asking:

"How many years have you run organizations like ours?"

I would ask:

"Tell me about a strongly held belief you changed recently. What changed your mind?"

"Tell me about something that made your organization successful that you later decided to stop doing."

"What experiment did you approve that failed, and what did the organization learn from it?"

"When someone three levels below you believes you are wrong, how does that information reach you?"

"What technology, competitor, or business model did you initially underestimate?"

"What would have to be true for you to conclude that our current strategy is wrong?"

Those questions tell me far more about someone's ability to lead innovation than the number of years on their résumé.

The leader you need may make you uncomfortable

Boards and executive teams naturally gravitate toward certainty.

The experienced candidate feels safer. Their résumé is familiar. Their accomplishments are measurable. They know the language of the industry.

The adaptive leader may feel riskier.

They ask questions.

They challenge assumptions.

They run experiments.

They bring people into the conversation who have historically not been included.

They occasionally say, "I don't know."

And perhaps most unsettling of all, they may question systems that the people hiring them helped build.

That may be precisely why they are needed.

The research does not tell us that experience is bad.

It tells us something more useful:

Experience creates value when leaders continue learning from it. It creates risk when leaders begin confusing experience with certainty.

In stable environments, experience can compound.

In rapidly changing environments, learning ability may compound faster.

And in a period defined by AI, automation, new business models, and extraordinary technological change, organizations should think carefully about which of those they are actually hiring for.

Because if your goal is genuinely to innovate, the leader you think you want may not be the leader you need.

References

• Bragaw, N. A., & Misangyi, V. F. (2017). The value of CEO mobility: Contextual factors that shape the impact of prior CEO experience on market performance and CEO compensation. Human Resource Management, 56(2), 243-265.
• Darouichi, A., Kunisch, S., Menz, M., & Cannella, A. A. Jr. (2021). CEO tenure: An integrative review and pathways for future research. Corporate Governance: An International Review, 29(6), 661-683.
• Hamori, M., & Koyuncu, B. (2015). Experience matters? The impact of prior CEO experience on firm performance. Human Resource Management, 54(1), 23-44.
• Henderson, A. D., Miller, D., & Hambrick, D. C. (2006). How quickly do CEOs become obsolete? Industry dynamism, CEO tenure, and company performance. Strategic Management Journal, 27(5), 447-460.
• March, J. G. (1991). Exploration and exploitation in organizational learning. Organization Science, 2(1), 71-87.
• Miller, D., & Shamsie, J. (2001). Learning across the life cycle: Experimentation and performance among the Hollywood studio heads. Strategic Management Journal, 22(8), 725-745.
• Nadkarni, S., & Herrmann, P. (2010). CEO personality, strategic flexibility, and firm performance: The case of the Indian business process outsourcing industry. Academy of Management Journal, 53(5), 1050-1073.
• Quigley, T. J., & Hambrick, D. C. (2015). Has the "CEO effect" increased in recent decades? A new explanation for the great rise in America's attention to corporate leaders. Strategic Management Journal, 36(6), 821-830.
• Tushman, M. L., & O'Reilly, C. A. III. (1996). Ambidextrous organizations: Managing evolutionary and revolutionary change. California Management Review, 38(4), 8-29.