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10. What Makes it Hard for Some Companies to Come Up with Their Next Act?

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Some companies can’t seem to figure out how to reinvest cash in a new business while others have wave after wave of market-creating growth.

Why is it so hard for some great companies to have second (or third) acts?  Why can some companies do it, while others can’t?

What do you think makes it difficult?  How would you address those challenges?

1 thought on “10. What Makes it Hard for Some Companies to Come Up with Their Next Act?

  1. A CEO needs to have a strong backing from the Board in order to execute a second or third act.
    Without a strong backing from the Board, the CEO is unlikely to take a high-risk act to reinvest the cash in market-creating growth. He will be spending his money on share buyback or beating other ratios set for him.

    A founder who has risen to the position of CEO will have proven to the Board that he has the ability and credential to make market-creating growth. The Board will afford such a CEO with greater flexibilities and patience. Thus, he is more likely to take up market-creating growth strategy which is perceived to have a higher risk.

    Would Larry Page be able to do his moonshot projects if he is an appointed CEO from another company instead of the founder?
    Would Steve Jobs be able to develop a phone in a company that sells personal computers or open retail stores when personal computers were traditionally sold through electronic retailers?

    CEOs who did not rose from the founder position were good managers. They were hired for their ability to manage the existing companies and likely to depend on sustaining innovation to grow. They probably lack the product/service development experience which a founder has.

    When hiring a CEO, it will be good to give a greater weight on R&D or product development components as compared to the traditional sales and operation components.

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