x Abu Dhabi, UAEMonday 22 January 2018

IT world learns leaders can be too charismatic

Trouble looms once chief executives are tempted to regard themselves as mascots for their brand, even if they are not showmen. Just look at Nokia and Microsoft.

John McAfee, left, is escorted by immigration officers in Guatemala City at the city's airport on December 12. William Gularte / Reuters
John McAfee, left, is escorted by immigration officers in Guatemala City at the city's airport on December 12. William Gularte / Reuters

IT corporations are starting to lose consumer and investor confidence as a result of over-reliance on the charisma of their founders and chief executives.

The widely reported scandals surrounding John McAfee, the founder of the computer software security giant McAfee have, for example, already begun to diminish the McAfee brand.

Mr McAfee founded the anti-virus software company in 1987 in Santa Clara, California, and left in 1994. However, last month, the death of a neighbour of Mr McAfee's in Belize from a gunshot to the back of the head led to the police wanting to interview the former IT chief.

After spending a week in neighbouring Guatemala, Mr McAfee is reported to be fighting extradition from Miami.

According to YouGov BrandIndex, an international organisation monitoring the pull of leading brands, the scandal surrounding Mr McAfee has had extremely negative consequences for his former company's image.

McAfee Inc had a score of 35 in September, which dropped to 20 in early November and fell further to minus 17 following news reports of Mr McAfee's flight from Belize with his 20-year-old girlfriend.

While Mr McAfee is an extreme example of a former chief executive alleged to have gone beyond the pale, even well-behaved IT company founders and chiefs can cause problems when they finally depart.

A classic example is the late Steve Jobs, who built Apple into a world-beating company before his death. Without its charismatic leader and his expert showmanship at new product launches, the company's reputation for innovation is floundering and many hitherto loyal customers are now switching to rival brands such as South Korea's Samsung.

Rob Enderle, a Silicon Valley analyst, says Apple, which became the most valued company during Mr Jobs's reign, "now is clearly having issues holding on".

He adds: "Jobs in person was nothing like he was on stage and in public view, I think you could argue this was based on what was learnt about Walt Disney and [the American showman] PT Barnum, both of whom clearly had an on-stage personality that differed dramatically from their offstage behaviour."

However, even when a chief executive refrains from excessive showmansip, his reputation can become dangerously synonymous with the company's continued success. Bill Gates, the co-founder of Microsoft, and Jorma Ollila, the former head of the Finnish-based Nokia, are both examples of company heads whose departure has marked a decline in the company's fortunes.

Five years ago, Nokia controlled more than 40 per cent of the global mobile market. Its share has since dropped to below 25 per cent. Crucially, its share of the top-end lucrative smartphone market fell to 4.2 per cent in the third quarter of this year from 16 per cent only a year earlier. In the same quarter, the company that was once the world's leading phonemaker posted a loss of €576 million (Dh2.79 billion), eight times greater than a year before, with revenues falling by almost a fifth to US$9.47bn (Dh34.78bn).

After the collapse of the Soviet Union in 1991, Finland as a country was floundering, as it had been a leading exporter to the Soviet Union. After 1991, the country was in economic crisis. Despite his conservative and reserved profile, Nokia's Mr Ollila was clearly seen as the man who had turned a small rubber overshoe manufacturer into Finland's economic salvation.

At its height, Nokia accounted for more than half the value of the Helsinki stock exchange and Mr Ollila was widely regarded as his country's saviour. But since he resigned in May, the company has floundered.

While Microsoft's fall from its height as the world's leading IT company has been gradual, it has also seemed inexorable since the departure of Mr Gates. Since he stopped working full-time at Microsoft in 2006, the company's once-dominant share in the computer software market has been eroded by competition from rivals such as Apple and, more recently, Google, with its Android software.

Nor is there any indication that the new generation of IT chief executives is any more willing than their predecessors to forsake the cult of personality. Facebook's chief Mark Zuckerberg, for example, is seen by analysts as instrumental in the company's success or failure.

There may, therefore, always be a shadow over the future performance of even the leading IT giants as long as their chief executives continue to be tempted to act as a mascot for the brand.

"In the end the CEO who can be an ambassador for the company, a part of the brand, is incredibly powerful but passing that on, even in the case Jobs where a process could have been created, has proven problematic," says Mr Enderle. "Even IBM whose most iconic CEO was Thomas Watson Jr … doesn't do this well.

"The issue isn't having the successful iconic head in the first place, it is assuring that once the formula is found it can be passed on to successors."