I was shocked when Google (Nasdaq: GOOG) announced that Eric Schmidt will step down as CEO and hand the reins to Larry Page, co-founder of Google.
As a financial journalist, I was befuddled. Other financial analysts/journalists initially didn't know the reason either, as far as I know.
Then I came across an op-ed piece by Ben Barr, co-editor of Mashable, which completely explained the situation to me.
The reason that Parr understood the situation and I didn't is the same reason Eric Schmidt was replaced by Larry Page.
In his piece, Parr outlined the thinking of business people: Google had a great quarter, it owns the search engine market, and seems to be the king of the internet.
However, two key recent products - the Google Buzz and Google Wave - failed. These failures were not inconsequential because they represented Google's venture into Web 2.0, which may very well be the future of the internet.
Parr also said Google is bleeding talent to Facebook, the king of Web 2.0.
So what's the problem with Google and Eric Schmidt?
Their problem is shared by several declining tech giants and their corporate CEOs (namely Microsoft post-Bill Gates and Apple post-Steve Jobs).
Parr said Schmidt is a great CEO, manager, and executive. Thanks to him, Google is efficiently run. However, Schmidt isn't a visionary like Mark Zuckerberg of Facebook, Bill Gates of Microsoft, or Steve Jobs of Apple.
When Bill Gates left Microsoft and Steve Ballmer took over, shares stagnated for a decade. Moreover, many of the company's new products failed.
When Steve Jobs was kicked out of Apple and John Sculley took over, Apple got crushed by Microsoft and launched multiple failed products.
The two aforementioned managers would thrive in most industries. However, I believe the consumer technology industry is different because so much depends on product development.
In most other industries, a good CEO is one who manages people well, knows his way around the corporate world, and is good at taking care of key relationships.
However, a CEO who is perfect in all three aspects can't possibly run Apple better than Steve Jobs can; he would have been utterly incapable of launching the iPhone, iPod, and the iPad. At best, he would have maximized profit-margins for Apple's person computer product line and wrestled away some market share from Microsoft.
Things like market-share and profit margins are what typical CEOs predominately think about. When Wall Street analysts and financial journalists approach technology companies, they come with a similar mindset.
However, what actually matters - and what people like Steve Jobs have- is the awesome ability to drive product development.
It's a mixture of God-given genius, a love for technology, a hacker mentality, and what Parr calls vision.
This is what makes for a successful CEO at companies like Apple and Google.
So why did Google oust Eric Schmidt?
It's because they don't want to end up like Microsoft. Instead, they want Page to work a Steve Jobs-like magic at Google.
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