Expanded roles for the CEO.

• Author: MITCHELL, DONALD W.

To raise shareholder returns and business performance, boards should encourage their CEOs to take on several new roles.

IN THE SAME WAY that world records continue to fall and average competitive performance improves in almost all fields of athletics, the standards for what CEOs must accomplish with their companies are also rising. In our research of those companies that have accomplished dramatic business improvements in the last decade, we have identified five new roles which, in combination with a continuation of the important past roles (see box on page 33), should make all the difference in the decade ahead. Interestingly, few companies have combined these roles successfully so far, primarily because some or all of the newer roles are considered important by few CEOs and their boards.

1. Business Model Innovation

   Most CEOs assume that they can continue to serve customers in pretty similar ways, and focus on improving quality, service, and costs to make this a profitable activity. Contrary to that belief, many of the most successful CEOs have led their companies to change the business model so that they serve customers in totally different and improved ways.

   Michael Dell's Dell Computer Corp. provides one such example. Computers had always been produced in mass quantities with standard features and sold directly to customers by sales people or through retail stores. Dell saw that customers really wanted low-priced computers custom-made to their precise specifications, ordered over the telephone or Internet, delivered the next day, requiring little set-up, and having a service capability where the customers could solve almost all of their own problems in a few minutes. Over a decade, Dell worked with his talented people to design just such a business process and quickly leapt past much larger and more highly regarded computer manufacturers.

   Lowry Mays' Clear Channel Communications Inc. provides another example. The company started as a radio broadcaster, being good at providing a growing, high-quality listening audience for advertisers. Mays soon realized that advertisers really wanted to get more customers at the lowest possible cost and reorganized his company as government regulations were dropped to provide the best and lowest-cost media buy for the largest local advertisers. In many cases, this meant not just changing the programming format (from, say, rock and roll to country and western) to increase market coverage but also acquiring television stations and adding billboards to the total marketing package. Clear Channel then custom-designs a more comprehensive media buy. Like Dell, Clear Channel went from being a small company 10 years ago to being an industry leader today.

   These two companies' CEOs played a key role in developing the vision and implementing the strategies to make that vision happen. Other CEOs have played, and can play, an equally effective role in making business model innovation occur simply through continually questioning the current business model. For most CEOs, this role will be the right one.

2. Accessing and managing low-cost capital for strategic advantage

   In the past, large companies felt safe from new competitors because of large established bases of business, good reputations, and great employees. Now such companies can find themselves threatened very quickly by new competitors brandishing enormous stock-price multiples who are using the value of that stock to buy a preferred customer position quickly. When coupled with new technologies like the Internet...