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The Opportunity Cost of Innovation

July 9, 2010

Today, there is one major quality required for leaders: innovation. Who immediately comes to mind? Most likely, this person is probably under the age of 30. We are too quick to associate the younger generation with creativity and innovation. A young prospect is bound to lead the future generation on a path of success with a substantial understanding of technology and social trends, right?

Probably. But, will this modern visionary understand the obligations of leadership? Organizational crises are rampant today (e.g. the BP Oil Crisis, Lehman Brothers). we learn important lessons and develop strategies through firsthand crisis experience that limit the potential for corporate downfall.  Which corporate individuals have such characteristics?

According to a Wall Street Journal article, CEO Tenure, Stock Gains Often Go Hand-in-Hand, CEO’s that have held office for more than 15 years have proven to outperform their less experienced counterparts in terms of stock gains. Yet, at the same time, the article warns that CEOs who have not groomed a potential successor in the last 10 years can significantly compromise the future of their organization.

So, what does one take away from this? A lack of experience is likely to increase organization risk. On the other hand, staying in power for a long time to gain additional experience also has a potential restriction to development. This implies that younger executives should be brought in to lead but, their ascension should be supported with hands-on experience and mentoring from their experienced predecessors.  Time and effort must be committed to these individuals so that they can develop properly and contribute positively to their organizations.

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