Nvidia loses its founding CEO Can it keep up the momentum?
Advice to the Nvidia board: Choose a technician.
As the chip giant’s executives search for a replacement for Jensen Huang, the history of succession at Silicon Valley companies suggests that the chances of long-term success are better for someone steeped in technology and product development than in finance, sales or marketing.
A change of founder is a defining moment for any company, whether it is years of planning or a sudden departure, whether the company is thriving or faltering. The fall came remarkably quickly for Mr. Huang, Nvidia’s co-founder and former chief executive. He resigned on Thursday after disclosing affairs with a woman who US intelligence has identified as a Chinese spy and with an executive who reported to him.
Nvidia’s business as a leading supplier of AI data center chips is booming. Mr. Huang’s hasty departure, analysts say, will have little short-term impact on the company’s business, despite a big stock market reaction. (The company’s stock has fallen 14 percent in the past five days.)
But the best tech leaders lead their companies to opportunities. At Nvidia, which was founded in 1993, Mr. Huang recognized more than a decade ago that chips used mainly for image processing in computer games could be reused as hardware engines for AI software. It was a huge gamble for a small company – and it paid off.
“With good execution, you can continue to be a founder for years,” said Steve Blank, a Silicon Valley entrepreneur and investor who is an adjunct professor at Stanford University. “But you may lack the founder’s vision to see beyond the horizon and determine what’s next. That’s why the best successors have a lot of technical and business acumen.”
Over the years, the track record of tech companies that have replaced founding executives has been decidedly mixed.
In 1985, Apple co-founder Steve Jobs was forced out after clashing with his CEO, John Sculley, who had come from PepsiCo. Under Mr. Sculley, Apple enjoyed years of rising profits. However, the company eventually struggled against cheaper personal computers based on Microsoft Windows software and Intel microprocessors. Mr. Scully left Apple in 1993.
Three years later, with Apple’s survival uncertain, Mr. Jobs returned to become CEO. The renowned product team leader led the company’s renaissance, introducing new digital devices including the iPod and iPhone that transformed the music player and mobile phone product categories.
In 2011, shortly before his death, Mr. Jobs named Tim Cook as his successor. Mr. Cook holds a degree in industrial engineering and a master’s degree in business administration. While some analysts have said that Apple has lost some of its innovative spark, today the company is valued at $5.16 trillion, the most valuable in the world. (In September, Mr. Cook became executive chairman, and John Ternus, a mechanical engineer and executive director of product development, became CEO.)
Intel didn’t do very well. Although Andrew Grove did not found the chip maker, he was among its first employees and led the company for nearly two decades. Immigrated from Hungary, Mr. Grove learned English and earned a bachelor’s degree and Ph.D. in Chemical Engineering.
Mr. Grove led Intel’s effort to dominate the market for microprocessor chips, the electronic brains of personal computers. He became the face of Intel and one of the architects of the personal computer industry, being named “Man of the Year” by Time magazine in 1997.
Mr Grove’s immediate successor in 1998, Craig Barrett, was also a technologist. But later successors less so – and Intel’s fortunes plummeted. As part of efforts to help revive chip manufacturing in America, the US government said last year that it would invest nearly $9 billion in Intel for a stake of less than 10 percent.
Some of the biggest technology companies have recognized that technical expertise at the top is indispensable. Microsoft co-founder Bill Gates stepped down as CEO in 2000, handing the job over to his longtime business partner Steve Ballmer.
Mr. Ballmer was known as a great sales and business development executive and a tireless, hands-on manager. During his years as CEO, from 2000 to 2014, Microsoft’s sales and profits grew steadily. But Mr. Ballmer’s lack of technical expertise has contributed to Microsoft’s reputation as an industry leader. Big-spending initiatives, particularly to compete with Apple in smartphone software and hardware, have failed.
Satya Nadella, who holds undergraduate and graduate degrees in computer science as well as an MBA, succeeded Mr. Ballmer in 2014. Mr. Nadella quickly refocused the company.
“He realized that Microsoft’s future was not going to be mobile,” said David Yoffie, a professor at Harvard Business School. “It was supposed to be the cloud. And he was very effective at steering the company in that direction.”
Today, Microsoft is a leading provider of cloud computing services, its software programs are available in the cloud, and it is investing heavily in artificial intelligence. The company is valued at $3.88 trillion.
For Nvidia, its next leader will have to develop a long-term strategy. With a 90 percent share of the current market for advanced AI chips and an influx of cash, the company will be able to fund its next moves.
Nevertheless, Nvidia’s very dominance in the market invites competition. For example, Google has developed chips designed for AI AND companies in the United States and China are working on open source alternatives to CUDA — Nvidia’s software platform for its chips — that are free to use and modify. Used by an estimated four million developers, CUDA software strengthens Nvidia’s grip on the market.
Nvidia’s current business is fast. “But society hasn’t really mapped and articulated the future,” said Michael Cusumano, a professor at MIT’s Sloan School of Management.
The travails of Mr. Huang, 63, are also evidence that he was not as laser-focused on business as he once was, Mr. Cusumano said. Seeing the next turn in the AI market could bring fresh eyes.
“Jensen Huang has done an incredible job over the years, but it may not be a bad time to replace him,” added Mr. Cusumano.