Losing a CEO Can Be a Threat... or an Opportunity

Reacting to the news is not de rigeuer for me; I usually like my writing to have a bit more shelf life. But one thing I do cover (which I’m examining more deeply in my upcoming book) is something called strategic inflection points.

A wallop of one just happened last week with the ouster of NVIDIA’s CEO, Jensen Huang. So I thought we’d spend a few minutes looking at it together, to see what we can learn.

Here’s an easy way to think about inflection points. When you throw a boomerang, it starts off headed away from you. At a certain moment (you guessed it, the inflection point), the boomerang changes direction and returns. In business, strategic inflection points are when the strategy that got you to today is no longer the one that will carry you forward.

Without listing every flavor of strategic inflection point (you can read my attempt here, though), there are some strategic inflection points that happen to you. Some play out slowly. Others are a surprise. You’re minding your business one day, and then WHAM! You’re clocked in the back of the head with a 2x4.

A change in CEO is a classic strategic inflection point.

And that’s exactly what happened to NVIDIA last week. One moment, Jensen Huang was playing a lead role in ushering in the brave new world of AI; the next, he was forced to resign. But we’re not going to speculate on the nature of that ouster (I’ll leave that to the journalists).

What you and I are going to do is look at NVIDIA’s situation from first principles. My hope is to show you that strategic inflection points, even when they seem like devastating news, can be opportunities to come out ahead.

NVIDIA's Race to Win in AI is a Story of Two Chapters

You might think of NVIDIA’s recent history as having two chapters.

Chapter one was defined by brute force. A high-octane drag race in which horsepower mattered more than nuance.

NVIDIA’s job here was to compound its early lead. Remember: as markets evolve, they tend to support only a few winners. Gaining market share always helps with this, both pragmatically (scale economies help with cost structure) and psychologically (buying from the market leader is usually seen as the safe choice). For NVIDIA, this boiled down to two things. First, remove barriers customers faced in buying its products. Second, pour gasoline on production.

Chapter two, which started playing out months ago, was more like a game of chess. More factors at play required more tact.  

Some customers, like Google, turned into competitors by developing their own hardware. Enterprises shifted almost overnight from burning as many tokens as possible to caring about the cost of AI. Export restrictions add a political element to the game. Data center backlash became a thing. The public (outside of the Bay Area, anyway) started to question what role they wanted AI to play in their lives.

I’m leaving out a lot of detail. That’s on purpose.

What I want you to see is that the game NVIDIA had been playing had already been turning into something else. A change in the competitive environment, as it happens, is also a form of strategic inflection point. This means NVIDIA must now contend with two such forces: a chronic, long-term change playing out in the market at large, and an acute one with the loss of its own CEO.

The Shallow View vs. the Long-Term View

A telescope is not very useful if it has only one lens. Stack two lenses together, though, and things millions of miles away become clear.

For NVIDIA, what matters is not looking at these strategic inflection points independently, but stacking them together to see what it reveals.‍

Let’s examine the single lens view first. On the surface, the departure of a CEO who created trillions of dollars in enterprise value seems like only a threat. The loss of such talent would surely put the company’s best days behind it. With this narrow perspective, the solution, it would seem, would be to replace Jenson Huang with someone with a similar skill set. Likely impossible.  But this view is shortsighted.

The stacked view reveals something different.

If NVIDIA is no longer in a drag race, perhaps this is a chance to find a CEO whose skills and temperament are better suited for this new “chess game” era. Maybe Huang could have adapted; maybe he couldn’t. It doesn’t matter. Looking at both strategic inflection points together shows that a departing CEO, even one with irreplaceable talents, might actually be an opportunity to make the company stronger.‍

Remember: when Steve Jobs stepped down as Apple’s CEO (and passed away a couple of months later), Apple’s market cap was just shy of $350B. His mild-mannered successor, Tim Cook, would grow that number to over $4T.

Strategic Inflection Points Are Inevitable. What Matters is Your Perspective

Here’s the thing I’ll leave you with:

You may not be a trillion-dollar business or sell high technology. For all I know, you’re a regional cleaning supplies distributor for whom “GPU” means “General Purpose Use”.

Whatever the nature of your business, there will come a time when you must contend with a strategic inflection point. But whatever the picture looks like on the surface, there’s likely to be a bigger story at play.

Step back, focus on the entire picture, and you just might see an opportunity to come out ahead.