Seeing with New Eyes: Cross-Pollination in Business Has Advantages

When a company is in need of new leadership, chances are the board and CEO are going to enlist a search firm that will comb through the same old group of people in search of that new leader. They will search for someone who has served in that job at a similar type of company and almost always in the same industry.

It’s the way the business world works.

But is it always the right approach? Not necessarily.

Instead, Lloyd A. Perlmutter, a C-suite executive with years of experience leading businesses through exceptional growth curves, says cross-pollination in business — hiring executives outside of the industry — can be the way to get the kind of innovative ideas that spark innovation and disruption.

Moving Beyond the Silos

When companies are searching for new leadership, “the process is usually the same: Highlight a candidate’s exact qualifications within the industry; what they have been able to accomplish in said industry and ensure they have done almost exactly what the organization needs them to repeat if they are hired,” Perlmutter says.

“I call it the square peg/square hole syndrome. In many cases, it leads to satisfactory results. But much like the difference between Red Ocean and Blue Ocean strategies, most of these searches and hires lack imagination. The process smacks of myopia.”

He believes there is a case to be made for decision-makers to look beyond their own narrow industrial lane. When they consider candidates from different departments, different teams, even different industries, it can lead to fresh ideas and dramatic change in everything from the work culture to the business plan to the product line.

Win Big When Cross-Pollinating in Business Works

A Harvard Business Review report on a study of more than 17,000 patents found that cross-pollination of ideas didn’t always lead to greater success. But when it did, the breakthroughs “are frequently of unusually high value—superior to the best innovations achieved by conventional approaches.”

Likewise, an Egon Zehnder report from May 2019 entitled “Exploring New Avenues for Hiring CEOs of Engineering and Construction Companies,” reported that between 2014-2018 companies that hired CEOs from outside the E&C sector saw more improvement in their growth rate and market cap than organizations that promoted team members from within or that hired new executives with experience in the E&C industry.

And, Perlmutter notes, this is striking mainly because Egon Zehdner’s research shows that only 25% of the companies studied hired from outside the E&C industry.

Brainstorming a Better Way

“While it is true any CEO must have, by the definition of its job description, transferable skills in terms of communication, leadership, strategic thinking, vision, the ability to inspire teamwork, people assessment and organizational development metrics,” Perlmutter says, “it is far too often that these skills are overlooked or de-emphasized in favor of what specific functions they oversaw and the processes they employed to attain results.

“It’s not that producing results isn’t tantamount, but sometimes what is needed is a new perspective, and overlaying best practices from one industry to another is often a recipe for success and breakthrough achievement,” he says.

Furthermore, a landmark 1996 Academy of Management Journal study concluded that CEOs with “medium or moderate experience” in an industry performed better than CEOs with high industry-specific experience. 

Instead of “knowing better” having toiled in the same industry for most – if not all – their career, executives who are new to an industry will spend time asking a ton of questions and acting on all the new information, Perlmutter says. They will be more adaptable, open, enlightened, and inclusive. 

Cross-Pollination in Business: Taking the Plunge

Getting creative about hiring is a scary prospect, especially for small business people who generally have less room for error.

So how can an organization get the potential benefit of cross-pollination without all of the risk? Choose to contract with an interim executive rather than a new full-time hire.

An interim CEO, CFO, COO, CIO, CTO or CMO will come on board for a defined period — it could be as little as a few months or as long as two years. They bring to the business environment their own proven know-how across organizations and industries. They are skilled at coming into an organization, looking at it from all of the different angles, then creating and implementing an action plan.

As John McGrath said in a 2016 issue of Entrepreneur Magazine, “A breadth of operational experience and business judgment is critical in building transferable skills that carry leaders from venture to venture and win to win. Successful CEOs generally have leadership qualities that span multiple industries…”

And, Perlmutter says, “If we believe that organizational performance truly rests on the human resources of that organization – regardless of what the company essentially does – then someone who understands how to assess talent, inspire a shared purpose and mission and implement the right structure to ensure masterful execution will be the right person to lead. Full stop.”