When a Leader Like Bezos Steps Down, Can Innovation Keep Up?

When the founder CEO of one of the world’s most valuable — and innovative — companies steps down, it’s bound to raise questions about the future of the business. Jeff Bezos’s decision to step back from day-to-day operations at Amazon provokes particular concern because the company has been an unbelievable innovator under his leadership. Similar worries have persisted about Apple post-Steve Jobs. Will these innovative companies lose their way without the founder’s drive and creativity?

The fear is legitimate, because research validates our hunch that founder-led businesses truly are more innovative. One such study, focused on S&P 500 companies, found that those where the founder was still at the helm generated 31% more patents than those led by professional CEOs. But in the post-founder phase, many companies lose their innovation mojo and turn into sclerotic bureaucracies.

Why do companies avoid becoming resistant to change, even as they grow into sprawling enterprises, if a founder is still in charge? My research with Jeff Dyer on the world’s most innovative companies suggests that it’s because founders have unique license to innovate. When they decide to champion a surprising idea inside their company, a project that would normally be destroyed by slings and arrows launched from all sides manages to survive. Salesforce founder CEO Marc Benioff calls this founder superpower innovation capital. In a recent book by that name, colleagues Jeff Dyer, Nathan Furr, and Curtis Lefrandt took that concept further to frame innovation capital as a set of personal capacities that enable some individuals to do better than others at winning the resources to innovate. After all, founding and leading a successful, innovative company requires great skill in the art of persuasion.

But there’s also another reason, even decades after the company’s start, that a founder has so much innovation capital compared with others in the organization — a reason that is more positional than personal. Simply by virtue of the fact that they founded the company, their vision of the company’s future is accepted as authoritative. No one else can claim to have as good a sense of the company’s raison d’être and what new challenge it is called to take on next. Contrast this with the typical post-founder company, where any number of people may be competing to be seen as the true keeper of the flame. Every one of their visions can be questioned as “not something Steve would have pushed for” — and fail to capture hearts and minds sufficiently to pull off the difficult feat of innovation. No one can advocate for a direction that “Steve” never took without being vulnerable to the charge that it is heretical.

Founders have immense innovation capital for other reasons as well. People appreciate how much skin founders have in the game: The company is their baby, their personal reputation is tied to the brand’s reputation, and their legacy depends on its success. This assures people inside and outside the company that when a founder commits to a novel idea, the pursuit of it will be relentless.

So there are valid reasons to fear the departure of an innovative founder, even when the successor is as seasoned and accomplished as Andy Jassy at Amazon. The good news for Amazon, its customers, and its investors is that Jeff Bezos has been well aware of this challenge since the beginning. And he’s been determined to beat the post-founder curse.

Bezos recognized early on that organizations begin to decline when they cease to innovate, and he diagnosed the problem as an unhealthy aversion to risk. Since the earliest days of the company, he has worked to put processes in place and establish cultural norms that counteract the systemic tendency of organizations, as they gain scale, to hew closely to established scripts and adopt an institutional habit of saying no to new ideas. Bezos’s catalytic question has always been, “How can we invert that to an institutional yes?”

Some of Amazon’s practices for managing innovation are now famous, like its “working backwards” process, which requires would-be innovators to present their ideas to management in a standard format. By creating a simple, standard process that is accessible to employees throughout the company, Amazon makes it possible for anyone, regardless of rank or position, to propose an innovation. Other Bezos precepts encourage a healthy attitude toward risk; for example, he wants all managers to distinguish between decisions that are “one-way doors” — meaning there is no going back once the decision has been made — and decisions that are “two-way doors,” which are actually far more common and allow for experimental risks to be taken because retreat is possible with no big loss.

The common thread among Bezos’s management ideas is that they all respond to the same fundamental questions: “How can we make sure that the innovation capital in this company is not so concentrated in the founder?” and “How can we get as many people as possible earning their license to innovate?” I can only assume, knowing how Bezos loves to laugh, that it was an intentionally goofy joke to announce his departure on Groundhog Day. As in the famous Bill Murray movie of that name, he has tried to create an environment in which his colleagues wake up every morning only to find that it remains day one.

Sustaining innovation when founder-leaders leave a company is a problem that extends beyond Amazon. At some point, every visionary CEO must give way to a next generation of leaders, but few of these new leaders are ascending to their new roles without rivals. Their authority to set the innovation agenda will not go unquestioned, and their personal ability to persuade will not be unlimited. Right now, if a founder steps away, the typical large organization is in serious danger of becoming, well, the typical large organization.

Many founders, anxious about the future of their companies — their legacies — are waking up now to the challenge that Bezos started working on decades ago. More than rhetoric about the importance of ongoing innovation, it takes disciplined attention to process, structure, and culture to beat the post-founder curse. They will have to find their own ways to distribute their innovation capital, and give many more people license to innovate.