As you likely know, Target was hit by a huge data breach five months ago when hackers stole the credit and debit card information of roughly 40 million Target customers during the holiday shopping season. This ultimately resulted not only in the resignation of Target’s CIO, Beth Jacob, but now also CEO, Gregg Steinhafel.   There is still a lot to be done to win back the customers who fled after the breach but, the breach is really just one of the challenges awaiting Target’s next CEO. 

Whoever replaces Steinhafel at Target will certainly have a lot on his or her plate. In addition to regaining lost customers, the new CEO will also need to clean up after Steinhafel’s disappointing efforts to expand into Canada and remedy the company’s decline in profits during the holiday quarter.  More importantly, the new CEO will need to:

– Create a new vision and write a new narrative.  He or she needs to be able to articulate where Target is and where they are going.  The narrative doesn’t have to be specific, but it does need to provide hope and direction to help regain employee and customer confidence.  They need a clean slate.

– Identify innovative solutions to the on-going e-commerce challenges.  Target has fallen behind in the growing e-commerce battle. They are facing more and more competition from e-commerce rivals such as Amazon.com and have been slow to make the move to small-format stores, where Wal-Mart is accelerating their efforts.  They need to look for someone who really understands the world of e-commerce, not a just a traditional retailer.  They need someone who can facilitate real change and lead through disruptive innovation. 

A disruptive innovation is an innovation that helps create a new market and value network, and eventually disrupts an existing market and value network (over a few years or decades), displacing an earlier technology. 

Is it possible for a homegrown CEO to lead that kind of change?  CEOs who spend their entire careers inside a single organization (like Steinhafel and former Best Buy CEO, Brian Dunn) have a particular lens that is formed from that experience, and they may lack the capacity to shift that lens to a new market and value network.  There are just certain experiences that they are missing from their playbooks that prevent them from most effectively leading change that isn’t incremental.

Target certainly has a reputation for cultivating homegrown talent. The company is often described as “famously insular”.  Steinhafel began at Target 35 years ago as a merchandising trainee, and his predecessor Robert Ulrich spent his entire career at the company.   Additionally, most of the company’s executive officers have been at the retailer for at least a decade.  Tina Schiel and Kathryn Tesija are two of the internal candidates mentioned as potential successors, and they have both been there since the 1980s. Do you see what I mean?  If history is any guide, it seems likely that Target would pick an insider as a permanent replacement.

Target is not alone in this behavior.  Hiring an external CEO is somewhat uncommon in U.S. companies.  In the last five years, 27 consumer-related companies replaced their CEOs, and only seven of those chose external candidates (Equilar, 2014).

The Board might fear an outsider will be a jolt to the company, but it could be a worthwhile jolt. Fresh thinking and an objective perspective on recent events and current realities could be useful skills for whomever takes the helm.   While internal hiring is still the norm at many retailers (including primary competitor Wal-Mart) more organizations are beginning to look outside.

Best Buy upended their tradition in 2012 when they named Hubert Joly as CEO. All their previous chief executives were company “lifers”, including aforementioned Brian Dunn, who had been with the company for three decades.  Coming from the hotel industry, Joly did not have retail experience, but he learned the business and has done a phenomenal job.  He has been able to navigate through disruptive innovation for the organization.

I think Target could take a note from the nearby retailer and potentially benefit from bringing in someone externally with a different perspective and experience outside of the retail world—an outside all-star.  What do you think?