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Why CEOs Must Always Be Innovators

In the video below, The Motley Fool speaks with Roger Martin, strategy expert and dean of the Rotman School of Management at the University of Toronto. We discuss how leaders must look at innovation within their organization. Martin believes that CEOs must lead like their company's life depends on innovation in order to stay one step ahead of the competition. He believes that investors should watch out if CEOs of companies in their portfolio aren't leading in this way. 

A transcript follows the video.

The full interview with Roger Martin can be seen here, in which we discuss a number of topics including Bill Ackman, innovation, corporate responsibility, executive compensation, and how to pick out great companies. Martin is the coauthor of Playing to Win, a new book focusing on strategy written with former Procter & Gamble CEO A.G. Lafley.

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Brendan Byrnes : How important do you think it is to have a CEO or top management that are constantly innovating, to take Apple as an example? Are you of the opinion that they're in trouble now that Steve Jobs is gone and Tim Cook is in there -- more of an operator and less of an innovator? Is that how you see it, or do you think both can be successful?

Roger Martin: I've never met Tim Cook, so I'm loath to make assessments of people I've never met, but to your fundamental question I do think, especially in the modern era of business, if you don't have a CEO that really believes that his or her company's life depends on innovation, I think it's bad for you.

I just think, with more global competition, especially with really legitimate players in so many sectors in the low-cost geographies -- whether it be Indian outsourcers in that business, or Chinese manufacturers in a whole bunch of businesses -- if you're not innovating, they're going to be able to replicate what you're doing now with a much lower cost structure and your advantage will be eroded that much faster.

You always have to be one step ahead, and I think you need a CEO who's comfortable with that, not uncomfortable, not wistfully thinking, "If we could only just keep things the way they are," or "If I could only go to the government and prevent those Chinese or Indian companies from entering our market."

If that's your CEO today, I just don't see good things for you.


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