A succession story less dramatic than Succession - Neil Barua steps up as PTC CEO Jim Heppelmann announces retirement

After over a quarter of a century with PTC, CEO Jim Heppelmann is stepping down from 13 years in the top slot, to be succeeded by Neil Barua, formerly CEO at ServiceMax, which was acquired by PTC for around $1.46 billion last year. 

Heppelmann takes on the role of Chairman with immediate effect, while Barua, who has been  President of PTC’s Service Lifecycle Management business since the ServiceMax acquisition, becomes CEO-elect. He will assume the role of CEO on 14 February next year. Explaining his decision to step aside, Heppelman said: 

I feel the company is in great shape in terms of topline and bottom-line growth with multiple layers of initiatives that can sustain this performance well into the future…we’re continuing to demonstrate the resilience of our business as our growth powers on while PMI [Product Manufacturing Information] trends in the wrong direction. 

So, for me, with more than 25 years under my belt now at PTC, half that time as CEO, I think it's a perfect time to think about putting a new generation of leadership in place that can sustain this high level of success well into the future. I love this company, and I'm very proud of all that's been accomplished during my time here, but life is calling me to a new chapter and following the succession I plan to retire from traditional management roles.

Succession

On hearing of Heppelmann’s decision, the PTC board engaged the CEO Succession practice at management consultancy firm Korn Ferry to source a suitable replacement, looking both inside and outside the company. In the event, the best candidate was sitting inside the building, said Heppelmann: 

Neil is smart and articulate and he knows our industry. He's been a CEO twice already, yet still has a lot of career runway. He has a finance background, but really leans in with customers and product strategies. He's developed great followership within PTC already. And by the time Neil becomes CEO, he will have spent more than a year coming up to speed as a PTC insider.

We are set up to have a seamless transition that offers complete continuity in the company's strategy and performance…Neil and I will work together over the coming six months to ensure Neil has ample opportunity to get to know our important customer, employee, and shareholder constituencies and to transition my knowledge, relationships, and responsibilities to him.

As for Barua himself, he commented: 

I've learned a lot about PTC since the ServiceMax acquisition seven months ago, and I'm excited to continue learning from Jim, [COO] Mike [DiTullio], [CFO] Kristian [Talvitie], and the rest of the leadership team during the transition period. I want to personally thank Jim for all he has done for PTC for setting things up so well for me and the team and for the friendship that we've built.

He added: 

PTC is in a terrific position, and my top priority is continued execution. Over these last six months, I've seen firsthand how excited our customers are about our model-based, closed-loop digital thread strategy, and how critical our software is for their digital transformation journeys. I've also observed the talent and passion of our employees and the commitment they bring to our customers and partners. There is no other company like PTC and I can't wait to roll up my sleeves and help take it to the next level. Over the next several weeks and months, I will be meeting and spending more time with our customers, employees, partners, and investors.

My take

Sometimes the best choices are to be found right under your nose! There was a lot of emphasis placed on continuity of executive experience and smoothness of this succession - it’s certainly going to be a lot more stable and assured than the TV show! At diginomica, we’ve worked with Barua a lot over the past few years and been impressed with the direction in which ServiceMax was steered, as well as by his articulate exposition of the underlying strategy. 

He comes into the top seat at PTC at a time of ongoing macro-economic uncertainties. Heppelmann talked yesterday of a number of challenges, including China and pockets of  the SMB business. But there are strong growth proof points as well, he added: 

It's sort of the same story as before - inside an uncertain environment, there's a few pockets of weakness…There’s some real pockets of strength, too. Like we've said before, Aerospace and Defense, for example, happens to be a pocket of strength, medical devices happens to be a pocket of strength. 

So, it's kind of a mixed bag. I think it nets out for the year to less favorable than I want to be. And I said we did slow down a bit. I mean, we exited last year with 15% growth. And this year, at the midpoint, we're calling 13%, but the year is not over. So, it could be we lose a point, point-and-a-half of growth this year, two points maybe, I don't know.

But I'll tell you what, that's pretty darn good in this environment and it's certainly better than any of our peers have been able to do in this environment. So, we feel proud about it and feel confident going forward that this is a very growth-oriented sustainable, resilient business and it's not likely to change dramatically from that.

And this isn’t the first time PTC has navigated bumpy external factors, he added: 

We've also experienced in the past that when there's a slowdown, for example, in some of these [business sector] pockets…when the environment improves, we get a surge as all of that business comes trickling in now because people have authorization to go forward with this project [that] they’ve had sitting on the shelf for a while. So, we saw this in 2009, we saw it in 2020. In 2020, Q2 and Q3 were pretty weak, and we had a blockbuster Q4 and kind of made up for all of it. So, I think our view is probably, when the environment improves - and I'm not sure when that will be - probably, we'll get a surge of strength as some of these projects that have been held back by the customers get funded again.

It’s obvious that 2024 is going to be a big year for PTC.