The idea of the “generic manager” – someone who possess some set of competencies shared across all managerial positions and levels, and can simply be plugged into any organization or work unit – is one of the most pernicious ideas out there, if you as me. It has led to frenzied movement of managers, which leaves a mess where they used to be, no matterhow great it may seem for the organization inheriting them.
But, that being said, “leading”, and what it involves, or the objectives it is intended to achieve, can vary from place to place and time to time. Many times, those who lead do have to possess expertise about the content domain in order to either a) create a vision for the organization or segment of it, or b) evaluate competing visions provided to them by others within the organization, or c) evaluate the extent to which a vision is being achieved. At those times, it helps to know something about the subject matter.
But at other times, the expertise required is not about the business lines of the unit or organization as much as about people, or about the clientele. At other times still, naiveté in the leader may be helpful in eliciting a period of reflection in the organization – “Just what IS it that we do?” – that may be particularly important tot he organization at that moment in time.
So, all other things considered, I think it better for leaders to have some mastery of the business of the organization, than not, but I can imagine instances where it is not a necessary dividing line between organizational effectiveness and chaos. They just better bring something else to the table, is all.