Archive for the 'Startups' Category
Aug 11, 2008, post by Randall
As an investor, the most important lesson I’ve learned over the years is that great companies are built by great teams. Furthermore, great teams rarely are one superhuman “A” player surrounded by a supporting cast of “B” players. And unlike the Borg Collective which seeks to “… add your biological and technological distinctiveness to our own”, great management teams need to have a set of complementary, yet overlapping, skill sets.
Most of us know the example of how Steve Wozniak the brilliant hardware designer teamed up with the uber-persuasive Steve Jobs to create Apple, an iconic Silicon Valley startup success story. While that partnership didn’t last forever, it’s pretty clear that the fusing of the talents of these two brilliant individuals directly led to Apple’s early success. I encourage you to read more in a “must read” book I’ve recommended earlier, Founders at Work.
Jim Balsillie
Mike Lazaridis
Here in Waterloo, Research in Motion (RIM) would not be today’s superstar company unless Jim Balsillie joined engineer, founder, Mike Lazaridis. Until Jim joined Mike in the early 1990’s, RIM had long remained a typical engineering oriented company doing about $500 000 annual revenues from 20-odd products. Although Jim could never have built the products, his introduction to the management brought the marketing and financial drive and focus that ultimately led to the Blackberry led success story we know today. Rather than the cult of the individual, once again it is the power of this amazing duo that built RIM.
What is unusual about this case is that both Mike and Jim share the title CEO, billing themselves as co-CEOs. Perhaps more companies should consider this approach?
Reed Hastings
Back in 1995, as MKS was starting to look to the capital markets, one of my personal inspirations, Reed Hastings CEO of Pure Software (and now Netflix), observed that “Pure Software has built a team where any of the senior management team could be CEO”. I certainly took that approach to heart when building MKS’s great team and it has been an important insight ever since.
For example, Chuck Bay, who was Pure’s CFO at the time has subsequently gone on to be CEO Broadbase Software (acquired by KANA) and President and CFO of Spatial Technology. Rob Dickerson, who was VP & GM of Developer Tools for Pure, a key operationally focused executive, subsequently became CEO of Faves and President, CEO of Pacific Edge Software (acuired by Serena Software) and EIR at Ignition Partners. These are just two data points illustrating the calibre of the team Reed built at Pure Software.
At MKS, we managed to build an amazing team, especially in the mid-late 1990’s with superstars like Ruth Songhurst, Eric Palmer, Tobi Moriarty, Michael Day, Frank Pfeiffer and Paul Laufert. It was a great mix, with stars from Canada, US and Germany. As well, almost uniquely, we had a balance of the genders. It is a big disappointment to me that I continue to see how rare that is.
To round out our discussions, anyone wanting a deeper grounding in this important topic should read the book Co-Leaders: The Power of Great Partnerships by David A. Heenan and Warren Bennis, John Wiley & Sons, 1999. With the thesis that great organizations need “more than a visionary CEO”, the bookoutlines the rare, but critical, role building a strong management team takes in building exceptional companies.
To summarize this book, in the authors’ words, “Co-leadership . . . is a tough-minded strategy that will unleash the hidden talent in any enterprise. Above all, co-leadership is inclusive, not exclusive. It celebrates those who do the real work, not just a few charismatic, often isolated, leaders who are regally compensated for articulating the oranizations’ vision”. Although, like many it has taken me years to learn this valuable lesson, I couldn’t say it better myself.
There are lots of detailed case studies, from companies in many industries, with a few key lessons for co-leaders, including:
- Know thyself
- Know thy leader (check your ego at the door)
- Avoid titanic clashes (!)
- Find out what the enterprise needs and deliver it superbly
- Lead as well as follow
- Know when to stay put (control the temptation to star)
- Know when to walk away (learn when to say no)
- Define success on your own terms
To reiterate, great companies are almost always built by great teams. As organizations and markets get more complex, I believe co-leadership will become increasingly the norm. For smart and successful people to control their egos takes a lot of maturity. Furthermore, the ideal team depends, in large part, on the stage and growth of the company. As I’ve learned, great teams take a lot of work to build, but can also dissipate over time. Indeed, they are a rare and fragile flower, to be cultivated constantly.
Nonetheless, it is definitely worth any entrepreneur’s full time and attention to unleash the power of the team - whether a gestalt of two, three or even more remarkable individuals.
Sphere: Related Content
Jul 10, 2008, post by Randall
New York Times on Sunday contained an article which immediately caught my attention, as it appears to provide the missing piece pulling together all of my recent postings outlining an “Entrepreneurial Toolkit”, so far consisting of these five core skill sets:
- “Fearless Passion”
- “Don’t Drink Your Own Bathwater”
- “Embrace Change”
- “Taste the Cash Burn”
- “The Power of Two (or Three)” (coming soon)
The article, “If You’re Open to Growth, You Tend to Grow”, New York Times, 6 July, 2008, in extolling an individual’s openness to change and personal growth, really provides a common thread, weaving together the above skills.
To quote Carol Dweck of Stanford University,
“People who believe in the power of talent tend not to fulfill their potential because they’re so concerned with looking smart and not making mistakes. But people who believe that talent can be developed are the ones who really push, stretch, confront their own mistakes and learn from them.”
The notion that nurture trumps talent, is an interesting one. It underscores why defining some great attributes for an entrepreneur in my Entrepreneurial Toolkit is such a good idea. For the right people, if they strive for personal growth, each and every one of these attributes is in reach.
I’ve always held an innate belief that hiring is about way more than the credentials from the best schools and relevant job experience. By finding people who value “stretching themselves”, companies are adding those who can navigate today’s complex and every-changing environment to their team mix.
It’s also a very positive and empowering message.
Good mentoring and management, like good parenting, works.
Think about it.
Sphere: Related Content
Jul 08, 2008, post by Randall
Whether you run a startup (pre-revenue and running on fumes), a larger, later stage company (with actual revenues and earnings) or even a public technology company, the topic of cash should never be far from your consciousness. And, it goes without saying that keeping tabs on cash is generally even more germane in social enterprises.
For many early stage entrepreneurs, skilled in technology, marketing and strategy, the notion of vigilance around cash burn might seem mundane, something to be avoided or delegated. There is no question that companies endowed with more cash on their balance sheets can act more strategically. Conversely, It is the rare company indeed that isn’t significantly cash constrained at some part of its life cycle. As a result, you need to be on top of cash burn and not let cash crises catch you off guard.
Of course your need, or even better should virtualize, solid financial and accounting management skills. Notwithstanding this, as CEO, cash needs to figure as a constant item in your personal mental checklist. In the New Venture 2.0 Playbook, discussed in much more detail in an earlier blog post here, Grover Righter has aptly dubbed the level of importance of cash as “The CEO’s Mistress” (pictured at right).
Yet, many entrepreneurial CEOs can’t answer simple, but fundamental, questions, such as:
- what is your monthly burn?
- what is the life of existing (and committed) cash in the business?
- Which expenses could be cut, should I wish to extend this cash life by lessening burn?
- What was that cheque really for?
While the Venture 2.0 Playbook outlines a complete methodology to build certain entrepeneurial technology startups, from beginning to exit for much less money, the key point of today’s post is that every entrepreneurial CEO must internalize the whole issue of cash burn. Remember, it’s not enough to sleep peacefully at night, comfortable in the notion that your CFO is handling all of that cash stuff.
And, ironically, this need doesn’t disappear even in a larger firm. When I ran a public company, portfolio manager expectation was that the CEO knew the business model, budget and forecast to a reasonable level of detail for up to 2 years into the future and also with longer term strategic thinking. Because public CEOs (and CFOs) are expected to give “street guidance” of future quarters, it feels like trying to drive a car where the steering column is very long — in this case say 18 months long. Keeping all of this in your head can be challenging. And, furthermore as you discussing product, market and strategic questions, all may well have financial implications. In other words, even minor adjustments in one area of the business can significantly alter the “18 month steering” problem of future financial guidance.
To summarize, for the entrepreneur without formal financial training, seriously consider upgrading your financial skills (by formal training, finding a good mentor or via your own research). And, even more important, take them to heart - particularly in the area of cash management.
Sphere: Related Content
Jun 28, 2008, post by Randall
Successful entrepreneurs must push themselves to develop a set of, often seemingly contradictory, business and life skills. We’ve already talked about fearless passion and not drinking your own bathwater.
Today, we’ll expand on a skill that is becoming ever more important in these times of rapid technological, social and business evolution — the need to embrace change. In my own life, it has been a personal hallmark, so much so that without major new challenges and course corrections, my life satisfaction drops precipitously. Therefore, seeing Guy Kawasaki’s recent interview with Ariane de Bonvoisin called Change is Good reminded me to add change into my personal Entrepeurial Toolkit as skill #3.
For me personally, it is wonderfully affirming that, what I used to consider a pathological need for change, is in fact highly adaptive for the future world. Ariane’s book defines ideal entrepreneurs as “chance optimists”, who believe change is mostly good. Furthermore, those who have a strong believe in the positive power of change can flex their “change muscle” to overcome adverse emotions, or “change demons.” I think you get the picture, but it is certainly well worth reading, if only to re-affirm how important change has become to building lasting value.
The notion that change is cool has long been a hallmark of the culture of Silicon Valley, and most technology startups. Entrepreneurial founders are naturally aggressively impatient, pursuing change with an ADHD-like intensity. In fact, one influential business school commentator, who will remain nameless, suggested that the management style favoured in the Silicon Valley, which is so tuned to rapid growth and a challenging environment, would totally fall apart in the more repetitive world of “traditional” business. The truth is that the technology startups of the 1980’s and 1990’s were almost certainly belwethers heralding the morphing of our economy into one that is largely knowledge-based. I’m really not so sure that a business built on repetition and “continuous improvement” (which, sadly, is often more like “death by a thousand cuts”) has much of a future. But, what is unquestionably true is that the change-intensive technology startup culture is miles apart from traditional businesses whose historical rate of change was measured in decades, not weeks or months.
In a world full of change, do maturity and learned experience continue to have value? Absolutely. Serial entrepreneurs learn to “replay a tape” of past successes, and even more importantly, to 
avoid pitfalls that have bedevilled them in the past. However, replaying the tape is much more complicated as the pace of change accelerates. A good analogy is that you are replaying the tape as the format transitions through 8-Track, to Cassette, 
CD and now to MP3s in Flash memory, while the music genre morphed from Disco to Punk to Rap. Notwithstanding this, there are still enduring universal truths about making great music that transcend format or genre. The same is true for entrepreneurs building great businesses.
I mention this because I still have people ask me to talk about experiences in developing “go to market” strategies from 10 or even 15 years ago. While there are some valuable object lessons there, the approaches today (as we’ve discussed in other blog posts) are totally different. That being said, I feel that those earlier experiences have helped me to navigate this current change-infused world. Alas, my early world of physically shrinkwrapped software, sold through mail order distributors like Programmer’s Paradise and advertised in physical magazine ads, that built MKS in the 1980’s is largely history. The 1990’s saw most software sold via ecommerce on the web. Millenial startups leverage vast social networking platforms (Facebook, Twitter, etc.) and mobile distribution models. Like the tape analogy, each iteration of the market is pushing the envelope and, yet, each borrows heavily from existing playbooks as well.
Furthermore, even technology startups can get into a rut of repetition. As an entrepreneur, it is critical to have a network of intelligence that helps you navigate your ever changing business landscape.
If you want to learn from first hand from Ariane de Bonvoisin on the subject of “Taking Charge of Change”, or even ask your own questions, sign up for her 21 August, 2008 Calliflower call by clicking here.
In summary, embrace change by being both a “change optimist” yourself and encouraging it in your team. My strong belief is that it will enhance your ultimate success as an entrepreneur, and also increase your personal satisfaction during your personal journey to success, however you define it.
Sphere: Related Content
Jun 11, 2008, post by Randall
In the tech heyday of the mid-1990’s, my favourite US investment banker, Mark Slater (formerly of Hambrecht & Quist) had a strategy to avoid CEOs that, as he so eloquently put it, “Drank their own bathwater”. Mark had identified the tendency amongst CEOs, even entire executive teams, to become so satiated with the power and glitz of riding the waves of technology/media hype, that the corporate adulation goes straight to their head.
Ego and ambition, never faults in themselves, taken to extremes tend to cloud be
