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Founders: How To Destroy Your Startup In Three Easy Steps

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The difference between building the next unicorn and the next dot-bomb may not be as big as you think.

Here at Harvard Business School we learn about how to run companies. While one can argue about how well prepared graduating students may be to actually run successful companies, in general, I’d like to believe we at least leave here knowing how NOT to run a successful company.  On that note…

If as a founder you want to ensure that you DON’T build the next unicorn, simply have the following three attitudes:Don't destroy your startup

  1. Don’t be self-aware. Have complete confidence that you’re the right person for the job, no matter what the job is, because you obviously know everything.
  2. Don’t build a strong culture. Your red-hot startup doesn’t have time for any of that unimportant “soft” stuff.
  3. Don’t think about corporate structure. You’re iterating so fast you can’t predict where you’ll be in even a month, so how could you plan a structure?

That’s it, you’re done. You can go back to your startup now. However, if you’re like me, and would like to build the next unicorn rather than the next dot-bomb, you may want to keep reading.

 

Sorry, You’re Probably Not As Talented As You Think You Are

You’re the founder of your company. It was your idea. You’re brilliant. You’re THE guy. Who else could possibly run your company better than you? It turns out… maybe a bunch of people. Everyone has different strengths and weaknesses, and certain people are better (or worse) fits for companies at various stages in their lifecycle. Know your blind spots, and if you really care about your company, fill them in, even if it means filling them in with other people.

Do you want to be rich? Or do you want to be king?You may actually have been the best person in the world to found your business, but that doesn’t mean you’re the best person to take it to the next level through its later stages of life. Very few founders are. This is something to be aware of and embrace, not something to be afraid of. The way one builds an organization that creates a sizable impact is by building a strong team, and that starts at the top with a world-class management team. As an example: Larry Page, who founded Google and was its initial CEO, stepped down as CEO once Google hit its growth stage, handing over the reigns to Eric Schmidt. Eric Schmidt did exactly what he was brought in to do, and successfully navigated Google through its aggressive growth stage, and eventually handed the CEO title back to Larry Page a decade later, whom at that point had a lot more experience operating a large company.

As a founder, failing to be self-aware and building a team where people are in roles that do not maximize their respective strengths is probably the most sure-fire way to make your business fail. Don’t fall into this trap. Personally stepping aside from the CEO role may eventually be optimal for your business, and if that time comes, you will have to ask yourself if you want to build a high-impact company or simply want to be king. Choose wisely.

 

Culture Isn’t B.S.: Scaling A Strong Team Requires A Strong Culture

It’s so easy to think that your idea is completely unique, and better than everyone else’s out there. When looking at successful companies, many people think “if only I had that idea, I would have been a huge success as well.” As it turns out, this is rarely the case.

Culture can make or break your businessMost good ideas are not completely unique. If you have a brilliant idea in mind as you’re reading this right now, someone else somewhere out there is probably already thinking the same thing. Additionally, if you do happen to be the first mover on a smart idea, VC firms will quickly fund entrepreneurs to create competitors for you, so you will not be alone for long.

So if every good idea quickly becomes competitive, what determines which company succeeds and which company fails? Execution. Most value is delivered through excellent execution of an excellent idea, not simply from having the excellent idea itself. Friendster was created years before Facebook, yet hardly anyone would claim Friendster was more successful than Facebook was. This raises the question: how does one ensure excellent execution of the idea? The answer is simple – by creating a strong corporate culture as the company grows.

Creating a strong, positive, driven corporate culture is phenomenally important. The culture creates an environment of excellence and achievement, and pushes people to succeed where others have failed. The culture attracts world-class talent to your growing company as it scales. The culture affects morale. The culture helps get buy-in from your team, encourages your employees to work hard at their jobs, because they care for and are passionate about their work. It makes them go that extra mile. It is these factors, factors that founders often don’t realize, that are the reasons one company in a space may succeed while the other may fail despite working on almost identical ideas.

Many founders think of the culture as “soft stuff” that they don’t have time for, is unimportant, or even worse, don’t think about at all. Ignoring the culture of your startup invites disaster, as a destructive culture can take place, and once established, cultures are so amazingly difficult to change. It’s worth the time. Creating a strong culture can be an amazing competitive advantage for your business, and can ultimately make or break your business. Figure out what type of culture you want to have in your company, and start creating it.

 

Your Idea Is A Home-Run: How Do You Scale?

One word: structure. Every founder dreams of the day their business is a glorious success. If you’re currently a founder, take a moment and think about it right now. Now think about the nitty-gritty parts of that vision. What does your company actually look like? Do you have multiple divisions or departments, and if so, who is in charge of each of them? Do you operate internationally, or just domestically? Who reports to who?

Choose a structure that can scale with your businessStructure is critically important to scaling effectively, and is often times overlooked. When your company started it was probably “a couple of guys in a room.” Little or no structure at all can work effectively in such an environment. As your company grows and you start hiring your team, spending the time to figure out what the best structure is for your company may ultimately determine your success or failure. Just like how you may not be the optimal person to run your business at various stages in its lifecycle, particular structures may be effective or ineffective in those phases as well.

No structure is perfect in every way. Too much hierarchy and coordination early-on may slow down your team as you’re trying to move quickly. Too little hierarchy and coordination later-on invites confusion and inability to implement strategy, leaving your team in disarray. If changing your corporate structure is necessary, it absolutely should be done. When doing so, choose wisely, as changing corporate structures too frequently can also create problems. Constantly changing your corporate structure means roles are constantly changing, your team will be all over the place, and it will be hard to recruit top-tier talent as they won’t have confidence their role will even exist in six months.

The optimal structure is one where expectations are clearly defined, information flows smoothly, and strategies can be implemented and executed upon effectively. It should be flexible enough that it can adapt with the changing business environment your business will face as you scale and grow. Most importantly, your structure needs to align with your culture. A totally flat structure can work for your company; a totally hierarchical structure can work for your company. There are examples of amazingly successful companies that use both, despite the two structures being as opposite as can be. Don’t be afraid to experiment. Find a structure that fits your company and culture, can grow along with you, and positions your company for success.

3 thoughts on “Founders: How To Destroy Your Startup In Three Easy Steps

  1. Good points, John. I find the first one about humility to be particularly interesting and thorny in the startup world. In my experience, the people who found companies tend to fall on the more self-confident side of the self-confidence spectrum. Which is to say, most of them are super cocky. Every founder has, at some point, decided that they will be better off founding a completely new venture that is totally untested than they would be by joining an established company with a track record of success. Only people with a fairly high opinion of themselves are going to make that decision.

    I struggle with this as a job-seeker in the startup world who doesn’t love working with people who have over-sized egos. In my case, I have basically come to accept that enlarged egos come with the territory, and my best bet is to find a founder whose self-confidence is justified by a great deal of ability.

    I think expecting founders to recognize that they may not be the best person to scale their own startup is asking a lot of these people. Who among us can honestly say that we can be trusted to fire ourselves at the appropriate time? But you’re absolutely right that looking for people to fill their blind spots is a great way for founders to think about building their management teams. It also has the added benefit of making it less likely that an investor will decide the management team could use a new CEO.

  2. Thoughtful post. One item that particularly resonated with me was the thought about structure. One thing in my experience is that some employees that gravitate towards early-stage startups are particularly averse to ANY kind of structure (not just the oppressive, overly-intrusive kind). Part of the appeal of early-stage companies for this type of employee is precisely the lack of structure that’s common in these companies. One key determinant about the type of structure that’s appropriate has to be employee expectations, tempered by the needs of the business. Introducing new elements of structure will almost certainly cost you employees, which may be ok, but it’s definitely something to consider when tweaking the system.

  3. John – interesting post. I liked the way you approached the topic and I agree that by having the following 3 attitudes you will most likely run into problems. One question that kept coming back to me is your third point about structure and more specifically about your advice regarding not changing the structure that often. For some rapidly growing and constantly changing startups I believe that a continually changing structure might be needed in order to keep pace with the life cycle of the company and the current / near term needs. It might be the case that not changing the structure rapidly enough might end up destroying significant value and lost market opportunities.

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