Startups are unique animals: “a startup is an organization formed to search for a repeatable and scalable business model.” This means that at its birth, a startup is in a unique position - having zero constraints. There is no product, market, revenue, employees, HR, legal issues etc. A good friend of mine who just launched his Nth start-up after finishing his vesting at a large company described it best - “I am having the time of my life. I only deal with signal: zero noise, product or people all day.” In many ways the startup journey is a downhill spiral of the CEOs quality of life by adding constraints - users, customers, investors etc. Of course, we know we need them to succeed.
Some startup CEOs check in code daily or design screens, while others close deals or schmooze with investors. The scope of what different CEOs do and their backgrounds can be very diverse. So what do successful CEOs have in common? What is their ‘real job’ and why do we need them? In other words, what are the things the early stage startup CEO actually has to do, or else the company will fail?
Setting the company vision, communicating it and holding the line
A successful early stage CEO must be able to create, define and maintain the vision - what are we here for? A vision is the essence of what the company is about. Why is this an important journey to undertake? Why is this groundbreaking if we succeed? Why should we attempt to undertake this?
A vision must:
- Be easily described in a mission statement, under 10 words
- A consumer company should be described from the consumer’s perspective, and an enterprise company from the customer’s perspective - never from the company/shareholder’s perspective e.g. "Saving drivers 5 minutes a day on the their commute"
- Answer the question “if we are successful, why is it a big deal?”
- Many startups I meet are so focused on execution that they haven’t asked the question: “Assume we are successful, so what? Who cares?” This is the key question great VC’s will ask first. Is this a journey worth undertaking? Make sure you have a good answer here before undertaking the journey, since once you start, there is no turning back!
Holding the Line
“Fratres! Three weeks from now, I will be harvesting my crops. Imagine where you will be, and it will be so. Hold the line! Stay with me! If you find yourself alone, riding in the green fields with the sun on your face, do not be troubled. For you are in Elysium, and you're already dead!”
General Maximus Meridius [Gladiator (2000 film)]
Holding the line of attack has been critical to militaries since before the days of Rome. It is what turns a group of men into an army capable of multiplying its force dramatically. During the charge, holding the line is more important than the life of any individual soldier; if the line falls, they are all dead. A startup charging forward must hold its line, its vision and its certainty and must work as one to achieve victory. It cannot be distracted with too many directions, ideas or problems. The CEO must set the direction and once set, make sure the team “Holds the Line” to victory, regardless of the casualties along the way.
The easiest thing for a startup to do in the face of adversity is to change the vision. This can be a small change (to deal with competition, product performance, monetization challenges) or a large change - let’s do something completely different. As Eileen Lee pointed out in her research on Unicorns ($1B+ exited companies) - “The “big pivot” is also an outlier… Few [Unicorn] companies are the result of a successful pivot. Nearly 90 percent of [Unicorn] companies are working on their original product vision.”
If your vision is big enough and important enough, by definition you cannot easily change it and find something else that is just as big and important. Not many such visions exist. You can adapt and change tactics as you learn more from your mistakes, but do not confuse that with changing the vision.
Again, “Hold the Line”:
- Life is hard. Failure is part of life, but not an excuse to change direction or move on. Winners fight to the end - they don’t change sports
- The new direction looks sexy BECAUSE YOU DON’T KNOW IT! Similar to the neighbor’s grass, as you move forward in your startup, you learn more and more about your industry, product, users. Many of the things you learn are frustrating and problematic - you now need to deal with them rather than go back to blissful ignorance within a new direction
- Its the CEO’s job to create and maintain the vision and deal with the problems arising from the deeper understanding of the space you are in and find ways to push on.
- The vision will evolve due to new information and experience, and it is the CEO’s job to know when to hold the line and when to evolve the vision. Holding the line against your investors, employees and users, because you ‘know’ that the vision is right, is a large part of the intangible value a great CEO brings. The difference between an effective startup CEO and messianic nut is nuanced and only clear after the fact. Did she know if, when and how to evolve the vision? Luckily, history is written by the winners...
Why I hate the term ‘pivot’
‘Pivot’ has become the Valley’s buzzword to glorify failure. It attempts to legitimize failure and even cast it in a positive light. Failing is TERRIBLE! We should hate ourselves for failing, agonize over it, feel physically ill from it. Failure means we have burned other people’s money, wasted our team’s time and effort, and let down our early adopters. If we have to change direction, we should do it with a heavy heart and shaking knees, not with a hop and a skip. In my experience, most “Pivots” are due to poor execution and as an excuse to avoid dealing with hardship. We should experiment and try different methods to achieve the goal, expecting to make lots of mistakes *but* learn from them to achieve our goal. We will have temporary setbacks and mistakes, we should learn from them, but we must complete the mission.
Identifying, implementing and re-evaluating ‘The Most Important Thing’ (MIT)
A startup CEO’s greatest challenge is to know what the Most Important Thing (MIT) is at this time. This is the number one mission: if we can only succeed on one thing, this is it, and if we fail to execute this thing, we are DEAD (not wounded, sad or unfulfilled - DEAD).
MIT has different depths at different points in a company’s life cycle. This is the organizing principle of the startup, with all staff clear on this overarching mission and all resources mustered to achieve this goal. A good way to think about it is by quarter, month, and week. This quarter’s MIT is the only thing that matters in the foreseeable future (which is less than a quarter…) so is it user growth? Product market fit? Scaling backend? Monetization? Fundraising? This is the hardest call to make for a CEO and it must be clear, simple, singular and correct. This drives everything else the org does as it defines the monthly and weekly MITs - since if employees are not supporting the mission then their work doesn’t really matter. The CEO must dedicate most of her time to succeeding on the MIT.
What about second most important thing?
An army, even at war, needs to eat. There are lots of ancillary tasks that need to get done - servers need to run, bills need to get paid, beans needs to fill the espresso machine - these are all important but not for the CEO. I used to be a very micromanaging CEO, agonizing and involving myself in everything from what coffee flavor to order to negotiating with an office vendor. Since a startup is such a small unit, everything matters and one can easily explain their involvement only in tasks they’re comfortable doing since those tasks (and every other one) are classified as ‘important’. What I learned at Waze was to ignore the things that were not the MIT at that time. It could drive me crazy that too much money was being wasted on the wrong coffee beans, that a process was not efficient or that our website sucked but once I learned to focus on the MIT, ignoring these things made sense and the organization’s capacity grew dramatically.
Where the CEO spends her time is a message to the whole organization. Every time I spoke to the team I would always start with reciting the MIT of the moment. When we argued about product features we tried to use the MIT as our guiding principle - “yes, it’s a great feature but does it help our MIT right now?
One of my biggest MIT misses at Waze was a vital learning experience. Waze had been growing rapidly since the summer of 2010. We were adding users like crazy and carried by that momentum we closed our B round, raising $25M. Flush with new cash, the main question was “How do we scale quickly?” This was probably one of the most critical times for us as a company and the management team as a whole. As we were rushing forward, we noticed that in spite of our user growth, our driven KM’s (Usage) had remained pretty flat. Our MIT for the past year had been growing users, and we became so obsessed that we forgot to pause and ask ourselves if user growth was still our Most Important Thing.
At the time, we had very weak analytics capabilities, preferring to focus our engineering resources on user features vs. reporting and analysis. So, we made the controversial decision to freeze growth activities and focus all resources to analyze what was going on. We spent one month pulling reports, tagging new events, meeting with our users and doing anything we could to better understand how Waze was being used. What we discovered was that our product was just not good enough, although the vision was. Our user acquisition activities, expectation management and positioning were correct - people kept installing and signing on for the mission, but Waze app performance was too poor for them to stay. Users who left us lamented that “I love the app and the concept, but there aren't enough users in my neighborhood so the product didn't work well and I grew tired of waiting”.
Understanding this allowed us to focus on a new metric - 90 days driver retention (with 30 days as a short term proxy) which was then at 8% in the US (only 8% of users who drove this month would still be driving in 90 days). We created a list of the issues getting in our way; this included big things (the map wasn’t good enough in a region or our response time from our routing servers was too slow) to small things (confusion arose when audio prompts said “keep right” instead of “exit right” in the US to get off a highway.) By clearly defining and knowing what our MIT was at that point (retention vs. acquisition), we decided not to hire any more people until we could implement our plan since new people hurt output in the short term, and focus our time and effort on the right things. Six months later we hit 30% 90-day driver retention and it continued to grow from there. Once we knew we were on the right track, we could re-evaluate out MIT and look at our next one.
Reevaluating your MIT is critical and the CEO must set the cadence of this evaluation. Clarity of MIT definition, communicating it, enforcing it through the organization and reevaluating it is the essence of the CEO job and If she screws up, the company is probably lost. A popular reason startups fail is scaling too early (e.g. assuming MIT is scale when product-market fit is off). Waze was almost such a casualty
Maintaining and accelerating velocity through rapid decision making
Startups live on velocity. Every day cash is being burned, competitors are getting funded, and users are growing tired of your bugs. The luxury startups have in lack of legacy quickly erodes away - every day new legacy is created within your startup and it is slowing you down. Speed is your ally.
A CEO can contribute to Velocity by fast decision making. In fact, the only reason she is in the room is to make the decision. It matters less if it’s the right one as long as it’s made fast*. If it’s wrong, we will discover it and still have time to correct. If we wait, we pay in speed, in morale and lose the time to save ourselves.
Assuming you’ve hired great people, both options you will face will be well thought-out. Since your team is smart, they will not be providing poor options. This means that the decision is between two equally good decisions (or equally bad), but that the margin of error in making the wrong one is not that critical - both ideas should be of similar quality, just different approaches to the problem.
A great example is feature prioritization. These are usually the most heated arguments and at the moment, it seems like the company’s future depends on it. However, assuming the team is good, both features make sense and in the long run, it is very rare to have a specific feature that turned the company around. Keep the MIT as your compass. Choose one option in the meeting and move on. Agonizing over it will slow you down and won’t necessarily lead to a better outcome.
There is one exception to the velocity rule: decisions that are not in the MIT path. My instinct used to be to make all decisions quickly. What I’ve learned the hard way is to ignore non-crucial decisions. If they are not MIT, they can either wait or be decided on by someone else. Making decisions fast and well takes a lot of effort, focus and energy - don’t waste it on unimportant things. You will be surprised how many things seem to work themselves out when you ignore them; if they come back to you again, they will have become more important, you will have had more time to collect more data and can make the correct (and swift) decision at that time.
There are many other things a successful CEO needs to do in terms of leadership, hiring, sales, product, operations etc but establishing and driving toward the vision, nailing the MIT and maintaining velocity are at the core.
The views presented here are mine alone and are not associated with Google in any way.