August 06, 2006
Case categories include: Leadership Operations
By Robert Sher
Does Internet e-mail have a future? That’s a silly question today, but 12 years ago there was hot debate on just this point. Jeffrey Morrison, CEO of Stage One Partners in Los Gatos, piloted a startup e-mail firm in 1994 when the balance of opinion was against Internet e-mail. He led his company like an autocrat, without any guilt.
As CEO of Siren Software, he worked on the front lines, making regular visits to the type of corporations that would become his customers. While most of them had a history of using Lotus’ cc:Mail (non-Internet e-mail), more and more of them were moving in the direction of the internet. Mr. Morrison studied the details of the competing technologies. He delved into the companies promoting each technology. The venture capital community mindset was that non-Internet e-mail was where their investment should go. Inside Siren Software the debate raged too – with half the engineering team on each side of the fence.
Small young firms whose aim is to grow have a tender hold on life. Typically they don’t have a lot of money, which means they barely have enough people to hit the main goal that means success. That goal is often visible to other, similar firms, so they don’t have a lot of time to grab leadership of their marketplace.
Siren Software couldn’t win by doing both types of e-mail. They were too small to hedge their bets. Jeffrey Morrison made an autocratic decision in early 1994. Internet e-mail would be their future. Zero energy and investment would be made in cc:Mail or any non-Internet e-mail systems. He also ended all debate within his firm. All the proverbial eggs went into one basket, and Jeffrey watched and managed that one basket very closely. It was the right choice, and the firm was sold for a significant gain late in 1994.
CEOs of small startups have to personally own not just the vision, but nearly all the detailed decisions that lead to the vision’s accomplishment. This is NOT the way larger firms run well. But when you’re tiny, each ad, each newsletter, each facet of the product being built can knock you off the vector that needs to lead straight to your key goal. Every week counts, and every dollar counts. It has got to be right the first time.
If startups were just about executing a series of static decisions in rapid fire, the model of distributed decision making with a bright team would work well. Yet there is nothing static about a startup. The constant feedback from customers, combined with the discovery of one obstacle after another in product development/engineering, means that there are constant course adjustments company-wide to stay on the vector – on the right course.
The synthesis of all this input is best done inside one person’s head, and that person is the CEO. The CEO would most certainly discuss this with his bright and capable team so their opinions and input would weigh heavily on the decisions. Those decisions are not just strategic. They include directing and approving on a daily basis the engineering work, marketing and sales work, and to some degree, customer service work. For example, press releases, advertisements, sales pitches, and screen-by-screen software performance would all be touched and approved by the CEO. The main criterion for approval is, “Does this piece of work keep us on the vector that leads to our vision?” Without this kind of attention to detail and involvement from the top, the work will start to go off the vector, and days will be lost.
This is not justification for all CEOs to be micro-managers. Most businesses are not startups; they are maintaining their positions in the marketplace through well-defined processes. These more mature businesses, even if small, shouldn’t have the CEO reaching into every small decision. Mr. Morrison says, “When it has been proven that your value proposition is superior to the competition, and when market acceptance is at hand, the time has come for the CEO to let go of many of the details.” The business will have the momentum to be managed by subordinates. The mission of the company will be more static and clear. Typically, businesses at about 10 million almost always need a CEO willing to let his management team run the operation.
Larger companies often create startups within them. The ideal method is to have one person – often the CEO – run it like a startup, incubating it outside of all the rules the “main” business runs with. Once the new project has momentum in the marketplace, then, and only then, should it be absorbed into the primary management structures.
Transitioning from a small, startup leadership style to a more shared leadership style is difficult for many CEOs. Some of us are best suited for startups, some not. If you’re a large company executive thinking about a startup, work hard at building your skill base. Do you know enough about ad design? Writing press releases? Analyzing and manipulating data yourself? Do you have technical expertise? Take an interest in details that you might normally ignore, and go to school on those who are handling them for you now. If you’re already in the fray and you feel like you’ve come up short, get good help quickly and learn from them. Whatever you do, don’t delegate the authority. Be decisive.
If you’re a decisive autocrat who enjoys getting your hands dirty working on the front lines of business, a startup is your home. No guilt needed.
• The CEO of a startup must have the skills and willingness to be constantly hands-on in sales, marketing and product development.
• Startup companies need to make many major course corrections to overcome obstacles as they are discovered early on. The management of this swirl of information and action is best done personally by the CEO.
• He or she must be decisive and autocratic, letting no-one get distracted from the urgent mission to make a bee line straight to the achievement of market acceptance of their product or service.
Robert Sher is principal of CEO to CEO, specializing in assisting CEOs and business leaders as they navigate critical passages. He is the author of The Feel of the Deal; How I Built a Business through Acquisitions. He may be reached at Robert@ceotoceo.biz.
Company and Case Facts:
Company: Stage One Partners
Person: Jeffrey Morrison, CEO
Alliance Member since: 2005
Business Founded: 1991
Annual Sales Volume: $1.2 million in 2005
Head Count: 8
Service: Partners with startups to provide management and capital for early stage growth
Typical Customer: Inventors and engineers
Written: August, 2006
Address: Stage One Partners, 208 Granada Way, Los Gatos, CA 95032-1101