Month: January 2017
Lately, I’ve been stewing over increased complexity being generated by companies around their organization approaches. While this activity varies by stage, in many cases the leadership team expands to a large (greater than six) number of people, there become two executive teams (the C-Team and the E-Team), the CEO gets sucked into endless distractions and working “in the company” rather than “on the company”, and I could go on with a 1,000 word rant on the challenges and complexity.
Recently, I saw a structure rolled out by a CEO at a company I’m an investor in that made me pause because of its simplicity and brilliance. I didn’t like the labels the CEO used, but I loved the intellectual approach.
It coincidentally had three categories. Three is my favorite number and has been since I was three years old. While I can carry more than three things around in my head at a time, when there are only three attached to a specific thing I find that it’s second (third?) nature to me and requires no additional processing power to remember and organize my thoughts around three things.
If you recall my post on Three Magic Numbers, this will immediately make sense to you. Or if you’ve ever heard my story about struggling with clinical OCD in my 20s where the number three was one of my key anchor points, you’ll have empathy for my relationship with the number three.
I abstracted the structure I saw from the CEO recently into what I’m currently calling “The Three Machines.” While this can apply to any size company, it’s particularly relevant to a company that is in the market with its first product, or a company that is now scaling rapidly with a set of products.
The three machines are: (1) the Product machine, (2) the Customer machine, and (3) the Company machine.
If you step back and think about all of the activities of a company in the phases I described above, they fit in one of these three machines. However, most leadership teams don’t mirror this. Instead, in a lot of cases, there is a traditional leadership team structure that has a CEO and a bunch of VPs (VP Engineering, VP Product, VP Finance, VP H&R, VP Sales, VP Marketing, VP Customer Care, VP Operations, …) which are often title inflated with CxO titles (CTO, CFO, Chief People Office, CMO, COO, CRO, …) or artificial demarcations between VPs and SVPs (and EVPs.)
Regardless of title structure, the CEO has a span of control that gets wider as the company scales, often with more people being added into the hierarchy at the VP or CxO level. As this continues, and CxOs are added, you end up with the C-team and the E-Team (which includes the non-CxOs). The focus of each person is on a specific functional area (finance, marketing, sales) and traditionally scoped.
In a few cases, big organizational experiments ensue, often after the organization dynamics hit a wall. Holacracy, which is still bouncing around, was a relatively recent trendy one. I disliked holacracy from the first time I heard about it and resisted even experimenting with is, preferring to watch what happened when others tried it. In 2013, Nick Wingfield wrote an often-citied article in the NY Times titled Microsoft Overhauls, the Apple Way that is liked to a now famous graphic of different org charts for Amazon, Google, Facebook, Microsoft, Oracle, and Apple.
I’ve wrestled with hundreds of conversations around this in the past few years. I never have felt satisfied, or even particularly comfortable, until I landed on the three machines recently.
My current hypothesis is that if you are a CEO, focus your organization on the three machines. Product, Customer, and Company. Then, have a direct report own one of them. If you have a sub-scale leadership team (e.g. you are three founders and four other employees), as CEO you can own one, but not more than one. As you get bigger (probably greater than 20 employees), hopefully how you have enough leadership to have one person own each, but recognize that if someone is being ineffective as a leader of one of the machines, you will have to replace them in that role (either by firing them or re-assigning them).
Let’s assume you have enough of a leadership team that you have a key leader who can own each one. Organize the company leadership around each machine. The titles don’t matter, but the hierarchy does. Naturally, you will have a product or engineering leader for Product, you will have a sales, marketing, or operations leader for Customer, and you will have a finance or admin leader for Company.
But, this does not mean that your VP Engineering is your VP Product and Engineering. That rarely works – you want to separate these two functions. But your VP Product, or your VP Engineering, or your CTO could be responsible for the Product machine, with the other VP functions reporting to her. You probably also don’t want to merge your VP Sales and VP Marketing and VP Customer Care function into a VP of Sales, Marketing, and Customer Care. But, if you have a Chief Revenue Officer, you may have done this. While that can work, recognize that it works if the CRO realizes he is in charge of the entire Customer machine.
I’m still in the first few weeks of really building a theory around this so there’s a lot of sloppy thinking on my part so far. For example, I don’t think this necessarily means that the CEO only has three direct reports. But it might. Or, in some cases, at certain scales it might. I haven’t focused on what it means in terms of the overall hierarchy. I haven’t really thought about how multiple different product lines come into play. I don’t know if there needs to be dramatic retitling at the top.
I do, however, have several companies that are very clearly focused on these three machines. Yet, they are at different scale points and have different formal hierarchies. Over the next few months, I’m going to use this lens across every company I’m an investor in as I poke and prod at how it might, can, and should work. And, determine if it’s a valid hypothesis.
Feedback of any type is welcome.
Several months ago I agreed to be part of a funding campaign for Gaza Sky Geeks. This is an organization that we had previously supported through the Techstars Foundation, which is how I was introduced to them.
The goal was simple – provide enough funding for a generator for the organization. I can’t remember what the first goal was, but I think it was around $60,000 total.
The support for this effort has been awesome and the campaign has expanded as it blew through the original $60,000 goal. The handful of initial supporters has expanded to a now impressive list, that includes recent support from Marc Benioff.
The campaign is now shooting to raise enough money to Launch Gaza’s First Coding Academy. There are two days left in the campaign and are currently at $210,000 of a $270,000 goal.
If you are game to donate, please give us a hand. And spread the word.
If you are curious about the matching funds, they are coming from the following list of people.
Marc Benioff: Founder, Chairman, and CEO, Salesforce
Skoll Foundation
Brad Feld: Managing Director, Foundry Group
Paul Graham: Co-Founder, Y Combinator
Eric Ries: Entrepreneur, blogger, and author of The Lean Startup
Dave McClure: Founding Partner, 500 Startups
Fadi Ghandour: Co-Founder, Aramex
Badr Jafar: CEO, Crescent Enterprises
Hala Fadel: Partner, Leap Ventures
Jon Bradford: Co-Founder of F6S and Tech.eu
Freada Kapor Klein: Partner, Kapor Capital
Mitch Kapor: Partner, Kapor Capital
Zahi Khouri: Founder, Chairman, and CEO – National Beverage Company – Coca Cola Palestine
Samih Toukan: Chairman of Jabbar, Co-Founder of Maktoob and Souq
Blaise Aguera y Arcas: Principal scientist, Google
Mustafa Sezgin: Head of Engineering in Amsterdam, Uber
Khailee Ng: Managing Partner, 500 Startups
Jenny Lawton: COO, Techstars
David Cohen: Co-Founder, Techstars
Christopher Schroeder: Investor and author
Gisel Kordestani: COO, Crowdpac
Hussain Al-Shorafa: Co-Founder, Second Act
Zohre Elahian: Co-Founder and Board Member, Global Catalyst Foundation
Zoe Adamovicz + the Neufund Team
Krista Marks: CEO, Woot Math
I love origin stories. Some of them glorify entrepreneurship in a way that makes them challenging to parse, as the struggles of our heroines and heroes gets romanticized in a way that tastes sugary sweet. But, when they are written in first person, unedited, on a blog, they are often delicious in a tasty and fulfilling way.
Jud Valeski, the co-founder of Gnip, wrote a great one a few days ago. It’s titled How Did Gnip Get The Twitter Deal? and does a thorough job of telling the story from Jud’s perspective. If that’s all that was there, it’d be a solid origin story.
But then Doug Williams, who was on the Twitter side of the Gnip / Twitter origin story, weighs in with a comment that is the same length as Jud’s post. And now we get Doug’s view. Not the official Twitter view. Not the C7H5NO3S version that has been denuded of anything challenging and controversial.
The combination is delicious and worth reading. I lived it as an investor and only have two categories of things to add. The first is that the most important role of the investor in deals like this is to talk your team (in this case Jud and Rob) off the cliff. Or, more likely, to take the flamethrower out of their hands before they started spraying it on everyone in sheer frustration. The other is a few well timed phone calls to key people (in this case, Dick Costolo, who totally saw the value of the relationship but at the time was trying to navigate whatever the current version of Twitter dynamics were.)
The end of Jud’s post has two extremely important points in it. The first to play by the rules of your partner.
“This conflict between your product and the publisher, is real, and it can make or break you. On one hand, you want revenue, and if you break/bend the rules, you can get more of it. However, doing so puts you at odds with the publisher (arguably your bread and butter). Take your pick. We chose to play by the rules and were able to navigate to a successful partnership and outcome. We firmly believed that breaking/bending the rules would yield an incrementally small amount of revenue, and never actually let the business get as big as it could. Think about it this way, black markets exist, and always will, but they’re never as big as the open market. Pursue the open market, sure, it’s harder, but the rewards are bigger. If the only way you have a business is by breaking rules, stop what you’re doing and go do something else; that’s ultimately lame; explain that one to your kids.”
The other is what we called “Be Everywhere That Twitter Is.”
“We spent years cultivating relationships inside Twitter (from the CEO, which changed a few times during our efforts), to mid-level, to developers, to BD, to on and on and on). When we were at a conference and there was a Twitter person there, we elbowed our way to them to get a word in. When Twitter put on conferences, we were there. When Twitter wouldn’t answer the phone because we were that annoying gnat in the swarm, we backed off the calls until we had something significant to put in front of them (a new feature, a new business milestone). Partnership negotiation is a fine line between expressing your need for the other partnership, and illustrating your ability to be independent.“
And Doug, in his conclusion, reinforces the value of that approach.
“I’ll leave you with this final anecdote. While in the midst of the start of our initial term sheet negotiations with GNIP, my team was moved under a new executive. After bringing him up to speed, he told me he didn’t like the strategy and called it off. That day, he and I were to meet with Jud and push things forward. I had to break this news to Jud that the exec had pulled the plug and wouldn’t be at the meeting. It’s difficult to say who was more heartbroken at this point. In his patient and persistent way, Jud keep calling. He kept asking questions. He kept showing up at the office. We kept working on the term sheet and he motivated me to go to bat again. Again, we eventually got the nod. Luck, timing and patience paid off, but more than all kept Jud showing up. That is the ultimate lesson he taught me, one that I carry with me every day.”
There’s a lot of healthy and tasty juice in this origin story. Jud / Doug – thanks for putting it out there.
Pro Tip: If you are at CES today and want to connect, I’ll be hanging out at Eureka Park from 11am this morning (Friday) when I’m on a panel about diversity until I leave the premises at 2:30.
My dad and I left the Venetian yesterday at 8:30am to head over to the Las Vegas Convention Center. When I arrived back at the room at 10pm, I was done / baked / toasted / wiped.
For a number of years (somewhere between 5 and 9, according to the little badge they gave me), my dad and I went to CES together every year. In 2013, when I got depressed, I decided not to travel for a year. I punted CES that year and for the next few years, so this is the first time in four years we’ve done the drill.
We had a blast together yesterday. I think my dad was delirious by about 9pm when he left our party and went up to the room. And hour later when I checked in on him before going to sleep, he was flat on his back in bed pretending to be awake but was clearly out for the count.
We started at the LVCC. I saw a tweet from Dan Primack saying the North Hall was basically indistinguishable from the Detroit Auto Show. He nailed it – it was basically a takeover by the worldwide auto industry with a few startups sprinkled here and there. It felt like six months ago every CEO of a major auto company sent an email to the CMO that said
“We are going to be at CES. We need to show up three things: (1) Our EV prototype, (2) A completely new in-car electronics package that looks better than Tesla’s, and (3) something about autonomous driving. Your budget is $10 million. Don’t fuck it up.”
If any of this shit comes together, we are going to have completely different cars by 2020. If you are a VC and you haven’t placed your bets on this sector yet, good luck. And if you have, make sure you are spending lots of time with big auto corp dev / M&A people.
If you’ve been following any news about CES, you know that it’s been a huge Alexa takeover. Amazon’s move in the home is brilliant. I love Alexa and I’m amazed at how far ahead Amazon suddenly is. When I think of all the money, time, and energy Microsoft, Apple, Google, Nintendo, Sony, Samsung, and LG have spent in the home, I have one word for them. “Wasted.” As far as I can tell, I’ll be talking to Alexa in the future a lot more than I’ll be saying “Ok Google”, especially when I’m talking to a Samsung TV.
Several times an hour I bump into someone that I like. That’s one of the fun parts of CES – you are surrounded by 180,000 of your fellow nerds and you bump into Dick Costolo on the way to dinner. I ended up in a fifteen minute conversation with Josh Ellman. I could list another 20 serendipitous connections in random places but you get the idea.
After wandering through the Sphero secret rooms in their booth, I told my dad I thought it was the best booth experience I’ve ever had. Way more awesome than yet another random shag carpet open space with marketing displays.
Interviewing James Park at Eureka Park about the Fitbit story was fun. My experience with James, his partner Eric, and Fitbit continues to be one of the most rewarding and enjoyable – at all levels – professional experience I’ve ever had.
And then dad and I wandered around the Sands. It completely blew away the LVCC and was so much more interesting to me that I’m just going to spend the day at the Sands, wandering around startups, smaller companies, 3D printers, robots, and all kinds of stuff I like. There are zillions of CE startups in Sands. While 90% of them will fail, it’s pretty awesome to see what entrepreneurs are working on.
The only thing more baffling to me than the auto stuff were home robots. I think the 2017 crop of home robots at CES will be like the 2013 crop of 3D TVs. Kind of cool, but not commercially viable. We’ll get there, but it’s not this.
And – well – lots of chocolate ice cream. That’s one of the best things about Las Vegas. Chocolate ice cream is less than 0.25 miles away, no matter where you are.
Everyone has a junk drawer. Or two. Or ten. One of mine is to the left.
So does every company. It’s now often referred to as “Labs” (as an homage to the infamous Google Labs which was disbanded in 2011.)
We’ve seen a lot of companies spin up a Labs as a way to try to create new products. In most cases, after about a year, it’s a junk drawer of random shit.
At a Techstars meeting on Monday, in response to something I said, Jason Seats blurted out “that’s just putting it in the junk drawer.” I love when Seats does that – it makes me stop and think. And, in this case he was absolutely right – it was a lot better to simply delete the thought that I’d had (and the activity around it) then to put it in the junk drawer.
I’ve come to really hate the concept of “Labs.” Fortunately, most of the companies I’m involved with who have done a Labs thing have shut it down and reabsorbed it back into the product organization in a more systematic way.
At some point, I realized that Labs was either (a) a random place to put a founder who is no longer working on the core activity of the business or (b) a place to work on a set of things that product can’t make progress on. Both of these are foundational issues.
If (a) random place for a founder, the CEO may not be dealing with an organizational issue around a founder. Or the founder may not be tuned in to how to work with a now scaling organization. There are situations where you want a founder (or founders) to go work on a new R&D project, and it could be called Labs, but it should be focused on a particular product initiative, not a non-defined grab-bag of randomness. When I think of the success cases here (and I have a few), it’s really “new product R&D” rather than “labs”, even when the new product isn’t clearly defined yet. But that leads to (b).
If (b) a place to work on a set of things that product can’t make progress on, this usually appears when the CEO (and potentially a founder) are frustrated with the pace of new product development. This is a recurring theme in my world when a company hits around $5 million of revenue on their first product. It happens at multiple points again in the future and is a good example of the differences between starting a company and scaling a company. It’s easy to blame this on the product organization, but it’s often more complicated than that. Sometimes it’s a single executive; often times it’s the way the engineering and operations organizations (including customer support) interact. And sometimes it’s the CEOs lack of understanding of how to run a maturing / scaling product line while adding in new products.
In either case, the default to creating Labs as a solution to a problem is not a good one. And, when I get home from CES, I’m going to throw all the shit in my junk drawer away.
At the MIT Celebration of 50 Years of Entrepreneurship in November, I heard a number of fantastic lines that have stuck with me. One of them was from Noubar Afeyan.
“Entrepreneurship is intellectual immigration.”
As I sat in an audience of about 200 extremely accomplished MIT graduates spanning over 50 years, I thought to myself “he just fucking nailed it.”
I’m a huge fan and supporter of immigration, especially around entrepreneurship. If you look at the landscape of success entrepreneurs in the United States you see a remarkable number of first and second generation immigrants. We can argue about immigration policy all day long (and plenty in DC do, mostly to insure that nothing actually gets accomplished) but the historical statistics around immigration and entrepreneurship in the US are undeniable.
Noubar talked about immigration being “going someplace outside of your comfort zone.” Every first generation immigrant I’ve ever met has talked about immigrating to the US as something akin to this. Many entrepreneurs I’ve met have articulated a similar emotion around their experience leaving whatever they were doing to start a new company.
My whole life has been built around the idea of intellectual immigration. I’m constantly exploring new things, getting out of my comfort zone, and moving toward new “things.” As part of this, I’m moving away from (emigrating away) from old, established things.
Ponder that.
In November, during the week of the presidential election, I was at MIT for the Celebration of 50 Years of Entrepreneurship at MIT. The Friday night event included a keystone from Simon Johnson, an MIT professor who became famous during the financial crisis because of his superb analysis along with his almost daily blog The Baseline Scenario and his willingness to openly challenge an enormous amount of conventional thinking.
I remember hearing Simon for the first time at an MIT Sloan Dean’s Advisory meeting in the basement of a fancy hotel in NY in the middle of the financial crisis. Many of the advisory board member attendees looked like hammered dog shit as they were part of the New York financial services and real estate world. Simon gave a clear eyed, extremely compelling pep talk that challenged everyone to ask questions and think hard, rather than just retreat into gloom.
On the Friday night after the election in 2016 on the six floor of E-52, Simon gave another impassioned talk. As he wrapped up, he addressed the elephant in the room, which this time corresponded with Trump, a Republican Congress, and a huge swath of red on an electoral map where a bunch of people, including me, had previously expected blue.
One question really stuck with me.
“How do you make technology work for those who are not working? Especially for those who are not working because of technology.”
This is not the first time we’ve had to deal with this as a species, or a country. The transition from the agricultural revolution to the industrial revolution is a simple historical analogy. There are others, but Simon asked another question after making the analogy.
“Is this time different?”
I don’t know the answer to the questions but they slapped me in the face and made me sit up.
Over the past two weeks, I’ve had a lot of interesting conversations, mostly with Amy, about the next 20+ years. I believe humans are in for the biggest transformation (and subsequent challenges) that we’ve faced so far since the origination of our species. I think it’s going to be extremely complicated, painful, and confusing to many.
Simon suggested a powerful approach and one he’s going to take. He’s going to rip up all the old models and start with a blank sheet of paper. As part of that, he’s going to start with the question, and explore. He doesn’t know where it’s going to lead him, but he’ll let it go where it will.
I’m of a similar mindset. I’m also comfortable with my first principles, like the notion that a key part of the improvement in our situation, both economic and cultural, around the world are startup communities. I believe ever more deeply than ever in the philosophy of #GiveFirst, which is the title of my 2017 book. I’m committed to the work path I’m on with Foundry Group and Techstars, the philanthropic path that Amy and I are on with the Anchor Point Foundation, and the philosophical path I’m on with many friends around the world.
While I don’t have any answers to Simon’s question, I have more questions and answers to some of those questions. And, I know how to find answers, and find more questions. So that’s what I’m going to do this year, both in the context of my existing work, and on new intellectual, functional, and philosophical paths.
You’ll see this show up in what I read, what I do, and where I travel. For example, you’ll see hints in my Goodreads book list (whether or not I do book reviews.) For example, each of the last two books I read – Interface by Neal Stephenson / J. Frederick George and Hillbilly Elegy: A Memoir of a Family and Culture in Crisis by J.D. Vance – are both relevant to this discussion.
I’m not trying to find the answer right now to anything in particular. Instead, I’m starting with a blank sheet of paper and trying to learn more, with a beginners mind.
I’m giving two talks this year at CES as part of Startup Stage at the Sands, Level 1, Hall G. The first is on Thursday 1/5: 1 – 1:45: Fireside chat with Fitbit: From Inspiration to IPO. The second is on Friday 1/6: 1 – 1:45: Diversity in Tech
If you are around and interested, come listen and say hello.
I’ll be at CES from Wednesday to Friday. I went for many years, punted for the past few years, but decided to go again this year.
Techstars runs a big program called the Startup Stage that has three days of programming. It also co-hosts Eureka Park, at the Sands, Level 1, Hall G which is a collection of around 600 startups. I’ll be hanging out there when I’m not walking to CES floor, which typically takes me a day.
My dad will be with me. We love to walk to the show floor together and just be together for a couple of days. While he’s a doctor, he’s been a tech nerd since I was little, always alongside me as I played around with new stuff. He’s endlessly a kid around this stuff – always trying new things, talking to everyone, and just having the time of his life.
I’m giving two talks this year at CES as part of Startup Stage at the Sands, Level 1, Hall G.
- Thursday 1/5: 1 – 1:45: Fireside chat with Fitbit: From Inspiration to IPO
- Friday 1/6: 1 – 1:45: Diversity in Tech
I don’t go to CES to find the next great thing. I go to soak myself in what companies are releasing now. I run into (randomly – I don’t schedule anything) a lot of friends from the industry. I relax into the density of the amount of stuff getting shipping in 2017, as I think about where it will be in 2022.
And – I hang out with my dad. Which I love.