Why Entrepreneurs Don’t Scale
April 13, 2011 Leave a comment
So I read this Harvard Business Review article by John Hamm, titled like this post, and I would like to share his and my opinions on the problems that entrepreneurs have when dealing with rapidly growing ventures.
According to the article, there are four main reasons why founders have problems when their firm enters the right part (literally and figuratively) of the ‘hockey stick curve':
1. Loyalty to comrades
2. Task orientation
3. Single mindedness
4. Working in isolation
This deals with the fact that you have to analyse everyone in your growing organization (including yourself!) and figure out if the person still is in line with the new company goals. Maybe you will find that your co-founder or your first 2 employees, who build the company from nothing to what it is right now, no longer fit into your long term vision. This basically means that you have to look at people’s performance and not at how much you like them. This can be a very, very difficult decision for any founder. The only way I think you can really make sure you don’t fall into this trap (except from being an emotionless bastard), is to do as I wrote in my previous posts. Step away from your company and look only at what is necessary for the next step. You have to be able to see your friend’s performance in the perspective of the company as a whole, and determine if he still fits in or not. If not, you have to face the difficult work. Simple as that, you have to, otherwise you will jeopardize the whole company.
In the startup phase, founders often have to work on specific, very clearly defined tasks, on the product or service. Most of the deadlines and goals can clearly be seen, next week, next day or even in the next hour. However, as soon as the venture starts to rapidly grow, the founder/CEO has to switch to a long term vision, with less clear deadlines and goals way beyond the horizon. This switch often is difficult for founders, particularly coming from an operations, product development or finance background. Leaders have to be able to select a few, two, maybe three or four, major goals for the next quarter or even year. They have to be able to select, from the obviously long list of all important issues, only the most important ones and restrict himself from selecting the whole list again. Once he found, with his executive team, the 3 or 4 most important goals, he has to make sure everyone in the company adheres to these goals, even if they are contradictory to the previous goals.
Single mindedness is a very important ability of a founder to make his/her idea a success; however, it is also one of the most dangerous ones if the company grows. In an early stage it will help solve problems, get the product ready in time, and it can even impress investors, in a growth phase however, this will only limit the company’s growth, and increases the chance of missed opportunities. Founders need to broaden their perspective and attention when they want their company to succeed out in the big world. They cannot focus on one single part of the product or company anymore. The customers, investors but more importantly, the employees need a leader that cares for everyone equally.
Working in Isolation
I believe this forth point is very similar to the previous one, with one distinct difference. When founder is not able to work or present to the ‘general public’, it will influence the companies success dramatically. The founder has to be willing to give interviews, to be ready every time an outside or inside person needs his ‘personal’ attention. As soon as the company has success, the leader will become the public face for it, and he/she can no longer hide in his office or workspace. Even if the leader doesn’t want to be the public face, the media, customers and employees will make him the face of the company, so you better face up with it.
What to do about this?
In conclusion of these four points, I think they all boil down to 2 important characteristics that are necessary for a founder to be a successful ‘growth leader’. The founder has to be able to step back from the company and judge objectively every single thing that occurs or has to occur. The second step is, that the founder has to be willing to keep learning every step of the way. Most people won’t make the transition from founder to CEO completely naturally, and they will need advice, help and schooling. So don’t be afraid to ask for help, hire a presentation or media coach, ask people to judge you and listen to them and try to become better every single day.