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Does Your Start-up Need to Grow Up?

Posted by Hemant Puthli on January 21, 2010

Over the last decade or so, the heady blend of technological innovativeness and entrepreneurial drive has resulted in a widespread burgeoning of technology-centric start-ups. This was mostly fueled by quantum leaps in the price/performance of technology products in a climate of de-regulation and liberalization, especially in the telecom industry. At the turn of the century, the spike in Y2K business and the concurrent boom in dot-com opportunism were the most highly visible phenomena that marked this trend. Soon after, the predictable post-Y2K void and the inevitable dot-com bust saw a lot of bankruptcies and sell-outs, and, as one might have expected, very few new launches. A few years since then, however, Web 2.0 — the second wave of web technologies coupled with mobile computing and other trends that have collectively been dubbed ‘social media’ — has brought a groundswell of economic activity around technology-centric start-ups. This has been further spurred on by the success of Facebook and Twitter, which have emerged as role models that many Web 2.0 / social media start-ups emulate. Simultaneously, in the post-Y2K world of global sourcing and off-shore IT and IT enabled services (ITeS), there has been a spate of IT / ITeS start-ups that are all aspiring in some way or other to become the ‘next Infosys’ in their respective markets.

However, not all technology start-ups become mega-corporations (though the reverse may be true: several giants in the technology industry were small boot-strap start-ups in their infancy). Not just that, many don’t even scale up to the mid-market level (defined by, say, annual revenues to the tune of tens of millions of US $ and/or multiple hundreds of employees) and continue to remain at the ‘Small’ end of the ‘Small & Medium Enterprise’ (SME) categorization till they are either acquired by larger and stronger players or are just simply driven out of business. Founders and promoters of such ventures are often puzzled and frustrated by the inability of their start-up, now in its adolescence, to break through seemingly invisible barriers that appear to be limiting its growth, in spite of being in business for several years and having built a respectable brand with a proven track record. What they don’t realize is that a lot of the answers to their conundrum lie within the organization itself and in the mindset of the leaders that define and propagate its culture. In many cases, promoters get rid of the problem altogether by selling off the business, but the organization continues to carry the seeds of the problem which then poses a challenge to the new owner. In any case, the inability to grow beyond the invisible barrier continues to be a confounding mystery. Why does this happen? Quite simply, they have started-up and they have grown but they haven’t grown up. Let’s take a deeper and harder look under the hood and try and understand the anatomy of an average start-up culture.

The “Forever Young” mindset has everybody “Living In The Past”

First, let’s focus on the main malaise that afflicts most start-ups, illustrated by the following near-verbatim quote from a recent interview of Facebook’s Co-founder CEO & President, 26 year-old Mark Zuckerberg: “It is really important to always keep a beginner’s mind and think what we would do if we were starting the company now”. This may have been relevant in the context of Zuckerberg’s responses to questions he was being asked in that interview, but it’s a pleonasm to say that every start-up must have a “beginner’s mind”. The more important question is: must they always keep it? Common sense suggests that as a start-up grows it should develop the “beginner’s mind” further and move on to the next stage in its growth, which usually calls for a shift in mindset. It is always a good thing to go back and revisit the time and the space where the “beginner’s mind” was nurtured, but it would be a big mistake to continue to live in that mental space-time. Like humans, start-ups must learn to leave their childhood and adolescence behind as they start to deal with the complexities of corporate adulthood, if they want to grow beyond a point. (Even for humans who seek personal growth, reminiscence of halcyon days as teenagers does not constitute a vision for the future.) Utterances like the one above by Zuckerberg, pulled out of context, acquire their own life as viral memes of start-up wisdom in the highly impressionable social cyberspace, because they resonate very well with the “Forever Young” sentiment of entrepreneurs who simply don’t want to grow up. On the other hand, entrepreneurs who show a hunger for evolution and who are only too eager to embark on a journey towards maturity and sophistication, at the personal as well as the business level, are more likely to make that very important transition through which they will learn to take on and live out a C-level role on par with leaders of other industry majors.

The myth of the “Hands-on CxO” — portrait of the technician as a businessman

In many ways, the “Hands-on CxO” is a corollary of the “Forever Young” mindset. Beyond doubt, at start-up stage it is crucial for CxOs to be highly hands-on, roll up their sleeves and be exemplars of the ‘Do It Yourself’ (DIY) culture. But at some point along the road to growth and maturity, the business leader needs to grow up and actually become a CEO instead of behaving like an overgrown program manager or a sales rep, just as the technology leader needs to grow up and actually become a CTO instead of behaving like an overgrown code-cutter. That journey is as much a personal metamorphosis for the concerned leader as it is for the organization as a whole. Key focus areas for ‘growing up’, in this context, include learning to appreciate the importance of strategy and tactics on the one hand and structure and process on the other, learning to let go of preoccupations with production and delivery issues, and learning to delegate large chunks of the day-to-day operational routine to other team members (who in all likelihood are only too eager to step up and take charge). Not only does delegation release precious bandwidth of key leaders so that they can focus on understanding and embracing their new responsibilities as C-level executives, but also, delegation provides growth opportunities to the team members who get work assigned to them that they were not doing before. This kind of role transformation represents a major career shift for leaders of a start-up and many who aren’t quite ready for that shift tend to resist it with all they’ve got — they would insist on continuing to be hands-on / DIY specialists and would either refuse to delegate or agree to delegate but compulsively continue to micro-manage through remote control. This is partly because they love working on the technology too much, partly because they loathe and fear their new (‘management’) responsibilities too much, partly because they fear losing control over the start-up’s core technical competencies (and risk being challenged by internal upstarts who might grab the opportunity to get a better handle on the secret sauce) and partly because they fear losing touch with technology per se over the years (which would be a handicap should they have to go back to industry for a job, in case the start-up fails).

Cultivating a culture of gods and rock-stars may be good but could also erode value

In almost every technology start-up, there’s a small group of ‘gurus’ who are revered as the gods of that particular domain. The Hands-on CEO and the Hands-on CTO are at the apex of the hierarchy but others in this coterie are almost equally powerful. Younger team members and fresh recruits who show a lot of promise are encouraged to earn ‘rock-star’ status through their first few achievements, and are then invited to join this elite clique. The symbiosis is quite clearly understood but always tacit, never overtly spoken about — the gods preen themselves, drawing on the idolatry of the rock-stars, while the rock-stars enjoy being mollycoddled as special employees and gloat over the privilege of on-line and off-line proximity and access bestowed upon them by the gods. This caucus of gods and rock-starts drives the start-up’s agenda and scripts its future. They have the power to lift the start-up to great heights, as also to bring it down with a crash. They determine what platforms, what tools and what methodologies the firm will use, what they will create (or won’t) and what kind of work they will do (or won’t), who they will partner with and how they will go to market. They shape the talent acquisition strategy and process. It doesn’t stop there, in many cases: they also go on to influence (if not directly determine) strategic and tactical choices dealing with which business opportunities in which markets to chase and how to play to win. The power acquired by this core group could result in several side-effects that have the potential to subvert growth and end up hurting the start-up. For example, it could give birth to cultural xenophobia against lateral hires from the industry, especially if the new entrants also have stellar resumes and come highly recommended. It could trigger a ‘not invented here’ syndrome against new tools, methods, platforms and even new ways of thinking about the business. It could lead to a clinging-on to technologies or methodologies or ideas (or even operating locations and lifestyles) in which the caucus has deep emotional investments, but which are not aligned to market imperatives or do not support growth targets.

‘My Way or the Highway’ could lead to a dead-end either way

The most difficult challenges that a start-up faces in dealing with the winds of change brought by growth and scale, is the letting-go of points of control and the stepping-away from the comfort zones of the past. Growth and expansion usually involve the inorganic inclusion of new people, new ideas, new tools and new methods. Whether it is parting with equity to a new investor (or a new senior recruit) or having to bring in external talent (that internal old-timers may see as a threat) or having to re-shape the organization (resulting in a redefinition of power centers and personal alignments), start-ups must learn to open their minds and their hearts to change. Rejecting or strongly resisting change can mean stagnancy which eventually leads to failure. On the other hand, embracing change may not always guarantee results and in any case, change is never easy. That said, it is historically evident that start-ups that successfully break through the invisible barriers to growth are the ones whose leaders, gods and rock-stars have seen the need to change well ahead of time and have been pro-active in anticipating and meeting that change, thereby opening themselves up to the opportunities that come with maturity.

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3 Responses to “Does Your Start-up Need to Grow Up?”

  1. Monisha Advani said

    Completely resonates my sentiment! Nice article… MA or ex start-up upstart

  2. […] This post was mentioned on Twitter by Hemant Puthli, H P Associates. H P Associates said: Does Your Start-up Need to Grow Up?: http://wp.me/pAcdh-ja […]

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