Surrounding Factors of Startups: Part 3
Despite their season-ending loss to the Memphis Grizzlies in the 2021 NBA season, the Golden State Warriors have undoubtedly been one of the best basketball teams of the past decade. And a crucial factor behind their excellence has been the power of two words: culture and leadership. Yes, the Warriors at their peak were an extraordinary skilled team, with the combination of shooting talent and playmaking prowess able to catapult their offense to the top of the NBA (their defense was world-class as well). But, as is true for any organization, talent alone doesn’t accomplish anything. For an organization’s talent to be truly harnessed towards achieving a goal at hand, great leadership and a strong culture are essential.
This holds true for startups as well. At the end of the day, people are the driving force behind any progress for a startup. It’s why so many early-stage investors point to the quality of the founding team as their prime criterion for whether to fund a company; while functional products and big markets are important, it is ultimately the people who have to leverage these two to create lasting value for their customer. Brilliant ideas are irrelevant without brilliant execution, and brilliant execution boils down to team’s ability to work collaboratively and efficiently to make things happen — a function of leadership and culture.
Before we go deeper on the importance of strong leadership, it is important to fundamentally break down what the term means. Warren Bennis, who was a renowned author and scholar on the topic, defines leadership as the “capacity to translate vision into reality.” Applied to organizations, this means having a clear vision and purpose in place (in terms of what the group wants to accomplish), and being able to unite people to work together in harmony to bring that vision to life. While the vision component of leadership is focused on what a group can accomplish, it is the people component that determines whether and to what extent the group can accomplish their goals. Both components are equally essential to a group’s success, and are interdependent in many ways. Organizations with a powerful mission and a clear direction attract great people, who can then work collectively to stretch the imagination and increase the possibilities of things that the group can accomplish. The two reinforce each other in a virtuous cycle; it’s a positive feedback loop which is integral to the performance of any business.
The Vision Component of Leadership
A common discussion when it comes to startup leadership is the contrast between the missionary and mercenary. John Doerr (partner at Kleiner-Perkins), who has spoken extensively on the topic, puts it this way: “Mercenaries focus on their competitors and financial statements; missionaries focus on their customers and value statements. Mercenaries are motivated by the lust for making money; missionaries, while recognizing the importance of money, are fundamentally driven by the desire to make meaning.” Startup investors like Doerr seek to invest in founders who are missionaries, because those are the ones who will hang in there and endure when the going inevitably gets tough. The number one killer of startups is not running out of money, but instead the founder quitting and giving up on the company-building journey. Missionaries who are deeply passionate and committed towards the problem they are trying to solve are less likely to quit, as their intrinsic drive to turn their vision into a reality gives them the grit and determination to persevere through adversity.
A story which demonstrates the conflict between a missionary and mercenary comes from Apple in the 1980s, with Steve Jobs and John Sculley at the helm. The two were fundamentally different in their leadership, in both the purpose which drove them and the style in which they lead. Jobs was a missionary at heart, with a bold vision to build a personal computer for anyone to use. At a time where computers were only sold to the hobbyist market, Jobs had the foresight to see how putting a personal computer in every house would create radical change, and had the right product insights to make it happen. In fact, it was his obsession with key aspects of the product — such as a design focused on simplicity or end-to-end integration to create the first fully packaged computer — which helped Apple build products which customers loved. This same product obsession was not echoed by John Sculley, the veteran corporate executive who joined Apple as CEO in 1983. Sculley was a battle-tested leader in business, with experience as the president of PepsiCo, and came in to provide guidance and operational acumen for a young Apple company. However, Scully’s lack of product focus was accentuated by his inability to deeply understand the technologies which Apple was building. He had spent his entire career selling sugared water, a gig where his entire attention was directed towards sales, marketing, and numbers on a spreadsheet. Sculley encapsulates the essence of a mercenary, as a leader with more focus on the bottom line than product vision.
With these fundamental differences in leadership outlooks, it’s not too hard to predict what happened next. Sculley and Jobs seemingly worked well for a couple of years, with both trying to leverage their complementary skillsets to guide the company. But soon the inevitable happened, with disagreements and arguments arising between the two. From product tweaks which Sculley thought to be unnecessary and counterproductive, to conflict over the pricing of the Macintosh, tensions would indeed heat up. These tensions would reach a boiling point in 1985, with a showdown between Jobs and Sculley leading to the board ousting Jobs and firing him from the company which he started. The arguments for Sculley and the board are valid, with Macintosh sales dropping and Jobs’s erratic leadership style creating dysfunction within his team. However, it’s no surprise that Apple’s market share would experience a steep decline (going from a high of 16% in the late 1980s to 4% in 1996, the year before Jobs returned) under the leadership of Sculley. This series of events highlights a very powerful lesson in business leadership: no matter the past experience or material skills a leader may have, it is very hard to guide a company to enduring success without a passion and vision for the products being sold.
The best missionaries are visionaries. They are driven by an insatiable motivation rooted in the change they want to create in the world, a motivation which is so deep that it’s infectious and trickles down to other members of the team. The heart of visionary leadership is being able to inspire other people to develop that same deep commitment towards the company’s mission and purpose, so they too can resonate with the big picture impact of turning the vision into reality. This can only happen with clarity of communication, something which starts with clarity of thought. A leader’s first order of business is to think deeply about the vision of the company, and boil it down into its irreducible and foundational ideas. While it’s important to be able to wrestle with complexity, it is the simple yet immutable first principles which are the easiest for others to digest and understand. Once this happens, the leader will be able to clearly articulate their vision for the company, and build a team of people who strongly believe in it.
The People Component of Leadership
While a missionary leader with a grand vision has the potential to do big things, that potential will only be realized if the entire team is able to work collaboratively and coherently to execute on the vision. As Bill Gates has said, “there’s an essential human factor in every business endeavor. It doesn’t matter if you have a perfect product, production plan, and marketing pitch; you’ll still need the right people to lead and implement those plans.” The hallmark of the people component of leadership is being able to create the conditions which direct the positive attributes of all the team members towards the organization’s purpose and end goal.
This sounds simple in theory, but is often hard to do. When recruiting, founders always evaluate potential hires on their value-add, or the positive attributes they can bring to the table when on the team. These positive attributes can range from engineering prowess to market knowledge and sales expertise. But just bringing someone in to add some sort of value doesn’t guarantee that the value will be added. Leaders have no immediate control over where their subordinates direct their attributes, skills, and energies. Let’s say there are two new engineers for a company: engineer A, who is fully invested in executing on their role and helping the company achieve their mission, and engineer B, who has no interest in the company’s purpose and is simply doing the bare minimum to get compensated. While these two engineers may have the exact same engineering talent and attributes, the gap is massive when it comes to value realization. Most of engineer A’s value is being realized, while a significantly smaller proportion of engineer B’s value is being realized: the difference lies not in talent but rather mindset and attitude. It is the leader’s responsibility to create the conditions that ensure that the mindsets and attitudes of their team fall closer to engineer A’s than engineer B’s, thus maximizing the value realized.
How does a leader do this? Fortunately, mindsets and attitudes are dynamic, and can be changed for the better with the right amount of guidance, mentorship, and coaching. The best leaders are coaches, and the best coaches are leaders with a genius which goes beyond the domain they work in. The iconic coaches of the last 40 years — from Phil Jackson to Bill Walsh — are where they are not just because of their expertise in basketball or football, but also due to their people skills and ability to create the conditions where players perform at their peak levels. Like engineers at a tech company, the extent to which a player can help their team is largely a function of their mindset, a factor which can be heavily influenced by the coach they play for. This is perhaps the area where lessons from sports is the most translatable to business, as strategies used by coaches can be applied to any people-centric organization.
One coach whose principles are widely applicable to the startup and buisness world is Phil Jackson, who has the record for the most NBA championships won by a coach with 11 of them. 6 of these rings came with Michael Jordan, Scottie Pippen, and the Chicago Bulls in the 1990s, while the other 5 came with Kobe Bryant and the Los Angeles Lakers. Jackson coached talented teams with talented players, there’s no doubt about that. But when working with individuals who are masters at their craft and the best at what they do, there is an ego component which may settle in. It’s the coach’s responsibility to minimize the effect of these individual egos so that they don’t act as a barrier to overall team coherence and unity, just like it’s a manager’s responsibility to ensure that the qualities of engineer A (instead of engineer B) are prevalent throughout the organization. Managing egos is a challenge which every leader faces; Jackson was able to tackle it by leading with compassion.
Compassionate leadership is what enabled Jackson gain an understanding of his players which was so deep that it had a long-term transformational impact. For sports teams in particular, it’s integral to understand players on the basis of not only the skills they contribute on the court, but more importantly the people they are off the court. Jackson was brilliant at this, building strong relationships with every player and understanding their motivations and characteristics. This combination of a strong relationship and deep understanding of the person is what helped Jackson influence his players at a mental level, driving shifts in their mindsets which strengthened the value they were able to create for the team. For example, Kobe Bryant entered the NBA as a player who was very talented and hardworking, but one who had little faith or belief in his teammates. This mindset was the driving factor behind the selfish on-court play he exhibited early in his career; Bryant would often take contested shots over multiple defenders instead of looking for an open teammate because his trust in himself was so much greater than his trust in his teammates. While most coaches would have no tolerance for this type of behavior and have enforced punishments immediately, Jackson’s compassionate leadership approach took a different route: by building a strong relationship with Bryant, he was able to drill down and find two fundamental motivations at the core of Bryant’s approach to the game: the desire to win at all costs, and the goal of one day going down as the greatest player to step foot on a basketball court (essentially surpassing Jordan). With this deep understanding and the trust of his star player, Jackson taught Bryant three simple but powerful lessons: that championships could not be won alone and required a full team effort, that the only way he could win was by trusting his teammates and making them better, and that it was this unique ability to elevate everyone around them which separated all-time greats like Jordan and Magic from the rest of the pack. By aligning Bryant’s motivations and incentives with what was best for the team, Jackson inspired Bryant to work towards his own leadership capabilities, which transformed his impact as a player and helped him lead the Lakers to two championships in the late 2010s.
Compassionate leadership is just as applicable to business as it is to sports. Jeff Weiner, the executive chairman and former CEO of Linkedin, is a huge advocate for leading with compassion. Here’s how Weiner defines compassionate leadership, in the context of his initial realization that he needed to alter his style of leadership (back when he was at Yahoo): “It meant walking a mile in the other person’s shoes; and understanding their hopes, their fears, their strengths and their weaknesses. And it meant doing everything within my power to set them up to be successful.” Compassion, at its most fundamental level, is empathy plus action. It’s having the capacity to understand how another person is feeling, combined with the ability to take action and help them in any way possible. At the business level, this means understanding everyone on the team and the different levers which influence their behavior, and then using this insight to find an optimal way to inspire and motivate them such that their big picture goals and incentives and aligned with that of the organization. In other words, it’s using compassion to transform a team member from engineer B to engineer A.
Another coaching legend whose lessons can be applied to business and startups is Bill Walsh, who was at the helm of the 1980s San Francisco 49ers and guided them to 3 Super Bowl titles. However, perhaps the most impressive of Walsh’s achievements was the turnaround he orchestrated upon his initial arrival in San Francisco. When Walsh joined the 49ers in 1979 as head coach and general manager, the team was coming off a horrific 2–14 record, which accentuated the utter dysfunction and turmoil within the organization. One writer even declared the 49ers as the worst franchise in not only the NFL, but all of professional sports! However, just two years after the start of Walsh’s tenure as the coach of the 49ers, he was able to lead them a Super Bowl ring, winning Super Bowl XVI (in 1981) against the Cincinnati Bengals. In other words, it took only two years for Walsh to take his team from the absolute bottom of the mountain to its pinnacle.
This marvelous turnaround wasn’t a function of Walsh’s desire to win fast. There was no promise of a Super Bowl ring in two years when Walsh entered the organization; in fact, there wasn’t any mention of hopeful outcomes or results in his plans. Instead, this marvelous turnaround was a function of Walsh’s attention towards the process rather than the outcome. As Walsh himself describes it, “I directed our focus less to the prize of victory than to the process of improving — obsessing, perhaps, about the quality of our execution and the content of our thinking; that is, our actions and attitude. I knew if I did that, winning would take care of itself, and when it didn’t I would seek ways to raise our Standard of Performance.”
Walsh’s signature saying (and the title of his book on leadership) was “The Score Takes Care of Itself.” This motto, which perfectly epitomizes Walsh’s philosophy, can be applied to business leadership as well. If you focus on optimizing for the attitudes and actions which are exhibited by the people in the organization, the long-term results will take care of themselves. At an individual level, this means having specific standards which each member of the company should meet. For quarterbacks on the 49ers under Walsh, it was being able to scan the entire field for receivers and throwing the ball at different velocities and trajectories. For product managers at a startup, it may be understanding problems faced by customers to build a compelling value proposition and knowing the architectural and business capabilities of the competition. While the number of touchdowns thrown by the quarterback or the revenue brought in by the new product may be most important at end of the day, it’s the actions which drive the results.
Culture
While the people component of leadership helps maximize the value which individuals create, it is a strong culture which unites these people to become more than the sum of their parts. Before getting into the nuances of company culture and the impact it drives, it’s important to first establish what culture is. From the vantage point of a leader or CEO, Ben Horowitz (co-founder of the venture capital firm Andreesen-Horowitz) describes culture as “how your company makes decisions when you’re not there. It’s the set of assumptions your employees use to resolve the problems they face every day. It’s how they behave when no one is looking.” Culture boils down to the values and principles that leaders instill within their organization, which are then manifested through collective behavior, actions, and decision-making.
There is no singular “one-size-fits-all” approach to building culture. If there was, all companies would adopt it and we would see homogeneity in the culture of organizations. No two company cultures are ever identical; this is because the culture of an organization has an interdependent relationship with the unique value they create. To help understand this relationship between a company’s culture and ability to execute on their vision, it’s useful to consider the relationship between a sports team’s culture and their ability to execute on their primary goal, winning. For short bursts of success, like winning one game, culture may not be the biggest difference-maker. But for long-term success of high magnitude, such as the ultimate goal of winning a championship, culture plays a very key role because it dictates how the team wins. As Bill Walsh has said, “The culture precedes positive results. It doesn’t get tacked on as an afterthought on your way to the victory stand. Champions behave like champions before they’re champions; they have a winning standard of performance before they are winners.” The same applies to startups: while building and shipping a minimum viable product is largely function of ideation and engineering, it is the culture of the group that determines how they will approach finding product-market fit, scaling to critical mass, and virtually every other obstacle which stands between them and the execution of their vision.
All in all, leadership and culture are foundational elements for a startup’s success. Simply put, it is the quality of the leadership which will drive the quality of the startup’s execution as it pertains to reaching their goals. Great leaders create even better corporate cultures, ensuring that the processes around how the organization operates will ultimately help them fulfill the company’s vision and mission.
