What kind of founder do you want to be?

Rich versus King

by stevew on January 8, 2010

Having no customers, no product and therefore no real problems (yet), I’ve had the luxury this week to think about the kind of company I want to build. When I left Reuters in 1998 to start my first business, I had the idea that I was going to build a company that I would be proud to be a part of until my old age (what was I thinking?), and one in which the staff came first and profits second.  Of course, you quickly learn that without profits it’s nigh on impossible to take care of your staff, and that working forever maybe isn’t such a great outcome after all.

Before getting to the question of what kind of business I want to build, I realised I had to answer the question “what kind of founder am I?”.  Harvard professor Noam Wasserman published some interesting research about founders which he refers to as the “Rich versus King” phenomenon, where he describes entrepreneurs as typically being one of two types – the first wants to build a business where they themselves are at the ‘centre of the universe’ (King), whereas the other is just in it for the money (Rich).  (Bill Gates, Michael Dell, Larry Ellison are amongst the more notable exceptions, but these guys are obviously few and far between).  Given my early attitudes to my first business, I think I wanted to be the King.  But I soon learnt I didn’t make a very good King, and in any case being King wasn’t all it was cracked up to be – you have all kinds of tedious stuff to deal with in a start-up.  Thankfully one of our co-founders stepped into the role of CEO before I could do too much damage, and I got on with the arguably more important and certainly more interesting (for me at least) business of building out our product line.

I came across Professor Wasserman’s research through Jason Cohen’s blog – Jason started a company that develops code review software and subsequently sold the business to AutomatedQA.  In his article Rich vs. King in the Real World: Why I sold my company, he talks candidly about his decision to sell his company and in particular about the non-linear relationship between cash in the bank and lifestyle.  Reading his article helped me see that starting a new business is (for me) fundamentally about making money.  Sorry if that maybe offends some of my more altruistic readers, but I think it is important to get clear about motives, as a mis-assessment here can have nasty long-term side effects.

And Now for the Good News …

Thankfully, in my experience at least, there’s a clear correlation between driving a business to achieve strong financial returns, on the one hand, and establishing a remarkable place to work, with remarkable products and remarkable people, having remarkable customer relationships through remarkable customer support, on the other.  Working to put those things in place makes the hard graft of building a successful business more like an adventure and less a death-march to exit, for all concerned.  So despite my capitalist motives, my goal is to build a remarkable place to work

In November 2009, I had the pleasure of hearing Ryan Carson speak at the 2009 Business of Software Conference, where he talked about building a remarkable company (in fact I think the talk was entitled “How to give your company soul” – there’s a summary of his talk on the BoS conference wiki).  Although his proposition was that you need all eight of his conditions for true remarkability, a few specific things stuck out for me:

  • Lead with drive and passion – it’s obviously easier for your team (and the market) to follow that kind of leadership
  • Love your customers – never, ever let your staff complain about them (they pay everyone’s salary for goodness sake!)
  • Treat your team members like royalty – make sure they have the best gear, facilities, environment, etc you can afford
  • Don’t just think about your business – find a way to somehow give back to the community at large

Of course, as Ryan points out, it goes without saying that you also need to have a “kick-ass” product.  Just need to work out what that product is…

Post to Twitter Post to Delicious Post to Digg Post to StumbleUpon

{ 9 comments… read them below or add one }

Frederik J. Jensen January 8, 2010 at 6:25 pm

“Just need to work out what that product is…”: What about finding a customer to love first and then build the product?

Reply

stevew January 8, 2010 at 10:54 pm

Frederik – it’s an interesting question (maybe one for another article) – which comes first, the customer or the product? Sometimes customers can show you where to go in terms of product direction, but sometimes when you want to move the state of the art along, I think you have to innovate independently and take the market along with you. Nevertheless, it’s a good reminder on where we should start – thanks.

Reply

Jason Cohen January 8, 2010 at 6:36 pm

I completely agree with all this.

Putting “profitability” second is like saying “I’m going to be a great human being but ‘eating’ comes second.” No, eating comes first.

But there’s a difference between comfortable profit and profit at the expense of values. And as you point out, there’s nothing contradictory about creating an awesome place to work and making profits!

Reply

stevew January 8, 2010 at 11:28 pm

Jason – I came across your “sell out” article earlier today – it was a real clarifier for me. I neglected to explain in my post where I am on your graph, but I guess that’s fairly obvious. I wondered after I pressed ‘Publish’ whether the article might have send the message “here comes another money-grabbing capitalist” – definitely not my intention, but being clear about motives up-front seems to be pretty key to me. Thanks for the encouragement.

Reply

Christian Bjerre January 8, 2010 at 8:58 pm

”Cash is king” – and no matter what motives are being postulated then at the end of the day, we’re all in it for a living. Can you make something lasting and of value – then it’s great, but you still have to feed your children, cloth them etc. So cash is needed in one form or the other… There is nothing wrong about that and I think you’re just stating it open instead of wrapping into some “mission, vision, value” statement list (which is incredibly similar from company to company across a multitude of industries). Stay clear in your directions and motives – then you’re also clear in your communication.

On the second part I cannot help thinking about a book I got my hands on last year in Toronto. The color of the cover and the clear print almost shouted to me “buy me”. So I followed the request of the book and bought it. Short, nice read, but very much along the lines of what I feel is important – and which you are taking from Ryan Carson… I could surely miss that in many of the daily interactions I have – inside and outside of my professional career.

The book is “Your Management Sucks: Why You Have to Declare War on Yourself… and Your Business” by Mark Stevens (Amazon: http://www.amazon.co.uk/Your-Management-Sucks-Yourself-Business/dp/1400054931/) . Give it try and see what you think. The industry he writes about is mainly advertising/marketing, but I felt that he touched some of the nerves, which build my connections.

Yes, you need a product. Would be great if it really “kicked-ass”, but to be honest I’d settle for the best-selling product anyday. Compare revenue in $/€/£ of a number of companies with “kick-ass” products to companies in same industry, but with the best-selling product. I think you will find some intestering ratio … and also some interesting absolutes.

PS: You can borrow the book from me, Steve. Just drop me a note.

Reply

stevew January 21, 2010 at 8:13 pm

Christian – in terms of the product, I’m not sure they’re mutually exclusive – building a kick-ass solution surely makes your sales and marketing a whole lot easier. I’d be interested in your views on how to have the best-selling product, aside from offering a great product with great support at an acceptable price – maybe the subject for another post.

And yes, I’d love to borrow the book.

Reply

Anders Kirkeby January 11, 2010 at 9:19 am

Looking forward to follow your travails towards the only true denominator of value in a capitalist society.

If the aim is getting rich as opposed to generating a steady income I would indeed expect the need for some kick-ass element. If new an innovative that might be it and if it’s more of a me-too product there will have to be be differentiators to gain market share. But that element doesn’t have to feature richness – could be anything really.

In a start-up I really think you need differentiators which are clear enough for everybody to believe in. Strategy isn’t enough, there has to be more than that, be that “soul” or some other metaphor. Even with the best laid plans you’ll still need people to put in the extra effort and it’s harder to do so if you’re just the 17th provider of commodity xyz. Differentiators obviously come in many shapes and forms and doesn’t have to have a cost attached to them thankfully.

If you need more content for your most likely growing reading list I’d recommend a nice little book I found long time ago among my wife’s brand management books: “The Big Idea” by Robert Jones: http://www.amazon.co.uk/Big-Idea-Robert-Jones/dp/1846682746/

Reply

Ole Klinkby January 18, 2010 at 9:11 am

Hi Stevew
I’m a new reader on your blog and look forward to follow your endeavor. I agree to you about the target with your new business – you cant make remarkable company if you are not in it to bee rich – you can’t generate the necessary funds to attract the remarkable employees, and i don’t get fun if you have empty pockets.

I would any day go for the product first – because your customer very seldom have the fantasy to imagine what the technical boundary are – but this don’t mean that you can skip the very important test of the need of your new product and a discussion of market size and and a sharp price.

I agree with you that management shall focus on th consumer experience and the employee behavior so everybody know that it’s the customers that pays show.

Good luck

Reply

sebastian October 11, 2010 at 3:04 pm

Of course, eating comes first.

The problem is that school programmed our generation to settle in eating (and not even in a healthy way). So we accept job descriptions and forget we can produce the surplus of gifts.

We should aim for happiness (not relief of hungry).

If we do that, some will achieve it. That would spread happiness to our staff and customers creating a virtuous system that happens to be a business too.

Isn’t Zappos a living example of it? isn’t that the most convincing proof that it works?

If you get convinced about it, then the homework (the hard part) is to maintain the situational context where that happiness can unpredictable be experienced.

And that is an art.
sebastian´s last [type] ..Lucidity is the new capital

Reply

Leave a Comment

CommentLuv badge

{ 1 trackback }

Previous post:

Next post: