The Performance Conundrum: Start with the Best? Or focus on the Rest?

The Numbers Game: Why Everything You Know About Soccer Is Wrong – by Chris Anderson (former professional goal keeper) and David Sally (behavioural analyst) is an interesting read for those trying to figure out the Performance conundrum in an inter-connected world where cause-effect correlations are spurious at best.

In the book, the Weak Link theory for improving Performance is demonstrated by contrasting Basketball & Soccer.
Basketball: A sport where a star player can easily compensate for other (comparatively) weak players.
Soccer: A sport where a star player cannot easily compensate for other (comparatively) weak players.
If you are playing to win in a Basketball type context, go with the Strong Link strategy. i.e. focus on buying & building your Star players. Have stronger strengths.
If you are playing to win in a Soccer type context, go with the Weak Link strategy i.e. support your weak players & build an Above Average team. Not a bunch of Superstars. Have weaker weaknesses.

Businesses are more like Soccer than Basketball (IMHO).
While there are individual roles (like Sales), they can succeed only if the rest of the team (Delivery, Marketing, Finance etc) delivers.
No Star performer can deliver consistent high performance without solid quality support.
But we see the Strong Link strategy everywhere.  It is very difficult to ignore.
“Did you hire a Star Performer?”
Answering “No” to that question is not easy!
“I am building a strong solid team that will perform consistently and a business model that can scale over time.”
Well tried. 😊 Now go hire that Star. Pay “top dollar” if you must. 
The Strong Link strategy is more glamorous & gets the sponsors as it is very easy to justify.“We are paying more for the Star!”  Of course.This is not to imply that Stars are not of value. The question is: Can Stars deliver sustained Performance?

If the business growth is modelled on Star performers, we will need a lot of Star performers for the business to scale consistently and over time. Not really a scalable model. Good for a quick fix. And the weak links will keep "dropping the ball" as this model scales.
Should we be pursuing the Weak Link strategy? What if we start paying attention to improving the weaker players & building an Above Average team?
The Weak Link strategy is not glamorous. It builds solidity and performance over time – but it needs a longer term view.
And an ongoing investment in helping the entire team perform better through tighter Goal definitions, Strategy articulation and tighter Review & Reward mechanisms.
The Weak link strategy is about building a business model that scales without the need for Stars. If you have Stars, even better.
As Yoda would say using his Math theory:Neither necessary nor sufficient for success, Stars are.
The investments behind the Weak Link strategy give an opportunity to all the existing team members to grow, take up roles that stretch their limits, provide professional satisfaction (after the initial trepidation around new responsibilities) & higher compensation.

Complete alignment of Organisational & Individual goals.
Succeeding with the Weak Link strategy requires high-quality attention to goal alignment and commitment to building strong processes, reviews & performance dashboards across the organisation.
Over the years, some of the best performers, in teams that I have had the honour of being a part of, have not really been the Stars of that field. But people who had the desire to make a difference & could focus on what is necessary.

And then someone took a bet on them. And backed them up as they went through their inevitable ups and downs. And they, to their credit, hung in there.

At various points in our lives, we have been the Weak Link, haven’t we?Someone took a bet on us then.
Gave us a chance. The job. The break. The funding. The deal. The list is a long one.
And then watched out for us as we stumbled our way to our goals.
Maybe we should pay it forward, take a bet on our team and solve the Performance conundrum! And of course, play more Soccer! :)
What do you think? 

Co-Founder You Are?

"I need to find a co-founder" - said someone who had a start-up.

"Why?" - I asked.

The "Why" led to the "Who" which led to the "When" - which led back to the core question of "Who is a co-founder?"

Is a co-founder someone who "co-founds"? i.e. part of the original team that started out?

Is there a time axis to this? Only in the 1st year? or before Series A? What if someone comes in later? What about folks who are already there when a new co-founder comes in? Are they not co-founders?

First Follower: Leadership Lessons from Dancing Guy is the wonderful video of how the whole crowd starts dancing only after it sees the 2nd follower join.

Not when the Dancing Guy started dancing. Or when the 1st follower joins.

Maybe a co-founder is someone who shares the risk or provides tremendous value when others were not willing or able.

If so, why restrict it only to the early stages? Someone could add tremendous value & take risk later in the company's life cycle as well. Or over a period of time.

In a start-up, the co-founders' credentials are seen as the early marker of value. Early customers & investors want to meet the co-founders as they are not sure if they should trust the new idea.

As the start-up grows, the marker of value changes. My understanding is as follows:

Idea-Team - Product/Service - Users - Customers - Profits.

E.g. If you have 500 customers and have a good Product, does it really matter to your customers who the co-founders are?

As a business scales, co-founder designations can confound the growing organisation structure. Customers and media seem to like co-founders. Not standard designations.

The "professional" managers struggle to figure out how to handle inputs from co-founders. Are they also like any another manager in the org structure? Can they reject them? Or do they have special horns?

Yes. Yes. No.

Similarly, the co-founders struggle with their changing roles in the evolving organisation.

Can they still fluidly move across functions, levels and take decisions by following their instinct? Or do they have to work within the newly forming org structure, confined to a particular role, through newly hired "professional" managers who are still learning the ropes?

On both sides, it is not an easy transition and many don't make it.

(Btw, irrespective of the credentials of the co-founders, any additional management hired is called "professional". I never could figure out why co-founders are assumed to be unprofessional and managers to be professional. But thats for another post someday.)

Maybe the co-founder tag comes with an expiry date?

Or maybe being a co-founder is a state of mind. It is not a role. Not a designation. Not an acknowledgement that you were there first. or 2nd. or 3rd.

Maybe it doesn't matter when you joined. Or what role you play.

If you keep faith in the vision when everyone else is losing hope.

If you take the risk when no one else is willing to.

If you stand-up against dilution of the vision due to the pressure to grow faster.

If you stand up for the right culture & values.

If you keep building the organisation brick-by-brick.

You are the Earth and everything that’s in it,   

 And—which is more—you’ll be the co-Founder, my friend!

(With due apologies to Mr. Kipling)

Try not. Do. Or Do Not. There is no Try. - Yoda

Maybe we can have a whole company full of co-founders. Why not? :)

May the Force be with you.

Leverage and the battle between Boards & Founders

Infy Board members called NRN back as they thought Infy had got its strategy wrong - and NRN can fix it!

Some Microsoft Board members want Bill Gates to step down as they think Microsoft has got its strategy wrong - and Bill Gates can't fix it!

What is it about such Founders that makes Boards think they are capable of and responsible for - all success and for all failures?

In one word: Leverage.

The ability to get a lot done with very little.

Founders who have built the business over years have a very high leverage in the business.

Leverage because they know how the various moving parts in the business work with each other, how a small change here can make a big impact there.

Leverage because they know the context of the business over many years, why certain decisions were taken and how the changed context today makes it necessary to review the decisions.

Leverage because they know people in the industry. And people in the industry know them. When something needs to be done, the founders know whom to call. They also get a lot of market intelligence. Not data, not information, not research. Intelligence about who is doing what, why etc - because of their network.

Leverage because they know the market landscape, have credibility with market players and have an instinctive feel for the space.

At some point in a company's growth - typically when the product-market fit has happened and some predictability has been achieved , the collective wisdom of a Board is seen to be better at deciding the strategy than the Founders' leverage.

The problem is that the correctness of a strategy is only known post-facto. And so, the prevailing view in the Board can become the decisive factor on how to use the Founders' leverage.

If a Board believes that a Bill Gates will use his leverage and constrain the new CEO candidate, they want him out.

If a Board believes that a NRN will use his leverage and get Infy back on track, they want him in.

Most investors will have you believe that the Board is wiser. That the Founder is good for the creation part. Not the management & growth part. (and that's a good topic for another post!)

Mr. Zuckerberg, Mr. Brin & Mr. Page have ensured that they have control on the destiny of their business. Businesses in high-tech that require rapid decision-making, pivoting etc probably work better this way.

In most start-ups, it is a negotiation - and depends hugely on the working relationship between the Founders and the Board members. There is a risk of the lowest common denominator becoming the consensus strategy. And that can lead to mediocrity.

The ideal model seems to be one of combining the Founder's leverage with the Board's wisdom. The Board's focus on stability, predictability, profitability with the Founders' instinct for new growth opportunities and knowledge of the space.

The Board's Yin with the Founders' Yang.

Go with the Board's wisdom on matters pertaining to existing stable businesses and how to scale them. Go with the Founders' instinct on ambiguous new opportunities - and when faced with an inflection point in the market.

But that's easier said than done. As Microsoft and Infy show, a perceived inflection point can produce two diametrically opposite reactions.

And the battle continues....

"Fundable" business? Or a good business? Are they the same?

Recently got involved in a business plan competition that had some amazing new ideas.

Some of the ideas were really good. Did not require much money. Made a great impact. Good value proposition. Good team etc.

However, one of the parameters to judge was "Is this idea investment-worthy?". No. It was not. But it was heck of a lot better than many of the other ideas we had seen that day.

And that got me thinking.

Should I focus on building a "fundable" business? or a good business? Are they the same?

Firstly, in most cases, fundable implies the funding is from an angel/ VC/PE fund. And this class of capital is what is forcing a distinction between fundable businesses and good businesses.

From an investor perspective, given the class of capital it accesses for setting up a VC/PE fund, they have to play a high-risk, high-return game. And hence, they will have to screen out ideas that do not meet their criteria.

All fundable businesses need not be good businesses. They are fundable because there is a "mystery" (a word that one of my friends from the PE industry used); there is a possibility of significant and more importantly, rapid scale - apart from the usual points about large markets, good team, value proposition etc.

All good businesses are not fundable businesses. They are "good" because they are predictable, profitable, repeatable. Scalable  - yes. Rapidly scalable - maybe. But very often, not so.

Some fundable businesses evolve to become good businesses.  In most cases, the good businesses do not have the "mystery". The model is stable. The value proposition is defined. It is all about execution. The new girlfriend fixation that I referred to in one of my earlier posts.

The focus on funding can lead to a very different path from the focus on building a good business.  Do you find new, exciting growth opportunities - that make the business "fundable"? or do you focus on building on a good business that is solid and has a huge opportunity - but not fundable?

The high-risk funds were required to build a good business from just an idea. Once the business is built, the same source of funds might not work as the nature of the venture has changed signficantly.

Maybe it is better to focus on building a good business and then let the business define the class of capital it can attract. Maybe debt. Maybe angels from the industry. Maybe individuals - in a quasi public issue. Maybe no capital at all.

But at least, ensure that the focus is on building a good, old-fashioned business first. And a fundable business second.

The new girlfriend fixation in start-ups!

When I quit Wipro to start my first business (in 1998), many people around me were very excited about how I will now "be doing something new" "be my own boss", "make my own choices" "decide which day is a holiday" etc etc.

While the correctness of their assumptions is another story altogether, I found it interesting how the concept of something new was so fascinating.

To borrow a phrase from my friend, Jayashankar (SportzVillage co-founder), this was the "new girlfriend" fixation. Excitement around something new. The potential of the infinite.

The value of novelty while starting a "new new" business was amazing.  Here's how:

1. Team: I got to meet people I would probably never have met otherwise. Many, very interesting people reached out and offered help. Many of them offered to join the venture, become a partner, consult, provide free advice etc. Some of them joined the journey. Suddenly hiring was not a problem. Finding enough roles, opportunities - and money - for the great people who wanted to join was the problem.
2. Investors: Since the early stage capital is "high-risk high-return" capital, investors want to invest in something new. The cost of capital or the source of capital drives an investment behavior that requires game changers. Ideally, something never done before. Something that has the potential to change the world. Something that has a hockey-stick growth curve. At least the potential to do a 100X return. In reality, if it gives 10X, it is a great deal. And if it doesn't work out, hey, it was high-risk capital anyway. The investment thesis assumed that 1 out of 10 will work. So, investors love really unique business ideas.
3. Market: Early adopters in the market want to know about new products/services. They are keen on trying stuff out and are willing to bear the pain of a new evolving product/service. They reach out to the providers - thereby getting them critical early revenues & learning.
4. Media: The media just loves novel stuff. Here is this new business that is going to change the world. As a novel start-up, you don't really need a PR agency. Just network and folks will write about you.
   
   
   

So, in summary, you are able to find team, money, customers and media visibility. What else does a young business need?

As a result of the above, the start-up grows & over time, the novelty wears off.

And now, the "old girlfriend" syndrome starts showing up. Here's how:

1. Team: The team joined because it was doing something new and nobody had a clue how to do it. Now, the "what" and the "how" have got well-established. The products/services are defined sharply and the systems/processes start coming in place so that the business can scale. But many of the team members joined because they were going to do something new! The new girlfriend is not so new anymore! The hunt for novelty makes lots of new ideas come up. But the business needs the team to do more of the same - and better. At least most of the time. This can lead to some members of the team feeling disconnected from the business. At such times, maybe, emphasising the "why" of the business - the vision, value creation and the impact that the business will have over years - is probably critical. The new girlfriend fixation can lead to innovation for the sake of innovation - instead of consolidating a proven model.

2. Market: New players enter the market after seeing the success of the novel start-up. Each one of them perforce has to be even more novel in order to get the early adopter's attention. In the process, some of the new products/services are not financially sustainable. The "industry" gets formed and customers start saying "Yes, there are quite a few companies like you now". Customers, revenues, margins, processes, systems etc: all established and with enough data points to draw various trend graphs.

3. Media: The media now starts writing about the "industry" and how the players stack up. The novel start-up is not so novel anymore. Phrases like "pioneer", "father of the industry" etc etc start getting used - but the emphasis is on how the industry is forming. The novel bit is the fact that the industry is forming and evolving.

4. Investors: Investors don't find you interesting anymore. The mystery of the new girlfriend is over. The excitement of the unknown and the possibility of the infinite is gone. All the facets are known. It is actually easier to raise funding for a new business idea in the same field instead of building it on the platform of the current one. Investors move on to the next new girlfriend. The next "wave" occurs.

The new girlfriend fixation has turned the ultimate goal of a new start-up into its weakness.

Good business is boring. Execution is everything. Yes, but the challenge of transitioning all stakeholders from the new girlfriend to the not-so-new girlfriend is not trivial.

Keeping the team focused on doing good business (and maybe not as exciting), keeping investors interested, keeping customers engaged and the media excited can be a challenge. But the real value is not in the novelty. The real value is in the intrinsic good business you are building.

Good business is boring. But good business is what we started out to do. It was exciting when we started because we did not know how we were going to build it.

As I recall from a conversation with Jay (a few years ago): 'Now, if i get bored, I watch a movie. or go play golf. I don't start a new business."

Deal with the boredom. Find excitement in doing the same thing better, faster and cheaper. Because that is where the real value is getting built. Not in the next new girlfriend.

Knowing that, over time, the new girlfriend will be a not-so-new but a lot more wonderful girlfriend, can help.

You did not get funded? Congratulations! :)

Yeah....sour grapes, right? :)


Have been  thinking whether not getting funded is a good thing. Or a bad thing.

Mike Tyson once said "Everybody has a plan........until they get punched in the face"

The key question is not how to avoid getting punched in the face. That will keep happening. The key question is what you do after you have got punched in the face. Do you get knocked out? Do you quit the fight? Do you get stronger and fight harder?

Money never hurts. More money comes with more investors to manage & exits to worry about in the long run - but in the short to medium term, it definitely makes it easy for the team to execute on their plans. Hopefully the plans are in the right direction.

But what about less money? or No money?

Assuming that you took care of all the hygiene factors (good product, team, customers, model, professionalism, ethics etc etc), here's why I think you should be happy you did not get funded:

1. Funding is not equal to validation: The folks managing funds don't know the future. (Surprise, Surprise!). Very often, getting funded is seen as a validation of the business model & hence an early sign of . potential success. Yes, it can be.
But it is not the only source of validation. And the absence of funding does not mean the absence of validation. The best validation is from customers. And from team members who stay on to fight the battle even if you don't get funding. Or finally, if deep inside you, you feel it still makes sense.

2. It makes you focus: There are two options if you don't get funded. Shut down. Or Keep Going. Assuming you keep going, the absence of funding makes you focus - on your customers, on your team, on what is working in your business. When you don't have money, decision making is also very easy. If any internal project needs money, the answer is "NO!". :)   But it turns out that in most cases, the team goes out and gets it done anyway - without money.

3. It makes you turn profitable: Hey! It's not like you have much of a choice, do you? :) Either shut shop. Or turn profitable. Option 1: not an option. Move to Option 2.  Change strategy, "pivot", cut costs, fire bad customers, fire high-cost, low-performance team members, focus on good margins, keep good customers happy, collect money on time etc. All good stuff!

4. You realise that you are fine without funding! You realise that customers are still buying, the team is focussed and the business is growing. Yes, there are stresses on the system - but they can be managed with a lot less capital and some attention. And this builds the quiet confidence inside you that you can keep this going & growing - and do what you feel is the right thing to do for your customers & your team - instead of worrying about what investors think.

5. Some of the best businesses did not raise venture/PE funding: They took their time and grew organically. Many of them tried to raise venture/PE capital and failed. Multiple times. Salesforce.com is one such example that is about to go IPO, I am told. So, conversely, if you did not get funded, you could qualify for this league. :)

So, again: You did not get funded? Congratulations! :)

Good luck riding the punches!

Building business the Genghis Khan way!

So, I just finished reading this great book on Genghis Khan (Genghis Khan and the making of the Modern World - by Jack Weatherford)

Before I started, I had this perception of this guy who epitomised cruelty, plunder and pillage. But as I read it, I realised that, unlike other nobleman who would spare the opposing nobleman but kill the soldiers, Genghis Khan gave the soldiers amnesty (if they were willing and had not betrayed their ruler earlier), killed the opposing ruler & his family.

This practice gave him an ongoing addition of loyal soldiers while probably making him the ultimate bad guy in history - since history very often is written from a ruler/ruling society perspective.

After the book, I am amazed by this man and the way he built his empire Here's why:

- He built the largest geographical empire in history. Ever. From Vietnam to Hungary. From Siberia to India. From Korea to the Balkans. From China to Baghdad across Afghanistan and till the Indus. Twice as much as any other empire in history.
- With a Mongol population of less than a million - and hence with just around 100,000 warriors, he ruled over nearly 12 million.
- For thousands of years, Mongol and other ethnic tribes in the steppes had been fighting. Genghis Khan united all of them and appointed himself the "Great Khan".
- He "united the people, created an alphabet, wrote the constitution, established universal religious freedom, invented a new system of warfare...opened roads of commerce in a free-trade zone that stretched across continents" (from the book by Jack Weatherford)
-  He united the dozen Slavic regions into one large Russian state. Created modern day China from the remnants of the Sung dynasty.
- His empire lasted for another 150 years. His descendants ruled empires in Russia, Turkey, India, China and Persia.
- The Moghuls in India are related to him - though originally they are Turks. Genghis Khan himself did not enter India as they found the country oppressively hot and the humidity loosened the tight bowstring, thereby reducing their key competitive advantage: Horseback warriors moving very quickly and shooting arrows very accurately.

While the cruelty, pillage and plunder has been emphasised by many historians - including Voltaire, there are many key aspects of the "Genghis Khan Way" that have probably not been emphasised. Here goes my shot at summarising those:

1. He promoted people in his tribes based on merit, loyalty and achievement - and not based on birth.
2. He lowered taxes for everyone and abolished them for doctors, teachers, priests and educational institutions.
3. He established a regular census and an international postal system.
4. He created an international law and recognized the ultimate supreme law of the Eternal Blue Sky over all people. He granted religious freedom to all but demanded total loyalty from conquered subjects of all religions.
5. He created a free-trade zone across the continent and ensured safe passage by eliminating bandits and pirates.
6. He instituted the novel practice of granting diplomatic immunity for all ambassadors and envoys - including hostile nations with whom he was at war.
7. While at war, there was no scope for negotiations on an order. But the decision to go to war as well as many other key decisions were taken via a (relatively) democratic process called the "khuriltai" (council) that included folks from the various tribes/clans.
8. He ensured that the "loot" from any city they captured was shared systematically - and that the families of the fallen soldiers got a fair share. This inspired loyalty.
9. He embraced local technology & expertise. By combining the gunpowder, casting technology and the rocket, he created the modern cannon. Early enemies thought the Khan had brought fire-breathing dragons along with him.
10. His team travelled light, fast and lived off the land. They also used whatever they found to create the equipment they needed to fight. For this, they led with an Engineering corp that could innovate based on what is available. For this reason, most rulers who fought him expected his army to show up a week or two after the day when they suddenly showed up!
11. His last ruling descendant, Alim Khan, emir of Bukhara, remained in power in Uzbekistan till 1920. Genghis Khan ruled from 1206 to 1227 AD.  For 700 years, his dynasty ruled some part of the world.

And he did this without inventing any new technology. Just by his ability to organise people - at war and during peaceful times.

And you do not see any monument built by him because his tribe lived in "gers" - tents with an inner structure and covered with felt cloth. And wherever he went, he focused on getting the "loot" as well as the expertise. Not building monuments that would reduce his ability to move quickly. 

So, here's my attempt at how to build a business "The Genghis Khan Way":

1. Be fast & focused. 
2. Don't build structures that hinder rapid movement.
3. Promote based on merit. Not on privilege or birth.
4. Don't always attack. Retreat as a strategy makes the enemy overconfident and lower their guard.
5. Use the element of surprise. Try something never done before.
6. Unite warring factions. Make people work as a team. Create a network of small teams.
7. Demand absolute loyalty to the cause. Be ruthless with folks who are not. 
8. Let individual beliefs prosper as long as loyalty to the cause is assured.
9. Seek out folks who are experts in their field and get them to solve your problems.
10. You don't have to invent a new technology to win. Seek out existing technologies and synthesize them for your goals.
11. Be generous with your team. Take care of their families.

And don't worry about how history will judge you. Do what you think is right.