Tag Archives: Steve Jobs

The Startup Founder Effect: The Genetics of Success

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By:  Andrew Johnson, Ph.D.

Black Antique Car

Founder Henry Ford’s leadership style affected his company both for good (ushering in the age of the automobile and for bad (decisions that put it into second place behind General Motors.

The ‘Founder Effect’ was discovered by Ernst Mayr in 1942 (Wikipedia) as part of his seminal work on population genetics.  It basically states that many of the traits that you might see in a given sub-population of individuals can be attributed to the genetics of the first individuals that inhabited the space (especially when the niche is isolated).  This can help explain the sometimes quirky existence of traits that may appear to have no real value for the survival of the species (e.g. higher rate of polydactyly (extra toes and fingers) in Amish communities than that observed in the general American population).

What has this got to do with my startup?
Well just like the isolated communities mentioned above, the ‘genetic imprint’ of the founder of any company has especially strong effects in the early days of the company which may persist far into the future even when the founder(s) are long gone.  The culture of the company, the personalities and formal structure of how things are accomplished come from the founder.  Some of these factors are beneficial and in fact can be traced to the very reason behind a company’s success while most others disappear into oblivion.  However, sometimes these quirks of the founder can largely lead to the eventual failure of the endeavor.

OK then, So What
There are both positive and negative stories told about companies that continue to be run by their founders as well as those that have replaced this team.  Henry Ford and Ford Motor Company, Steve Jobs and Apple, Thomas Edison at what eventually became General Electric are just a few examples of founders that continued to lead their companies beyond what we would call an ‘exit event’.  Each person left their ‘genetic’ imprint (good and bad) on the culture and how that the company thrived.

We would general say that each of these men was extremely successful but what can be lost in the admiration of the companies that they each established is what were the lost opportunities, the alternatives not tried, the products that never saw the light of day.  Steve Jobs was famously known to have a tyrannical management style that equally pushed a slew of incredible technologies into the world and killed others, seemingly at a whim when they appeared to diverge from his own opinion of what was good or bad.  We will never know how many terrific and life changing things will never see the light of day when they were killed based on his opinion.  Edison was known to be equally intolerant to ideas that did not fit his vision for what he wanted (most famously he waged a marketing and commercial war to promote Direct Current (DC) over alternating current (AC) based on his own, it turns out flawed, view that DC was superior).  In fact this, in spite of all of the success with which Edison and his company is associated, character attribute or ‘Founder Effect’ drove one of his most brilliant scientists, Nicola Tesla, straight into the arms of his greatest competitor, Westinghouse.

As we can see, there are benefits and limitations to companies that are run by founders.

Some of the benefits are:

  • Passion and Vision :  This can be the very force that keeps the company both focused and on track in the face of outside forces that threaten to derail the company from its mission.  Raising money, building teams, facing skeptical customers etc. are a just a few of the things that put off lesser mortals.
  • ‘My Way or the Highway’:  Companies run by founders can introduce new innovations and develop whole new markets at a staggering pace.  A lot of this can be traced back to the single-minded drive of the founder.  He /she is not slowed down by gathering consensus at committee meetings as the company reaches important inflection points in its trajectory to success.  Having one ‘top-dog’ founder calling the shots can cut through a lot of the indecision and delay that can come from direction by committee.

Some limitations are:

  • ‘My Way or the Highway’:  The down-side of this style of leadership is that when the founder is wrong, there may be no recourse to alternatives.  Henry Ford was famous for stating “Our customers can have a car any color they like, as long as it is black”.  This shortsighted view of the relationship between a company and its customers (the ultimate bosses) soon left Ford trailing General Motors for virtually most of the early history of the automobile industry.
  • Making It Personal:  Edison had a personal feud with Westinghouse and this led him to the ‘take no prisoners’ focus on winning the electricity wars.  It can be argued that Edison and his company would have been far better off working together with Westinghouse than the time, money and effort that were wasted in trying to defeat the enemy.  It can be hard for some founders to separate their own egos from what might be best for the company as a whole.

What’s a Founder to do?
Should a founder fight to stay on with his company as it succeeds or make an exit and allow the company to grow under new management?  There is no right or wrong answer to this.  Obviously you want to maximize the positives and minimize the negatives of the founder’s influence.  If you are a founder, finding the time to take stock of your relationship to your company on a regular basis will allow you to achieve this.  The following tips are provided to help you with this critical assessment.

  • Has anyone told you ‘no’?  You may think that you have created a culture of openness but if you have not been told ‘no’ by your team, then you may have an issue here.  Remember, you can’t possibly be right about everything all the time and a good team should help you avoid mistakes.  If you are not hearing ‘no’ occasionally, then you need to work on helping your team feel comfortable doing so.
  • How are decisions made?  As you flesh out your team, make sure that you keep ‘delegation’ in mind.  This can be very difficult to do but you need to be thinking about brining on people that will take things ‘off your plate’ so that you can stay focused.   By keeping this concept in mind as you hire, you will make sure that the people who join you will be those that you can trust with the very life of the company.   If you already have your team, make sure that you are empowering them and that they are regularly making important decisions on their own for the company.
  • How are good ideas, not central to the company’s mission, disposed of?  One of the key attributes of a good Founder is to remain very focused on getting into the marketplace.  Good teams will have lots of good ideas (new product ideas, new markets to enter, new applications for R&D to develop etc.)  The key here is to be firm and respectful, but open-minded as well.  If you do this right you can keep the company focused while still encouraging new thinking.  Not an easy task.  If you do take the time to master this, these once rejected good ideas could one dayrepresent your next great product in the market.

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Picture Credit:  Gemma Grace via photopin cc

Testing, Testing: The Startup Executive And His Corporate Counterpart

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Fishbowl on briefcase

Selecting a ‘big fish’ CEO from a large company or an experienced one from the startup community. Matching the style of leadership with your needs is more important than where they have come from .

By:  Michael Kaiser

A startup company, in any business undertaking, is usually the creation of an entrepreneur or inventor, who is either unwilling to continue working for, or dissatisfied with the operational restrictions of established corporations. The move to create a startup company may also be the result of a corporation’s meltdown or downsizing, hence the opportunity “to do what I always wanted, my own business”. For those who left an established corporation, the transition may be as difficult as those who created a startup which then becomes the target of a corporate takeover that affects their hitherto control and independence. In both cases, four elements reign supreme: money, investment, innovation, leadership.

In general, early startups are more susceptible to failure than advanced or established corporations, either due to lack of funding or a specific organizational experience requirement. Obviously that is one area where a former corporation high-executive will have a better chance of success. But the entrepreneur, no matter if by previous corporate title or by sheer personal initiative also wields advantages such as initiative, the product or service it creates, and the independence to move forward without the rigid interference of executive echelons.

The Risk Takers
Entrepreneurial executives are usually recognized as “risk takers” but that is not to be taken as their defining attribute because, not surprisingly, they avoid unnecessary risks that may impact their agenda for success. In the current global economy, those entrepreneurs that will jump in the pool without checking if there is enough water to avoid injury will find the hard way that they are not ready  to swim.

That is not to say that risk is an entry/exit barrier; rather it is the concept that the risk taken fills a need. Recent examples in business history are Steve Jobs and Microsoft’s Bill Gates. It was their determination (Jobs worked until the last two or one day before his death), vision and leadership that brought about the global impact of their innovations. (The 10 greatest entrepreneurs – Investopedia).

Organic Growth
The entrepreneur’s personality does not suffer fools, but also requires that he/she should select and be surrounded by capable partners that will support the vision of their leader but also be able to challenge it when necessary. One reason for that is that a startup’s solution to generate income and grow their products or services as soon as possible requires an “organic growth” strategy.

The Established Corporation (EC)
In contrast to a startup, an established corporation (herein EC) has the resources, organizational plans and established business recognition that allows it to expand globally as well as the domestic market. Procter and Gamble, General Electric, Pfizer, Novartis, and Toyota are just a few examples that come to mind. The EC is usually, if not always, listed on a financial exchange such as the New York and London Exchanges, the Asian ones and the NASDAQ. That apparent advantage over the startups came crashing down in 2008 with the economy’s “Great Recession”, which to the present day has not fully recovered.

The Crisis
The economic crisis forced many EC’s to cut the number of employees or facilities, and seek mergers with other EC’s. More surprisingly, even dramatically so, many large corporations had to reverse their established organizational standards to operational policies somewhere between their previous ways and the more dynamic and fast moving startup; imagine the difference between an EC as a tractor trailer and the startup as a sports car. In many cases, top executives that held their jobs for many years were summarily removed or forced to resign.

One particular reason why those EC’s that were able to survive the 2008 economic crisis had to change their entrenched policies as soon as possible was their investment presence in the global marketplace. Even those EC’s long established in the major exchanges mentioned above had to face not only the headquarter loss but those of their subsidiaries in Europe, Asia and Latin America as well.

Experience
The CEO’s of established corporations do not differ too much from that of their startup counterparts, but at the same time their experience with entrenched organizational policies and negotiating skills with clients or competitors, as well as the need to report corporate directions to the board of directors, with the support of teams reporting to them, represent a clear advantage in facilitating the conduct of the their business. In contrast to startups, the EC’s can operate and expand their business growth by adopting either an organic or inorganic growth strategy.

There is one specific and important requirement shared by both startups and established corporations in their quest for success: Leadership.

The Twain Can Meet
The old saying that “never the twain shall meet” meant that two things or people are very different and cannot exist together. The British novelist Rudyard Kipling chose a more geographic description: “Oh, East is East and West is West, and never the twain shall meet”.

Well, that is not always the case in the business world, because there is one exception that allows an easier executive transition and it is the established corporation’s CEO moving to a startup. Although entrepreneurial executives like Steve Jobs, Bill Gates or Larry Page and Sergey Brin (Google) were able to wear the corporate mantle as their companies grew to a global level, those are exceptions more than the norm.

The Entrepreneurial CEO
A highly energetic and innovative startup CEO feels the need to wear multiple hats in order to implement his/her vision without interruptions or critique from employees or company directors. Those executives like to put their seal on the company as soon as possible, without interference and distractions. That is particularly evident in software/hardware, life sciences and engineering nascent companies. But once their companies have grown to the level of a large corporation, or are acquired by one, they require financial expertise, resources and organizational rules that are just some of the advantages expected and available in a large, successful corporation. And that is when many entrepreneurs, accustomed to ‘my way or no way’ leave or are eased out their startup after a reasonable time, or are induced to accept executive roles such as Chief Scientific Officer, VP Engineering Division, etc.

The Corporate CEO
By contrast with the above, a corporate CEO executive is often called in by investors/venture capitalists to save a startup that finds itself in rough waters, because its CEO is unable to navigate the storm or his/her ego is such that he/she cannot accept help from experts; the startup in question has a very marketable product or service, but the leader is floundering. Thus, a new, very experienced corporate CEO is called in to take control, even if it is not Jack Welch or A.G. Lafley.

The Lafley case is particularly interesting: as the former Chairman and CEO of Procter and Gamble, he was called in by investors and the Board of Directors to retake the leadership of P&G, a household name that found itself facing losses under the executive that followed Lafley once he left P&G after his successful tenure. The reason for recalling Lafley was obvious: leadership and vast managerial experience with a large global corporation; he accepted the “May Day” call from his former employer (What A.G. Lafley’s Return Means for P&G – Harvard Business Review). The point being made here is that an experienced and recognized corporation executive can, although not always, save a promising startup company from sinking in a storm and lead it to success. There is little chance that a creative, dynamic, innovative startup leader would be called to save a large, global corporation. Yes, the twain can meet, but more often than not, only in one direction.

Epilogue
The subject of this article covers just a few of the multiple scenarios that deal with different examples, outcomes and opinions, as mentioned at the beginning of this article. To afford the reader further information I enclose a list of helpful sources (see below) divided in three sections: 1) Entrepreneurs; 2) Organic and Inorganic Growth; 3) Management.

Recommended Information  

1) Entrepreneurs

2) Organic and Inorganic Growth

3) Management

  • Our History In Depth – Google How a startup became a global power.
  • Google – Wikipedia The startup that became a mega-corporation.
  • Jack Welch Quotes – Brainyquote Worth reading because they reflect his driven CEO personality.
  • Jack Welch – Wikipedia A very successful executive at GE, who also generated deserved criticism.
  • Bill Gates – Wikipedia Notice the similarity of his management style with that of Steve Jobs.
  • Steve Jobs – Wikipedia Without doubt one of the most complex, creative and charismatic entrepreneurial and corporate figures in American history. His abrupt managerial style was widely criticized.
  • What A.G. Lafley’s Return Means for P&G – Harvard Business Review The action an established corporation had to take to regain its market share and why.
  • Leadership Styles – Wall Street Journal Six Different Leadership Styles

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