Love What You Do

In the words of Steve Jobs a great quote sent to me yesterday by my new partner Rodrigo:

“Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work.  And the only way to do great work is to love what you do.  If you haven’t found it yet, keep looking.  Don’t settle.  As with all matters of the heart, you’ll know when you find it.  And, like any great relationship, it just gets better as the years roll on.”

The world, not just the tech world, lost a true visionary and inspiring leader yesterday.  Just think about the past 10 years and the positive impact Apple’s products have had on most of our lives – Mac, iPod, iPhone, and iPad.  How many of you found out about Job’s passing on one of his devices?  I did.

Even if Jobs has not been iconic for you personally, I highly recommend taking 15 minutes to view his Stanford commencement speech from 2005 imbedded below.  One of the best, most direct “experience life” speeches, not just about enjoying your work but truly enjoying life – and poignant given his passing.

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Where’s Your Operating Plan?

Every business needs a 12-month operating plan, even startups at the earliest stages.  The only major difference between a startup Operating Plan (OpPlan) and a mature OpPlan is that the startup OpPlan will inevitably be wrong.  Then why do it?  Because it represents a stake in the ground, your living metrics, targets and milestones so that when targets are either missed or exceeded, it forces an internal review of “why” and then “how” to make adjustments to keep the business performance on track.  I’m going to focus here on the importance of OpPlans for early stage businesses.

First, what is an OpPlan for an early stage or emerging business?  Probably the most common mistake I see is equating the OpPlan to the 3-5 year financial projections spreadsheet that every startup creates to raise money.  While these projections are incredibly useful and contain many of the assumptions that go into the OpPlan, the OpPlan requires an extraction of key assumptions in written form that is easily communicated to everyone in the organization and certain external stakeholders (investors, Board).  Specifically, the 12-month OpPlan contains the following – think of it as an outline for a powerpoint presentation to share with employees:

  1. Statement of Vision, Mission and Strategy.  At the highest level, these should be really clear and posted on a few walls in the office.  How can you know what to do today if you don’t know where you are going and why?
  2. Core 12-month Objectives.  This should be 5 or fewer major objectives for the business that, if achieved, will define success over the next 12 months, at least based on what you know now.  They ought to be completely consistent with point #1 above.  These are not activities or tasks but rather major objectives (ie, “Achieve 5% market share in our category”).  They don’t describe the “how”, just the “what” and since there’s only 5, key stakeholders (Board, investors) should view the achievement of these objectives as a highly successful month/quarter/year.
  3. Key Initiatives and Priorities.  For the current quarter and in order to meet the Objectives, what are the key Priorities and Initiatives that the team will focus on?  We are now breaking down the Objectives in #2 into a manageable set of Initiatives, answering the “how”.  This list becomes the ultimate arbiter when resource conflicts arise (and they will).  Completion of these Initiatives should absolutely result in performance against the Key Metrics (discussed below).  These corporate Key Initiatives then drive more detailed plans within each functional area – Sales and Product priorities drive the product roadmap, which in turn helps to prioritize the Technology, Analytics, Support and Marketing/PR initiatives.
  4. Key Metrics, Target Values and Accountability.  For each Objective in #2, what must be measured (Metric) and what are the Target Values for each Metric that ensure the Objectives are met?  And who is responsible for achieving each Target Value?  Important to track Metrics monthly, understand why there are variances and, most important, take decisive action to address under-performance.  Examples of corporate metrics might be # customers, average revenue per customer, visitor conversion to sale %, hire 10 people, etc.  Ultimately, each functional area (sales, tech, marketing, support) will have their own set of Metrics and Targets that roll up into achieving the overall corporate Targets.
  5. Financial Projections / Budget.  To include Revenue and Expense targets and assumptions.  There are really two methods for determining Revenue projections – “Top Down” and “Bottoms Up” – and I think its important to have a view into both because they often tell different stories.  Top Down approaches begin with understanding the potential market size, assuming some penetration or market share to determine Revenue growth.  Bottoms Up, on the other hand, starts with understanding the sales cycle, product development complexity and available capital to determine a more “reasonable” picture of Revenue scale.   Another way to think about it – Top Down shows “what’s possible” in a world of few constraints and Bottoms Up is more in line with “what’s achievable” being more realistic about resource constraints.  But having a view into both allows for some analysis to answer the question “What additional resources would it require (money, people, technology) to scale the business faster?”

Finally, I highly recommend creating a “One Sheet OpPlan”, a 2-sided but one page document that has Key Initiatives and Priorities for the current period (quarterly) on the front and Key Metrics and Target Values on the back.  This document gets distributed to ALL employees so everyone is fully informed and aligned on what drives success and, more importantly, how individual efforts tie directly or indirectly to certain Objectives that drive that success.

This important process and document really forms the basis for instilling a Performance Based Culture within the organization by tying individual performance and compensation to company Objectives.

Detractors may say that this is all too much structure and process for a startup where you are simply trying to get the product right and achieve some customer traction.  I would agree that putting too much effort into planning when you are a team of 2 or 3 is probably not the highest and best use of time.  However, while the need for this level of thought into the business may vary, certainly by the time you are taking external capital into the business its important that everyone is aligned on where the business is going and what defines success in the near term, even if success is defined by “get 2 paying customers”.  Even an objective this simple requires sales, a product, technology reliability and scale, support, design, analytics, etc. such that each department has a list a mile long of things they can’t get accomplished due to resource constraints.  A well constructed OpPlan helps to coordinate priorities across departments and keeps everyone’s eyes on the prize.

Are You Working in a Performance Based Culture?

Or in a culture that rewards based on popularity or some other subjective measures?

I’ve had several vastly different experiences in organizations that preached “we are building a Performance Based Culture (PBC)” and generally I don’t think there’s any confusion or lack of understanding about what it is.  The problem, and where I’ve seen it break down, is a poor execution by 1) not putting in place the key ingredients to enable employees to truly understand how their actions will be measured and rewarded and 2) inconsistent and subjective evaluations by leadership.  This last point is the cultural kiss of death for having employees believe that true performance will be rewarded.  Just because you are told you work in a PBC by a C-level executive doesn’t mean you do.  So for startups, why is an explicit transition and focus on building a real PBC important?

Most successful startups go through a few phases of growth that inevitably leads to varying degrees of erosion of the talent level as the team grows, particularly if the team grows quickly and can’t hire staff fast enough.  At the early stages, the right way to hire is to be ruthless about hiring only the best – test everyone extensively in specific skills, intellect, skills flexibility and cultural fit.  Individual performance metrics are less important as everyone is hunkered down to build the product and achieve product/market fit.  And, everyone on the team in the early days has to be a star, their work is too important and is seen and experienced daily by everyone else.  An explicit focus on PBC is not necessary, it simply already exists.  However, over time the organization passes through two important phases that require changes in leadership both of the business and of people.

  1. Rapid scale in employees.  For hyper-growth companies at roughly 20-25 employees (and urgently going to 50 or more), it becomes impossible for the “entire team” to interview every candidate and hiring velocity becomes a gating factor to progress.  Thus compromises tend to be made, B & C level talent sneaks in and because the company is growing so fast, its requires a heroic effort to instill a culture of “firing fast” for mediocre performance.  The result, you end up with some “hangers-on” employees that are not horrible at what they do, but they certainly are not leaders and innovators that will propel the company forward.
  2. Different skills required to scale the business – particularly on the leadership team.  In the best run organizations, this is the time that a more disciplined approach to managing the business takes hold – putting processes in place, tracking and reporting on metrics that drive success, and explicitly preaching and building a Performance Based Culture (PBC) for evaluating and rewarding employees.
So what’s the big deal, seems easy enough right?  I think much of it IS easy – determining organizational goals, defining the desired behaviors, creating individual goals – takes work but not an overwhelming challenge.  The hard part is constantly communicating and coaching employees, supporting their achievement of individual goals, eliminating fear and making reward, hiring and firing decisions that are absolutely consistent with the preaching and the promise, decisions must be objective.  Leadership can’t on the one hand preach rewards and advancement based on objective performance and then exhibit subjective, special treatment or “inner circle” mentality based on a popularity contest.  Everyone will see it, eyes will roll and faith in any sort of real PBC will be lost.
Bottom line, if you are a leader in a startup that is growing rapidly and in need of a more explicit focus on performance management, here’s an oversimplified formula that’s worked for me:
  1. Be clear about what drives success for the business, then create a handful of metrics, measure them, share them, post them – make sure everyone has clarity if we do x, then we achieve y.
  2. With success metrics clear, ensure everyone has actionable individual goals that tie directly to the organizational metrics.  This can be tricky for non-executives.  Every individual goal should roll up into the organizational metrics, directly or indirectly (Some goals should reinforce desired behaviors, not just quantified metrics).
  3. Provide frequent feedback, encourage dialogue and make course corrections.  This should be an ongoing topic of discussion every week as part of a broader check in with direct reports, especially in the early days of implementation.
  4. Be timely.  Don’t let half the quarter expire before individual goals are in place.  It shows a lack of commitment.  How can evaluations be objective if goals are undefined for half the period?
  5. And most important, lead by example, evaluate your staff objectively.  No inner circles, no boys/girls club, no rewarding big talkers, no overly subjective evaluations.  Even with the best intentions this can go awry simply because you may not have a full view of your employee’s performance if they work closely with others.  Important to actively seek out performance feedback from those with the best understanding of performance.  Put in the effort to get it right, you may be fooled by a lack of information on someone’s performance, but everyone else in the organization won’t be.

Don’t Hate Me Cause I’m a Business Guy

I recently read a fantastic post by Jacob Quist entitled “Why Engineers Distrust Business People” that provided a unique perspective on what I never fully understood, but was always aware, to be a common tension between deeply technical folks and those of us who are far more competent in non-technical arenas such as business operations, business development, sales or marketing.  In Jacob’s post, he believes the foundation of this distrust is due to the fact that historically engineers have been directed at the highest levels of the organization by business people and it only takes a few bad experiences to perpetuate a stereotype.  This is certainly a 2-way street, there are plenty of bad engineers and technical leadership out there, but typically its the business side of the house that directs the organization.  At least historically.  Jacob is right, its all about providing mutual value which leads to mutual respect.  Now with so many new startups founded by engineers, there’s a burst of independence from these bad experiences, creating a challenge for even the most effective, accomplished business entrepreneurs to find “co-founder” opportunities unless they bring the idea or concept to the table.

As a “business guy” who’s worked closely with engineers in startups for over 10 years, I’ve consciously made efforts to complement, not contribute to (read: get in the way of), the technical aspects of the business while treating the technical/engineering function equally if not more important than anything that drives the success of the organization.  Most recently I’ve tried to take it one step further, a step that I rarely see other business folks embrace – ensuring technology leadership has an equal seat at the table at the highest levels of strategy and product development and enabling the technical staff, the engineers, to contribute to product development in the form of a “safe challenge” dialogue with the product team.  This view has evolved over time for me as I’ve been exposed to increasing levels of strategic talent in the technical individuals I’ve worked with.  Experienced engineers often have incredible design and product sensibilities because they are the closest to the end product.  While they may not create the original design or spec, they are problem solvers in implementation, constantly iterating to find the best solutions.  And they usually understand a product’s complexity better than anyone, which HAS to be considered in any strategic product discussion.

So to all of you startup engineers out there, especially those who are founders and assuming you need a business partner (and you do, subject of a future post!), what should you look for in your “business partner”?

  • Demonstrable success in starting, building and scaling a startup.  These are 3 distinct phases of a company’s early growth that require different skills and perspective, and you need someone that has success in all three.
  • Philosophically aligned on the role of technology.  Ask the tough questions about the qualities of a great CTO, the role of the engineers and how strategic decisions are made for the organization.
  • The business co-founder does not have to be the CEO.  This is a great ego-check moment.  There should at least be a dialogue and healthy debate, never a default assumption.  And discussing how roles will evolve as the company grows is equally important.
  • Find an overall athlete (COO or Head of Ops)  instead of a functional expert.  This is probably the most controversial point that many will disagree with.  Many founders want to solve their most immediate need (more sales, marketing to acquire customers) and thus seek to find deep experience in a single skill as the first or second key leader.  I would contend that in a startup, there are a dozen areas that need leadership now to properly set the company up for success and that if every other attribute on this list is met, the “right” business partner can fill any immediate functional need sufficiently in the interim.  Another important point – acquiring and building out a talented, cohesive and high performing leadership team is difficult and a skill that should be historically demonstrated by your partner.
  • Ability to immediately contribute.  Leadership recruiting, product strategy, fund raising, sales, business development, marketing – the seasoned business lead can successfully step into most of these roles initially as the other functional leaders are recruited.
  • Test for worst case scenario.  When all hell breaks loose and it looks like the business is going to crater, how will your partner deal with it?   Do you share common philosophies on hiring, spending, tough decision processes?  This is difficult to predict, but you have to talk about worst case, because in a startup, worst case is most likely case!

What other qualities should you look for in your “business” partner?

Why Most Startups Need a “Business Guy”

I read an intriguing blog post titled “What the Hell Does a “Business Guy” Do? by serial entrepreneur Rob Walling.  The basic premise of his post is that the only compelling reason a “technical founder” should bring on a “business founder” (BF) as a partner is if that BF has “successful marketing experience”.  While I agree that marketing, specifically customer acquisition, is probably the most important and difficult problem to solve in a startup’s early days, I believe there are other important aspects of both building a team and a foundation for scaling the business that technical founders (in my experience) don’t always possess.

Of course I’m biased, because I represent the BF that Rob discusses.  Having been on the ground floor of 3 startups as the lead business and operations person, there are a few consistent areas of value that I’ve seen critical to early stage success, in addition to the marketing/customer acquisition skills Rob mentioned.

I would define these areas of value in the context of what I believe a BF profile must look like.  In my opinion, a credible BF needs to have demonstrated operational success in a startup environment, from early product development through financing, rapid growth and scale, including:

  • has been through multiple early product fails and iterations
  • has a high tolerance for ambiguity, chaos and daily priority changes
  • can contribute immediately in at least one critical business functional role at the outset – Marketing or Biz Dev ideally
  • has navigated a financing from external investors
  • has built a cohesive, uber-talented team that are the best at what they do AND that share similar culture sensibilities and work ethic (this is hard to do)
  • has successfully acquired and scaled customers, partners and revenue
  • has established metrics for tracking business success and a way to reliably measure and adjust
  • has battle scars, fail stories and an ability to articulate why the same fails won’t happen again.

So, this BF is not just a strategist or marketer, but a true partner to the entrepreneur who has a unique ability to take the entrepreneur’s vision and build a real business out of it.  The importance of this experience should not be underestimated.  True visionary entrepreneurs typically have an “anything’s possible” belief system and won’t be deterred.  Balancing that perspective with someone who can implement and tolerate that kind of ambiguity and chaos is paramount.

If the technical co-founder has experience in all these areas, then yes, I agree with Rob that partnering with a non-technical founder may just represent unnecessary equity dilution, but I’d venture there are lot’s of new businesses being created right now by super-developers without these important experiences under their belts.

Some might argue that all of these skills don’t have to be wrapped up in one person and that they don’t have to all be present at the earliest stages of a company’s development.  It ultimately comes down to the skills and experiences of the original founder, but having a BF partner who has been through the “business building” process successfully can ensure the correct sequencing of process, people and technology and let the entrepreneur focus on high value creation – strategy, product and funding.

What do you think?

Foundational Events in a Company’s Life

In the life of an organization, it’s easy to reflect back at certain foundational events that either resulted in a new level of organizational development and success, or just the opposite in the case of failure.  But they are “foundational” because their occurrence contributed so significantly in either a positive or negative direction.  While there are numerous important wins or losses that are memorable and significant along the way, especially in a startup, these foundational events are set apart based on their epic significance.

At TrueCar, there have been at least 2 such events over the past 3 years.  The closing of our first Venture round of financing in 2008 and merging with our sister company Zag in 2010 to create TrueCar, Inc.  Well, we just had another one announced Monday that I believe could lead to a tipping point for TrueCar – A partnership with and equity investment from Guthy-Renker, the leading international infomercial producer.  The most notable of their product partnerships is Proactiv, the acne treatment system that has grossed over $800M.  This partnership with GR involves a large equity investment from them that will help fund a massive brand development and advertising campaign for TrueCar.  It speaks to the potential for success that the experts in this process are confident enough to invest capital and put their own skin in the game.

Why is this so significant for us and why now?

First, why now?  The past several years we (Zag & TrueCar) have been quietly and gradually building our product and brand and have been gaining share of automotive retail with little to no marketing spend.  We’ve instead grown through large partnerships with companies like USAA, AAA, Consumer Reports, American Express and others as well as a robust PR machine that has helped build a foundation for the TrueCar brand, both in the automotive industry and with consumers.  But PR and distribution partners will carry you so far, to really scale the brand you must have widespread, household awareness which can be incredibly expensive.  However, in order to spend marketing dollars to acquire customers, there has to be a positive ROI on that investment, meaning for every dollar spent on marketing, more than one dollar must be generated in profit.  That’s a tough equation to make work unless the product engine is converting customers at high rates.  This is an oversimplification, but suffice to say that we now have the engine in place that enables a positive ROI on paid customer acquisition.  So, the time is right.

Second, why is this significant?  A partnership, including investment, with a leading brand-proliferation company like Guthy-Renker enables a mass introduction of TrueCar to consumers that would be almost impossible to achieve otherwise.  It has the potential to make TrueCar a household name among consumers.  It enables us, now that the “product engine” is built, to immediately and rapidly build the TrueCar brand nationally as the new and only way to purchase your next vehicle.  If our conversions (website visitor who purchases through our program) stand up, this will not only be a large cash outflow to pay for the marketing, but also a hugely profitable partnership due to the revenue generated from paying customers who see and respond to the advertising programs.  It’s also significant because this widespread, infomercial approach has never been done before in automotive retail, and we believe auto is ready for this type of innovation.  That could lead to an important first-mover advantage.

Only time will tell whether this will be an epic foundational WIN or LOSS.  But it will certainly be foundational.

What were your “foundational” company events that defined success or failure?

What Are You Reading?

While I wouldn’t consider myself a voracious reader, I do have a habit of reading 2-3 books concurrently and they are typically of varied content.  I also have a hard time getting through an entire book unless it is very well written and engaging.  For whatever reason, I’m finding the interesting and important components in a lot of the books I’ve read lately could be communicated in 20 pages or less.  I guess I need to find better books… or get a longer attention span.

Anyway, here are the books I’m currently reading –

1. The New Dad’s Survival Guide: Man-to-Man Advice for First-Time Fathers by Scott Mactavish.  As an expecting father, I’m absorbing quite a few books in this category.  This book is laugh-out-loud funny, seriously I blurt out laughing, and easy to read, written in a quasi-military drill sergeant tone with acronyms like NFU (New Family Unit or baby), FPP (Female Parenting Partner) and BCF (Be Cool, Fool).  It’s more humor than useful, but it’s a welcome relief from some of the other father-focused books that are not only serious, but packed with more information that anyone could possibly absorb.

2. The Reason For God:  Belief in an Age of Skepticism by Timothy Keller.  It’s interesting how being a first time expecting parent can affect areas of your life that you haven’t given much thought to lately.  Spirituality and religion, for me, is a case in point.  I grew up in an active Catholic household, which I think provided a good foundation of values, but I’ve never really explored other faiths, faith in general, and challenged that belief system that I grew up in.  It has been easy to put off.  But now I feel some responsibility as a father to do some research, explore my own beliefs and develop a point of view on religion so I can at least provide a foundation for my son until he is old enough to do his own exploration of his beliefs.  This book by Timothy Keller is very good.  He makes an analytical case for God and takes it one step further, for a Christian God.  However, he does it with a balanced approach by acknowledging many common objections to God, then presenting arguments for both viewpoints.  I’m enjoying this read and intend on my next book in this category to be the opposing argument.

3. Good to Great:  Why Some Companies Make the Leap… And Others Don’t by Jim Collins.  This is an annual re-read for me.  I’ve read this book a handful of times, it’s that good.  The leadership principles in this book are so spot on as I’ve had sufficiently varied experiences to see different leadership styles perform just as Jim predicts in his book.  This book keeps me in check.

4. Inside of a Dog:  What Dogs See, Smell and Know by Alexandra Horowitz.  I’m a huge animal lover, particularly of dogs.  I know everyone thinks their dog is the greatest, smartest, most affectionate animal on the plant and I feel the same way about my dog Foster (who passed in 2008).  I really wanted to find some analytical research into the mind of man’s best friend.  Whereas most books on the subject seem to be based on opinion and experience, Alexandra, a behavioral psychologist, actually performs behavioral studies and analysis to get inside the dog.  There are nuggets of interesting facts in this book, but I’m finding it difficult to read.  At the end of the day, how can we really know what our dog is thinking?  For the most important things we long to know about what our pets are thinking, I don’t think she definitively answers them.  Probably one of those books I won’t finish.

So, what are you reading?

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