What Harvard Business School is Teaching This Tech Entrepreneur

Reflections on the Last Three Weeks at HBS:

Over the weekend, I took some time to reflect on my last three weeks at HBS and the key lessons I’ve learned. This post is a follow-up to “What I Learned: Week 3 at HBS.”

As an entrepreneur, I continue to be really glad I’m at HBS. From classmates and through the HBS case methodology and out-of-class simulations I’m learning a lot that I’ll be able to take with me into to the next company–particularly about leadership and organizational behavior.

Here’s more color on what I’ve been up to the last three weeks and what HBS is teaching this tech entrepreneur so far…

A Journey Back in Time to iContact in Q4 2010

This time, I’ll begin with a story.

It was October 2010 in Raleigh, North Carolina. I had been the CEO of iContact since 2003. I had recently turned 26. I was definitely learning as I went along. The firm at the time had around 250 employees and 60,000 customers. We had just closed on a $40 million round of financing that August from PE firm JMI Equity. We faced, perhaps, our greatest strategic choice yet and the stakes were higher than ever before.

To continue our growth–should we:

1. Launch a free version of our product to reach a lot more users (and eventually more paying customers) as a competitor had shown to be possible;
2. Develop a social media marketing product to enable us to serve our core small business customers more fully;
3. Move upmarket into serving larger customers;
4. Some combination of all three.

All the information needed to make the right call was at my fingertips. But what was the right strategic choice?

I spent weeks agonizing over the decision and looking at the internal, customer, and market data from every angle to make up my mind. Then, I kicked off a month long process to bring my executive team in on the planning process. Then, we went through a five month operational process to implement the decision.

Wait a second–did you catch that? I spent a month making up my mind and then I brought my executive team into the process? What was I thinking?

Strategic Mistakes I Wouldn’t Have Made Had I Attended HBS Before iContact

I made (at least) three critical mistakes in the above strategic planning process.

1. I brought in my executive team after I had spent a month making up my mind on the decision. I didn’t bring them in on the process early enough and I didn’t properly incorporate the information they had into the process. By the time I brought them in–the bias-toward-action get things done entrepreneur in my blood was ready to act and implement. But from their vantage we hadn’t even discussed the key strategic decision yet.
2. I didn’t create a process under which needed information could be freely brought to the table.
3. I still thought my job as CEO was to fix the problem rather than develop my team to fix the problem.

One of the key “HBS takeaways” from the last few weeks for me has been that to continue to grow beyond initial success, an entrepreneurial founder CEO must change their very nature and slow down to:

1. Create effective processes for disciplined information sharing.
2. Give up as many operational roles in the company as possible.
3. Bring the senior team in early on during strategy formation.

The Key Difference Between a Start-up CEO and a Later Stage CEO

As I’ve reflected this weekend on the last three weeks of classes, I’ve crystallized some thoughts I’ve been having recently regarding the key difference between the CEO of a start-up and the CEO of a larger company.

As CEO of a large profitable company, if you do nothing, a lot continues to happen just fine–for quite some time anyway. Larger profitable companies have an infinite number of months of operating funds on hand (as long as they stay profitable).

As CEO of a start-up, if you do nothing initially, you never go anywhere. And once you’re burning through cash, if you do nothing, you go out of business. In general, start-ups are burning through cash every month and struggling to survive.

Start-ups may only have 2-9 months of cash on hand (sometimes less!). Start-ups often have a short timeframe until they will be either forced to generate more revenue than expenses, raise another dilutive round of capital, or go out of business. And so, if you’re leading a start-up, generally you have to act. Not next week. Not tomorrow. Right now.

The big mountain in front of you will only be moved through the will of a determined, focused, and fast moving leader. You think as you go. You develop a great deal of self-reliance. You intimately understand the customer problem you’re solving because you live it daily. You have a clear vision. And you just make it happen through sheer determination and persistence.

The Chief Everything Officer vs. the Chief Empowerment Officer

In the first year of a start-up, the title “CEO” stands for Chief Everything Officer. You’re often the chief janitor, chief recruiter, chief marketer, chief spreadsheet maker, chief evangelist, and sometimes even the chief engineer. If there’s a problem–solve it. If there’s an issue–fix it. The mantra is: Do. It. Now.

The very reason why so few start-up founders can successfully scale as a leader beyond 50 employees is simply this–start-up founders too often don’t get the training or mentoring they need to go from the perspective of “I’ll fix it” to “I’ll develop my team to fix it.”

After your firm reaches 100 employees, “CEO” stops standing for Chief Everything Officer.

After 100 employees, “CEO” begins to stand for Chief Empowerment Officer. Your job is not to do everything. Your job is not to solve most problems yourself. Your job is to develop your team and empower your team to solve problems.

While fixing the problem yourself and micromanaging the solution is often quicker in the short term, micromanaging actually makes the company slower to solve problems in the mid-term and long-term.

Why? Because micromanaging inserts a bottleneck (you) in the process and fails to develop critical team problem solving skills. This reality seems obvious. But, too often the start-up entrepreneur who actually makes it to 100 employees feels like they’ve succeeded against all odds and so they should just continue doing what got them there.

What is the Job of the Later Stage Venture-Backed CEO?

So, what is the job of the later stage CEO (post-100 employees)? Here’s my take:

1. Recruiting and leading the senior team and holding them accountable to pre-defined quantitative goals.
2. Guiding the team in developing a cohesive and focused business and product strategy with clear market positioning.
3. Intimately understanding the needs of customers and market trends.
4. Raising capital and managing resource allocation.
5. Guiding and building the culture of the organization.
6. Managing investor, board, and analyst relationships.

None of these six job requirements say, “fix operational problems yourself” or “set strategy yourself.” Yet too often–this is what Founder CEOs continue to do way too long into their tenure.

Start-up Genes and Cruise Ship Captains

So why is it that the successful “start-up CEO gene” negatively correlates with the successful “large company CEO gene?” Why must this lesson on micromanagement and process be learned eventually by nearly every start-up CEO as they mature?

This phenomenon occurs, I believe, because the key trait that leads to success as a start-up CEO (which is a relentless bias toward action and focus on rapid implementation and incremental improvement) is often the exact trait that causes that same person to become impatient with the processes necessary to prudently make the right decisions and run the company when it grows larger–at least without the right mentorship and training.

Sometimes the swiftest speed boat racers (entrepreneurs) end up sinking the cruise ship (the large company) by trying to turn it too fast and too frequently. Larger ships require coordinated plans and defined processes to properly turn their direction. Speed boat racers rarely enjoy “process” and “planning” and often have this “success bias” that makes them think what’s worked so far will continue to work.

However, if the entrepreneur is going to build something that long outlives them and makes the impact on the world they hope for, it’s either time to learn to manage a large organization or bring in someone who can.

As HBS Professor Noam Wasserman has noted in his research on Founder-CEO succession, “While the Founder-CEO’s skills were a good ‘?t’ for the contingencies faced by the company before, enabling the company to reach its critical milestones, those skills are usually much less important now that the company faces radically different contingencies (Organization Science, March-April 2003).”

While an outside professional CEO often doesn’t have the same passion for the business as the original founder(s), disaster can occur if the unprepared entrepreneurial CEO keeps the helm too long without the right guidance and mentoring.

I Learned The Micromanagement Lesson – Yet I Clung On to Strategy

As CEO at iContact for nine years, over time I “half learned” this lesson regarding not being a micromanager.

We had built a wonderful and experienced seven person Senior Leadership Team including an CFO, CTO, CMO, Chief Architect, SVP Sales, SVP Support, and VP HR. In every case, I was fortunate to have hired people much more experienced than myself. I let Tim run finance, Ralph run tech, Kevin run sales, etc.

I had learned the key lesson around 2005 that my job as CEO was to hire people more experienced than me and hold them accountable to clearly pre-defined results, not to process. Thus I could step back and the company grew–from $3M in sales in 2006 to $48M in sales in 2011.

While I gave up the individual departmental operational responsibilities (and benefited greatly from having done so), what I never truly gave up at iContact was strategy. This ultimately, was one of the practices that prevented us from succeeding further and reaching a greater potential.

We would have these quarterly and annual strategy retreat sessions–but too often they turned into me guiding the team toward what I thought the right path was instead of the other way around.

Strategy is Really About Choice and Focus

By the end of 2011 at iContact I finally came to understand the value of process and integrated thinking in the setting of corporate strategy. I brought a bit of a more structured process into how we thought through 2012 strategy, asking each team member to prepare position papers on what they would do if they were CEO.

By then, however, the market had become more competitive, the path we had embarked on for 2011 hadn’t worked as well as we hoped, and we had fewer good options to choose from. Ultimately, we chose to sell the company to Vocus in February 2012 to gain liquidity and access greater distribution channels.

So which of the four choices did we choose in 2011 at iContact?

Strangely, #4. We did all three of the above listed options! We launched a free version, launched a social media product, and positioned upmarket.

If had taken HBS Professor Michael Porter’s strategy class back then I would have known that strategy is about choice. A “do everything in one year” strategy rarely works. While things turned out okay–in hindsight I believe if we would have focused on executing one of those key moves in 2011 extremely well instead of attempting all three we may have been better off.

How HBS Has Taught the Key “Micromanagement Lesson” Three Times In The Last Three Weeks

It really wasn’t until the past three weeks as HBS has consciously taught this “micromanagement lesson” three times that these learnings above have truly cemented in my brain. I have to say, learning through experiential cases and team simulations at HBS is a lot less costly than learning on the job!

Over the past three weeks, HBS has attempted to teach us this oh so important lesson of how to bring the best out of a team at least three times…

1. During the Everest Simulation – We were put on a team of five and given the task of reaching the top of Mt. Everest in a computer simulation. We were given the roles of leader, marathoner, doctor, photographer, and environmentalist. I was the environmentalist. While I’ll leave out the details in order to not spoil any surprise for future classes, suffice it to say the simulation was very effective at teaching the importance of the leader creating a process to share information.

2. During the Shad Simulation on Building Circuit Boards -

HBS split the entire first year class into around 75 teams of 12 students. Each team had a leader designated and was in charge of creating an assembly line process to build three different types of circuit boards – economy, deluxe, and imperial. We learned not only how to organize our labor for maximum efficiency of output in a timed contest, but more importantly how to create a process to share information effectively within a team of twelve very smart people.

3. During the Wolfgang Keller Konigsbrau Case in LEAD class -

This case chronicles the path of Wolfgang Keller, General Manager of a Ukrainian Premium Beer Brewery, as he figures out what to do with his head of sales and marketing, Dmitri Brodsky. While I won’t describe the case in much more detail, suffice it to say that Wolfgang was the classic micromanager and hadn’t yet learned the lesson to hold his team members responsible for results rather than process.

It was the class discussion however with our LEAD Professor Lakshmi Ramarajan that left me with the best takeaway of my time so far at HBS. She told us, paraphrasing, “There are two types of leaders. Those who solve the problem and those who develop people who solve the problem.”

I was so glad to hear HBS reinforce these two key business lessons time and again:

1. Build and develop a team to scale yourself.
2. Teams which have a good process of information sharing (combined with smart people in the room) generally get much better results than those in which the leader does not create such a process and whose team members keep key information in silos.

What I’d Do Differently Now

Summarizing my key leadership lessons at HBS so far, here’s a comparison of what I thought prior to coming here and what would I have done instead had I already been through the first six weeks of HBS…

Topic	What I Thought Pre-HBS	What I Probably Should Have Done — Incorporating HBS Lessons
Strategy Development	I thought my job was to analyze the internal, customer, and market data and come up with a viewpoint relating to company strategy, then to lead my team to seeing it the way I did and have them build the operating plan to implement the strategy. I would often spend weeks analyzing data and only once I had come to a pretty firm perspective, hold a quarterly strategy retreat. Unfortunately the retreat was generally held after I had already made up my mind and thus I missed incorporating critical pieces of information that may have helped us make better decisions.	Instead of brining the full executive team together for 1-2 days per quarter, I should have brought together a small committee of the key members of the senior team to discuss strategy at least monthly in shorter meetings as part of the input and analysis phase. Instead of analyzing quickly at the last minute and then rushing to implement an all-of-the above strategy, I should have forced us to clearly choose and communicate our target audience and differentiation factor and built up a year long program focused just on moving toward that well-defined and well thought-through market position. My bias toward action got the best of me.
Information Sharing	I didn’t create a process under which needed information could be freely brought to the table.	I should have created a process under which needed information related to strategic decisions could be freely brought to the table and one through the painful work to create an agreed upon accounting costing system to better calculate the profitability of our two major customer segments (like in the case of Kanthal the Swedish manufacturer).
Developing Your Team	I still thought my job as CEO was to fix the strategic problem rather than develop my team to fix the strategic problem.	While I did give up almost all operational control to the six departmental heads, I still retained strategic control. I spent too much time cerebrally “in my own head” reviewing data and figures and not enough time pushing the team (who had a lot more experience than I did) on what they would do strategically.

You’re Invited: A Metropolitan Safari for Rwanda at iContact

I wanted to invite Dare Mighty Things readers to a special event coming up at iContact. We are hosting a “Metropolitan Safari” on Monday November 8th at 6:30pm at our new offices in Morrisville. We will have as guests two remarkable women from Rwanda who will share with us their perspective of the Rwandan genocide, how the country has turned their economy around through technology and entrepreneurship, and the role of women in rebuilding the country. We will also be giving the grand tour of our beautiful new space and offering rides on our new slide. We will have African food, African music, and an open wine and beer bar. Tickets can be purchased here. You can also RSVP on Facebook. You can use the discount code “ICONTACT” when you register if you wish. All proceeds from the evening will benefit The Akilah Institute for Women in Kigali, Rwanda. More information is in the invitation below. I hope you can come. Thanks for helping us spread the word! You can also download a PDF invite for the event. Sincerely, Ryan You’re invited to join us for a very special evening at iContact’s new offices in Morrisville, NC What: iContact’s “Metropolitan Safari” Fundraiser for the Akilah Institute for Women Rwanda When: Monday, November 8th, 2010 6:30pm to 8:30pm Where: 5221 Paramount Parkway, 2nd floor, Morrisville, NC 27560 Purchase tickets here (You Can Use Discount Code “ICONTACT”) Join us November 8th and see iContact’s new offices in Morrisville for the first time while supporting a great cause. We’ll be giving the grand tour of our brand new building on the Lenovo Campus that gives us room to grow to 550 employees and offering free rides on our slide. We’ll start out with cocktails and hors d’oeuvres on the 2nd floor at 6:30pm then going upstairs for the Akilah presentation. I hope you will join us for this special evening. Ticket Information > Purchase tickets (Use Discount Code “ICONTACT”) All proceeds from the evening will support the Akilah Scholarship Fund and empower young Rwandan women to become leaders in their communities. About the Akilah Institute for Women Akilah empowers young women to transform their lives by equipping them with the skills, knowledge, and confidence needed to become leaders and entrepreneurs in East Africa. Learn More | Make a Direct Contribution

Dr. Gerry Bell on Leadership, Listening, Happiness and Peak Performance

Session 1, Dr. Gerry Bell
EO/MIT Entrepreneurial Masters Program
Year Two, June 17, 2010

I’m in Boston for a few days attending year two of the EO/MIT Entrepreneur Masters Program. Our first presenter this morning is Dr. Gerry Bell of my hometown Chapel Hill, NC from the Bell Leadership Institute. Here are the notes from the session.

The 6 Laws of listening:

1. You can’t listen and work at the same time.
2. You can’t listen and think at the same time.
3. There is no such thing as multitasking.
4. Everyone knows exactly when you stopped listening.
5. You can’t fake listening. You can’t pretend to listen. You can’t fool people.
6. People only tell you the truth when they think you’re capable of hearing it.

You can’t afford to live your life on the surface. Listen and you will go deeper.

When you’re listening, ask questions to clarify what people are saying and elicit additional information.

If you find you’re uninterested and eyes are glazing over, ask a clarifying question.

A good tool to get people to open up a bit is to say, “Can you tell me more about that?”

There’s a thousand pieces to the puzzle of most meaningful conversations. A lot of times the real meaning to why someone is saying what they are to you cannot be determined in level I.

Class comment: Active listening is foreplay for a woman.

Playback what people are saying to you when talking about deep or important issues.

Never say, “well I disagree with you.”It just throws down the gauntlet and won’t lead to positive results. (’Yes and’ them instead of ‘No, but’ them)

Listening is the essential skill to build an understanding of people.

You can learn to listen better.

Living With Authenticity

There is no other way to live than living with authenticity.

You live longer when you’re authentic and you’re profoundly happier.

We experience stress when we behave differently than we are.

People say “I’m going to start being myself when this happens.” Don’t miss life while you’re living it.

As yourself if you’re going to listen to this person, or not. Make a black or white decision. Don’t half listen. Either 100% listen or delay the conversation.

Say, “I’d love to see you, I’ve got a deadline. Let’s discuss this at XX time.” Be pleasant, look at them, smile, and move on and then come back to it when you can focus.

Whenever you go to talk to someone, ask them if this is a good time.

Live authentic, open, and clear.

Emails/texts should only be used for surface level communications (level 1). The more personal it is, the more important it is to talk in person or at least by phone.

You have to guard your time as much as your money.

Skills Needed to Make Money

• Technical Skills/Specialty Skills
• Commitment: Ability to commit yourself with deep 100% focus on what you’re doing
• Interpersonal & Leadership Skills

Commitment is built by loving the work you do and being able to enter flow. The worst thing that could happen to you is to wake up and not love going to work. Make sure you’re doing things you love to do for your profession. Make sure you wake up and are so excited you can’t stand it.

Your personality dictates how you lead. You better be great in people skills to build a successful organization. Invest in yourself to build yourself. The smartest decision in someone’s life is to build themselves. Work on your people skills before you have kids as your kids will inherit your personality weaknesses. Your childrens life will be better if you invest in yourself. Your business will do better if people like you. People do business with people they like.

Warren Buffet has made $50B and his conclusion was ‘invest in yourself.’ He said ‘take communication courses.’

The best leaders are outstanding with people. The worst leaders are not good with people.

Living a Great Life

Boredom will make you crazy. You should never never never never retire. If you retire to go play you are likely to have the most unhappy period of your life. A lot of people sell their business to recover their happiness. Don’t do that, change your business. To have a great life you have to be exhilarated about getting up.

You have to create your life so every day you wake up you love life. Don’t ‘make a lot of money so that you can have your life back later.’ You can actually make more money by focusing on doing what you love to do, because you’ll be passionate about it.

Dr. Bell studies peak performance in a complex life. It is possible and is looking at examples of how to do it to stay at prime.

Don’t overwork as then you’ll burn out and want to quit.

Peak Performance

When were you most engaged? What caused this?

When were you least engaged? What caused this?

You cannot produce better than when you are in prime. Performance comes on a bell curve. You are best at 100mph, not 200mph.

You have a significant increase of illness when you work too hard. Hiatal hernia, heart disease. You have significant increase of destroying your relationships with spouse, kids, parents. You become flat and you dislike what you do. You’re unhappy. The happiest time is when you’re at prime. You can’t have more fun and have a greater impact on humanity when you’re at prime.

If you’re going 115mph you become grumpy, irritable, impatient, and don’t sleep well. You die early.

It’s hard to contribute to humankind if you’re dead.

If you love it, working long hours is not bad. If you don’t love it and your strained, it is bad.

Don’t work like a dog until you’re 50 and then wake up and have no health, no spouse, no family.

Every day you wake up your goal should be to have the best day you’ve ever lived.

Do great work every day.

We’re in the 21st century of understanding science and in the 1st century of understanding people. The secret to make the world a better place is to have great leaders who build businesses who provide jobs who are worthy of human life and someone can go home and buy food for their children, and have shelter, and educate them.

When you go through the slums of Sao Paolo or Somalia, the only solution will be if people who are entrepreneurs build businesses so people can have jobs.

Great leaders build great companies. Average leaders build average companies. Poor leaders destroy companies.

The 7 Causes of Happiness or Unhappiness

1. Yourself
   Do you like yourself or not? You have to like yourself to be happy. If you don’t like yourself, money is irrelevant. Invest in yourself and helping your children become effective, achieving, happy people.
2. Loving Relationships
   You don’t have to be married, but you have to have the ability to love. If you can’t love you’re missing one of the joys of life. This is a genetic need of human species.
3. Health
   The biggest single mistake people make is to throw away their health and abuse themselves. Be as good at mastering your health as your business. You can’t make the world a better place if you’re not here. The average human body is designed to live to 100. 70% of life expectancy is lifestyle, not genetics. Do you love being alive? If you do, you should set a goal to be alive as long as you can. Don’t throw away your health and then at 60 try to start over. Set a goal to live to 100. Do you want to see your grandkids? We are thoroughbreds in the Kentucky Derby and we need to train to be able to perform.
4. Work
   Can be the greatest joy or greatest pain. Make sure you’re working on what you love doing.
5. Money
   It’s not how much you have, it’s how you see it. Do not make your childrens’ lives easy with your money. Rather teach them skills to solve their own problems. Make sure your child has a job by age 11. Work ethic is ingrained by age 12. We got to be successful because we learned to work early.
6. Spirituality and Community
   Feeling of giving back and contributing to the world. When you leave the world leaving it better off than when you.
7. Fun
   You should have as much fun as humanly possible without destroying your work, family, marriage. You normally drink as much as you don’t like yourself. Drinking dulls your senses.

Develop Your Six Core Compentencies on Being a Great Leader

1. The Entrepreneur
   Initiator, developer, seeks and finds opportunities, seeks success and achievements, positive can-do attitude, high goal setter
2. The Competitor
   Assertive, honest, faces problems squarely, raises the bar, rises to the challenge, makes the tough decisions well
3. The Producer
   Focus on getting things done, organized, takes leadership, does it now and gets it done, a finisher, streamlines work, maintains focus and priorities, highly disciplined
4. The Stabilizer
   Recovers quickly from mistakes and failures, has confidence, cool under pressure, calm, balances priorities and time, paces self, careful
5. The Team Builder
   Good listener, giving, supportive, builds teamwork, gives love and affective easily, mixes easily with others
6. The Creator
   Innovative, flexible, fun, good sense of humor, strategic thinker, adapts easily to change

Manage Around and Reduce Your Six Extreme Personality Pattens

1. The Performer
   Overly ambitious, takes too many risks, prpmises more than can delivery, manipulates people for own success, over extends self and others
2. The Attacker
   Too critical, fault finding, disrespectful, too aggressive, argumentative, rude and abrupt, destroys teams, destroys relationships, makes people afraid of you
3. The Commander
   Domineering, rigid, controlling, inflexible, overly analytical, micromanager
4. The Avoider
   Too cautious, avoids risks, does not take initiative, is afraid to fail, too detail oriented
5. The Pleaser
   Too nice, allows others to take advantage, smooths over conflicts, backs down from competition, too agreeable, won’t fire anyone
6. The Drifter
   Disorganized, messy, impulsive, starts things and doesn’t finish, short attention span. If this is you, build your ‘Producer’

Make your goal to be every person you see, when you’re done seeing them, they feel better. Be open and caring toward people. Everyone you see and talk to wants to be talked to. Don’t be cold, critical, or hostile.

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Presenter Bio:
Dr. Gerald D. Bell, founder and CEO of Bell Leadership Institute, is a leading consultant to major business organizations throughout the world. He is also an award-winning professor, rated by Forbes Magazine as a “Don’t Miss,” at the Kenan-Flagler Business School at the University of North Carolina-Chapel Hill. Dr. Bell’s cross-industry experience and in-depth expertise have earned him a reputation as one of the most sought-after keynote speakers and effective resources on leadership in the United States and abroad. [Full Bio]