Monday, December 28, 2009

My Top 10 Entrepreneur CEO Lessons: 2000-2009

As we near the end of the decade, there have been several articles published about how bad the 2000's have been. For me, while this hasn't been the easiest decade, it is the one in which I learned what it means to be a CEO and, beyond that, an entrepreneur.  During this decade, I've weathered two crashes - the "dot com" bust in 2000 and the sub-prime meltdown in 2008.  I've learned to do turnarounds, startups, a leveraged buyout, mergers & acquisitions, and even one bankruptcy and in the process, I've managed to learn a few things, at the cost of a few gray hairs.

So looking back on the closing decade, here are my Top 10 lessons learned:
  1. Cash is different from profits and more important - This is a well known truism, but it didn't really sink into my bones until the first time I had to delay vendor payment in order to make payroll.  For a startup, if it isn't directly related to gaining revenue, developing shippable product, or required to comply with the law, think twice about spending it.  Juggling insufficient cash is painful.
  2. Technology is easy; customers are hard - Nothing is more important to a company than gaining repeat, paying customers, in sufficient volume to pay the bills. Customers are gold and it is much easier to keep and grow a customer than to win a new one.  Companies die from lack of revenue, not lack of technology.  As one who has had to mothball good technology, I wonder how much more is languishing in basements, public storage lockers, and warehouses from failed startups.
  3. "Should we" is more important than "can we" - Because most entrepreneurs are technology people, their mindset tends to focus on whether something can be done.  But this is often less important than figuring out whether something should be done.  A well executed idea isn't of much use if it's tackling the wrong problem.  Like the time, when one of my companies developed a new process monitor for semiconductor fabs only to discover that the equipment makers had integrated their own versions into their latest generation equipment, wiping out the market for third party systems.
  4. It's better not to hire than to hire the wrong person - Believe me, there is one thing worse than having an open position when you are buried in work, and that is to fill it with the wrong person.  The wrong person can cost you time, money, drag down morale, and even get you sued.  Not sure about that potential new hire?  Keep looking.
  5. Job descriptions should just be a starting point - People are multi-faceted, yet once we hire them, we tend to restrict them to the narrow confines of their job description.  What a waste of talent, one that a startup or small company can't afford.  Once you've found the right person, learn about that person's hidden talents and engage the whole person.  For example, at one company, I had a lab technician who was also a skilled amateur photographer.  Our marketing person figured this out and saved thousands of dollars in photo shoots by letting this man play in her world.
  6. During tough times, people need hope - People will endure a lot as long as they have hope. Not only hope in a future, but one in which their contributions matter in getting there.  Without hope, people stop caring.  And when no one cares, the company dies. As CEO, in tough times, your number one job is to give people real hope, not false hope.
  7. When things are going badly, level with people - Giving people hope does not mean sugar coating things.  This is false hope.  And if your people are halfway intelligent they'll see right through it.  The basis of real hope comes from truth.  Calling a spade a spade gives people real hope when they realize that management and the CEO aren't living in some fantasy world and its not taboo to talk truth.  Having said that, being straight with bad news will cause some people to leave. Let them go; trying to keep these weak sisters around isn't worth the distraction in a crisis.  The resilient ones will stay and will contribute if you let them.
  8. Most VCs are just bankers - I expect to take flack over this one, but in venture capital, as with many professions, the 80/20 rule applies.  Treat with skepticism the claims of VCs to add value to your startup in terms of their operational expertise, making introductions, hiring, and strategic advice. While the top 20% can add value in this way, the remaining 80% are as risk adverse and hands-off as a commercial banker.  At least the latter don't pretend to be risk takers and company builders.  Most of them are just supplying money and they need you to turn it into an economic entity that can generate a return on investment.
  9. Every CEO needs a jester - The medieval court jester was more than an entertainer.  Originally, the jester's job was to deliver unpleasant truths to the king to keep him from losing touch with reality.  Of course, this could be quite hazardous to the jester's health, which is why they often became skilled at delivering unpleasant truths in an entertaining fashion.  As CEO, one of the greatest challenges you have is getting honest, information free of "spin".  People have a tendency to suppress bad news and exaggerate good news as it moves up the chain.  People working in the trenches with the willingness to confront the CEO with unpleasant truths are worth their weight in gold.
  10. An entrepreneur is only as strong as his/her network - The heart of what an entrepreneur does is to create something from nothing.  He/she does this by marshaling resources and know-how from the network of people they know.  Their network is the source of knowledge, people, funds, customers, and counsel that an entrepreneur then turns into a product and economic entity that becomes a company.  Cultivate your network.
May you have a prosperous 2010 and start to the new decade!

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