Monday, June 13, 2011

The "Other Stuff"

This week has been a whirlwind of activities associated with my son Alex's graduation from middle school.  We've had final performances, award ceremonies, and, of course, the graduation itself.  Maybe it's an East Coast/West Coast thing or maybe the times have just changed, but I don't recall any of this hoopla when I finished 8th grade.

What I found most interesting this week was the awards ceremony.  There must have been fifty different awards given out over a wide range of activities - music, art, leadership, drama, science, math, spirit, community service - the list went on and on.  I was quite impressed by the diversity of opportunities offered by the middle school, all chances for a student to find their passion and place where they might excel in their own unique way. And I understand the high school offers even more!

And from the whispered comments amongst the students, I think this took some of them by surprise as well.  I kept hearing some variation of "XXX?!  How did XXX get that award?  They're not that smart!"

I found that type of comment very interesting.

You see, in Silicon Valley, brains and achievement are practically objects of worship.  In fact, brains are almost automatically linked in the minds of many with achievement in a mathematical relationship that looks like this:

where ACHIEVEMENT = f (BRAINS, knowledge, other stuff )

But in my experience, while being smart and educated are no doubt an asset, they are a helpful yet insufficient condition for achievement.  (And I'm not willing to equate success with mere achievement.)  Instead, what I've seen is that it is often the "other stuff" that accounts for why someone who is less gifted intellectually can achieve as much or more as their high IQ peers.

What is the other stuff?  While obviously not an exhaustive list (and in no particular order):
  • Capacity and willingness to work hard - A big part of achieving something is be willing to do the work that needs to be done.
  • Determination - In almost every challenging endeavor, there is a roadblock or two or three.  Those with the will to keep at it often find a way over, under, around, or through it.
  • Resiliance in the face of setbacks - And in the process of overcoming roadblocks, there are many blind alleys and unforeseen setbacks.  Those willing to press on and not succumb to despair are much more likely to achieve their goals.
  • Courage to try - The first step on the road to achievement is just putting yourself out there.  The journey of a 1000 miles isn't happening if you're afraid to step out of the house.
  • Being able to relate to other people - While individuals are often the catalyst, it is difficult to achieve things without the help of others.
And that's what I saw at awards night.  While there were definitelymany awards aimed at scholastic excellence, there were just as many celebrating endeavors where the other stuff was just as, if not more important, to success than sheer brainpower.  What a great lesson for the students.

Over the next three weeks, I'll be taking a three week blogging holiday until mid-July. The reason?  I've again been given the privilege of teaching high school students about business as part of the Stanford Educational Program for Gifted Youth (EPGY).  These are some of the meta-lessons I hope to convey.

Monday, June 6, 2011

The Employee to Entrepreneur Transition

I work with a lot of startups and to me, one of the most fascinating journeys of personal growth to watch is the transition from corporate employee to entrepreneur.  While there are many who believe that "entrepreneurs are born not made" and that an entrepreneurial personality is completely antithetical to being a good corporate employee, my experience, supported by a 2009 Kauffman Foundation study(1), has been that this distinction is not so cut and dried.

According to the Kauffman Foundation study, there are two types of entrepreneurs.  The first, whom they label "early entrepreneurs" fits the classic Silicon Valley stereotype:  college educated, twenty-something single male who may or may not have graduated, technically oriented, iconoclast with a strong independent streak (e.g. Bill Gates, Larry Page).

However, the second more typical entrepreneur is a 40-year old married male with children.  About half had over ten years industry experience working for other companies before starting their first company.  Nearly half had either zero or negative entrepreneurial aspirations.  The majority were good students in high school and college with 95% of these holding at least a Bachelor's degree and 47% holding an advanced degree.  In short, these were people who fit the mold and in many cases performed well as corporate employees.  So it is possible to become an entrepreneur after having a corporate background.

Having said that, there is a definite transition that has to occur for a former corporate employee to become a successful entrepreneur, one that I've personally experienced.  And as you might expect, some are able to make the transition quickly and easily, while others not at all.  In my case, it took fifteen years (but I tend to be pig-headed and somewhat resistant to change).

So what does the employee to entrepreneur transition look like?
  • Defined Program =>Undefined Program:  As an employee, you job is to execute the program.  Your time, priorities, and, in many cases, even the means are defined.  This is true even if you are CEO.  As an entrepreneur, it is up to you to create the program.  There is no one telling you what your priorities should be or how or when you should spend your time.
  • Predictable Income=>Variable (initially zero) Income:  As an employee, you contribute your time, skills, and knowledge in exchange for a regular paycheck.  Base salary typically doesn't vary with how the business is doing (unless it is very, very bad in which case even the pay cut is pretty predictable).  As an entrepreneur, assuming that you get to the point of revenue, your income will often scale up, down, and sideways depending on the cash needs of your business.  Need a raise?  Then you have to find a way to raise profits.
  • Safety Net=>No Net:  As an employee, most companies often some form of benefits from health to retirement. Lose your job?  You can apply for unemployment.  As an entrepreneur, you may not be able to afford the luxury of benefits.  If you're lucky, you might be able to get medical.  Forget about a 401(k) plan.  And if your venture goes under particularly if you are classified as self-employed, you can't apply for unemployment.
  • Infrastructure=>No Infrastructure:  As an employee, its amazing how much office infrastructure one takes for granted until you become an entrepreneur and don't have it.  Payroll?  Copy machine?  Printer?  IT support?  Travel arrangements?  These are somewhat lacking when your office is the local Starbucks.  This can be particularly jarring for senior level corporate executives turned entrepreneur used to having an executive assistant.
  • Specialist=>Generalist:  As an employee, good corporate practice is to have a well defined job description with clear lines of responsibility.  Your value is in your "technical" skills whether that skill is JAVA programming or HR compliance.  And therefore your employer wants you to focus on doing your specialty well.  As an entrepreneur, you need to be able to handle many things outside your area of expertise, because if you don't, it won't get done.  Your value is in crystallizing and communicating a vision, motivating your team, and securing resources via your network.
It's important to understand this transition to avoid two common pitfalls that can sabotage your startup:
  • Spending money in areas you can't afford:  When you're doing a startup, your number one job is to get to product/market fit with a viable business model.  Any money spent on things not directly impacting this reduces your chance of success.  Now is not the time to spring for life insurance benefits, remodel the office, and hire an executive assistant to schedule your airline flights.
  • Hiring the wrong founding employees:  Silicon Valley is rife with horror stories about founding teams hiring the big company executive with the great connections but who can't seem to operate without support staff, won't extend outside their comfort zone, insists on 9-5 hours, and can't afford to skip an occasional paycheck.  Screen for this.
At the end of the day, the source of the pitfalls is fear.  When you're forty-something with a spouse and kids, not having a paycheck is scary.  Not having health insurance is scary.  Not having enough staff to handle the details so that you know balls are being dropped is scary.  Not having an executable road map is scary.

Which brings me to the defining characteristics of every successful entrepreneur:  courage driven by vision.

(1)  Wadhwa, Vivek, "The Anatomy of an Entrepreneur,"  The Marion Ewing Kauffman Foundation (2009).