Ok founder, now get the hell outta’ here!

Remember VMware, the company as recently as January, had appeared to be rocketing into Silicon Valley stardom?

The company was founded in 1998 by Ms. Diane Greene and her husband, Stanford University computer-science professor Mendel Rosenblum, to develop software that allowed a single computer to run as multiple “virtual” servers simultaneously, with several different operating systems and numerous applications such as databases going at the same time. Mr. Rosenblum remains an adviser to VMware. The company was later bought by EMC, the Massachusetts data storage giant. EMC acquired VMware in 2003 for $635 million and retained 86% of its stock.

On Aug. 13 last year, EMC spun VMware out as a distinct stock offering and the company was an instant hit, recording the biggest technology initial public offering since Google’s in 2004. Its stock shot up from a $29 offer price to $51 at the first day’s close of trading. Within a few weeks, VMware’s market capitalization placed it as the world’s fourth most valuable software company. But VMware’s stock price, which peaked at nearly $125 on Oct. 31, has been in a tailspin in recent months and the company faces increasing competition from Microsoft, Oracle and Sun.  Going by the recent downward revision of its earnings guidance, VMware’s stock fell $13, or a little more than 24 percent, to $40.19 at the close of trading.

And then? Instant justice. Reacting to the decline in its fortunes, the Board of Directors fired co-founder and Chief Executive Diane Greene, replacing her with a former Microsoft executive Paul Maritz apparently to help the company combat its growing competition and take it to the next level.

Often founders find themselves in the crosshairs when performance suffers or a founder’s style clashes with that of a new boss. Shares of Sun Microsystems climbed immediately after founder Scott McNealy announced he was leaving the CEO post. Jones Soda founder Peter van Stolk left amid languishing profits saying, “I didn’t want to be one of these guys who hang on too long. As the company grows, different skills and requirements are needed to move the thing forward, and they aren’t necessarily entrepreneurial skills.”

This Harvard Business School case study concluded that “An inherent paradox in succession is that a founder who has been doing a good job actually increases the chance he or she will be fired.”

But there can be such a thing as showing a founder the door too soon. Often, a clear transition hasn’t been mapped out. Other times, the founder has specific relationships with vendors that are vital to the company’s operations. Sometimes, the Street just likes the person.

There are of course conflicting reports of EMC’s high handed interference that Ms.Greene detested.  But I find the inherent flexibilities (or are they liberties) remarkable.  If Board finds the CEO can’t take the company to the next level, be she a co-founder – she can still get canned.

I think here is a lesson for many smug founder entrepreneurs that stay anchored as CEOs refusing to acknowledge their role has become less relevant.  So is here some learning for Boards to play a proactive role – that of an activist - in ejecting those CEOs to save the day for customers and shareholders.  I am not saying that is the case at VMware, a truth that will be revealed only in the days ahead.

But I certainly like the spunk.  And the insecurity that comes with it spurring many a CEO to deliver or else.  Steve Jobs was fired by the Board of Apple and we all know how he got back and delivered.  Hope Ms.Greene shall have her go too.

 

Motivator #1 - your goal

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If you want to run a marathon you don’t just go out that day and run 26 miles. If you want to be a tremendous success in business you don’t just wake up one morning and are running a $100 million company. Whatever you are looking to achieve in life the steps along the way and the overall mindset of success are critical. We need to celebrate each day’s success and build on it for the next day. We need to start thinking of ourselves as successful and then live into that reality. We do create our own reality and by thinking we are a success or thinking we are not that is exactly what we are.

Most people recognize a champion only when he steps up the podium, but he actually has become a champion far before it. In fact, he has become a champion years before that glorious moment; because to reach that moment, first and foremost he has to become a champion in his daily life. He has to train hard for years, control his diet, and deny a lot of pleasures to prepare for the contests. While other people can live whatever way they want, he must live a disciplined life. Most people only see him in the glorious moment, but it is this lifestyle that actually brings him to the podium.

I think of my own early years.  I had spent over 15 years of my life working for different companies.  I was lucky to have a mixed bag for superiors – a few that were brilliant and others downright mediocre.  I was happy to learn an awesome lot from the former but having to put up with assholes was awkward.  In fact that drove me to start out on my own even as I was hardly prepared for the associated risks. By then I had acknowledged the omnipresence of mediocrity and recognized that brilliance is hard to come by.  The funny part was, I wasn’t too sure into which crucible I fell.

But I was certain about something.  If I were patchy in some area, I certainly would like to improve.  I was ready to admit and change. Soon I will be good at it because I worked at it.  That’s a trait you don’t find in assholes.  They are dodgy and they shirk a lot, passing the buck at every slip.  Do not hope to achieve great things if you don’t want to pay the price in the first place.  The journey to mastery is long and difficult. You need sustained motivation to walk it.  Set yourself a goal and pursue it arduously.  That is your motivator #1.

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Comfortable being misunderstood

Jeff Bezos is about my age, 44.  So he would be to many of you too.  What sets him apart? 

Achievement. 

His company Amazon.com first changed the way we bought, read or reviewed books. In 2007, his business pulled in revenue of nearly $15 billion, up 38 percent from the previous year. Amazon’s stock keeps rising, and Bezos becomes ever richer. His estimated worth is about $8 billion.  The 13-year-old company is the biggest online retailer in the world, but recently Bezos has taken Amazon beyond retailing; it now sells its computing, warehousing, and delivery services to other companies. Even tiny startups can rent just about anything Amazon does. And the company made news with its debut of the Kindle, a slim electronic book reader with iPhone-like cachet.

I bring in a small nugget here.  Amazon was incorporated by a divorce attorney!  Here he comes clean on several such interesting stuff.

Thanks to Ben Casnocha, I read that interview. But what I liked most was his reply to two specific questions [by Conde Nast Portfolio.com] –

“One of your big initiatives, a search engine called A9, fell flat. What happened?

If you decide that you’re going to do only the things you know are going to work, you’re going to leave a lot of opportunity on the table. Companies are rarely criticized for the things that they failed to try. But they are, many times, criticized for things they tried and failed at.

Did you ever get criticized for some­thing you tried that worked out?

When we pioneered customer reviews, it was incredibly controversial. I got letters from publishers saying, “You don’t understand your business. You make money when you sell things. Take down those negative customer reviews.” We’ve never done anything of real value that wasn’t at least a little bit controversial when we did it. But if you want to be a pioneer, you have to be comfortable being misunderstood.”

Are you comfortable being misunderstood?

Here is my little take on pioneering where I said “So much of the pioneer’s time is preparation, so much is routine, and so much retrospect, that the path of her genius contracts itself to a very few hours.”

For more, just click the tag “Life” under the title `Categories’ to your right.

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Straight from the (Yale) Dean’s mouth

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My constant carping on the irrelevance of traditional B-School education found a great ally in none other than Joel M Podolny, Dean and William S Beinecke Professor of Management, Yale School of Management.  Money quote -

 

“… The Internet, the 24-hour news cycle, the popularity of social networking, and almost instantaneous ‘on-demand’ access to knowledge have all contributed to a significant shift in the mindset and the learning process for the 20-somethings now entering our MBA programmes…..New methodologies and new approaches to MBA pedagogy that more accurately reflect the demands of the contemporary work environment and the realities of the current MBA student population are urgently needed.”

 

My line of business brings me face to face with several CEOs, COOs and all CXOs – all B-School grads - but most of them lose interest if the presentation is innovative or even slightly deviating from the template they’re used to.  I give them a simple ratio analysis or a balance sheet projection (the old stuff) together with post event capital structure, they are doubly happy to cut my check.  I try to give a bit of ancillary industry comparison or a new revenue line, they lose the picture.  Recently it happened with a NLS/AI startup focusing on Mobile Apps. I found use for AI in web analytics being developed by a CRM client of mine, they kinda’ gave a cold response. Perhaps, they marked it “off-priority”.  Well, I am happy for the check part. But I want to do more justice, make clients see hidden opportunities – but they won’t let me.  Just do so much types.

 

The world didn’t sit up when I cried out.  Now the Dean of Yale says it, I hope some of them will

 

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Getting “Lovemarks”

Kevin Roberts, CEO of Saatchi & Saatchi zigs when others zag.  No one knows what he’ll do next. 

The legend has it that while during a presentation in Canada, he took a machine gun and blew up a coke vending machine to prove to his employees and bottlers that Pepsi can go past Coke!  He is also the author of the book Sisomo – that is about Sight, Sound and Motion.  He is credited with coining a brand attribute – loyalty beyond reason – that he famously called “Lovemarks”.

Some gems from this K@W interview –

“Yoshi Suzuka, who ran Toyota for a decade, said to me 10 years ago, “Kevin, you will never know more about cars than Toyota — and we will never know more about the people who buy them than Saatchi & Saatchi.”

Companies like us now have to become very, very close to consumers. That’s complex because every consumer is different. So the whole mass reach and scale thing is gone. It’s complex because information and knowledge are now pure and simple table stakes. You will send the MBAs out of here. They will be fully equipped with information. They will be very knowledgeable about how to use it. Harvard will do the same, Stanford will do the same … they will focus very hard on information and knowledge.

What will win in our world is using those vital table stakes quickly, but then developing insight and foresight. You can’t get insight and foresight from data and from analysis. If you want to know a hell of a lot about lions, you better go to the jungle and not to the zoo. So, you’ve got to figure out how you can empathetically have the insight into consumer behavior and then have the creative foresight to do something about that before the competition. [Steve] Jobs and his folks are very empathetic.”

You can’t get much better than that!

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Fixing B-school models

Akkshay Mehta, an IIM-A graduate says “There is hardly anything in the B-school curriculum that prepares students for such rapid change.”  I say Amen.

If anything, they are good at *brownnosing* their way to the top.  They almost follow it as a dictum - more you rub nose with influential rumps, higher you go in the organizational ladder. They call it tact. Could they have learnt it at B-School? 

I’ve always held leadership can never be taught. You become a leader when your thoughts are so refined and others `get it’ better in its light than on their own. The prescriptive structural model followed by B-Schools motivates folks to score straight A’s than stimulating their creativity.  What it ignores? Capturing attributes like drive, curiosity and intuitiveness in the future leader.  I don’t think any evaluation process to be complete without sizing up those. That can’t be figured out by tests either. You’ve got to see them in real action where they are. Current institutional and tutorial models are easier on the faculty, allowing them to get away doing a shoddy job. Recast it with one of self-learning and heuristics.  Just watch how they perform at work and you’ll see how many still manage straight A’s. Begin with Wall Street and see their warped intelligence busily pulling down banks with utmost ease.  If that’s difficult, just check out authors of subprime debacle. It will be a tell all.

Update :  Here’s what Subhiksha CEO R.Subramonian, IIM-A graduate (1989) has to say on B-school model.

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Clarity of perspective

Stuff that separates a great leader from the good….?  Sample this. 

“Roberto Goizueta, the late longtime CEO of Coca-Cola, proved that there is no such thing as a mature business. His critical insight was an ability to define exactly what business Coke was in–a task that is far harder than you think. For instance, he taught his executives that when they set goals for market share, they needed to focus on the share of stomach, not the share of carbonated beverages. His adversary was water, not soda. By this definition, Coke’s 40%-plus market share became 3%, changing the company’s view of growth.” 

That’s clarity for you….  Hats off to those great leaders !

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“Follow your compass and not your clock”

People respect you as a leader if you cut the rhetoric and urge them to examine their core.   I have experienced it first hand as I move with my client’s staff.  They all had a life story to tell.  I’ve noticed those stories morphing into who they are and defining their style at work.  Haven’t we wondered why each of us has our own signature style?  There you go. We all have a different life story that defines our style.  

Then I read this interview with Bill George, Ex-CEO of Medtronic and co-author of True North: Discover Your Authentic Leadership. What we have in True North is a further development of George’s concept of `authentic leadership’ but also a rigorous, revealing, and rewarding analysis of what George and Sims learned during their interviews of more than 100 leaders. The title to this post is an anecdote from the book where Ann Moore of Time Inc. comforts Andrea Jung, CEO of Avon products when she had been passed over for the CEO job.  In Ann’s words, “It’s not important that you’re CEO by 40. Life is long. You need to make sure this is the company you want to be at.”

I was tempted to cite some exemplary “crucibles” provided in that interview (and in the book) but have decided not to because each should be presented within the context of the lively narrative. For me, some of the most interesting and valuable material in this book focuses on coping with severe hardships of one kind or another.   I’ve had a ton of that in my life.  I had coped with it all and still do. Long ago, Jack Dempsey observed that “champions get up when they can’t.” Authentic leaders must first become authentic people and, more often than not, that process requires experiencing and then overcoming being “knocked down.”  

In Bill’s own words “…. An individual’s leadership is defined by his or her life story. In the 125 interviews we conducted, each person kept going back to their life stories as defining for them. From those life stories, you could see the clear link to their passions”.  Read and enjoy.

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Like hell, it’s chutzpah…

Celebration of Indian innovation and enterprise can’t get better than this.

The Economist –

“RATAN TATA, chairman of the Tata group of companies, has a cerebral and cordial manner. But the so-called “one-lakh car”, which Tata Motors unveiled in Delhi to a rapt public on Thursday January 10th, is a product of impatience and chutzpah. Instead of waiting for the great swell of prosperity in India and elsewhere to create millions of customers for his company’s products, Mr Tata has decided to wade out—further than any one has gone before—to bring a car to them.”

I would drink to that..

Angel Larry

Ok. Here I said “[Angels] are so shrewd that they see right through you from a mile”.  And here I said “As you move along,  you might find the right Mentor.  With a bit of luck, the right one may even find you.”  Readers thought I was just coddling them up.  

I stand by my words. Here’s the proof.   

It was Oracle founder Larry Ellison who reportedly had called up Evan Goldberg, ex-Oracle employee, founding his startup NetSuite, way back in 2000.  NetSuite was then operating out of a Silicon Valley apartment (over the hair salon and next to a liquor shop) , and Ellison had invested in NetSuite even as it was shaping up as a potential competitor.  Not just he invested in it, he didn’t cannibalize it to save the mother brand Oracle. 

Now he’s richer by a billion and one even as the company has yet to turn in profits. NetSuite came out with its IPO yesterday and by the close of trading, NetSuite shares climbed 36.5 percent to $35.50, putting the value of Ellison’s 54 percent stake above $1.1 billion. Ellison, NetSuite’s largest shareholder, has remained a close adviser to Mr. Goldberg and Zachary Nelson, NetSuite’s President and CEO, and is expected to continue in that role after the I.P.O…. Show me a better mentor if you can !

Meanwhile, Oracle shares soared 7 percent after it announced a 36 percent increase in quarterly revenue over the same period a year earlier. The value of Ellison’s 1.17 billion Oracle shares rose to about $26 billion.  Mr. Ellison plans to transfer all of the 32 million NetSuite shares he holds to a “lockbox” limited liability company that will be managed by an unrelated third party to avoid conflicts with a potential competitor.  Did you say foresighted…?  I say, Larry is far-sighted too…I mean, he sees well into the future.

That’s what makes Ellison an angel. Isn’t he one…?  Goldberg and Zach Nelson will tell you.

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