Blitzscaling with Reid Hoffman & Co: The Tribal Stage
It has been one month of Blitzscaling with Reid Hoffman(CEO and Founder of LinkedIn) and crew at Stanford University. We have had 9 sessions and have heard from 6 guests.
Three guests focused on the Family Stage of a start-up: Sam Altman (President of Y Combinator, one of the most successful seed accelerators in the world according to Forbes), Michael Dearing (Founder of Harrison Metals, a VC firm that recently received $68 million so that it could continue to invest in tech products that increase the well-being of society) and Ann Miura-Ko (One of the most powerful women in start-ups, again according to Forbes, and Co-Founder of Floodgate, a VC firm that invests in digital businesses of the future)
And three guests focused on the Tribal Stage of a Start-up: Jennifer Pahlka (Founder and Executive director of Code for America, a non-profit that seeks to bridge the gap between the tech sector and public policy), Mariam Naficy (Founder and CEO of Minted, a crowd-sourced design company) and Eric Schmidt (Former CEO of Google and recently appointed Executive Chairman of Alphabet)
For our first assignment, we were asked to reflect on the principles within the Family Stage that a) most resonated with us and b) most surprised us, which I quickly did here. For our second assignment, we were asked to write about the same things, but in terms of the Tribal Stage, which I did below.
But before I jump into it, I wanted to quickly re-iterate what the class identifies as the Tribal Stage of a start-up. From a qualitative perspective, the tribal stage is the point at which a start-up has launched its initial product and is ready to grow its market share. From a quantitative perspective, the tribal stage is one step beyond the family stage in terms of employees (1 to 10), users (10,000 to 100,000) and revenue (less than $10M to over $10M).
Now, although I have no personal experience dealing with a Tribal Stage — I am still very much in the Family stage — word on the start-up street is that it feels a bit like you have just thrown yourself off a cliff and the only way for you to survive is by building an airplane before you hit the ground. Sounds rough. Lucky for me, my classmates and I were able to gain some insights into the whole process from those who succeeded and lived to tell their tale.
Teachings from the Tribal Stage:
I. Congratulations, it is now time for you to start a movement
“The product is important, but not important enough” — John Lilly
So you’ve got a product. It’s just barely working, but it is showing signs of life. In other words, people are actually benefiting from your product. Holy shit you did it. Congratulations, it is now time for you to start a movement.
Great, how? Well, the good news is you’ve got options on the table. The bad news is, like most things in the start-up world, there are no previously written handbooks that you can follow. It is up to you to come up with something creative, ballsy, <insert other “popular” adjective> that speaks to millions. Drop in the bucket right?
John Lilly, former CEO of Mozilla, shared some insights with us as to how he and his team managed to pull it off with Firefox back in 2002.
Case Study: Firefox, a free and open source web browser created in 2002 by Mozilla, goes big
Firefox’s main claim to fame was that it was the first web browser that had built-in ad blocking software. According to John, this was a big deal in 2002 because back then you couldn’t open up a browser without being attacked by hundreds of pop up ads. Unsurprisingly, customers loved it. However, they didn’t love it quite enough for Firefox to compete globally. Remember, “the product is important, but not important enough.” Therefore Mozilla knew if it wanted to compete with Internet Explorer, Safari and Netscape it had to start a movement. So in 2002, this is what they came up with:
Run a fundraising campaign for 30 days. Ask everyone in the Firefox community to send them $10. In exchange for the $10, list the community member’s name in a New York Times Firefox Ad.
Interesting. So, applying what we know about Mozilla and Firefox, why did they end up going with this option as opposed to all other options that were likely on the table to kick-start their movement? Let’s take a look contextually.
First, Firefox was an open source browser. In other words, they prided themselves on being community oriented, accessible, and friendly. So, a fundraiser aimed directly at its community aligned with its values.
Second, prior to the movement Firefox already had a community of globally dispersed users at its disposal. Not only that, but a large portion of these global users had actually contributed to helping build the product, being opensource and all. Therefore, reaching out to this network and asking for $10 seemed reasonable seeing as how those members had already bought into the product at that point. In fact, Mozilla was so confident the fundraiser would work, they committed to purchasing an expensive New York Times Ad.
Lastly, it was 2002 when Mozilla launched their fundraiser ad and the idea of a global community fundraiser was something very new. Although, it had been done before, Mozilla structured their campaign in a way that was unique and incredibly newsworthy. As a result, Mozilla became known for creating the first ever crowdsourced campaign.
So what happened? What were the results of the campaign?
Well, Mozilla not only ended up doubling the money they put up for the New York Times Ad, the campaign went viral and Firefox was downloaded more than 10 million times in the first month. Boom, just like that Firefox became a major player in the web browsing space.
Key takeaways and lessons from Firefox that I will apply going forward:
When attempting to create a movement:
1) Be clear about which cards you have in your hand. Mozilla knew it had a global community base of users to work with. They also knew their community already felt ownership over the product seeing as how many of them contributed to building it. All they needed to do was reach out, which they did via a fundraiser that happened to further entrench their users feeling of ownership.
2) Don’t underestimate your community; it can be an incredibly powerful leverage point. The only thing Mozilla underestimated was how powerful reaching out to their community was going to be. What do you think each person who sent Mozilla $10 did? Well, chances are they went out and purchased a copy of the New York Times so that they could show their friends and family that their name was in the friggen New York Times. What do you think happened after they showed their friends and family their name was indeed in the New York Times? Well, chances are they probably told them a bit about Firefox; a product they clearly believed in, seeing as how they spent $10 to help them grow. Who do you trust more than your friends and family when it comes to product purchasing/usage decisions? The answer is no one. So not only did Mozilla reach out and reinforce its community members’ commitment they also got its community members to talk about Firefox within their inner circles on its behalf. In essence, creating a multiplier effect.
3) Make a bet and make it big, but make sure it is grounded in forethought. Mozilla needed to build a movement and also knew that the movement had to stem from their geographically dispersed community .Therefore, they had to think of something that was ubiquitous and relevant to a very wide geographic base. Something internationally common and special enough to convince them to send in $10. Something unique enough to garner media attention. And so they made a bet, and a big one too, by purchasing a New York Times ad.
Today, FireFox maintains somewhere between 10–20% worldwide market share depending on whose statistics you look at, putting them firmly in the top four most widely used browser in the world. Could they have reached that scale without their movement? Chances are probably not.
II. Buckle up, it’s time to build your team
“Never forget that hiring is the most important thing you do. People say this, but then they delegate hiring to recruiters. Everyone — EVERYONE! — should invest time in hiring” — Eric Schmidt
Not only do you have the daunting task of instigating a global movement to make your product relevant across the world, you also have to simultaneously focus on building up your team. And fast.
This can be challenging for a few obvious reasons. For starters, it will be the first time you and your co-founder will have to come to terms with relinquishing a bit of control. More people means more departments which means more moving pieces; likely more than you can optimally handle. Second, hiring the right people from the get go is incredibly important. It sets the tone, culture, attitude and mentality of your organization early on. So make sure you allocate enough time to this the first time around. Lastly, there all those difficult questions to consider after hiring your team that Michael Dearing emphasized to us during his lecture. Like:
- How do you get them to work together towards common goals?
- How do you give them the right amount of responsibility?
- How do you make sure the job gets done?
- How do you know how things are going?
- How do you do this with respect for others?
- Michael Dearing, along with every other individual who has ever been involved in management
It is a lot to think about for anyone; and especially a lot to think about for a start-up pup that is simultaneously trying to instigate a movement. Thankfully, Eric Schmidt, the king of hiring and former CEO of Google, shared some of his insights with us based from his time at Google.
Case Study 2: Google, the king of hiring
Part 1 — It’s time for you to relinquish a bit of control
It is 2001 and PC Magazine has just announced Google as the search engine of choice. The company is 3 years old, has $25 million in the bank, 11 employees and has just opened up a second office in New York. Larry and Sergey are twenty-somethings who have just been told by their investors that it is time to bring in some “parental supervision”. In other words, it was time for Larry and Sergey to hire an experienced CEO to help manage the influx of cash and scale the company.
Initially, the founders were against the idea. They didn’t want an outsider managing their company, it felt too corporate and they figured they could manage it just fine on their own. No one, not even their investors could convince them otherwise. That was until one investor in particular got the idea to take them around Silicon Valley to physically show them what CEOs were responsible for. Bingo. After physically seeing the day to day operations of a number of CEOs managing high net-worth companies, the two founders conceded…under two conditions. First, they would have complete control over the hiring and selection process. Second the new CEO would not be entitled to any stock options. Deal.
Larry and Sergey’s investors sent them a list of qualified candidates and Larry and Sergey followed up by inviting each participant to a one-on-one interview. According to US Today, 75 candidates were invited initially to be interviewed by the founders. Not a single one was hired, that was until Eric Schmidt came along.
Eric impressed the founders for a few reasons: he had both a coding and business background, he previously held high-level positions with two other high profile IT companies and he could sit in a room with the two founders, keep up with them intellectually while simultaneously not annoying them. And lastly, which according to Eric perhaps gave him that slight competitive advantage, he was a “burner”, aka he had attended a Burning Man Festival.
In 2001 Eric was brought on board as Google’s new CEO and immediately started managing Google’s chaos. Although it took the founders a bit of getting used to it didn’t take long for them to realize that having Eric around gave them more time to bring their visions to life.
Part 2 — Branch out. Focus on hiring normal people who have done exceptional things
Eric: I’d say we need people with this kind of experience.
Larry & Sergey: That is the stupidest thing we’ve ever heard.
Eric: Okay, so who do you want to hire?
Larry & Sergey: Incredibly intelligent people. They will figure out that what you want them to work on is stupid, and then they will work on the right thing.
For Google “incredibly intelligent” people referred to those that were from top tier Universities and had high GPAs. And in the beginning Google would interview these individuals over and over to ensure that they were indeed “incredibly intelligent”. For one man in particular this meant 18 interviews; the worst part was he didn’t even end up getting the job.
As Eric helped the founders take the company from 11 to 60,000 employees (can we just pause for a moment to realize what a feat this was. It’s like the Ironman of hiring. Go Eric and Co), he decided it was imperative that the team implement some policies to make the entire process more efficient and more human centric (e.g. it was no longer deemed okay to give someone 18 interviews… gee you think?). Further, he was now in a position to look back and identify what was working and what wasn’t. And not only from a process and procedures standpoint but also from a personal standpoint. In essense, he was getting better and better at identifying which individuals excelled and which didn’t after being hired. Below are some of the pieces of wisdom he imparted on us with respect to hiring that resonated with me most:
· Never stop hiring engineers; properly deployed, they can always generate enormous returns above their salary.
· Hire normal people who have done exceptional things, they tend to be keepers.
· Hire the divas. They will drive the culture and care passionately about the company.
· CFOs that have gone bankrupt are among the best hires. They have been through hell and back.
· The industry overvalues experience and undervalues strategic excellence. Focus on hiring people who can get it done or people who were going to do it anyways.
Part 3 — Be aware of your biases.
As Google began to systematize their hiring process its data started to reveal something a tad unsettling. On average, women that went through Google’s hiring process would more often than not receive a low interview score but go on to perform exceptionally well in the role. In other words, there was an inverse correlation between their interview scores and how well they performed on the job. The culprit: Hidden Bias.
By meticulously studying and following up on their hiring decisions and data Google was able to correctly identify that they indeed had a hidden bias against women. Way to go Google, you are one of few to look at your own data critically. After identifying the issue, Google actively started to implement strategies (hidden bias workshops, education, etc.) in an effort to identify the unconscious behavior before it was expressed through action. In doing so, they also set off a wave of similar actions from Facebook, Apple, Yahoo and others.
Key takeaways and lessons from Google that I will apply going forward:
When attempting to build up your team:
1) Don’t worry, relinquishing control doesn’t always have to be scary. Larry and Sergey came around to the idea by specifying certain conditions that made them feel more comfortable about the whole thing. Further, Eric helped them feel more at ease by reinforcing that he knew it was Sergey and Larry’s company from day one; a sentiment he continued to reinforce throughout his entire career. Both these made for a smooth transition and helped Google become the company it is today.
2) Don’t hire generic people, lean towards the brilliant and wild ones. It may take a bit more time to find and manage these individuals but it pays off in the long run because they will set the tone, culture, attitude and mentality of your organization. Plus they’re fun to have around.
3) Be aware of biases and put something in place in order to make sure you are accounting for it. Biases are a blind spot that you need to account for systematically. If you know they exist, you know there is something you can do to curb the effects of them.
III. What good is a team if you don’t have systems in place?
“Put metrics and dashboards at the center of your management team” — Mariam Naficy
Okay, so you have instigated a global movement, you are on track to have a team of exceptionally well-rounded wild and vivacious staff, and have made it this far in my long ass assignment write up, now what? Well, according to those who have forged the path ahead of us, the last step in the tribal stage is to get your systems in place. Updating 10+ people is very different than updating 1 and in the tribal stage, agility is everything.
Miriam Naficy, Founder and CEO of Minted, shared some insights with us as to how she managed to build a few systems at the centre of her business.
Case Study 3 – Minted, where systems come in all shapes and sizes
As a self proclaimed shopper and mall rat Miriam was quick to notice how fast consumers fashion decisions changed season to season. One day a hypothesis came to her, what if you could turn all design decisions over to the crowd? Could you, as a retailer, stay fresh and relevant forever? In 2007 Miriam launched Minted, a crowd sourced design company to find out.
It turns out the answer was a resounding yes. Both independent artists and retailers loved it and funders were quick to issue Miriam $11 million to build the idea up further. It didn’t take very long for Miriam to enter the tribal stage. She had succeeded in creating a movment among independent artists, had hired an entire executive team to help manage her company in a matter of months and was ready to install a set of systems to make everything run a bit smoother. These were the four systems she invested in:
System 1: Dashboards, succinct and repetitive dashboards
Thankfully for Miriam, she loves building dashboards (a graphical representation of key statistics that is updated consistently) and believes they are the absoulte best way to leverage herself and tranfer knowledge to her burgeoning GM’s. As a result, it was one of the first systems she implemented as CEO of Minted.
How did she go about creating it? She said it started with a blank sheet of paper and a pretty solid idea of what mattered most to her business. She then did her best to convert these ideas into relatable metrics. Once she had a few metrics down she would organize them into like-groups, integrate them into a user interface and then display them visually.
Reid: But what if you choose the wrong metrics for your dashboard, then what?
Miriam: The key is to create consistent questions from the beginning and not to change them; that is the only way to compare metrics over time.
System 2: Dashboard reinforcement
Given a dashboard’s value is derived directly from the use of that dashboard, Miriam quickly needed to ensure that both her and her staff used the dashboard effectively. But how? By creating yet another system; a reinforcement system.
Every Monday morning Miriam would gather her executive level staff and bring them together to review the metrics on the dashboard. In essence, Miriam’s second system (Monday metric meetings) reinforced the use of her first system (Dashboards).
How many of us can think of a product, tool, or piece of software in our organization that is being underutilized right now? Chances are there is no system in place to reinforce the use of that tool.
System 3: Survey Monkey
A product outside the business can also act as a system if everyone in the organization is accustomed to using it. For example, if your organization uses Slack as a mode of communication then your organization has implemented a communication system. Another example is Google Docs; do you continously upload documents to Google Docs so that your co-founder can review them? If yes, you and your co-ounder have implemented a document review system that relies on Google Docs.
For Miriam, Survey Monkey is a platform her and her staff use continously to poll Minted’s independent artists. “You wouldn’t believe how much Survey Monkey impacts our business.” Therefore, Survey Monkey is acting as another system in Mirima’s organization. The only difference being that the system depends on a product outside of the business’s control.
System Four: Peer-to-Peer Feedback
The last system Miriam discussed with our class is one that she had recently implemented. She conveyed to us that she had reached a point in her career where she no longer wanted to be the only person holding others accountable and delivering the bad news. Who can blame her? And so she started to develop a system to fix it; a peer-to-peer feedback system.
Given that Miriam’s peer-to-peer feedback idea had been somewhat recent, it hadn’t quite become a full-fledged functioning system at the time of her discussion. That said, it sounded like she had layed quite a bit of groundwork so that it could become one in the near future.
For instance, she had already asked her staff to read the book The Five Dysfunctions of a Team by Patrick Lencioni to introduce the idea. She had already started to coach her employees on how to become more accountable and most recently, Miriam hired a coach to help her executitve team start to learn how to give their employees appropriate peer-feedback.
My bet is that in a few years Miriam will have a self-enforcing peer-to-peer feedback system; one that is just as strong as her Monday morning metric meetings and her company’s use of Survey Monkey.
Key Takeaways and lessons from Minted that I will apply going forward:
1) Think broadly when choosing your metrics. One of the first metrics Miriam wrote down on her blank piece of paper, before it was turned into a dashboard, was NPS (Net Promoter Score). NPS measures the likliehood that your customers will recommend your product or service to their friends and/or colleagues. Miriam chose this metric for two reasons. First, her business model was almost based entirely on word of mouth, therefore knowing the likliehood that customers would recommend Minted to their community was clearly important. Second, by tracking NPS Miriam knew she could immediately compare her score to other companies NPS scores as well as to an industry benchmark. In other words, Miriam chose a metric that not only suited her model but also enabled her to immediately track her business’s success.
2) Don’t be tempted to change your metrics once you have landed on them. The reason Miriam advizes against this is because comparing metrics over-time adds quite a bit of value. Think about it, if you have access to historical data you have hindsight. For instance, you have a pretty good idea of seasonal changes in your organization, you have a pretty good idea of your historical track record, you have a better idea how you are doing relative to other years, etc. In essence, you have access to the ebs and flows of your business. Now, lets assume there is a metric out there that you think might be stonger than the one you have been currently tracking? Well, you have to ask yourself is it worth it to give up your historical context?
3) Systems come in all shapes and sizes. In Miriam’s case she had a customized product system (a dashboard), a reinforcement system (a Monday morning metric meeting), an outsourced product system (Money Survey) and even an embeded employee system (peer-to-peer feedback). The definition of a system is a set of connected things or parts forming a complex whole, in particular. In other words the possibilites are endless. Don’t limit yourself when it comes to implementing systems.
Conclusion
If you succeed in the Family Stage and make something users love then you get a shot at the Tribal Stage. And although the Tribal Stage seems like a hefty toll — instigating a global movement, building up your dream team, implementing systems so that your dream team can function — if you can pull it off you get the ultimate satisfaction of adding something you curated to the world market; the holy grail for any start-up founder.
Sam Altman, Michael Dearing, Ann Miura-Ko, John Lilly, Eric Schmidt, Mariam Naficy each were kind enough to share their holy grail stories with us and although much of what they said, and I reiterated, wasn’t anything new per-say it absoultey helps to have stories of your predecessors to refer to. Not only that but their stories keeps us dreamers convinced in the worst of times that the “holy grail” isn’t just some fallacy, it actually exists. And that by building a great product, getting things done really quickly and being ridiculously resourceful it could even happen for one of us. I mean yes, statistically speaking the odds are certainly against us but in a year where Donald Trump has a realistic shot at becoming the President of the United States, it’s hard not to believe anything is possible.
Next up, the Village Stage.
P.S If anyone is intersted in any of the Blitzscaling lectures, Reid and the Crew made sure they were free and available for anyone. They can be accessed here: https://www.youtube.com/user/greylockpartners/videos
