Build A Recursive Organisation Where Everyone Thinks and Acts Like A CEO
For all the glamour that goes with being a young, Silicon Valley start-up CEO, the minutiae can be quite something else.
In the undisputed tech hub of the world, there is no dearth of brilliant ideas and talented founders. Yet, 9 out of 10 new businesses fail, and of the ones that do take off, several struggle to achieve scale. Young founders are no strangers to the frustration, long hours, doubt and loneliness that go hand-in-hand with being the CEO of a fledgling enterprise. What, then, does it take for entrepreneurs and companies to become successful and build resilient organizations?
It’s a question we, at AnuPartha, put to Keval Desai, ex-Googler and now a venture capitalist with InterWest Partners, with over 20 Silicon Valley start-ups in his portfolio. Having honed his skills at Google since its early days where he led development of products and businesses in Google’s advertising business including AdWords, he has imbibed the culture of an organization that is the model for almost every company in the industry. Google consistently innovates with products, and has been the launch pad for many young ex-employees to start their own successful ventures, so it would be fair to say that he has learnt from the best.
In his career spanning over 20 years, Keval has acquired his own unique wisdom about what it takes for CEOs to build successful and sustainable companies in today’s world, staying resilient in the competitive tech start-up world and the importance of the right kind of leadership talent to the success of a company.
Holistic Thinkers are the Building Blocks of Resilient Organizations
To build organizations that last, a company has to start with the right building blocks, and for Keval Desai, ‘Holistic’ thinkers are that key component. Typically, “holistic thinking” refers to a big picture mentality in which a person recognizes the interconnectedness of various elements that form larger systems, patterns and objects.
In Keval’s definition, in the context of the venture world, Holistic Thinkers are those who think and act like a CEO at whatever stage of the corporate ladder they are at. Even though they may be specialists at the top of their field, they constantly ask themselves questions like: “Who is the customer? Will it eventually have a business model? How do I go to market with this product?” As a result, they take better and faster decisions, says Keval.
“When hiring, you don’t just ask if the person is the best engineer, lawyer or finance person. You ask if the person can think and act like a CEO.” tweet
The importance of holistic thinking in today’s business climate comes up often, and very strongly, in the conversation with Keval. He argues that while in yesteryears, it was the norm for the CEO to make decisions based on information that took days or even weeks to compile, today’s CEOs don’t enjoy that luxury. Now information can be gathered, processed, delivered and executed in seconds, because technology has made it possible. “Technology advancement effectively means having to make decisions in a shorter period of time, and so you need the best people to make those decisions for you,” he says emphatically. What sets the winners apart is the ability to act quickly, and decisively, at whatever level they are at in the organization.
He says that several companies have a very stringent and lengthy interview process today, precisely because they believe that hiring right is the best, and often the only, way to ensure continued excellence and innovation. He shares one of his secrets to identifying holistic thinkers among the throng of gifted achievers: ask whether they have taken the initiative in their youth to start something of their own, as opposed to following someone else’s lead.
“Maybe they started a lemonade stand or a book club, maybe they started a new chapter of their fraternity. These people started something. Starting something, as opposed to joining something, is a hugely important signal to see if a person is a holistic thinker.” tweet
Contrary to conventional belief, Keval considers hiring pure specialists as a death-knell for organizations. “It’s okay to hire a specialist but that person has to have the lens of a CEO,” he states firmly.
Build Recursive Organizations, Where Ideas and Leadership Can Come from Anywhere
At a macro level, what does a group of holistic thinkers mean for an organization? Keval draws from the computing analogy of recursion to spell out his view of how the whole eventually is more than the sum of its parts. A recursive organization is made up of holistic thinking individuals who relate their function to growing the business, and eliminate a lengthy feedback loop as they have the autonomy to think and act like CEOs. Effectively, everybody is like a CEO. He goes onto explain, “If you really want to survive, you should have an organization that’s like a banyan tree. It starts with one trunk, but the branches go back to the ground, and they become trunks themselves, and with time, you don’t know which the original trunk is!”
“Resilient organizations have flatter, non-hierarchical structures, like a banyan tree, where ideas can come from anywhere.” tweet
It is a particularly apt analogy for survival, as it stresses on the importance of pursuing growth from the ground up, outward and upward. Reflecting on the glory days at Google, he says some of Google’s best applications came out of such a process. “One engineer at Google figured that they should be doing search-and-email, and that became Gmail; someone else said we should be doing search-and-maps, and that became Google Maps!”
CEOs Must Aspire to Have a Hands-Off Approach if They Want to Scale
Keval has an unconventional, albeit very successful approach to being a CEO, which is no surprise given his training ground. He extends the banyan tree analogy to what he believes a CEO should do, post the initial phase, to scale his company. Just as it is difficult to make out which is the banyan tree’s main trunk, a CEO must adopt a hands-off approach to running his or her company as well. This means that he or she should create entities within the organization that survive and run on their own, so that the CEO can almost approach it from a distance, as a guide. This evolved, upgraded, role is not very different from the role a venture capitalist plays in managing the various companies within his/her portfolio. “If you have done the basics of hiring the right people correctly, then it is a natural progression to scale and grow the company,” he admits. It isn’t easy for a CEO to hand over the reins of an organization he has built, and not all CEOs do it well, he confesses, but it is a move that is imperative for growth and survival, in his opinion.
“It is a hard decision, and that’s why many companies get to be a billion dollars in market value, but they don’t become $100 billion companies, because the CEO-Founder doesn’t make that all-important transition — from thinking like a CEO to thinking like a venture capitalist!” tweet
Every Start-up Founder Needs His or Her Eric Schmidt!
As a VC, Keval places great importance in the value of an outsider perspective to improve a Founder CEO’s performance, with the eventual goal of growing the company. He believes that in most cases, the value of a coach cannot be stated enough. “Every CEO needs his or her Eric Schmidt, or Bill Campbell!”, says Keval, reflecting on the insight he gathered, again while at Google.
Schmidt played the role of Coach for Sergey Brin and Larry Page during the early, critical years at Google. It might be counter-intuitive for a CEO to have a coach; after all, a CEO is supposed to be the best person available for the job, and herein lies a critical detail, believes Keval. The CEO-Coach that Keval describes isn’t just another professional executive coach, but more someone who’s been-there-and-done-that, and understands entrepreneurship by virtue of the fact that he/she has built and scaled one or more companies successfully.
“There aren’t too many good coaches, there are a few. A lot of them often come from those organizations that have themselves used coaches to a great degree of success.” tweet
A Founder CEO in turn identifies a coach as someone with whom he/she has a strong emotional connect, someone in whom he/she can place implicit trust, and an individual who would be a great sounding board to work through problems with possible huge consequences. Understandably, these coaches are very niche in profile and are not easy to come by. Why, Larry and Sergey bonded and got to know Eric Schmidt at Burning Man, the unique annual festival-in-the-desert that celebrates community, art and radical self-expression! It’s that kind of ‘connect’ that works wonders for a successful Coach-CEO relationship.
He is very careful to make the distinction between a CEO-Coach and an Investor Board Member. In some cases, he considers a board member to be more critical in adding value to a CEO’s decision-making but maintains that his philosophy as a VC prevents him from being overtly involved in the operations of a company. His ‘select well — empower — let go’ approach holds true in this case as well. “As always, a founder or CEO is free to pick the path ahead in the way he best deems fit,” he confesses.
“Right from when I invest in the company, I tell them that they can scale themselves by growing in a recursive way.” tweet
You Must Fail, and Fail Early, but Don’t Make a Fatal Mistake
Keval compares the approach of a Coach to being a parent, and credits Eric Schmidt for the idea. Schmidt had told him that becoming a parent makes an individual a better CEO or coach. Just as a parent gives their child well-meaning and selfless advice, a coach feels responsible for a company in much the same way. “You want your child to do well, but you have to let them make their own mistakes. You only intervene when you want to prevent them from making that one fatal mistake.” Keval admits that it took him becoming a parent to know the truth behind that advice. Extending this philosophy to his own VC career, he says, “If I see a CEO doing something that could possibly kill the company, I step in and help prevent that from happening. But again, most people are not going to do that, so I usually let them make their mistakes, and allow them to fail. I have learnt over time, that you are most effective as a VC when you align your interests with that of the entrepreneur, and your relationship is that of a friend, philosopher & guide.”
He admits it is a tricky situation to be in, because it is not easy watching something you are invested in do badly, but concedes that it is a way for CEOs to develop trust in the guidance of outside counsel. Not surprisingly, this is marred by the Smart People Paradox. In his own words: “The smarter you are, the less likely you will be to listen to advise from other people, not because you are a bad listener, but because you are smart, and you rationalize that you will not fall into the trap.” But Keval warns that in trying to protect themselves from failure, the smartest CEOs often over-think solutions and end up neither innovating nor reinventing.
“The best thing that a VC or a Coach can do is get entrepreneurs to make a non-fatal mistake sooner rather than later.” tweet
Turning a Couple of Silicon Valley Myths on Their Heads
Keval’s VC investments stand out because he has 8 women CEOs in his portfolio, and out of 7 board seats, 4 are women CEOs! This is somewhat of a rarity in Silicon Valley where popular opinion holds that women are still making inroads into what is a white male dominated domain. “We are just looking for great CEOs”, he says. “We have always had women CEOs. It is not like one day we woke up and said, hey let’s invest in women entrepreneurs. We have been investing in great entrepreneurs, and so you have half a dozen women”
“I don’t think you need women oriented strategy to fund great women entrepreneurs. Fund great entrepreneurs and you automatically have lot of women in your portfolio!” tweet
Keval believes that there is a tremendous opportunity for new businesses from emerging markets, and a VC would do well to acknowledge that outsiders to the Valley bring with them a fresh perspective, and an emerging market realization, that people within might sometimes take for granted. For instance, he sees a lot of promise in the mobile internet space, especially in emerging markets, simply because their outlet of communication with the world is the mobile phone and not the desktop PC, so the opportunity to scale a business is tremendous. “People these days find it easier and more convenient to first get a smart phone to connect to the internet, rather than a PC!” Citing the example of the success of the mobile messaging platform WhatsApp, he says, “There was an emerging market realization that somebody in Silicon Valley had because they were from the emerging markets and really knew their markets and customers.”
Knowing how to lead and scale a company isn’t a precise science. There is no fail-safe rule book and no one-size-fits-all approach to making it big. Each entrepreneur has to tread their own unique path to success, but there is a lot to learn from the Keval Desai mantra for success: that if a CEO hires the right people with a holistic, long-term view of the company, if he/she succeeds in getting the backing of a competent and caring coach and if he/she has the humility enough to learn from mistakes early, then they could well be on their way to making a mark in their area of choice.
Originally published at www.anupartha.com on July 27, 2016.