How to Kill a Baby Unicorn
There are ways to fail at being a 450 person company… there are a lot of failures at this point… so when you look at the current giants they’re not just there because “oh I got the right app and I had the right product market fit and now I just hang on to it and I just do what any smart person does”… there’s a bunch of art in how you build these companies
To me this is an uncomfortable truth. My company is a year old, we’ve built a product I’m extremely proud of, and we’re on our way to establishing product market fit — I’d assumed that once we firmly achieved that, the worst would be over.
But that assumption is dangerously naive — MySpace, Friendster, Orkut, and countless others haunt the graveyard of companies that failed in later stages of scaling. It appears as though getting things right early on just earns you a ticket to the main game.
And so, invigorated by fear, I’ve paid close attention as Reid, Allen Blue, and Eric Schmidt outline the common pitfalls that companies make as they advance from the family and tribal stages (1 to 10s of employees) into the larger village and city stages (100s and 1000s).
Timing is Everything
Reid has this to say:
I wrestled a lot with the term ‘Blitzscale’, and the reason is there are a lot of good and interesting parallels with the term ‘blitzkrieg’… prior to blitzkrieg all war was done through a supply chain… so you had a maximum speed you could advance your front. The essential innovation of blitzkrieg was “to heck with the supply chain — go fast”… once you got to your half way point of your intended battle, if you cross that you win or lose big.
If you lose, you lose terribly.
Thanks Reid, that’s comforting.
This begs the question — how do I know when my company is ready to scale? Eric Schmidt offers some advice.
If you don’t understand the subtlety here you would conclude that the goal here is to grow everything as fast as you possibly can everywhere — let’s just make as many engineers, as many products, as many sales people… and that just doesn’t work. It doesn’t work because ‘no product shall ship before it actually works’… you have to have judgement about when the product is ready to scale against it.
Eric suggests that a good indicator that your product is ready to scale when people are actually using it — when you’re experiencing consistent user growth over several months.
Nobody at Google used Wave… how many people do you see walking around Stanford using Google glass?
I haven’t been to Stanford, but I’m assuming the answer is “not many”.
Communication is Also Everything
150 people is Dunbar’s number — a suggested cognitive limit to the number of people with whom one can maintain stable social relationships. Once the number of employees in your company exceeds 150, communication and coordination becomes a problem.
Reid suggests that companies ask themselves these questions:
What’s a culture that defines parallel action across a large number of people, and what’s a way of articulating the plan that most people know how to coordinate with one another
When the company is small it’s not really necessary to formalise communication about these issues, as it’s constantly being discussed and worked out.
However, in a larger organisation it becomes more difficult to ensure that everyone is working towards the same goals. Allen Blue talks about the importance of focus:
Almost always there’s a set of critical components you actually have to focus on. You don’t have to focus on everything…. You can’t do everything perfectly, so the question is what are the 2 or 3 things you have to get right.
For LinkedIn those 3 things were Product, Go to Market, and Engineering, but they should be particular to your company.
Reid and Allen both advocated the need for clear and concise documentation of the company’s mission, values, and plan. They both had ample praise for the presentation and documentation that Jeff Weiner put together for the company in 2010…
Allen:
This is the first time in the company’s history that we had to be executing on multiple threads simultaneously. When you’re a smaller company you’re generally going to do one thing really well… now you need to be able to execute at 3 or 4 things at scale all at once, which is why you need to be able to sum it up like this.
Reid:
We knew a bunch of this stuff, but we’d never constructed a document like this ’cause we weren’t trying to figure out how to get 500 people and growing to all be executing on the same plan
Good managers and executives are constantly reminding their teams what the goals are, and what the mission is. When you know that everyone else is working towards the same goal, you can make reasonable assumptions about what others are doing, and you can behave accordingly.
Hiring is Everything Too
Eric Schmidt reinforces why hiring is so important
The way you build great products is you have small teams with strong leaders who obsess over tradeoffs and they push things off and they say “we’ve got to get it done”, and they put a lot of pressure on the team and they work all night and they produce a product that just barely works…
Hiring in the early stages of a company is easier in some ways — you’re often hiring friends, family, and former colleagues, and you’re selling the opportunity of building a company from the ground up. Reid points out that when you’re hiring in the later stages you have to sell a different vision, more aligned with your company’s grand mission.
In LinkedIn’s case, they’re offering the opportunity to have a global impact on the lives of professionals — opening them up to more opportunities and allowing them to be more productive.
Eric Schmidt agrees, going so far as to imply that you don’t want people who don’t quickly understand and believe in the company’s vision:
There is a way to systematically hire better people than anybody else. What Bob Tailor who I interviewed yesterday… said was “sell the dream”. So here’s how he funded the ARPANET… he called up people and he described what he wanted and they either got it and got incredibly excited, or they didn’t, and if they didn’t he just went to the next person… how hard is that. Well if your idea is pretty good, if the person is sufficiently dull that they don’t get it, then are they going to get it after some persuasion? Probably not. You want somebody quick.
This really resonated with me — I think largely because my startup is incredibly divisive, and I’ve spent countless hours trying to get people to see what I see. I’ve recently started to learn that the opportunity cost of these battles of persuasion are very high, and I’m better off ceding the debate and giving myself more time to find the people that immediate love the concept.
I also think it’s interesting that Eric references a fundraising technique as a way to hire. It’s a reminder that whether you’re hiring, fundraising, or acquiring users — you’re selling.
Eric also offers this contrarian advice:
Hire the divas. Traditional management books say they’re a pain in the ass, and they are. But the divas that believe in your vision are the ones that will drive your culture of excellence. Steve Jobs was a diva. They expect a lot, they drive people hard, they’re controversial, and they care passionately… the industry over-values experience, and undervalues strategic and intellectual flexibility, and I feel strongly about that.
In Conclusion
A baby unicorn is a lot more fragile than you might expect — there are a lot of things that can kill it, and there’s a lot you have to get right to make it grow.
However, if you scale at just the right time, you’re diligent in your planning and communication, and you hire well, there’s a chance you’ll make it to the next level.
