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November 01, 2011

Top 5 Scaling Lessons From Superhero CEOs

JLA
Scott Kirsner of The Boston Globe called them the startup equivalent of the Justice League of America. Seven superhero CEOs gathered on Friday afternoon at the Mass TLC Unconference to discuss the challenges of scaling their young companies. The CEOs on the panel were (from left to right):

  • Michael Simon, CEO/founder of LogMeIn (2009 IPO) 
  • Scott Griffith, CEO ZipCar (2010 IPO)
  • Gail Goodman, CEO Constant Contact (2007 IPO)
  • Niraj Shah, CEO/cofounder of Wayfair ($500m revenue)
  • Colin Angle, CEO/cofounder of iRobot (2005 IPO)
  • Paul English, CTO/cofounder of Kayak ($200m revenue, S-1 filed)
  • Matt Lauzon, CEO/cofounder of Gemvara (reportedly $10m revenue) 

The panel was particularly fun because the environment was very relaxed - the Unconference uniquely creates a dynamic free-for-all where different topics are created spontaneously and teams are formed throughout the day to address big issues.  This panel on scaling was touted by Scott over the course of the week via numererous tweets and so attracted a large audience.

Here were some of the key takeaway lessons from this august group:

1) What Got You Here Won't Get You There. Each of the executives talked about tough decisions that they had to make with early team members that helped build the company to the point of scaling, yet held them back because they didn't have the right skills to lead the organization to the next level.  An "A" executive during the scrappy start-up days has a very different profile than an "A" executive at scale.  To drive this point home, I often use a metaphor called The Jungle - there are three stages to the life of a company: The Jungle (where you are hacking away to find a path), The Dirt Road (where the path is established but still bumpy) and The Highway (where the path is smooth and it's all about achieving maximum speed in a well-defined direction).  It is a rare executive that is skilled at two of these stages and nearly unheard of to be great at all three stages.

2) Outside Catalysts Force (Healthy) Change.  Sometimes you need an outside force to act as a catalyst to change the way you do things from scrappy start-up to more process-oriented, scalable business.  The CEOs pointed to this frequently, whether it was an acquisition (cited by Paul English when they acquired SideStep), global expansion (cited by Scott Griffith when they entered the UK) or filing for an IPO - these event jolted the organization into changing the way things were done in a very positive fashion, forcing discipline and processes that didn't exist previously.

3) Create a Culture Based on Integrity.  Paul English pointed out that the word integrity has an important definition beyond truth, and that is consistency.  His point being the consistency of the culture that emanates from the leadership is critical to help companies as they scale.  The implication, which resonated with the others on the panel, was to avoid creating a culture that is inconsistent with your identity and your authentic core as a founder.  Pursue the priorities that get you personally fired up.  Niraj Shah cited the fact that he avoided taking outside money for over 10 years and ignored much of the outside advice that urged Wayfair (fka CSN Stores) to over-expand as an example of staying true to your authentic self  and what strategy feels the best reflection of your mission.

4) Nothing Comes Easy.  When young entrepreneurs read about the success stories of founders like the ones on this panel, they sometimes forget that there were many ups and downs along the way - and there still are!  Many of these companies were "10 year old, overnight success stories" and each of them had their struggles.  Michael Simon talked about taking years to discover the business model that led LogMeIn to be so successful.  Niraj Shah joked wryly that the Wayfair rebranding resulted in his company going from low brand awareness to no brand awareness and each of the public company CEOs clearly struggle quarter by quarter to drive results and demonstrate success.  Michael Simon told me before the panel, with a smile, that when his stock goes up, it's because of LogMeIn's strong business momentum and when it goes down, it's because the market is having a bad day.  None of these CEOs are resting on their laurels.  Gail Goodman once told me she felt Constant Contact was in the second or third inning of a nine inning game.  And she's been CEO for 12 years!

5) Alignment, Alignment, Alignment.  Gail Goodman hammered the importance of alignment.  Some of her investors were ready to sell the company when it hit $30 million of revenue and over $100 million of market value.  She wanted to build a billion dollar company, and had to find investors that were aligned with this bigger vision.  

I could have listened to this panel of CEOs all day.  The hour went by way to fast and I hope there is a sequel coming soon - we need the Justice League to point the way to acehiving entrepreneurial success and scaling!

Ironically, the panel was conducted a day before an interview with Mark Zuckerberg, where he indicated that if he were starting Facebook now, he would have stayed in Boston.  I guess others are noticing that you can scale great companies in Boston nowadays! 

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Hi there, thanks for the nice article. Is there a complete transcript or videocast of this panel discussion available?

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Yes - on Scott Kirsner's Innovation Economy blog at Boston.com.

Thanks a lot!

Great article for those of us in the growth mode of our start ups. The first point about your team of executives being different at the start-up level then at scale being different has been true with the four companies I've worked with.

Excellent points from the people who have walked along the path of start up to major corporations.

This is the best article I've read in a long time. Thanks so much for sharing these thoughts, there is a lot of meat here. I love the perspective of being in the 2nd or 3rd inning of a 9 inning game after 12 years...you could only really feel that way (and be happy about it) if you built a company that you truly loved building.

In light of the first comment, it's interesting that the majority of the panel are co-founders who did manage to scale their companies very successfully. Would you say they're the rare executives who can succeed in the Jungle and on the Dirt Path? Or have they succeeded by redistributing executive responsibilities as their companies scaled?

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They’re very special founders who have been able to personally scale by surrounding themselves with strong managers. 

while true, I hope the executives that get canned get some good severance for the time that they put into the company. As putting in all kinds of effort to start them up only to get kicked to the curb when things start going well is probably a heart breaker for them.

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