Archive for the ‘Venture Team’ Category

A Chat with John Chambers

jchambers4I wrapped things up in Cisco at the end of May and moved onto Kansas for the last week of the Kauffman Global Scholars Program ’08. Before moving on however I completed my project on the Connected Technologies for the IBSG team at Cisco. Before I left I also had the privilege to talk with John Chambers (wiki, Bio, Time, Forbes) of Cisco Systems. Since January 1995, when he assumed the role of CEO, John has grown the company from $1.2 billion in annual revenues to its current run-rate of approximately $40 billion. In November 2006, he was named Chairman of the Board, in addition to his CEO role. I managed to get some of his time and attention thanks to a common friend of ours. The main question I had for him was simply what advice he would give to aspiring entrepreneurs, and what motivates him now that he is CEO of one of the biggest companies in the world. His advice to aspiring entrepreneurs is below, some of which is reiterating what I had heard throughout my time as a Kauffman Global Scholar, but coming from a MNC hi-tech titan such as John really pushes the statements home:
1. Markets
– Try to catch a market in transition
– Come with the capability to differentiate yourself from your peers in a market
– Be realistic – have you got a market in transition
– Be realistic – does your business actually differentiate you from your peers
2. Team
– Its all about the quality of your team
– If you have a great team that you can motivate well – its hard not to be successful
– If you have just very average players – then its very difficult to win

When I asked him about what motivates him:
3. Motivates him now:
– Building a company that has the chance to be the best for the world, and best in the world
– Cisco’s role in the hi-tech industry has the chance to really dramatically be different from any other hi-tech company in history, and also to be dramatically different in terms of how they’re viewed in the world, and not only how they give back, but how they’re able to partner with countries, companies and citizens in a unique way to really make a difference in their lives and the standard of living of their organisations
– He considers Cisco a family; one that works together towards common opportunities and common challenges, and its one that really cares about each other and one that is probably one of the best places to work. They watch out for each other like a family. Its making that difference that motivates him, and realising that it is a once in a life opportunity for everyone
4. Motivated him initially:
– Loves competition
– Loves building organisation
– Loves teamwork
– Loves to win
– Loves to sell (admitted candidly!)

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Dilemma: Rich vs King

One topic which has come up time and again during the Global Scholars program has been the issue of Rich vs King. Noam Wasserman from Harvard HBS wrote an article on “The Founder’s Dilemma“. It describes how most entrepreneurs want to make a fortune and run the business singlehanded. But as Wasserman reveals, it’s tough to do both. If you don’t figure out which matters most to you as the entrepreneur/founder, you could end up being neither rich nor in control. Consider that:
– in order to make substantial money from a new venture, you need financial resources to capitalise on the potential opportunity. That means attracting investors— which requires relinquishing control as you give away equity and as investors alter your board’s membership.
– to remain in charge of your business, you have to keep more equity. But that means fewer financial resources to fuel your venture. So, you must choose between money and power. Wasserman suggests that one begins a new venture by articulating their primary motivation for starting the business. Then to understand the trade-offs associated with that goal. As your venture unfolds you must be monogamous with that goal, and make choices that support, rather than jeopardise it.

Cisco FoundersAs an example, Cisco was founded by Stanford graduates Sandy Lerner and LenBosack in 1984. John Morgridge, the first CEO managed to push out the 2 founders in 1990, following difficulty between him and Lerner. Lerner has been described as a “powder keg of passion and emotion who couldn’t conform to the discipline and methods of business management”. Morgridge couldn’t make her fit in, so she was asked to leave and Bosack soon quit thereafter. This is a good example of a Founder struggling to deal with removal from the “King” role and ultimately being forced out of the venture.

The CEO of startup XYZ who I have met in Silicon Valley, and who is at Series C VC funding, approaches his position as Founder CEO pragmatically, or at least this is what he communicates. I found his attitude very interesting – that he goes to work everyday knowing that it could be his last as CEO of the company he founded. When we met him he acknowledged that any day the VCs involved with his company could decide to replace him as CEO, and that he was willing to accept this decision. I was unsure whether I believed him but was willing to give me the benefit of the doubt. Noam Wasserman suggested that CEOs will often tell VCs that they’re willing to stand aside at any time, but whether they mean this is a completely different matter!


My View: Through my training as a Global Scholar I have learned that the Founder does not encapsulate the company. One should always separate themselves from the business entity from the start. It’s important to consider what’s best for the business as a sole entity, separate from the interests of the founder(s). This is the approach adopted by the Stanford Enterprise Center regarding University spinouts – they actually make founders apply to the Enterprise Center in order to obtain the license for technology they themselves created – thus competing with any other company for rights to develop the technology/concept/business! This is basically the Rich approach, as apposed to King, as it necessitates relinquishing equity to foster rapid development.

This is a hard lesson to take on board in my opinion. To generate new business concepts or technologies with the altruistic view that they are separate encapsulated business entities, and to always act agnostically in the best interest of that technology or business (i.e. solving the real world pain most efficiently) is a difficult position to take. But again the decision to take this position comes back to why you’re creating the business in the first place. If you’re creating the business to resolve some real-world pain/problem then this should be the focus regardless of whether you’re CEO or not. Letting one’s ego/emotions get in the way (the King approach) of the rapid progress and development of a business (e.g. seeking VC) which solves this “pain” should perhaps be considered selfish/self-centered/egotistical? I’m not sure there’s a right or wrong answer to this issue, but if you surrounding yourself with an ‘A’ team (including management, investors & advisory board) then I think you should certainly be able to find appropriate resolutions. Some more thoughts…

It seems ridiculous that a founder should have right of passage to the CEO position when a company is functioning and operating 100%, and is significantly funded by external entities. If one doesn’t have experience in such a role, why would it make sense? Founders’ passion is an essential ingredient to the persistence required at the startup phase. It can assist a founding CEO in evolving and learning rapidly on the fly. OR this emotional attachment could hinder their ability to function effectively as a MNC’s CEO, and make logical decisions about the company’s future.

However this is my view on the theory behind the rich vs king (Founders as CEOs) dilemma. In practice I would deal this issue dynamically, by having a candid/open/honest conversation with potential investors to discuss my intentions/desires to (not) maintain the CEO position. I would establish clear grounds under which I would maintain or relinquish the position, and the consequences of each:
– Maintain it: if milestones and targets are met. Subsequently increased job (CEO) security (and other incentives) could be provided to allow the CEO to function more effectively and under less unnecessary pressure.
– Relinquish it: a worse case scenario could be established to allow the founder to take another position in the company, perhaps as CTO or as right-hand-man to the CEO? This could take the form of the Founder “Co-CEO” using their extensive knowledge of the business and intimate understanding of it to compliment the new CEO’s superior management and economic knowledge.

There may be various possible solutions to the ‘Rich vs King’ dilemma but I still think that having the right type of management, investment, advice team is key. This has been reiterated by alot of the thought-leaders I have encountered in the Global Scholars program. But most recently this was advice given to me by the Cisco kingpin himself – John Chambers!

Building Teams & Social Networks – Howard Aldrich

copy-of-img_4650.jpgDay 16, Monday 11th Feb: Week 4 was preceded by some quality R&R in Ponca City, Oklahoma, over the weekend. Owen and I visited my girlfriendsfamily down there for a couple of days. Without detailing too much and shaming the Kauffman Global Scholars program for all of eternity we went to a shooting-range, were in awe at some buffalo up close, laughed at stupid prairie-dogs, felt intimidated by real cowboys at a calf roping competition, had quality BBQ, and last but certainly not least swallowed a beer or three!

aldrich.jpgWeek 4 kicked off with our last seminar at the Kauffman Foundation by Prof Howard E. Aldrich titled “Building Teams and Social Networks”. Howard is professor and department chair of sociology, and adjunct professor of management in the Kenan-Flagler Business School at the University of North Carolina. Prof Aldrich researches entrepreneurship, the origins of new organizational populations, gender differences in business management, organizational evolution, and the process by which entrepreneurial teams are founded. He alluded to many of these areas during his seminar with us, but focused primarily on the use of LinkedIn.com in forming strong professional networks. Howard emphasised a few points including:
– Why aren’t individuals more connected?
– Overlapping ties, social barriers, uncertainty, trust
– Need a broker to make connection between you and target contacts
– Direct vs. indirect & strong vs. weak contacts
– Strong ties -> homogeneity -> easier comms -> consensus -> ignoring incumbent truths
– Weak ties ->heterogeneity -> diversity
– Contact list = weak ties -> couldn’t vouch for if asked
– LinkedIn (in Howard’s opinion) = strong ties -> could vouch for them
– He worked through one scenario with us of who we’d make one critical phone call to in an emergency-type situation where we could be sure that person would help