Large company managers predict the financial outcome of their companies. Startup CEOs sketch a story about what might happen.
Giant corporations are like huge ocean oil tankers: they have to be extra careful and know precisely when and where they must turn to avoid crashing on the rocks. New enterprises are like opportunistic squirrels looking for nuts on the forest: they move in short jumps, remain alert in anticipation of surprises (good or dangerous) and make immediate course corrections to exploit fresh discoveries or escape ruin.
Managing a startup is different. Its financial forecasts are updated on the fly, as soon as new information arrives. Weekly updates of sales for the next six months are typical. Changes are expected, even encouraged, by boards of directors familiar with what it takes to get the most out of a startup.
Large company managers are unaccustomed to such uncertainty. They take pride in predicting a financial outcome for the next twelve months and "bringing in the numbers on the money." Wall Street does not like surprises, even large positive ones. Uncertainty is the enemy of stock analysts and investors in shares of public corporations.
In a startup investors and the board of directors do not like missed opportunities or lack of prompt attention to trouble. If the startup CEO hits the numbers on the penny but misses three huge orders because he did not react fast enough, the CEO is immediately put on probation.
That is one primary reason why it is so difficult for a successful VP from a famous public company to adjust with success in his first startup. It also partially explains at least to me why some first-time founder CEOs do very well with their first startup: they do not know any other way to manage a new enterprise.
Think about the consequences for a CEO having to live with such uncertainty for the first time: Your managers will be just as dynamic, full of surprises, changing day to day in response to fresh discoveries, rude surprises and eager to exploit new opportunities. It is one source of the phrase "Managing a startup is as difficult as herding cats."
The organization is similarly dynamic. The org chart is obsolete from day to day as people simply "do what has to be done" regardless of who is responsible. A CTO calls up an alternative vendor and cuts a superior deal for equipment (because the CEO and VP Engineering are up to their ears with other problems). A Director of Marketing flies to Japan to fix software glitches and calm down a key customer (because Customer Service is up to their waist in alligators from angry customers). And so it goes in a startup. There is no time to argue about turf wars or pride or who did not do what when and why. Startup people simply jump in and do what has to be done.
The CEO trick is to keep everyone on the same track while the track is being bent by the company people in new directions. That is why startups are so intensely personal and closely communicative. Meetings are done in the hallways on the way to other meetings. Instant messenger chats are normal. Emails over the weekend disclose new software modules ready for hook-up. Mobile phone chats on the way to work change the agenda for the next three meetings of that day.
This also explains why a healthy company culture is so important. Its values guide people working together (that is the literal meaning of the word "co-pany" derived from Latin: People gathered to break bread together.). Trust emanates from a healthy culture. So does honesty and transparency. And humility. The technical genius behind the now famous ETFs (electronically traded funds) once said to me "It is amazing how much you can get done when no one cares about who gets credit for doing it." Whatever the culture, it is important that people fit it, regardless of technical skills and what school they went to. That frees people to be innovative, creative and courageous (and wise) risk takers. It produces the Googles of each new wave of opportunity.
There are other implications for managing predictions, including managing the board of directors, venture capitalists and the media. I'll address the related issues next week.
BOTTOM LINE: Respect how uniquely different it is to manage a startup. In new enterprises, stories and sketches trump predictions and precise outcomes. That is difficult to adjust to the first time for a manager from a successful public company. When you understand that, you will be well on your way to building an unfair advantage for your new enterprise. It is at the center of what it takes to convert an idea into a world-class success.