Of rates of change, and letting go
How founders can lead best during their ventures’ tricky teenage years
Parenting, it is often said, is a thankless task. Children are born as the fruit of effervescent optimism, but the daily grind of changing diapers, sleepless nights, strained marital relations, and adolescent moodiness is often enough to make the very best of us forget why we produced the little terrors to begin with. At no point is this harder than during the children’s teenage years, when parental midlife crises collide head-on with their offspring’s decreasing willingness to listen to sage advice, or follow rules. It’s a challenging time for all involved, and just how deftly parents handle their children’s transition to responsible adulthood can determine much of their future success in life. The same is true of founders and their growth-stage ventures during the difficult “teenage” transition from fledgling startup to grown-up business.
We succeed as parents when we foment in our children enduring human values and carefully nurture their talents, but ultimately set them free to make their own choices, armed with integrity and values, confidence, good judgment, and ambition. Children outgrow us, and our job is not to control them, but to equip them for their own unique independence. In other words, we succeed as parents when we let go, and embrace the changes that maturing into adulthood brings out in our children.
Similarly, much of the success of leading growth-stage ventures comes down to founders embracing change, and letting go – two ideas which are rarely spoken about in the context of entrepreneurship, and almost universally misunderstood.
To understand why change matters, consider what allows ventures to grow into greatness to begin with:
Enterprises are the combination of people, assets and capabilities that come together in ways of working – ie specifically “how” products are designed, “how” they’re manufactured, marketed, priced, and branded. Businesses aren’t defined by people, actually, nor assets or capabilities. Those are the enablers. Businesses are in fact defined by their ways of working, their processes. The very best businesses succeed not because they have star individuals, nor the finest assets, but because of how they orchestrate those enabling components into a handful of highly effective and supremely relevant ways of working that give them their competitive advantage. Inditex, the owner of fashion retailer Zara, is unbeaten in the world of apparel for its unique way of working rapid innovation and agile supply chains. Apple reigns supreme at industrial design. Amazon is legendary for its maniacal analysis of consumer data to drive every decision in the company. Businesses become exceptionally successful because they build and foment exceptional ways of working.
But exceptional ways of working are born out of change. All growth ventures first begin with an idea. A mission. A hope that there might be a better way. And the first step is to prove that that idea is shared by consumers, and that there are plausibly efficient ways to satisfy those unmet needs. It’s just about product-market fit in these early days, and the scrappy scramble to find that fit is the hallmark of the rollercoaster ride in revenues from 0 to $10M. Call this Life Stage 1.
But after the excitement of Stage 1 comes Stage 2 - the growth from $10M to $100M in revenues and beyond: the teenage years where product market fit has been proven, and the focus shifts to scaling ten-fold. The only way to achieve that growth, sustainably, is by focusing on ways of working. And that means: embracing change. Because no startup ever designs their ways of working for excellence during the initial search for product-market fit. Scaling, however, requires revisiting the imperfect, scrappy, accidental ways of working of the founding days, and replacing them with ways that are fit for purpose for a venture 10x bigger. It requires a lot of change. Often people think that hiring and org charts are that change. But they’re not. Those are just enablers of change – but if the underlying ways of working aren’t consciously altered, then hiring an army of people won’t change a thing.
The measure of success in scaling, hence, ought not to be how much a venture’s revenues are growing (that can be unsustainable, and all collapse), but how widely and effectively it is changing its ways of working. In other words: the core measure of success in scaling a venture, is the rate of change in its ways of working.
Founders should obsess over it, and make it the mission of the whole organisation. Measure your rate of change. Look back, every quarter, and ask yourself how widely and how deeply your ways of working have changed. And if they haven’t changed at all, if the organisation is still doing things the way it has always done them, then the chances are that little progress has been made on laying the foundation for sustainable long-term growth.
And that, in turn, brings up the point for founders around letting go. Not in the sense of giving up, or no longer caring. On the contrary. Letting go in the sense of trusting exceptional individuals in the organisation to take as their foundation the vision, mission and core of the brand the founders created, and codify exceptional ways of working out of them that could well transcend the capabilities or imagination of the founders themselves.
Just as with successful parenting, where children grow up to be their own entities outside the shadow of their parents, so great ventures, too, necessarily outgrow their founders, as individuals, in the teenage years. And embracing that, despite its emotional challenge, means a parenting job well done.
Ernesto Schmitt is co-founder at The Craftory, the progressive investment fund on a $550M mission to back the world's boldest consumer brands.
