Friday 22 June 2018

Startup diary: Why a good COO is crucial on slow climb to startup success

Someone has to have the authority to make your organisation work – what you need is a chief operating officer. Stock image
Someone has to have the authority to make your organisation work – what you need is a chief operating officer. Stock image

Richard Rodger

What is the difference between launching a startup and gambling? In both cases you're putting money on the line in the hopes of a big payoff. For both, you need a large appetite for risk. For both, you need the universe to co-operate and give you a little luck.

There is a difference in how long you have to wait before you know if you've made any money. At least in a casino you get instant results. In a startup, it can take years to lose a fortune. That makes a casino look like a much better bet!

The type of people who will lend you money for a casino are probably not the sort of people you want to borrow money from. People who lend you money for startups know that most startups will fail.

But the key difference is in the mentality that you bring to the activity. Startups are almost never successful just by luck alone. All the casino has to offer is luck, both good and bad. Getting a startup to work is not about waiting for a big break, not about that one big customer, not about that one key hire, not about that one key innovation.

Ben Horowitz is a founding partner of Andreessen Horowitz, the tier one Silicon Valley venture capital firm (Airbnb, Twitter, Facebook, that sort of thing).

Before becoming a VC, Horowitz was the product manager for Netscape back in the first dotcom boom in the late 1990s. He talks about his experiences in a book called 'The Hard Thing about Hard Things', which is just about the best book on startups I've read (so far). Go read it.

In his book, Horowitz talks about how his company Opsware (which ultimately sold to HP for $1.5bn or so), was nearly destroyed by a competitor. Opsware made software to manage physical servers. There was no 'cloud' back in those days. Their biggest competitor, Bladelogic, was beating them in almost every deal. Why? Their product was just better. Faster. More features. Better support. Just … better.

His team tried to come up with all sorts of magic solutions - silver bullets that would turn things around in a single quarter. This is where things get hard as a founder. Your company is dying, you have limited resources, and you only have a few moves left. Do you bet it all on black? Do you gamble?

The temptation to do so is extreme. You can't see any easy solutions, and with just a little 'luck', you can turn things around. Just one more roll of the dice.

But this is not the way to solve the problem. It's a fast way to make a fatal mistake and end up out of the game. The solution is to gamble like a professional. That means you need to stay alive. You need to realise that there are no silver bullets. All you have are ordinary lead bullets, and the only move that has any chance of success is just to turn up to work each morning and keep making small improvements. Each week, just make things a little better.

It's easy to underestimate the cumulative effect of marginal gains. They add up over time. Opsware eventually produced a competitive product and won market share.

It took them over a year of work, improving their product and delivery step by step. Lots and lots of lead bullets.

That's the strategy. What are the tactics? How do you actually execute a strategy of continuous improvement to your product? It is exceptionally difficult to stay focused on the boring details, and not chase shiny new things. As a startup founder, you are naturally attracted to the new and shiny - it's what got you started in the first place. And it's why many startups fail.

I'm not going to give you a recipe to avoid this problem. That's not what this startup diary is about. Instead, I'm going to talk about the tactics that I'm going to use to avoid this particular way of dying. Time will tell if they work.

First, I think you need a responsible person. Someone has to have the responsibility and the authority to make your organisation work. Someone has to care about the operational details. I don't think this can be the CEO.

Your time and your tasks are too fragmented. The CEO has to concentrate on strategy, sales and finding great people.

What you need is a chief operating officer (COO). This is perhaps the most important early hire. Where would Facebook be without Sheryl Sandberg? Or Apple without Tim Cook?

In my particular case, I'm also acting-CTO. That completely wipes me out when it comes to operational matters - I'm just about hanging in there, and only because I was a COO before, so I know the playbook.

There's just too much going on in a startup, and you can easily suffer from what I like to call 'brain-fry', where you literally cannot make operational decisions, because you have no analytical capacity left.

I'm very lucky at present that the senior people in voxgig can handle the chaos - they all have operational skills that cover me. But it can't go on forever.

The second thing you need is an operational culture. The idea of startup 'culture' is something that really frustrates me. It's not about ping-pong tables and '80s computer games. It's not about gourmet food and top-of-the-range computers. It's not about designer offices and drinks cabinets in the kitchen.

An operational culture is something different. There are many things that need to happen each day, each week, each month, each quarter, each year, to make a product work. A lot of maintenance. A lot of incremental improvements. A lot of communication. A lot of lead bullets. They are not exciting, but they need to happen. They can't happen unless there is a culture of execution.

The company needs to have a shared value system that rewards and recognises consistent application of small efforts. This is very different from the rush to launch the first version of your product. Every week is new and different, and exciting, and you get to ignore problems - this is the fun of startups.

But after you launch, you need to begin the slow climb to success. That can't be done unless you get your operations right - and God help you if your product takes off in the meantime. That can be fatal. Scaling is difficult enough.

Third, you need to measure. You can't fly blind. You need to know how may people are using your product, how many are buying, how much money you're spending, and what people are actually doing day-to-day. One of the reasons investors like the monthly update from startups is that it very quickly shows up a lack of measurement. It should not take more than an hour to produce that report. The information should be immediately to hand. A COO makes sure this is the case.

This is our next big challenge. To 'operationalise' the company. Yes, that is an atrocious misuse of the English language. Isn't it a fabulous bit of corporate-speak, though? As a piece of jargon it does express exactly what needs to be done.

So those are my three tactics: get a COO, build an operational culture, and build a measurement system. All useless if the product is a failure of course, but I feel that with the customer discovery we've done to date, our main risk is on the execution side, rather than the market side. We shall see.

Newsletter numbers this week: 1,332 subscribers, 20pc open rate.

There are no silver bullets that will get us to 40,000 subscribers by the end of year-it's going to happen one carefully-aimed shot at a time.

Richard Rodger is the founder of voxgig. He is a former co-founder of NearForm, a technology consultancy firm based in Waterford.

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