Transparency Is Hard, but It Works
Transparency can’t just be a tactic. It has to be a core value that’s consistently followed.
If you openly share some things, but hide others, credibility will suffer. Your team will always wonder what you’re not sharing. Your customers, your investors, the press—whomever you interact with—will be trained to mistrust you. A reputation for caginess lasts a long time and follows you across companies and geographies.
When we adopted transparency as a core value at Moz, it wasn’t always easy, and we didn’t always live up to the ideal. But more than any other aspect of the company, transparency, and the trustworthiness it instilled in our team, our community, and our customers built the company’s legacy. We shared our financials online (just as I have in this book). We wrote about our product struggles, our fundraising failures, our most difficult internal conversations, our strategy. We were called crazy and foolish for oversharing so much about the mechanics of the business. But we also became trusted, and, especially because the field of SEO and the broader world of tech startups are so often impenetrably secretive, it paid off.
Service Business Vs. Product Business
Which model is right for you? Service model? Or product-based one?
First, let’s directly compare the two:
| Service Business | Product Business | |
| Startup Costs | Low | High |
| 5-year Average Survival Rates | Mediocre | Miserable |
| Limits to Growth Acquisition | People, Marketing, Retention | Capital, Engineering, Customer |
| Competitive Barriers to Entry | Low | Medium to High |
| Scalability | Low | High |
| Staffing Requirements | High Ratio of Staff-Customers | Low Ratio of Staff-Customers |
| Gross Profit Margin | Low | High |
| Net Profit Margin | Medium | Low (often due to reinvestment for growth) |
Clearly, the answer to the product versus services debate is “it depends.” Smart founders need to use their best judgment about their strengths, their goals, and their market to determine whether one model is a clear winner, and/or whether it pays to experiment with some of each.
Unless you’re expressly seeking to raise money from venture investors, nothing’s stopping you from offering a subscription product to your services clients, or from adding consulting services to your product business. Don’t let Silicon Valley culture’s traditional thinking on this bias you away from the right decision for your company and your customers.
How to Be a CEO in 6 Easy Infuriatingly Challenging Steps
- Realize, frustratingly late, a particular pain point that’s holding your team back from effectively or efficiently accomplishing a goal (e.g., you can’t run the A/B tests on your website because you have no framework for measuring results, nor any expertise in how to build effective tests).
- Attempt a variety of techniques to overcome that pain point (hiring people with previous competency in the practice, researching and learning it yourself, delegating the learning to other team members, acquiring technology or data, implementing a rigid new process, etc.).
- Determine that most of the things you’ve tried have failed, and cycle through many more until you . . .
- Experience the elation of breaking through, at least partially, and finding some success.
- Uncover new frustrating side effects and unintended consequences of your solution(s).
- Half the time, settle for partial implementation and a set of compromises that work well enough to become the new norm; the other half, realize that the solutions are worse than the problem and determine a way to simply avoid or ignore the pain point, possibly by refocusing your strategy so you simply don’t have to deal with it.
Some Unorthodox Tips on Choosing Your Market and Your Idea
If you can keep your ego and your aspirations below the need to pursue venture capital in order to aim for a billion-dollar unicorn, you can ignore a lot of the advice about choosing a giant, fast-growing market ripe for “disruption.” Instead, it’s totally cool (and may make your life vastly easier) to chase after smaller markets where you have unique knowledge and passion, and where ongoing, smaller amounts of innovation can separate you from the pack.
Great ideas and products are often born from mediocre ones. The keys are
- Time (enough to iterate and evolve into something remarkable)
- Humility (enough to see what’s wrong and admit a failure so you can move forward)
- Survival (a profitable services business can be a godsend here)
Your business will be even more likely to succeed if the market you target is served by incumbent solutions that are some combination of
- hated by their customers
- unwilling or unable to evolve with their customers’ needs
- protected by competitive advantages you can unravel (or that a shift in market dynamics or regulation is unraveling for you)
- in their early stages and not yet dominant (i.e., a non-mature market)
If you find a market with two or more of these (think vacation home rentals before Airbnb or crowdfunding before Kickstarter), your odds rise exponentially.
It’s Hard to Pick the NFL’s Draft Order if You’ve Never Played Football
Here are the top things Rand did to become a better leader of technical people and teams:
- Ask questions during skip levels that go beyond identifying problems and into concrete solutions (skip-level meetings are where a senior manager meets with team members who report to the managers below them). For example, asking, “What good development practices did your last company have that you don’t see in play here?” surfaces best practices.
- When you find an engineer on the team who can articulate different strategies she has tried, and the why behind them with conviction and clarity, give her power to try implementing some of those changes here. Be her champion, even when she ruffles some feathers making change. If some of the strategies don’t work out, praise the effort.
- Read everything you can about different engineering cultures and best practices. Read dev blogs for companies like Spotify, Netflix, and Airbnb. There are a lot of great books, blogs, and conference talks about best practices.
- Take notes about the technologies and practices that you hear about in design reviews and one on ones. Then go back to your computer and google them like crazy. Read everything you can about the technology. While reading, keep in mind that engineers are famous for indulging in so-called religious wars about why a particular technology is “so much better” than another one. Learn to spot it when an engineer moves beyond advocacy to naive devotion to a particular tech. Take everything with a heaping spoonful of salt. You need to know the lovers, the haters, and the companies that are using the tech. There’s no such thing as the “perfect solution,” and beware anyone who tells you otherwise. It’s all trade-offs.
- Recruit technical leadership with a teaching orientation. The best way to ensure that your CTO is going to make you a better CEO is to hire a CTO who likes to teach. Make it clear that you’re looking for someone to drive change and educate you and the team. Beware CTOs who try to “shield” you from the details. Being able to explain complex things simply is a job requirement.
- Ultimately, leading technical teams comes down to curiosity and courage. You must be humble, ask questions, and read a lot about engineering. If incremental changes aren’t getting better results, you need the courage to change technical leadership. Keep changing and trying new things until you start seeing positive momentum, and then get out of the team’s way.
It Takes a Lot of 7s and a Long Time to Win at Startup Roulette
Startups have better odds than the lottery, but they’re dramatically worse than “put it all on red” at the casino. The myth that “founders get rich” has brought thousands of people into the world of startups potentially for the wrong reasons and almost certainly with the wrong expectations.
Does this mean you shouldn’t found a startup? Or join an early-stage company? No. But it means you almost certainly shouldn’t do it exclusively for the promise of short-term wealth.
One of the great things startups can do is massively accelerate your career path. If you’ve felt trapped in positions that don’t challenge you, or constrain your earnings or influence potential, a few years at a startup, even one that ultimately fails, can dramatically shift that reality. Early-stage companies need people who are self-motivated, mission driven, and can get immense amounts of work done in short periods (by working very hard, by being efficient with their time, or both). Demonstrating that you have strategic vision, the ability to execute, and the qualities needed to recruit, motivate, and lead will make you a rare, desirable commodity in the modern economy. One of the reasons so many early-stage companies sell in small acquisitions (often called “acquihires”) is precisely to get these proven, self-driven, multitalented people on board.
Values Pay You Back In The Long Run
Values may not make you money in the short term, but they’re invaluable to any business in the long term. Values are not always easy. They force hard decisions. They can work against short-term growth. They restrict paths that might otherwise be open to pursuit.
Establishing and adhering to core values carries great intrinsic and extrinsic benefits. But usually these become evident over the long term, and that can be immensely frustrating for startups struggling simply to stay alive long enough to get to profitability or fundraising.
This tension is hard, but my experience and the correlation of values adherence to performance suggest it’s worth it. Plus, sticking to values makes it possible to look in the mirror without hating the person staring back. At Moz, we have six core values, represented by the acronym TAGFEE
- Transparency
- Authenticity
- Generosity
- Fun
- Empathy
- Exception
These are the beliefs we prioritize above the success or growth of the business. TAGFEE acts as a litmus test for whether we should or shouldn’t take an action, hire or let someone go from the team, or create a process or policy. We use it in everyday discussion about the content we put on our website, the ways we engage with our community, the products we build, and the internal actions we take.
If People Have to Cry in the Bathroom, You’re Doing It Wrong
Think of how Mark Zuckerberg, Steve Jobs, or Elon Musk are portrayed in media and film—recalcitrant geniuses who have no life outside their work and no end to their drive, but likewise are utterly useless when it comes to caring about people. The company is all that matters.
Project Aristotle, an internal Google research project, looked at thousands of teams at the company with years of empirical data on performance, and concluded that empathy between team members and a group norm of emotional support was the best, most consistent predictor of a team’s success.
The common threads Rand has seen separating successful teams and projects from unsuccessful ones generally have the following elements:
- Clarity and shared understanding of goals (i.e., everyone gives the same answer to the question “Why are we building this and what do we hope to achieve with it?”).
- Unity around the specific work required and how each person will contribute to it (i.e., everyone can give an answer to the question “What am I supposed to be doing and how does that fit with what each other person on the team is doing?”).
- Confidence in the people around them to contribute equitably (i.e., everyone believes the statement “If I contribute my portion, everyone else will contribute theirs and we’ll be successful”).
- Belief that should things go wrong, they/we will have the ability to catch it, fix it, and survive it (i.e., everyone agrees with the statement “If this doesn’t work, it won’t mean the end for my project/team/company/career”).
- A powerful sense of camaraderie and kinship, such that everyone on the team/project cares about the people around them and takes joy in the shared experience of working together (i.e., everyone would say “I want good things for all of the people on my team, and I’d be happy to make sacrifices for them and believe they’d do the same for me”).
Continue Reading – Summary of Lost and Founder Continued: Cheat Codes for Next Time