Leading Your Startup – The Command and Control Fallacy

There are a lot of myths about entrepreneurship. One is that startups need a strong authoritative leader who takes charge, sets the agenda, rallies the troops, and almost single-handedly takes responsibility for driving the venture forward. I call this the ‘command and control fallacy’.

Now, there’s no denying that startups need leadership. And vision. And focus. That’s not in question here.

What is being questioned is the ‘hero’ model of leadership. It’s certainly not the only way to lead, and not even the most effective. This isn’t exactly fresh news, but I think there’s often a temptation for people to fall back onto this style in fast-moving, stressful and ambiguous environments where there is a lot at stake … which is what startups often are!

What’s the problem with command and control?

  1. It isn’t effective. An exhaustive analysis by McKinsey & Co. (based on more than 115,000 people over four years) found that "command and control leadership – the still-popular art of telling people what to do and then checking up on them to see that they did it – is among the least effective ways to direct the efforts of an organization’s people"1
  2. It isn’t robust. Relying on one individual is risky – what if they are away, tired, sick or dead? It’s also difficult to scale since one person, not matter how capable or industrious, can only do so much.
  3. It’s based on flawed assumptions. Management doesn’t have all the answers upfront, and employees in a startup are creative, highly committed and more than capable of taking responsibility for their own contribution.

Moving to a better approach:

With a small team, big ambitions, and limited resources, startup ventures need to get the best from their people. Here are a few tips for avoiding the command and control fallacy, and adopting a more collaborative approach to leadership:

  • Only hire people whose character and competence you trust
  • Ensure each person has their own area of responsibility, for which they are (or can become) the expert
  • Mutually agree on goals, and encourage them to develop their own action plans to achieve them
  • Challenge their thinking in a constructive way and stretch their horizons about what is possible
  • Resist the urge to jump in and take over if they do things differently to you
  • Give people room to make their own mistakes and learn from them
  • Review progress as a team – what worked well, what didn’t, what was puzzling, what will we do differently?
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Business Plan Competitions

Last night I was at the 2007/08 launch of the Melbourne University Entrepreneurs’ Challenge (MUEC), one of Australia’s premier business plan competitions.

There are a host of business plan competitions around Australia (e.g. RMIT, Swinburne, UQ) and the world (e.g. Harvard, UC Berkeley, Oxford), and the number is growing rapidly. A Business Week article last year cited over 350 business plan contests globally in 2006, double the number that identified in 2002.

How do they work?

A typical competition involves a number of stages, including an initial concept outline, a full business plan, and (for finalists) the opportunity to pitch to venture capitalists and other potential investors.

Various training, mentoring and networking opportunities are provided along the way to help contestants form a team, develop their concept, and prepare for the competition milestones.

What’s the benefit? 

While most business plan competitions offer $10,000 or more in prize money and in-kind services, the main benefits for participants (even the winners) are experience and contacts.

Of course, winning has its advantages (e.g. Dynamic Hearing has licensed its technology for hearing aids), and even being a runner-up can help (e.g. Southern Innovation received funding from one of the judges).

But it’s worth remembering that winning ain’t everything. A great business plan does not always lead to a great business. And sometimes a plan that failed to make the finals becomes a thriving business (e.g. Komodo CMS).

Taking a broader perspective, business plan contests help connect and encourage people who share a passion for entrepreneurship. Compared to other places (most notably San Francisco), Australia’s entrepreneurial community is relatively undeveloped. So, to my mind, this makes events like MUEC even more important.

Should you enter a business plan competition?

If you’re an established entrepreneur, with a track record and good connections, I’d say don’t bother. Just get on with launching your business … and consider offering your services as a judge or mentor!

But if you’re an aspiring entrepreneur, taking part in a contest can provide valuable experience and contacts. And while most competitions are affiliated with a university, you often don’t need to be a student yourself – just make sure you’ve got one or two people from the relevant institution in your team.

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* If you’ve entered a business plan competition previously and want to share your experiences, please get in touch at latentfuture (at) gmail (dotcom).

Using Change to Your Advantage

Change is constant. Change is inevitable.

Benjamin Disraeli

One well-trod path to entrepreneurial success is capitalising on changes in the external environment. Rather than inventing a new techno-gadget and looking to find a market for it, why not be alert to shifts in regulation, technology or society itself and design a business model that uses them to shake up a stagnant industry.

This approach to creating new ventures requires:

  1. Being alert to changes in the environment
  2. Thinking through their potential impact and flow-on effects
  3. Designing a business model that capitalises on the changes in a useful way
  4. Recognising when the time is right and launching the business

Timing is critical. Plenty of people have been right about an underlying trend, but launched before the opportunity was ripe, or before supporting factors were in place. That said, you don’t want to be too late – someone else might nail it first.

 

Here are a few examples of how external change can create opportunities (and threats) for business models:

ebglogo.gifEasy Being Green: Took advantage of regulatory change, using the NSW Greenhouse Gas Abatement Scheme to build a business making homes more eco-friendly …at no cost to the consumer. It made money selling carbon credits earned for installing energy efficient light bulbs and shower heads.

However, the winds of change don’t always blow in the right direction. Regulatory uncertainty over the future of the NSW government scheme recently led to a price collapse in carbon credits, effectively destroying the company’s revenue model and putting it out of business. More details here and here.

ituneslogoiTunes + iPod: Apple used technology changes to revolutionise the music industry. They saw the internet changed the economics of distributing music, and existing music companies would be reluctant to change.

Apple also recognised online music distribution was only half the picture – people needed a better way to take their music with them. Hence the iPod – a design icon and highly portable music device, enabled by improvements in the cost and size of electronics technology. The combination of iTunes and iPod is truly powerful.

boostlogoBoost Juice Bars: Recognised a social change towards increased health-consciousness, and saw the potential for juice bars as a healthier alternative to fast-food.

The founder, Janine Ellis, realised the time was right and that many competitors would soon enter, so she chose a franchise model to enable rapid expansion and ensure the right culture.