Education and Entrepreneurship

Fred posted his thoughts the other day that you don’t need a college degree to be a successful entrepreneur. He is clearly right in that one CAN be successful without it.  Gates, Zuckerberg, Dell have proven that. 

I’ve always said that I didn’t think an MBA was a prerequisite for a successful business career.  That’s easy for me to say, as I don’t have one despite many years of applying, deferring, cancelling, reapplying and general hand-wringing over whether or not to go in the mid-90s.  An MBA is probably a positive on a resume for the most part (hard to argue it’s a negative), but it’s not a prerequisite.  Every time I see “MBA preferred” on a job posting, I cringe (we never say that at Return Path).  Really?  You’d *prefer* to hire someone with an MBA over someone with two additional years of relevant work experience? 

That said, I’d note that there are things one gets out of a good college education that are critical to success in life.  Yes, they can be learned outside the classroom.  But unlike business school material, which is in many cases the stuff of work experience and more easily augmented by observation and the occasional business article or book (as far as I can tell), the things one learns in college which are applicable to entrepreneurship aren’t about the subject matter of the course.  They are things like:

– learning and applying new concepts quickly

– critical reasoning

– crisply presenting ideas

– respecting deadlines and guidelines

– understanding and appreciating other points of view

As with business school, these things *can* be learned outside a university environment, and certainly there are unusually talented people who have these traits hard wired.  But I do think the university environment cultivates and nurtures these skills in a way that is easier than the “do it yourself” world of teenage entrepreneurship. 

Five Years On

As of this past weekend, I’ve been blogging on OnlyOnce for five years.  My main reflection as I was thinking about it during this morning’s run is that blogging is different.  I started blogging to try out what was at the time the “new, new thing” (there were almost no CEO blogs at the time), just like I have tried out lots of other new technologies or web services from time to time over the years — from Skype to Facebook to Twitter to about 50 others.

You’ll never see a tweet from me about an anniversary of using Twitter.  Or any other comparable from that above list.  Blogging has ended up being fundamentally different.  It’s not just another expression of my status updates or another way to connect with friends and colleagues.  It’s become a core part of my business operating system, although I suppose that’s the case for many other tools as well. 

I think the main difference is that OnlyOnce has become a true form of creative expression for me.  It’s like (I imagine) writing a book or composing a piece of music. I’m not suggesting it’s high art, but I view it more as an ongoing project than most other online tools or sites I’ve tried out over the years.

Here’s to the next five years of it.

Vertical (Dis)Integration

A couple years ago, Dave Morgan wrote one of the best thought pieces on the future of the newspaper business in his Mediapost column.  Essentially his observation was that newspapers are an outdated vertical integration, and that to survive, smart papers would disaggregate into 5 separate companies and run each one as a separate business, taking on a new life unshackled from the newspaper:  local ad sales (they could own that franchise for the Yelps and Yodles of the world), local content (who better to syndicate local content?), local distribution (no other companies drop something on every doorstep every day), printing (still a business that requires scale), and digital.  It’s just a brilliant idea.

And it’s a shame none of them followed his advice, since they’re all going out of business now.

What occurred to me this week as I’m soaking in the goodness that is my new Amazon Kindle is that while newspapers may need to disaggregate to stay alive, Amazon is slowly amassing a strategy of very clever vertical integration that could well fuel its growth for decades to come.

The Kindle is brilliant vertical integration — it’s the device, the distribution, and the retail model all in one.  And if Amazon is smart, eventually once they have enough market share, they’ll just start doing deals directly with authors and cut out the publishing industry altogether and own the content as well.  They can hit both the long tail (with publishing and distribution costs approaching zero, the risk associated with signing a new untested writer for a revenue share deal are nil) as well as the head (cool place to release your newest book if you’re, say, Steven King).  And at that point, they’ll have a model that should produce an enormous amount of profit for them.

It’s interesting to look at these two situations in parallel — the transition of old media to new media, with one set of losers and a winner, where winning strategies are polar opposites.

My 360 on Your 360

Last year, I wrote about the 360 review process we do at Return Path, which is a great annual check-in on staff development and leadership/management.  In Part I of What a View, I described the overall process.  In Part II, I talked specifically about how my review as CEO worked, which is a little different.

This year, we changed the format of our reviews in two ways. First, for senior staff, we continued to do the live, moderated discussions, but we dropped having people also fill out the online review form.  It was duplicative, and the process already consumes enough time that we decided to cut that part out, which I think worked well. 

Second, for my review, instead of having the Board review me separately from the senior staff, I combined efforts and had all of them participate in my live moderated discussion together.  I also think this worked well, although we did receive some feedback about how to modify the format slightly for next year.  It was great for the Board to get a window into how the team feels about me, and vice versa, and it produced a single, unified development plan for me, which is much more helpful than two sets of feedback about different questions and issues.

The one theme that came out of this year’s live reviews, which is definitely worth thinking about, is the impact of the Heisenberg Uncertainty Principle, that once something is observed, the act of observing it can actually change it.  Because the live discussions are face to face (anonymous to the person being reviewed, but not anonymous among the reviewers), some people mentioned that they were conscious of what they were saying in the presence of others in the company.  Others didn’t particularly care about that but did say things that could be construed as negative about some of their fellow reviewers.  Someone came up to me after one session and said "I wonder what the rest of the group thought of my comments — I need a 360 on your 360!"

The reality is that transparency is a good thing.  There shouldn’t be any state secrets about someone’s performance, especially when the person is in a senior management position.  All people always have things they can improve upon, and the open discussion around what they are and why they happen produce MUCH better results for the people being reviewed, uncomfortable as it may be at times.

The sessions are confidential, so participants should feel comfortable that their thoughts won’t be shared outside the room.  Plus, we provide a mechanism to give feedback that really is hard to provide in public for whatever reason via email or one-on-one conversations with the moderator.

Advisory Boards

This is a topic that’s come up a fair amount lately here. Advisory Boards can be great sources of help for entrepreneurs. They can also be great things to participate in. Here are a handful of quick tips for both sides of the equation.

If you are building an advisory board:

– Figure out what kind of Advisory Board you want to build — is it one that functions as a group, or is it one that’s a collection of individual advisers, and a Board in name only?

– Clarify the mission, role, and expected time required from advisers on paper, both for yourself and for people you ask

– Be prepared to pay for people’s time somehow (see below)

– Figure out the types of people you want on your Advisory Board up front, as well as a couple candidates for each “slot.” For example, you may want one financial adviser, one industry adviser, one seasoned CEO to act as a mentor or coach, and one technical adviser

– Aim high. Ask the absolute best person you can get introduced to for each slot. People will be flattered to be asked. Many will say yes. The worst they will do is say no and refer you to others who might be similarly helpful (if you ask for it)

– Work your Advisory Board up to the expectation you set for them.  Make sure you include them enough in company communications and documents so they are up to speed and can be helpful when you need them.  Treat them as much like a Board of Directors as you can

If you are asked to serve on an advisory board:

– Make sure you are interested in the subject matter of the company, or

– That you have a good reason to want to spend time with the entrepreneur or the other Advisory Board members for other reasons, and

– Don’t be afraid to say no if these conditions aren’t met (it’s your time, no reason to be too altruistic)

– Clarify up front the time commitment

– Try to get some form of compensation for your effort, whether a modest option grant (size totally depends on the time commitment), or the ability to invest in the company

– Be sure to let your employer know. Ask for permission if the business you’re advising is at all related to your company, and get the permission in writing for your HR file

– Follow through on your commitment to the entrepreneur, and resign from the Advisory Board if you can’t

Those are some initial thoughts — any others out there?

OnlyOnce is 8 years old this week, which is hard to believe. So it is fitting that I got halfway through a new post this morning, then a little alarm bell went off in my head that I had written something similar before.  The topic is around moderation versus extremes.  I first wrote about this topic in 2005 in a post called Shifting Gears but I have thought about it more recently in a different way. 

Instead of phrasing this as a struggle between “Meden Agan,” which is Greek for “everything in moderation,” and “Gor oder gornischt,” which is Yiddish for “all or nothing,” I’d like to focus here on the value of occasionally going to an extreme. And that value is around learning. Let me give three examples:

-We were having a buy vs. build conversation at work a few months back as we were considering an acquisition. Some people in the room had an emotional bias towards buy; others toward build. So we framed the debate this way:  “Would you acquire the company for $1 instead of building the technology?” (Yes!) “Would you buy it for $10mm?” (No!) Taking the conversation to the extremes allowed us to focus on a rational answer as opposed to an emotional one — where is the price where buy and build are in equilibrium?

– With my colleague Andrea, I completed a 5-day juice fast a few weeks back. It was good and interesting on a bunch of levels. But I came away with two really interesting learnings that I only got from being extreme for a few days:  I like fruits and veggies (and veggie juices) a lot and don’t consume enough of them; and I sleep MUCH better at night on a relatively empty stomach

– Last year, I overhauled my “operating system” at work to stop interviewing all candidates for all jobs and stop doing 90-day 1:1 meetings with all new employees as well. I wrote about this in Retail, No Longer. What finally convinced me to do it was something one of my colleagues said to me, which was “Will you be able to keep these activities up when we have 500 employees?” (No) “So what is the difference if you stop now and save time vs. stopping in 6 months?” Thinking about the extreme got me to realize the full spectrum

It may not be great to live at the extremes, but I find extremes to be great places to learn and develop a good sense of what normal or moderate or real is.

(This is a bonus quick 5th post, inspired by long time StartupCEO.com reader Daniel Clough, to the series that ended last week about Scaling CPO’s- the other posts are: When to Hire your First Chief People Officer, What does Great Look like in a Chief Privacy Officer, Signs your Chief Privacy Officer isn’t Scaling, and How I Engage With The Chief People Officer.)

As I’ve noted over the years, the Chief People Officer role is a tough one to get right and a tough one to scale with the organization if what you’re really looking for is a strategic business partner who can lead not just the important blocking and tackling in HR but innovates the people part of your organization, building new systems and programs, approaches recruiting as building great teams instead of filling seats, helps manage your company operating system, and developing and coaching leaders.

A number of later stage CEOs I mentor have come to me over the years when they have a sub-par Chief People Officer and said something like “I’m going to put HR under my CFO.” To me, that’s a bit of a cop-out – it’s acknowledging that the person in the role isn’t strong enough to be a full-throated executive, but the CEO doesn’t want to go through the hassle or expense of replacing them.

Here’s my answer when I hear that from a CEO: “Ok, then your CFO will actually now become your Chief People Officer.  You must have a Chief People Officer on the exec team reporting to you.”

There are few things about which I have a stronger point of view. Someone in your organization must have strategic oversight for human capital. If it’s not your head of HR and you can’t bear recruiting/replacing that person, then it needs to be whoever your put that person under. Or it’s you. But at even mid-scale companies, why would you take that responsibility on yourself?

Last week, I wrote about Inquiry vs. Advocacy, an important principle I learned early in life and then explored more deeply in an Action/Design workshop my coach Marc took our whole leadership team through years ago.

This week, I’ll continue to riff on the theme of communications tools in the CEO toolbelt by talking about The Ladder of Inference (detailed article here). This is a great graphic from the article:

Any time you’re struggling with opinions vs. opinions or people are jumping to conclusions based on a narrow set of evidence, this framework is your friend. The best way to start any tricky conversation with those characteristics is to start “at the bottom of the ladder,” meaning you start by reviewing the available data on the topic at hand. As John Adams said, “facts are stubborn things,” so start by agreeing on a common set of irrefutable data on the topic. Then you can take a step up the ladder to a more productive conversation about interpretations, then ultimately come to decisions or conclusions.

Jim Barksdale, the former CEO of Netscape had a great saying that supports this principle, too: “If we have data, let’s look at the data. If all we have are opinions, let’s go with mine.”

The language our team developed around this is easy. It’s like a safe word. Any time someone is jumping to conclusions without being rigorous about the underlying data, they’ll be the recipient of a comment like “wow you went right up to the top of the ladder on that one!” Either that, or someone will pull out a wonderful reference to Office Space.

(Post 1 of 4 in the series of Scaling CPO’s)

In most startups, the HR function starts out as tactical, because you have to get people hired and paid, and while you might have a founder or early-stage employee who can do these things, often these tasks are frequently outsourced to a PEO.  As the company grows, it probably in-sources payroll and benefits, hires a recruiter, and maybe has an HR Manager who handles the function. Depending on the number of roles you see being filled, the degree of specialization, or a host of other factors, an in-house team to handle the tactical aspects of HR makes a lot of sense. But at some point you may need to hire a Chief People Officer.

One sign that it’s time to hire a Chief People Officer is if you feel that you’re the driver of company values, that you’re the one talking about values and viewing the company and interactions with that lens—but you’re the only one that cares about the core values. If your HR function is only focused on the tactical aspects of the role and not on how values drive the company, you’ll need to consider a full-time People Officer because focusing on tactical functions only will not help your company scale.

Another sign is if you are spending too much of your own time training managers and leaders or working on interpersonal dynamics on your leadership team. What’s the right amount of time? I think of these tasks (if you’re a a CEO) as things where you should be more like a consultant rather than the driving force behind them. If you find that a large portion of your day or week is filled with people ops activities, it’s time to think about hiring someone.

A third sign that it might be time to hire a People officer can happen when your board asks you what your talent strategy is with respect to improving diversity, retention, and engagement metrics, while simultaneously decreasing average employee salary, and you don’t have a great answer. While it’s acceptable—occasionally—to not know the strategy at a detailed level for a particular part of your business, if you get asked a question by your board and haven’t the faintest idea on how you can get an answer, that ‘s a good sign that you should consider brining in a full-time Chief People Officer.

A fraction Chief People Officer may be a great option, especially if you have a very competent HR manager or director who has strategic inclinations but not enough experience operating as a strategic executive.  If you have a person who just needs a little more supervision in order to “level up” then a fractional executive could be helpful. Or, if you need someone to play more of a consigliere or team coach role to your executive team but don’t want to engage a coach — and your day-to-day HR leader is getting the job done but too junior to facilitate workshops for the senior team, a fractional executive would work. Finally, if you have a very junior HR function or are insourcing it for the first time and need help setting up the whole function from scratch at an advanced size relative to other functions, a fractional executive would be helpful.

As a startup it’s easy to focus on the day-to-day operational details of the People Ops team because those things—payroll, benefits, hiring, onboarding—are tangible and have metrics associated with them. But those things won’t help you scale. If you want to scale your company, if you want to go from $2 million in revenues to $50 million you’ll need to have a person in your organization who is passionate about the values and passionate about helping individual contributors and leaders connect their work to the values. A Chief People Officer will be able to step in and be a leader to the leadership team; after all, companies are built into greatness by people, so this key position is pivotal to the company. 

(You can find this post on the Bolster Blog here)

I wrote a post in 2013 entitled Debunking the Myth of Hiring for Domain Expertise vs. Functional Expertise. In it, I talk about how in hiring senior executives, sometimes you can’t get both functional expertise (great Head of X) and great domain expertise (subject matter expert in X), but that in scaling businesses, there’s another important vector to consider, which is that if your principal business challenge is scaling, then a critical thing to look for in a potential executive is experience with scaling businesses, or at least experience working at businesses of different sizes/stages.

Today’s post is about a fourth vector beyond functional expertise, domain expertise, and scaling expertise: Context, an important vector to consider as well. When I first had this thought, I was having trouble distinguishing it from domain expertise. Now a few months later, I think I am clear on the distinction.

I worked for a while as an interim executive at a company that had giant companies for clients – very, very large companies. Tens and Hundreds of Thousands of employees. And the scope of services we provided was very internal to our clients, meaning our services touch 100% of employees. Early in my career, I worked as a management consultant and did spend the bulk of two years working in very large companies, frequently onsite for several months at a time. Most of my career, though, I have worked in startups/small companies, and while the clients I’ve worked with often included some very large companies, we’ve typically served very small, externally-oriented teams at large companies. So my personal context for this job is somewhat limited.

Why is that relevant? It’s different to work in a small, well lit, high energy, open plan, newly designed urban office than it is to work in a massive footprint office filled with high-wall cubicles and no windows in a suburban office park. It’s different to work in an environment where there are 5+ layers of management between someone and a department head. It’s different to work in a place where career paths are largely vertical (or involve switching business units) as opposed to what I’m used to, which is careers that can Scale Horizontally. And on and on. All these things are important Context for how our clients consume our services. And they’re all different from what I’m used to.

There is no substitute for actually working years on end in large companies, just as there is no substitute for working years in the startup context. Having said that, I think context can be learned about as quickly as subject matter, and about at the same depth.

(This post is running concurrently on the Return Path blog.)

It is now widely understood that the Internet runs on data. I first blogged about this in 2004—14 years ago!— here.  People have come to expect a robust—and free!—online experience. Whether it’s a shopping app or a social media platform like Instagram, these free experiences provide a valuable service. And like most businesses, the companies that provide these experiences need to make money somehow. Consumers are coming to understand and appreciate that the real cost of a “free” internet lies in advertising and data collection.

Today, the Wall Street Journal ran an article exploring the data privacy practices of Google and some of the third party developers who utilize their G Suite ecosystem. Return Path was among the companies mentioned in this article. We worked closely with the journalist on this piece and shared a great deal of information about the inner workings of Return Path, because we feel it’s important to be completely transparent when it comes to matters of privacy.  Unfortunately, the reporter was extremely and somewhat carelessly selective in terms of what information he chose to use from us — as well as listing a number of vague sources who claimed to be “in the know” about the inner workings of Return Path. We know that he reached out to dozens of former employees via LinkedIn, for example, many of whom haven’t worked here in years.

While the article does not uncover any wrongdoings on our part (in fact, it does mention that we have first-party relationships with and consent from our consumers), it does raise a larger privacy and security concern against Google for allowing developer access to Gmail’s API to create email apps. The article goes on to explain that computers scan this data, and in some rare cases, the data is reviewed by actual people. The article mentions a specific incident at Return Path where approximately 8,000 emails were manually reviewed for classification. As anyone who knows anything about software knows, humans program software – artificial intelligence comes directly from human intelligence.  Any time our engineers or data scientists personally review emails in our panel (which again, is completely consistent with our policies), we take great care to limit who has access to the data, supervise all access to the data, deploying a Virtual Safety Room, where data cannot leave this VSR and all data is destroyed after the work is completed.

I want to reaffirm that Return Path is absolutely committed to data security and consumer data privacy. Since our founding in 1999, we’ve kept consumer choice, permission, and transparency at the center of our business. To this end, we go above and beyond what’s legally required and take abundant care to make sure that:

1. Our privacy policy is prominently displayed and written in plain English;
2. The user must actively agree to its terms (no pre-checked boxes); and
3. A summary of its main points is shown to every user at signup without the need to click a link

While a privacy expert quoted in the article (and someone we’ve known and respected for years) says that he believes consumers would want to know that humans, not only computers, might have access to data, we understand that unfortunately, most consumers don’t pay attention to privacy policies and statements, which is precisely why we developed succinct and plain-English “just-in-time” policies years before GDPR required them. When filling out a form people may not think about the impact that providing the information will have at a later date. Just-in-time notices work by appearing on the individual’s screen at the point where they input personal data, providing a brief message explaining how the information they are about to provide will be used, for example:

It’s disappointing to say the least that the reporter called this a “dirty secret.”  It looks pretty much the opposite of a secret to me.

In addition to our own policies and practices, Return Path is deeply involved in ongoing industry work related to privacy. We lead many of these efforts, and maintain long-term trusted relationships with numerous privacy associations. Our business runs on data, and keeping that data secure is our top priority.

Further, I want to address the scare tactics employed by this journalist, and many others, in addressing the topics of data collection, data security, and who has access to data. It’s common these days to see articles that highlight the dangers that can accompany everyday online activities like downloading an app or browsing a retail website. And while consumers certainly have a responsibility to protect themselves through education, it’s also important to understand the importance of data sharing, open ecosystems, and third party developers.  And more than that, it’s important to draw distinctions between companies who have direct relationships with and consent from consumers and ones who do not.

While they may not be top of mind, open ecosystems that allow for third-party innovation are an essential part of how the internet functions. Big players like Facebook and Google provide core platforms, but without APIs and independent developers, innovation and usability would be limited to big companies with significant market power and budgets—to the detriment of consumers. Think about it—would Facebook have become as wildly popular without the in-app phenomenon that was Farmville? Probably, but you get the point: third party applications add a new level of value and usefulness that a platform alone can’t provide.

Consumers often fall into the trap of believing that the solution to all of their online worries is to deny access to their data. But the reality is that, if they take steps like opting out of online tracking, the quality of their online experience will deteriorate dramatically. Rather than being served relevant ads and content that relates to their browsing behaviors and online preferences, they’ll see random ads from the highest bidder. Unfortunately some companies take personalization to an extreme, but an online experience devoid of personalization would feel oddly generic to the average consumer.

There’s been a lot of attention in the media lately—and rightfully so—about privacy policies and data privacy practices, specifically as they relate to data collection and access by third parties. The new GDPR regulations in the EU have driven much of this discussion, as has the potential misuse of private information about millions of Facebook users.

One of Return Path’s core values is transparency, including how we collect, access and use data.  Our situation and relationship with consumers is different from those of other companies. If anyone has additional questions, please reach out.