Archives for category: Tradeshift

Factories of Make-believe

Ben Horowitz recently published his book “The Hard Things, about Hard Things”. It’s no exaggeration to say I love it. As a third time founder having experienced many of the challenges first hand I wish that book was written 15 years ago when I tried to build my first company (although I’m not sure, I would have read it back then. Learning seems to be easier in hindsight).  One of the great things about Ben’s book is that it focuses on sharing the hard lessons, when it’s not all smooth sailing.

Inspired by this, I thought I would add some of the lessons from Tradeshift. Just like Opsware, Tradeshift is a company in wartime as are most B2B companies trying to break into highly entrenched software markets controlled by incumbents with massive cash moats. At Tradeshift we have been fairly lucky in our ability to attract high-level investors who believe in our vision and who want to back us for the long-term, but that doesn’t mean every single day isn’t a fight.

The topic I want to focus on is leadership. Three years ago at a dinner with Ben White and Stephen Chandler from Notion Capital I asked them what had been the hardest part of scaling their company, Message Labs, from startup to a 750m USD exit. They both replied without blinking – scaling leadership above a 100 people.

Curious, and still full of youthful arrogance, I asked why. “Isn’t it just a matter of hiring the right people?”

Stephen patiently explained to me it was not as simple as that. You need to build a culture, training and leaders and make sure communication is aligned all the way through the company. You can’t rely on your own ability as a founder to just stand on a soapbox and be heard and understood.

Talking to other CEO’s and co-founders it’s clear to me that lack of clear leadership across the organization is what kills most C or later stage companies. Having earlier talked about how we handled culture and leadership in the earlier stages of Tradeshift’s history
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I thought I would share how we organize leadership at Tradeshift today and some my own beliefs in what makes for efficient leaders.

Two weeks ago we had a Global Leader Camp, which is our own new talent and leadership development program at Tradeshift. We invited 27 current managers or people who were seen as leaders in the company from their actions or roles, making sure to both include current leaders and the talent for the next generation of leaders.

The goal was to make this a generation of leaders that would help shape Tradeshift through the next three years and lead from the frontline.  We focused on leadership and not so much management (leadership is the job of setting direction and inspiring others, management is the process of getting shit done) as we already have a very strong results culture.  We wanted to make everyone capable leaders of product, people and vision in the diverse and challenging environment that is Tradeshift.

One of the reasons we started this program was to get away from relying solely on the founder signal – where leadership basically was me or my co-founders getting up on that soap-box and having everyone listen and be inspired. We needed leadership on the ground. We were seeing too many people feeling disconnected from the vision of Tradeshift and what it meant for them, too much cynicism (building highly complex B2B products in wartime will do that to you) and people who loved Tradeshift, but were starting to burn-out after three years of running at max speed. You can’t just wish these issues away or do an even more powerful speech to have them disappear. As a founder or CEO you need to go to the root cause and even more scarily hand over some responsibility to others in maintaining and building the vision.

The below presentation is what I used as a starting point, detailing my own leadership beliefs as a way to start discussion about what we all considered leadership.

 

As a leader you have to realize that the only real tool you have is yourself, your own experiences, beliefs and ability to execute. It’s an extremely exposed position because any failure point to flaws in what makes you who you are. It’s also extremely rewarding to succeed as you are growing personally.

So the first disclaimer is that what works for me, might not work for you and that’s ok – as long as you do believe something and use that in the way you lead others. I encourage everyone to find out what works for him or her.

So adding a little bit of context on my core beliefs:

Start-ups are factories of make believe
Everyone remember that scene from Peter Pan where he tells you that you can fly if you just believe it? Stepping out of that window and trusting it is a radical move is the same thing as working for a startup. A startup is only suspended by the collective belief of the people who work to build it, its investors and its customers.

That also means you always must to walk that fine line between hope and cheerleading and being realistic and critical. You can challenge direction of where you are flying, but never if it’s possible to fly (unless you want to crash badly). At Tradeshift we typically say it’s great to be critical, but sucks to be cynical (permanently not believing in anything).

Flying requires bold and visionary ambition
This next step is almost as important as believing you can fly. Make sure you have a bold and visionary ambition. People generally won’t risk their life (or time) on something that is not meaningful. Very few people will take that step into emptiness to make 1% better toilet paper. This goes for both your company and your team. Make sure the goals you set and the team is connected to the vision of the company and not just “make x 1% better”.

Vision without execution is just hallucination
It feels really nice, but doesn’t do shit. When you are challenging people to trust you, to take the leap into emptiness, it’s really easy to get called a liar if you fail. The only difference between being a liar or a visionary is execution. Once you have taken the jump, work your butt off to make sure that the vision becomes reality. You need to cross that chasm of disbelief and the only way to do it is by proving it through execution.

Lead from the front
In the second year of Tradeshift I was sitting together with a new colleague getting our board presentation ready for the next day at 1am. I felt really sorry that he had to spend his night like this and I told him that I was really sorry. He looked at me and said, “That’s no problem, and the difference between tonight and my old job is that my CEO would never had been sitting next to me.”

There are plenty of long nights, weeks, months, years in any start-up – remember that everyone is watching you and if you are the first to shovel shit – they will follow. 

Fight for your vision, always
Quitting is for pussies. This is Ben Horowitz advice for CEO’s but I think it’s valid advice for any leader pursuing an idea.  Any new idea that matters meets massive resistance so get ready to fight for it. The difference between a leader and everyone else is often how much they are willing to fight for their ideas.

Challenge conventional wisdom
Ben Horowitz talks about selection bias, which is what happens when decisions are close to 50/50 and leaders go with the group because they are afraid of being alone when they fail (better to fail as a team). This is not just something that matters between a CEO and his board, but all the way down in an organization. Leaders are leaders because they dare taking controversial decisions and stick to them, even when they go against the grain of the group. 

Be the first to change direction when needed
You have to fight for your vision and challenge the conventional wisdom. But you also need to be the first to change direction if your decision was wrong. Don’t cling to it because you are afraid of losing face. The ability to let go and move on is one of the most important skills of a leader.

Radical trust
If somebody fucks up the biggest thing you can do is help him or her, rather than blaming or yelling. Trust me, they will remember that a 100x more than you being angry. In Tradeshift we practice radical trust in the people we hire and give them a lot of freedom and when they screw up we don’t take it away. We encourage them to move on and learn.

Vulnerability is strength, not a weakness
I’m an insecure overachiever and I can be afraid that others will think that the incredibly skilled and experienced leaders working for me are better than me. But I’m not afraid of showing that vulnerability. Through the years I have learned it’s better to be real and flawed as a leader rather than trying to project a picture of constant perfection. Everyone will have an easier time relating to you and they will not abandon you the moment you fail (and you will fail many times).

These are the beliefs that have helped me navigate as a leader and what I shared with the next generation of leaders in Tradeshift. Together with an intense program of strength based leadership training, coaching, cultural leadership and working with real life leadership challenges I’m sure we have generated a strong generation of leaders in Tradeshift who will help lead from the trenches for the next three years.

facebook-egypt

I don’t think that most people in Silicon Valley understand what viral means. Facebook is viral, Twitter is viral, but they think it means it spreads fast, “like a virus”, but a virus don’t just spread fast, it changes everything it touches. That is why it’s viral to begin with, because it changes the subjects it spread through. The same is true for technology; Facebook and Twitter have undeniably changed the world. We are changed as a result, Mark Zuckerberg claims that more transparency is better, I tend to agree with him, but I only think we have touched the surface. We haven’t touched anything that really matters. We have democratized media, without democratizing the underlying world that media reports about.

Business is an organism, networks of trade move value, and money is a signal, switching value among the participants, empowering the ability to act. Today this system is opaque, closed and built to defend the status quo. Huge chains of companies move money, goods and value up in the system towards those who have leverage over those who have not; this is the literal supply chain. It defines the world; the top is in the west, the bottom in the emerging world. The lower you are in the chain, the more of the value you produce and the less of the benefits you get. If you are a supplier you will be paid in 60, 90 days, just because those higher in the chain can set the terms. Causing people to get paid less, companies to grow slower and create fewer jobs than they potentially could and in the end I will argue, everyone to lose.

This is reflected in the technology of business, those who can afford it run SAP and similar. They are all built on the same idea and principle, centralize data, power and control, those who buys these systems exerts control, over suppliers and their employees.  While they sell on a promise of cutting cost, cutting cost in organizations by centralizing and controlling how people work, cutting cost in the supply chain by enforcing anachronistic systems for business, that all benefit the large buyers.

They reinforce the structure of the business networks they are a part of, in a literal sense. If you were a supplier to one of our large customers before they switched to Tradeshift, you would pay a “tax” of 0.15% on every single transaction you did with them, just for the privilege of telling your customer “you owe me money” often thousand of dollars, for no other reason than because SAP could get away with it. At the same time if you worked at this company you would be using systems, that would force you to be like a trained monkey, say “yes or no” to this invoice, move this data. Most corporate systems are an extension of the assembly line, but instead of moving parts, you are moving data, our corporate software is build on 100 year old ideas about how people interact.

This is why there is no independent revolution in business, no massive network of indie developers bringing down the house and causing an internet revolution, yes maybe for small business, for the small things, but when it comes to the things that matter, the core of the economy in banking and the real value the incumbents are still tightly in control by centralizing power and building closed systems.

We propose something radical; we propose that we democratize business. That we open up the networks, that we create transparency and that we do it all with the blessing of everyone participating (except for the old incumbents). What if there was a global network for business, where everyone could participate? Where everyone would get value out of participating. Not just the top of the supply chain, where developers had free access to develop and build applications on top of shared data and where increased transparency is the result. Nobody would have said that this was possible in media before Facebook or Twitter launched, by now nobody is arguing.

This is not something we just think, it goes into everything we do, summarized the following are the values we design our product by, build our organization by and values we share with our customers:

  • We value transparency over closed systems
  • We prefer value generation through sharing over profit maximization
  • We value collaboration over command and control
  • We believe in empowering the individual over micro-managed processes

We do this by following the money, we start by offering companies a better way to connect and do what matters to them, to exchange value. In Twitter the media is the tweet in Tradeshift the media is value, money, business information and trust exchanged digitally and we open it up for everyone to participate on equal terms (free for suppliers, paid for by buyers). Today these processes are all inside the SAP system and heavily taxed, data arrive manually, as millions of invoices processed on paper in India, payments written as checks, phone calls, as a network it’s not unlike the manual process of news just a few years ago. With Tradeshift companies connect and do business in real-time, starting with the suppliers, connecting, sharing with each other and creating transparency in the supply chain, they then approach the buyer and say, let’s connect electronically, but on our terms. Without the paper business changes radically and the SAP system becomes the last stop of data rather than the central hub that controls everything.

So why will large global companies participate in this idea? Because it works. The philosophy behind SAP and their partners is slowly dying. They were created in a time were profit maximization was the primary objective for any large company, today those objectives are much more nuanced a new breed people inside these companies focus on value creation, they don’t see the world as a zero sum game, they have figured out that if their partners, their supply chain and their customers grow, they will too. This is not just technology companies, but also companies within manufacturing, health-care and most verticals you can imagine. This change is global too, in the 2.5 years Tradeshift have been live we have signed up 500,000 companies (with millions of employees) in hundreds of countries. Not because they wanted to be part of a revolution, but just because it was easier, faster, more convenient this way (just like I doubt anybody ever signed up to Facebook because they felt they needed to join a revolution). This change is real, we have companies all over the world that now are getting access to global customers, finance, data they did not have before. Because they have data they have power, they are suddenly in control and can make informed choices, they can build better companies, grow faster and create more jobs.

This is just the start; imagine what would happen if all the companies in the world is connected this way.

The other day we were interviewing a great new software developer for our marketing team, Denica, when I asked if she had any questions, she said, “I would really like to work for a startup and I’m unsure I will fit into a big company like Tradeshift”.

I yelled, “We are a startup!” and then I realized – we certainly don’t look like it.

We have four floors in the centre of Copenhagen. Nice desks, furniture – we are comfortable. In Danish you would say it’s “hyggeligt”, which means something like cozy.

It scared the shit out of me. Being from a nation where government welfare is the default, a nanny state, I can see how “hygge” can kill any startup. The reality is that Tradeshift is still very much a startup: we might look like a real company, but underneath that very nice and well-marketed exterior is a fragile being in its most dangerous state – “a startup looking like a real company”.

This is the state where new hires might not know the difference between a startup and the former companies they worked at if someone didn’t tell them. Two years ago it was self-evident that we were a startup from the simple fact that we were sitting in a garage freezing our asses off as we could choose between running the heater or having power for our laptops and Internet (no we did not choose warmth); back then we were never in doubt what was next, because everything was on fire and nothing worked – we worked like maniacs and loved every second of it, we were not afraid of anyone and we had nothing to lose.

As your company grows, you can’t help loosing a little bit of that feeling, you hire managers, create new processes and just settle into certain ways of “doing stuff” and suddenly before you realize it you look like a real corporation not a startup, but you are not, the investors still expect extreme growth and that you disrupt something, comfortable people don’t disrupt. But more than I believe that most existing management methods are not scalable to the hyper scale required for fast growing startups, classic command & control just breaks down when scaling fast.

So what do you do?

At Tradeshift we specifically try to counter becoming too corporate by disrupting our own organization continuously.

As we grew we knew we had to do something to keep the startup feeling alive. We introduced some simple concepts to fight the corporatification and make sure we keep the best from the early days.

1)        Break the pattern: every three months we have our Tradeshift team camp, which is a crazy experience of 48 hours non-stop work on new concepts, strategies and ideas combined with plenty of beer and lack of sleep – in short original startup-life simulation.

2)        Piracy is expected: we try to drill into anyone that we expect them to be pirates and make decisions they think are right first, and ask later. I believe in hiring really great people, giving them a direction and then letting them run as fast as they can.

3)        Accelerate the problems: challenges are good and comfort isn’t; if we are becoming too comfortable I try to break something, typically by overloading it. We just told our sales team that there are no limits to how much they can sell in 2012, knowing that the rest of the organization still don’t have a clue how we will deliver, but in the end I know they prefer the challenge to boredom.

If you can keep your organization challenged, breaking the patterns and encouraging piracy I think you can postpone the inevitable growing up (at least for a little while).

Now I can’t wait till Denica experiences her first team camp in December and hopefully learns that we are still very much a startup.

But just to be sure, I did this presentation at our last company wide meeting.