Leadership: From SME Startup to Success
After 40 years of running SME (small to medium-sized enterprise) businesses in the software technology space, including several startups, I would argue that the CEO skills needed during the early stages of business development are different than those needed once the business is up and running. Understanding the change needed for this transition can help you anticipate it.
Listening to a talk by Lorna Davis, former CEO of Danone, reinforced this prerequisite. I was struck by the different leadership styles she experienced during her business career. She described her own experience initially wanting to be the CEO hero who would single-handedly create and execute a vision to take the company on a journey to success, and how she ultimately discovered the collaborative approach was more successful.
Apparently, technology giant Microsoft is going through a similar metamorphosis, having recently transitioned from Steve Balmer’s hero CEO style to the more collaborative CEO, Sataya Nadella, with quite astonishing results.
But what does this have to do with SMEs?
Running an SME
In the USA, companies with five hundred people or less are categorized as SMEs (in the UK, those with fewer than two hundred fifty people). Running a ten-man business is worlds apart from running a four-hundred-man business. For this article, the SME refers to businesses employing up to fifty people.
The Start-Up Phase - Visionary Powerhouse (CEO Hero)
In the early days of business development, the role of the CEO is vital. If you are the founder backing the business with your money, you are totally vested in the business. This approach makes sense in the early days when getting a business off the ground is at its most challenging. There are many knocks, bumps, and surprises, and you need cast-iron faith in your mission to persevere, and support your team and stakeholders through the inevitable, dark days.
However, in my experience, it is your resilience - your absolute belief that your idea is right and your never say die attitude - that will ensure you will succeed. So, in Lorna Davis’s terms, it is the appropriate time to be the CEO hero.
Having a great idea helps, one for which there is a market. But a not-so-good idea can fly, too, if you have the passion to make it work.
The Vision Thing
You must have a clear vision of what you are trying to build. If you do, you can sell it to stakeholders, customers, etc. with passion and zeal. All decisions in your work and home life must be made against the backdrop of the vision: “If I do this, does it take me nearer my vision?” If not, don’t do it. This single mindedness will ensure you succeed but be prepared for collateral damage; your home-life and relationships may get trampled on. If you are fixated on a work-life balance, don’t start a business and expect it to succeed.
An anecdote: One technique I learned from U.K. business and sports motivational coach, Michael Finnigan, is visualization. Michael’s business has the great name I2I, Impossible to Inevitable, which really sums up the SME startup challenge. He is the most positive bundle of energy you could ever hope to meet.
Visualization is having a clear picture of what success means to you. One image must sum it up. For me, it was being interviewed on Bloomberg TV about my business success. I carried that image with me everywhere, and when times were tough, I would focus on it and remind myself of that goal.
Have a clear vision. Be relentless, enthusiastic, and tough. Be the charismatic, hero leader. But, at the same time, be wise, have empathy, listen loudly to what the market is telling you, and subtly adjust your vision as the need arises. God gave you a powerful brain - use it. Follow your customers.
Beyond Start Up
Once the business is up and running, empathy and collaboration should play a bigger part in your success. Listen to your customers, teams, partners, and the market. Get out there and network. Look for opportunities and threats and adjust your business and vision accordingly.
If you can see a new market emerging, your hero instinct will encourage you to be an early participant. And it’s great! You will become an evangelist, have articles written about you, and be invited to talk at conferences. Everyone will want to hear from you to learn all about this new market. Do you know why? Because you are educating the market! At this stage, no one is buying anything (that will come later). If you are not careful, you can become an enthusiastic fool.
Emerging markets are great, but as an SME, try to enter after the groundwork has been done, when people are buying stuff. Let others do the educating for you. Remember the old saying, “the rewards for pioneering are arrows in the back.”
Listen to your team and engage with them. You employed them; you must respect them. Listen to their views and take account of what they say.
What is most difficult for the young, hero CEO to digest is that you are not always right! A very successful European businessman who spent his life buying and selling banks, shopping malls and businesses of all sorts once said to me, “Andy, if I am right half of the time, I am doing very well!.”
The other lesson he gave me was, “You can’t always do the right thing, but it is important that you work with the right things.” Identify the things that are critical to your business and work on those.
As your business moves from startup to motoring, stop interfering! At this point, the energetic young, hero CEO is accustomed to making decisions and has seen some success, so he thinks he is right. He can’t stop dabbling, changing things, and interfering. This can be highly damaging to the business and demotivating for the quality team that has been carefully assembled to help him run the business.
There comes a time when you need to let the business run. When the best thing to do is nothing - ‘Management by Benign Neglect,’ it has been called. The business has its own momentum; you have set it on its path. Now leave it alone and see what happens!
This brings us back full circle to Microsoft and the transition from hero CEO Steve Balmer to Satya Nadella, collaborator CEO.
By the time Steve Balmer took over from Bill gates as CEO, Microsoft Windows had been established as the standard operating system on over 90% of all shipped personal computers. If PC sales continued to grow exponentially, Microsoft’s revenues would grow, too. The best thing Balmer could do was leave it alone, and that is what he did. Instead, he expanded Microsoft’s expertise to phones and games consoles. He didn’t mess with the basic engine; he let it run. Some would argue he missed the mobile revolution and cloud/internet development. These are now Sataya Nadella’s focus, and the Microsoft share price has tripled in four years, as a result.
Sataya Nadella is actively listening to his customers and trying to understand their pain to ensure Microsoft builds products and services that meet their needs today and into the future.
It is great to be a hero CEO in the early stages of business development when needed, but as the business grows, there are fortunes to be made by being a great collaborator.
Andy Makeham has enjoyed a lifetime in software ‘business development’, as a programmer, implementor and entrepreneur. He has grown, bought and sold many business software companies and floated one on the public markets. He has worked with private and ‘private equity’ owners. Today Andy acts as a business development advisor to the software sector. In that capacity he is working with SOS Inventory.