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Preview — High Growth Handbook by Elad Gil
So winning the market is the big thing.
Number two is getting to the next product. We are in a product cycle business. Which is to say that every product in tech becomes obsolete, and they become obsolete pretty quickly.
In fact, the general model for successful tech companies, contrary to myth and legend, is that they become distribution-centric rather than product-centric. They become a distribution channel, so they can get to the world. And then they put many new products through that distribution channel.
One of the things that’s most frustrating for a startup is that it will sometimes have a better product but get beaten by a company that has a better distribution channel.
But then the third thing you need to do is what I call “everything else,” which is building the company around the product and the distribution engine. That means becoming competent at finance, HR, legal, marketing, PR, investor relations, and recruiting.
It’s because 150 is the Dunbar number, the number of people you can directly know.
And a lot of product/market fit is the fit with the early adopters. And so you get these extremely enthusiastic people, who in a lot of cases have sought you out as the vendor, saying, “Wow, your thing is really cool. Can I please use it?” And that’s your sign of product/market fit.
The problem is, the early adopters are only ever a small percentage of the overall market. And so a lot of founders, especially technical ones, will convince themselves that the rest of the market behaves like the early adopters, which is to say that the customers will find them. And that’s just not true.
And so at some point, if the early guys don’t get to the other 95% of the market, somebody else is going to go take it away. And whoever has 95% of the market, number one they’re going to get all the value.
I think the distribution moats end up being at least as important. At some point, whoever has the distribution engine and gets 100% of the market, at some point that engine itself is a moat. Again, that might be an enterprise sales team for a SaaS company, or it might be the growth team at a consumer company.
First of all, raising prices is a great way to flesh out whether you actually do have a moat. If you do have a moat, the customers will still buy, because they have to. The definition of a moat is the ability to charge more.
companies that charge more can better fund both their distribution efforts and their ongoing R&D efforts. Charging more is a key lever to be able to grow. And the companies that charge more therefore tend to grow faster.
If you price it high, then you can fund a much more expensive sales and marketing effort, which means you’re much more likely to win the market, which means you’re much more likely to be able afford to do all the R&D and acquisitions you’re going to want to do. And so we always try to snap people into a two-dimensional mindset, where higher prices equals faster growth.
we invest R&D as a percentage. But anybody who’s actually worked in R&D knows it’s not really a question of money. It’s not really a question of percentage of spend. It’s who’s doing it.
I’m always pushing companies to go to a flat structure of independent teams. I’m really on the Jeff Bezos program on that, the two-pizza team thing.2 I think hierarchies kill innovation for the most part. And I think that matrixes are just lethal in most cases. There are exceptions, but in most cases, you need original thinking and speed of execution, and it’s really hard to get that in anything other than a small-team format, in my view.
As your company scales, the CEO role will need to scale with it.
As CEO, you will need to find a way to get leverage on your time—and learn to say no a lot.
One of the most important things you will do as CEO is learn to say no to those things that are not the best use of your time.
a classic young, idiot board member will say, “Well, I’m giving you my expertise and advice. You should do X, Y, Z.” But the right framework for board members is: You’re the CEO. You make the call. We’re advisory.
How can I show up saying, “I’ve thought about this, and here’s something that I think is the best possible thing I can lay on the table.”
The larger the board is the harder it will be to manage it and keep it both focused and productive.
Don’t tolerate random people showing up. A board meeting is not open to whoever the venture firm wants to include.
You don’t want your board to be too large. The larger your board, the less it is going to get done.
I’m a bit of a jerk with my companies, when I’m the entrepreneur, in that I set the expectation very, very early on that I’m not going to do a fancy PowerPoint deck. I’m going to have a sheet of paper with the big points on it and the big numbers on it, and then we’re going to get together and have a conversation.
You should optimize for shorter times between each step and for rapidly getting offers out.
You should referencecheck everyone.
Each manager can set 30-, 60-, and 90-day goals for new employees. This gives a sense of direction, context, and structure for the new employee.
Early employees that can grow and scale responsibilities within a company are invaluable.
The role of the CEO is basically to figure out and decide what the company should do and then make sure it does that.
The trick to being effective at this is that you have to get really good at saying no and just not doing things. There are a lot of things that are urgent but not important.
But most of the time press feels great and delivers nothing.
You need to be conscious as it’s happening, and realize that at some point you’ll get far more leverage on your time if you hire people and work with them closely than try to do everything yourself.
When hiring executives, look for people who have the experience and background that would make them a good fit or hire for the next 12–18 months. Anything shorter than that and they will not be able to scale sufficiently far relative to the time it takes to hire them. Anything longer and you will over-hire and end up with someone who is a bad fit for the job.
Do they think about how their functions can be a competitive advantage for the company? Most companies are only good at one or two things, which is often enough to be successful. But companies that can tackle more than one thing well tend to outshine everyone else
You can usually look around an office, especially if it’s an open office, and see who’s coming to people’s desks. The people who are thriving—at any level, junior to senior—tend to have people approaching their desk all the time.
In that case, I tend to prefer circulating notes the night before. They can be bullet point-style, using the three Ps—plans, progress, problems—and shared in advance, so that people’s brains are chewing on what’s going on.
For COO, you optimally want someone strong enough to be CEO of a company, or at least someone with solid general management or key functional experience.
For example, at Microsoft, Gates ran product, Steve Ballmer ran sales, and Bob Herbold as COO ran finance, HR, marketing, PR, and other areas.
In our particular situation, the COO that we brought on was formerly a general manager of a large division of Intuit, and a CEO prior to that. So he had a lot of experience owning all the major functions of an organization. He had a particular interest in things like talent development, organization design, and scaling up of organizations—so a very people-oriented COO.
How do they fit in your culture? Businesspeople will be different from technical or product people in a number of ways, but they should still hold to your core cultural values.
And then the other thing is, I felt that the complexity of going overseas was pretty massive, actually. The trouble that it would place on the company’s executives to have to split their time in a very, very taxing way, involving a lot of travel and a lot of hours, I just felt was going to really break us. It would actually be a little easier to start a different business in the U.S. than to take the other business overseas.
Re-orgs should never be open conversations with the whole company (or a functional area) about what form the new organization structure should take.
The biggest failure mode, is not setting the right expectations.
Your culture acts as an unwritten set of rules and values that drive behavior and cohesion across the company. Your company culture is the foundation on which everything you do rests.
Constantly emphasize values day-to-day. Repeat them until you are blue in the face. The second you are really sick of saying the same thing over and over, you will find people have started repeating it back to you.
Reward people based on performance as well as culture. People should be rewarded (with promotions, financially, etc.) for both productivity and for living the company’s values.
There is a fine line between self-confidence and arrogance. When I interview people for engineering roles, the smartest people write down the question and work through it. The people who think they were the smartest try to do it in their heads and get it wrong.
YOU CAN’T DELEGATE CULTURE
I really think you need to be explicit about that, that the challenge is not in preserving the culture but in having it evolve the right way.
We’ve also worked with companies that call this “culture add.” “Who’s going to bring what we most need?” rather than “Who fits in with what we already have?”