Kellogg VC CEO Summit

1. Dave Kellogg Principal, Dave Kellogg Consulting www.kellblog.com @kellblog Unlearning as We Scale VC CEO Summit 11/6/20 This presentation and Kellblogby Dave Kellogg are licensed under a Creative Commons Attribution-NonCommercial4.0 International License.

2. Some Thoughts on Unlearning Irony alert: This quote often attributed to Mark Twain, but there is no evidence to suggest he actually said it.

3. On the Perils of Taking Advice from Successful People Theodore Levitt Whose greatest hits include “people don’t want ¼” drills, they want ¼” holes,” and “the purpose of a business is to create and keep a customer,” and “railroads were not in the train business, but in the transportation business.” See also: https://kellblog.com/2020/05/02/on-the-perils-of-taking-advice-from-successful-business-people/

4. My Experience with Scale and Scaling Operating • Ingres, $30M to $240/400M • Versant, $1M to $30M • Business Objects, $30M to $1B • MarkLogic, $0M to $80M • Salesforce, $3B • Host Analytics, $8M to $50M Board & Advisory • Aster Data (exited) • Granular (exited) • Alation • Nuxeo • Profisee • <Your Company Here> • Advisory: Tableau, MongoDB, Recorded Future, GainSight, Cyral, Plannuh, …

5. What We’ll Discuss Today • The age-old startup adage about people • Fixing and generalizing the adage • Hiring next-level people • Because or despite analysis

6. The Age-Old Silicon Valley Adage “The people who got you here aren’t the ones to get you to the next level.” • Mostly true • Often abused (maybe they were bad for the last level, too) • But what are you supposed to do about it?

7. The Implication Disposable People (Use them for this level; shoot them at the next)

8. Darwinian Life at Growth Startup • Extended executive staff had maybe a 12-16 people • Nine-year tenure as we grew from 240 to 4,500 people • How many other e-staff lasted during that period? • I think zero • Why? (In my humble opinion) • The adage • Building in year N felt like liability in year N+1 • Conclusions • You certainly brought your A-game to work • We lost a lot of good people, and the institutional knowledge that went with them

9. Failure is an Option And what do you do when it happens?

10. Adage Reconciliation Alert Your partner program certainly runs on this adage … and shouldn’t it apply to people, too?

11. Darrell Royal

12. How To Balance the Conflict? “Dance with who brung ya.” “Those who got you here won’t get you there.”

13. At Salesforce, I Saw a Different Way Was only there a year, but learned a lot • People were recycled, not disposed → loyalty/valued, institutional knowledge • Title was free, perhaps to a fault. (A perfect inflation hurts no one.) • Roles were ambiguous → collaboration was the only option • People worked as much for Methods* as managers → collaboration • The org chart was in constant flux → culture of change, not stasis • Strong culture and commitment to the company (1/1/1) • (Well, there were the cage fights^ too, but we won’t talk about those) * In the sense of V2MOM. ^ In the sense of Beyond Thunderdome.

14. Now Let’s Talk about Steady Eddie/Addie • You can’t build a company of 3,000 superstars • Google, excepted • You may not even want to • But “we only hire the best people” • Do you? • And pay them at the 70th percentile? • Silicon Valley culture does a big disservice to Steady Eddie/Addie • When did it become a sin to be good at your job, enjoy it, and not be seeking advancement? “Just remember this, Mr. Potter -- that this rabble you're talking about, they do most of the working and paying and living and dying in this community.”

15. Two Not-Terribly-Silicon-Valley Concepts The Set & Forget DirectorThe Vitality Curve (As Much as I Dislike Jack Welch) Well, that didn’t age well See: https://kellblog.com/2015/03/08/career-development-what-it-really-means-to-be-a-manager-director-or-vp/

17. I Fixed It Culture of Valuing Employees Culture of Experimentation (It’s OK to fail at something; you are not your role) Culture of Change necessarily ^ but we generally want to keep them with organization, nevertheless

18. Generalizing the Adage “The people, systems, processes, and strategies that got you here aren’t necessarily the ones to get you to the next level.” • Systems • e.g., applications, infrastructure, controls, security, … • Processes • e.g., OKRs, planning, onboarding, board agenda, hiring, 360 feedback, performance reviews, operating cadence, communications, compensation, … • Strategies (really, operating strategies) • e.g., technical debt, churn, business building

19. We Fall in with Love the Systems We Invented Look at my beautiful • Planning process • Weekly tracking sheet • KPI dashboard • OKR management system • Staff meeting agenda • Operating cadence • All hands communications Is everybody? Do they still work? Should you mix it up? What message does stasis send?

20. Operating Strategies That Change With Scale • Technical debt • Who brung ya: “we got here by banging out MVPs and then delivering features.” • Reality: that shit will kill you. • Solution: Trust Releases • Churn approach • Who brung ya: “we can live with 15% gross churn rate, we’ll just offset it with new sales.” • Reality: 15% of $100M is $15M. Today’s company size < tomorrow’s gross churn. • Solution: get on top of it, now. • Business building • Who brung ya: “we built our business by just hiring more reps.” • Reality: approach doesn’t scale. Europe != NJ. Federal != NJ. New products != NJ. • Solution: change mentality from “hiring reps” to “building businesses” and plan/staff/empower accordingly.

22. Hiring Next-Level Execs is a Risky Proposition What if it doesn’t work? • Lose a year • Incur huge direct/indirect costs • Drive out valued teammates • Frustrate yourself • Board starts asking questions

23. Your Reward For Trying and Failing

24. Board Flow Chart: Can You Build the Scale Team? Founder Yes “The F in class F means it’s our f’ing company.”No Unrealized potential Operational turmoil Board conflict Potential early sale Apply next-level adage to CEO No

25. What Goes Wrong? • Overskating the puck • Hiring the IPO CFO at $50M • Boards often misguidedly encourage this • Athlete theory • Recruiter sells you “an athlete” who’s in inventory • Because you’ve not clearly identified what you want/need • Hiring the lather/rinse/repeat executive • Boards often misguidedly encourage this See https://kellblog.com/2020/03/17/on-recruiting-the-must-have-nice-to-have-list/

26. Story: The Single Most Expensive Marketing Event I’ve Ever Seen • I was CMO of a $500M company • We hired a new, next-level scale COO from a big company • Super successful, sales oriented, built last company to $1B+ in revenues • He wanted to do sports/relationship marketing • We sponsored an ATP tennis tournament • VIP treatment for 30 attendees for nearly $1M • “You do know that I could buy every attendee a Ford Taurus, instead?” • The right question • “What was % of revenue from top 10 customers and ASP at his last job?”

27. Some Very Smart People Are Lather/Rinse/Repeat Making lots of money seems to imprint here The more you make the deeper the imprint

28. Unlearning What We Think About People • How many times have you seen “great people” at their last company flail at yours? • Maybe there are no great people • Just great people for a given job in a given situation • (And maybe great companies make good people great) • (And that should be your goal)

29. Avoiding the Lather/Rinse/Repeat Executive • Look for it on the LinkedIn profile • Rewind/replay pattern • Success/failure pattern • Test for it in the interview process • What did you do there? What would you do here? • How similar does this situation look to that one? • Why? What information would you need to decide? • Converse: to the extent the situation matches, the right one-trick pony might be a good idea.

31. Apophenia The tendency to perceive meaningful connections between unrelated things Technically, this is an example of pareidolia, one type of apophenia Our Brains are Such Good Pattern-Matching Engines That We See Patterns that Aren’t There.

32. Where Have You Arbitrarily Decided A Success Factor? (On logic of: we’ve done X, we’ve been successful, ergo we’ve been successful because of X) • Culture • Values • Product • Leadership • People • Focus • Customer centricity • OKR focus • KPI focus • Planning process • Hiring process • Operational cadence • Communications • Marketing • Community • Sales (no one says this, btw)

33. Unlearning Thought Exercise We have been successful … Because of In spite of Independent of Practice/process/value/sacred cow #1 Because of In spite of Independent of Practice/process/value/sacred cow #2 Because of In spite of Independent of Practice/process/value/sacred cow #N • • •

34. Summary & Conclusion • Meta-knowledge is important • “It’s what we know for sure that ain’t so that gets you” – Twain (or not) • Learning matters, as does unlearning • We generally put more energy into new learning than challenging existing • Pithy adages contain truth, but often conflict and are misapplied • The people who got you here won’t get you to the next level • Dance with who brung ya • The next-level adage generalizes well and you should generalize it • Beware the perils of hiring next-level execs and the rinse/repeat fallacy • Sometimes we take the wrong lessons, see patterns that aren’t there

35. Q&A Think of questions later? Contact me at LinkedIn, davekellogg@mail.com, or @kellblog