Scaling a company: Why leaders in tech fail to capture the market | Xquadrant

Scaling a company: Why leaders in tech fail to capture the market

  • Warning: This article has the potential to change your business and your personal leadership forever. If you’re looking for a quick piece of content candy, I advise you to skip this article and get back to work. However, if you know that what got your organisation here won’t be enough for its next phase of growth then you’re in the right place.

The ugly truth is this. In fast-moving sectors like tech, 90% of smart and experienced business leaders - like you! - are going to fail to achieve the incredible results they envision.

  • Their organisation either fails to execute fast enough to fully seize the opportunity - and competitors capture the growth instead.
  • Or they experience fantastic growth but fail to put in place the foundations to sustain their success. The Kauffman Foundation found that 2/3 of the Inc. magazine’s list of the 5,000 fastest-growing companies had shrunk, gone out of business, or been disadvantageously sold after 5-8 years.

More...

The material I’m going to share in this article is the ‘secret sauce’ behind the world’s most admired growth firms. Digest it, apply it, and it will transform your leadership, your business and your legacy.

Meet Alex

(It can be Alexander or Alexandra… you choose, but I felt I needed some kind of picture here.)

Alex is an exec in a high growth tech firm.

There’s a huge and growing opportunity, and company is expanding internationally and racing against deep-pocketed industry giants in a bid to capture the market.

Traction and growth is the number 1 priority.

It’s an awesome gig; a career-defining opportunity to create something truly significant in the world. There are high expectations and big challenges, which is part of the attraction.

Alex is smart, experienced and ambitious, and loves the intellectual challenges as well as the pace and excitement of the tech sector; the adrenaline and the daily rush of activity involved in the constant push to the next milestone.

Despite the real success and progress to date, Alex is wrestling with a couple of fundamental issues which have the potential to put a hard limit on future growth.

Problem 1: People issues

Firstly, there aren’t enough good people to grow the business any faster.

The growth of the business requires everyone to “up their game”:

  • team members need to step up to manage teams
  • managers need to step up to organisational leadership
  • senior leadership needs to successfully navigate uncharted territory

Frankly Alex isn’t sure many of the people have what it takes for the next phase of the company’s evolution.

To compound the issue,

  • Recruitment is a constant battle when better-funded competitors are chasing the same talent
  • Employee retention is always challenging - particularly in a couple of teams where morale isn’t great
  • Communication isn’t brilliant, which wastes time and effort
  • There are a couple of managers that are creating way too much stress and drama in the business

Because of all this, alignment and execution isn’t where Alex knows it needs to be to ride the market growth.

Problem 2: Maxed out

This lack of people results creates the second issue: being almost permanently maxed out. As a star performer and a key player in the business, Alex is continually drawn in to strategy discussions, product concerns, operational incidents, customer pitches and governance calls.

On one level, it’s exciting and rewarding to be a involved in so much of the business. But it’s also a recipe for frustration, long hours, and the sense that the organisation could do so much more.

Where do we go from here?

As ever, we never change our results until we change our thinking.

So now let's pinpoint the fundamental assumption that's limiting Alex from releasing the growth potential of the organisation.

Have a guess before clicking: what do you think it is?


PART 1: Summary Notes

  1. 90% of the smartest and most experienced tech-sector business leaders I see are going to fail to achieve the incredible results they envision.
  2. You have a small window of opportunity to change the world, but by the time you realise the problem it may well be too late.


Part 2: Superstar thinking

Before we get into the meat of what is holding Alex’s organisation back, we need to zip back in time 5 years when Alex was at a previous firm. Does this ring a bell?

The Training Course (5 years ago)

Alex had just finished a two-day management training offsite with 40 other VPs.

The program was engaging and interesting and Alex is motivated to put some of the concepts into practice.

Upon seeing Alex walk in to the office with a shiny new binder under his arm, the team groans.

Not only are they slightly resentful that their manager has been on another ‘jolly’ whilst they do the real work, but they’re now suspicious. What new hoops will they be asked to jump through now? What’s the fad of the month?

“Don’t worry,” they whisper to each other. “Let’s just smile and keep our heads down and his enthusiasm will burn off in a couple of weeks.”

And indeed, within a couple of weeks everything is business-as-usual. The team keeps doing what it’s always done, how it’s always done it.

We’ve all seen this scenario play out multiple times with training programmes, management conversations and change initiatives. No discernible change. So we get cynical and sceptical about whether ‘soft skills’ can really be improved and whether we can really deeply transform our people and our organisation.

So we conclude:

  • Situation: We have a people issue - lack of skills, motivation, alignment
  • Complication: There’s not much we can do about it
  • Solution: Make do with what we have, try to recruit some superstars, and rely on our own competency to make things happen in the meanwhile.

"Let’s just smile and keep our heads down and his enthusiasm will burn off in a couple of weeks."

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In other words, because we don’t think we can effectively address the people and skill issues, we settle for compliance more than engagement and we focus on task-achievement rather than team-empowerment.

And so we find ourselves a bottleneck in the organisation, overworked and frustrated how much more could be achieved if the whole organisation was playing at a higher level.

Superstar thinking

In a nutshell, because we see people’s capabilities, motivation and mindset as largely fixed, we divide employees into two categories:

  • the superstars (obviously including ourselves in these ranks!)
  • the rest

As a result, we overload the superstars (including ourselves) and underuse the rest - whilst looking for the next great superstar to hire into the organisation.

Now, of course, hiring great people is important.  But...

  • 1
    A team of high-performers DOES NOT equal a high-performing team (just ask any Englishman about our football squad over the last 20 years!). I’ve been in a couple of teams of truly outstanding individuals where overall performance was - frankly - mediocre. There is a missing piece we’ll cover on the next page.
  • 2
    Most companies simply cannot consistently hire “top 1%” people at the scale and speed they need, and so this becomes a massive bottleneck to growth.
  • 3
    Even if you only hire superstars, you create some awkward effects, as Leonid Bershidsky wrote in an article called Why are Google employees so disloyal?:

Technology companies that hire the smartest young people around all but guarantee themselves a high churn rate … No matter how satisfied these highly marketable young minds may be, no matter how much they enjoy the free meals and hybrid car subsidies, they will jump ship as soon as they get bored or get a better offer elsewhere.”

David Bath (a VP at Inmarsat) said something very similar today to me in a LinkedIn message about the detrimental effect in tech firms of the Silicon Valley “hero myth”.

We replicate what we’ve experienced

In my work consulting with CXOs at tech firms large and small over the last 20 years, I estimate 80% of leaders have this kind of superstar thinking. It’s totally normal, and I’m certainly not blaming Alex here.

To understand why, check out this photo of me and my family.  You'll notice we have two kids.

Questions:

Guess how many kids my parents had; guess how many kids my wife’s parents had.

Answer:

Two, and two!

In family life, we so often we replicate what we’ve personally experienced. And in work, the same applies.

The unfortunate fact is that most of us haven’t really experienced a different way of leading a business that would create a totally different outcome.

The good news is that you’re now ahead of 80% of leaders. You’re able to see the issue with a fresh set of eyes. 

I had superstar thinking for the first part of my career. Heck, if I’m honest I (very humbly of course!) saw myself as a bit of a superstar:

I’d got a first-class degree from Oxford and rose through the corporate ladder fast, making it to Partner in record time before being headhunted for a senior role at Cisco.

But then I started noticing teams of incredible professionals who seemed unable to grow, and teams of people with more modest resumés who were creating incredible results. I started to ask some questions.

Questioneering: what’s the higher-value question?

I really enjoyed Joseph Bradley’s recent book Questioneering. Partly of course because he gave me a nice call-out in the introduction (definitely overblown, but my mum would be proud!):

The core idea of the book is that in an Internet age where all the answers are known, real value is created by asking higher-value questions.

So here’s a higher-value question for you to consider:

What would be a more effective approach to building a fantastic organisation than “superstar thinking”?

Got some thoughts together?  OK, let's go ahead and see exactly what a different approach looks like when put into practice into a high-growth tech firm.


PART 2: Summary Notes

  1. We have a people issue - lack of skills, motivation, alignment
  2. We don’t think we can effectively address the people and skill issues
  3. We settle for compliance more than engagement, and find ourselves a bottleneck in the organisation


Part 3: Greenhouse thinking

The story so far: it’s people issues that are limiting Alex’s ability to grow the business, but it just seems impossible to change people, and there just aren’t enough ’superstars’ to carry the business forward. In this episode: we discuss a different approach.

Meet Chris

Christopher or Christine, as you prefer. (I just decided to keep Alex & Chris the same gender)

Chris is a CXO in a similar high-growth firm to Alex.

Like Alex, Chris is smart, well-educated and with a good track-record.

Chris’s world is also full of demands from employees, customers and investors.

But there’s something a little different with Chris’s organisation.

The day-to-day issues that Alex has are being addressed in Chris’s organisation too, but without dragging Chris in each time. Good decisions are getting made even without the senior leader present.

As a result, Chris is busy but not maxed out - and so actually has margin. This margin allows Chris to operate at a higher level than Alex, think more deeply, consider more facts and more factors, and identify the game-changing moves the organisation truly needs to make.

Exec Team meetings are no longer the weekly muddle of updates, pressing tactical issues and unfinished snippets of strategy discussions; they are focused on the major decisions and an agreed set of priorities.

"Good decisions are getting made even without the senior leader present."

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Chris still faces the challenges of recruitment, obviously - but there’s a growing buzz that the working environment is so attractive and people are turning down more lucrative offers to come and work for Chris.

More to the point, however, the pressure is off to find the next “magic candidate” for the company’s development, because there’s a strong pool of internal candidates ready to step up to the next level of responsibility.

Whilst still involved in the immediate demands of the business, of course, Chris is focused on preparing the way for the next level of growth:

  • Providing the strategic clarity and leadership to release the people they have to truly bring their best
  • Creating a culture that turns best practices into the norm
  • Building a consistent execution discipline throughout the organisation enabling ever-greater challenges to be met.

Chris has the replaced the “quick hit” of being involved in the driving product and sales performance into the deeper satisfaction of creating something much bigger. As a result sales are scaling faster than ever.

The secret to Chris’s success?

Greenhouse thinking

We’ve been trained to think of organisations as machines, operating almost under Newtonian cause-and-effect mechanics. Terms like re-engineering, alignment, and performance give away our assumptions.

The problem is that machines are static, don’t adapt naturally, and are obsolete easily.

Not ideal for the rapidly-changing markets we work in.

However, organisations are made up of people. So perhaps a better analogy would be of organisations as organisms

This has a lot of merit in the fast-changing world of tech. Organisms grow, dynamically adapt, reproduce, expunge toxic elements, and so forth. They’re - dare we say it - agile!

Here’s the thing: creating a healthy organism is very different from building a working machine.


Imagine you buy a pot-plant, and put it under the desk where there’s no sunlight and no water.

Six months later, you find the plant - withered and dead, of course - and complain it was an underperforming specimen. But the plant never had a chance!


Now let’s imagine you construct a Greenhouse and provide the perfect conditions for growth and reproduction. Each species receives the right amount of sun, nutrients and water. Suddenly, you’ve create a thriving ecosystem.

So, another high-value question for you:

What if we could actually build an environment in our organisation that systematically creates growth and health (i.e. engagement, alignment, performance) in every leader and every team …. an environment that would address the “people problem”, remove the skills bottlenecks and allow the organisation to organically scale?

Alex vs Chris

Both Alex and Chris are highly competent, experienced and smart. So what’s the difference in their ability to build a scalable organisation?

Here’s the secret. Good leaders like Alex operate from an Execution Mindset, great leaders like Chris operate from an Environment Mindset.

The root cause of mediocre performance is the performance mindset (superstar thinking) - rather than the environment mindset (greenhouse thinking).

Execution Mindset (Superstar)

  • Looks to ‘be in the room’ so the right decisions get made
  • Places inordinate value on the ‘next great hire' to take the company to the next level
  • Sets deadlines and goals but unsure organisation is really ‘fit’ enough to hit them
  • Sees performance issues primarily as a people problem
  • Assembles teams of high performers
  • Focuses on sales, marketing and product
  • Enjoys the adrenaline rush of being in high demand
  • Looks to add skills to the business

Environment Mindset (Greenhouse)

  • Creates disciplines that create great decisions even when they're not in the room
  • Hires well, but also builds systems that continually raise up strong internal leaders
  • Builds execution discipline across the firm, enabling ever greater challenges to be met
  • Sees performance issues primarily as a leadership problem
  • Grows high-performing teams
  • Focuses on people, culture and systems
  • Enjoys the adrenaline rush of creating something much bigger than them
  • Looks to multiply skills across the business

The good news is that it’s entirely possible to create exponential environments. It’s just that leaders who know how to build these “greenhouse” environments are incredibly rare, valuable and inspirational. And as we tend to replicate our experience, we rarely make this leap accidentally.

If you’ve got this far, perhaps this is moment for you to become this kind of leader. Leadership expert John Maxwell describes this transition as moving from Level 3 Leadership (production) to Level 4 and beyond (reproduction).

So how do you actually do this?

So let’s discuss implementation: how do we create these kinds of environments that raise performance across the board?  You'll be surprised at one of the key ingredients that needs to be in place.


PART 3: Summary Notes

  1. If we saw our organisation as an organism, we could ask ourself a “high-value question”: how can I create an environment - a greenhouse - that would create genuine growth in my people and allow my organisation to organically scale to business requirements?
  2. The root cause of mediocre performance is the performance mindset rather than the environment mindset
  3. Performance never creates environment; environment creates performance.


Part 4: Building Exponential Environments

Creating an exponential environment isn’t rocket science. 

In fact, complexity is the enemy. 

As smart, conceptual leaders we enjoy the buzz of the complex, the complicated - but that’s a key reason why most management theory, change-management and people-development fails.

Most people find it too difficult to internalise and apply new information and habits in the reality of a pressurised, fast-moving environment where people have real products to build and real clients to serve.  That's why we focus on simplicity and adoption, always.

We can find it hard to think that something relatively simple can actually be game-changing. Patrick Lencioni, author of the management classic “The 5 temptations of a CEO” notes:

It’s so simple and accessible that many leaders have a hard time seeing it as a real opportunity for meaningful advantage. After all, it doesn’t require great intelligence or sophistication, just uncommon levels of discipline, courage, persistence, and common sense. In an age where we have come to believe that differentiation and dramatic improvement can be found only in complexity, it’s hard for well-educated executives to embrace something so simple and straightforward.

We are looking for iPod-like simplicity.

Simplicity —> Adoption.

Adoption —> Results.

Simple doesn’t necessarily mean easy though - it does require some discipline and some patience. 

And it does require four key ingredients to be in the mix. For example: Heroic Vision and Transformation Vehicles.

If you’re interested, I’ll share the full list with you in the Insider, later (don’t worry, it’s free). But for now let’s look at one. Language.

Ingredient 1 of 4: Language

Of the four key elements of building an exponential environment, LANGUAGE is one of the most significant. Language creates culture. When a specific tribe uses specific words to represent specific ideas, everybody starts seeing the world through the same lens, certain ideas are lifted up and valued, and a shared identity develops.

How language raises performance

An example: 17 years ago the consulting firm I was in sent all its consultants on a two-day course on Strategic Selling by Miller Heimann. It’s pretty famous - you may have heard of it.

We learned a process for mapping account complex sales processes - the famous "Blue Sheet":

The Blue Sheet is a nice sales framework. But the power lay elsewhere....

They trained us to use specific terms for the different stakeholders: User Buyer, Technical Buyer, Economic Buyer, Coach. All these terms had very specific definitions.

The very next day our sales performance jumped up a notch.

Why? As soon as any (random) group of consultants was assigned to a new sales opportunity, we could immediately roll up our sleeves and start mapping out the opportunity using our shared language: “OK: who’s the User Buyer? Who’s the Coach?”

The language drove adoption of a world-class process.

I and several other colleagues who I'm still in contact with still use that language today.

That's the power of language.

The power of leadership language

So: language can create world-class performance. Now imagine an entire organisation using a world-class leadership and collaboration language. World-class performance starts to follow:

  • teams collaborate better together
  • leaders take their team members to new heights
  • best practices are transferred organically
  • drama and gossip go right down
  • the whole organisation gets better aligned

This is exactly what we observe when we implement this.

To see what I mean when I talk about Leadership Language, I recommend you go ahead and DOWNLOAD 3 powerful examples of leadership language that you can immediately put into practice with your team.

As you will see when you look at the examples, there are a whole load of beneficial effects that arise when this language is implemented within an organisation:

  • 1
    People get it immediately - it’s an instant “aha”.  It cuts through the noise.  It's simple, sticky and memorable.
  • 2
    It raises self-awareness - people suddenly see their own leadership tendencies and how it affects their team.
  • 3
    It creates a compelling 'future self' vision. People have language to articulate specific capabilities and skills they desire; and they start to pursue those.
  • 4
    It enables new conversations between a leader and their team. Important concepts are "packaged" into a simple word or phrase, allowing these concepts to be quickly explored in operational conversations.

Other Ingredients

I hope you can see the opportunity here: very few firms have intentionally implemented a comprehensive, world-class language throughout their organisation to specifically create effective leaders and high-performing teams at the scale and speed that a high-growth tech firm truly needs.

So we've covered the importance of greenhouse thinking and started to discuss how to actually build an exponential environment.  Language by itself, of course, isn’t enough to make this happen. I’ll cover the other 3 keys in future articles, or you can subscribe to the Xquadrant Insider newsletter to get the lowdown.


PART 4: Summary Notes

  1. Creating an exponential environment isn’t rocket science. In fact, we are looking for iPod-like simplicity.
  2. It does require some key elements to come together, such as language. Language creates culture and actually drives performance.
  3. It requires a dose of humility on the part of the leader (you) to accept that to get different results in your organisation, you yourself may need to take a different approach.


Part 5: Scaling a company - summary

Well done, you’ve made it this far. I know that was a lot to take in. Let’s recap:

  • 1
    The surface issue may be product, sales or financing, but the root cause issue limiting growth always comes down to people (skills, motivation, clarity, alignment).
  • 2
    We don’t think we can effectively address these “soft” issues, so we flip into “execution mindset” and deliver on the immediate tasks at hand.
  • 3
    We quickly find there’s a shortage of superstars in the organisation - and so growth is capped.
  • 4
    The “high-value question” is: how can I create an exponential environment that allows my entire organisation to perform at a higher level, no matter how big we scale?
  • 5
    Creating an exponential environment isn’t rocket science, but it does require four key elements to come together, such as language.

Now, the power of tech to change the world for the better continues to inspire me - and its dark side continues to concern me deeply.... which is why there’s one more question we need to consider before talking next steps.

Important Aside: You are the key

As the organisational leader, you will be key to creating a culture that can sustain exponential growth.

Because leaders define culture.

And business leaders tend to have one of two very different kind of business mindsets. Which do you subscribe to?

  • Mercenary: Entirely focused on financial gain. The ends justify the means. Matter by winning.
  • Missionary: Looking to create positive impact on their customers and society: to make a difference - with financial rewards flowing from that. Win by mattering.

If you are a mercenary leader, please stop reading. You’ll like the potential for massive performance improvement in what I say, but for this to work you have to be committed to getting the best of our people for THEIR sakes, and not just as a means to an end. So frankly we’re not going to be a match.

You see, several years ago I asked myself what I would say in 20-30 years time, with grandchildren on my lap asking me what I did, and I realised I wanted to talk about stuff that mattered.

So I made a decision to fully commit myself to the Missionary model. To make a difference in the lives of leaders who are themselves intent on making a positive impact in their world. That’s how Xquadrant was born.

So if you aspire to be a missionary leader, who longs to build something that’s positive for the world, that’s positive for your team and that also delivers the numbers… I have an invitation for you.

Invitation: Implementation notes

At Xquadrant, my associates and I help tech execs at a pivotal growth point in their business create Exponential Environments so they can capture the market and fulfil their potential to make a positive dent in the world before the window of opportunity has passed.

We’ve seen this approach work in Fortune 500 companies as well as in fast-growing start-ups of 50 people or so.

As part of our work, we share best practices with a select group of customers in the Xquadrant Insider. This is a email subscription that provides implementation notes on the personal, team and organisational transformations that will enable your business to truly scale.

There’s no quick fix to change things overnight, but if you follow along and implement these into your life and business, you’ll transform your influence and impact and get results you didn’t think possible.

Much of the content in the Xquadrant Insider has previously only been available to our paying customers.  If you'd like to get the inner scoop and become a leader who constantly creates healthy organisational environments capable of exponential growth, please click on the continue button.  We'll also send you, immediately, the two Leadership Tools we mentioned above.

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Richard Medcalf
 

Richard Medcalf is Founder & CEO of Xquadrant. Having held senior positions in both the professional services and tech sectors, he's committed himself to improving the quality of leadership and organisational performance around the world. The way to his heart is through curry.

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