Travis Kalanick’s ‘Profound Apology’​ Is a Cautionary Lesson for Young Founders

(This is an article David co-authored with our Kellogg colleague Brooke Vuckovic for Entrepreneur Magazine)

The “profound apology” issued by Uber founder and CEO Travis Kalanick that he must “fundamentally change as a leader and grow up,” in response to a video showing him berating a driver that went viral, underscores how the pressures of a high-growth startup can undermine leadership development when and where it’s needed most.

In his apology, posted on the Uber site, Kalanick admitted, “This is the first time I’ve been willing to admit that I need leadership help and I intend to get it.” For Kalanick, who has also faced criticism for the culture at his company after sexual harassment allegations went public in a blog by a former employee, this is a crucial admission. The serial entrepreneur, who founded file sharing startup Red Swoosh in his early 20s and Uber in his early 30s, shows the importance of entrepreneurs developing holistically — vertically into self-awareness and self-management, as well as horizontally across the skills needed to run a business.

Kalanick’s statement that, “My job as your leader is to lead…and that starts with behaving in a way that makes us all proud,” is also a cautionary tale for entrepreneurs who don’t put sufficient emphasis on personal and leadership development.

As our work with young entrepreneurs shows, capturing the investors’ interest takes more than just a great idea or even good results. Founders who exhibit self-awareness, leadership ability and agility, and who can grow along with their company, will be more likely to go the distance. The intensity and pace of launching and scaling a high-growth startup are so great, young founders, in particular, must pay attention to the amplifying effects of speed on their leadership. Entrepreneurs who develop holistically establish the foundation for building the necessary confidence to manage complex relationships, competing priorities, and fast-paced decisions.

While it’s common for young entrepreneurs to have mentors, many of whom are experienced entrepreneurs and investors, much of the feedback from these sources is focused on the functional elements of business-building (product development, marketing, design, finance etc.). What’s far less common is thoughtful guidance on how these founders successfully evolve into leaders — and how their “executive DNA” may positively or negatively impact the success of their early ventures.

No matter how good the idea or convincing the business model, a startup rises and falls on the leader’s capacity to develop and grow alongside the business. There are three dimensions of awareness that deepen a young founders EQ.

Awareness One: Strengths, Weaknesses and Derailers

Without self-awareness of one’s strengths and weaknesses, it becomes difficult if not impossible to build a team with complementary skills and expertise. To gain this awareness, young founders need to reflect on the key strengths essential to the team and to the success of the business. They also should know when to rely on others’ strengths and perspectives.

The temptation among many organizations, including startups, is for leaders to gravitate toward those who are “same as me.” But as research has found, homogeneity can stifle creativity and hold back the organization. A team that is diverse in terms of gender, race and ethnicity, as well as experience, thinking styles, and background is better equipped to tackle problems and bring to bear insights that create breakthrough innovations. One cannot do this without a high degree of self-awareness.

Awareness Two: Orientation to Conflict

Without understanding their orientation to conflict, founders will struggle to manage difficult or disappointing conversations. Key reflections here are how they manage interpersonal conflict with others, and how they manage operational conflicts among competing priorities and commitments.

For founding leaders of startups, there’s no avoiding bad news, disappointing results, tough feedback, and making hard decisions that leave others unhappy. A “softer” version of conflict comes into play internally as the young founder struggles with when and how to say no. The leader who learns the art of a “positive no” is more apt to maintain a laser focus on priorities in the business and in their personal productivity. They will also avoid the classic trap of becoming over-committed and yielding anemic results across the board; unable to prioritize and delegate authority to others, particularly as the company grows.

Awareness Three: Your Values and Purpose

Though last on this list, knowing one’s values is perhaps the most important awareness founders must have, as their personal values establish their startup’s culture. Key questions here are what do you stand for, and why does this venture exist?

Much like the process of product development, developing one’s identity as a leader is an iterative, others-focused process that involves trial and error. However, the leader’s identity and toolkit are often developed at warp speed as their business begins to scale. Without a clear sense of one’s values and purpose, founders are less likely to project the optimism and confidence demanded of them, and are more likely to become over-invested in their image, less open to learning, and less clear about their goals.

In the corporate world, leaders typically gain these three dimensions of awareness as they build a sense of self over time, through training, experience, and classic management relationships. But high-growth startups are a “heat inducing laboratory” in which young founders are thrust into high-stakes leadership roles quickly, and sometimes prematurely, as the business scales and the team grows. This makes foundational coaching and interpersonal development more important early on, even before a startup is launched.  In this respect, founder-leader fit is a close second to product-market fit.

For many young founders, the first taste of executive leadership accompanies the excitement and pressure of a startup launch. For those who grow both horizontally across business functions and vertically in leadership maturity and skill, success may be more likely, and certainly more satisfying. Chances are, they’ll never have to apologize publicly for a lack of leadership maturity as Kalanick just did.

Here’s What Can Happen When You Don’t Check Your Ego at the Door

(Originally published by David in Fortune Insiders)

A mistake that is not only foolish in the moment, but that can have long-term negative impact is letting difficult decisions linger. Maybe you’re procrastinating on dealing with a “people issue,” such as needing to let someone go for the good of the organization. Or, perhaps you’re reluctant to admit that your current business strategy or product just isn’t working out and you need to start over. If you agonize over informing stakeholders of a problem that has come to your attention, issues like these will only get worse.

Many of us tend to avoid the hard things — the decisions and actions that may make others unhappy or prove to be unpopular. As humans, we don’t like to be the bearer of bad news and disappoint people.

With difficult decisions, though, the longer you procrastinate in taking action, the worse things can become. For example, firing someone can be painful, and having empathy for the person to be terminated may delay your decision. But the longer the person stays in a job that, for whatever reason, is no longer a good fit, the worse it is for the rest of the organization. In my own experience, I can recall situations in which people needed to be let go, but we dragged our feet on making the decision because it was hard (not because the choice wasn’t clear). By the time we acted, what had started as a manageable problem had mushroomed into a major organizational issue.

When it becomes clear that a product or strategy isn’t working, the thought of disappointing stakeholders can be so overwhelming that you put off the decision to change direction or go back to the drawing board. That reticence may be tied up in not wanting to disappoint others, including customers and investors. But often, there is a deeper reason — ego. You’ve invested so much time, money, and energy into a particular strategy or product, that now you’re disinclined to admit that you were wrong. In this instance, your reticence to make the decision is all about your need to be right.

In startups, the ego issue is further inflated because of the glamour associated with entrepreneurship; you may tell yourself that the only way to bask in that glow is to be right. With this thinking, “humble pie” becomes very unappetizing. True entrepreneurial leadership, though, requires having the maturity to know that things don’t work out all the time. Moreover, telling investors about a problem as soon as it hits your radar may actually net a positive , even if the news is disappointing initially.

With startups and other early-stage companies, experienced investors expect problems and setbacks. Even more important, savvy investors have ideas, connections, and other resources that can help solve problems. But if you wait too long to tell your supporters, there may be nothing they can do.

There is another decision that should never be delayed: when there is an ethical problem. The longer a breach of ethics goes unaddressed, the worse the problem becomes — a potentially fatal mistake for the company, its brand and reputation, and its longevity. For example, Theranos is facing federal, civil, and criminal investigations after serious questions were raised about the validity of its testing products that were said to require only a few drops of blood. Theranos CEO Elizabeth Holmes has been banned from operating a laboratory for at least two years, and the company continues to face difficulties, including an investor lawsuit.

In contrast, consider the actions of Johnson & Johnson and its McNeil Consumer Products subsidiary when several people died in 1982 after taking Tylenol that, unbeknownst to anyone, had been contaminated with cyanide. The swiftness of the company’s response and the transparency of its actions allowed it to recover consumers’ trust and preserve the valuable brand. It’s hard not to wonder what would have happened had Theranos followed J&J’s lead and disclosed the reported problems with its blood tests as soon as they surfaced.

For startups and early-stage companies, the road forward is often bumpy and unpredictable. But being unable or unwilling to make tough decisions quickly will only compound problems, and lead you to regret a foolish mistake.

Your Lack of Experience Could Be Just What a Startup Is Looking For

This is a piece David originally authored for Fortune Insiders. 

If your career change moves you in the direction of a startup, there’s no need to worry about having a non-traditional background. Startups, almost by definition, exist to question norms: How can the demands of the marketplace be met in new or better ways? In contemplating that question, your non-traditional background may have equipped you with skills and perspectives that are exactly what a startup needs.

It’s not so much of a stretch, then, whether your background makes you two steps away (i.e., a large corporate environment) or five steps away (i.e., something seemingly unrelated, such as the arts or social work). In both instances, there are ways to bridge the gap from where you’ve been to where you want to go — provided it’s authentic. In other words, you must possess valuable skills without adding “spin” designed to make you look like a better fit than you really are.

Consider the two-step distance. Maybe you came from a large company where you operated within specific processes and procedures — very different from a startup with a less-structured environment. However, your knowledge of a specific industry (e.g. banking or accounting), your network of contacts, and even your knowledge of structures and processes may be the “missing link” a startup needs to scale. You bring the professionalism, rigor, and empathy for customers that the startup likely needs to get to the next level.

Typically, founders have big ideas when they launch a startup, but as the company tries to scale, they often need a distinctly different skill set in order to take the firm from the “idea stage” to the “growth stage.” Earlier in my career, for example, I worked for three of the big-five tax firms before joining a five-person medical device startup. I didn’t have experience in the medical field or in startups, but I brought to the team expertise in the kinds of processes and systems that helped the firm scale. The rest I learned on the job.

In addition to your corporate experience, you may also be passionate in totally unrelated areas that show another side of you. Your experience in, say, improvisational theater shows that you are creative, understand the importance of timing, and can think on your feet.

Now, let’s say that your professional background is five steps away — maybe you were an artist or you spent a few years in the Peace Corps. No matter that these backgrounds are completely unrelated to a startup, you possess personal strengths that helped you be successful — whether cultural, behavioral, or attributes such as problem-solving. Your artistic performances may have allowed you to develop strengths in preparation, organization, motivating a team, or creating an experience. Or, your work with an NGO in the field may have given you invaluable insight into how to do more with less. Simply having a fresh perspective can lead you to ask the one new question that unlocks a whole universe of new possibilities for a company.

A non-traditional background isn’t a deal breaker for entering a new field, especially at a startup. By being willing to learn and reframe your experience, you can work with the new team to gain a better understanding of the business, while contributing the strengths and skills that you bring.

The Venturing Mind

Startup Thinking is Not Just for Startups.

We have now been teaching the completely retooled New Venture Discovery class (KIEI 462) at Kellogg for a 2 full years. Between us we have we have taught the course 16 times to over 600 students and have learned a lot about which aspects of the course/curriculum work well, which don’t, and which elements we might change to improve things going forward.

As we reflect, one theme has become clear to us: the process of New Venture Discovery (translating an unmet needs into new offers and business models) is as applicable/useful to non-entrepreneurs as it is to those aspiring to launch new companies. We see evidence of this in a few notable areas:

  1. The makeup of the students that take the class – about 2/3 of which are not sure that they want to be committed entrepreneurs, but find the process of New Venture Discovery interesting and useful
  2. The feedback that past students share from their experiences after graduating. We’re told that they are using these tools and methods and some companies, like Adobe, have their own lean start-up/launch-pad tool suite.
  3. The reaction we’re getting from alumni and other executives when we share the principles of New Venture Discovery with them. We hear quite a bit of: “This is a great approach for any company trying to bring something new to market or innovate on its business model – my company gets bogged down in ‘planning’, and it takes forever to get to the ‘doing’!”

The fact of the matter is that the majority of people we teach, present to and speak with are not, and will never be founders of companies. That being said – many of them are finding it useful to learn how to think like a scrappy, customer-oriented entrepreneur. This pattern has led the two of us to begin to use the term “Venture Mindedness”. It means adopting a discovery-oriented mindset when designing new business models – regardless of whether you are a startup founder, corporate executive, physician, marketer…whatever!

There are three areas of the discovery approach that serve as the foundation of the venturing mind:

The importance of spending time in the field, having first-hand conversations with users/customers

Most businesses fail because they never achieve product-market fit. Most businesses never achieve product market fit because they never fully understand their customers’ needs. Most businesses never understand their customers’ needs because they don’t spend enough time with them – in the proper context (especially when they’re experiencing the product/service)– and asking the right questions.

This is as true for established companies (of all flavors) as it is for startups.

The power of embodying questions with prototypes

“Leave prototyping to the engineers.” At least that is the common belief of most executives and managers. This has, in large part, been born out of the ingrained understanding that ‘prototyping’ is as way of presenting an early version a final product and NOT as a way of asking questions of users.

Our point of view is that a prototype is a “question embodied” – and that we can prototype almost anything (a product concept, services, experiences, business models…you name it).

Again – this way of thinking is as useful and appropriate for large companies attempting to create new business value as it is for founders looking to disrupt an industry. Just because you are big doesn’t meant that you need to spend like it.

Sometimes the cheapest, lowest-fidelity sketch can answer the million dollar question. Why spend more time and money than you need to just to arrive at the same conclusion?

Embrace experimentation, failure and the process of iteration

Those with venturing minds believe that early in new offer’s life action and experimentation are far more useful than planning and forecasting.

The path of achieving product-market fit is never a linear one. Its elliptical, and the more cycles of the ideate-experiment-evaluate-refine cycle you get through the better off the business will be. The key here is to learn as much as you can, as quickly and as cheaply as you can.

With more testing, you encounter failure. Then, with that failure comes new insights, which allow you to create a better idea/plan, leading to more progress… and on it goes…

Because this is the inevitable reality in the actual way a new venture is created (lots of ideas tested that don’t pan out), it’s important to: A) test A LOT; B) test rapidly; C) have an optimistic and resilient attitude, viewing a test that fails not as a “failure” but as a customer or marketplace insight.

New Venture Discovery as much a mindset as it is methodology.

You don’t have to be building a startup to engage your Venturing Mind. This discovery-focused lens is just plain useful for bringing new ideas to market – regardless of if it is a product, service, business model, marketing campaign or a new company.

Forming Startups with MBA Classmates

One of my students sent me this HBR blog (recommending that business school classmates not start companies together) and asked for my thoughts.  I thought I would share them here – in case others are interested:

The Article: http://blogs.hbr.org/2013/11/dont-start-a-company-…

My Opinion:

I think that many of the the points made in this blog are valid – but I don’t think that they are exclusive to business school.

People start companies all of the time with individuals whom they only know along a single dimension (friends, co-workers, family etc.). I would argue that all of these situations, in one form or another, expose you to many of the same risks that the author points out about b-school classmates.  Starting a business with someone is much like getting married.  And like marriage you would ideally want to get a sense for multiple dimensions of that individual before you commit to a long-term, risk-sharing and financially impactful relationship (values, financial views, work-life balance preferences, acceptable outcomes, hiring others, strategic direction etc.)

That being said – in any of these situations, I think that its important to talk about these important things early on in the process of starting a business. Get things like personal risk profiles, biases, preferences for exit, company culture, individual financial situations out on the table. The sooner that this tough (and often awkward) stuff is discussed the better.  Outputs and understandings can then be woven into founders agreements and other charter docs that help prevent issues from arising later on – or if they do – have clearer outcomes.

Its better to have tough conversations about important topics early (even though they may be a bit uncomfortable and seem like a ways-off from being an issue).  The alternative could mean the demise of the company, friendships and even family ties.

David

MBAs in the Valley

A Kellogg student recently emailed me the following question: “I subscribe to Quora’s weekly digest and came across the question: “Are top MBAs looked down upon in Silicon Valley? If so, why?” Most responses said  they were. What are your thoughts, Professor?”

Here is the response I gave:

On the question you posed on how MBAs are viewed in the Valley, I think some of the responses on Quora were quite insightful. I would say, when I was in the Bay Area scene anyway (mid-90’s through 2007), there may have been the perception that fancy MBA’s (i.e. top five or so schools) will:

  • Be really expensive (“Hey, maybe I hire two associates from Cal undergrad instead!”)
  • Be hard to manage — they’ll posture that they know it already, they won’t take feedback well, etc.
  • Bother you within 9 mo. in the new job about getting promoted
  • Will not offer a pointed perspective—instead will try to cover all the bases, hiding behind jargon, decks and frameworks. (“And another way of looking at this is…” Meanwhile, Rome is burning…)

Did I encounter any of the above while in the Valley, working with MBAs?” Yes I did, BUT, getting an MBA from a top school says a lot – about motivation, smarts, etc. – and I definitely hired a lot of sharp MBAs over the years (and hired plenty of Kellogg MBAs because of their well-earned reputation for having a broad-based skill set and working well in teams). Nonetheless, I must admit that I was on a watch-out for these tendencies.

My advice to you fancy MBA types (and remember, I too was one back in the late 40’s) is to counter this perception by:

  • Showing humility. Don’t act like you know it all. You don’t. I certainly don’t—I’m still trying to figure out the questions. Bo don’t. Jack Welch don’t. Even Buddha don’t—well maybe Buddha do…So don’t brag and self-promote. People will realize you’re good quite quickly. Every kid in high school knows who the smart kids are…the same goes in business.
  • Listening well. This goes hand-in-hand with humility. Don’t act like you’re listening when in fact you’re just re-loading. Don’t do the “yeah-but” on people when they’re talking. Just listen openly and actively, asking clarifying questions along the way. Try not to strive for congruence too soon– just listen and mull over what you’re hearing without responding with a declarative statement. Good listening is so rare! Those who do it well enter some sort of kingdom of goodness.
  • Placing an emphasis on learning. You do this by reaching out to others, listening and asking questions. (Use lunch as a time to ask people out from other departments to understand their perspectives and learn about their priorities.) You also do this by digging into the guts of the business. Learn how to do data pulls in the BI Tool. Comb over the 10K, the balance sheet and the P&L and know the latter at a line item level. Dig into the secondary data — Comscore/Forrester/Nielsen, etc. Examine the conversion funnel in Omniture. Listen in on analyst calls. Very few will do these things. You will.
  • Leading by example. Be of service to the business. Put your head down and do stuff that needs doing–don’t say stuff. Always move toward action. I love the word “Activate!” I think of “Wonder twin powers, activate!” (Sorry—old person cartoon reference.) Your good work will speak for itself. Every once in a while your personal brand may need a little nudge in terms of brand visibility, but not as often as you’d think…
  • Having a point of view that’s measured and considered, express it succinctly, then stop talking.

With that, I’ll stop talking.

Carter