ENGINEER TO CEO
THE DEVELOPMENT OF BALANCE
After studying the formation of more than 150 companies, and talking with the heads of ten different venture capital organizations, I've concluded that 90 percent of technology based firms are started by engineers.
Perhaps this figure isn't startling, but if we focus on the disciplines involved for engineers and entrepreneurs, we can see why so many individuals and organizations fail.
First of all, engineers are skilled in the planning, design and construction of a product. They solve challenging problems, make technological breakthroughs and develop successful products. They are stimulated by producing the next generation of a product and making it successful.
On the other hand, entrepreneurs organize a business and assume risk for the sake of profit. The entrepreneur is out to make money, take risks and beat the competition. He is excited by the challenge of starting an organization and making it successful.
The engineer is product-oriented. The entrepreneur is profit-oriented. These motivations are dramatically different.
The fundamental drives and motivations are so different that, all too often, the engineer can't make the transition to entrepreneur. This inability to make the transition cripples many organizations in business as they go through their various stages of life.
Company Life Cycle
While many don't realize it, companies are a lot like people, in that they go through a complete life cycle.
First, there is the gestation period when the company is an idea that is talked about, and the parents-to-be plan big things for the child-to-be.
Birth occurs when the founders leave their present company, rent some office/storage space, obtain funding and start nurturing their first product in earnest. For the engineer and the entrepreneur, these are the fun years in the life of a company.
Energy, togetherness, creativity and dedication are everything.
People work long hours and have fun for little or no pay (especially when compared to their contributions). The CEO can be an entrepreneur, an engineer or an engineer/entrepreneur during this stage, because a small team worries less about titles and job descriptions and more about the task at hand.
During the formative years ($1 to $5 million), the organization begins to take shape and a management structure is developed. The engineer must spend less time on products (he is still permitted this luxury though) and more time developing and managing others. During this period, the company grows from a core group to between 50 and 100 people, and a management style emerges. Most engineers can survive as CEOs during this phase of the company's life cycle.
As the company approaches 100 to 150 employees and sales of $20 million, the company enters adolescence. Just as parents encounter problems with their children during this phase, the founders of a company also begin to encounter problems. The management team is stretched thin, sales flatten, and the CEO suddenly has to acquire new skills to help the firm move on to its next growth level.
During the adolescent period, there are rapid growth spurts. A loose, fun organization must give way to one of greater structure. A more professional management approach is needed. At this point, the engineer (and sometimes the entrepreneur) often stumbles, steps aside, or is moved aside.
When sales surpass $20 million, the employee population has grown from 150 to more than 1,000 people, with all levels of expertise, capabilities, goals and desires.
To reach this stage of maturity, and to pass safely through it, management must acquire even more skills. The company is now highly organized and has a very structured environment. The CEO needs professional management skills and must surround himself with people who have superior management experience and capabilities.
The company is now positioned to be a true, major factor in the industry, and perhaps a Fortune 1000 company.
In some instances, dramatic product acceptance whisks a young organization through the formative years to maturity without permitting the infrastructure to properly develop.
These blips of meteoric growth often mask many problems. Since the structure and team are not properly in place, the system breaks down because the growth cannot maintain itself it needs the support of management and others within the firm.
The heads of these organizations have basked in the spotlight of success. They have become gurus for still other aspiring engineers/entrepreneurs. Their pronouncements have been held in awe. They have been sought after from every quarter.
When the system breaks down, it is often too late to save the company. Our heroes' words suddenly take on the flavor of the ravings of madmen.
Just as with life, there is a natural process of development in a company. Its leadership must experience a similar increase in skills. Those who develop these skills are able to bring the company through the critical periods and get them back on the road to solid success.
Those who can't are destined to help bury the company or are "retired" to let others get the growth and profits moving.
The key to the individual's success is balance.
According to Jerry Casilli, general partner of Trinity Ventures, balance is a set of tangible and intangible skills. The tangible skills are general management, technological, marketing, financial and operational. Intangible skills are determination, leadership, team building, communications and human relations.
It is essential that the CEO understands who is buying the product, what they are buying and why they are buying it. This area is so important that many industry leaders feel that the heads of companies should spend 25 to 30 percent of their time with customers.
In so doing, they find out first-hand what is happening in the marketplace and who their competitors are. They also learn a lot about the customer's wants and needs now and in the future.
Another important area of expertise is sales and revenue forecasting. These are the forecasts that drive the company, so management must understand their methodology.
It is important to balance the tangible or measurable skills with a philosophy of thinking that provides consistency in the management style. These intangible skills can sometimes carry, pull or push an organization through the rough times.
The tough products and decisions aren't to be given only to a select few, but rather shared. They are what get the adrenaline going and permit people to shine. If there are failures along the way, people need support. When there are successes, people need the accolades.
Identify the key positions in the organization, and spend an exceptional amount of time hiring the best people possible not for today, but for tomorrow. If a CEO is good, he should have no fear of surrounding himself with superior people.
According to Cornell University, only 7 percent of what is verbally communicated is actually understood by the target audience. However, 38 percent of the action and 55 percent of the attitude are received. In other words, 93 percent of communications is not what is said, but how it is said. As a result, it is important for the CEO to be:
- Genuine, open and honest
- Sensitive to the feelings of others
- Willing to listen actively, not passively
- Human relations is important throughout the organization, not only with the direct staff, but with everyone. Call it a corporate culture, but it is an interrelationship with others in the organization that keeps them motivated and working toward a common goal corporate success.
Profile of Balance
The engineer who starts a company must make a transition from specific knowledge to proficiency in all areas. At the outset, he or she has to have strong communications, leadership and technological understanding. In addition, the engineer/entrepreneur needs the skills of marketing and management.
During the early stages of corporate growth, it is rare to find an individual who has all of these elements. In order to succeed, however, the individual must have a plan of action for developing and nurturing these skills and for overcoming deficiencies before they bring down the individual or the company.
As the organization enters adolescence, technological expertise begins to take a back seat to determination and new tangible skills that include finance, marketing and general management. The intangible skills of communications, team building and leadership are vital at this point in the organization's life cycle.
As the engineer/entrepreneur continues his transition to CEO of a mature organization, he adds other tangible and intangible skills. Complete proficiency in all of the areas isn't absolutely necessary. However, it is important that the CEO either has the skills, or surrounds himself with superior people who have them.
Through it all, there is no substitute for desire, dedication and determination. These character traits, along with a good idea and a good team of people, can assist the engineer/entrepreneur in turning an idea into reality and success.
A balance of skills will help ensure the engineer/entrepreneur that his soon to be born idea will not die a premature death.
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