Helping Founder CEO’s Turn Over the ReinsThu, 07/15/2010 - 17:26 | by Jim Vollett
The need for a transition
During 18 years of executive coaching, I have discovered that in order to be successful, most early-stage tech companies need two very different types of innovation, and therefore two very different types of CEO’s:
Technical innovation, supplied by the founder CEO
Managerial and sales / marketing innovation, supplied by the builder CEO
Certainly, much time and energy are required to select the right builder. But equally important is the transition from founder to builder, which can be extremely difficult. If the transition fails, the company can go down as fast as it went up. If the transition works well, the company can move to far greater heights, but it can still be an agonizing experience for the founder, the builder, and their relationship.
The problem – conflict with the founder
The board usually identifies the need for a builder CEO long before the founder does (in fact, the founder sometimes thinks that no change is required at all!).
This can lead to major emotional upset – for the founder, the founder’s team, and within the board, all of which detracts from the company’s operations at a critical time. The usual (and easiest) solution is to avoid confronting the issue until absolutely necessary, but this is often a costly decision.
A much better solution is for the board to engage a trusted guide as soon as the need for change is identified. This guide can be a board member, an investor, or an innovation coach who will:
Provide a roadmap for the entire transition
Provide the skills to create a bridge between the founder and builder, and between the different workplace cultures they each produce
I have established my own roadmap, which I call the Innovation Model.
The Innovation Model
In coaching companies through transition, I have discerned five distinct levels of innovation. Each level has a ceiling of complexity that a company has to break through before advancing to the next, higher level:
From nothing to "something stable"
The job of the founder is to believe in something valuable that no one else sees, and to do the necessary work to convince a critical mass of other people – investors, customers, employees, and vendors – to share that belief.
Throughout this process of convincing others, the founder takes a company through the levels of:
Research – building a prototype that proves there is a compelling unmet need in the marketplace
Development – selling a critical mass of business that proves to the world that the company is meeting a compelling unmet need, at a break-even price
Barebones Stability – reaching a break-even point, even if money is not spent on R&D
From "something stable" to "something great"
The job of the builder is to nurture the valuable "something" the founder first identified, and then help it realize its full potential.
Builders lead a company through the levels of:
- Stability and Preparation for Growth – stabilizing the product and the business so it can scale
- Growth – growing the company by expanding into different vertical and geographic markets
- Wealth – managing the rush of business once the company has established itself and perhaps selling the company for the highest price
What’s next for the founder – a matter of identity
The Innovation Model is useful for demonstrating the phases of transition and identifying ownership throughout the different levels. However, another important aspect is the emotional and psychological impact felt by the founder CEO.
Transitions can be very painful for founders because they are hit at the core of their identity, and it can feel as if they are losing a part of themselves. Therefore, a long-term solution must include a shift in identity, and the founder has two positive options:
Be an innovator – continue with the great ideas
Be an apprentice – learn how to build
The founder’s new identity – a serial innovator
One way for founders to approach the transition is to recognize their achievements and view themselves as members of a small group of successful innovators. After all, a founder has established and grown a company – an impressive feat that requires persistence in the face of uncertainty.
Chances are, founders are already thinking about their next innovation. And the fastest way to get to that next innovation is to turn over the current innovation to the builders, who can maximize its value. Then the founders will have the funds and reputation to do something much bigger next time.
The founder’s new identity – the apprentice
Another approach to the transition is for a founder to take the opportunity to learn from the builder. Being a builder CEO requires 10-15 years of a special kind of preparation, attained through experience and mentorship.
I have observed that founders often do not like the restrictions of being a builder CEO because they feel that it dampens their creativity, is too political, and is simply not much fun.
However, occasionally a founder has the necessary discipline, organization, and rational thinking to become a builder. They understand that there is a "technology" to attracting/building a powerful team, and they know how to use processes to replicate business success in different markets. These founders are part of a very exceptional group of people who embody both the founding and building of companies.
It’s never as easy as it looks
The transition process I have explained is not easy, and it requires difficult changes for everyone involved. If done poorly, the cost of the transition can be high, sometimes threatening the survival of the company. Done well, the transition period can be monitored and managed, helping the company to grow and prosper.
Call to Action:
If you are a board member, investor, founder, builder or member of one of these cultures, review your situation and see if this article opens new possibilities for you.
Also, keep an eye out for future articles, which will address the builder side of the transition and discuss how to create empowering relationships between founders and builders.