What is your Founder SuperPower?
4 biases your founders may have that might be preventing your company from scaling
There are many origins to tech startup business ideas, there is no doubt about that. New business ideas come from many places.
I’m going to focus on one of the more common origins of new tech businesses, which conveniently helps me illustrate a certain set of biases that can be big trouble for a startup in its early stages. These biases affect startups trying to get to scale, and often prevent them from being able to scale at all.
4 Founder SuperPowers that become biases that impede/prevent startups scaling up:
- Domain Expertise
- You Know Your Customers Already
- The Customer Is King
- The CEO Knows Best
It is worth noting that these superpowers (as biases) are common in most startup founders and early-stage tech businesses no matter what the origin of their business idea.
From Startup to Scaleup
How Does A New Tech Business Begin?
Many more new startup founders, especially in the last ~15 years or so, it seems, start their new business idea because they have identified an opportunity (in an existing industry) where there are people/markets underserved by current businesses. No surprises there. For these kinds of business ideas, the founders have seen an opportunity during their own careers, maybe across a couple of companies they worked at, and most probably, it was most acute or alluring at the last company they worked at.
Fast forward. No doubt, at some point in their career, it frustrated them that their present company didn’t go after this opportunity (and thus, that gave them stronger resolve to empathize more deeply with the under-served customers that their company was, well ignoring) This “injustice” may have spurred these founders into quitting their day jobs and going after that “gap in the market” themselves, by creating their own business, and doing what their previous employer could or would not do.
It turns out that these kinds of founders are generally very experienced and knowledgeable in their respective domains and those industries, and that knowledge (and their desire to talk about it out loud) empowers them to do something about it. No doubt they were quite vocal about the missed opportunity at their last company. After all, who else knows that kind of business and this opportunity better than they do — right? They are the opportunity visionaries.
We need these kinds of entrepreneurs. They have the drive and willpower to change the world around us. Many of them will fail in pursuit of that, of course, which is why we need so many of them to step up and step into it.
But, personally, I would like to see many more of them succeed at it and to do that, they need to avoid the known and obvious pitfalls in the early stages.
When it comes to building tech products, these kinds of founders need to understand (quickly) how different a product development venture is from anything they may be used to doing in their careers (or home lives) in the past. They need to learn why they may not be personally and innately as equipped as they would like to think they might be, to create a sustainable and scalable tech product business.
Domain Expertise — It’s a No Brainer!
We are going to call this first founder superpower — domain expertise.
You might think that this superpower alone should be enough to make any founder successful in the future of building their new business. An assumption many make, as do those founders! It seems to be pre-requisite number 1.
But I’m going to surprise you by saying, that is not the case. More often than not, it works against them in unexpected ways.
Intellectual Arrogance in Product Development is a crutch, not a superpower.
Knowing what you know well is super useful to a degree, and it can also be a market advantage (or even a first movers advantage). But knowing what you DONT know is a much bigger advantage when you want to build a tech product company. Simply because you can’t know. Spotting an opportunity in a market, and understanding deeply what that opportunity is, does not immediately equate to having deep knowledge about how to innovate a product that the market will buy. It may seem obvious to them, but if you think about it, it is quite a leap of faith. If it were really that easy, then we wouldn’t see high failure rates in the 90%s for startups, due to building something nobody wants.
If you know much about building any kind of product for a nontrivial-sized market, you’ll be able to immediately see the trap awaiting founders that think: that their own knowledge about markets is their market differentiator and secret sauce to success.
When you’ve crafted your business idea off of a clear opportunity you have seen (and viscerally felt) in an existing market, and you’ve qualified that from working in an existing career in that market. Then it is highly likely that you already have built a resilience [of belief] that will help develop the necessary thick skin to cope with duress in startups far more easily. It is far harder to do that for the person who conjures up a radical dream of the future from just thin air, based on no real evidence (anecdotal or empirical).
With that level of resolve in mind, new startup business owners with lots of domain expertise lead with a couple of things as absolutes.
- They know the business domain better than anyone that they could ever hire — so they think.
- They are the strongest champion of the opportunity they see — so they think.
- Only they can see how it will manifest to its full potential— so they think.
Armed with all this exclusive knowledge “horsepower”, they conclude that: only they could know where the market(s) are and what those markets need, thus what they should build. The ultimate designer.
The most dangerous arrogance of them all, of course, is that they have already defined who should be the new customers of their product before they even got started making their product, or testing it in the real market.
Therefore, when these kinds of founders have to scale their businesses and actually hire employees into their company (to do the hard work required to get all the things done that a product business needs to get done), these founders aren’t going to be looking for more thought leaders, domain experts or uber product designers like them. Nor are they going to be hiring champions of the selling idea, like them.
They will think that they have all of those bases already covered (in them), and to do that would feel like a waste of precious resources (at least in their minds). They have other higher priorities in mind.
Instead, they are going to be looking for people who can do the things they cannot do, and that don’t cause them conflict with what they can already do. And generally speaking, for these kinds of domain experts, that is NOT going to be in sales, product vision, or product design. It’s going to be hiring tech people, and it is going to be people who can build and deliver what the founder wants to build, and when they want to build it.
Furthermore, since they have all this domain knowledge about their market and customers, they will want to use that to design and orchestrate the rollout of what they think will work for the growth of their new business.
This brings us nicely to our next superpower — knowing your customers. But before we get there, I need to explain why this first superpower works against these kinds of founders.
2 downstream consequences to consider when you think you have all the knowledge, and you are a founder (ie the boss):
- You have yet to understand that you can’t possibly know the market for your new product ahead of any time horizon. Unless perhaps your product is an incremental change to an existing product already in a market. Even then, the world has moved on since whatever forerunning product yours is an improvement on. There are no guarantees that what worked yesterday will automatically transfer over to what you are now offering today. You would still have an existing customer migration and retraining cost to deal with in that case. In general, assuming that you know deeply your customer’s problems (that really need solving for them), does not automatically imply that you know for sure how to apply new tech to solve those problems. Nor does it imply that the tech you choose to make will actually solve those problems for those customers. This is the whole reason why we do product discovery and why we measure the effectiveness of what we build. To ignore that this work is required to be done is just foolish long term.
- As a founder, if you want to remain at the top of your new product company, the moment you start hiring new people into your company, you have to start distributing your knowledge and start trusting those you hire to do good work informed by the market. Otherwise, every decision about every little detail of the company; its customers, its positioning, messaging, and all the product work have to flow through you — as a signoff gate. If you do this, you simply will not be able to scale the company beyond the number of people whose work you can control directly (let’s say ~10–20 people). You either can’t hire more people who must directly report to you to control, or you will be hiring intermediaries (managers) who you will expect to dutifully follow your instructions verbatim, and pass your orders down the line. In either case, you’ve set yourself up as the only “brains” of the business, and everyone else is just a drone following your orders. This may have worked in Edwardian times in sweatshops and factories of mass production. But it is not going to work if you want to innovate in a changing marketplace at any reasonable scale. It will prevent your business from scaling its product to more customers. Educated, innovative, and skilled makers of products don‘t like to work as drones taking orders. If they aren’t trusted to do their own work, then your business is doomed for the scrap heap. The worst part about the demise of your company is that this process does not happen very quickly. So the founders who are getting away with doing this kind of thing take years to figure out that it won’t work long term, usually in their 50's-60s. By then, it is too late to let go of those damaging behaviours or the business.
You Know Your Customers Already— Obviously!
This superpower, we will call — My Customer
Have you ever worked in a large product company, where product is built at scale? I’m not talking about startups now, I am talking about the large established tech companies like the Microsoft’s and Google’s of the world where there might be hundreds of product teams and hundreds of products being developed. That is product at scale. Where they are constantly making and selling new products to millions of buyers, and users. These are mature, developed ecosystems optimized for producing new products.
Now, can you imagine the people (all around the world) inside and outside of these companies who want to line up to claim to be part of the ideas and the design of those kinds of products? To be the ones who have killer feature ideas that the big product company confirms and then builds? It is quite an attractor for them, and it’s quite some kudos that you can earn by claiming Microsoft built my idea!
Where do those people come from? and why do they even exist at all?
In most cases, they are one of 3 easy to identify groups:
- The first group can be early adopters (like alpha/beta users), or they are paying customers of the product (usually from a big customer account) who are trying to convince the product team to design the product specifically for their unique needs. They love the attention of the product team, begging them to influence the direction of the product — since these people have real, in-situ, domain expertise, which is of huge value to the product team at that stage.
- The second group is customer account representatives (perhaps in the services arm or consulting arm of the product company, or are 3rd party consultants), all trying to coerce the product team into building the product and features that help out their clients. So that they can close the services/sales deal, they need to get over the line with their clients and win the deal for that client. It is great fun for these people to represent their clients at these kinds of meetings, where they may have the product team over a barrel, because of the large revenue opportunity.
- The third group are the people who are simply seeking out a future job opportunity on that product team. They just want to be seen as being a valued, friendly contributor to the problem-solving process of the product, earning themselves an “in” when they go for the job interview, sometime later for that product team.
When you’ve worked in and around these kinds of highly competitive product environments, you will have noticed that the currency of trade becomes something akin to “customer pain dollars” and to be noticed in this economy is to tout as much of that pain as credibly possible, to attract the attention the product teams. The gaming that ensues from there, is one where those who can convince the product team that their idea/opportunity soothes the largest customer pains — wins. And the winner wins all the kudos. At Microsoft, we called this game— “My Customer”.
That was the game to play and win if you wanted to influence the direction of any product with a product team. Surprisingly, it is not only played by those various groups outside the product teams. But, it is also played by the product managers and program managers, executives in and around those teams. Seems like everyone wants their idea to work, and make a big impact in the market. No surprise right?
Now, even though you might think that this phenomenon exists only at the big tech companies, it actually exists at all tech product companies of every size. The only thing that changes at the smaller end of the company scale, is how many people there are playing the “My Customer” game and who they work for.
At the smaller end of the scale, in startups, it’s likely to be your own board, the CEO, and the company executives playing this game. All trying to convince the product team that their own brilliant ideas will create the next win for customers and the business. It is crazy. It makes sense to those people if they assume that they know their customer’s problems well enough and know for sure what works and what does not in the market, and further thinking that no one around them could know better than them.
The real danger at this scale, of course, is that those specific parties believe that given their years of experience, unique domain experience, and whatnot, somehow give them magical powers to predict markets better than anyone else can. But in truth, they have even less idea of what will work in these markets than those who work in those markets do. But boy! are their voices very loud, and hard to ignore. You’ll find that most of their ideas are just as hit-and-miss as anyone else’s ideas in the long run. They would be better off predicting the stock exchange and doing some investment side hustle, than messing with their startup outcomes in this way.
Only the savviest CEOs, executives, and board members know this fact to be true and thus don’t engage in dishing out their ideas to product teams. Instead, they will support and encourage their product teams in order to influence them to try different things to prove or disprove what they think might work, by informing those experiments with the valuable context and knowledge they may genuinely have.
They lead with humility, context, not control.
The Customer Is King — duh!
Back to those founders with the brilliant business ideas to begin with. What kind of business model background do they have?
As I have explored in “Do you really have a product mindset” it is likely that most founders come from a services business-model background, where the “customer is king”, and high customer satisfaction is a KPI that is pursued and rewarded in these kinds of business models.
If that is the kind of background a new tech founder has, and they think that is how this product game is played, then they are going to get a rude awakening one day when they realize that the business they built on bespoke customization deals, now needs to scale, and it can’t because they have nothing in place that CAN scale. No scalable organization and no scalable technology.
To make “a standard product” that can scale, you don’t actually build the thing that satisfies every customer on the path to scale. You may do this once or twice at the beginning of the business to validate your idea and get some early revenue in the door, to impress investors. But as an actual product strategy to scale with, it simply does not make any economic sense in the long run.
Customizations and bespoke, one-off features are far too expensive to build for every customer in your market, and they are far too expensive to maintain individually for each customer in the future. This is not product, this is how you build a services business.
Never mind the fact that scaling one customer at a time by knocking on doors, and by building individual customizations (just to close a big sale) takes months to years to get to a payday. Not only is it highly risky where the conversion rates are about 50/50 (if you are very lucky), but the account management and partnership work that is required to close these deals and service the support contracts that they generate, are very expensive. This ties up precious startup resources, that hold product companies back from attending to the needs of the mass market, which they need to crack.
The services mindset and behaviors that I describe briefly here are all second nature to people with Service Provider/Consulting backgrounds, and that’s why they blindly (and unwittingly) apply the same business behaviors to their own product companies. It feels very comfortable to them to proceed in this way, and they simply don’t know any better. They didn’t think to ask anyone when they started their company to be fair.
What is worse is that in a product-oriented world they constantly hear things like: “you have to be customer-centric” and “listen to, and focus on your customer’s problems” and “test on real customers in the market”.
Services-oriented people actually interpret those mandates to mean “focus on what your customers what, then delight them with software that does exactly that”
Which is ironically the opposite of what you need to focus on in standard product discovery and innovation.
Most people who actually understand product (and BTW, ironically, that’s not everyone working in organizations who are doing product) know that the norm here is actually saying NO to customer requests for more custom capability just for them.
The CEO Knows Best — of course they do!
OK, this is a big one, so please bear with me on this.
In most, if not all, small tech startups, the first two roles that are established in the company are the CEO and the CTO, regardless of how many people there are starting in the company.
Did you ever ask yourself why that is?
Well, your “ideas founder” (the one who uncovered the opportunity in the market, and likely left their career to found this company) is more than likely, not always, but in most cases, going to ordain themselves the CEO of the company.
They will feel like they need to do this because they are most committed to the success of this business since they hold all the I.P. cards at this point. So, they want to be seen (both internally and externally) as in command of that I.P.
The second person they likely bring on board, not always, but more than likely, is that tech guy/gal, the CTO.
Why is that? Why is this so common?
Simple answer: Because they are building a tech business which certainly has a hard dependency on building some tech. It is the perfect union of business and tech, which is a model they likely learned and observed in the last services-based corporate they worked at.
More complicated answer: Likely, the CEO is not fluent in tech stuff, and since it’s a non-competing skillset with their advanced domain expertise, they feel safe to bring tech people in under their control. As you will see, it is the control that they want to have.
Who are these CTO’s that come in at the ground floor for most of these early-stage tech businesses, with these impressive executive titles?
Well, there is some variance in this of course, but it is very unlikely to be a well-qualified and experienced CTO, or even a well-qualified and experienced tech professional. They simply cost too much money for an underfunded startup. They are more than likely going to be a bright intermediate or senior-level developer/programmer with abundant enthusiasm to finally get control of building their own baby, who also likes the idea of an early career bump!
With a startup company now in play, and time is short, is it any wonder that very quickly the CTO gets to work focusing on what they know best — writing code as quickly as possible? The CEO gets to work on doing the company admin, and focusing on the sales and customer relationship management side of the business, selling their idea.
Neither of these two folks is focusing much on discovering a product in a market. Why would they — right? They already know what will sell, and who will buy it — that is obvious to them. Neither of them will have much time for that kind of malarky yet. The game they are playing is a gold rush of producing as much product as they can, that sells like hotcakes, before they run out of money.
I wish I could express to you (in an impactful way) just how little time a regular (inexperienced) developer in a CTO situation is going to give to doing product discovery work in the market. Or how much time is an experienced domain expert in a CEO slot is going to care about testing their assumptions on their target market. They are both too busy doing what they know best and what has worked for them in the past. Likely, product discovery work isn't in either of their wheelhouses, nor even on their radars.
Instead, they would both love to be telling everyone “we are doing Build->Measure->Learn, Build->Measure->Learn!”. Except for the fact that they aren’t doing much more than Build->Fail-to-Sell->Build-more->Fail-to-Sell->Build-more.
The Product Manager role (which they don't have yet) is de facto going to become the job of the CEO. Why is that? Because the CEO is the one who will take responsibility for getting out of the building, lifting the phone and writing the emails, and engaging with prospective customers, selling the vision of their idea, and trying to gain credibility and validation of it. Any confirmation or support of their brilliant idea, from anyone, is going to drive them on to seek out more of that. It is self-perpetuating, but vanity metrics don't demonstrate traction.
The CEO will naturally think that this is what CEOs should be doing and that this is their part to play in the business at this time. This will make total sense to them since their business idea is fluid in their heads, AND they have all the domain expertise and industry experience to navigate all the customer conversations and objections, finding what version of their idea resonates the most. Whilst the CTO is beavering away at the code, at their desks, building the next thing to sell.
So, the CEOs have their coffees and they have their meetings and they cast their nets, and land a few customers, and they make their promises and commitments. Meanwhile, the CTO is left to just beaver away just trying to get a functional product up and running with the bare-bones functionality of the latest product idea.
With this backdrop. Who then do you think gets to decide what the buyers will say they want to buy? and who do you think will take the risky bets on what product capabilities will work to attract more customers? Who do you think will be wrangling with prospective customers trying to put together a deal that works for the next buyer/customer? Who do you think will make the call on committing to deliver a bunch of features that a customer “just has to have first” that makes sense to them, before they will buy this new product? No matter what the cost?
Yeah sure, the CEO and the CTO will conference on it, maybe. But it will be the CEO that makes all these kinds of calls — as they have all the context, and all the cards in hand. They are the ones controlling the sales, that pay the bills after all — they will claim.
Break the Cycle
Now, obviously, if there is only the possibility that you can only have 2 people in your early-stage business for the first few years, then you’ll likely end up with a CEO and CTO and a variation of the scenarios above, for some time. No doubt about that, unless those individuals are super experienced to know how NOT to fall into the traps that await them.
However, for those who do/have raised capital and can hire any sized team, if they can add just one more person to the mix (or better a few more people to it) then you can very quickly mitigate most of the pitfalls that these founders will fall into, for the betterment of the business long term.
Who should you have next in the company?
A Product Manager — ideally, as experienced as you can reasonably afford.
and then who?
Perhaps: an experienced User Researcher/UX/Designer next, and then a direct Salesperson, and then start adding more people to the product team. (But keep it to one team at this stage). Marketing next.
Why is this shift in the organization, so early on, important?
If you only have sales and delivery functions, then you have a tech company that rewards making more sales. Sales (as a function, at this scale) actually doesn’t care what the product is, as long as it sells. So, they are going to command delivery to build whatever they think might sell. Unfortunately, they are either going to be wrong most of the time about what will actually work for their customers, and not know it. Or they are going to get built the initial version of a feature that won’t be refined to be effective delivering enough value to their customers — and not know it.
While doing all that busy work, they are also going to shield their customers from the tech people. Sales won’t want tech people interacting with their customers for fear of them ruining a delicate sale or a deal that they have carefully constructed. So, tech people get to stay far away from customers and the pointy end of the business, and they get to put their heads down and focus on doing what they've been told to do — double time! Thus we have divided the company already to take orders from the head of Sales (likely the CEO at this point). The CTO position itself exacerbates this problem by having “tech” in its title at the top table. So we now have Sales and Tech. Or as most people have seen in the I.T industry, we have the Business (the profit centre) and we have Tech (the cost centre).
Unless the CTO is skilled enough and strong enough to stand up to the CEO and drive an actual product strategy, then they will simply settle into the role of head of the programming techies. Which, if they are not that experienced to begin with, will be quite happy doing, as long as they are applying their creative powers building new things in new ways.
In this kind of company, there is no one to advocate for the product as the thing that creates the business. The business (Sales) will assume that their ideas create all the business instead, since they are thinking strategically. There is no person/role/position (nor parity with Sales) to define what the product is, or what the product should becoming. No one to define how it will adapt to the market, as it is uncovered. There will be no cohesive forward looking sustainable, scalable product strategy, only a short term, trial and error, or whatever sticks to the wall sales stategy.
This Product role is pivotal in establishing early on in the business, long before you go to market with your product. Then, after going to market, it needs to defend and adapt the product (and its strategy) amoung other things, against damaging bespoke services engagements for individual buyers, in lieu of building for a larger market.
Without a Product Stategy and someone to champion it, it is very difficult to say that this particular sale or this attractive opportunity is NOT on-strategy, when you don't have a solid strategy, other than “whatever sells”.
The business of this tech business only succeeds if the product strategy succeeds at creating measurable product outcomes, that grow the business. These are the things that produce all the business outcomes, such as : revenue, growth, market share, and investment etc. These product outcomes need special care and attention if you want to understand how your product actually works in the market, so you can do more of that thing, and less of whatever does not prove to work in market.
Some people (even in tech product companies) don’t know how product outcomes and that process works, or even what causes it to work. They might just think that revenue happens because customers want to throw money at you for your brilliant idea, or that your company is cool.
So you see. The CEO doesn’t necessarily know what is best for their new product business. Running Product Development is NOT the job they should be doing. What should a tech Founder/CEO be doing? tells you what a CEO founder should be doing at this stage in their startup, if you are curious.
Leave the product development people, who know how that process really works, to do their thing to create all the downstream business.
But to do that, you need skilled people you can trust, and they need to have all the business context of the market and be connected directly to the market, to do the right things for the business. If you don't know what that looks like then Not Your Job in Tech will paint that picture for you.
To Sum It All Up
The first point is that all the domain expertise in the world and all the industry experience in the world is nice to have, but it isn't the secret sauce that produces solid scalable tech companies. Frankly, domain expertise can be bought into a tech company and milked for the limited value that it has, and this is done in successful tech businesses, run by experienced tech people.
Secondly, thinking that you can know your customers and crystal balling the marketplace is a delusion that results in building products that no one wants or needs, or cares about. You must learn from the market by placing something into the market and measuring its effect on the market. The goal is to change customers’ behavior, and only work on what produces product outcomes — that then turn into revenue, which then grow the business.
Remember that there is no shortage of people with brilliant ideas, inspired by your product, who would like to see their ideas working in your new business, or who are likely enamored or convinced that their ideas will certainly work because it is obvious to them from past experiences and impressions. All, those ideas need vetting and testing in the market, no matter who has them.
Thirdly, creating the right kind of organization is critical to establishing and scaling the company in the future. Where context comes from experienced domain experts and customer evidence comes directly from the market into a cohesive strategy, that is executed by those closest to the intersection of tech and customers — The Product Manager. That is the job of a product-focused person, not a sales or marketing-focused person. The product creates the business that attracts the investors, not the sales.
Finally, unless you can mitigate the CEO from being the smartest person in the room (brain at the top), and from being the largest bottleneck of the flow of work into the product (controlling all decisions in the company). Unless you start doing research and development on the market of your customers, to find out who they are. Then, your founders, your board, and your executives irrefutable superpowers, are going to drive the formation of an organization and culture that will choke itself (and any innovation it could have created) in the future.
Probably, and ironically, just at the moment when you need everyone to come together to scale the business to the next level.
