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| Home - Industry Article - Jun 07 Issue |
Choking on Your Own Success |
By Brian Turchin, Founder and President, Cape Horn Strategies, Inc.
Success unleashes its own critical leadership challenges. Unless you deal with them, failure can follow. Here is how you can tame three such beasts.
Business success can be fleeting. One day, it’s champagne and caviar and the next it’s a Big Mac.
Why is that? Because success, by its very own nature, creates unforeseen and counter-intuitive leadership challenges.
It’s like success pushes you through the proverbial looking-glass into a new world, where you discover, much to your surprise, that what worked before, no longer works now.
Here are three such leadership problems:
1. Leadership That may No Longer Lead
2. Executives Who may No Longer Execute
3. Resellers Who may No Longer Resell
Overcoming each requires a new way of thinking.
1. Leadership That may No Longer Lead
Here is a startling epiphany that happens to some CEOs. Staring in the mirror, with his razor poised to cut his stubble, he realizes that the person staring back at him is now precisely the reason his business has stalled. He has become the proverbial chokepoint in his own company’s future success.
How so? At some point in growing a very successful software company, a CEO may realize that his organization is now too big for him to manage. Where before he was an excellent four-ball juggler, balancing a few initiatives, he is now trying to juggle eight balls, balancing a multitude of initiatives, and some, unfortunately, just fall with a dull thud on the floor and stay there.
(Some CEOs, of course, are facing this situation today, and just don't know it yet.)
Why does this happen? Different size software companies require different styles of leadership. In our shaver’s case, his company has outgrown his leadership style.
For example, founders love to be in total control of their business. They hoard their decision-making like a miser hoards his gold. Yet, as the business grows in size, he will need to develop executives under him who can, within parameters he sets, have the authority to make their own decisions for their department or divisions.
But changing leadership style isn’t true just for CEOs of small companies as the example may suggest. It applies to CEOs of larger companies as well. Not too long ago, as his company was nearing one billion in revenue, Bernard Liautaud, CEO of Business Objects, hired John Schwarz as CEO with the challenge of turning Business Objects into a multi-billion dollar enterprise.
Success brings with it a challenge for the CEO. Should he, can he and will he modify his leadership style to suit the needs of the larger company?
2. Executives Who may No Longer Execute
Not only does this leadership challenge apply to the CEO, it applies to his direct reports as well.
In what is an unexpected, jarring and painful fact of business life, a CEO may have to replace exactly those executives who played a pivotal role in bringing his company to its current level of success.
Just as the CEO must change his leadership style, so must his executives. Even though some executives will thrive with a larger scope of authority and responsibility, others will wilt.
An example: A founder modifies his leadership style and instead of being a miser with his decisions, much more freely delegates real authority and decision-making downward to the executives who report to him.
But here’s the rub. Some of those executives stayed with the founder precisely because they liked it when the founder made all of the risky decisions. In fact, that’s the reason they continued to work for this founder for so long.
Giving this executive decision-making power is too threatening. When the time comes for this executive to make a risky decision, he procrastinates or lets his subordinates push him in one direction or another. The result: His group doesn't execute well and he misses by a substantial margin his annual targets. This is not the type of executive a founder can continue to have in this leadership position.
As a company grows, the CEO must be prepared to replace those executives who in the past helped his company succeed, but who no longer will be able to do so in the future.
3. Resellers Who may No Longer Resell
Continuing with leadership challenges, here is another one, but of a different type.
In order to continue with aggressive growth, a CEO may need to acquire some, most, or perhaps all of his resellers. How so?
Initially, a reseller – usually a sole proprietor running a family business – is hungry. He wants to build a successful business for himself. So he is aggressive, willing to invest his own capital and his own sweat to grow his business.
He succeeds. Year-after-year, he becomes a top-performer beating his sales commitments every year. And he builds a large base of satisfied customers.
But over time, as the reseller becomes more and more successful, he is no longer hungry. He becomes satiated since he has acquired all of his material comforts – and that is what mattered to him.
At this point in the reseller’s life, he isn’t interested in threatening the status quo. His attitude changes from being aggressive to being conservative.
And it shows. He is reluctant to sell new products. He isn’t aggressively marketing and selling to new customers. Where he was a top-performer before, he now is an underachiever.
Your goals and his have diverged. And they won’t converge in the future.
In this circumstance, where the software company CEO believes his reseller is under performing significantly, it may be time to acquire the reseller.
Being successful in business is like reaching one snow-capped mountain summit only to discover another and then another. And as a software company CEO leads his company’s ascent up to the next higher summit, he needs to be prepared: prepared to change his leadership style, prepared to remove executives who no longer perform and prepared to acquire his resellers.
Brian Turchin is Founder and President of Cape Horn Strategies, Inc., a management consultancy and research services firm. Since 1998, when he founded Cape Horn Strategies, Inc., Brian, a 30+ year software industry veteran, has helped small software companies, from start-ups to $50 million in revenue, grow their businesses. He is a requested speaker both nationally and internationally. Brian also writes extensively on the subject of success in the software industry. He founded and runs two Software CEO roundtables, one in Long Island and one in Manhattan, and one soon to be in Boston. In these roundtables he brings together monthly a group of non-competing software CEOs to discuss issues in a confidential setting. Brian is a judge for Software and Information Industry Association, the largest such association in the U.S., annual Codie Awards, which awards software as ‘best’ in a particular software category such SaaS. For article feedback, contact Brian at
bturchin@capehornstrategies.com
 
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