The Jan-Feb 2016 issue of HBR was a good read. I came across another article that was interesting. I had seen many people wearing alpargata with TOMS’ label, and also many others wearing much cheaper knock-offs produced in China. I did not know the story about TOMS, and while I thought I might like to have a pair of TOMS everytime I saw them on someone’s feet, I decided against paying for a pair of shoes that I thought earned its company a high profit margin simply because it was made in China, where wages and cost of material were comparatively lower. Before I read this article, I had no idea that: * TOMS was more than just a shoe company, coffee is also sold * The start-up was 100% owned by its founder, having grown in 6 years from a start-up to a USD 300 Million company, until 50% of the company was sold to Bain Capital, an investment firm * TOMS gave away a pair of shoes for every pair sold, extended to eyewear. Some interesting points shared by TOMS’ founder Blake Mycoskie: * The “experienced team of executives he brought in to manage the day-to-day operations of the company…was bogged down in personality conflicts and bickering…implement processes and systems similar to those used at their previous companies * “people follow you, buy from you, when they believe what you believe” * After his sabbatical, he realized that he was “better in the founder’s role – setting the vision…not running marketing or any other department” As a founder, Blake Mycoskie, in bringing in an external team of executives, experienced what many employees would have experienced if their companies had changed ownership or had senior figures brought in from another company or industry. Having been very familiar with how things were ran at their previous companies, the new executives would probably be very keen on bringing their previous experience to their new companies, especially if they were brought in to troubleshoot issues. During the transition phase, there could have been quite an upheaval, as I read in previous HBR articles where CEOs detailed how they restructured the companies they went in, by removing senior figures resistant to changes or by letting off departments that no longer align with the companies new directions. While HBR articles are typically from management perspective, it would be interesting if there were articles on employees’ experience during such transition. Blake Mycoskie’s point about “people follow you, buy from you, when they believe what you believe” is so simple to understand, yet so difficult to implement. Having heard of people who follow their superiors when they switch employers, I suppose this is what “people follow you, when they believe what you believe” means. People are not all the same. Some are better than certain things than others. I suppose in an entity, the CEO functions much like a founder in a start-up where the founder or CEO draws the vision of the company and communicates it to the company such that “people follow you, when they believe what you believe”. A founder or CEO unable to adequately communicate the vision to the people he/she is leading could lead to frustration of the employees who are unable to clear grasp where the goal is, much less how to get to the goal.
The Jan-Feb 2016 edition of HBR had an article about “unicorns” – defined as private, venture-backed companies valued at a billion dollars or more. I wonder when “unicorn” became a business term. As a child, a unicorn to me was a mythical creature usually silvery white with a pointed spiral horn protruding from its forehead. Now, “unicorns” refer to start-ups such as Uber and Airbnb that are valued by venture capitalists at humongous amounts. Small businesses used to have to obtain loans from banks. Now start-ups, typically technical in nature, pitch to private warchests which then by some method, value these start-ups and provide them with through various rounds of funding, huge amounts of capital. Jim Goetz, partner at Sequoia Capital, did not think that we are currently in a bubble, as in “many cases investors are protected from much of the downside by terms that make the deal look more like debt than equity”. There were many new terms and concepts in the article to me, such as “unicorns”, value proposition, upsides. The fact that venture capital firms provide funds to start-ups with a view to “exit” – IPO or sale of the start-up to a larger company set me thinking: founders who sold their start-up to much larger firms cash in huge amounts and can go on to set up another start-up. Could this be a cycle where they are constantly in the start-up space and because they never had the opportunity to take their companies to the magnitude of large companies, they could never acquire the experience of managing such large organizations that they could have built up themselves, unlike family businesses where they might have started small and continued to grow while remaining in the family?