In this week's Rule Breaker Investing podcast, Motley Fool co-founder David Gardner is happy to have in studio an author he has admired for years: Les McKeown, whose first book was Predictable Success. After being involved with dozens of start-ups, McKeown developed a clear picture of what worked and what didn't. More to the point, he started noticing that there were certain patterns emerging in these businesses' life cycles -- seven universal stages that repeat across nearly every organization that lasts long enough to hit them.
In this segment, he offers his best advice and tips for navigating the bumpy "whitewater" stage to reach the apex of the arc -- "predictable success."
A full transcript follows the video.
This video was recorded on March 21, 2018.
David Gardner: We were talking about whitewater. Let's say I'm listening to this interview. I'm engaged, I hear you, and I feel like I'm living whitewater. I might be my own entrepreneur. Small or large business. I might be working with an entrepreneur. I might be in an organization where I don't get to talk to the entrepreneur.
But Les, I know in your professional life you are a consultant. As you mentioned earlier, you've worked with some wonderful organizations. What is some of the advice that you would give us who are in whitewater? How can we get through?
Les McKeown: A great question. I think one of the things that I want to bring back into the picture is something you referred to earlier on, is that for our listeners not just to be thinking about this in terms of your overall organization that you work in, because it will certainly apply to that organization. But if you recall, these stages work with any group of two or more people who are trying to achieve common goals, so it's good to think about it in terms of not just your organization, but what about your division. Your department. Your project. Your team that you work with.
After any sort of reasonable period of growth, certainly once you've got past having 15 or 20 employees, actually where the organization is on the life cycle is the weighted average of where the underlying divisions, departments, projects, groups, and teams are. So, you can have one project that's down in early struggle. We just got started. We're just trying to make our way out of here.
Gardner: Internal start-up.
McKeown: Yeah. You can have another group that's deep in treadmill, and often with old organizations that's precisely the situation. Most of the business is in treadmill, and there are some satellite parts that are elsewhere. So, that's the first thing. Distinguish where you are from the organization as a whole.
Secondly in whitewater and with treadmill, in the book Predictable Success I do detail a series of very mechanical things that you have to do. You've got to look at your org chart. Build some skills that I call "lateral management" and so forth. Those are pretty mechanical. But the key thing I think you've got to look at is what's happening in the four inches between the ears of the key people who are running your department, project, group, team, or organization, and I want to be specific about that.
If you've hit whitewater, there are typically two types of people who are pushing the agenda, the growth of the business. Those are first of all the "visionary" that we've talked about before. That's somebody who may well have been the original founder. Has the idea for the business. Has the vision for the business. Works at 30,000 feet. Thinks in big terms. Always wants to move the needle in big ways.
Gardner: Steve Jobs.
McKeown: Classic visionary. And the other one is what we call the "operator." That's somebody that the visionary seeks out -- subliminally, often, and sometimes explicitly -- to actually do the hard work of making stuff happen, because visionaries like to start things, but they get sort of irritated that they have to needle out all of the details. So, they'll go find somebody who actually goes through brick walls to make it happen. Steve Wozniak. A good example with Steve Jobs. Bill Gates and Steve Ballmer is another good example of that.
An operator is a pretty ruthless finisher, so we've got our visionary starter who comes up with the idea and then a ruthless operator who would sell both grandparents multiple times a day just to get done whatever needs to be done, and it's not going to be pretty. It's going to get done, but don't watch. You won't like it. That's how you get out of early struggle and that's how you build fun -- and working with those people is great fun.
Here's the main issue in getting out of whitewater and into predictable success.
Gardner: To scale, because that's what we're trying to do here. If we want to go there, and if we want to get to predictable success, we're creating a scaled organization that can scale from there.
McKeown: Correct. And if you do want to scale -- if you choose not to go back to fun -- if you want to back to fun, that combination is perfect. Just keep it that way. Don't mess with that.
If you want to scale, there are two inherent not just barriers, but things that will fundamentally block your ability to scale that come with each of those styles. The first one is with the visionary. It's this sense of total ownership. The business is mine. I'm the business. The business is me and I am the business. I own this business.
Therefore, what? Therefore, I can come in on Monday morning and we can do whatever the heck I decide. I was at a conference. They told me that websites colored orange make more people buy. We're changing our website. It's going to be orange. That's what the visionary mindset is. If I decide it, we are going to do it.
And that becomes fun that's very necessary. That golden gut, that visceral thing that's necessary to grow the business. Now, that we're complex it's probably just wrong. That's point one.
Point two is it produces a whiplash effect when you're trying to scale that distracts everybody from the focus that's necessary, so we end up flockballing on the orange website and then, you know, the visionary founder meets somebody, and has a great dinner with them, and comes back and says, "We have to have casual Friday. We've just got to have it, so let's have it." It sounds like a silly, little thing but suddenly you've lost three weeks of momentum because we had to work at the policy and blah, blah, blah.
So, that's sense of ownership. And I tell people if they want to get to predictable success -- this might sound really silly -- I tell them you've got to stop using the word "founder." Just stop using it. Get rid of it. It's a barrier. Because when you talk about yourself as the founder, you're basically saying, "End of discussion." You're basically saying, "I am God." It's like bringing God in. You might as well say, "God told me to do it."
Gardner: Sometimes I refer to myself as the co-founder of The Motley Fool, but no longer. It's going to change from here on. I'm also chief rule breaker, but that's all I am, now.
McKeown: That's a good thing.
Gardner: I'm no longer a co-founder. I love it.
McKeown: That's going to help with treadmill a lot. And the second thing is that with the operator, the barrier to growth, there, is that any operator worth their salt built their sense of self-identity on being the person that does the dive and catch. They build their concept of value on being the person who made it happen.
Gardner: They're the athlete out there on the field.
Gardner: And that can be a problem, I guess, to scale.
McKeown: Of course it's a problem to scale, because what happens is when they have to start working in much more of a team-based environment, that becomes problematic. Operators are terrible delegators. They don't want to delegate, because they know they can do it faster, cheaper, better themselves. They just want to go through that brick wall. They don't want to bring an architect in who's going to show them how to take the wall down and build a better one. They're just going to charge right through the damn wall.
Well, that's not scalable. It's just not scalable. You end up with walls with a lot of holes in them, and that's not what we're looking to do.
And so, shifting that operator mindset away from thinking, "I'm it." Remember the heads-to-hats thing? We have big-dog operators who have built a lot of autonomy and freedom during the fun stage. Don't get me wrong. I'm not down on these people. They worked their... Am I allowed to say, "asses off?"
Gardner: Yes, on this podcast. This is the Rule Breaker Investing podcast. Now I will say that on Apple iTunes we're given "clean lyrics." There's actually a badge.
McKeown: I won't go into that, then.
Gardner: All right. Their "tails off."
McKeown: But what is the case for most big-dog operators is a very simple fact. They need to be and should be always working for organizations in fun. That's where they get satisfaction. And I've never, ever seen a business get through whitewater into predictable success without sitting down with some of the big-dog operators and saying, "Look. I love you. We've built this thing together. If you want to go where we're going, I'm going to help you find somewhere else." That's a horrible thing to have to say, but it's just true.
So, those two mental shifts in the visionary -- away from, "Hey, it's mine. I get to do anything I want, and I've got a great idea for next week" -- to becoming a steward. Becoming somebody who says, "The business has at least a veto over me at the very least." And the operator moving away, which is much harder to do than the visionary. The visionary can make that shift much easier than the operator can. The operator moving away from needing to be the person. The head, not the hat. The person who does the dive and catch every time. Those are the two most difficult things in getting out of whitewater.
Gardner: So, if you, having just heard Les McKeown, feel like you might be in whitewater, there's some really good advice. And Les, we don't have time for this, but in the book you do outline actually six concepts, features, or strategies, and I'll list them really quickly. We're not going to talk about them.
Do you have an org chart? That could be helpful. What about lateral management? Something you talk about in the book. Alignment. That sounds awfully good if you want to scale. No. 4 was cross-functional teams. No. 5, a sense of empowerment. And finally, six, ownership and self-accountability. That will be my final question when we talk about this later. But those are six prescriptions from you.
David Gardner owns shares of Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.