It’s the eternal scale-up dilemma: What do we do about founders who fail to scale? Founders launch the innovative, game-changing businesses we need to make a dent in the existential crises facing mankind, but those very same Founders are often the reason their ventures fail to scale. What are we to do? It’s the ultimate Founder’s dilemma for Funders!
Profound stakes: SDG’s lie in the hands of leaders in innovative impact firms
The global context brings profound stakes to this dilemma. The UN’s Sustainable Development Goals will require scaling the innovations brought to market by Founders. But if they fail to scale, we’ll miss the Global Goals – climate change, inequality and the resulting social upheaval, food security and water scarcity… overcoming these profoundly existential issues relies on scaling Founders’ innovations. Yes, funding, talent, legislation and an entire ecosystem working towards the same vision are also needed. But in the end it will happen because of innovations that scale, because leaders scaled healthy organisations to deploy them at scale. Its impossible to escape the ‘make or break’ role of leadership in innovative impact firms.
Founders: Your biggest risk
Scarily, a very high percentage of the best Founders fail when they scale because they fail to adapt to the leadership demands of the scale up stages of the business lifecycle. Quite simply, if we want to achieve systemic change, we need to solve this leadership problem.
…but also, your only hope
The four solutions that are often discussed as a solution to this dilemma can be referred to as Replace, Stay Small, Bolster, and Grow. 2 of them entail avoid the problems associated with scaling Founder-led businesses. As we will see, none of these will get us across the finish line. We simply MUST scale Founder-led businesses to achieve the Global Goals. So need more effective approaches to scaling innovative firms.
But first, the problems with the 4 traditional models.
Option 1: Replacing founders: normally a bad idea
Removing the founder and installing a corporate CEO or manager who has experience running large organisations was once the norm. Sometimes, the Founders move to secondary role aligned to their strengths; sometimes they leave.
But global VC giants like Sequoia have changed tack and no longer back Founders they will be forced to replace because the risks created by Founders leaving are just as great – maybe greater.
Founder-led businesses are fundamentally intertwined with the founders themselves. Founders truly are the glue. If they are replaced, any one of a number of issues can quickly kill the firm. For example: a ‘culture crash’ because too many ley people are loyal to the founder and reject their replacement; a ‘passion crash’, because Founders were the maniacal fountains of passion for customer experience, which walked out the door with them; or simply a ‘functional crash’, because we realise how many balls the Founders kept in the air when they fall after Founders leave.
OPTION 2: Stay small: practical, but surrendering our future is not an option
Some vote for choosing to stay small because it’s the best of a bad bunch of options. Of course, staying small is immensely practical. Rather, a small scale success than a grand failure.
But if most of our impact innovations stay small, we will fail to achieve the Global Goals and that is a world I don’t want my children to raise their children in.
Don’t get me wrong. Sometimes Replace or Stay Small are necessary options. But zooming out of individual impact businesses to the universe of impact investing and the reason we do it, this can’t be normative because then we will simply never achieve the SDG’s.
So, in a nutshell, helping Founders to scale well is the only hope we have of achieving the Global Goals. Fraught though the path may be, founders remain the best hope for scaling their businesses, and this is supported by best-selling book, The Founder’s Mentality, which revealed that most companies that achieve sustainable growth can trace their success to a bold, ambitious founders in the drivers seat, obsessed with the success of the business.
Thus the question: how do we best support Founders to scale?
OPTION 3: Bolstering Founders: necessary but often fails
A popular option is to build a strong leadership and managerial coalition that supports the founder without replacing them (i.e. Mark Zuckerberg, Sheryl Sandberg, and their Exco)
Of course, Bolstering the leadership team is a critical part of scaling. But first things first. If Founders remain in the cockpit, don’t sincerely ‘lead’ that process of bringing on board other senior leaders and sharing the reigns, while effectively ‘flying blind’ on how to scale up, they will simply undermine the efforts of more managerial leaders, leading to a toxic leadership culture clash, and its all ugly from there.
OPTION 4: Growing Founders: necessary but often futile
Of course, the ideal is to have Founders simply ‘growing faster than their business’, so they remain capable leaders in all lifecycle stages. But don’t just send them on training. Even at Harvard! Founders that ‘don’t get’ how the business is changing, how they too need to change, and just how dangerous ignoring those facts is, will simply be too busy keeping balls in the air and putting out fires to prioritise their own growth. Force them on a Harvard E-MBA and they’ll spend the day on their phone dealing with customer complaints and capital raising. Efforts to support their growth absent their own desperation for that growth (‘the agony principle’) will simply fail.
Option 5: S-BAG, or Shift, Bolster, Align and Grow
Which leads us to ‘the great reveal’. There is a path we have seen work. While there is no one model of support for every innovative venture, experience has taught us that our best option as the normative model across impact portfolios is a hybrid that we call S-BAG: Shift, Bolster, Align and Grow.
In a nutshell, Founders must first make a seismic internal shift (their understanding, mindset, and hence priorities and approaches), so that they will embrace and lead the process of being bolstered, align their role around their strengths and the team around the rest, and prioritise their own growth, which all combined means that they and the firm can scale together. S-BAG.
What does this look like?
- Shift: We need to help founders make a fundamental mindset shift that prepares them for scale. This must be a deep, profound, and personal shift about what it will take to scale successfully, what it means for the sort of leadership required by the firm, and what that means for them personally. Success here looks like a gigantic mental earthquake, engineered over time, leading to the Founder suddenly ‘getting’ and accepting that they might be the biggest problem for the firm, and that they need to both grow and partner with other (much more senior and empowered than they were previously thinking) leaders who can contribute to a collective leadership effort.
- Bolster: At this stage, the founders are ready for a powerful leadership coalition, which they play the main role in creating, including strong managerial types who can still hustle in the chaos of a scale-up and do the heavy lifting themselves (quite unlike most corporate managers, which makes these somewhat unicorn individuals). This team must be built (hired, structured, coalesced, and aligned) carefully, and will need to invest in galvanising and syncing.
- Align: Craft their role (even the CEO role) around their strengths and align the rest of Exco around the rest.
- Grow: Because of above, Founders must take on a radical personal growth journey that receives the same priority focus that revenue growth and capital raising receives. It must be a precision-crafted journey of the most radically Accelerated CEO Growth possible.
With the multi-pronged S-BAG approach, innovative Founders can scale.
But beware, this won’t work in all cases, and where it will it is not a linear road. It’s a journey directed by the unpredictable inner vicissitudes of complex (to be polite) beings. It’s a messy road that requires empathy for the personal part of the Founder’s journey. In the end, the venture will only walk the path to scaled impact if the Founder does the walking, which they will only do if they can embrace the path.
S-BAGGING founders to achieve The Global Goals
The reality is that there is no path to achieving the UN’s Sustainable Development Goals without a massive increase in the percentage of founders that succeed on the Path To Scale. Fraught and nuanced as this path may be, it’s still less fraught than the other paths, and down this road lies the only real chance of achieving the Global Goals.
And so we must simply get good at scaling by S-BAGGING Founders!
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