One of the most beautiful things about business is the fact that the results speak for themselves. Either a company is able to sustain itself by supporting its employees or it isn’t, but there is no in between. In perception, a company’s products and services are what create its sustainability, and that certainly is a large part, but the truth is harsher than that. In reality, there are millions of great product and service ideas that never anchored a successful and sustainable business. So what is the other part of the equation to start and sustain a business? Is it marketing? Operations? Finance? Yes. But at the root of those legs of the stool is a much more core tenet to the success of a business: people.
When we are evaluating a company and whether or not we want to pursue a business relationship, the first thing we look at is the product or service. Obviously, there must be a problem that is being solved and a large market that can and will use the solution. The very next thing that I look at is management. There are rather specific criteria that we look for in management, and the truth is what we look for is often different from what the rest of the world looks for, and where we seek to gain an advantage in our investments and clientele.
As an investor, it is naturally comforting to see a successful track record in management, but Zuckerberg was in his early 20’s when he started Facebook, as were Jobs and Wozniak at Apple, and Gates at Microsoft. Track record can provide a nice set of data points, but clearly investors would miss out on huge opportunities if that was the deciding factor. Leadership skills are also tremendously important. Our own company motto draws directly from Laotzu, stating, “To lead people, walk beside them.” A boss directs people, but a leader is not afraid to get his hands dirty and work with everyone, no matter how high or low. I would be remiss, however, to not point out that Jobs had less than desirable leadership skills, and stories of Musk and Gates’ short tempers are substantial. Again, while these are important and desirable in management, they are not quite deal breakers. There is one thing, however, that will result in an immediate end to any conversation we have with a potential client or investment.
Management does not know what they do not know.
As mentioned above, there are many aspects to a business, from operations to research and development to finance to marketing. Just as it would be impossible for a doctor to be a top heart, neuro, and orthopedic surgeon, it is impossible for a CEO to be excellent at all aspects of a business. In fact, almost assuredly, a CEO has a specific expertise in the specific aspect of the business that he or she came up through. Despite this, we seemingly run across CEO’s that want us to think they know anything and everything. It is obvious that this is done to impress potential investors, but a savvy investor would be wise to run like the wind from a CEO whom does this. In being consistent with examples that have been used thus far, let’s take a look at Apple. Jobs was not an engineer or developer, so Wozniak was the brains. He was not a designer, so Ives became the artist. He was not a logistician, so Cook brought synergy.
In looking at virtually any successful business, a CEO is aware and involved in every aspect of his or her business, but is never afraid to lean on the expertise of the leaders of each aspect of the business. Not knowing everything is by no means a weakness, but rather an opportunity to show strength – to find the right people who bolster the business.