Three times in my business career (twice recently) I have witnessed the metaphorical “winning” from a unique vantage point. No, I’m not referring to the Charley Sheen version of “winning,” but rather the raise the Stanley Cup over your head, hug the Larry O’Brien trophy, show off the Vince Lombardi trophy with confetti falling around you versions of winning.
And, to be very clear, I’m also not talking about the, “We sold the company for $75 million and I made $10 million” version of winning. I’m talking about changing the way people on the planet do things because you won.
As entrepreneurs and venture capitalists — these are our holy grail aspirations: When all of the hard work and dreaming comes together in a way that you might have secretly hoped but possibly never really believed might actually happen.
My three experiences of witnessing winning:
Android over the last four years: In one of the classes I teach at Stanford I am writing an updated case on Google’s Android. As we have been interviewing the executive team and seeing their strategies and actions, I am watching Google accomplish something truly great before my eyes. Not only do they have ridiculous market share in smartphones, but they are slowly putting together a “whole product” that possibly no other company on the planet can match (operating system, integration of web services like GMail and calendar, apps from third parties, content, hardware, etc.). And they are causing massive havoc for Apple, who has seen great fluctuations in its stock price.
Intel in the ’90s: I was a mid-level manager at Intel at a time when the company was printing money. We could do no wrong. Pentium came out and crushed the competition. AMD, Cyrix, Transmeta, etc. all blew up and couldn’t catch us. Every quarter we beat Wall Street’s expectations and the stock kept going up. Our variable bonus checks were meaningful vs. our salaries and we were the big kids on the street.
Box right now: I am also completing a case on Box as I type this. Now, Box’s story is still being written; they haven’t won anything. Yet, I have been very impressed by their vision of creating the next great enterprise software company, the thoughtfulness of the management team and their maniacal desire to bring consumer design into large corporate software. What I’ve seen is perhaps best compared to the recent run of the Los Angeles Dodgers – they haven’t won a championship, yet, but they won 42 out of 50 games — an incredible feat. Similarly, Box is on an impressive tear: they are doubling in size every year, they have 180,000 companies using their core product (including large enterprises such as Proctor and Gamble, Avaya and Panasonic), and they are moving aggressively to enable their customers to move data between documents and platforms that has the potential to redefine how companies interact with data.
Note that I’m not referring above to other things that I have witnessed or been a part of in my career — my first company going public, or even my running a multi-hundred million dollar-a-year division of a $180 billion-a-year company. Neither of those things can compare to the speed and scale which the three instances above illustrate.
As I was reflecting on these three examples, I began to wonder what they all had in common. As a venture capitalist, I also began to ponder what I should be looking for in our investments that can achieve the kind of results that these companies experienced. Four things come to mind:
The Big Success Wasn’t from the Original Vision: In the case of Android, the firm started as an embedded OS for digital cameras. There was no way to know the software would morph into the largest mobile OS in the world for smartphones (which did not exist as a category when the company was founded), and that it would force Apple to be on the defensive in several markets that it created. I also remember asking Intel founder Les Vadasz in 1996 if the company had become what the founders envisioned. His reply was “We had no idea it would become this.” The founders all hoped for commercial success, but they never thought they would achieve such high market segment share in a uniquely large and growing opportunity. Intel started by making computer memories (and was pretty successful), but it became a truly dominant global company in a different market (microprocessors) that had yet to be created when the firm was founded. Finally, Box began as a simpler way to enable people to do cloud-based sharing of files, but the firm’s goal now is to reinvent how enterprise software operates and how data is both stored and accessed. If the company achieves its long-term goals and vision, it won’t be based on the original premise which Aaron Levie and the other founders started the firm.
It’s About Taking Advantage When Opportunity Presents Itself: Just as importantly as the ability to find a “big opportunity,” all three companies were able to take advantage of the situation when the “big opportunity” presented itself. Google was able not only to evolve the Android software to run on mobile phones, but they also kept improving both its performance and user experience to meet customer requirements. In addition, they put the infrastructure in place to grow the surrounding ecosystem by partnering with handset makers on hardware, carriers for billing, developers for apps, content companies for music, movies, etc., in ways that possibly no other firm on the planet had the ability to do. Intel was able to stop cross-licensing its intellectual property to third parties (specifically, AMD), and build a manufacturing expertise that previously had never been seen in the semiconductor market. Box has worked to bring consumer software simplicity to a highly secure platform that has enabled some very large enterprises to completely change how their employees work with corporate information.
A High Concentration of Great Athletes: It’s amazing how many truly spectacular people still work at Google, and how the firm can continue to bring on board top-talent. I see it not only at the executive level, but also in how they get global thought leaders like Mark Levoy from Stanford and Amin Vahdat from UCSD to leave their top academic institutions to work on Google Glass and data centers respectively, and how they can attract successful private equity executives like Gene Frantz to join Google Capital. While all three took positions of power and impact, none are exactly running the top functions of the company. One cannot but be impressed at how deep Google’s bench is, and the high amount of top-talent inside of the firm. I have also often pondered how remarkable it was that Intel had people like Bob Noyce, Gordon Moore, Andy Grove and so many others all on the same team at the same time — how does one get fortunate enough to do this? Again, while Box’s story is still being written, the mix of young talent and experienced leadership is an impressive feat, with (so far) these different demographics working well together. In my interviews the entire Box leadership team is thoughtful, open-minded and aggressively smart.
Success Can Be Your Greatest Enemy: It’s axiomatic that success can leave one blind to upcoming risks (core capabilities become core rigidities, innovators face dilemmas, etc.). Intel’s success in PC microprocessors made it hard to see the rise of mobile platforms where ASPs were substantively lower than its core business. And despite Android’s success in smartphones and tablets, not every Google endeavor around Android or other new form-factors has achieved large commercial acceptance, yet (e.g. Chromebooks, Google TV, etc.). Schumpeter’s notion of “creative destruction” is acutely true seventy years after he coined the idea, and those on top today need to stay in tune with their customers, their eyes open to new trends and to remain paranoid of what’s lurking around the corner.
While my job is to fund companies that can achieve extraordinary levels of winning (and hopefully the corresponding returns associated with these endeavors), I’m becoming increasingly convinced that while the original idea of a company is important, true breakout victory is achieved when the best players take advantage of opportunities that sometimes unexpectedly present themselves.
And it’s becoming apparent that the first idea is possibly one of the lesser important factors in a company’s getting the chance to hoist the championship trophy vs. the ability to take advantage when a situation arrives.