Here’s Why Your Company Can Easily Hire The Wrong Person To Lead A New Business

Nov 10, 2020 - 4 minutes read time

Here’s Why Your Company Can Easily Hire The Wrong Person To Lead A New Business

Be very careful that the person in charge of a new business is responsible for its immediate need, not the forecast. 

Everyone knows the impetus for growth. Every company wants to develop a new business. Here is a common scene. 

You work in a big company. You hear about your CEO bringing out a new business. It calls for big innovation. The company would charge the offering with new pricing. New talents are recruited. A senior executive is appointed. The whole thing will report to the C-suite. 

You see much fanfare, and those behind the project expect everyone to pitch in. The launch will bring in much-needed growth for the company. 

But it doesn’t take off. The project disappears quietly. No one brings it up ever. 

What just happened? 

When Companies Pay Too Much Attention to a Stellar Record

Big companies are careful when filling senior positions. They would hire executive search firms or scrutinize internal candidates. When hiring someone to lead a new business, they look for someone who has a track record and is able to explain how they make it work. 

Howard Yu, Blog

More commonly, big companies are looking to hire people who can make an organization grow fast. They need to have the skills to run not a twenty-five-person team but a two-hundred-person team.

But new businesses, when they get started, are not usually big. What these companies end up doing is hiring someone for a future job.

They miss the “here and now.” 

What Makes an Effective Executive for a Big Organization

When you run a large organization, you tend to become very good at certain tasks, such as complex decision making, prioritization, organizational design, process improvement, and organizational communication.

What you do essentially is to amplify the projects already started by others. That’s because you cannot personally carry out activities one by one. You have to pull levers—like training, incentive schemes, and organizational design—to get the desired outcomes. In fact, you can get results at scale only by working indirectly

Take training as an example. Intel’s legendary CEO Andy Grove describes it as “the highest-leverage activities a manager can perform.

Say you are putting together a four-hour lecture for ten people, Grove hypothesizes. You spend another four hours to prepare. These ten people will spend the next twenty thousand hours working.

So even if your training only yields a 0.5 percent improvement in their work, the company will save one hundred hours of human work. Eight hours of work results in one hundred hours of productivity gain. What can beat that?

This is the sort of payback the top executive of a large company must seek out. 

Obviously, that’s a very different world for someone who is building a new business. 

Howard Yu, Blog

What It Takes to Build a New Business

At the birth of a new business, the emphasis is on creating both a product and a market. There is no organization to design. There are no processes to improve. The person in charge of the new business must channel their entire physical and mental energies into making and selling these new offerings. 

Content-free executives add no value in this environment. They need to be technically oriented and product-driven. There is no room for people who are masters of soft skills but who lack deep knowledge about the product itself. 

Here lies the big difference. For a top executive who runs an enormous business unit, most of the work is “incoming.” Requests come from employees, customers, or suppliers. But if you are in charge of a new business, you can’t wait for incoming emails.

There will be none. Nothing happens unless you make it happen. There is no inertia that puts your business in motion. 

By definition, a new business is going to stand still unless there’s massive input from you personally. In all likelihood, you need to take eight to ten new initiatives a day to stir up momentum.

Now you ask, “Who, in my big company, has that sort of stamina? How many self-starters are there in the company?”

What Executives You Have

What’s shown here are two different people who work at different rhythms. Consequently, when appointing a leader to develop a new business, be sure to ask at least these three questions: 

  1. Has the person personally built a new business before? 
  2. Is the person now in charge adding real value or merely passing information along? 
  3. Is the person trying out new ideas, new techniques, and new technologies firsthand? Is the person directly trying them out, not just reading about them? 

When things cannot be outsourced or delegated, they get really hard. That’s why big companies often can’t grow new businesses. 

 

Stay healthy,

Howard Yu signature

PS. What’s the track record of your company in appointing new business leaders? What works well? Why do you think it does? Join the discussion below… 💭


Comments


6 comments

S
Sanjay Tiwari Nov 13, 2020 at 1:56am

Hi Howard, we interacted during one of the Maersk Bridge sessions years ago. Lots of truths in your article, and I've now 'been there and done that' in a large corporate startup as well as in my own.
You're absolutely right that most corporate startups are over engineered and geared for maturity, with steering committees and monthly reports and expenses to match. A real startup is very lean and you have to be making lots of outbound calls each day to get your product sold. You either making the product or selling it, nothing else exists.
Would love to collaborate on an article on this topic as I have something written up, if you're interested.

Howard Yu:
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Howard Yu Nov 18, 2020 at 10:11pm

Dear Sanjay, thank you so much for your comment! It's great to hear from you again. Yes, I would love the opportunity to write more on this topic. It would be fun to draw upon your observations on what works well in the real world. Please drop me a note at howard.yu@imd.org and we'll take this forward! Howard

F
Frits Thomsen Nov 12, 2020 at 11:28am

Hi Howard

Your perspective is completely right.

I have experienced it my self. Coming from corporate C level to create a start up, in which you must do everything your self, because there is nobody to “leverage”

You find out after some trials’s with corporate guys that there is no need for leveragers, only for people who is extremely close to product and customer, and can think out of box constantly to develop both product and market.

I read your book “Leap” and in some way the directors in corporates who dare , with big risk takling, to disrupt their own companies share same DNA with the start up people , who constantly must challenge the paradigms of the past.

Best regards
Frits Thomsen
Denmark

IMD alumni

You ofte

Howard Yu:
H
Howard Yu Nov 18, 2020 at 10:13pm

Hi Frits,

Great to hear from you and thank you for reading "LEAP!" Your observation is spot-on! Companies are often defaulted to have "corporate people" to run new businesses. This is indeed troublesome...

Howard

C
Christophe P. Meili Nov 11, 2020 at 12:25pm

" There is no room for people who are masters of soft skills but who lack deep knowledge about the product itself. " Agree, and would add that the product can also be non-technical (e.g. a new service), but that there also, the leader of the new venture must herself go deep into the details. It's in large part about creation, a bit like an artist creates something from scratch, getting her hands dirty in the process.

Howard Yu:
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Howard Yu Nov 12, 2020 at 8:08am

Yes Christophe, I agree! The logic applies to services too. Thank you for pointing this out.

A
Anonymous Nov 11, 2020 at 8:38am

Indeed these questions are key. Good to read so that you realize that hiring someone for a future organization and not for the start, indeed happen.

Howard Yu:
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Howard Yu Nov 11, 2020 at 12:07pm

So glad that you find it helpful. Thanks! Howard

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Carrie Hawkins Nov 10, 2020 at 11:20am

Very interesting! That's why it's so important to invest and train your leaders, making the wrong hire comes at a cost!

Howard Yu:
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Howard Yu Nov 11, 2020 at 12:08pm

Yes, Carrie. Great observation. The effect really "compounds" over time.

C
Craig Lambert Nov 10, 2020 at 11:12am

Thank you for sharing your excellent article Howard!

Howard Yu:
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Howard Yu Nov 11, 2020 at 12:08pm

Great to hear from you Craig. Thanks for the support!

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