Amp it Up!, Software Is Reorganizing the World #56
Suthen's newsletter on the future of work, building businesses and financial independence
Amp it Up!
This is a phenomenal read on how Frank Slootman, CEO of Snowflake, Data Domain and ServiceNow takes a good business and makes it into an all-time great business.
His track record speaks for itself.
Here's his take on why he has been successful:
There is room up in organizations to boost performance by amping up the pace and intensity. Considerable slack naturally exists in organizations to perform at much higher levels. The role of leadership is to convert that lingering potential into superlative results.
We often blame the size of the organization as the reason why pace and intensity aren't where they should be. Slack is considered inevitable when you start building redundancies and see the inevitable decline in the quality of each person hired on to the team.
In my opinion, pace and intensity require a couple of ingredients.
Leadership: I've come across leaders who come in with incredible energy and a desire to change how things are done. I've also come across leaders who drain the energy from their team by creating unnecessary political battles or having a pessimistic view. The best leaders often put the team in survival mode with a clear goal in mind and sometimes an incumbent to dethrone.
Forward Progress: Pace and intensity are all fine and well as long as the team is moving forward. The feeling of 'going in circles' is probably the single biggest reason why high performers leave their job. In order to alleviate this, the entire organization must move with a similar pace/intensity and the leadership team must be bought into a common set of goals.
Building a High-Performance Team
Here's a couple of highlights that stood out to me as Frank was describing his experience.
Our companies were built and run for performance, full stop. We were single-minded in our pursuit of goals and drove our people to become the best version of themselves. For the best people, it was an incredibly liberating experience. Most everybody subscribes to the notion of a so-called 'performance culture', even claim to have one, but few appreciate what that means, what that takes, and what you have to give up. Our companies were all Marine Corps, not much Peace Corps. We did not come in peace. Emerging companies like ours fought giant incumbents for their existence every single day. We were paranoid and felt constantly threatened with our survival. You could not escape the combat mentality at our companies. We were in a shit fight all the time.
A key component to build a high-performance team is a strong compensation philosophy. An even-spread approach is a recipe for disaster. Yes, you'll be well-liked by your team (and creating an entitlement culture) but you won't be recognizing the fact that there are A players and B players. Frank's biggest concern wasn't overpaying B players but rather under-bonusing A players.
Mediocrity is the silent killer. Organizations are not getting killed by their C players. Everybody knows who they are, and performance eventually is addressed. The people who kill organizations are your B players. It’s the scourge of the enterprise because there are many and they are generally accepted. Often, they are seen as not bad enough to fire, but not good enough to keep. They are the ultimate passengers.
B players need to be pared: they either become A players, or they become C players and get flushed out.
The more extreme part of this structure is the fact that Frank had this conversation every quarter. As a manager, this would be incredibly hard but potentially effective because it forces you to give critical feedback more consistently.
Performance Execution Framework
Our companies ran at a higher velocity, with higher standards and a narrower focus than most. Going faster, maintaining higher standards, and with a narrower aperture. Sounds simple? The question is how you go about amping up your organization. How much faster do you run? How much higher are your standards? How hard do you focus? It is a performance ‘triad’ because they amplify each other. The compound effect can be electrifying.
Increasing Velocity
It is easy to differentiate yourself as an individual and company if you change the cycle times vs. the status quo. By increasing velocity, you're forcing people to do things differently, expect more from others, and more pressure. It also forces people to focus, low impact, and moderate effort ideas become non-existent.
Raising Standards
This is the inevitable speed vs. quality trade-off. The goal here is to push yourself to provide high-quality work, faster. This usually leads to a reduction in slack.
I enjoyed quoting the late Steve Jobs who had just two classifications: it’s either ‘insanely great’, or it’s ‘total shit’. There is no middle ground, Steve took it away. Our people easily related to this way of talking. Don’t we all want to be insanely great? The words started to creep into daily interactions when people judged somebody else’s work to not be ‘insanely great’. A polite way of saying that it was total shit.
If a decision isn't a 'hell yeah' in your mind, then you probably shouldn't make it.
Narrowing the Focus
Going from three objectives to one is the hardest thing you'd have to do as an individual.
I've seen my team perform best when they're given 1-2 things to do vs. giving several different objectives.
We need to sort out what is truly important, and what isn’t, and when. We procrastinate on that by declaring multiple priorities. Makes us sound thoughtful and comprehensive, but it completely lacks punch and impact. Pointed, critical thinking is rare.
Conclusion
So why doesn't every organization act on this? It's largely based out of fear. A controversial metric that may not be that useful is employee NPS.
When you're looking to change to a performance-oriented culture, there is no way you will be loved by all your employees (especially B and C players).
Casual observation shows that it is hard for leaders to act on this. It struck them as unduly hard-assed and they feared backlash, people walking out the door, and so on. Everybody wants results, but not everybody wants to do what that takes. Still, I am also seeing leaders swarm to this, dramatically amp up their org, produce amazing results and never look back.
Performance-centric thinking like this doesn't trend well with prevailing attitudes. Companies have become more fixated on their employees' NPS scores than their customers'. They coddle their people. They get caught up in things that have nothing to do with their mission. It takes conviction and courage to execute like this. As William Wallace said in 'Braveheart', 'people don't follow title, they follow courage'. You will be immensely popular when good results come in. That's all people want from you anyway.
At an individual level, you should ask yourself what type of leader do you want to be and/or work for? Will your company survive if it doesn’t have a high-performance mindset? How long will that last?
Software Is Reorganizing the World
Many of us are faced with the situation of not making as much as our parents. Historically, this was usually a sign to look abroad for new opportunities for wealth creation.
Today, there is no 'new country' that we can move to so that younger generations can create economic value (perhaps with the exception of Mars down the line).
In this post (back in 2013!), Balaji Srinivasan points out that people have started to migrate to the cloud.
Hundreds of millions of people have now migrated to the cloud, spending hours per day working, playing, chatting, and laughing in real-time HD resolution with people thousands of miles away ... without knowing their next-door neighbors.
Relationships are less defined by geographical distance but rather geodesic distance (degrees of separation within a social network).
An infinity of subcultures outside the mainstream now blossoms on the Internet—vegans, body modifiers, CrossFitters, Wiccans, DIYers, Pinners, and support groups of all forms. Millions of people are finding their true peers in the cloud, a remedy for the isolation imposed by the anonymous apartment complex or the remote rural location.
The recent pandemic has only strengthened this phenomenon with the behaviors associated with 'migrating to the cloud' (e.g. Zoom calls, social media, online communities) becoming the norm.
The next stage will involve the physical world reorganizing based on what happens 'in the cloud.'
So far, we've seen this in temporary bursts where people get together for a specific purpose for a limited time period. Here are some examples:
In the technology space, we have already seen this transpire at a small scale: a cloud formation of 2 people coming together for 10 years facilitated by Match.com, a formation of 10 people for a year in a hacker house, a formation of 100 people for a few months at a startup incubator, and a formation of 1000 people for a few days at an open-source gathering like RailsConf. More recently we saw the thousands that occupied Wall Street for a month, the ten thousand Redditors involved in Jon Stewart's Rally, and the tens of thousands that took Tahrir Square at the height of the Arab Spring.
More recently, there has been evidence of long-term communities being geographically colocated (Campus, Embassy Network, and the Rainbow Mansion).
The trajectory from here, while hard to predict, could lead to cloud towns/cities. Imagine 'Silicon Valley' type atmospheres for different communities.
Technology is enabling arbitrary numbers of people from around the world to assemble in remote locations, without interrupting their ability to work or communicate with existing networks. In this sense, the future of technology is not really location-based apps; it is about making location completely unimportant.
When physical goods themselves can’t be digitized, our interface to them will be.
This last point is particularly astute. While we aim to replace physical goods with digital products, we will at the very least create a digital interface to better connect us with physical goods that can't be replaced (food, transportation, places to stay and etc).
Taken together, we are rapidly approaching a future characterized by a totally new phenomenon, the reverse diaspora: one that starts out internationally distributed finds each other online and ends up physically concentrated.
This points to a fact that will likely hold true. As we fully recover from COVID-19 over the next 12-18 months, communities won't re-organize back into its original form. The pandemic has given an opportunity for digital communities to strengthen and form.
As cloud formations take physical shape at steadily greater scales and durations, it shall become ever more feasible to create a new nation of emigrants.
Thanks again for reading this week’s newsletter. If you can just comment on what you think is interesting, what you find confusing, and what you think is boring or irrelevant, that would be really helpful.
Until next week,
Suthen
Suthen -- really enjoying your posts. I found your post though another newsletter I subscribe to and I'm so glad I found this.
Been a long time shareholder and admirer or Constellation Software so even more interesting to hear your views from the inside.
Look forward to your future posts and please keep it up!