Founder's Mentality Blog
In our meetings on the Founder’s MentalitySM, I keep running across a common theme—the decline of “adult conversation.” By this, I mean the loss of peer-to-peer learning as companies scale.
Consider these laments from meetings over the last month:
- After a panel discussion in the US among founders who had sold their companies to a large corporation, one of them said, “I know this seems obvious—so obvious that we haven’t even mentioned it. But surely a major benefit of joining a [large company] is a panel like this, where we can talk to each other. And yet, I met most of these guys for the first time today.”
- At a private equity meeting in the US, where a group of CEOs were invited to share lessons, one of them said, “While I don’t want to offend our speakers”—I was one of the speakers and wasn’t offended—“the most valuable part of today was listening to the questions raised by other CEOs going through what I’m going through. I kept noting their names and capturing them in the hallway to learn.”
- At a workshop among the founders and senior outside hires at an Indian company, one of the hires said, “I’ve learned more about the issues faced by my peers today than I’ve heard in the last year. We are so preoccupied with managing our ‘lanes’ that we set aside almost no time to talk and learn from each other.”
- During a workshop with the senior team of a large multinational in China, one head of product management noted, “The only time I see half of you is in budget meetings, where the lights are down and we’re all staring at financial spreadsheets. We never talk about the actual business.”
There are lots of reasons that executives talk less and less to each other as companies grow. They are increasingly busy managing ever-larger groups of reports, for instance, or the company becomes more specialized, leading to less gang tackling of customer problems. Executives are often spread out geographically, or the rise of planners and staff functions eats up time that might have been spent talking to each other. But based on multiple conversations about this issue with leaders of fast-growing companies, I’ve concluded that there is something more fundamental going on: Many companies unintentionally value and support hub-and-spoke learning systems at the expense of peer-to-peer learning. Here’s my hypothesis:
- One of the most important benefits of company growth is learning. You should accumulate more experience as you grow and get better at what you do. This is at the heart of the notion that increased scale should improve your economics as you travel down the experience curve.
- Yet very few companies build in learning systems as they grow. They impose standards like “The Company Way of Branding” or “The Company Way of Selling.” But even if many of these efforts start off with the sharing of best practices, they are typically static initiatives. There is a one-time effort to create “The Company Way” and then all energy is put into adhering to it. Learning systems, by contrast, are active—they continuously collect feedback from the market, share lessons between the folks who need the feedback and put in place market responses based on this learning.
- When learning systems are put in place, they are usually hub-and-spoke systems. Staffers vacuum up lessons from the front line so the functional head of marketing or sales can codify them into something and redistribute it. While all these efforts are well intentioned, they actually discourage peers from talking to one another. Instead, they are expected to send their insights up and wait for the “book of insights” to travel back down.
- While peer-to-peer learning systems are rare, those who experience them say they are invaluable. One example: Gathering together the “kings” of an organization (those directly responsible for delivering your proposition to customers) to define the “non-negotiables” required to execute the strategy. This is a contrarian act on the part of the CEO; there is no natural way the kings would get together unless the CEO identified them and invited them to meet one another. Organizations are mostly made up of little pyramids, like a long mountain range, where those climbing individual peaks have no opportunity to talk to each other. Yet those struggling at the very top likely have far more to learn from others at the same altitude than from those further down their own mountain (I will stop torturing this poor metaphor now).
That’s really the problem, I think. Setting up opportunities for peer-to-peer learning is an unnatural act for most companies. The head of sales in Jakarta is encouraged to look up—toward an area head or a regional head—rather than look across to the head of sales for São Paulo for lessons. When these peers do see each other, it is for a one-off sales meeting.
A peer-to-peer learning system is different: It encourages the constant sharing of experience among peers so all can take a speedy flight down the experience curve. I’ve done enough work on learning systems in my time to conclude that a peer-to-peer system should have the following components, at a minimum:
- A source of feedback on the right issues. If we were talking about customer excellence, we’d have customer feedback. If we were talking about cost leadership, we’d have real feedback on relative cost positions.
- A process that gets the feedback to the person who can learn from it. This demands an active feedback loop where the folks responsible for a particular issue get the real-time feedback to learn.
- Peer-to-peer discussions as a regular part of learning. This requires a common set of goals, a common vocabulary (e.g., if you’re going to talk about customer learning, a common understanding of customer segmentation helps) and a way to get together to share ideas.
- Incentives to make all this happen.
As organizations grow they naturally build hub-and-spoke systems because that suits the interests of those heading the hubs. They don’t naturally build peer-to-peer systems because the act itself is contrarian—it requires you break down the walls between hierarchical teams to allow peers to talk to peers, without the effort of going up one line and down another.
It invites a little bit of chaos, which we applaud. It encourages an element of gang tackling, which we love.
The three elements of the Founder's Mentality help companies sustain performance while avoiding the inevitable crises of growth.