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Leadership lessons from startups

Think:Act Magazine "The Circus of Transformation"
Leadership lessons from startups

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Think:Act Magazine

Munich Office, Central Europe
January 22, 2024

Noam Wasserman provides his top ten transformation management tips

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by Bennett Voyles
Illustrations byEva Redamonti

Want to manage change better? Look no further than the startup world, where pivots are standard practice. Noam Wasserman has dissected thousands of transformation attempts and distilled them into a set of rules for survival.

Transformation does not just happen. In the startup world of small teams, it depends a lot on people like you. On you, in fact. Entrepreneurship scholar Noam Wasserman argues that for small organizations that constantly need to change, it pays to know and avoid the most common mistakes made by thousands of little transformers. How a budding venture responds to frequent change holds lessons for larger organizations as well.

Wasserman, who worked at Harvard Business School and currently is dean of the Sy Syms School of Business at Yeshiva University in New York, tapped into the power of negative thinking in two books: The Founder’s Dilemmas and Life is a Startup. He analyzed data on nearly 10,000 founders of more than 3,600 US startups and concluded: "If entrepreneurship is a battle, most casualties stem from friendly fire or self-inflicted wounds." Here are 10 points drawn from Wasserman’s work on how to get your transformation right – or at least less wrong:

An illustrated image of a green plank with two businessmen walking along it, one with arms bound against his waist, the other holding the rope attached to ropes around man in front. Stacks of dollar coins are either side of and below the plank, water is below the plank with sharks swimming around and between the coin stacks. Bright red background.
Time to move on? A founder may have set up a thriving business – but staying on as leader may be detrimental to growth, company culture and even their own prosperity.

1 – Step aside

Pivots can require personnel changes and founders may need to accept that they are the ones who should walk the plank. One study of 6,130 US startups showed that companies whose founder stays in control beyond product development tend to underperform. Often, a different kind of leadership is needed to grow the company.

2 – Question goals

One of the most frequent problems among small startup teams is trying to be both rich and king. Founders who keep control of both the CEO position and the board of directors end up with equity stakes only 52% as valuable as those held by founders who gave up both the CEO position and board control.

"Trusting your gut doesn’t always yield the best results."

Noam Wasserman

Entrepreneurship scholar

3 – False friends

Founders often go into business with friends and family. But when founders bring in a family member or a friend who is not a coworker, the risk of departure of the founding CEO rises by 28.6%.

4 – Duplicitous gut

Trusting your gut doesn't always yield the best results, particularly when it comes to a leader's personal career choices. Studies show that entrepreneurs earn 35% less over a 10-year period than they could have earned in a corporate job.

5 – Grumpy is good

Love your team? It may not be a good sign. One study of symphony orchestras found that professional musicians who didn't get along well personally performed better than orchestras where people liked each other. A little friction, it turns out, can promote team performance and member learning.

6 – Ask a stranger

An analysis of nearly 12,000 venture capital deals shows collaboration between VCs in different firms with the same ethnic background cost a 20% reduction in performance on average. So, don't turn to someone who looks just like you.

Complex illustration of two hollow halves of a head, one upside-down the other upright, facing each other, one boxer wearing shorts and boxing gloves inside each shell, crouched forward facing each other as if poised to engage in a fight. Bright red background.
Competitive advantage: Everyone prefers a smoother business journey, but it’s been proven that delving into challenging territory and experiencing friction can be good for sales and performance.

7 – Look for trouble

A test crisis helps build the capability to handle challenges. Resilient optimists tend to do best. A study of an insurance company discovered its most optimistic salespeople outsold the least optimistic by 88%.

"It's sometimes invaluable to have somebody push back on you."

Noam Wasserman

Entrepreneurship scholar

8 – Don’t commit

For startups, it can be easy to stick to a plan and hard to second-guess it. Set up particular checkpoints in advance and then change the plan if the results don't align with expectations. In a study of 22,000 venture-backed companies between 1987 and 2008, 34% either went bankrupt or were not expected to return money to shareholders.

9 – Invite pushback

The most effective founders raise tough issues early. The ones who know how to fight well tend to manage better, particularly when they learn to go out of their way to find the truth. "It's sometimes invaluable to have somebody push back on you," Wasserman says.

10 – Fight fear

Unrealistic negativity is an approach that's been proven not to pay off, so don't make fear a controlling shareholder. The Global Entrepreneurship Monitor reports that 30-40% of people say fear of failure would prevent them from starting a business, disqualifying themselves before they even consider the opportunity.

About the author
Portrait of Bennett Voyles
Bennett Voyles
Bennett Voyles is a Berlin-based business writer. Over the past 20 years, he has written over 1,000 articles on a variety of topics. He is also the author of Onward, Backward! -or- A Ramble to Santiago, a travelogue.
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Think:Act Magazine

Munich Office, Central Europe