The three kinds of CEO

Reflecting on my time at Coradiant, I wrote this post on Rednod in 2008. It still rings true today.

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Over the past few years, I’ve noticed that there are three kinds of CEO. If you run a startup, you’re one of these three. And there lie your strengths and weaknesses.

The good news is that by recognizing yourself, you can capitalize on your strengths and mitigate your weaknesses. The bad news is that many leaders don’t realize which of the three they are until it’s too late.

So today, it’s time to meet the product CEO, the sales CEO, and the finance CEO. And to decide which one you are.

Product CEO

The product CEO has faith in what they make. Its benefits are so obvious, so readily apparent to anyone, that they’ll win. There’s no need to market the product, or to worry about margins; that’ll work itself out.

How to spot one: These CEOs tend to demo their product by focusing on features, turning a presentation into a tedious tour of screens. They resist pulling products apart into sub-products, believing that more features means more value. Their offerings tend to be harder to use, but tremendously powerful. They want long, long lists of features with priorities and detailed descriptions. They’re convinced that “if you build it, they will come.” Obsession with competitor feature lists.

Where they come from: Engineering, technical support, product management, sales engineering.

The damage they do: These companies tend to have trouble crossing the chasm; they get traction with a core early-adopter market willing to invest in learning about the product, but because it’s too complex to explain, they fail to get the word of mouth needed. These companies also hit the wall harder than most, because their belief that salvation is around the corner, so they race to the next release rather than looking at the financials or growing revenues organically.

Sales CEO

The sales CEO doesn’t care what they sell, as long as they sell it. They know that getting customers is the hardest thing. Their favorite slogan is, “never mistake selling with delivering.”

How to spot one: The company commits to feature sets without properly specifying them first. Often, features are developed to satisfy a single customer. If schedules are too slow, the sales CEO may try to substitute services (i.e. people) for working code. But once the customer buys the product, the sales CEO is off to the next deal, and executive support for the completion of promised features evaporates. The company has frequent revisions to its product roadmap, and is often showing futures to close deals. And your feature list has ten “top priority” features.

Where they come from: The salesforce, of course. Some sales engineers fall into this trap as well, but their technical selling means they’re sometimes more balanced.

The damage they do: Overcommitting and underdelivering is a common accusation, but the damage that sales CEOs do is more insidious: They can’t say no. So instead of building a few features for a larger market, they tend to build many one-off features for a scattered market. They’ll also often hire a salesforce early, believing that “the market will tell us what it wants,” which burns a lot of capital. Finally, the company will often be a hybrid of services (people) and products (technology)—and the two seldom mix well.

Finance CEO

The finance CEO thinks that if they get the business plan right, it’ll magically happen. Sometimes, the business plan makes sense—the economics of a Netflix, for example—but more often than not, strategy emerges as a combination of plans and what happens that’s beyond your control. Nevertheless, this CEO believes that if every factor in the business environment can be modeled for the next 24 months, the answers will present themselves.

How to spot one: Frequent changes to the plan on paper to make sure it’s accurately modeling the real world, long before anyone knows what the real world is like. Focusing on minutiae and buying industry reports that show market size. Concern over margins very early on, rather than worrying about adoption first. A desire to have detailed product roadmaps far out into the future, when they’re likely to change anyway. Lots of time in planning meetings, rather than doing.

Where they come from: Primarily finance—CFOs, controllers, and accountants—but also project managers with a strong belief in schedules and planning.

The damage they do: A complex business model is hard to adjust, so they may resist changing things in the field just to see what works. When things go right, they often infer things from the model that ignore the complexities of the real world—for example, if every time we add a salesperson the revenues go up by $200K, we should keep adding them.

How to mitigate your CEO DNA

You’re probably one of these three. If you are, the first step is to hire, and delegate to, people with the other two skill sets. Realize that they’re smarter and better at it than you are.

The second step is to try and figure out where you’re leading yourself astray.

  • A product CEO needs to get out and sell more. You’re not entitled to an opinion on sales until your salesforce wants you on the sales calls with them. You need to make fewer, simpler releases. You need to pick one feature and talk only about that. Books like Made to Stick, as well as the 37Signals mainfesto on product development, should be on your must-read list. You also need to think how product features will affect the business model: What do they do to market share? Margins? Cost of sales? Ability to demo? Support of the product once sold?
  • A sales CEO needs to understand that the company’s long-term success, not their commission check, is what matters. You should force yourself to think macroeconomically: If I could have only one feature this year, what would it be? And why isn’t that my top priority? Read older Joel On Software posts, like this one on why good software takes 10 years to make. You have to trust your product team: Adding more people won’t speed things up for at least 4 months; simplifying and focusing will—as will not changing your mind each time you meet a customer. On the business model side, you must recognize the need for pricing and terms standardization, and you need to regard pricing and licensing as strategy, not tactics. Finally, you need to decide if you’re a product or a service company and stick to it.
  • A finance CEO needs to understand that the world is a messy place that can’t be summed up by a formula. You need to spend time with the product and sales team, and get involved more. Read some marketing strategy, starting perhaps with Mintzberg’s piece on crafting strategy. You need to pad your schedules, put buffers into your models. Instead of one complex model that itemizes cleaning supplies, make three rough ones—one for success, one for likelihood, and one for abject failure. Be open to one-offs and special deals if they might reveal a new line of business or different positioning. And be sure to recognize the importance of intangibles like word of mouth even though you can’t put them in a spreadsheet.

I’ve seen smart CEOs of all stripes struggle with running their companies, and with shaking off their default behavior now that they have sales, product, and finance responsibility all at once. If you can achieve the Zen-like balance of all three, you’ll thrive.

But knowing your weaknesses is the first step to fixing them.