Can you pivot without losing customers? How can remote co-founders stay aligned?

REID HOFFMAN: Hi, listeners. It’s Reid. Welcome to a special episode of Masters of Scale that we call a Strategy Session.

In these episodes, selected entrepreneurs, business owners, and CEOs ask the most burning questions on their minds, what challenges them, what intrigues them, where they see risk and opportunity.

With each question I offer my perspective about steps to take or practices to consider in ways that hopefully resonate for all of you.

For this Strategy Session, we’ve tapped into our community, offering Masters of Scale Members the opportunity to pose their questions.

In this session, you‘ll hear from seven different entrepreneurs, based in the U.S. and around the world, from health care to consumer products to professional services.

And I’m delighted to be joined by Anne Kave of Capital One Business, who will help introduce and frame each question.

Anne, great to have you with us.

ANNE KAVE: Hi Reid. Great to be here. I am so excited to hear from these amazing start-up leaders from the Masters of Scale community. While they’re each in different industries and locations, and at different stages of scale, their questions are so current for this moment in business. 

And the challenges they present are universal. They echo challenges I’m hearing right now from other entrepreneurs. But they’re also timeless.

I’m really eager to hear how you answer these questions, Reid. Are you ready to jump in?

HOFFMAN: Absolutely.

KAVE: Then let’s do it!

Our first question comes from Jason Lin, founder and CEO of Talent Basket, a youth-employment platform connecting students to online internships and opportunities. Talent Basket is incorporated in the U.S. but operates globally. The team is geographically dispersed, something lots of businesses today are embracing – for practical reasons and strategic ones. 

Jason’s question is about culture and vision: How can he best keep his organization unified? 

It’s a challenge that even single-location startups can struggle with. Getting the right patterns of communication is key to accelerating scale.

Let’s dive in.

Jason is running a startup in Taiwan with two other co-founders in Malaysia and Australia. His question to you is since they are all working remotely, how do they make sure the 3 co-founders’ visions are all aligned, and how can they grow as fast as possible?

HOFFMAN: Jason, a very important question, especially in this time of remote work. 

There’s a couple of key techniques. One, make sure you ask each other the hard questions. Where might you disagree? Where might you see the amplifications? Where might the world pressure test or stress test how your visions could become misaligned? Some of that is also to spend some time in general conversation, not just as we all entrepreneurs tend to do, but kind of where you’re situated in terms of what you’re doing, what the market looks like, what the world looks like, what changes you anticipate in the future, why you’re doing this work. Putting in the time help make the visions aligned even under the stresses and pressure testing that is the world, entrepreneurship, and the markets. For the second part, as growing as fast as possible, this is of course the subject of my book Blitzscaling, and the subject of a forthcoming book, The Masters of Scale book.

While both detail a lot of different things about growing as fast as possible, the high line is to say, which ways can we bias to action, which ways can we experiment and move on it, and which risks can we take in order to essentially grow as fast as possible and re-correct, as opposed to planning and making sure each step is capital and human-efficient.

KAVE: The next question comes from Luis Lojero, founder and CEO of Mural Med, a population health manager company serving LATAM markets out of Mexico.

His question is about balancing resources and focus between new ideas and ventures versus the core operation of the existing business.

I hear this sort of question all the time from entrepreneurs, struggling to capitalize as much as possible on their core idea, even as other ideas and possibilities keep popping up.

Luis asks if there is a time when a CEO should stop all attention to new business, markets, and products and just shift to focus on executing?

HOFFMAN: Great question. The answer’s a little complicated. The first is you should never stop all attention to new business markets and products. There’s a couple reasons why you would move to, call it, 1% attention, never 0%,

First, why never 0%? Why always at least 1%? Essentially, things can change radically in the market, even though you’ve decided, look, this is the play we’re going to make. There’s always the unknown unknowns. A competitor might be doing something. A market condition might change in a stunning way. A new technology might emerge. A strong revitalization of what your go-to-market strategy might show up as a parallel. And so you always want to have a little bit of an eye towards that.

Now, it may be a high interrupt. Only the kind of thing where you might go, “I need to pay a hundred percent attention to this. I’m now moving from one to a hundred because it’s such a big deal.” But it’s always worth keeping that 1% attention. And the 1% attention is your own eyes. The 1% attention is talking to people in your network. The 1% attention is talking to people in your company that even that very light monitoring never goes to zero. Now, that being said, there are times where you might go from, call it 80% attention on new business and markets, or 50%, down to one. And the reason is frequently with startups, this is our bet, we’re putting it all on the bet. It’s going to be very expensive to recover, maybe it’s not going to succeed. Speed matters intensely. And so to execute fast, to be coherent on it, to be driven on it, to not be distracted by external things, those are some of the key advantages that startups and the fact that you have mortality around the startup.

This is part of the reason why the startup effect of jumping off a cliff, assembling an airplane on the way down gives everyone that focus, that drive to completion quickly. That focus is part of the advantage that a startup has against most extant and established companies. Because in the established company, the employees, the people working on these products have a lot of different concerns. There may be conflicting priorities and complex management within a company. Whereas a startup is, this is our one bet. And we’re going to play through this set of risks in order to make it happen.

And so frequently in start-ups, the CEO goes entirely to executing. And sometimes even when I was the CEO of LinkedIn in the early days, I said, okay, the company needs to be entirely focused on executing. And my co-founders and the team were doing this in a really strong and aggressive way. There was nothing I could really add to it by leaning in, in particular weeks. I would still go into the office, be there visibly, ready to respond to anything they had as a question. 

And I would be doing the work prepping, okay, this is what the next phase looks like, but also making sure the team was completely undistracted and making sure that they felt that I was there with them in making it happen. Even though, say for example, on Monday, Tuesday, Wednesday, the real thing they needed to do was just working through the: Could we get the product built? Could we get the instrumentation built? Could we get the key things all established, none of which I would particularly help with, other than being there and visibly present and ready on a moment’s notice to help them with anything they were doing.

Now, sometimes of course, it also got to the, I needed to be in the room because we were making those strategic calls as we were moving, and as we were designing and focusing on that execution, but it is frequently the case, especially in early stage companies or high growth companies, startups, scale ups, where you’re going, okay, we are totally focused on execution now. And it’s a mistake to be doing other things.

KAVE: The next question is about how the founder’s role might change over time. In the earliest stages, founders and CEOs can find themselves deep in the trenches – for good reasons. But as the business scales, the needs of the business shift. And at the same time, the goals of the founder might shift.

I’ve heard so many CEOs and founders struggle with this, what the right role for them is in the next phase. 

That’s the context for this next question, from Rok Ursic in San Diego. Rok is co-founder and CEO of Cella Medical, which developed a credit-card-sized wireless device to help patients with heart issues stay connected to their medical team and out of the hospital. 

After many years of experience as a founder and CEO, Rok is starting to enjoy it more, and he wonders if he can contribute much more when he is not in the trenches. Reid, do you mind sharing your insight from when you decided to move from entrepreneur to product and business strategist and investor?

HOFFMAN: So Rok, this can be a complicated question. Some of it is personal and idiosyncratic. But generally, my advice tends to be, that you tune yourself first to be an operator and entrepreneur, and then later tune yourself to be an investor. And going back and forth between these is actually not that good and easy. So one benchmark tends to be, I’m pretty sure, that the time for my being an operator and executive, a founder, is now more or less passed. It doesn’t mean you can’t still pivot and pivot back, but it’s like, okay, I’m good and I’m done with that. That is actually, I think, important because you are going to start, as you move to being an investor and a board member, is you’re going to tune your time differently, your activity differently, your way of making decisions, your way of contributing.

Because as an operator and a founder, you tend to be the, I’m making the decisions fast, I’m making it happen, I am making the decisions and I’m driving them. It becomes very important when you move to investor, business strategist, board member, that you are not actually, in fact, making the decisions. You are being a catalyst, you are asking questions, you are provoking. You are sometimes saying, I think you’re on a really dangerous path or you’re on the wrong path. But when you have a temptation to try to take over the decisions, or simply say, “Well, this is what I would do,” versus helping the other person, you’re frequently being a bad board member, a bad investor. Because as they make each decision, they’re building their own competence, their own strength for doing it. And if you are subverting that decision, you’re creating a longer problem in the future. And so frequently, when you find yourself repetitively saying, “This is the decision,” either you’re saying something about you and where you are, or you’re saying something about your having made a mistake in investment, or some combination of those two.

So in terms of my internal deliberations, I thought, well, I, in fact, actually do a pretty good job of being that kind of partner. I have a diversity of projects where people bring me their hardest problems, and I help work on them. I’m comfortable being in the sidecar, not in the steering wheel. And that my job is not to be the CEO doing it, but my job is to help them be the strongest founders, CEOs, people, that they can be in this race that is entrepreneurship.

And some of it was an evaluation of where I was at in my life. And then some of it’s also the kinds of things where I feel that the highest value add, and that in fact, that I understood that game, as well as I understood the earlier game. And that’s part of what made my transition.

KAVE: The next question is about expansion strategy and the challenges of moving fast and concurrently on several fronts at once. When opportunity is in many places, and you’re eager to scale quickly to take advantage of it, how do you make sure you’re not overreaching? It’s a classic entrepreneurial hurdle.

This question comes from Guru Dandina, co-founder and CEO of PenMyPlan, a social commerce platform and marketplace for group travel planning and online booking, based out of San Jose and Bangalore. PenMyPlan is looking at geographic expansion, but the lessons here apply broadly. 

Guru asks: What advice do you have for a company planning to execute a consumer product expansion into multiple geographic locations for the first time in the span of one quarter, especially when the founder is in a different location?

HOFFMAN: So Guru, there’s obviously a stack of things to do here. One, make sure that you have good talent, with some exposure on the ground, that you have an understanding of the geographic locations, where they are similar and different. That, to the degree to which they are fairly different, that you have sufficiently diversified talent that understands each market and is very driven and motivated by it. And to make sure that you’re tracking the unknowns, you may have a theory that the multiple geographic locations are all the same, and that a single platform approach can be highly efficient in doing it. And the fact that you’re expanding across it means that you’re expanding in each of these areas.

But part of it is also to think through the plans B. So for example, what happens if one of the areas is not working out that well, what happens if the areas are more distinct than you think they are.

And one of them’s moving more slowly than the other, how does that change your management cadence? How does it change your hiring? How does it change your capital allocation? Because you obviously need to keep as focused as you can in order to execute well. What might you do? And some of that is classically measuring and making sure that you are changing or pivoting as you go. Because you may very well go, “Okay, we’re going to go to multiple geographic locations for the first time, but we may have to drop one or two of them, for any of these reasons. Or we may have to slow burner some of them, or create a two-tier strategy, one for some geographic locations and another for other geographic locations.” So you need to make sure that all of those things that you’re thinking about, even in the time span of one quarter, and even when you’re in a different geographic location.

KAVE: Let’s turn to the topic of balancing customer acquisition with customer engagement. This can be a super-tricky road to navigate because a wrong move can create a lot of waste. If you throw money at acquiring customers that you can’t keep happy, that’s a problem. But it can also be a problem to wait until a product is at peak engagement before inviting folks to use it – the opportunity might pass you by. 

This question comes to us from Akhila Bhatt, lead product manager for Metigy, an all-in-one marketing platform based out of Sydney, Australia for small and medium-sized enterprises.

Akhila asks: When is it time to focus on expanding the acquisition of new customers, versus early stage efforts to build love, engagement and retention from early adopters? She wonders if she starts focusing on acquiring too soon, will they just be wasting money by having low conversion and retention rates? 

HOFFMAN: So Akilah, it’s a very wise question. Frequently, the way this is discussed is, “Do you have a leaky bucket in your customer acquisition?” Because if you have a leaky bucket, whatever your method of acquisition is, whether it’s paid or virality or other things, you will leak it through. And sometimes, very high growth can mask a leaky bucket, because the bucket continues to fill up even though it’s leaking at the bottom. So you’d like to understand what your retention looks like before you start scaling up acquisition, generally. However, frequently you’re in a competitive environment. It’s one of the reasons why I wrote Blitzscaling, because actually in fact, sometimes drastic uncertainty, a leaky bucket, a business model, your real go-to-market strategy still doesn’t slow you down from wasting money and going super fast and figuring out the conversion or retention rates as you go. Sometimes that’s because of extant competition, sometimes that’s because of potential competition.

However, if you have the ability to measure it, to take your time with it, then it’s good to measure it and good to understand, because it’s not the first mover that wins, it’s the first mover to scale. And part of scale is a product and service that has a high retention coefficient, so you do not have a leaky bucket. And that’s part of the reason why the language we frequently use for this is product market fit, but obviously it’s product scale market fit.

Another implicit part of this question is that you’re never really going to give up those efforts to build love, engagement, and retention, because you’ll still be experimenting with various things you can do. Now, sometimes one is a priority over the other, but that will still be something that you will be focused on. And sometimes in experimentation, taking some risk, wasting money, et cetera, and acquiring sooner is useful. Because part of what happens as you begin to scale, you will actually get a bunch of learning data that includes how you correct or pivot back to improving conversion, and improving retention rates.

Unfortunately, more of the answer to this question is an art than a science. While you may be looking at the numbers and thinking, “Okay, this is the benchmark,” a lot of it depends on how much capital you have. What does the competition look like? What is the need for how fast you’re moving? But if you have the time to figure it out and then move very fast, sometimes the slow build, the testing, and then the moving very fast is the right blitzscaling strategy.

KAVE: This question comes from Beatrice Zatorska, co-founder and CEO of Science Says, an online content platform for scientists to share research-backed facts with the general public. LIke many entrepreneurs, Beatrice has been forced to make some tough pivots, as the vision of the enterprise evolved and conditions changed. But she’s worried that with each twist, she risks losing the hard-won users she’s already earned. We’ve heard this sort of concern from other business owners, wanting to hold onto their gains even as they embrace that change is required. 

Beatrice askes: When you pivot from an existing version of a product to a new one, ​how do you make sure not to lose existing users?​

HOFFMAN: As you know, Beatrice, it probably depends on the size of the pivot. Usually, what makes these kinds of pivots difficult is that you do lose some existing users, because a pivot is a change to something new versus simply an elaboration of version one to version two. Now, there’s a variety of techniques for trying to have an existing set of users who already have a connection with you, a trust relationship with you, et cetera, to try a pivoted product, a new product, a different product. Sometimes those are discounts, sometimes those are free trials, sometimes those are extensive marketing campaigns.

So there’s a number of different tools by which people try to keep users with them as they pivot or evolve or radically change their products. One simple thing you might be able to do to test it is, depending on how clearly you are willing to reveal a pivot is to run surveys against your existing users. Saying, “Hey, how would you like this product?” And get them somewhat engaged in the design process.

And that can be a simple way of both gathering feedback, preparing them for it, and then executing against it, as a way. Like all things that are entrepreneurship, the real answer to this question will depend a lot on, for example, a detail for you of what your scientists are doing to communicate facts and how the general public will hear them and what your competitors look like. And so there’s all of those very specific questions to these general principles.

KAVE: Our last question is about the entrepreneurial mindset, which I know, Reid, that you’re deeply committed to. It comes to us from Mack Bawden, founder of a non-profit called Run On that connects athletes in wheelchairs to runners who push them. Mack’s question is candid and direct. The practicality at its core applies to all of us. 

Mack asks: What is your advice for someone who just graduated, is totally broke, wants to change the world, but right now just needs to make money to survive?

HOFFMAN: Mack, your question reminds me of my first book, The Start-Up of You. And one of the frameworks that I have in that book is called ABZ planning – where Z is the lifeboat plan. So it’s very important in entrepreneurship that you actually have something of a safety net such that you can try your plan A. And then go back to plans B and then later to another plan A. And so that safety net is super important. So taking that risk on survival is a foolish thing to do.

The key thing that I tend to think here is to say, “Well, no, no, actually in fact, make sure you’re making money in order to survive, make sure you’re making career progress.” Because even if your savings don’t really amount to very much in your initial money, your career progress leads you to interesting new jobs. And obviously when you’re thinking about this is the kind of thing that I want to be doing in order to change the world. You should always be thinking about like, look, first I do this, even though it’s well off the way that I want to change the world, my pollstar. Because I’m going to do multiple hops to get back onto the path I want. Now, one of the really key pieces of career advice that I give is, well, how do you differentiate against the competition? Think in terms of two-step. Not just, oh, this is the one job that everyone wants, but if I do this job, then my next job, I have a strong competitive differentiation on. I have a strong increase in my ability to start a company, fund myself if I’m at a lull between jobs. But actually a two-step approach is I’m going to go do this job because that opens up an interesting range of opportunities. Potentially, including founding a company or a nonprofit in order to then be most powerful in doing that. So in short, survival first, but then start thinking about how to use the survival work and jobs to either get to a point where you could be starting to work on that, or to essentially be able to create the platform or the trampoline by which you can take risks. Good luck with all that. And thank you for all these questions for our Masters of Scale Members.

And thank you, Anne, for being my partner and our listeners’ guide on this episode. 

KAVE: Well, Reid, I love being a part of the Masters of Scale community, learning from their questions and from your answers. I always walk away inspired, and even more committed to supporting entrepreneurship. Thanks again for including me. 

HOFFMAN: It’s been a pleasure. I’m Reid Hoffman. Thanks for listening.