I’ve been writing “8 Lessons Growing 8 Companies,” a history of 8 young companies where I’ve worked or founded, to give a story from each that led to a teachable moment. The first lesson, “Good leadership is a prerequisite for a good business,” came from my time at KnowledgeSet Corp in the late 1980’s. The second lesson “Why you need access to inspiration and experience,” tells the story of my first management job at Verity in the early 90’s.
The third lesson, “It’s All About the People, the Team, and its Values,” shares what I learned at Infonautics building one of the earliest Internet startups.
Here is what I learned next…
CDNOW, a Pioneer in E-Commerce
I joined CDNOW in April of 1997 to head up technology. The company was young, with about 40 employees and a modest revenue run rate. Founded by twins Jason and Matt Olim, CDNOW was a pioneer in e-commerce, selling music CDs at the time that Amazon started selling books. I sometimes joke that I felt like the third twin (though a decade older) given Jason was focused on growing the business and Matt worked on the technology, so I often sat between the two.
About a month after I started at CDNOW, Jason and I were in the car on the way to a meeting with prospective investors. I asked him what the one thing was that he really wanted me to accomplish in my first six months. Like any good visionary and entrepreneur, he rattled off about ten things. So I asked him for five. Then three. And finally we narrowed it down to one. (Seems like I was a pretty good coach even then 😀) What did he need me to do? He wanted CDNOW to be the most highly available commerce website during the holiday shopping season. Scalability and availability. This is before the cloud, you hosted your own servers and had your own Internet pipe. There were no e-commerce platforms or open source frameworks to buy or use. You built what you need yourself. (Which contributes to why pioneers often take the arrows in the back.)
We raised money, built the team, some of my Infonautics colleagues came over to help, and we hustled. During my first holiday shopping season at CDNOW, Amazon had outages. The big shopping portals like AOL and Yahoo had outages. And CDNOW was always up. Not only that, but a month later we started advertising on TV, something new for e-commerce companies, and sponsored events like the American Music Awards and Grammys. What kind of scalability do you need when millions of people see your “Buy Now” commercial at the same time? We were ready, remained nearly 100% available, and successfully sold every CD that every customer desired to purchase. (I can’t find the 1998 TV commercial online, but here’s a 1999 one.)
This was the beginning of the commercialization of the Internet, a technology whose use was growing exponentially. CDNOW doubled every six months - doubling sales, traffic, and team. We seemed to be at the right place at the right time. CDNOW went public in 1998 and merged with our closest competitor (N2K) in 1999.
Given the successes we had with our technology and tech team, I was asked to also lead the creative services team - which was kind of revolutionary since “design” was traditionally marketing, not tech. Online commerce redefined what was meant by Product. My organization grew to more than 120 with software, operations, IT, QA, project management, and design. When I joined CDNOW a year earlier, I had six reports, including one of its founders, Matt.
After we combined with N2K, CDNOW peaked at over 700 people. I had to get good at developing a solid leadership team. Which I did. As CDNOW continued to grow, I was asked to take on more responsibility. Product Management. Customer Service (a 24x7 team of about 120). New Business Development. Media (Content).
About this time, our Distribution and Fulfillment had been struggling because the music industry, specifically distributors who were older physical operations, were unable to change at the pace required. Our success was driving them out of business. As a result, we chose our next path to growth (or survival) as merging with offline music commerce. We entered into an agreement to combine with Columbia House (jointly owned by Sony and Time Warner). I was asked to prepare to run online operations for the merged entity (which would be public) and I took on the role of COO. We stabilized our ability to fulfill an ever increasing number of orders by re-negotiating with our distributors so they would be in a position to survive.
The rest is history and should be a book that someone writes. The merger with Columbia House falls through, the Dotcom bubble bursts, we’re still losing lots of money and have no access to capital. We prepare for Chapter 11 while we seek to sell the company. Bertelsmann, a media giant at that time, comes to the rescue flush with cash from their divestiture of AOL Europe to Time Warner (about $7B) and buys CDNOW. They take our public company private, Jason leaves, and I am asked to become CEO.
It took me three years to go from VP Engineering to CTO to COO to CEO. Try and learn that at an MBA program. As CEO, I became accountable for the remaining departments - Sales and Marketing, Legal and Finance. In my first year at the helm, we turn the company around, holding revenues steady at $150M while we reduce losses from $65M to $25M - a $40M improvement.
How does someone grow that quickly? Yes, I worked hard and focused on results. Yes, I was afforded an opportunity being at a good place at a good time. Still, no amount of hustle, talent or luck could have made such a rapid transition successful. What made it possible?
Making Yourself Dispensable
The key to this growth was that fact that I made myself dispensable.
Huh, you say? How could someone who gets stuff like that done be considered dispensable? As each new need developed at the fast growing company, at each opportunity that I was presented, I had a team of people working with me who could do my job.
What I didn’t realize at the time is that I was doing succession planning (or succession development as HBR suggests), “a process for identifying and developing new leaders who can replace old leaders when they leave, retire or die.” (Wikipedia). Thankfully I didn’t leave or die, and retirement is out of the question.
We had a great team when I was leading tech at CDNOW. When I took over creative services, Russ Cherry took over the software group for me. When I took the COO role, Russ became CTO. Russ, likewise, had people who could always replace him. Then when I became CEO, our CMO left, and we had Samantha Liss and Dana Lasher to split the role. When Joel Sussman left as CFO, there was Jerry Johnson. The list of successors that made our meteoric growth possible is too long to name.
To some people, being dispensable might be counter-intuitive. We hear that knowledge is power. If what you know and what you do is irreplaceable, then that’s job security, right? Perhaps it used to be true in highly political large organizations, but it’s quite the opposite in today's business environment. Change and transition are the new norm. All businesses and their organizations are rapidly evolving. Whether your company is small or large, or your position is executive or not, you must always be ready for what might come next. The more nimble you are, the more opportunity you are able to seize. Being anchored in one position, with one skill or one goal, is just that - stuck.
Some think that succession planning is for only the CEO role. We do often start there and go top-down, especially when the CEO owns part or all of the company. We need to be prepared for how the company moves forward should there be leadership or ownership changes at the top.
A succession plan should not stop with the CEO. We should have one for every level of management or leadership, and ultimately for every role. As I framed it, as an individual, you need to be nimble. The same is true for the organization. A team of flexible individuals creates a nimble organization.
How can you easily address succession planning in your role or business?
1. Develop a plan proactively
Waiting to consider succession until it’s necessary - at a transitional event or crisis - is the worst possible time to evaluate your organization. If you need a succession plan now, then you’re likely too late. It’s a strategic investment, so start the plan during a period of relative calm. Do it as part of your regular business planning and team performance planning.
2. Be purposeful about professional development and mentorship
Leaders and managers should be working to develop every individual regularly. We’re not only accountable to meet goals and track metrics, we are responsible to develop the individuals on our team and the people in our organization. Have a professional development plan for everyone, make investments in people, and talk about it regularly and openly. Mentorship and coaching is fundamental to an effective organizational development strategy.
3. Hire ahead of the curve
You’ve heard the insanely overused quote from hockey star Wayne Gretzky, “Skate to where the puck is going, not where it has been.” I like it because it creates a visual image for a powerful strategy concept. In nearly every business, your team is your greatest asset. Figure out what you want your organization to look like in the future, and hire those that will be able to successfully fulfill or grow into those roles. Forecasting isn’t only for financials, it should transcend into organization and processes as well.
4. Keep it simple and stay realistic
You’re reading this and perhaps seeing a lot of obstacles - we don’t have the time, can’t afford it, need to focus on short term survival, etc. Don’t overthink succession planning. Steven Covey reminds us to start with the end in mind. We set all sorts of goals for our business, so why not have organization goals? Small steps in succession planning can go a long way. Your plan is dynamic and will evolve, and they take time to implement (perhaps years), so focus on the process and not the outcome. In doing so, you not only better secure your future, you will also improve operational efficiency, increase employee satisfaction, and find it easier to meet your goals.
Don’t think that you’re ever too small work on succession planning. Even for a solo entrepreneur, it’s never too early to have a plan. The fact is, the smaller you are, the more significance each role holds. You - more than anyone - need a plan to become less indispensable. How would you take advantage of growth and opportunity if you’re stuck in your existing responsibilities?
Perhaps I was lucky at CDNOW in that the company was flush with capital and I had a good intuitive sense for building teams. In hindsight, I saw it clearly - what was instrumental to the company’s growth, and my own personal development, is that there was always someone able to step in or step up. Make this part of your growth strategy.
Remind me sometime to tell you the story about my head-on car crash during a freak Spring snowstorm while heading to my second day of work there. It’s typical of me, though not always my fault. On my second day working at Verity, I was in the office during the 1989 Loma Prieta earthquake in the SF Bay Area.
I'm always happy to chat with you about organizational development. Easily book time with me to get insight or help.
Did you also read Lesson #1, Good leadership is a prerequisite to good business, and Lesson #2, Why you need access to inspiration and experience, or Lesson #3, It’s All About the People, the Team, and its Values?
Do you need help managing all your business growth, or perhaps not seeing the growth you want? Trajectify is doing an awesome Live event, a masterclass with four coaches and four sales and marketing experts. Check out Trajectify LIVE on Sept 13, limited to the first 100 entrepreneurs.
Look out for Lesson #5, Mathematical Rules Don’t Apply to People (1+1 doesn’t always =2) from when I led the spark plug innovator, Knite.