March 14, 2010

It's About Leadership: A Proposed Scorecard for Massachusetts Technology Companies

First of two.

In 1988, six months after I started Avid Technology, Inc., I got a $500K first round investment from Bill Kaiser of Greylock Management. This began a long and successful business partnership between Bill and I. Recently we got together for a day at MIT to think about the local economy, and how to encourage new behaviors to increase success in the region.

This post is meant to be a starting point, and is the result of discussions with Bill Kaiser, Tom Hopcroft, Steve O'Leary, Colin Angle, Brad Feld, John Cullinane, Paul English, Don Dodge, Will Herman, Dharmesh Shah, Jeffrey Bussgang and Scott Kirsner.  

It's About Leadership: A Proposed Scorecard Massachusetts for Technology Companies

Sports are a wonderful metaphor for real life, because they encapsulate so many things that we know are crucial in business as well as on the playing field: Teamwork, leadership, talent, strategy, and hard work. All sports have one thing in common: A clear measure of the score, and an unambiguous knowledge of who has won and who has lost.

I believe that if we increase our talent pool, and increase our leadership expertise, then jobs, profits and revenues will follow. After all, just like any company, a region is really little more than the pool of great people that it contains.

But how do we increase our talent pool? And how do we increase our leadership role in the country and in the world? First, I believe we need a measurement of success that in the long run will translate to success in growing leadership and thus talent. I believe we have sold too many of our great companies, and we have put our national and global leadership at risk. Yes, we do have talented people here, but do we want to employ them as outsourced R&D for distant companies? What happens to our ability to recruit great talent when the jobs here are away from headquarters? Whose career has ever soared by working in an "outpost?"

I propose a scorecard that helps push us towards having companies locally run. It's a shorthand way of saying: "Play big." "Don't sell out." It's a way of saying "Lead here."

Since metaphors are made to be mixed, the scorecard comes from baseball, and playbook (next post) from football. The scorecard is a way to talk about success. My hope is that we might all agree on a common definition of the score, and use that to push ourselves to better performance and higher leadership.

Any growing company that is selling a successful product.
This would mean any company that successfully reaches the market and serves a growing need.
Essentially, you're on base once you show that more and more people need and obtain your product.

Any growing company with sales over $10M.

Any growing company with sales over $100M

Home Run
>1B market cap

Grand Slam
>10B market cap
Dominates its market; fast market growth

This is an extremely simple scorecard, with five levels separated by a factor of ten in sales, then a factor of ten in market cap. It gives us a way of naming what we have, and maybe what we don't have. More importantly, it lets us think in terms of "candidates" for greatness:

"Home Run Candidate" - This means a local company that could go pubic, and reach over a billion in market cap. Constant Contact and iRobot are examples.

"Grand Slam Candidate" This is a company that is probably already public, and could become an unchallenged global leader with over $10B in sales.
Akamai is an example.

Our Grand Slam Technology Companies

Thermo Fischer Scientific

Establishing the Right Horizon Early On

I believe that we are selling our triples before they can be home runs, and selling our home runs before they can become grand slams. Within each company, this probably makes perfect sense. A great deal for the investors and for the current employees. But I believe that if we sell our triples and home runs, we forever eliminate the benefit that may have accrued had these companies topped their field as an independent company. No Grand Slams. Just divisions. I just don't think you can lead a region, let alone a nation and the world, with divisions.

Some of this is based on the horizon that companies establish early on in life. Think about how brash Amazon's goals were, and how doggedly they pursued them. The result is a Grand Slam of epic proportions. While Amazon may have had offers early on in life, it's high but focused goals would have precluded any early sale.

We will only get what we set out to get. Let's set our horizons boldly, but achievable. Let's design our work to result in Grand Slams that are based here. There are plenty of regions out there who will sell us their Triples and Home Runs if we can offer them a great price, and a ride around the bases.

Bill Warner is the
President of Warner Research and Founder of Wildfire Communications & Avid Technology
blog post
was originally published on January 25, 2010.  You can
find this post, as well as additional content on Bill's blog, which is located here.