December 30, 2007

A CEO’s Tale: Why the Dragon’s Den doesn’t have Edgy entrepreneurs but China does!

Filed under: Start-up First Aid — Administrator @ 6:50 pm

This year, we traded in our kite boarding gear and plane tickets to Boracay for Wellington boots and plane tickets to the United Kingdom in order to spend hols with Lara’s family in Lightwater, Surrey.

Other than the fact that Lightwater’s only Chinese food restaurant was closed all week we had a fantastic time. I’ve learned a lot about British society – for example, Britons split their evening equally between watching two game shows When Joseph Met Maria and Dragon’s Den.

I’m not a huge fan of game shows to start with – so, I guess the fact that I’m so totally confused as to why anyone would spend a hour plus watching Andrew Lloyd Webber stare starry eyed at six contestants singing and dancing their way into the lead role of Joseph in the musical Joseph and the Amazing Technicolor Dreamcoat is not surprising – but there is something to this Dragon’s Den that has absolutely snagged my attention (imagine American Idol meets Antique Road Show meets Wired).

The concept is simple: Aspiring entrepreneurs and business owners with ambitious growth plans walk into a room (the “Den”) – usually alone, sometimes with models or partners, often with product – and face a panel of five multimillionaire entrepreneurs and venture capitalists (the “Dragons”) who are looking for investment opportunities. The contestants then pitch their product or business plan in the hope of earning some of the Dragons’ cash.

I’m not sure if I love watching the schoolyard (i.e. hair pulling, scratching) exchanges amongst the Dragons themselves or the Average Joe bumbling and fumbling his was through a pitch – anyhow, good stuff.

However, in spite of contestants unrelated business concepts there is one absolute thing they all have in common – these guys are operating in an environment where there is little concern that the Queen is going to shut them down, board up their windows, or toss them in the Tower of London.

This is not necessarily the case in China where the government keeps a healthy supply of building material (e.g. lumber, nails, and hammers) and duck tape at the ready for those rather special (and random) situations whereby a start-up or enterprise requires, err, well, let’s just say a bit of “remodeling”.

I bring this up because I’ve noticed (over the past year or so) an odd management neurosis of sorts sprouting up within some of China’s most dynamic and innovative start-ups. This is particularly evident in companies where the management team includes both local Chinese and Westerners. I’m not quite sure how Freud would identify this neurosis but according to my handy China business guide “Green Tea and Scotch – 88 Negotiating Strategies for Glorious Enlightenment and Harmonious Existence” it is called Edgy.

According to Green Tea and Scotch entrepreneurial teams symptomatic of Edgy not only tend to be associated with start-ups (lead by multicultural management teams) pushing the envelope just enough to exist at the tip of the innovation sword but also operate, to some degree, in a legal grey area.

An Edgy outbreak is highly distributive, debilitating and in some cases can mean lights out for a young company teetering on the edge of obscurity and prominence – especially when investors in China (and I guess everywhere) put such a high premium on stability and team cohesiveness.

And while I have yet to observe any psychotic symptoms, such as delusions or hallucinations associated with an Edgy outbreak, there are signs that some people are incapable of making it back across the proverbial “status quo, all systems go, no sacrifice, no victory” line.

For example, several weeks ago a super innovative China based start-up that I’ve been working with for several months had an opportunity to headline at a major international event (and not one of those “venture capital/private equity conferences” we all love so much) with global media coverage which would have significantly powered up and propelled the company’s global profile to wicked high heights (and not only with investors and industry geeks but also with consumers) – I’d say this “situation” was as close to a Tipping Point as any start-up can get without selling itself to Google for (fill in the blank) billions of US dollars eighteen-months after going live.

The CEO/founder of this start-up weighed the risks associated with this degree of coverage and attention and decided the company was not only mature enough but would definitely benefit (across the board) from this event – only to receive a sieve and bloody tongue-lashing from core members of her management team when she informed them of her decision to green light the event – the team’s gripe was as follows:

“…the success of our business depends on toeing the line in some areas that might be considered by some organizations as grey…and while we’re not (directly) in this grey area, in addition to the fact that a vast majority of Chinese companies already operate in this area (including many of our NASDAQ listed big brothers), we’re worried that if we go public with our business model and strategy there is a risk that one local organization will find out and ask us to stop doing our business…given our company’s young nature and the cultural mix of our management team…we’d strongly suggest no going forward with this event…”

So, like any solid, rational leader she processed her team’s commentary and opinions, discussed them at length internally and externally, consulted advisors and government liaisons, and in the end (after what some would consider “overkill deliberation”) determined the benefits of attending this event greatly outweighed the risks.

And still, her team came after her screaming bloody murder – for several days all productive work came to a halt – junior staffers and programmers where worried the company would implode and they’d lose their jobs – whispers passed the lips of dissenting managers just loud enough for everyone to hear: Who was she to put the company at risk? Who was she to put their jobs, for which they’ve sacrificed so much for, at risk? Who was she to go against the “local” team’s better judgment?

So, I’m just taking a wild stab at this but I think the answer to their “Who was she…” question is, well, the CEO.

Edgy, anyone? Absolutely…

Indeed, fear, not inability or incompetence, had gotten the best of this company. It was as if these people had their heads in the sand (but fingers on the keyboard programming away) for the better part of the past two-years – didn’t they realize at some point the company would need to go public (in the media sense) in a major way? Didn’t they realize that highly innovative companies press into uncharted territories and tend (more often than not) push the boundaries of what might be considered status quo?

My question is (as a follow-up):  How would have this team reacted to this situation if the CEO happened to be a native mainland Chinese rather than, for example an American or Canadian Born Chinese (note the CEO is not a mainlander but neither is she Canadian nor American)?

I’m guessing, from my own experience working with both local and foreign founders/CEOs, that there might have been some debate but by and large (generally speaking) it would have been a non-event; in fact, I’m 99% positive it would have been a non-event.

Ultimately, the CEO followed through and attended the event – her presentation focused entirely on her company’s business strengths and the market opportunity – and she did a killer job. Great Success! Well, sort of…

And yet a nasty cloud hangs over head as she’s now faced with a conundrum as to what to do with her Edgy team – can she resurrect the team that build the existing killer service or is that team lost forever like the AllSpark? What would you do?

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