Sun Tzu Art of War for Founder CEOs
Company building is not so different from raising an army and State building
What makes a good Founder CEO?
One of the perks of being a VC is that you get to sit next to the driver’s seat in your investee’s journey from zero to one and beyond. There will be countless bumps and potholes on the road and it is up to the driver (aka CEO) to keep his hands on the steering wheel so the car does not fall off the cliff or crash into a barricade.
I am thankful for the opportunities to be a board observer for some of Burda’s investees, even if it is often from the sidelines. It helps me build clarity on the good bad and ugly of company leadership. Before, I was part of the middle management trying to peer through the shadowed veil of C-level decisions, as a board observer, I get to see much of it up close and even personal.
There has been much ink spilt on peacetime vs wartime CEOs which I have come to think is not the best way to frame it. There should be no dichotomy to what defines a decent human being and a strong Commander in Chief.
孙子曰：兵者，国之大事。
死生之地，存亡之道，不可不察也。
Sun Tzu said: The Art of War is of vital importance to the state. It is a matter of life and death, a road either to safety or to ruin. Hence it is a subject of inquiry that can on no account be neglected.
Source: Lionel Giles’ translation of Sun Tzu’s The Art of War
So what makes a good Founder CEO?
This is my personal take on it, distilled from Sun Tzu’s Art of War, because business is war in itself and in peacetime, we are preparing for war or in Sun Tzu’s words 计 “Laying plans”.
Passionately vested in the raison d'être (一曰道 “The Moral Law”)
Starting a company for the right reason(s). Period.
An opportunistic hustler who is trying to start a company to ride on the VC world’s flavour of the month just won’t last very long when the going gets tough, or he succeeds in raising so much money so quickly that he crashes and burn. Many real life examples that the media loves to cover.
Karma is a bitch and the longer the payback, the harder it hits. Always do what you think is right.
In Sun Tzu’s words, The Moral Law is vested in the Sovereign of the State. Taken into context for VC backed companies, “sovereignty” is divided between the Board and the founders, depending on how heavily diluted they are. It is therefore paramount to admit only investors that are aligned with your company’s purpose into your Board.
As the recent pandemic has shown, leadership, from both the C Level and the Board, makes or breaks companies.
First principles based thought process (二曰天 “Heaven”)
A deep understanding of the workings of the market and industry that the business operates in. Separating facts and principles from myth and convention.
Without a deep appreciation of the status quo with all its misgivings and how the status quo came to be, there can be no innovation.
What is an undisputable principle such as the rising and setting of the sun vs make belief due to years and decades of habitual practice?
Putting it in tech parlance, what are the jobs to be done and how can we create value by re-defining how to fulfill the jobs to be done within the confines of what is possible?
And in our world today, what is possible or impossible shifts rapidly and a Founder CEO will need to constantly monitor upcoming paradigm shifts.
Intimate knowledge of the lay of the land (三曰地 “Earth”)
Armed with an understanding of the fundamental principles of the space which the business operates in, what are the obstacles in the path ahead?
They can be competitors, an economic recession, lack of available capital, regulatory complexities etc.
Mapping the obstacles above onto the industry value chain and picking ones’ battles can mean the difference between life and death.
You don’t lay siege to a strongly fortified position even if your forces outnumber the enemy 2 to 1. Sun Tzu suggests us to divide our forces to attack supply lines and harass the enemy. If the enemy commander is rash, that will force his hand and dilute his defensive strength through a retaliatory response.
Which area(s) are the company well poised to tackle today and tomorrow?
High level of empathy and self awareness (四曰将 “The Commander”)
Without empathy and an understanding of ones’ own strengths and weaknesses, hubris arises, especially with power fueled by an abundance of capital and media adulation.
Understanding the people who work with you and genuinely caring for them as individuals with different needs and fears is critical to being an effective leader.
Being constantly self aware of ones’ emotions and cognitive biases, planting safeguards (aka internal controls) around yourself will go a long way, especially during crisis time.
Able to identify, attract, lead and nurture a team that complements his or her weaknesses （五曰法 “Method and discipline”)
No one is perfect and no one is an island. Rome was not built in a day and company building requires a gathering of diverse perspectives and skillsets and marshalling of resources.
Adding on to the point above, I am a strong believer in the law of attraction, hustler CEOs will attract other hustlers and/ or mercenaries, visionary CEOs who have clarity on the company’s purpose will more likely attract like-minded talent.
This also requires a certain efficacy in salesmanship and storytelling which is important in managing other external stakeholders such as the board of directors, prospective investors, government, customers etc.
If one does not have an attention for details, make sure you bring on board someone who is the opposite that can help scrutinize the details and act as a devil’s advocate when needed. Many founders underappreciate the importance of having a strong steward of fiscal discipline in the company until it is too late.
Good Founder CEOs create great working places
Good Founder CEOs create great working places that employees rave about, regardless of the success of the business or its ability to generate a venture return. As a proxy check, whenever I go deeper into due diligence on a company, Glassdoor is one of the places I go to.
There is no smoke without fire and a large number of negative reviews from disgruntled employees is a smoking gun of malaise in the organization. It is also quite easy to tell fake reviews from real ones and companies that go as far as to plant fake reviews tell you much about the leadership’s integrity…
When the tide recedes, companies with poor organizational behaviour goes into the death spiral. Company culture (see “Commander” and “Method and discipline” above) is often the only bastion of defense when a company is besieged by unfavourable macro conditions and/ or intense competition (“see Earth above”).
However, at the end of the day, if the “Moral Law” is corrupted, very few companies will survive a “war” like the one we are in today due to the pandemic.
Its’ common cents,