Biology is Destiny: Choice of Culture Models and Startup Survival
This is a guest post by Ty Hagler
In 1998, just a year after returning to lead the company he founded after a 12-year hiatus, Steve Jobs took the opportunity presented by a MacWorld address to confront Apple’s critics in public. During his appearance, he humorously outlined what he dubbed a “Hierarchy of Skepticism,” in order to make a clever, pre-emptive strike against the criticisms he’d inevitably face next.
At the first level, critics ask, will the company survive? Then, once that is solved, they ask, but will the profits be stable? Next, what is the strategy? Finally, can growth be sustained? In truth, as Jobs posited that day, the skeptics may never be satisfied.
Our company, Trig, is entering its 10th year in 2017, and we are in a very fortunate position. We are wrestling with questions of strategy and growth, rather than survival and stability. In light of our current status, we believe that there’s no time like the present to think more deeply about our culture and values. Reassessing who we are and where we stand will shore up a bedrock foundation before accepting more growth.
A 2002 study by the Stanford Project on Emerging Companies (SPEC) collected and analyzed the most comprehensive database on the histories, structures, and cultures of Silicon Valley startups in its time. The study identified six different models of cultures that evolved over a 15-year period among 200 companies in the Valley. SPEC’s research revealed a breathtaking finding: one of the six cultures had a 100 percent survival rate through the dotcom bubble, was the fastest to go to IPO, and continued to hit growth targets as a maturing public company. If you are an entrepreneur, investor, or are in any way involved in the startup community, this should get your attention.
Take a look at the six models outlined by the Stanford research findings:
Star Model: Hires were the best and brightest from elite universities, were well compensated and given “huge amounts of autonomy.” The strategy of applying the “A-team” to solving issues and developing great product made this model very popular with VC’s
Engineer Model: “This is your stereotypical Silicon Valley startup, with a bunch of anonymous programmers drinking Mountain Dew at their desks; they’re young and hungry and might be stars someday but right now they’re focused on solving technical problems.”
Bureaucratic Model: A common and proven model of organization, with a robust hierarchy and processes. Thick with middle managers, extensive job descriptions, org charts, and handbooks.
Autocratic Model: Close cousin to bureaucratic, but driven by a single person, usually the founder and/or CEO, one of whom reportedly described it thus: “You work. You do what I say. You get paid.”
Commitment Model: Firms where people could work their entire lives, even if most chose not to. Eschewing the rapidly shifting nature of many of their peers, these companies valued rich and lasting intra-company relationships. “Commitment CEOs believe that getting the culture right is more important at first than designing the best product.”
Hybrid / No Clear Model: These firms combine elements of two models as a compromise in anticipation of future changes to the management approach. For example, the observed culture might have fallen midway between Star and Bureaucracy, - getting off the ground with prominent talent, while planning for a transition to a Bureaucracy model following IPO.
Before we reveal which model had a 100 percent survival rate in the study, it’s worth noting that the authors found that changing cultures during the company’s growth led to higher chances of going out of business. Origins matter – the founder’s early formation of culture, values, and HR practices are a strong predictor of success. Change is disruptive – any short term benefits from changing a culture’s enduring core values to respond to external pressures are offset by significant long-term costs of undermining the predictable internal expectations among employees that can lead to higher turnover, increased management burden, and declining profitability that puts the survival of the company at risk.
With the Hierarchy of Skepticism in mind, this means that culture is a crucial consideration for answering that initial first question of “Can it survive?” When forming Trig and first composing our values, I referred to a list of quotes I had been keeping, that I found inspirational and challenged me to be more pragmatic, collaborative, and uphold integrity above any hardships that might be solved through compromising character.
We have more to share in the white paper, especially the surprising findings of which culture model was most successful. If you like the content so far, you’ll be also signing up for emails to our community of like-minded entrepreneurs and investors. We promise we don’t bite and you can unsubscribe at any time.
Ty Hagler is the founder and CEO of Trig Innovations. The original post can be found here.