EGD News #162 — Scale yourself from founder to leader

Sent on November 25th, 2022.

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A startup raises funding to go to the next level. At the same time, the founders must also go to the next level. They need to hire more people, raise financing, and lead a bigger company.

I recently read an HBR piece about founders not adapting their leadership capabilities to their growing businesses’ needs. In this piece, CEO coach John Hamm writes:

Over the past four years, I’ve worked closely with more than 100 entrepreneurs and seen them struggle to adapt as their companies grow beyond a handful of employees and launch a new product or service. In the process, I’ve observed that the habits and skills that make entrepreneurs successful can undermine their ability to lead larger organizations. The problem, in other words, is not so much one of leadership personality as of approach. A leader who scales can jettison habits and skills that have outlived their usefulness and adapt to new challenges along the way.

Here’s a critical habit I’ve observed in-game CEOs that keep them back: They continue focusing on the game, even when the company needs them for company-building activities. Hiring the team, and getting the team to create the games, should be the focus.

I have a saying for this: It feels like you’re building a game and not a company.

In the previous piece, I wrote about game studio foundations. I think that’s a place where many fail. Investors often obsess about early KPIs and market opportunities but neglect the company builder capabilities of founders. They end up investing in a game that has a company attached to it.

Spot the challenge of scaling early

At the pitching phase, here are signs of troubles:

• The pitch deck is a carbon copy of the “Perfect Games Company Pitch Deck” (which doesn’t have a slide on company building)
• The pitch deck is a “Deconstructor of Fun article;” the founders spend time explaining how the game will work, the player motivations, and how it’s positioned in the market.
• Founders are not clear who the CEO is, or the pitch deck doesn’t name a CEO
• The CEO is acting like a product manager, leading a games team. They are elaborately explaining why the game will succeed. But success doesn’t come from making the game work; it comes from making the company work.

If you can get past the game focus and onto the “company builder” focus, there are more good habits to pick up. One is asking for help to achieve scaling as a founder.

I think a lot of entrepreneurs start with a lot of insecurity about what they don’t know. What you want is not to be paralyzed by it, but to harness it—to use that nervous energy to learn and make yourself better. You’ve got to keep your personal learning curve ahead of the company’s growth curve.

— Drew Houston, co-founder and CEO of Dropbox.

Here’s an investor confession: The scaling aspect is something that many founders never bring up with me. It’s not in the pitch deck and not in later meetings when I’m involved. I’m amazed that go-to-market for the game is more critical than planning how the CEO will scale with the company.

Sure, the CEO points out that they’ve been a game studio lead for six years. So they’ve been leading dozens of people.

Does that apply to having a company of your own, with a massive team and a constant threat of money running out?

How to start scaling

Leaders who scale overcome these tendencies by dint of self-discipline, listening to and seeking input from others, and being willing to shift their outlook. They deal honestly with problems and quickly weed out non-performers. They see past distractions and establish strategic priorities. They make concerted, sometimes uncomfortable efforts to do what doesn’t come naturally to them for the team’s sake. And they learn to work with and communicate to diverse employees, customers, and external constituencies. Most important, they make the company’s continuing health and welfare their top concern.

— John Hamm, CEO coach

I wanted to understand why someone isn’t scaling. Here’s my theory:

• “The founder isn’t scaling,” why?
• “The founder tries to do everything by themselves,” why?
• “The founder doesn’t want to involve others,” why?
• “The founder believes that it’s his responsibility to know these things,” why?
• “The founder believes he needs to deal with this in his own way.”

Some of the best founders I’ve spent time with don’t deal with issues on their own. They have mentors, advisors, and people to turn to for advice. Like they could ask, “How should I approach building a team at this stage of the company?” The founder is embracing a growth mindset, where they embrace the fact that they are learners forever, but they can become better by seeking knowledge and asking questions. They can start to scale.

Fledgling CEOs aren’t aware that by clinging to their existing strengths and habits, they risk creating dysfunctional companies.

— John Hamm

Lean toward the uncomfortable

Asking for help can feel uncomfortable, but it can be the way to go. But help and advice from others require that you ask the right questions and interpret the answers correctly.

When I talk with Turkish game developers, they always default to building a team of ten to fifteen people quite quickly, getting to a point where a big enough team is taking care of things. The Turkish developers are also growing up in an ecosystem where the default is to build a big company. Peak Games, and Dream Games, are some big local companies. The default is not to tinker with a game but build a big company.

In gaming, many people know that success is tied to one game becoming huge. Clash of Clans (Supercell), Empires and Puzzles (Small Giant Games), Angry Birds (Rovio), Candy Crush Saga (King), and Lily’s Garden (Tactile).

But what worked previously might not be possible anymore. Free-to-play has changed immensely since the days of Supercell and Peak Games. What got Small Giant Games to success; those days are over.

As John Hamm explains, “most new CEOs fall back on what has worked well for them before—even though these old approaches often don’t fit the current problem. A product manager turned CEO may believe the next product will turn a profit.”

Founders who scale know how to interpret the knowledge out there.

The founder in gaming thinks: “Once we find the game that works, then we will be OK.” But what if you should go down the route of not making games but creating an environment where games are created?”

To end, here’s a great talk on scaling from 2015 by Stripe CEO Patrick Collison.