OMD's ABCs #274: Amp it Up by Frank Slootman, MSFT is more innovative than FB, Business is Personal, Environments that Breed Creativity...
Hello!
This week we have a book review of Frank Slootman’s Amp it Up. It was an amazing read not only Snowflake’s culture but also Slootman’s leadership philosophy from his experience at ServiceNow and Data Domain.
The book review was the major article for the newsletter. Following that are a few thoughts around investing from interesting Twitter posts. One in particular was about Microsoft possibly being a far more innovative company than Facebook or Google.
After that is an update, a couple of photos, and a quick thought on making time.
The ABC’s of the OMD learning function are below. Feel free to pick and choose the segments that interest you and I hope they make you think about something you didn’t before, raise an eyebrow, or leave you satisfied.
Art: Books, Movies, Creations
Business: Investing, Systems, Work
Culture: People, Self, Observations
Art: Books, Movies, Creations
Amp it Up by Frank Slootman Book Notes
Review & Rating: Refreshing / 10
Amp it up is about Frank Slootman’s journey as CEO at Data Domain, Service Now and Snowflake. It was a refreshing read. Candidness oozed out in paragraphs as Slootman described his leadership philosophy. I don’t think many would agree with Slootman’s beliefs—despite the consistency in logic and its alignment to purpose—and that made the book ever more tantalizing.
Yes, there is a tone of celebratory patting-the-self-on-the-back as is common with any books by a CEO or leader. But the cover isn’t his face, which is a red flag for any non-fiction book (if their ego bleeds outside the book to the cover, I’m not going to bother with it at all).
It was an easy read that gave a point of view of one of those rare operators who are able to go into a company and supercharge it. Many business books focus around the mythical entrepreneur that seems to have this genius ability to make a business work—often, this ignores many other factors. But Slootman has no illusions of that and actually shines a light to how we make a few exceptions the rule. His story is one of constant blocking and tackling as he talks about the truly difficult trade offs every leader has to make to build a successful business (i.e. something that generates cash flow).
While most entrepreneurs of billion dollar companies in Silicon Valley have flamed out and most of their 21st century creations teeter on questions of whether they actually are decent businesses, all of Slootman’s companies he turned around exist (dare I say thrive) today. At the least, I think the book is a great read for leaders to remember what the purpose of their business is, to focus and avoid distractions like social causes or whatever bullshit marketing PR gimmick ESG stands for today.
Book Notes:
Notes have been grouped and categorized. Direct quotes are in Italics.
Mission
A great mission is big, clear and not about money. Snowflake’s is: “to mobilize the world’s data by building the world’s greatest data and applications platform, not just of the cloud era, but in the history of computing."
Having a mission is often about fighting against distraction. Distraction kills companies. Distractions include using the company to address social injustices and climate change. Those external goals are not the priority of the business.
Mission driven is all about what you do every day. It’s what you decide to do with your time, effort, and resources. It’s about the every day grind. Slootman sees this as nonnegotiable and that most approach it in a casual manner compared to them. They don’t LIVE it as Snowflake does.
Business is War
People need to learn to accept truth, not live in fairy tales of denialism. “Only the government can print money; the rest of us have to take it from somebody else.”
Free isn’t free. Everything has a cost and trade off. "Good leaders explain that none of us are ever truly safe in our roles for any length of time. If this fact makes people uncomfortable, that’s good. You need to get comfortable with being uncomfortable because the only alternative is denialism.”
On lawsuits: “The legal system will always be exploited by those who cannot compete on merit.”
Victory is persuading competitor’s top talent to join you. “It’s a double whammy: not only is our enemy losing some of its best talent, but we’ve taken their strength. A talent drain is the best evidence that a company is in serious trouble and is losing its will to fight.”
Business & Leadership Philosophy
Slootman believes superior architecture is the enduring differentiator between the three companies he led versus their competitors. “Architecture matters.”
Imagine the big future state and work backwards to the present to achieve it. He’s not a fan of incremental tinkering with no set North Star.
If someone says the goal is 30% more customers in 2 years, he’ll push back for "why not 100% more?” He wants people to push the outer limits. The constraints exist so we have boundaries to break.
Slootman also referenced Theodore Roosevelt’s The Man in the Arena speech. Oh yes. A good one indeed. "Don’t settle for respectable mediocrity; seek to exploit every ounce of potential you are entrusted with. If you want to win big, imagine a radically different future that is not tethered to the past.”
Trust is everything. "It is the role of leadership to maintain a culture of brutal honesty.”
Don’t use external consultants. “Great operators live, breathe, and own their strategies.”
Every business unit leader must also be a strategist and operator. They can’t be separated. There needs to be consistency of vision and execution E2E. This also explains why he might’ve seen the customer success function as redundant and a burden. "Execution is king.”
Bring on board drivers instead of passengers. Drivers control their destiny and want to push their team and company forward a certain direction. Passengers on for the ride and are mercenaries that don’t care about the long term. Drivers matter. Passengers don’t. “Employees should be able to look at themselves in the mirror and feel strongly that they matter to the organization, that they contribute in significant ways, that their absence would significantly hurt its results.”
Mass layoffs are when all the passengers are thrown overboard. While other passengers will be fearful that they may get caught, the drivers may feel free from the loss of dead weight.
Topgrading: Slootman’s process of systematically upgrading the talent at each key role. It’s not just about firing the bad performers but even those who aren’t performing at the top caliber for the organization to succeed. Everyone must elevate the rest. His team keeps a list of potential candidates, their status and matches them up against people inside the organization.
A leader needs to know how to hire and fire. “…leaders are only good as the people they surround themselves with.”
Though it sounds like a tough and heirarchical place, Slootman appears to focus on eliminating as many layers of management and limiting reports. All results in more self-managing managers and ICs. Anyone can email Slootman and they will get a response (it might just redirect them to another leader better suited to answer). But it seems he sets a tone of strong leaders at the top, then a layer below of all the business unit/function leaders who can all self-manage and work with each other without needing Slootman. He has created a team that doesn’t need him to adjudicate. I merely steps in to make hard decisions here and there and act as the leading culture carrier. He calls his department heads the governing body of the company. They’re the ones that figure out what to do.
Trust is what matters and people trust a straight shooter. Slootman says what he means and acts it out. He tries to be consistent everywhere. He would publicly admit failures quickly to set a good example.
Compensations had to align with the company’s objectives first, and then salespeople. The company cared about consumption and salespeople cared about contract values. Aligning both was important. Strong financial oversight and discipline on sales compensation is an important art. The environment will incentivize the behaviour.
Bias towards hiring strong top-level leaders over a lot of low-level managers. It might seem expensive but it will pay off in the long run. It’s the idea that a few super talents are better than 100 okay talents, especially for knowledge workers where judgment scales.
Not overweighting pedigree and perception for snobby industries like consulting, banking and venture (Slootman’s words). “Elite graduates cost more, and most companies would rather do without the stereotypical attitude of their graduates.”
“Having seen things done is not the same as doing them.”
A good manager is impressed by people’s ability to be candid. Good leaders have to be self-aware enough to know where they are best suited to play. A talented asset in one type of business will be a liability in another. “Humans always learn more from our struggles and failures than from our easy successes.”
A good CEO leads the board and not the other way around. The CEO needs to have a strong say on the compensation of his/her execs, not the board. The board’s role is to provide guardrails but not to align the CEO to their own strategies and externally-oriented directions. It’s not their place. “I have occasionally told them [the board] that they will have to find a new CEO if they want to overrule me on such matters [decisions].”
“…you must be mentally prepared to walk away to preserve your scope of authority as CEO, or your tenure in office will be irreparably compromised.
Pressure + Speed
Leaders set the pace. Slootman compressed cycle times and created a sense of urgency within. This also self-selected for high performers who craved moving faster. "Apply pressure. Be impatient. Patience may be a virtue, but in business it can signal a lack of leadership.”
"You can embrace the discomfort that comes with moving faster instead of avoiding it."
Default is to increase pressure. "All my experiences have taught me that when in doubt, you should lean in and try to grow faster.”
There is no law that says momentum has to slow down naturally. Sales can continue to climb higher and higher. The limitation is the market size from penetration and saturation. Given that, an organization that wants to continue to grow faster will need to find adjacent markets to penetrate with proven strengths.
When ServiceNow started seeing traction in HR verticals, they hired HR salespeople and catered to this new industry in the same manner they did with IT. It required understanding the new environment and bringing in those that could speak the language of the new vertical. But the framework to be applied was the same.
Focus
Figure out what matters and what doesn’t. "What are we not going to do?”
"If you can only do one thing for the rest of the year and nothing else, what would it be and why?”
Priority means ONE thing. Reprioritize constantly. "The moment you have many priorities, you actually have none.”
Make the organization mission driven. "Being on a mission unlocks the X factor: an intangible that can drastically elevate performance as people set out to achieve greatness—together."
Slootman on Culture
What is culture? “...it loosely defines the dominant and persistent patterns of behaviors, beliefs, norms, and values of a workplace community.”
A high performance culture isn’t for everyone. It’s a lot of pressure and it's relentless. It’s fine for people to choose not to be part of one. It’s on them to accept this fact about themselves instead of hating companies that are so purposeful about something that they disregard some social facets. “A strong culture can greatly help organizations and become an enduring source of competitive advantage. But a weak culture can easily destroy organizations from within.”
Weak cultures have fiefdoms because there isn’t a strong value system enforced by leaders to unify everyone to coexist and be consistent. “Culture is not about making people feel good per se, it’s about enabling the mission with the behaviors and values that serve the purpose."
Culture is often the key differentiator of performance. “…if you want a great company, you can’t give out free passes for mediocrity. Good enough is never good enough.”
Culture isn’t either/or. Snowflake could combine its existing San Diego style culture with a high performing culture.
A strong culture stands for something. It won’t be inclusive to everyone. It can’t be if it stands for something. It’s supposed to have an organic self-selecting nature and only those kinds of cultures that deter most will be able to stand for something. It’s my guess that a number of low performers could easily call a high performing culture as toxic just because they aren’t great fits for it. "If you succeed in building and protecting a strong culture, it will simultaneously attract people who admire the culture while repelling those who find it distasteful. That’s an intentional feature, not a bug.”
What helps reinforce the culture is the peer group. A peer group built carefully will play the role of antibodies of pushing out those who are not up to the high performance standards of the organization without the leadership having to do or say anything.
Slootman uses Lencioni’s The Five Dysfunctions of a Team as a framework to assess the functionality of his teams.
Look for companies that are always looking to be scrappy no matter the size. They will inherently eliminate all waste by adopting this mindset.
Hiring
Slootman learned how to hire and retain top talent from his experience losing the best people during the dotcom days because his company couldn’t match comp/benefits.
“We coped in ways I have used ever since: hire people ahead of their own curve. Hire more for aptitude than experience and give people the career opportunity of a lifetime. They will be motivated and driven, with a cannot-fail attitude. The good ones would grab the opportunity to accelerate their careers with us.”
By this, Slootman refers to finding those frustrated with their careers like he was once. It’s a kind of organic system that leads to self-selection and survival of the fittest. It led to a better, cheaper and more loyal talent base.
Creating Alignment
Slootman eliminated individual objectives based performance metrics in all companies he led because it stopped people from thinking about success from the company/team perspective and obsessed over the individual.
Compensation based on bookings resulted in oversell on bookings but that didn’t lead to renewals in future periods. “We pay everybody the same way on our executive team, and we have a very select, focused set of metrics that we pay bonuses on. Our sales exec does not get paid on a commission plan if the rest of us aren’t."
At Service Now
He pumped up R&D spend from 2% of revenue to at least 15-30%
He listened to customers and expanded the product from ITSM to more generic workflow management workflow
Hired lots of young leaders and helped them develop.
Left after feeling burnt out and believing the growth trajectory they were on couldn’t be derailed. I guess he gets bored after setting these systems in place?
At Snowflake
Slootman is trying to create Snowflake into a modern data utility company. Slootman’s explanation of Snowflake: “…basically a utility company for cloud computing with a consumption model. As with your local electric company, you pay only what you use.”
Coming out of retirement for Snowflake: Mike Speiser brought Slootman on as CEO. Speiser had sold a company he had bootstrapped and funded Snowflake with his own money after meeting Benoit and Thierry. “It is unlikely that a company other than Snowflake would have persuaded me to get back in the arena, but the opportunity to become its CEO was hard to resist. Today I am less driven by career ambition than by a hunger for sport, action, excitement, teamwork, and a never-ending pursuit of self-improvement.”
Slootman axed the dozen direct reports from previous CEO within first few weeks. He wanted a leaner team of of 5-6. Reminds me a little of Ricardo Semler of Semco. It’s the same philosophy of fixing the easy ones like questions of loyalty and trust so you can fix bigger problems at company level.
You pull plugs fast. “When there is doubt, there is no doubt.”
Mike Scarpelli, his CFO from past two tours of duty, came on as his copilot. It was non-negotiable.
He consolidated product leadership under Benoit, the co-founder, as head of product. Greg Czajkowski was brought in to run engineering. They fired other leaders that made the structure messy here too. “I would sometimes say in all-hands meetings that I was personally committed to help each of our employees reach a different station in life as a function of the company’s fortunes. In exchange, I was asking for the best they had to offer. That was the deal: we do the best we can for each other.”
The San-Diego culture pre-Slootman: “It lived and breathed a quirky souther California lifestyle culture, where many staffers went surfing at dawn and wore shorts and flip-flops year-round. They were shocked when i showed up from Silicon Valley with a completely different mindset: pedal to the metal, put your boots on, execution is everything, business is war. you can imagine how well that went over.”
But Slootman had a healthy respect for the founders and it’s something that can’t be ignored or forgotten. There is a Confucian mindset I resonated with from Slootman here. Success takes a village to achieve and the founders are always honourary members of the village. “Even if you’re dealing with founders who aren’t ego-driven, recognize them anyway. It will help employees understand that you appreciate the founders—and that you yourself aren’t on an ego-driven power trip.”
The unicorn status we give start-ups is just as much (if not more) about the mythical nature of the founders over the company itself. “CEOs are plow horses while founders are racehoreses—so the opinion of your founders will continue to carry weight.”
Product first. A great sales team can’t compensate for product problems. I think Peter Thiel had the view that a decent product with an amazing sales team could get the job done. That appears to be what most of Silicon Valley is doing even today. But such strategy depends on the type of product and I garner there is a spectrum where one works better than the other.
Data gravity = data seems to concentrate in intensity and scope around certain sectors. Meaning, not all data is equal. This is another way Slootman reinforces focus (i.e. rifle vs. shotgun).
Got rid of customer success: “IF you have a customer success department, that gives everyone else an incentive to stop worrying about how well our customers are thriving with our products and services. That sets up a disconnect that can create major problems down the road.”
Everyone at all departments and functions must focus on the goal of customer satisfaction because that drives retention, profitability and long-term survival of the company.
Rolling in the responsibilities to salespeople gives them full E2E ownership of the customer lifecycle (i.e. it doesn’t end until they leave or the company dies).
Technical support people were made to own customer issues from E2E. Tech support was also moved under engineering to report to same head of engineering. Engineering must feel the effects of tech support. This creates organizational alignment
Tech support owns customer issues with engineering. Sales owns customer relationships. “People will forget that you used to have a customer success department once the primary teams are fully empowered to solve problems on their own. You will end up with a simpler, less costly, and better functioning organization.”
Recruiting used to be outsourced. Slootman brought it in house to be done by the sales management.
Self-awareness
Slootman is a man of the arena. He retired from Service Now for 1-2 years before returning to the gladiatorial pits of leading companies. He’s a competitor. Even in his time off he competed in sailing with a team. Celebrating wins feels like jinxing the self. It’s always about overcoming the next set of challenges in front. “….you become haunted by never doing enough, that you are failing to do as much as you are actually capable of.”
Slootman was also self-aware enough to get out of the VC game after joining Greylock partners. He found the collaborative partnership model without a chain of command to be far too difficult. It wasn’t his style. It wasn’t what he was meant to do. Repeatedly, he’s shown a philosophy of not changing people’s modes of operation but creating an engine/machine and filling it with those who have the proper temperament for it. It’s the simple “It’s not for everyone but it’s for someone.”
“I have the temperament of an operator, not an investor/advisor.”
One gets a sense of his disciplined, no bullshit, systematic orientation from his youth as someone who was raised in a household where how one carried the self inside the casual home setting mattered. One’s manners on the dinner table, how one walked, and addressed others all mattered for Slootman’s family. It quite reminds me of my own childhood and I can empathize with how this creates learned behaviours of expecting others to do the same and having a standard of operation about the world.
“I always operated as if I owned everything, whether I did or not…I have since always tried to increase our people’s sense of ownership so they will act as owners. That mentality needs to be nurtured.”
Proving Others Wrong
A chip on the shoulder from VCs who rejected him for CEO positions because they said he didn’t have the right experience that checked the box of running a sales team:
“These rejections left me with an unfavorable opinion of many venture capitalists who could not recognize talent if it smacked them in the fact. I would later get some satisfaction over the naysayers by serving as CEO of three of the fastest-growing companies in Silicon Valley history.”
Business: Investing, Systems, Work
Interesting Twitter Finds
Are MSFT and Apple more Innovative?
Compare Google and Facebook to Apple and MSFT and it makes me think that the latter two (who’ve been touted as being un-inovative) have done far more with innovation than the former two who’ve bought their way into most things. Now, Google and Facebook have integrated their acquisitions exceptionally well as far as product development is concerned.
But I think it’s smoke and mirrors that the “younger” companies are actually innovative. Rather, they might actually be one-trick ponies that didn’t grow up…just kids in hoodies and beards.
Sure, FB took on the mobile transition. But that’s as a company that wasn’t THE dominant social media company. MSFT transitioned the dominant office tool base from on-prem to cloud-based subscription. MSFT even build Azure, which is now crucial for much of modern commerce to operate. Every company that uses FB or Google to sell their shitty bags or hats from some factory in China or Vietnam will need to be on the cloud if they have plans to stay on long-term as a proper business.
Apple’s evolution traversing various categories of hardware and software to building a nascent ecosystem and being one of the defacto modes of entering the internet—iOS/MacOS, Android/ChromeOS and PC is the only way humanity can access the internet—makes them an innovation powerhouse. Whereas Apple has the consumer ecosystem, MSFT has the enterprise ecosystem.
To be fair, Google does as well and this isn’t an argument to whether MSFT or Apple are better businesses. But I think from a company’s ability to continuously evolve, I think MSFT has evolved from the simple tool/OS level infrastructure it had to become one of the largest gaming and cloud computing companies on top of owning enterprise software and data warehousing. Google and FB were advertising companies and they’re still advertising companies. Yet, we always think MSFT is the boring older brother to all of “big tech”.
Business is Personal
Compounding wealth requires partnering with people with integrity. How else will you hold during the hardest of times?
A popular saying I hate is “It’s not personal, it’s just business.” But when shit hits the fan, everything boils down to sticking with the people we trust and not some fact, stat or data.
Most who disagree haven’t been punched in the face yet. I admit, this doesn’t apply to a few. But whilst the those in Silicon Valley or the nooks of quant-land will try to make the world try to be less emotional and say some BS like data-first or data-driven or data-something to give the impression of knowledge, commerce at the core is a human to human transaction and that’s always personal.
We may have tried moving it away from being as human as possible (to our detriment as a society long-term) the strongest connections are that which are personal and that’s what I’d rather invest in.
Culture: People, Self, Observations
I’m trying to enjoy time with family and clear my head. But making time has been a new challenge with more client work and the growth of OMD Ventures. It’s a blessed problem I have.
This is my afternoon view. No, it wasn’t edited…I don’t know how.
Anyway, how can I not use this inspiring background to sit and think?
Vancouver is nice.
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Disclaimer
This information is not investment advice. This is a personal site. Any views or opinions represented are personal and belong solely to myself and do not represent those of companies that I may or may not be associated with in a professional capacity, unless explicitly stated.