Unicorns vs. Llamas: A Study in Startup Extremes
Recently an investor contacted me about a startup in their portfolio. The investor had read my post How to Kill a Startup. The company was struggling. The investor was frustrated with the CEO and wanted an outside opinion on the product. I met the leaders, looked at the product, and gave them an honest opinion.
They invested in a unicorn and got a llama.
At almost the same time I was doing this project, I happened to have a few conversations with people working at unicorn startups. These were mostly casual conversations about the various inner workings of sales and partner relationships.
The contrast between these two was profound.
I finished my report on the llama company a while ago. However, I was fascinated with how divergent these places were. The three most significant differences were: vision, conflict, and failure.
Of Course its Vision
There is a recurring joke in the world of system admins and cybersecurity professionals: “of course it's DNS.” DNS misconfigurations are frequently (always) the root cause of connectivity or access problems. What makes this funny is how network admins frequently (always) convince themselves it is not DNS, but some other esoteric problem.
Ten years ago, I did a project for a billion-dollar acquisition. The core risk in the entire transaction was the visionless CEO. He was a stereotypical good old boy, who loved to tell tales of his conquests in the 1990s, while his aimless, toxic company diddled around with subpar software.
Here I was ten years later, with the exact same scenario (sans about a billion dollars). Another CEO who knows every hot shot in the industry, but barely comprehends the software his own company sells. How do these people get their jobs?
These leaders are more interested in protecting the image of who they were, rather than projecting an image of where they are going.
Meanwhile, at the unicorns, vision is everywhere. The leaders constantly talk about their mission, values, and what they want to accomplish. They are insistent on unifying around common goals and plans. They have well-communicated strategic plans. When they speak of the past, it is only to better understand where they are going. When they speak about the people they know, they focus on what they learned from them.
It is not complex: unicorns have a vision, but llamas do not.
Healthy Conflict
Nevertheless, vision does not solve everything.
At the llama company, I noticed that the meetings were docile and unidirectional. Only the leaders spoke. Questions and crosstalk were minimal. The conflict was uncommon and uncomfortable. When a question was thrown out, the answer was usually hand-waving and truth avoidance.
In contrast, at the unicorn, meetings are raucous. The conflict was common. Ideas, plans, and designs were openly and routinely challenged. It was perfectly acceptable to tell somebody, “I think you are wrong” as long as you could explain why you felt they were wrong.
At unicorns, conflict is passionate but not emotional. The conflict focuses on helping employees see something, rather than feel something. At the llama company, it is the inverse. Conflict is intended to make people feel something, so they stop looking for problems.
Marveling at this revelation, it occurred to me that unicorns attract not only intelligent people but also people who are confident enough in their skills, that they can handle being challenged (and being wrong). In contrast, the floundering startup was filled with insecure people who felt any questioning of their ideas was some attack on them personally and created a hostile workplace.
Again, it is not complicated: healthy companies have healthy conflict.
Willingness to Fail
The healthy conflict was indicative of a larger organizational quality: resilience. The people at the unicorns are not afraid to fail. Specifically, one of the unicorn employees told me a story about working on a project for a new product feature. The founder wanted the feature, employees felt it was distracting. After months of grinding away, the project failed. The founder was unhappy.
The founder convened a “blameless post-mortem” (he had an R-rated name for it.) The team discussed what worked and what did not. Conflict and disagreements were flying. Then one coder made a comment that caused everybody to see the feature in an entirely different light. The blame-free environment allowed a reserved programmer the freedom to express an insight nobody had considered.
In minutes, the team brainstormed a new design. In weeks the feature was ready for testing. In a month, customers were using it and the feedback was positive. The team failed, learned, listened, and adjusted.
Meanwhile, at the llama, the CEO was firing employees because a production deployment failed. This failure caused a serious setback with a customer’s project. The CEO had no interest in understanding the failure. Rather he whined about not having the right people with the right pedigree.
It is simple: unicorns view failure as an integral part of success. Llamas view failure as nothing more than failure.
Conclusion
Is it really this simple? Of course not. Running a company is a mess of complexities and nuances. Moreover, unicorns have one colossal advantage over llamas, resources. It is a lot easier to make a mistake when you have tons of cash in the bank.
However, unicorns were llamas once upon a time. That startup with the $10B valuation did not start that way. They started in a similar place as the llamas. They had to work themselves out of the muck and build something special.
If you are wondering what my advice to the investor was, it was simple: build a strategic plan with vision and send the CEO to leadership coaching. The CEO was not a bad or stupid person. He lacked the skills to lead. He needed to work with other leaders and learn how to be a more effective leader.
This may not solve all their problems, but it gets them off the llama farm.
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