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    Cyberposium--Briefs - Two Cyberposium Events Underscore People Power

     
    2/25/2002
    Being smart is not enough. Nor is arming yourself with the latest high-tech gadgets. The skills most in demand in the cyber world are those relating to people: the ability to size people up, to tell them the truth, to gain their trust. So said keynote speaker Esther Dyson and a panel of seasoned entrepreneurs at Cyberposium's opening night on February 8, 2002.
    by Martha Lagace, Senior Editor, HBS Working Knowledge

    Esther Dyson
    Esther Dyson

    Tips from a prolific investor
    "Most of what I do is common sense," says tech guru Esther Dyson. Getting a CEO to listen to the market, to look reality "in the face," and to figure out when it's time to find a successor are among her activities as a member of fifteen different boards and an investor and/or advisor at fifty-four companies. CEOs work very hard to earn their role, she said, and part of the deal is they tend to stop listening to people.

    Dyson spoke to an audience at the Harvard Business School Cyberposium 2002 held February 8.

    The diminutive Dyson, a prominent specialist in high tech, syndicated columnist, and controversial figure (from her stint as a former leader of ICANN), took a low-key approach onstage at Cyberposium. In her remarks, delivered in a conversational style with Phil Terry, CEO of Creative Good Inc., a consultancy favorably profiled in her monthly review Release 1.0, Dyson discussed what she looks for in new companies, her work in Russia, and the necessity of confidence in markets and in leaders. She also accepted Terry's persistent plugs for PC Forum, an annual industry event she hosts in March, which lent the conversation a distracting, infomercial-like quality at times.



    Quotation
    Not every idea has to be subjected to entrepreneurship.
    — Frank Moss, Bowstreet
    Quotation
    Active investors need to make decisions based on people rather than payoffs, Dyson told the audience. "One of the first questions you have to ask yourself is the following: ‘When things go wrong—because inevitably something will go wrong—am I going to regret that I ever got involved with this person?' If they're not people you're going to enjoy working with, it's not worth it," she said. "So it's not the business plan or the product itself that matters as much as the people carrying it out."

    Fail, but don't fail your people: the entrepreneurs' story
    "Fail often." Those are encouraging words from—you guessed it—an entrepreneur. Does nothing ever get them down? Well, a few things do, some are bound to admit. At Cyberposium's first "visionary panel," Matthew Szulik, CEO and president of Red Hat, an open source software company—offered this advice, and joined three other veteran entrepreneurs to swap war stories. Moderated by Fast Company founding editor Alan Webber, the session offered plenty of advice to students and professionals who filled the auditorium.

    Frank Moss
    Frank Moss

    No one should try to be an entrepreneur if the passion isn't there, panelists cautioned. There is no shame in working for a big traditional company, at least for a while, because big companies can "polish" many good ideas that are not strong enough to sustain small entrepreneurial firms. "Not every idea has to be subjected to entrepreneurship," said Frank Moss, chairman of Bowstreet and former CEO of Tivoli Systems. Unless someone has a plan that could "fundamentally change the planet," Moss said—perhaps in information technology, drug discovery, or media—that person should just sit tight for a while.

    The four panelists owned up to having made plenty of mistakes. One mistake is to fall in love with your product and disregard the market's overwhelming indifference, said Sharon Whiteley, a career entrepreneur and the president and CEO of ThirdAge Inc. Another is to fail to effectively communicate your "story" to the marketplace, added Bob Davis, founder of Lycos and a partner at Highland Capital Partners.

    Szulik, of Red Hat, supplied a cautionary tale of his company's early search for a top executive. It was a dot-com year and most of the candidates weren't experienced, he said. Finally he hired a person who seemed ideal: qualified, great references, "everything checked out." Szulik had a nagging sense, though, that the new exec didn't quite accept the basis of Red Hat: in short, the open, collaborative nature of open source software.

    The new hire's time ran out one day when Szulik was away from the office and took a phone call from a concerned IT specialist at Red Hat. The IT guy just wanted Szulik to know that "Mr. X" had stuck a purchase order in front of him for $600,000 to buy Microsoft Windows NT, the proprietary operating system that competes with Red Hat.

    "I think it was a major mistake on my part," Szulik told the audience at Cyberposium. "I didn't trust my instincts. Even though we had gone through the qualification process and all the references and everything went well, at the end of the day, if people aren't buying into your vision and belief system and values it might turn out to be very painful. It cost our shareholders some money and it cost Red Hat time."

    Speaking of staffing, it is harder than ever to keep employees calm and motivated these days when you don't have valuable stock options to dangle in front of them, panelists said. Again, this is where mutual trust and solid values come to bear. More than ever before, the firm's leader needs the ability to inspire, they agreed. Referring to the recent Super Bowl, Moss said, "The [New England Patriots] knew they were going to win; this team visualized what success was going to feel like…Putting that visualization out there and getting [your own team] psyched up—it's an art" that he can only hope he is carrying out.

    In March of 2000, said Szulik, a red hot Red Hat was valued at $18 billion and stock was trading at $300 a share. There was only one direction the numbers could go. Leadership starts with the CEO of the company, he said. "How do I stand up and tell [employees] we're going to create a great sustainable company if the CEO is selling like a madman to get out of the stock?" he asked rhetorically. "I think there is no greater point where the rubber meets the road than when it comes to your own personal financial goals. I had to lead by example, and I'd like to believe that had an impact on the retaining of our high quality people. The core people who had built the company are still very involved."

    Sometimes failure is inevitable for entrepreneurs, but failing to be straight with employees, panelists and Esther Dyson indicated, is unforgivable. Perhaps the Enron chiefs should have listened in.

    · · · ·

    Related stories in HBS Working Knowledge:
    Cyberposium 2001

    Photos by Martha Lagace

    .
    Esther Dyson Video
    View the video of the Esther Dyson presentation at the HBS Cyberposium, February 8, 2002.
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