Box Founder Aaron Levie On The Fears And Realities Of Our Chaotic Times

Aaron Levie looks like a mad scientist. He’s not disheveled, but he’s got a jangly energy, along with a wild mop of hair that he has a habit of pulling his hands through while talking nonstop. And, man, can he talk: about technology, cloud computing, venture capital, corporate strategy, and on and on.

Levie showed up late for our lunch, at a small restaurant in Manhattan’s Tribeca. He’d been literally running through the streets to get there. It was a perfect metaphor for his existence: out of breath, on the go, packing as much as possible into every minute. “Fortunately, I have this,” Levie says, pulling out an inhaler. He’s got asthma, which makes his kinetic pace even more striking. And endearing.

He’s just 27 and a USC dropout. He left to start his own business, focused on–wait for it–online file storage. Boring, right? Yet he successfully cold-called potential investors, including Mark Cuban, who contributed $350,000. Today Levie is the CEO of a business with a $1.2 billion valuation called Box, which counts huge companies like Procter & Gamble as customers. He has 600 employees working for him, and goliaths like Microsoft and Oracle in his sights. He’s totally confident but also deeply anxious. He’s mindful of how precarious his situation is: “The three-month roadmap is about the best horizon you can be thinking about coherently,” he says.

Levie is a member of Generation Flux, because this kind of ambiguity doesn’t unnerve him. On the contrary, he is engaged by it. Here’s how.

Disruptive Innovation … Disrupted

As Levie put it to me, “The typical organizational structure supported by most business school/management theory I don’t think works.”

At our lunch, Levie offered up a compelling theory about The Innovator’s Dilemma, the seminal work by Clayton Christiansen that examined how financial incentives can block innovation at big, successful firms: If you already have a dominant, highly profitable product or service, the decision to introduce a more efficient next-generation offering could undercut your margins, and why would a successful business choose to limit its own profitability? What Christiansen recognized–and preached–was that a protect-the-base approach made companies vulnerable in the long run to new competition. The requirement, Christiansen argued, was to disrupt yourself–to dominate the next wave of business, even if in the near-term it undercut your existing one.

Levie’s theory is that, in today’s era of rapid and unpredictable change, the Innovator’s Dilemma itself is being disrupted.

“What happens when the Innovator’s Dilemma isn’t what causes disruption?” Levie asks. “Today it is not simply that the numbers don’t add up, that there is limited incentive for larger companies to launch lower-margin competitors to themselves. It is that, even if you do, there’s no guarantee–or less–that your ‘innovative entry’ will win.” If an established brand like Kodak poured resources into photo sharing, would it necessarily best the dozens of startups attacking the same space (one of which, Instagram, built a $1 billion valuation with just a handful of people)? When any number of garage-based startups can compete with and outperform even established, experienced, deep-pocketed companies, Levie observes, the dominant firms of yesterday have at best a precarious hold on the success of tomorrow.

Levie put his finger on one of the key fears–and realities–of our chaotic times. “The advantages of longstanding brands, of distribution, of reach–these don’t offer the same advantages in this era,” he notes. “Thanks to technology, the newcomer may be as well or even better equipped. Choosing the winners can seem chaotic, even random.”

Maintain, Disrupt Simultaneously

Levie is a disciple of Steve Jobs: He talks about Jobs with deep respect.

Jobs’ gift as a leader, Levie says, was to instill an entrepreneurial approach, and innovate rapidly enough to remain ahead of the upstarts. The traditional CEO role is that of a classic “manager,” who directs resources, and moves the riskiest parts of the operation–the possible new businesses–away from the center of operations. Jobs turned that on its head, Levie notes. “Nothing goes up the ladder, in Steve Jobs’s case,” he says. “He goes down to the lowest levels. If you don’t go down to the lowest levels, you distance yourself from the marketplace and your people.”

Levie explained this further in an email: “You basically have to build an organization that is always capable of acting like a startup when the time is right, but can run a large scale business simultaneously. What happens to most organizations is that management gets further and further away from the actual activities/disruptions/changes going on in the marketplace (unlike their startup peers), and thus their ability to take key and necessary decisive action is impaired.

“Separately, but equally important, most CEOs and management spend equal time across all the areas of the business (the areas that are their competitive advantage, the things that just help the company keep the wheels moving, and so on), often times indiscriminately. When it does come time to respond to a change in the market, or introduce a new disruptive product, this is the work of some distant product team. The ability for that team to get the attention, level of detail, and startup-like aggressiveness that it needs is often missing. Steve [Jobs], at least ostensibly, developed an organization that could “run the business” while he focused on the dimensions that most mattered to dealing with the ‘chaos’: creating new products, driving them into market, partnerships, etc. And it being Steve’s company, he had too much pride to release crappy products that he wouldn’t want to use; you don’t get this kind of sensitivity in a typical organization. The motivations and authority are aren’t there to make it happen. In essence, he was able to build new startups time and time again within the Apple framework.”

Stay Ahead Of The Wave

I caught up with Levie again several weeks later, when he was back in California. I asked him how business was going. “I’m okay at the moment,” he says, “I’m trying to avoid getting disrupted. Any company has to be managed and run a little different when it gets bigger. The ultimate success is to define future markets, and place yourself at the center of them. I try to think a lot about trends happening and make moves to put us in that place. What does a new generation of tablets mean for enterprises? How does changing security have implications for corporate data? We war game out all of those scenarios. What can we do that our competitors can’t, given their models? By having the discussion, we get everyone more engaged in the pace of change that’s needed.”

Levie offers an example: “Three hours after the iPad keynote in 2010, we had a team meeting. We had the conviction to have an app available on day one, and that put us years ahead of a company like Oracle or Microsoft. It builds your company’s DNA, not waiting. I similarly freaked out when Google Wave came out, “It’s gonna take over the world.” I get teased about that now. But you need to have healthy paranoia.”

“In a successful organization, you always get a lot of internal pride. You don’t know when that is what’s talking. With Google Wave, everyone was telling me I was an idiot. Was it internal pride? Or do they see something that I don’t? It turned out the latter, a flawed product.

“But you always need the blank screen. In all situations, you need to say, let’s start with today. Time and cycles are so compressed. We have to change with every revolution of the engine, every new product. If we’re not filling those gaps faster than everyone else, we’re in trouble. We want to define the conversation, as opposed to reacting.”

Death To Downtime

Levie says he looks up to Jack Dorsey, the founder and CEO of Square. “Jack is a great example of so many things,” he notes, “how they’re rolling out their vision methodical and consistently. Lots of other companies try to pop up with a new feature every six months. Square has a cadence every month or two, which helps externally build the story and internally sets a rhythm of innovation.”

Says Levie, “If you make big bets and then calm down again, it doesn’t build your DNA. It’s all about building the cadence, the rhythm of launching new products.”