Most businesspeople are familiar with the old style of leadership — a model that reflects the days when hierarchy and command-and-control reigned. But what does leadership mean in the digital economy, where organizations are as decentralized and as networked as the Web itself? What does leadership mean when the pace of change is so rapid that decisions are made with minimal information? And what does leadership mean when the people in your organization both demand more independence and require more guidance? Are Net-based leaders a different breed? To find out, we asked the leaders of 12 of the Net era’s most successful companies. Their answers tell us what’s really different about leading an Internet company — and offer insight into what it takes to win in the age of the Net.
President and CEO
San Jose, California
Coming from land-based businesses — Hasbro, FTD, Stride Rite, Disney — to an Internet startup, I’ve had to get used to one major factor: the sheer rate of growth. We’re growing at 40% to 50% per quarter. That pace absolutely changes the leadership challenge: Every three months we become a different company. In one year, we went from 30 employees to 140, and from 100,000 registered users to 2.2. million. At Hasbro, we would set a yearlong strategy, and then we would simply execute against it. At eBay, we constantly revisit the strategy — and revise the tactics.
The other critical difference in running an Internet company is our closeness to our customers. This is especially true for eBay, because we enable individuals to do business with one another in a way that’s completely new and powerful. As the medium for that new marketplace, we need to be extremely sensitive to our customers’ needs. To do that, we use our instant-customer-feedback mechanism as much as we can: We try out ideas on thousands of customers at once, using live discussions or instant customer surveys. We get products into the community as quickly as possible; then we listen to reactions to those products and make changes accordingly. Some of our best ideas — like feedback profiles, which are now central to our service — have come from our community of users.
With all that change going on, one of my most important jobs is keeping the company focused on our core values and on the business that we want to exploit. Successful Internet companies have lots of opportunities thrown at them, so getting sidetracked is easy. Our overriding goal is to create the world’s largest online person-to-person trading community.
Meg Whitman has held leadership positions at FTD, Stride Rite, Walt Disney, Procter & Gamble, and Hasbro. Since its IPO in September 1998, eBay’s stock price has soared from $18 to a high of $314. Today the company has a market value of $19 billion.
New York, New York
In a business environment where the clock is ticking faster than ever, it’s not the job of leaders to have all the answers. The “prince of Egypt” model of leadership — here’s the plan, follow me, I’ll take you to the promised land — is out. Leaders today must be evangelists for changing the system — not for preserving it.
Our business is simple: The United States has 41 million avid book buyers. We want to turn as many of them as possible into our customers as quickly as possible. Everything else is up for grabs. But rounding up those buyers is not my job. My job is to find and develop people who are relentless about asking, “Why does the publishing business work this way?” and who are confident about demanding, “What were we thinking? We need to change now.”
That’s why, at our last directors’ meeting, I handed out copies of my favorite business book — “Harold and the Purple Crayon.” The plot is simple: A little baldheaded kid with a big purple crayon draws himself into and out of various situations. If he’s on a path that’s too long, he draws a shortcut. If he gets hungry, he draws some pies. If he finds himself in deep water, he draws a boat. The point is, Harold creates the solutions he needs as he proceeds through an uncertain landscape. Harold has the kind of creativity and nimbleness that we need to win in the Net market. The lesson that the book teaches is key — and so is the fact that it takes only five minutes to read!
Jonathan Bulkeley (email@example.com) learned about growing a business at one of the Net era’s splashiest success stories: America Online. In 1995, as head of operations in Britain, Bulkeley grew AOL UK from zero subscribers to 500,000 subscribers in just two years. Last year, he was recruited by Barnes & Noble and by the Bertelsmann-owned barnesandnoble.com. His job description: “The answer to Jeff Bezos.”
Cofounder and CEO
New York, New York
The primary job of a Net-company leader is to show restraint. We have a principle at MovieFone: “Don’t just do something — stand there.” In a world where deals are flying and opportunities abound, sometimes letting them all cook for a while is the best policy. All too often, I see people who are so eager to make deals and to take stands that they limit their options. For instance, before we agreed to the AOL acquisition earlier this year, people kept asking, “How come you’re not making a deal with a big portal? If you announced one, your stock price would really pop.”
If I had made such a deal, or if I had even made a statement about one, that would have ruined the deal with AOL. It wasn’t until I sat with Bob Pittman, AOL’s president and COO, at the premiere of “You’ve Got Mail” that the opportunity defined itself. We were at the premiere because both of our businesses were featured in the movie — and because we care about the movie-going population. Then we had one of those mystical moments when both of us laughed at something, and I thought to myself, “This company has a smart guy running it. We could give that company the kind of Hollywood presence that it needs. There’s a love connection here.”
Besides imposing restraint, the other major challenge of leading a Net company is keeping the right people. If a company can apply the same talent to a problem for an entire year, it can make twice the progress of a company that has high turnover. That’s particularly important in the world of the Internet, where entire teams of senior-level people have often been with a company for less than a year and where the average tenure is less than 18 months.
Andrew Jarecki (firstname.lastname@example.org) founded MovieFone with three partners in 1988, at the age of 25. Today the ubiquitous 777-FILM (or 333-film) listings and ticketing business covers more than 17,000 movie screens in 42 cities and serves more than 150 million users a year. This year, AOL bought MovieFone for $388 million in stock.
Chairman and CEO
Qwest Communications International Inc.
When you’re trying to make a big play in a space that remains undefined — as we’re doing by laying the groundwork for convergence — the leader’s job is to make sure that all people in your organization understand where they can work autonomously and where they must collaborate. In this environment, good organizational-design principles become more important, not less important. Lots of people like to talk about culture — I like to talk about governance. Who has the authority to spend money, to negotiate ventures, and to experiment with technology? What’s your plan for creating shareholder value? Those processes may not be sexy, but they are important. And it’s not only necessary to implement those processes; it’s also vital to communicate them to everyone in the organization.
Good governance doesn’t mean becoming a control freak. Rather, it means knowing what to structure and what to leave alone. For example, my network-design engineers are digging up the ground to lay 18,500 miles of fiber-optic cable. That project has very traditional construction, community, and environmental concerns, all of which require structured work. In contrast, the folks in our e-commerce group in Sunnyvale, California are working with young Silicon Valley companies, cooking up innovative new ideas. We don’t want any tight controls on them. My job is recognizing what needs structure and what doesn’t.
Joseph Nacchio (email@example.com) joined Qwest in early 1997. A multimedia-communications company, Qwest is now building a high-capacity Internet-based fiber-optic network to serve more than 130 cities in the United States and Mexico. Previously, in his 26 years at AT&T, Nacchio held a variety of top jobs and played a central role both in developing the brand and in running the consumer and business long-distance unit.
Founder and vice chairman
Being a leader today requires constant conceptual reinvention. Market leadership typically means that you’re the best at solving a certain type of problem. But Net businesses don’t have the luxury of narrowly defining the task at hand. They have to envision a future in which customers are going to behave in new ways because new solutions have become available. The real challenge for any leader in this environment is to execute a solution to a problem. Last quarter, we were selling 750 airline tickets a day. Now we’re selling more than 2,000 tickets a day. The systems that are handling this quarter’s business won’t be able to handle business for the next quarter.
Forget about today’s problems: You’ve got to focus constantly on the next generation of problems. How do you do that? You have to believe. In the Internet world, people like to talk, but very few truly believe. If, for example, you really believe that you’re going to double your business every year, then you’ve got to hire ahead of the curve. That’s why, last year, when we were doing maybe $400,000 worth of business each week, we recruited Rick Braddock, the former president of Citicorp and a top-tier leader. Today we’re doing 10 times as much business as we were then. Hiring Rick for a $20 million business may be overkill right now — but we’re going to need him to run a business that will be doing $500 million or $1 billion a year. If you wait until you’re actually doing that much business to hire the necessary talent, then you’ll be too late.
Jay Walker (firstname.lastname@example.org) created “buyer-driven commerce.” Through priceline.com’s Web service, customers can name an agreed-on price in advance for tickets on airlines, for cars — even for mortgages and hotel rooms. Walker is also chairman of Walker Digital Corp., a high-tech marketing lab that developed priceline.com’s systems and that has received more than 20 related patents.
President and Cofounder
A leader’s job is to recognize when a company is headed in the wrong direction and to get it back on the right track. That means understanding what the tear-down points in your business are — and ripping into them before someone else does. When we started, we thought advertising would be the core of our business. We were wrong. We thought that the way to define our network was to distribute servers all over the country. We were wrong. We’ve had to recalibrate again and again — and we’ll have to keep doing it in the future. In the Net space, you have to chase disruption points every day.
Another part of my job as a leader is to be clear that winning in this world is all about selling. We’re standing on the edge of a huge, expanding market; you’ve got to have the bodies to go out there and to reach customers first. That means scaling up your sales force. A few months ago, we created broadcast.com University, which provides our new folks with two weeks of intensive training. If you want to control your destiny, you have to start by asking, “What gets us to cash the fastest, and can we scale that?”
Mark Cuban and his business partner, Todd Wagner, started broadcast.com about four years ago, in a spare bedroom in Cuban’s Dallas apartment. Yahoo! recently bought the company for $5.7 billion.
Founder, President, and COO
We have a big goal for the future: we want every single computer vendor to be using pcOrder technology to sell computers. To get there, we have to respond very quickly to questions and challenges at all levels of the business. As a leader, the way I do that is by getting very extreme about handling “stuck” points — and then moving on.
Take recruiting, for example: Like a lot of companies in the high-tech world, we find that recruiting can be a huge bottleneck. So I decided to move some of our best marketers into recruiting. Because we were already very good at college recruiting, we launched a campaign to “own” the city of Austin. We blitzed the city with paid advertisements, events, and direct mail. We created a “turn in your friend” campaign and rewarded employees with a $5,000 bonus and a chance to win a Porsche if we hired their friend. Not only did we end up adding more than 30 key people, but we also learned some great things about hiring: We now know how to turn an entire city into a recruiting pool.
Christina Jones (email@example.com) launched pcOrder.com in June 1996 as a spin-off of Trilogy software Inc. Today companies such as Compaq, Hewlett-Packard, and IBM use pcOrder software and databases to buy and sell computer systems over the Net.
President and CEO
Calico Technologies Inc.
San Jose, California
There’s no getting around it: We have to make decisions faster because our customers are making decisions faster, and the industry is changing faster than ever before. That means that, as an organization, we have to work with less top-down control. The only way to do that, without falling to pieces, is to build a company that’s made up 100% of leaders. My number-one priority is to give everybody in the organization the tools and the confidence to make decisions faster. We’ve created a three-day course — “Eight Calico Leadership Practices” — that everyone takes. These eight practices are deep behavioral principles that we integrate into performance reviews and use as a common vocabulary throughout the company. We’ve also instituted a lot of tactical mechanisms to make better decisions faster. For example, if anyone in the company has waited more than a week for an important decision to be made, that person has an open invitation to come find me, and I’ll make the decision — on the spot. It turns out that I rarely have to “unstick” a situation, because people all over the organization have adopted this policy within their teams.
Despite all of our focus on speed, we consciously slow down for one thing: hiring people. That’s tough to do when you’re growing as fast as we are, but it’s the one aspect of business today in which the cost of mistakes is greater than the advantage of acting in real time. Within the hiring process, we do spend a good deal of time defining a job’s requirements and checking an applicant’s references. That way, we can build a better partnership when an employee does come on board.
Alan Naumann has had 16 years of experience in managing high-tech businesses. Before joining Calico, he was vice president and general manager at Cadence Design Systems. Calico’s e-commerce software and services power such sites as Cisco Systems, Compaq Computers, Dell Computer, and Sun Microsystems.
IVP (Institutional Venture Partners)
Menlo Park, California
Every leader today has to unlearn one lesson that was drilled into each one of them: You gather data so that you can make considered decisions. You can’t do that on Internet time. Leaders have to develop the chops for real-time decision making. I learned that from Bill Gates. He always said to me, “I don’t care if a manager makes five serious mistakes. At least that person is making decisions and learning from them.” If your instinct is to wait, ponder, and perfect, then you’re dead.
In practice, that means that leaders have to hit the undo key without flinching. Now that product cycles are being compressed from 18 months to 6 months or even 3 months, you have to be willing to try something and see if it works — and, if it doesn’t work, to change it fast.
The best leaders carry a mental map of the industry, of opportunities, and of discontinuities — and they check that map constantly. Take Mpath, a company that we financed, that builds technology to support robust Web-based communities. Early on, Paul Mattuecci, Mpath’s CEO, had directed all of the company’s efforts into building a subscription model for Mpath’s services. At some point, warning flags went up on his mental map, telling him that this model would never make the company big. So he quickly moved the whole organization to an advertising-based model.
Ruthann Quindlen (firstname.lastname@example.org) has worked on the leading edge of the software industry since the late 1970s. Previously, Quindlen was a managing director at Alex Brown & Sons, where she helped such firms as Microsoft and AOL go public. Her forthcoming book, “Confessions of a Venture Capitalist,” will be published by Warner books.
Founder and Chairman
EarthLink Network Inc.
Leaders in the Internet arena can choose one of two frequencies: On the one hand, there’s so much noise around the Net that it’s tempting to run with the elite players and to follow their offers of deals, funds, and synergies. But you could easily end up with a bunch of decisions and partnerships that don’t necessarily make sense.
On the other hand, you can take your deepest conviction, create a clear picture of the future, and then move forward on that vision — even if it seems to be taking you into a desert. That’s what my original effort at segmenting the Internet felt like. We decided to focus on the access business — not to build networks, not to create browsers, not to develop content. People thought we were nuts. But we believed in our vision so wholeheartedly that we rejected all other moves and deals that didn’t come from that initial hunger. More important, we were able to compel others to join us.
Sky Dayton (email@example.com) founded Earthlink in 1994 to provide direct and inexpensive connections to the Net “in every home and business.” Since creating his Total-Access Internet software, Dayton has grown his company from 2 employees to 2,000 employees, has built it into the fourth-largest Internet-access provider in the United States, and has taken it public in a $2 billion market capitalization.
Buena Vista Internet Group
From a creative and business viewpoint, only about 25% of the Internet has been invented. If you want to be a leader who has a significant share in creating the remaining 75%, you have to build an organization that’s full of people who are not only hungry but also capable of capitalizing on the opportunities that arise in a constantly shifting landscape. As a leader, that means getting as many people as possible to feel as if they’re running their own businesses: It means giving them entrepreneurial freedom.
Beyond giving every initiative its own P&L, my job as part of a 120,000-person traditional media company is to remove impediments, to give teams every resource that they need to respond to opportunities quickly — and to ensure that they have enough capital to create an environment that’s going to attract the best talent.
Jake Winebaum (firstname.lastname@example.org) has led Walt Disney’s Internet initiative since its inception. Today he oversees services that range from Disney.com to ABC news and ESPN.com. He recently brokered Disney’s equity investment in Infoseek and arranged a partnership to create a portal called Go Network.
Cofounder, chairman, and CEO
New York, New York
Despite all of the talk about change in the business world, many companies still see change as a one-time event. They take the new-sheriff-in-town approach: Just follow my tracks, and you’ll get to the river. What people have to understand is that change caused by Internet technology is a change in state, not just a change in situation. As a leader, you have to create a comfort zone within a high level of change. For us, that means getting very good at the basics.
We have a common set of values that are ingrained in all of us, along with a highly detailed, highly consistent methodology, so that when someone says we’re in phase 2.5, everyone from Portland to London understands exactly what that means. We’re also constantly creating new modes of internal education. We have a quarterly curriculum called “Inspire U.,” in which we offer night classes on everything from database design to “50 ways to screw up a project” to the science of aromatherapy.
People who work here are already motivated, because they understand that we’re involved in an incredible moment of change for society as well as for commerce. We want to make it as comfortable as possible for people to operate in an environment where email is popping up, new technical knowledge needs to be absorbed, and new competitive models need to be tolerated.
Chan Suh (email@example.com) and his partner, Kyle Shannon, built Agency.com into one of the world’s top interactive consulting firms In less than four years. The company has 700 employees, $80 million in revenues, and a client list that includes Gucci and British Airways. Born in Korea, Suh grew up in Paris and attended college in New York.