Just Managing: The Old Rules That Rule the New Economy.

Sandy DiNubilo has served as an HR domo for a slew of startups, and she's learned a basic lesson that most founders should take to heart: "There will be no basketballs thrown at other people's heads."


You'd think that any hotshot smart enough to launch a successful Web startup would understand that bouncing hard objects off your co-worker's noggin just isn't good business. But no. DiNubilo, a Silicon Valley veteran who has served as a temporary HR chief for a roster of hot startups, says that gross violations of trust, respect, and etiquette are more the rule than the exception among Amazon.com wannabes.

This column, however, is not about etiquette, but a more important notion underscored by DiNubilo's experience: that managerial fundamentals - or a lack thereof - are tripping up many of the most promising startups. It's alluring to think that change-the-world technology, coupled with a cultural rush to capitalize on it, are creating a new form of business. Alluring, but unhealthy.

At a time when easy money and fast growth are covering a multitude of sins among Web starts, old rules rule the new economy. I'll gladly concede new rules of business, such as the power of increasing returns or the deconstruction (and reconstruction) of intermediation. Yet most startups still get tripped up by failing to cover such basics as matching the right finance to the business model, hiring and managing the right people, and learning how to learn and adapt.

Above all, here are several enduring principles that cut to the heart of success for any company:

Profit matters

"All the new thinking is about loss," begins "Meditation at Lagunitas," a poem by Robert Hass. It continues: "In this regard it resembles the old thinking."

And indeed, the walloping that unprofitable Net stocks have taken in the past months is a sign that positive cash flow does count for something, that the glut of VC money today is funding technology and markets, but caring little for individual and robust companies. Most money-draining Web startups frantically look to screwball critical numbers as the key metric for future success.

Yet the Rube Goldberg model of buzz leading to eyeballs leading to venture money leading to a quick IPO and associated riches just doesn't play in the long term. Those companies that understand how to eventually generate sufficient cash flow to fund their own growth are those that will survive.

People matter

If brilliant business plans guaranteed prosperous companies, then the analysts and sci-fi writers would be cashing in options today. But between the idea and the IPO rests the execution, which is all. As more money flows into the startup phase, it's clear that access to smart people matters more than ever. It's the keiretsu of talent that the KP veterans can assemble around a deal that makes it different than your neighborhood venture capitalist.

I'm not talking about ethereal strategists, however. Competence at managing people translates into simple operating principles. For example, those who have done a corporate apprenticeship, or have even have been through another startup or two, understand the key distinction between employees and friends, and respect those boundaries. In other words, they don't expect their co-workers to laugh off a whimsical shot at them with a basketball; nor do they expect friends to work all-nighters for a year without a clear articulation of what's in it for them.

Character counts

The character of a corporation matters. Not brand or identity here, but the fundamental issues about your company's core values. In all the scrambling to launch a Web site, too many companies are forgetting to think about who they are. What are their strengths and weaknesses? How well are they equipped to deliver on the promise they make? When technology is ubiquitous, then companies are competing on that which technology cannot achieve - in other words, they are differentiating themselves by how well they serve customers, which is based on how well they understand who they are.

Purpose matters

What is your company's mission? If you truly think it's going to change the world, then, well, great. If you're simply intent on capitalizing on a temporary market slice that will garner you a quick IPO, get ready for Andy Warhol's reputed "fifteen minutes of fame" redux: when the bubble bursts, everyone will have enjoyed their fifteen minutes of wealth. And what remains will be those companies that have a clear mission, and who use it to simplify the most complex issues. See: Amazon.

On the Web, more remains the same than one would think. Yet because companies ramp up and down so quickly, they appear to be operating under quantum physics, when in fact they are just revved-up Newtonians. Blame it on the major change: a fundamentally different business metabolism. Even with this new speed, companies still need to be fundamentally sound. It's just that on top of building great companies, company builders must also build in the ability to adapt quickly and completely. Until the founders learn to become as proficient at the process of the business as they are with the product itself, they will find enduring success to be beyond their reach.

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Just Managing – articles that Tom wrote for The Industry Standard and some Business Articles written for Inc., Fortune Small Business, Harvard Management Update, and other places.


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