The technology industry is in crisis and yet many do not see the warning signs. How can an industry with as much innovation as the technology industry be in peril? The root of the issue rests with several complications…and people. As leaders, we hold a substantial responsibility to the very people we lead. Yes, many may consider them ‘human resources’, but they are still people. These are people with their own lives, families to support, communities to contribute to, and are often young folks trying to put their fingerprint on the world to make a difference. Yet, we may be leading the very flock we hope to flourish right off a cliff.
LEADING THE CHARGE
Passion. The entrepreneur is often driven by a fire in their belly driven by passion. Passionate about solving a specific problem or issue they often experience in their own life. That drive exudes into the organizations they form and people they lead. The organization is built around a common premise and passion.
The psychology of the people, however, is driven by several competing factors. The further one gets into an organization, the further away their focus from the common premise. One of the strongest diverging factors is money. We hear the stories about startups that turned into billion-dollar goliaths and in the process made many employees very wealthy. There is a story that when Microsoft went public in 1986, it created many millionaires overnight. It was said there was at least one millionaire in every hallway. One cannot ignore the allure of making it big is enticing.
FOCUS ON THE WRONG OBJECTIVE
Creating a common premise around passion is key. Founders are often passionate about solving a much-needed problem. That is not the issue. The question is how big of a problem is it and for whom? Focusing on a niche problem has a very different potential than solving a much larger problem. The potential number of customers, value and therefore upside is very different. Of course, larger problems may draw more competitors to the space too. Several dynamics affect choices around focus.
In addition to understanding the problem, one must understand who is the right target. There is a general assumption the Chief Information Officer (CIO) is still the ultimate target for anything technology related. Unfortunately, it not be further from the truth. And the target is changing over time (read: The difference between the Traditional CIO and the Transformational CIO). Many decisions may have been made by the CIO in the past are now made by others and may or may not include the CIO.
The complexities in understanding and knowing your target are ever-changing. Blindly assuming the CIO is your key target can lead to wasted effort, missed sales and hinder success.
A HARD LESSON TO LEARN…AGAIN
In the first dot-com era, we learned two things: 1) stock options are not worth anything unless there is an equity event and 2) many things will devalue stock options over time. Unfortunately, we are learning these two lessons again. Entrepreneurs, rightfully so, empathetically convey their passion to solve a problem. Prospective staff join firms at the advent of potentially solving said problem and making a significant fortune in the process.
It is this very perception that is woefully flawed and leads to the lost generation in technology. Staffers are willing to take significant pay cuts in lieu of stock options. Essentially, staff are working below their potential pay value on the prospect that the stock options turn into greater value.
Yet, very few will experience this outcome. Why? To pay out, 1) the company must succeed and experience an equity event that is large enough to pay staff stock options, 2) the stock options must not devalue through additional investment and other activities, and 3) the staff member must stay on-board long enough to vest. That is a tall order to run the gauntlet and succeed on the outcome.
NOT ALL DOOM AND GLOOM: CHOOSE CAREFULLY
Does this spell doom and gloom for startups, their entrepreneurs and the staff that choose to come on board? Absolutely not! The potential for the technology could not be brighter. The issue is one of focus and choice. If the energy put into startups trying to solve niche issues was redirected toward solving big problems, the outcomes would change. Our industry has many large problems to solve.
It is hard to get entrepreneurs focused on the larger problems. At a recent event, a panel of young college-age entrepreneurs was asked a number questions about their choices and projects. Many of them had tinkered with both software and hardware projects. However, many ultimately chose to focus on hardware projects. The panel was asked why that was the case. The answer: Unlike software, with hardware there is a tangible result. Something you can touch and see immediate benefit from.
Obviously, there is a gap between what is needed versus what is happening. Entrepreneurs must consider the ramifications (good and bad) of their decisions. Staff must consider their passion and ensure that their values and drive align. Staff need to go into opportunities with both eyes open and not assume a major payday. The combination of the two will lead to greater success among startups and solving bigger, yet unsolved, problems within the industry. At the same time, the energy of people will go toward solving big problems with meaningful outcomes for all those involved.