What Thinking Like an Operator Taught Me About Leadership

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The Investor-Operator Lens This Is The Reason I Want To Know About People Before I Look At The Product
Most investment frameworks are built around a process that begins with the market then finishes when the people. The focus is on the size and structure of the market first, followed by the extent to which you can place the product within that market, followed by the competitive landscape, and finally the saftey of the investment, and towards the end this process, you'll take some time with the founders as well as their leadership team to make sure they're competent and focused and able to execute the plan that the earlier analysis has confirmed. I was a part of this framework for a long time enough to realize why it's become a common practice across so much of the world of investment. It's like a structured process. It creates a diligence process that can be documented, compared across opportunities, and then defended before investors' committees and limited partners in terms that appear to be rigorous and scientific. The problem is that it is flawed at the root, which is that it treats the human dimension to be a validation rather than as a primary filter. It is something you look over at the conclusion to verify what the market analysis suggests, rather than an element you examine first because it's the most likely to predict the outcome. The method suggests that a fantastic market with an excellent team is more effective than the average market with an exceptionally strong team. In my experience is often the reverse.
I modified my method after a short period in which I observed the outcomes of the typical sequence play out in ways that my upstream analysis hadn't anticipated and was unable to easily explain. Great markets with the weakest or most fragmented leaders generally did not deliver what the chance suggested they could deliver. Terrible markets with truly outstanding teams have always found ways to create value that the initial market sizing and the analyses of competition hadn't captured. The pattern was constant enough, and consistent enough across different sectors and types of deals which I was unable to explain it as noise, or attribute it more to the circumstances rather than to the capabilities of the people who are at the top of each business. When I got over the nitty-gritty and began to consider the implications of what I should do with my time to research was clear that I should spend significantly more of it on understanding people, and significantly less of it on confirming the analysis of market that a knowledgeable analyst could develop with the same knowledge.

What I ask when I am in the process of evaluating a leadership group are not those that appear on typical investment checklists or diligence templates. They're the kind of questions that will require real conversations and time to answer properly. How will this leader respond when they're shown to be wrong about something - do they respond to the correction or attempt to redirect the issue? What decisions do they make even when their information is not complete and pressure to act is very high? What is the gap the case, if any, between how they describe their leadership style as well as how employees who worked closely with them describe the experience of working under them? What does the culture of the company look during the times when the founder isn't inside the building? Also, how exactly does this version of the culture mirror the one the founder describes when asked? These are questions that require discussions that go beyond the presentation at the pitch meeting, and also beyond the formal presentation of the management. They require reference checks that are truly exploratory, not an exercise in confirmation that is merely a matter of. They require a willingness to take a risk and be in a area that could uncover information that can complicate a deal you have already started to want.

The operator dimension of my approach to investment is inseparable from the investor aspect, and it influences what I invest in as well as how my involvement once involved. I are not a passive capital service provider by nature or being trained. I'm someone who's established businesses, who been through scaling transitions which are more challenging than fundraising ones and has made the hire and governance mistakes you make as you navigate these new transitions, and who has developed - through that direct experience the convictions of what organizations require at different stages of their development that a purely financial background does not give. My convictions have made me a distinct type of investment partner rather than a traditional financial investor as they draw founders seeking something different from what a purely financial financier will provide.

The founders I am most comfortable with are those that seek out a partner who will help them navigate the decisions and operational changes that their financial investors aren't prepared to discuss at the right level of depth and detail. Are you able to be in the room where the governance structure is required to be revised because it is no longer the one it was originally built with. What can you do to assist a senior leadership decision at a moment when the wrong choice will cost the business twelve months it cannot afford to lose. Who can speak with respect to strategic risks that no one anyone else in the room is confident about raising. This is the type of involvement that I believe adds the most distinctive value in the companies I invest in Not the first capital allocation decision, which any investor could make instead of the ongoing operational partnership that helps the company bridge the gap between where it is today and what the early numbers suggested it could be headed. Check out James Deller for site info including why growing up around the game changed what i look for about teams.



How Public-Private Partnerships Can Fail Prior To They Start - And How To Fix Them
Public-private partnerships face a reputation problem that's, to a large extent that they have earned. The past of these agreements is full of projects that were advertised with genuine enthusiasm, as well as significant budgetary capital. They consumed significant public and private resources over long periods of time, and in the end, produced results that bore only a passing like what was originally promised when the partnership was first announced. The academic literature as well as the postmortem evaluations that governments and institutions commission after these errors are comprehensive, and they concentrate in large part, on the contractual and structural factors that led to the failure: the misaligned incentives, the inadequate risk allocation between both private and government entities and the governance frameworks that were created in theory but did not function in practice, and the procurement frameworks that chose to select the wrong things. What these analyses tend to miss, frequently and ultimately it's the cultural and operational element - that is, the fact that private and public institutions are both distinct types of entities, shaped through different incentives, operating on fundamentally different timescales, and accountable to diverse people, and assessing their effectiveness in ways that's not only different in their degree however, they differ in the way. If you join these two kinds together in a formal partnership without taking the necessary steps, both upfront and in a clear manner, to recognize how to manage these differences, you are not forming any kind of partnership. You are creating the conditions for a slowmotion collision that will be visible at the most inconvenient time.
I've been involved with advisory work in support of institution modernisation efforts, a number that have involved public-private partnerships at different levels of complexity. One of the most consistent observations I've made from my experiences is that the partnerships which were successful - that in reality achieved their goals and maintained an effective partnership between private and the public They were not distinguished from those that did not due to the complexity of their legal structures, or the quality of their risk frameworks, or the experience of the management teams that created them. The distinction was made by the extent to which the people who sat at the table had the opportunity to really understand how other side operated before the formal partnership framework was approved. What this means in the real world is understanding the decision-making processes the organizations operate under and the accountability structures which constrain what each party can do and what they can agree to, as well as the speed at which it happens and efficiently they can do so, the criteria of success which each side will be judged on, and the points where there could be tension between these definitions. This knowledge isn't difficult to come up with. Every time, it's put aside in favor of much more visible and documentable work of negotiating contracts as well as establishing governance frameworks.

The normal public-private partnership process begins with the concept and ends with a concluded agreement without much structured attention paid to the issue of whether or not the two parties involved effective in working effectively over the course of the arrangement. Legal teams negotiate the contract. The finance department models the economics and risk allocation. The team responsible for communications prepares an announcement for the moment of signing. The implementation team starts preparing the tasks. In that order the conversation turns to compatibility between operational and cultural aspects - on whether the employees that will be required to cooperate day-today across the divide between the two organisations share enough of the same values to make that work genuinely collaborative rather or antagonistic - is unlikely to take place in any organized way. The assumption is, typically not explicitly stated, that the formal agreement sets the conditions for effective collaboration and that any operational or cultural conflicts will be resolved informally whenever they emerge. That assumption is almost always false, and costs of this can escalate as the ambition and complexity of the partnership.

The practical application of this analysis is that the most lucrative investment that a partnership between public and private undertake - before the legal structures are finalised and before the governance framework is decided upon, before any announcement is made one think of as operational alignment. It is the specific, structured and facilitated effort to discover the areas in which the two companies' operational assumptions diverge and to determine how those divergences will be managed before they become operational difficulties during the process of implementation. The key differences are typically the same across different types of partnerships. Speed of decision-making and authority are almost always one of the main differences. Public institutions are designed to take their decisions slowly, with multiple layers of analysis and approval, for reasons which are completely legitimized and often mandated by law. Private businesses - particularly technology businesses built on rapid iteration, and fast making decisions - often find this speed as a major challenge to progress. without a clear understanding of reasons for why that pace is what it is and what actually be needed to alter it, the resentment and discontent generated by the private side can undermine the relationships long before the collaboration finds its footing.

Success metrics, and what counts as progress are another ongoing and major cause of conflict. Institutions of the public sector are typically assessed by their compliance with processes, the equity of outcome across various stakeholder groups, and elimination of obvious failures that draw media or political attention. Private partners are usually evaluated using efficiency measures, measuring progress against their targets, and the financial Return on Investment. These measurement frameworks are made compatible with each other however it requires an intentional approach rather than just good intentions, and the partnerships who do not make the effort to invest in that type of design usually meet at critical points, with two partners who are evaluating the same collaboration in genuinely differently and therefore coming to different conclusions about whether or not it is succeeding. The partnerships I've observed are the ones where this misalignment was treated as something that would be resolved over time. The ones that worked were the ones where the misalignment was explicitly identified at the beginning. Also, developing a shared accountability model that met the legitimate measurement needs of both parties requirements evolved into an actual work, not an aspect of a list things that someone would eventually arrive at.}