Just curious.
best
r
* * *
I had no idea how Frank would respond, but if he passed on this deal, I wanted to make sure he was rejecting the big idea lurking beneath the surface of Funerals.com, and not Lenny's superficial version of it.
Both Debra and I were home for dinner for once. As she sorted through the mail, I rallied every pan in the house. With a bottle of Napa Valley sauvignon blanc, we ate outside as the sun set without a fuss.
Later that evening, still digesting, I sank into my leather chair with a book by the thirteenth-century Zen master Dogen, my quiet house open to the light breeze stealing in off the hills. The low timpani of snoring dogs signaled that the world was just fine.
Dogen's brain-numbing insights eluded me. I couldn't get past his notion of time: “Do not think that time merely flies away. Do not see flying away as the only function of time. If time merely flies away, you would be separated from time.” Another monk's riddle — I needed something a lot less challenging tonight.
There is always e-mail.
I trod lightly so as not to disturb the hounds. But who was I kidding? They were dead to the world, expecting me to take the first watch. The old PowerBook took a few extra minutes to fire up. My Mac was not long for this world.
Just a few messages, including a response from Frank, had dropped in since I had last checked a couple of hours earlier.
* * *
TO: [email protected]
FROM: [email protected]
SUBJECT: Re: A Second Life
Randy,
Interesting. The content and community aspects are appealing—playing to the Internet's strengths. Incorporating the local services also sounds good. I can definitely see some network effect here. Makes a win-win and a more defensible referral channel. Obviously has to be fleshed out, but more intriguing.
Unfortunately, it's not the Funerals.com Lenny presented. Is it yours or Lenny's? Lenny seems stuck on the casket business. Who will lead this?
Frank
* * *
Who will lead this?
Good question. I knew Lenny's answer based on the org chart in his plan, but Lenny had not yet demonstrated that he had the right stuff. He was trying to reduce the challenge of starting Funerals.com to rote execution, and he was focusing on managing the process. But this was a startup. It would take an inspirational leader to rally a team and supporters to build something worthwhile. So far, Lenny had failed to inspire any of us.
Management and leadership are related but not identical. Lenny's vantage point from the bowels of the Borg, though, had never given him an appreciation for the difference. Management is a methodical process; its purpose is to produce the desired results on time and on budget. It complements and supports but cannot do without leadership, in which character and vision combine to empower someone to venture into uncertainty. Leaders must suspend the disbelief of their constituents and move ahead even with very incomplete information.
From the start, Lenny had set out to manage Funerals.com; he assumed that management ability was what Frank and I wanted most to see in him. He aggressively pared back the early vision that had brought Allison and him to the business in the first place, in order to make it more manageable. His business had become so focused that when he couldn't anticipate how something would be managed, he excluded it from the plan and the business altogether. The result? Funerals.com was a laser beam pointed at a very narrow, easily defined e-tailer idea. And it failed to excite Allison, or me, or Frank and his partners. Truth be told, it didn't excite Lenny either, except for the prospect of that pot of gold.
Like Lenny, I had, early in my career, failed to appreciate the crucial distinction between leadership and management. Luckily I had the good fortune to work with Bill Campbell long enough to learn the difference.
After Apple reabsorbed Claris, Bill became the CEO of GO Corporation, the pioneer in what was hailed as the next megabillion dollar industry, pen computing. Bill asked me to join him as CFO and VP of Business Operations. As Bill's inside guy, I kept everything tuned: creating the plan, raising the money, doing the deals, and running the numbers. In short, I executed.
GO was formed to create a new and more intuitive way for people to operate computers, using a pen for input and navigation instead of a keyboard and a mouse. GO's vision spawned a mad rush to this seductive new interface. Before long AT&T, IBM, Microsoft, Apple, and many others had joined the fray. In the two years I was there, GO grew significantly, burning more than $2 million a month. Before it was over, we had raised over $75 million—a phenomenal sum for that time. The vision was brilliant, but the technology for handwriting recognition wasn't up to the task. We were dancing as fast as we could, but it became clear to many of us that GO was unlikely to succeed. Yet Bill's leadership was so powerful that no one from the management team bailed out. This was a group of talented people, most of whom went on to leadership roles at other companies, including their own successful startups. But because of Bill, no one pulled the cord. Everyone rode that plane all the way down to a belly landing.
When I finally did leave GO in 1993, it wasn't clear what I wanted to do next. In the years we worked together, Campbell had periodically suggested that I consider becoming a CEO. He had encouraged me to prepare for the role by giving me projects and responsibilities that would help me run a business at some point. Perhaps misery loves company, but for Bill, being a CEO was one of the most fun and satisfying roles he'd ever played. I was flattered by his suggestion, but I was hardly your prototypical M.B.A. with an unquenchable drive to prove myself as a captain of industry.
I wanted a role full of creativity, where inspiration was more valued than perspiration. I was intrigued by the digital “content” business, the emerging idea that computers could deliver useful information and engaging entertainment, not just applications. Sniffing around, I realized that digital content would be the next big door to open in the marketplace. I bought some PC games and CD-ROMs, which were just becoming popular as founts of rich content, and discovered some fascinating experiments in interactivity. Games were the first incarnation of this new medium, but I saw an opportunity to create many other strains of interactive, digital content.
Out of the blue, a headhunter called looking for a CEO for a game company called LucasArts Entertainment, located in Marin county, just north of San Francisco. This was the electronic games division of George Lucas's entertainment business. The headhunter was desperate because LucasArts had rejected all his usual suspects. I was his long shot. I couldn't understand why the company would have any interest in me, but he persisted. So, in one of my only remaining suits from my lawyer days, now ill-fitting and out of fashion, I met with the LucasArts hiring committee. As its members described the company, the mystery of their interest in me only deepened. The job description unequivocally excluded me. I didn't have the experience they wanted, and I wasn't a gamer. Still, they asked to meet again. The headhunter suggested I lose the suit.
Concerned about the apparent mismatch between the position and me, I discussed the pros and cons with a close friend from GO, Debbie Biondolillo. A wonderful woman with a wealth of common sense, she had been in charge of HR at GO, and before that was an HR vice president at Apple. I gave her the spiel I intended to deliver to the hiring committee. It focused on the underpinnings of the LucasArts business model, product strategy, and distribution arrangements.
“That's all very insightful. Solid thinking,” Debbie commented when I finished. “But they're looking for the CEO. They're looking for the leader. What's your vision? What's the big idea? How will you get people excited? They'll want to hear where you intend to take them as a company.”
I was a wise, old hand when it came to solving tactical issues. That had always been my job as a manager. Now I was being asked to lead and motivate, to create a vision that could attract and inspire talent and partners. Managing—vigorously driving execution—is a rare skill, Debbie
told me, but rarer still is the ability to lead, inspire, and motivate people.
So I sat down with a blank piece of paper and started working out my ideas. I concocted a diagram about the evolution of interactive storytelling—concentric circles showing how interactive storytelling was or could be different from other forms of storytelling and other media. It was a crude chart, but it seemed to make sense. It excited me, both because of what it said and because I'd forgotten how much I enjoyed that free-form way of thinking.
After some soul searching—developing a vision that excited me was certainly a factor—I decided to proceed with the interview process, which meant meeting the myth himself. I rode my motorcycle to Skywalker Ranch, buzzing with ideas for LucasArts. I had a plan to expand on the creative strengths of the organization and to drive the medium in a way consistent with George Lucas's storytelling legacy. With LucasArts we would accomplish for the video game business what Industrial Light & Magic had done for the movie special-effects business. The Lucas brand would become a haven for a new breed of creative talent excelling in interactive storytelling.
When I finally met with George, I couldn't stop talking. I whipped out my charts. I ran on about interactive storytelling and my vision for the medium. George, who had of course already given the topic a lot of thought, engaged with me in a lively give-and-take about the future of games and interactive content. Whether it was my vision and enthusiasm or simply LucasArts' desperation, I don't know, but I was eventually offered the helm.
No CEO's job is all vision, though, and my job at LucasArts included considerable management efforts. We almost immediately restructured our domestic distribution strategy and renegotiated our international distribution deals, improving our margins and control significantly and thereby putting us in a better position to attract outside products for redistribution under the Lucas label. We engaged our own sales force. These moves were controversial, given that Lucas had never invested in anything other than the creative side of the business, but they turned out to be a stroke of good timing when our earlier distributor went under just as we were releasing our summer hit product, TIE Fighter.
Next we greenlighted a sequel to the company's CD-ROM megahit, Rebel Assault, against the protests of many in the company. Once again, we were fortunate, and the sequel turned out to be a huge seller. We set up a new group to develop an edutainment CD, a first for the company. We hired a “Next Generation” development team and struck a deal with Nintendo to be a preferred developer and partner in a Star Wars title for their impending juggernaut game console, the Ultra 64.
I struggled to build consensus at every step, but I knew that ultimately I had to earn everyone's confidence through results. With hard work and good luck, the results came. In less than two years we catapulted the company to the number one PC game publisher and increased sales and earnings by a factor of three or four.
I liked being the leader better than being the guy who made the trains run on time. I found that the art wasn't in getting the numbers to foot, or figuring out a clever way to move something down the assembly line. It was in getting somebody else to do that and to do it better than I could ever do; in encouraging people to exceed their own expectations; in inspiring people to be great; and in getting them to do it all together, in harmony. That was the high art.
Lenny would need to step up and make a similar transformation. He would have to take on the mantle of leader and rally people to his vision to enlist their support. He could not hope to get by simply trying to make the train run; he would have to set its course and motivate others to join him for the ride. It would be easy to dismiss him as no Jack Welch, but if he could become the Retriever and assemble Funerals.com from the muck, he would be the right CEO for phase one. The time to worry about operating leadership would come in the company's next phase.
WORKING WITH Steve Perlman at WebTV taught me how critical it is in an early-stage startup to strike the right balance between leadership and management.
I met Steve at Apple in 1986 when he was a young whiz kid, one of the more inspired inventors, in the Advanced Development Group. We stayed in touch over the years. In the spring of 1995, just after I started at Crystal Dynamics, Steve invited me to his house for a peek at his latest top-secret project. In his study, crammed with wires, electronic boards, and gadgets from Fry's Computer Store, he showed me the Playboy Web site.
Checking out the Playboy site was commonplace among early Web surfers, but Steve was doing it with one critical improvement: there it was in his study on a television set. In creatively marrying two disparate technologies never designed to work together, the computer and the television, Steve had just made the Internet available to every couch potato. Suddenly it was possible for the Net to touch anyone with a TV set, not just those with computers and the savvy to use them.
Steve and his partners were founding Artemis Research, ultimately WebTV, to pursue his invention. Lacking experience in operating a business, he wanted me to join as CEO. As excited as I was about his vision for the Internet on television, and as fond as I was of him, I had to beg off because I had just taken the CEO gig at Crystal Dynamics. I did, however, advise him and his team on building the company, and shortly afterward I joined the WebTV board. Steve called me often to seek advice about specific operational issues—financing, business plans, negotiations, hiring. He proved a quick study.
A year later, as I left Crystal, Steve asked me again to join as CEO. Not an easy decision this time. He was a natural, inspirational leader, and his charismatic vision attracted the best talent, investors, and supporters. But given his role as company visionary, my job, if I had become CEO, would have been primarily operational, more like my role at GO than at LucasArts. I had to decline.
Still, WebTV was growing rapidly, hiring a couple of hundred people and raising over $100 million dollars in the first couple of years, and Steve needed someone who had lived through it before. So, without taking a formal position, I increased my involvement to help with operating issues, and that's when Steve gave me the “Virtual CEO” business cards.
This was a quintessential “Brave New World” company. Despite its rapid growth, WebTV's business model was still largely undefined. No one knew how it would finally make money. The hardware was far costlier to make than our wholesale price to distributors. Profits would have to come from services provided through the box, but which services and at what price were still unclear.
In this uncertainty, Steve shined. To call him a technical leader did not do him justice. Technology was not the sole source of his success. He was in fact a brilliant promoter— part Edison, part P. T. Barnum. He could inspire investors and employees based on a mesmerizing vision that, for the moment, made everyone forget the absence of a clear economic model. In round after round of financing, Steve was always able to sell a higher valuation than I thought possible and bring in critical partners.
Supporting Steve, I felt a strong obligation to investors and employees to rationalize the business quickly. We needed to make economic sense of it, and better sooner than later. Steve resisted. He insisted on evolving his vision for the Internet on television and exploring its potential before constraining himself and the company with a bottom-line operating mentality.
One day, in the middle of my wrestling with building a business around Internet TV, Steve walked in and announced, “It's not the Net on TV, it's Enhanced TV.”
What the heck is Enhanced Television?
His new, broader vision included but went far beyond the Net on TV. At its core was the notion that information could flow back and forth between the service or program source and the viewer. No longer wholly passive, the viewer would be able to interact with the television. Interactive programming would be served up from the Internet and seamlessly connect with video programming from cable, satellite, and terrestrial broadcast. Viewers could chat with their favorite soap stars, get behind-the-scenes glimpses of celebrities, explore the historical background for the even
ts in a movie, or peruse a mountain of statistics while watching a game.
At first I dismissed Enhanced TV as Steve's folly, yet another frustrating distraction from our attempts to make WebTV into a real, operating enterprise. Of course, Steve persisted, and, finally, I realized he was right. The Net on TV had the disadvantage of introducing a new service to the living room, where it would need time to gain a foothold. The ultimate market was probably small; not that many couch potatoes were dying to surf the Net. But enhanced television offered to take a ubiquitous, well-understood medium—television—and make it better. Enhanced Television was about 100 million households. A big idea.
The problem was that while increasing our market opportunity Steve had also increased the complexity of the business by an order of magnitude. How would you connect television programming with the Internet in a compelling way? Where would the content come from? How would you cover the costs of additional storage in the set-top box needed to accommodate it all? My head spinning, I could see a river of red ink gushing down the halls like blood in The Shining. We would need a billion dollars, not $100 to $200 million. I didn't know how to raise a billion dollars.
The Monk and the Riddle: The Art of Creating a Life While Making a Living Page 13
