Chapter 13

Advice from the best

Early in my career, while I was on a flight from Sydney to the USA, I happened to be reading the latest edition of Fortune magazine.

In that magazine was a summary of a book called Control Your Destiny or Someone Else Will. The book was about Jack Welch, the legendary CEO of GE.

Jack had six rules for success, which actually formed the basis for my own management style. These rules are not just useful business lessons – they can easily be translated into life lessons as well.

1. Face reality as it is, not as it was or you wish it to be.

2. Change before you have to.

3. Don’t manage, lead.

4. If you don’t have a competitive advantage, don’t compete.

5. Be candid with everyone.

6. Control your destiny or someone else will.

I still believe today that a leader who can consistently execute on ALL of these six rules will be well positioned to build a long-term, sustainable company. It’s amazing how visionary and relevant these rules were – and still are. Consider the first two rules. The current way of expressing these concepts is that if you don’t want to be disrupted, you better pivot – or you will become irrelevant. Disrupt or be disrupted! If you don’t face reality when things around you are changing (no matter how hard that may be), if you don’t pivot, then you will become irrelevant and disappear. So many successful companies have fallen into this trap.

Face reality as it is, not as it was or you wish it to be

Complacency, and the desire to protect a highly profitable revenue stream, are the biggest challenges that an incumbent will face. So many companies have been killed simply because they didn’t want the status quo to change.

I sat on the board of Fairfax between 1999 and 2002. Fairfax was for many years a highly successful media company. They had a monopoly on the information that underpins the three major life decisions (aside from marriage) that people make: where we are going to work, which house we should buy and what car we want to drive. So lucrative were these revenues, derived from their major mastheads – The Sydney Morning Herald, The Age and the Financial Review – that they were known as ‘The Rivers of Gold’. Why would Fairfax want this to change? Only an exceptional manager would have recognised that the internet was about to disrupt their core business AND been willing to embrace the opportunity that it presented – even though, in the short term, it may have had an impact on Fairfax’s Rivers of Gold. I don’t think Fairfax saw either the threat or the opportunity presented by the internet. To me, it was completely obvious that classified advertising was so well suited to the Net – sorting lots of information by price, by neighbourhood, by job, etc. But when you had hundreds of millions of dollars of revenue to protect, only a bold leader would have said: ‘If somebody is going to kill our core business, it’s going to be us.’

As I’ve stated before, in business you need a few lucky breaks – and for SEEK, realestate.com.au (REA) and carsales.com.au, Fairfax was theirs. By the early part of the 2000s, Fairfax had become irrelevant, and by 2018 it had disappeared, swallowed up by Nine Entertainment for about $3 billion. The combined market capitalisations of the three disruptors is about $40 billion. Fairfax didn’t want to face reality as it was, so it continued to wish that things would stay just as they had been during those glory years. The only consolation for Fairfax is that there are so many other Fairfaxes out there: Barnes and Noble got Amazoned, Netflix killed Blockbuster and Uber challenged the taxi industry. So, as a founder, if you don’t want your Kodak moment, face reality as it is, not as it was or as you wish it to be.

Not all startups succeed. In fact, most fail, despite the best endeavours of hard-working founders. Sometimes what may have seemed like the best idea on a PowerPoint slide presentation may not end up being that easy to execute. My advice: if, after a reasonable period of time, you know it’s not going to happen, face reality as it is, not as you wish it to be. Move on! I have worked with founders who never want to say die. They fall in love with their idea and don’t know when to surrender. I have seen this cost founders so much in their future careers – they just went on too long.

Change before you have to

In some respects, it is easy to change when your core business is bleeding. But the challenge for any founder is to change while your core business is strong. Intel, the world’s dominant microprocessor supplier, only got into microprocessors because their core business, memory chips, had in fact become just that – a memory. Intel had no choice but to pivot. The Japanese suppliers Fujitsu and Toshiba had crushed them. If Intel hadn’t changed, the company may have disappeared. Under the leadership of industry icon Andy Grove, they pivoted to become a microprocessor company – and, as they say, the rest is history. By contrast, pivoting when your core business is on the decline doesn’t usually have a happy ending. Kodak tried to embrace digital technology when their core print business was nearly dead, Fairfax tried to embrace the internet when it was way too late, and the giants of retail in the USA are no longer giants.

As a founder, you have to constantly be thinking, What and who could kill my company? Complacency kills successful companies. The iPhone came about because Steve Jobs asked that exact question: What could kill the iPod? While still generating massive cash flows from the iPod, Apple pivoted. Recognising what the phone had done to the camera, Steve Jobs wasn’t going to let that happen to the music player. So, yes, Steve Jobs – marketing genius. But just as importantly, Steve Jobs – business genius, too. While Apple’s core business (excuse the pun) was thriving, he pivoted and made it the most valuable company in the world. It would have been so much harder if he had waited for a phone company to incorporate an MP3 player into a phone. Who uses the iPod today? Nobody, it’s embedded in the smartphone – in most cases, fortunately, in the Apple iPhone.

But did the same company that revolutionised the music industry by disrupting the record/CD industry become disrupted itself? Perhaps! The industry has evolved from records, to CDs, to Apple’s download service, to music streaming – now led by a new player, Spotify. Although Apple changed before they had to in order to protect the revenue streams from the iPod, they didn’t evolve as the industry evolved to streaming, and they are now playing catchup to keep pace with market leader Spotify.

Don’t manage, lead

I remember one of my team once saying to me, ‘Dave, I really respect you.’ I asked him why, and he said, ‘Because you’re the CEO of Com Tech.’ I replied: ‘Jase, if that’s the only reason why you respect me, I’m not that flattered – any idiot can register a company for $900 and call themselves CEO, founder, president or whatever the hell they want. If you respect me because I have articulated a clear vision for the company, we are executing on that vision and I treat people with respect no matter where they work, then I’m flattered. But not if I’m respected for having a bloody title on a business card.’ More about leadership in a later chapter.

If you don’t have a competitive advantage, don’t compete

At the beginning of this book, I said that being a founder is not easy. So, if you’re going to have a crack, make sure that you give yourself the best chance of winning. I was fortunate enough to get into local area networking just as it was about to take off. The incumbent had gotten fat and lazy, and had no regard for customer service. There was a massive opportunity to dominate the market for this rapidly growing industry in Australia.

Together with a small team, we seized the opportunity and executed. We had 70 per cent of the networking market in Australia. It was growing at 40 per cent per annum. Six months after I had been appointed as a Novell distributor, Novell added another two distributors. Com Tech never relinquished our market share and position – we continued to grow while the others floundered. Our timing was impeccable: the incumbent was ripe to be disrupted and the two new players had a formidable competitor in Com Tech. They never had a chance.

As a founder, always make sure that your timing is right – it’s probably the most important indicator of future success. Imagine trying to compete with Canva today. They were first to market and executed flawlessly, and they now have a dominant position in the global market in a category that they have created: a graphic design platform category. It will be very hard to break their dominant position, and it would be foolish for a new entrant with no competitive advantage to try and enter the market. If you can’t beat ’em, find another idea – you don’t want to make your startup harder than it’s going to be anyway.

Be candid with everyone

I always tell my boys that if they only learn one thing from me, it should be, ‘My word is my bond.’ It’s the best advice that I can give any founder. You don’t deserve respect, you earn it – from your employees, your customers, your business partners and your shareholders. The best way to lose respect is when your actions don’t match your words. Once you have made a commitment, always honour it, even if you may have screwed up. Perhaps you promised a bonus to someone who subsequently hasn’t earned it – you still need to pay it!

Being honest with everyone means telling people the truth, not just what they want to hear. If you know a staff member is not meeting their objectives, let them know that if things don’t change it may be best that they get their CV up to date. It is better than telling them how great they are today and getting HR to fire them tomorrow. If you’re having customer service issues and you don’t share those issues with people in the front line, how do you fix those problems? I was always extremely transparent with our team and shared all news – good and bad. That’s how we solved problems together. If I look back on my career, I really think my candid management style was the main reason that I earned the respect of the constituents that are key to any business: staff, customers, business partners and shareholders.

I always appreciated business partners who were open and honest with us. Gary Jackson, the country manager for Cisco, told me, ‘Don’t waste your time selling to the big four banks and the telcos, we do that business direct.’ I knew not to waste our valuable resources bidding on these opportunities when I would only lose to the vendor. We focused on what we could win, and there was still more than enough for us to build a great business around Cisco. If I valued Gary’s honesty, I knew that anyone dealing with me would feel the same.

Control your destiny or someone else will

You control your own destiny when you have a highly motivated, energised and aligned team of people all working towards the same goal. As a founder, attracting and retaining a team of great people, and motivating them to be the best that they can possibly be, is one of your key functions. Culture flows from the top down. Companies, no matter what size, are capable of anything when you have a highly motivated team.

In 1996, nine years after we had started, Com Tech had 240 people. We were doing $165 million in revenue and making a profit of $14 million – on paper, it seemed like an amazing business. However, I saw storm clouds ahead. Our two major vendors, Novell and Bay Networks, were floundering, while Microsoft and Cisco were thriving. The industry was growing, so the fact that our two major vendors were shrinking was therefore not an industry problem. Clearly, we had the wrong products in our portfolio. If we didn’t sign up with the two market leaders, Cisco and Microsoft, then, like our incumbent vendors Novell and Bay Networks, we too would become irrelevant.

Our company strategy for our first nine years of existence was: We sell the number one OR number two product in the market. It worked really well when our major vendors commanded 70 per cent market share, but when that changed, I knew that I needed to do something different. I changed one word. ‘OR’ became ‘AND’. We sell the number one AND number two product in the market. We signed Microsoft and Cisco, in addition to selling Novell and Bay Networks. We made other major changes to our business too. In addition to being a distribution company and a training company, we became a systems integration company in Australia, serving the ASX 200. We also rebranded our distribution business to Express Data. To effect these changes, we needed the support of about 100 of our staff – that was 40 per cent of our entire company. Not a word got out to the industry.

Without an unbelievable team, we could never have achieved what we did. Within a year, we had grown to over 1000 people and were market leaders in the three areas that we addressed: technical training, the distribution of networking and communication products, and our new line of business – network integration. It was hard work, but I’m always grateful to the amazing team we had in place who allowed us to control our own destiny before someone else did.

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