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110404

The Start-up CEO and CTO

The biggest mistake a CEO and CTO can make is to ignore each other

By Frans M. Coetzee

Editor’s Note: This is Part 3 in Frans M. Coetzee’s series “Here Be Dragons: Managing a Tech Start-up,” which discusses the pitfalls and glories of starting up your own tech company

New entrepreneurs frequently misconceive the roles of the chief executive officer (CEO) and the chief technology officer (CTO) in a small organization and how these two work together.

The CEO is supposedly the evangelist and chief strategist, whose vision is professionally executed by a dedicated team attending to the details. In practice, the CEO is truly the executive without portfolio. All intractable problems in the company—no matter where they originate—end up on the CEO’s desk. As the CEO dispatches one problem, two new problems arise. (The mythical, multiheaded Hydra is the icon of the start-up CEO.) If you wish to be a CEO, be prepared to deal constantly with problems others cannot solve and to put up a fight to gain the time to do non-crisis–related work.

The CTO job is seen as the choice development position, one that lets you cherry-pick the technical problems and largely avoid business turmoil. So most CTOs suffer a rude awakening when they realize that the interesting problems are solved by others, while they rush along at breakneck speed dealing with constant distractions and nontechnical issues. In fact, the major job of the CTO is not hands-on development or technical problem solving. It is dealing with business people trying to talk to technical people and forcing a coherent vision of the product into the heads of the technical staff. Most of the CTO’s time is spent bridging the tech-business divide, then verifying that these groups respond appropriately. (The mythical doorman Janus, whose two faces were turned to watch both the under- and the over-world, is the icon of start-up CTOs).

For both the start-up CEO and the CTO, being the boss means taking out the garbage. Unlike your counterpart in a large corporation, you are the one who ultimately has to deliver the product to the customer or face immediate failure. As a result, on top of your own particular assignments, you will find yourself doing whatever else is needed to plug the gaps.

If you want to assume either the CEO or the CTO role, apply careful introspection and make sure you have the skills and desire to perform the necessary duties.

Now that the stage is set, let’s take a more detailed look at the two principal actors of the start-up.

The CEO
The CEO has to be someone who can manage multiple threads, impose order, and make hard decisions. There are many managers out there, but good CEOs are scarce. Frequently, managerial candidates are drawn from the large set of upwardly mobile MBAs who are birthed and fed in large companies that have sheltered them from ever making a decision with a consequence. In big corporations, vaguely overseeing a series of go-nowhere projects—or even having a series of understandable failures that relieve senior managers from making hard decisions—is often considered to be much the same as a record of moderate successes. That being the case, some managers in big companies have excellent corporate careers despite the fact that their actual performance is lackluster. Only a few of these managers can be start-up CEOs, notwithstanding their glowing résumés.

Before hiring a CEO from such a background, find out the true scope of the person’s accomplishments and, in particular, what hard decisions he or she has had to make. Find out whether the person knows how to really work hard and how to push products along that last yard into the marketplace. Talk to people who have worked with the person. If everyone says they liked the person, good. However, if his or her popularity came at the cost of never having told off staff or pushed them hard, consider other candidates. A start-up cannot afford a weak CEO unwilling to share the load and maximize resources.

The CEO should be someone who is willing to shoulder the burden of delivering a tangible product. In fact, if most members of management only organize, but never actually deliver anything concrete, even something as a simple as a completed report or letter, the company is doomed. I have often heard highly paid executives rationalize that, given their pay scale, spending time actually working on any task personally is a waste of money. Executives who only delegate invariably become detached from the real problems in the company, set disastrously high or low expectations, and lose the respect of their staff.

The best start-up CEO is someone who inherently recognizes the concept of quality. Such a person understands the tradeoffs in the business, especially between the long and the short term, and understands why money and time might sometimes have to be invested in a product even if there is no obvious immediate financial motivation.

As an example, consider Google: the company’s cofounders pursued a plan of extensive optimization of the quality and speed of the search results. And they did this at a time when the bean counters and marketers had eviscerated most technical progress at the other search-engine companies in order to squeeze a few more pennies from the technology. For Google, the pursuit of optimization led to technical depth overall and eventually to large competitive barriers. Even small details that showed the pride of the company—such as changing the logo daily—eventually translated into major brand differentiators.

The CTO
The CTO serves as the fusion point person and is required to give structure and form to wispy ideas collected from both the business side and the technical side. The business side expects concrete outputs that can be used in business planning, such as understandable functionality, risk assessments, and realistic time lines. The technical staff expects concrete specifications that can be transformed into products. It is up to the CTO to align technical reality with marketing dreams and financial commitments.

The CTO should be someone who is comfortable spending a significant fraction of time apart not working on gritty technical issues. So what does a CTO spend time on? First, there’s the business side. Business people often will not take care of the business side, so the CTO almost invariably has to step in. It may be useful to think of the business side as an input/output pipe; it never produces deliverables, it only transforms them. The CTO will have to feed the pipe. Thus the CTO will be sidetracked into financial, legal, customer service, human resources, and sales and marketing efforts—and even into doing favors, such as reviewing unrelated investments in other companies for your venture capitalists.

I and other CTOs I know have found that the CTO is often expected to be the ultimate provider of answers to questions on why your product is better than the competition’s. Market research is a major part of the CTO’s province. In most start-ups, the CTO is expected to perform this research during those hours previously wasted sleeping. Some words of warning: always check your writing before sending out a report; your words will end up verbatim in marketing materials as “technical jargon.”

The second major thing the CTO will spend time on is ensuring that the technical staff actually works toward developing a product that fits the business needs of the company. I once found near-disastrous mismatches between the code of two developers that showed they had harbored unrecognized, fundamental disagreements about the direction of the company’s product—and had done so for months. This happened despite freely distributed written strategic and functional plans, frequent meetings, and a shared office. The only solution to this kind of confusion is for the CTO to spend substantial time with each technical staff member, and to ceaselessly reiterate and enforce his or her vision of the final product.

The best start-up CTOs I have seen have a gift for putting together a strong, consistent story that intertwines the product technology with the business plan. A wise executive once said that his wisdom came when he realized that his entry-level programmer, coding late at night on the core product, was making decisions as critical to determining the ultimate capabilities and market of his product as his best strategic plans. A good CTO’s story is the thread that guides everyone—from entry-level programmer on up—to develop the envisioned product, even when explicit specifications are missing.

Given little more than some ideas and a blank piece of paper, true CTOs have the ability to “see” a new product in all its technical detail. When you meet one of the great ones, it can be humbling: primed with a few suggestions, they will describe solutions as complete and detailed as if they were simply reading from a book. This ability is rare. Some otherwise excellent technical people crack when their livelihood finally depends on distilling a complete product from nothing. That said, I have not seen either of the core CTO gifts in anyone who was not also highly technically proficient in some area.

A note if you are considering being a CTO: realism is the last CTO requirement. In a start-up, most young CTOs for reasons of cost and pride include themselves in their engineering and development head count, taking on complete engineering tasks critical to product development. This overload can be fatal to long-term coherence as team members and other divisions drift while you are holed up in your cubicle trying to meet your personal deadlines. As CTO, your primary technical task should be to retain control over the core technical direction and to do planning and specification.

Especially in the early stages, the grand vision is probably only in your head. If this vision is not expressed in the core design and base implementation, it never will be, and you will pay dearly as long as the company exists. I strongly advocate for the CTO’s participation in actively working on the product, but be aware of and manage your true priority. And never jeopardize the whole by continually doing someone else’s work as well as your own—fire the cretin and get real help.

Interaction
What should the CEO expect from the CTO, and vice versa?

The CEO is responsible for delivering resources to the CTO, but the CEO should also tailor the company’s commitments so that the CTO can deliver the products with the given resources. The CTO, in turn, is responsible for delivering products to the CEO that support the business plan, reliably and according to the planned schedule. The CEO and CTO should jointly balance short- and long-term considerations. The worst position for a start-up company to be in is when the CTO misses one delivery after another while the CEO frantically flails around inventing ad hoc products and assuming absurd customer commitments in hopes of landing a whale of a sale.

Here, then, is the lesson for any potential CEO: the biggest mistake a CEO can make is to work independently of, or ignore, the CTO. That mistake can hurt any company, but it’s fatal to a tech start-up. A CEO with a sales and marketing background, who is typically less interested in how the product is built, will be tempted to downplay and shortchange functionality that is not visible to the customer.

A good CEO, however, understands and accepts that the company cannot grow faster than the underlying technology of the product. A CEO should never place a company in a position that requires the CTO to produce miracles to save the company. Though this may be tempting if the CTO has a history of doing so, miracle production is not sustainable over the long run.

And here’s the corollary for any potential CTO: the biggest mistake a CTO can make is to work independently of, or ignore, the CEO. Especially if you are a cofounder, with control of the board, it will be a temptation to obey a hired CEO’s orders only selectively. Good companies simply do not function that way. A good CEO will and should exercise full executive power. At a minimum, the CEO will select the people who work with you and directly or indirectly determine the flow of deliverables, commitments, and corresponding authority. Poor decisions on the latter will become your responsibility, whether you deign to answer the CEO’s phone calls or not.

A further note to the potential CTO: in most companies, the technical staff do not control the company. The CEO will be your boss. Unfortunately, especially in Western companies, there is still a degree of condescension by the MBAs to the technical side, and “techies” are considered to be interchangeable. If you’re the CTO of a company in which the CEO and board fundamentally do not respect technical staff or cannot differentiate between an application programmer and an HTML developer, get out. Your staff will hold you responsible for not garnering them respect and giving them a voice, and you will find that you will never truly gain their trust. At the worst possible time, you will be forced to replace functioning staff with inferior staff willing to work on the cheap.

As a CTO, you should also be able to depend on some understanding by the CEO of the technology and its strengths and limitations. The CTO cannot write down or explain every item or contingency. In tech companies, there is the well-known concept of “mechanic’s feel,” an innate understanding of the technologies of a business that cannot be acquired or communicated by meetings, reports, or plans. If a CEO does not have sufficient technical “feel” to know when projects are going well—despite scary issues—or when projects are going badly—despite great reports and lovely PowerPoint slides—then the company will not work.

Likewise, the CEO should expect the CTO to be able to go on a sales call, to reproduce the basic outlines of the financial or marketing plans, and to respect the customers. For the CTO who ignores basic business issues, a rapid graceful exit to a technical lead position (such as heading up a special projects team) is strongly advised.

Finally, if you’re considering a CTO job at a start-up, make sure that the other managers are brighter than you. If not, walk away. The hard reality of the start-up marketplace is that only 5 percent of companies succeed. Take an especially good look at your potential CEO: is he or she able to measure up to be the top one in 20? And don’t be swayed by an apparently great product. What the company produces is irrelevant if the CEO is not worth his or her salt. Why not be a light bulb surrounded by stars? You will get all the benefits and none of the heartburn.

About the Author
Frans M. Coetzee received a Ph.D. in electrical engineering in 1995 from Carnegie Mellon University in Pittsburgh. In 2000, after stints as a researcher at Siemens and NEC, he cofounded Certus International SA, a security software company, which was later acquired by GenuOne Inc. He served as CTO for both companies through August 2003 and is currently a key advisor and board member of GenuOne, which makes supply chain security products.

 


 

 
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