Tung Quan

Why do companies with major resources & distribution often make mediocre products that don’t reach their potential? There are a handful of reasons, many of which you already know. But there is one under-discussed reason: Operators Optimizing for Optics To understand this, let’s start with a story. START OF STORY Acme Inc has brilliant, visionary founders (Alice & Bob), amazing culture, has built a well-loved product, and thereby created a business much larger than the early people (including the founders) had ever imagined. -- With this growth, they’ve had to hire a bunch of Operators: leaders who are skilled in scaling process, teams, operations, and overall execution. So far so good. As the business & the customer-base grows, it is a no-brainer for Acme to tackle adjacent areas of opportunity. -- So, during 2024 annual planning, Alice, Bob, and the exec team identify & present to the company a couple of key “strategic priorities” in these adjacent areas. One of these is especially vital to get going in H1 2024 because it poses a long-term risk to Acme’s position & growth. -- Thing is that this is a brand new initiative that is targeting the kind of user that Acme thus far has not really been built for. (some examples: normally serves SMBs, new initiative is for midsize corps. Or, company normally serves consumers, new initiative serves businesses) -- Anyway, the basis for investing in this strategic priority is very sound. Sophisticated customers and industry analysts are already asking Acme to do this. It would be playing both offense (big revenue opportunity) & defense (avoids long-term disruption & disintermediation). -- Alice & Bob know that it is critical to hire the right leader for this new initiative. The executive team agrees. So, after considerable thought and exploration, they choose Dan. Dan joined Acme 2 years ago and has absolutely crushed it: he has taken his division from $20M to $100M. -- Dan is ambitious and was starting to get restless anyway. He wanted a new challenge at Acme before he felt ready to start the next chapter of his career (ideally as CEO of a midsized company). The exec team is bought in on this, Alice & Bob are excited, this feels like a win-win. -- Alice & Bob (henceforth, A&B) give Dan ownership of the new initiative. To signal to everyone how important the new initiative is, Dan will report directly to Alice, who mainly looks after the product side of Acme. Everyone, including Dan, really wants this to work out great. -- The first task is to create a codename for the initiative (of course!). They pick “Zeus” (supreme Greek god). Dan begins forming a core team that will work with him on Zeus. Alice, Bob & Dan set up thrice weekly check-ins to brainstorm, review progress/blockers for Zeus. -- A bunch of research had already been done in 2022 & 2023 on the customer problems, the market landscape, competitor positioning, etc., so the team is not starting from scratch - they have some useful hypotheses to work off of. A&B agree that’s a good starting point. -- It is important to Dan that expectations are clearly set w.r.t. 2024 plans for Zeus: milestones, success criteria, core metrics, dependencies, etc. In his early meetings with A&B, Dan is careful to set very realistic expectations. The “Under promise and over deliver” mantra has served him very well in his career. Remember: Dan plays the corporate game at the Olympic level. -- A&B feel a tad uncomfortable discussing milestones, success criteria, quarterly metrics targets, etc. this early on, but they see Dan’s energy, they know his track record at Acme & before, and they recognize that they are first-time founders, so they sincerely support him in setting these expectations. -- Everybody at the company knows Zeus is an important initiative, they’ve heard Dan speak at all-hands (and think he’s great). So some of the most talented designers, PMs, EMs, engineers, etc. want to work on Zeus. So Dan has now put together a small but mighty core team. -- Dan views his main job as understanding A&B’s vision for Zeus (especially Alice’s since she is the product visionary [0]), translating that vision to concrete product milestones, building a great team & process to execute quickly towards these milestones, and moving the KPIs. [0] Dan is also well-aware that Alice will be writing his performance review & he has over the years gotten very good at managing expectations & perception with whoever will be mainly responsible for assessing his performance. It is no accident that Dan’s rise in the corporate world has been meteoric -- As a leader & manager, Dan steadfastly believes in clarity, transparency & alignment. A useful tool for him here is the Executive Product Review: a great way to raise important questions/proposals, get execs’ opinions/surface divergence, and give his team members face-time with the execs. -- So, in addition to his thrice-weekly 2:1s with A&B, Dan sets up a fortnightly Zeus Exec Product Review, which includes the key company execs + A&B. This being Dan, these meetings are clinically run: pre-reads, key updates, metrics, anecdotes, major blockers/asks, decisions, etc. -- The exec team is impressed and feels very happy that their input is being solicited for Zeus. Some of them were concerned that they'd be left out of the loop after Dan started reporting directly to Alice, but now they think Dan has done a splendid job of keeping everyone involved. -- On the other side, a few months in, A&B are starting to get nervous. But they can’t quite find the words to express their nervousness in rational terms. “Something” feels off about the way Zeus is progressing: Dan & team haven’t quite arrived at a core differentiator for Zeus. -- Meanwhile, Jessie, a Designer reporting to Dan, is feeling similarly. While potential Zeus users are saying that they’d be willing to try Zeus when it is launched (they love Acme after all), they are also saying that they are reasonably happy with Zeus’s competitive product. -- It is the first week of March, and Dan has 2 tense conversations on successive days. The 1st one with A&B, where they express their concerns about lack of clear differentiation. The 2nd with Jessie, who shares the tentativeness behind some users’ actual commitment toward Zeus. -- While Dan was caught off-guard by these conversations, he makes sure to keep a cool, calm, composed facade (a skill he developed early on in his career as a consultant). He pushes back a bit on A&B regd differentiation (“We have the distribution! But I will mull this over & get back to you” ) And he pushes back a bit more on Jessie (“We have a plan, let’s not re-litigate things we’ve already decided in our Jan/Feb Zeus Product Reviews. We need to hit Q1 OKRs too!” ) -- In his next 2:1 with A&B, Dan dutifully follows up on the differentiation question: “I've talked to Tim about how Zeus needs to be integrated such & such with our core Acme product. Users have asked about that since day 1. I think this is going to be a big differentiator for us” -- Dan shares supporting user feedback quotes. Alice’s spidey sense tells her that this isn’t enough, but she remembers her executive coach saying that she must learn to trust her most talented people. “I am not close-enough to this user segment, so I could be wrong”, she thinks. -- Fast-forward, in July, Zeus v0.5 launches to a select set of customers. Dan is great at coordinating launches and making sure that they create buzz. Analysts/press/Twitter are largely positive. Dan shares an impressive launch impact update with execs. Lots of charts & numbers! So what if the Y-axis shows tiny numbers. If it is up & to the right, it qualifies. -- In August, Dan subtly brings up the issue of Acme's upcoming company perf cycle. He asks A&B for feedback on what he can do better, but in the process reminds them how he & his team launched 4 days before schedule (unheard of at Acme), the positive press, early quotes, etc. -- During the September promo cycle, Dan gets promoted. This was not an easy promotion, but almost everyone on the exec team (except Dan’s previous manager) agrees that Dan has done a spectacular job with leading Zeus thus far. “We need more projects to run like Dan has run Zeus” -- Fast-forward 6 more months, Jessie has now left Acme, although 2 new Designers have joined. Zeus operations are still excellent: superb monthly status updates, well-run product reviews, pretty dashboards, hitting all quarterly OKRs, high approval rating for Dan as a leader. -- But the actual business is doing just okay, and is well below where A&B had instinctively expected to be in Jan 2025. Meanwhile, Zeus’s competitive product is growing like crazy in the market. It is beating Zeus on almost every metric: number of customers, features, margin, ARR, retention, etc. etc. -- Obviously, A&B have discussed this ad nauseum with Dan over H2 2022. From Dan’s POV, he is doing his best to translate A&B’s vision to a winning product. From A&B’s POV, the product & its positioning is just not compelling enough, lacks creativity & deep user understanding. -- Dan is not stupid. He gets that Zeus is behind. But he has good “reasons” why that’s the case: - There isn’t adequate integration with Acme’s core product - Zeus go-to-market isn’t strong (GTM team doesn’t report to him) - A&B’s vision is still fuzzy, even to them etc. etc. -- Anyway, after 6 more months of trying to steer the ship in the right direction, Dan says enough is enough. He’s already been at Acme for 3.5 years, has worked on both scaling a business & a zero-to-one story (Zeus), and he believes his resumé now has what’s needed for the CEO job. -- Dan finds a CEO role at a company in an adjacent vertical to Acme (whose founders want their company to be more like Acme). At Acme, after 1 more year of trying, A&B make the hard decision to sunset most of Zeus and integrate the remnants of it into their core product & team. -- Lastly, Jessie is now a co-founder of a YC startup that is absolutely crushing it. And to fast-forward a few more years, this startup will take over a large part of Acme’s core business by 2028. END OF STORY -- While the details surely vary, stories of this shape are, at any given time, playing out in most tech companies I know. Mind you, this is not just at “bad companies”. Some of the very best tech companies in the world have their share of Operators like Dan and projects like Zeus. -- And while there is never just one reason for such a failure, I want to call your attention to an insidious, under-discussed root cause of Zeus-like failures: The tendency of many (not all!) ambitious leaders to manage new initiatives for Optics rather than for Impact, and get rewarded for it. -- And frankly Dan isn’t the only culpable party here. Everyone, from Alice & Bob at the top, to Acme’s broader executive team, to perhaps folks on Dan’s team — everyone (except Jessie) played a non-trivial role in the debacle that was Zeus. -- What might have prevented this debacle? Several things actually: 1) Dan should not have been appointed as the leader for Zeus. Operators are great for scaling, at the right time, but they often bring premature optimization to projects, and that can kill its prospects very early on. Even if most folks can’t see that readily, the project is dead before it was ever alive. -- 2) Things could have gone better even with Dan as leader. If Dan were more self-aware, he would have seen his role differently. He could have hired great Craftspeople like Jessie on his team, and then *listened to those Craftspeople* to translate A&B’s vision to a winning product. -- 3) A&B (& the broader exec team) should have understood that a lot of what seemed like “great operations & management” actually hurts early-stage bold initiatives like Zeus. Premature operational optimization can be a very bad thing for early-stage projects in startups & large companies. -- 4) Last, but by no means the least, A&B should have had the leadership maturity to see through (and candidly call out) what Dan was doing: managing for Optics, instead of a) actually understanding users b) iterating towards differentiation c) instilling a drive to win d) optimizing for major business impact -- This post is already quite long, so I will end it with an observation about this last point: Operators are everywhere in tech companies. They are extremely valuable. But, assigning an Operator who is not self-aware to the certain projects can be fatal for that project & your team. -- You see, many Operators, even if they have good intentions, do not understand the role of a leader of an early stage initiative. Through years of experience with at-scale products & teams, and through years of sub-par training, they feel comfortable with “running the process”. -- Operators like Dan legit think that their job is to understand what the CEO wants, orchestrate actions across the org based on that, and set up processes, structures & accountability checks to ensure that those actions are performed efficiently. What is their big miss here? -- For any early stage product initiative, its leader ought to deeply understand the user & business problems to be solved, build a small, energetic team that is inspired to solve them, build product to test informed hypotheses, with the most basic process to support these actions. -- Yes, it does matter what the Founder/CEO thinks. Yes, the Founder’s vision is to be understood & taken seriously. But every Founder worth their salt knows that real product work isn’t just about transcribing his/her vision. New product work is messy, and it requires enormous creativity. -- What should Operators who want to get better at leading early stage products do? Chiefly, it requires unlearning some “truths” and playing with some new truths So let me conclude this post with my prescription of what such Operators should do less of, and start doing more of: That’s it. Congrats on making it this far, and I wish you my very best 🙌🏾👍🏾 --