Startup Leadership: how to master the five skills in four stages of entrepreneurial growth

Entrepreneurs succeed not just by creating a good product or an innovative company, but also by developing themselves into leaders.

Only a fraction of entrepreneurs are able to get beyond launch stage to scale, or last more than four years – and then sustain the innovative edge. Entrepreneur and author Derek Lidow explains that emerging companies have specific leadership requirements, stage by fast-moving stage. Each stage calls for different kinds of skills, not just ideation or management. Startups succeed if their founders can create a personal leadership strategy based on self-awareness and driven by a broad-based focus on evolution and adaptation.

Entrepreneurs need leadership skills to create and motivate highly productive teams for the long term. These are well explained in Lidow’s comprehensive book, Startup Leadership: How Savvy Entrepreneurs Turn Their Ideas Into Successful Enterprises. The 13 chapters and eight appendices are spread across 258 pages, with many tables and stories to make the material accessible to readers.

“The real world is brutal, and most entrepreneurs do not know what it takes to succeed with their dreams,” begins Lidow. Self-awareness and self-knowledge are the foundation of the entrepreneurial leader skill set.

Five Skills of Entrepreneurial Leadership

The five skills of a successful entrepreneurial leader are self-awareness, motivation, relationship building, leading change, and enterprise basics.

Founders need to balance their selfishness with selflessness – their vision and mission is influenced by themselves, but they are willing to devote energy, time and resources to others to make this vision happen. Even altruistic entrepreneurs want to improve the world in their way.

Deep down inside, motivation can be driven by a need for independence, wealth, success, contribution to the world, or freedom from poverty and fear. Understanding these kinds of feelings and drives can be scary, because it may even reveal a sense of hurt, revenge or neglect. A professional coach may be useful in these stages of leadership growth.

Traits to understand in oneself are introversion/extroversion, sensing/intuiting, thinking/feeling and perceiving/judging. IQ, EQ, ability to focus, stamina and negotiation skills are also important to assess. Skill proficiency develops along a scale: basic, competent, master and best-in-class.

“It is essential that you have a good grasp of the skills you have and the skills you lack,” urges Lidow, because you need to build these out in your team.

Relationship building requires understanding when the parties are willing to cooperate, compete or retreat in an agreement. Communication is key here, between the founders and their families as well as founders and their companies. Motivation involves helping employees feel they are in control of their destiny and environment, performing at their best, and doing something meaningful.

Enterprise basics include understanding the difference between projects and processes – as an organisation grows, more and more project experience becomes codified into repeatable efficient processes. The experimental culture in the early stages gives way to an efficiency-driven culture in later phases, and this can cause problems for leaders, managers and employees as the organisation evolves and the culture is formally defined.

Four Stages of Enterprise Maturity

The four stages of enterprise growth, according to Lidow, are: customer validation (getting the real customer), operational validation (functioning enterprise: delivering the product), functional validation (satisfying customers, withstanding competition, varying the product mix), and self-sustainability (innovating again while also being efficient).

It is at the third stage that many startups fail, because here the organisation should be able to function with less contribution from the founders, like a well-oiled machine. Sometimes the founder gets too excited about launching the next wave of products before the earlier wave has stabilised, or before enterprise-style maturity has taken root in a youthful organisation.

Failure after the fourth stage occurs when a company is reduced to a one-trick pony and cannot reinvent itself or cannibalise older products (innovator’s dilemma).

Bringing it all together: Skills + Stages

Having sketched the foundations, Lidow illustrates how these basics come together through a series of hypothetical and real case studies (Teach for America, Segway). Entrepreneurs should figure out their market strategy by answering these 10 key questions: who will want to buy the product, why, how will they know about the product, where will they buy it, how much will they pay, how will you make and deliver the product, what skills will you build in your company to succeed, what are the critical enablers, how much will production and delivery cost, and how much will business processes and administration cost.

Each of these questions has different answers in the four stages of company growth. Entrepreneurs will have to discover and master the differences between informal and formal culture, various kinds of organisation design and interaction formats (eg. huddles, meetings, IT tool-based workflow, formal governance and risk structures).

As the organisation grows, entrepreneurs need to learn how to manage boards of advisors and directors, as well as relations with the media and investors. There will also be the inevitable series of crises, for which Lidow recommends action steps such as crisis identification, planning, mitigation, recovery and lessons learned (the last step is often overlooked).

Typical failures facing startups are poor hiring and firing, unproductive teams, misguided strategies, unleadable organisational structures and unresolved crises. Valuable ideas are everywhere, but success only comes with growth, self-awareness and leadership, Lidow concludes.

About the author:

Derek Lidow was founder and CEO of iSuppli which he sold to IHS in 2010 for over $100 million. He graduated from from Princeton and Stanford where he earned a PhD in applied physics. Lidow is an expert in the electronics industry and consulted for companies suchas Sony, Samsung, Philips and IBM. He teaches entrepreneurial leadership, creativity, innovation and design at Princeton University.