Tape Sucks: Inside Data Domain, A Silicon Valley Growth Story by Frank Slootman

Summary

  1. Frank Slootman talks about his time and leadership style

Key Takeaways

  1. Being cash positive, we really didn’t need the money for operations, but a strong balance sheet reassures enterprise customers so they buy gear from a small supplier.
  2. This fear-based behavior can scarcely be overstated. Large enterprises consistently prioritize their buying decisions to minimize the risk of embarrassment backlash. Huge premiums are paid in the misguided name of “playing it safe.” Dominant suppliers carefully cultivate and nurture this incumbent bias.
  3. From the perspective of an operations guy, there is a lot of riff-raff in venture capital: posers, herd mentality, technology infatuation, too much education, not enough experience to appreciate what grit and focus it takes to grow a business out of nothing. To have a fighting chance, you want to be with the best firms, and the best partners in those firms. Odds are already exceedingly low for venture success.
  4. In hindsight, it helped explain how some of our breakthroughs came about: they ended up betting on Moore’s law, the microprocessor subsystem, and avoiding the entrenched bottlenecks in the storage subsystem
  5. The famed Austrian economist Joseph Schumpeter is usually associated with this term, but the basic idea goes back all the way to the works of Karl Marx. The notion (which has experienced a recent resurgence via Clayton Christensen’s writings on disruptive innovation) is that in order to create something, you have to destroy something else in the process. So, creative destruction is an axiom of business: you are not going to grow much without exacting a proportional decrease in business somewhere else. You better know whose livelihood you’re going to mess with.
  6. A challenged product sector is obviously a much better starting point than attacking a category that is favorably regarded. When picking a fight, don’t seek out the most formidable opponent.
  7. Many technologies are conceived without a clear, precise notion of the intended use. There is plenty of hoping and praying going on that some new technology will magically find a suitable problem to solve. Often, we think we know, vaguely, in the abstract—but the truth is we have no clarity on how our technology stacks up in that use-case, relative to alternatives. Start with the application or use case, not the technology. Don’t make it an after-thought. Ass-backwards, it is awfully hard to successfully recover from a technology-led venture that cannot locate its target.
  8. It is remarkable how little our strategy changed from dollar zero to a billion in sales. The most important thing we did throughout the journey: resist the ever-present temptation to muck with the strategy.
  9. Making yourself “scarce” is something to ponder.
  10. You simply cannot invest intelligently in revenue generation if you do not understand how to ramp effectiveness and make the underlying economics work. It should be obvious that a sales force that loses money will only accelerate cash burn—in the absence of deep pockets, not a game to be played for very long.
  11. If you have aspirations to go public, you cannot do so without a predictable model that you control. It is also a way to weaken competitors. At Data Domain we hired away the best of the best from our competitors—not only did we gather strength, we weakened them at the same time.   Ulysses S. Grant once said that victory is breaking the enemy’s will to fight. Our version of victory was a great salesperson quitting the competition and joining our band of brothers. Breaking their will to fight (prompting “surrender”) was one thing, but getting them to defect outright and rally to our cause—this was crushing for incumbent morale.
  12. Your power is in your own sales function and product—keep that in mind. The channel is a powerful, entrenched fixture in the industry, and one that demands respect. If you don’t bring the channel in, they will bring in your competition.
  13. Yet, there comes a time when the venture must pivot from conserving resources to applying them rapidly, as fast as you know how to do effectively—when that cross-over time comes is not always obvious. The irony is that most ventures seem to spend too much early on, and not enough later on when they could grow faster and pay for it. The question becomes “can you grow faster?” And, if not, why not? That should be a good board meeting discussion. The turning point comes when your sales activity is solidly paying for itself, and is clearly becoming more profitable with increasing volume. Now you have a virtual money machine and you want to start opening the floodgates.
  14. Accounting is the bastardization of economics. It can be puzzling to see early stage ventures focusing on P&L profitability, as that mentality can choke off growth in a hurry. You should not care much about profits early on. Instead, you care about maximizing growth while maintaining sufficient cash balances to sustain it.
  15. I have seen startups managing for profitability prematurely—a huge mistake. They simply do not appreciate the dynamics of an early stage, high growth operation versus a large, steady-state company. Big company thinking: check it at the door.
  16. Trust your team—nothing else scales.
  17. After suffering through a few instances of this mismatch at Data Domain, we adjusted our search algorithm and began looking for candidates who did not have the resume yet but did have the potential and desire for a career break to get to the next level. We called them “athletes”: candidates with the right aptitude and behavior profile but without the prerequisite experience.   Put differently, we started looking for people who we thought had their best work still in front of them, rather than behind them.
  18. Speed is the essence of a startup: we have to be able to take mistakes in stride, and self-correct in the normal course of business.
  19. Newly hired salespeople were stunned that they could pose a question online, and responses started piling up within minutes.
  20. CEOs can’t manage from behind the desk—you need to be the first guy or gal over the barricades, gloves off. You need to know from experience what it’s like getting your nose bloodied; otherwise, your troops can’t relate to you and you can’t relate to them.
  21. I staked out the Greater Boston Area and made more sales calls in the Northeast than anywhere else. Why? It was the home of our principal competitor at the time, EMC. We wanted to show our people we could beat them in their own backyard.
  22. If you don’t naturally swarm to the action, you need to learn that attitude.
  23. People can instantly finger a phony. Let them know who you really are, warts and all—show your humanity, your passions, your likes and dislikes. What do you feel strongly about? Can they still remember what you said a week later? Are you leaving a room with more energy than when you entered it? Not sure? Then you didn’t.   For most of us, it is work to become an authentic leader. By authentic I mean being who you really are versus acting out some burnished version of you.
  24. Software development actually suffers from diseconomies of scale: the more engineers, the slower it goes.
  25. Don’t be a pleaser, and don’t be an appeaser. Do what you think is right. Do anything less, and you only have yourself to blame.
  26. He had this style about him leaving no doubt that while he would share his point of view, he was not making recommendations or prescriptions: you, the CEO, were the judge. It actually made it easier to seek him out, as he didn’t demand you follow his point of view. He impressed on me that the role of the board was to hire and fire the CEO, and that he would not hesitate to pull either trigger!
  27. I found this advice priceless. You might as well spend all your time on winning—nothing else matters. Of course, a good board wants you to do exactly that. It obviously doesn’t mean you should blindly bat away all opinions coming at you, but just try them on for size and merit, and go from there. Keeping good council is strength; caving in on perceived pressure is weakness.
  28. Our drive for a set of values in the organization came about gradually, as more people came into the company. We started writing them down and describing them:   Respect   Excellence   Customer   Integrity   Performance   Execution   The first letter of each of the six values spells the word R-E-C-I-P-E.
  29. Becoming a value-led organization doesn’t happen automatically. We imported somebody else’s culture with every person we hired, and therefore had to undo a bunch of stuff. We called it “re-programming.” People learn culture based on what behavior they observe around them, good, bad, or somewhere in between. The magic begins when you start displaying what you mean by them in practice, when the consequences are real.   One aspect of compliance was that we told new hires upfront that while we might be somewhat patient and forgiving on performance, we would not be on conduct. Conduct is a choice, not a skill set. If someone made the wrong choices in the face of all the guidance received, it could and would be a dismissible offense.
  30. I’d go as far as to say that company culture is the only enduring, sustainable form of differentiation. These days, we don’t have a monopoly for very long on talent, technology, capital, or any other asset; the one thing that is unique to us is how we choose to come together as a group of people, day in and day out.
  31. They don’t “work for you”—we all work for the company. As a manager, you are there to help them succeed.
  32. Strong references (who voluntarily become your “promoters”) are priceless marketing collateral.
  33. Early on, when employee candidates asked us what our culture was like, we invariably said “blue collar.” Not a lot of flash—if it doesn’t directly aid our cause, we don’t spend money on it. Extravagance was frowned upon, and becoming self-congratulatory was avoided; these things weaken the focus and muscle of the company. Setting the tone comes from the top. Humble and hungry is what we wanted to be.
  34. Somebody once asked me how he or she would know whether they were a driver, and I answered, “you better find out before we do.” In other words, be more demanding of yourself. Are you increasing the company’s speed or not?
  35. No strategy is better than its execution. When you get better at execution, the strategic issues will crystallize more as well. Like art being 99% perspiration (versus inspiration), business is 99% execution (versus strategy). A company can go a long way with an average strategy and superior execution, but they will not go far without great execution, no matter how brilliant the strategy.
  36. Startup CEOs are more like plow horses than racehorses. A racehorse gets pampered all week, to be taken out of the barn for a few minutes to race on Saturday afternoon; startup CEOs live 12+ hours a day behind the plow. It doesn’t feel so glamorous when you get home at 11 at night and you need to get up at 5 am to catch a flight out of town.

What I got out of it

  1. Love Slootman’s no non-sense mentality and learned a lot from his explanation of his time at Data Domain