20VC 3 Biggest Mistakes Founders Make When Scaling, Management 101 on Trust Building, Morale Maintenance and Hiring & What We Can Learn About Parenting From Nature Programs with Scott Dietzen

Abstract

Abstract

In this episode of 20 VC, Harry Stebbings interviews Scott Dietzen, the former CEO of Pure Storage, who shares his journey from academia to entrepreneurship, emphasizing the importance of building trust, the value of learning from losses, and the necessity of hiring complementary skill sets. Dietzen discusses his approach to sales by understanding customer needs and the significance of saying no to ensure customer success. He also highlights the critical role of managing both the team and the board, with insights on fostering a collaborative board environment and the pitfalls of founders not sharing bad news with the board. Dietzen's leadership philosophy is shaped by his experiences as a parent, advocating for modeling behavior rather than micromanagement, and he stresses the importance of focusing on the company's success over individual achievements.

Summary Notes

Introduction to Scott Dietzen and Pure Storage

  • Scott Dietzen is a vice chairman of the board at Pure Storage.
  • Served as CEO from 2010 to 2017, leading the company through significant growth and an IPO in 2015.
  • Previous roles include president and CTO of Zimbra and CTO of BEA Systems.
  • Acknowledgments to Mike Spicer, Somsh Dash, and Satish Dharmaraj for their contributions.

"I'm so thrilled to welcome Scott Dietson, vice chairman of the board of Pure storage and served as the company's CEO from 2010 to 2017." Explanation: Harry Stebbings introduces Scott Dietzen, highlighting his leadership at Pure Storage and his previous roles, setting the stage for the interview.

The Role of Core Signal, Squarespace, and AngelList in Venture Capital

  • Core Signal provides fresh, raw data from public web sources for VC firms.
  • Squarespace offers mobile-optimized websites, email campaigns, and SEO tools.
  • AngelList supports fund management and startup incorporation through Angellist Stack.

"Core Signal is a data vendor providing fresh, raw data collected from public web sources." Explanation: The quote outlines the role of Core Signal in providing data that assists venture capitalists in their discovery and analysis of companies.

Scott's Academic Background and Transition to Entrepreneurship

  • Scott Dietzen earned a Ph.D. in computer science but decided against an academic career.
  • Influenced by his father's entrepreneurial spirit and work ethic, he pursued entrepreneurship.
  • Scott's professional journey began with mentorship in a CTO-like role.

"I ended up earning a PhD in computer science back in the day because I used to think I wanted to be a professor." Explanation: Scott reflects on his initial career aspirations and how his academic background influenced his path to entrepreneurship.

Scott's Path to CEO at Pure Storage

  • Scott joined Pure Storage as CEO when the company was small, with a vision for market strategy.
  • He believed in the potential of Flash storage to revolutionize data centers.
  • Scott's leadership and the board's support were pivotal in Pure Storage's growth.

"I got connected through Mike Spizer and through Anil Bustery with the early pure storage team. And I fell in love." Explanation: Scott describes how he was introduced to Pure Storage and his immediate connection with the team and the technology, leading to his CEO role.

Influence of Scott's Father and Work Ethic

  • Scott's father was a hardworking entrepreneur, which instilled a strong work ethic in Scott.
  • The success of his father's business, despite not being in technology, was an inspiration.
  • Scott was drawn to the excitement and potential of the technology sector.

"My dad worked extremely hard. It's where I got my own work ethic because it kind of just wears off on you, I think, when you're growing up." Explanation: Scott credits his father's hard work for shaping his own work ethic, which played a significant role in his entrepreneurial journey.

Building Leadership Teams and Boards

  • The CEO role requires building a strong leadership team and a supportive board.
  • Scott highlights the importance of having experienced advisors and board members.
  • The guidance from seasoned professionals helped de-risk Pure Storage's venture.

"Anil Bustri told me the hardest bit about the CEO job is you've got to build both below you and above you." Explanation: Scott shares advice he received about the dual responsibility of a CEO to build a capable team and a strong board to ensure success.

Approach to Competition

  • Scott encourages founders to welcome competition as it drives market growth and improvement.
  • He prefers sports analogies over warfare when discussing competition.
  • Learning from losses is crucial, as they often provide more lessons than wins.

"I relish competition. But I would say I try to stay away from warfare analogies." Explanation: Scott explains his positive view of competition and his preference for treating it as a sport rather than warfare, emphasizing the importance of learning from competitive experiences.

Learning from Losses vs. Wins

  • Scott believes that losses offer more learning opportunities than wins.
  • While wins should be celebrated, losses require careful analysis to improve.
  • The key is to review losses critically and openly to identify areas for improvement.

"In losses, there's almost always a lesson to learn." Explanation: Scott discusses the value of analyzing losses to extract lessons that can lead to better strategies and outcomes in the future.

Learning from Losses

  • Identifying lessons from failures is crucial for improvement.
  • Entrepreneurs often share victories but hesitate to discuss losses.
  • Openly sharing insights from losses can prevent repeating mistakes.

"But in general, there's almost in every loss there's something you can identify or multiple things you can identify about your product, about your engagement, your partnering strategy."

This quote emphasizes the importance of introspection following a loss to pinpoint specific areas for improvement in product, engagement, and strategy.

"And if you talk about the losses, then you can bring this entire smarts of the company to bear on making things better so you don't lose again for the same reason."

This quote suggests that discussing failures with the team can harness the collective intelligence of the company to address and rectify issues, ensuring the same errors are not repeated.

Maintaining Morale While Being Realistic

  • Morale based on unrealistic perspectives is unsustainable.
  • Long-term goals should be communicated alongside current challenges.
  • Trust in the company's vision helps teams navigate through difficult times.

"Well, so I think the morale, if you're not being realistic, the morale is fake."

The quote indicates that genuine morale cannot be built on a foundation of unrealistic expectations or achievements.

"The critical thing is to keep your eye on the long term goals and make sure you're sharing what success looks like for the company in five plus years."

This quote stresses the importance of balancing the presentation of long-term success with the reality of present-day challenges to maintain morale.

Building Internal Trust

  • Trust is a key component of a successful team.
  • Leaders should use inclusive language and take responsibility for failures.
  • Managers should distribute rewards fairly and set expectations early.

"One of the simple things, first of all, is to never talk about yourself. You don't use I me when you're talking about something that the company is going to do."

This quote highlights the importance of using inclusive language ("we," "us") to foster a team-centric culture and build trust.

"Taking responsibility for a problem but then passing credit when anything goes well is a really simple recipe for building trust."

The quote suggests that leaders should own up to mistakes while giving credit to the team for successes to build trust within the organization.

Responding to Negotiation and Trust in Hiring

  • Trust is established during the interview process and should be mutual.
  • Leaders should make expectations clear and act fairly in compensation matters.
  • Trust can be lost due to hiring mistakes or repeated errors by employees.

"When recruiting people, when they'll start to try to negotiate, I will shut them off and say, look, this isn't necessarily a fair ask of you to negotiate."

This quote reflects a firm stance on negotiations during the hiring process, emphasizing fairness and setting clear expectations for trust.

"If your bit flips on somebody, if you lose confidence, then you need to make the change."

The quote implies that leaders must act decisively when they lose confidence in an employee to maintain trust within the team.

Handling Dismissals and Feedback

  • Firing employees is challenging but necessary for team dynamics.
  • Constructive feedback and opportunities for saving face are important.
  • Regular, substantive feedback prevents surprises during dismissals.

"I strive to give some concrete, constructive input why this isn't working out."

This quote underscores the importance of providing specific feedback during a dismissal to help the employee understand the reasons and grow from the experience.

"Every manager should be having substantive one on ones with their employees pretty regularly."

The quote advocates for regular one-on-one meetings to facilitate ongoing feedback and prevent surprises if dismissal becomes necessary.

Salesmanship and Understanding Customer Needs

  • Listening to customers before presenting solutions is key to sales success.
  • Understanding customer pain points allows for better product alignment.
  • Salesmanship involves connecting the product to the customer's situation.

"Every sales meeting we had with customers, I would always insist on the customer talking first."

The quote reveals a sales strategy focused on prioritizing the customer's voice and needs, ensuring that the sales approach is tailored to address their specific challenges.

Customer Management and the Power of Saying No

  • Saying no to customers can be incredibly powerful, especially in the early stages of a business.
  • Unhappy customers have a significantly negative impact, with ten times more downside than the upside of a happy customer.
  • Salespeople may resist saying no, but this honesty can build long-term credibility with customers.
  • It's crucial to assess whether the business can truly make the customer successful before agreeing to serve them.

"powering things you can do is say no to a customer. Especially early on. Unhappy customers are supremely painful. Ten x more downside for an unhappy customer than upside for a happy customer."

This quote emphasizes the importance of avoiding unhappy customers due to their disproportionately negative impact on a business.

Hiring Philosophy: Good vs. Great

  • The debate over hiring a good candidate now versus waiting for a perfect candidate later is challenging.
  • The importance of a hire varies by stage and function within a company.
  • For critical roles like engineering, especially early on, it's important to strive for top talent due to the significant difference in productivity.
  • Other functions may not require the absolute best in the world, but still need to be performed competently.
  • The hiring process should be rigorous to ensure cultural fit and willingness to engage in the company's thorough evaluation methods.

"Engineering hires in particular, especially early on, are something I would sweat really, really deeply, because the difference between a top 1% and a top 10% engineer is pretty dramatic."

This quote highlights the importance of prioritizing top talent for engineering roles due to the substantial productivity differences between the best and the merely good.

Managing the Board: Value and Engagement

  • The CEO should manage both upwards to the board and downwards to the team.
  • It's beneficial to have multiple experienced CEOs on the board for diverse and valuable advice.
  • The board should not consist of close friends who won't challenge the CEO; instead, they should push back and offer expertise.
  • Encouraging communication between the leadership team and the board, rather than funneling through the CEO, can be advantageous for the company.
  • In board meetings, give the leadership team the opportunity to present and engage with board members.

"I really like to foster a lot of communication between the leadership team and the board as opposed to being like a funnel myself."

This quote stresses the importance of direct communication between the leadership team and the board, enhancing collaboration and mentorship opportunities.

Common Mistakes in Board Management

  • Founders sometimes incorrectly use the board as a sounding board for problems without proposing a solution.
  • Another mistake is not sharing bad news with the board, which limits the board's ability to provide assistance.
  • These issues often stem from insecurity and can be mitigated by focusing on the company's success rather than personal success.

"One of the classics is just posing a problem to the board and then saying, what do I do? That's not the board's job."

This quote points out a common error where founders expect the board to solve problems instead of seeking guidance on a proposed plan.

Fundraising and Board Dynamics

  • It's strategic to avoid fundraising immediately after a bad quarter; planning should start at least nine months ahead.
  • Choosing a fair valuation and the best board participation can be more beneficial than simply aiming for the highest valuation.
  • Overpromising to the board during fundraising is a mistake; it's better to set realistic expectations and strive to exceed them.

"We never took the highest valuation that was offered to us. We chose a fair and good evaluation in order to get the best possible board participation for the company."

This quote advises against focusing solely on valuation and suggests that the quality of board participation should be a key consideration in fundraising.

Leveraging Board Experience as a CEO

  • Having experience on boards before becoming a CEO can provide valuable insights into board dynamics.
  • Careful selection of board members and management of board meetings are critical.
  • The CEO should ensure all board members have the opportunity to contribute, particularly those with expertise relevant to the discussion.

"I think it's really helpful to see how the mechanics work, to see what you like about how boards are being managed and what you want to change."

This quote reflects on the benefits of prior board experience in shaping one's approach to board management as a CEO.

Insecurities in Leadership

  • Leaders often grapple with insecurities, and Scott Dietzen admits to facing his own during his career.
  • He experienced impostor syndrome in grad school and his first job, questioning his belonging amid highly intelligent peers and professors.
  • Despite not being the best technologist or business person, Scott's ability to bridge the two areas contributed to his success.
  • Learning to trust his instincts and focusing on the company's success rather than personal accolades helped him overcome insecurities.
  • Hiring people with complementary skills and checking one's ego at the door are strategies Scott emphasizes for effective leadership.

"I certainly had insecurities. In grad school, there's something called impostor syndrome... I've never been the best technologist or the best business person at any of the companies I've been at, but I can straddle them effectively."

"It's all about the company. It's not about you. Right? You're a tool, just like everyone else on the team for the company's success."

  • The first quote reflects Scott's feelings of inadequacy despite his accomplishments and his realization that his unique skill set was valuable.
  • The second quote highlights the importance of prioritizing the company's needs over personal ego, promoting a team-centric approach to leadership.

Impact of Parenthood on Leadership

  • Scott Dietzen shares how having children influenced his leadership style, emphasizing independence and the avoidance of micromanagement.
  • He believes in modeling the behavior you want to see, both as a parent and a leader.
  • Scott tries to embody the qualities he seeks in his team and encourages managers to be individual contributors as well.

"You have this vision of children that they're going to want your leadership. And my own experience, at least, is the opposite, that my children were fiercely independent from birth."

"A lionesse will engage aggressively if she fears for the safety of her cubs, but otherwise she models the behavior that she wants."

  • The quotes reveal Scott's observation that children often display independence, which parallels his leadership approach of not micromanaging and allowing team members to take charge.
  • The lioness analogy signifies the importance of leading by example rather than through direct intervention, unless absolutely necessary.

Leadership and Continuous Learning

  • Scott Dietzen values continuous learning and revisits certain books that offer new insights each time, such as the "20 Immutable Laws of Marketing" and "Innovator's Dilemma."
  • He recommends Yval Harari's books for a broad perspective on humanity's past and future.
  • Scott believes in simplifying complex ideas, a trait he admires in Harari's writing.

"So I've gone back several times to the... I think it's the 20 immutable laws of marketing. That's one first chapter of innovators dilemma is every time I read that, I get something new out of it."

  • This quote shows Scott's commitment to revisiting foundational texts to deepen his understanding, highlighting the value of lifelong learning in leadership.

Personal and Professional Goals

  • Scott Dietzen's current focus is on board work, investing, and mentoring, rather than a traditional job.
  • He aims to contribute to the success of the companies he's involved with, particularly in securing funding and coaching CEOs.
  • Scott prefers the B2B space for its predictability and his personal expertise.
  • His personal goals include having fun, working with people he enjoys, and being a great father.

"My goal is to have fun and work with people that I like and be a great dad."

  • This quote encapsulates Scott's approach to balancing professional and personal life, emphasizing enjoyment, relationships, and family.

Advice and Personal Reflections

  • Scott Dietzen often advises others to view their work as a marathon, not a sprint, but admits he struggles to follow this advice himself.
  • He describes himself as an obsessive competitor and acknowledges the challenge of leading a balanced life.
  • Reflecting on his career, Scott wonders about the paths not taken but expresses satisfaction with his choices and the outcomes.

"I would say when I was in the seat, I would say it's a marathon, not a sprint. I struggle to follow that."

  • This quote reveals Scott's self-awareness regarding his work habits and the tension between advocating for balance and his own competitive nature.

"I'm so gratified with the career trajectory that I've had and the many great people I've gotten to work with and the great markets I've gotten to play in."

  • Here, Scott expresses contentment with his career journey, appreciating the opportunities and relationships he has experienced.

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