Why CTOs Should Know Accounting

By Stephen Forte,

No one talks about how important it is for your CTO to learn the business side of things. That needs to change. If you’re a co-founder or senior executive at a startup or growth stage company, you need to be more than just an expert in your area. I know that’s asking a lot. Becoming an expert is a massive task. But it’s not enough. Each senior leader needs to be familiar with engineering, marketing, sales, and accounting if you want to maximize your chance for success.

 This concept has been popularized for non-technical founders for some time, through efforts like Mayor Bloomberg’s Learn to Code and Business Week’s magnum opus What is Code. But I’ll wager if you’re a CEO, you suck at social media. You probably don’t understand it, even though it’s the future of customer engagement. That needs to change. And this change needs to extend beyond giving non-technical founders technical skills. We need to help CTOs get business savvy.

Perform a Self Assessment

 If you had to take over any of your company’s functional roles (marketing, sales, etc.) for a short period, would you be able to lead effectively? If the answer’s yes, great. Proceed. But if not, you’ve identified a major need.

Things happen, and you need to prepare for contingencies. Not only that, how can you screen and hire the right person if you can’t speak the same language?

Non-technical CEO’s should code so they can:

  • Understand how the sausage gets made
  • Talk to their team with the right vocabulary (i.e. Agile, Scrum, and Kanban)  

If you’re the CTO, don’t you want to be relevant in business meetings? You won’t be as strong in marketing as your CMO, but you can add value and influence decisions.

If you outsource business decisions to your non-technical co-founder, there will be consequences. Best case scenario? You disengage from the business side.

Worst case: your disengagement leaves your CEO to feel lonely and stressed. And then one day, you wake up to a phone call from that person saying, “Hey, we’re out of money.”

Don’t let that happen to you.

Jump into the Business Side

 I love founding teams comprised of engineers because:

  • Less technical risk
  • Solve their own problems
  • Shared background with me

I’ve been a CTO many times in my career, and I’ve exited multiple companies. But heading back to grab my MBA still made me a better CTO.

I don’t think all developers should get an MBA even though, unlike many of my peers, I think there’s value in one. Instead, I’d suggest creating your self-study MBA.

Design Your Personal MBA

Here are my suggestions for a practical education that will make you a better leader in every functional area.

Accounting

 All techies should read The Essentials of Finance and Accounting for Nonfinancial Managers by Edward Fields (who was my Accounting professor in business school).

It’s not exactly A Song of Ice and Fire, but you shouldn’t want to put this book down. You’ll get familiar with:

  • Balance sheets
  • Income statements
  • Cash flow statements
  • Budgets and forecasts
  • Annual statements

I know. It’s dry. But the book is so necessary.

If you want to supplement it, take an online accounting and finance crash-course like this one at Udemy.

Marketing

 Al Ries and Jack Trout wrote The 22 Immutable Laws of Marketing. The book was published over two decades ago, but it’s still essential. Learn from real world case-studies.

And remember this lesson: if people don’t read your website or emails, they’ll never buy your stuff.

To improve your copywriting, try the great Gary Halbert’s Boron Letters.

Sales

 Sales makes the world go round. Here are two great books:

And finally, for our non-developer friends who’ve stuck through this:

Engineering

 Read the Bloomberg article What Is Code that I mentioned before. It’s an interactive history lesson that walks through everything developer and even delves a little into philosophy.

At the very least, you should get familiar with HTML & CSS so you don’t need to bother your developers on trivial tasks. Brush up over at Codecademy.

  You’re never going to be an expert in all of these roles. But at a minimum, you need to be conversational.

Have a bias for action and carve some time out for learning. Let me know how it goes.

* Image by Flickr user foam 

  Category: People, Startup Tips
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Scar Tissue

By Tytus Michalski,

Building a startup is intense and going through the many challenges creates scar tissue. This is not physical scar tissue, it is intangible.

Although it may seem like this would be difficult to identify, it is generally quite clear when someone has this kind of scar tissue. One reason that many investors prefer experienced startup founders is because they typically have scar tissue.

When we started PMA in 2002, the macro environment appeared to be terrible. Everyone was pessimistic and building a startup at the time was definitely a contrarian idea. Nevertheless, our first few months went relatively smoothly.

Then SARS hit Hong Kong. There were real heroes working in the hospitals, putting their lives in danger everyday, and many did not survive. In comparison, we were actually in minimal physical danger. Shops and restaurants became deserted, which was especially noticeable given that the population density of the city is among the highest in the world. In addition to the health issues and the economic impact, Hong Kong went through a massive crisis of confidence, and we were certainly affected. I would like to say that we all had enough foresight to be practically optimistic but that was not the case. We were simply hunkering down to make it through the challenge.

Eventually, we emerged from the crisis, and Hong Kong rebounded. There were many more challenges building PMA, but that experience helped us to become more resilient and eventually the company was acquired in 2006 for over US$200 million.

But the intangible scar tissue never went away. Even writing about it now, the impact is still there. More generally, everyone who was connected to SARS and Hong Kong during that time was affected in some way.

While building a startup is difficult, events like SARS remind us that there are bigger challenges to deal with in life. Many first time founders have already experienced challenges far greater than building a startup. They have intangible scar tissue.

  Category: Culture, People
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Habits are Your Company Culture

By Tytus Michalski,

There is no consensus on company culture, so some companies do not even pretend to have one. Their mission statements are “achieve US$1 billion in market value by 2020” or “maintain sales growth of 20% per year”. In addition to being a failure of the imagination, this approach is unlikely to achieve even these narrow definitions of success precisely because of the lack of culture.

There are more companies with relatively inspiring official mission statements such as “innovation for a better future” and “making the world healthier”. These are complemented by statements of values, such as “Respect, Integrity, Communication and Excellence“. However, as Enron proved spectacularly, this is not enough.

The reality is that organizational culture is not created by the slogans on a website or giant posters hanging on office walls. Culture is created by everyday habits.

Why are habits so important? Our memories are actually not very good. Of course, they can be trained over time: repeat to remember. But to really have an impact, memories need to change behaviour, and that means habits.

Habits are simple ideas but messy in reality. For example, the idea of curiosity. Many companies would benefit by having more curiosity as a core value. But how would you turn curiosity into a habit, a true value, rather than simply an empty statement?

First, start with a small win. For example, Friday Pizza Questions, a Friday afternoon pizza session when people can sit down and ask interesting questions. No answers, just questions. Over time, you will build up a list of questions and start to notice patterns. In addition, people will get into a habit of asking questions just for the sake of asking questions. They will start to ask more questions during the week. Build from there.

Friday Pizza Questions contains the three core elements of a habit cycle:

friday pizza questions

1. Trigger / cue: Friday afternoon

2. Routine: ask a question

3. Reward: mmm, pizza

Most importantly to build a lasting habit, you then have to repeat until it is automatic.

Having an inspiring mission statement is a starting point to build a successful culture, but mission and values must also align with habits. Start small, then repeat and grow.

  Category: People
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