Chris Zook: Why founders are the future

I came across a quote recently that struck me as very powerful. It said, “The solutions to some of our most complicated problems are often too simple to believe. We either don’t carry the courage to implement them or we doubt the power of simplicity.”

Chris Zook, best-selling author and advisory partner at global management consulting firm Bain & Company, joined us at ONE: The Alltech Ideas Conference (ONE19) to discuss the critical role of simplicity in business and the importance of embracing the founder’s mentality.

According to Zook, the Founder’s Mentality^® was created through the convergence of three factors:

1. The speed of change in the world, which can change business strategies and decisions in a plethora of ways. Interestingly, two-thirds of executives recently surveyed reported believing that their main competitor in five or six years will be a different company than the one they primarily compete against today.
2. Despite the widespread feeling that we are currently experiencing a period of high growth rates and low unemployment levels, in reality, only 9 percent of companies worldwide have achieved even a modest level of sustained and profitable growth over the last decade. While bursts of growth are common, sustaining growth is rare.
3. The results of five years of researching and studying thousands of companies showed that, right now, more than 80 percent of breakdowns in the marketplace (e.g., bad product launches, losing market share in key segments, failure to be as innovative as key competitors) can be traced back to pre-existing, internal conditions that, very likely, could have been easily remedied by the company itself.

The paradox of growth

Growth is a key factor to measuring the success of a business, but Zook pointed out that, ironically, “growth creates complexity, and complexity is the silent killer of profitable growth.” Along with co-contributor James Allen, Zook developed the concept of the founder’s mentality, which is based on the idea that companies can become global leaders without losing the principles that first led them to success.

It’s worth considering that successful companies are often considered revolutionary in their respective industries when they make their debuts. They are quick to adapt, make decisions and forge ahead. Their primary focus is their customers, and they deeply value simplicity. However, as many companies begin to grow and achieve scale, they lose sight of the core set of beliefs and values that originally helped them prosper, and this is generally when significant problems begin to arise. Zook and his colleagues’ research has shown that the majority of the handful of companies that have sustained 10 or more years of continued, profitable growth have either maintained or restored (as was the case with Starbucks) their founder’s mentality.

Success from the inside out

As Zook noted, “Strategic problems outside often reveal deeper challenges and the root causes of breakdown inside.” The Founder’s Mentality approach outlines three primary indicators of a business’ deep internal health and preparedness for the challenges of growth, with Zook stating that a company is 15 to 20 times more likely to be a top performer if they present and value these elements:

1. Front-line obsession: Every founder starts as an employee on the front line, as was true with our own Dr. Pearse Lyons. He was the first person in the office every morning, and he knew the company and the science behind our products better than anyone. He was Alltech’s first salesperson, and he never stopped thinking of himself as such. Many innovative ideas stem either from working directly with customers or through observations from front-line employees; it is exactly these employees, however, who often begin to feel the most alienated as companies grow. A company’s biggest advocates should be the people on the front line of the business.
2. A sense of insurgency: Many founders simply start with an innovative idea and a team of passionate people. Insurgency involves building for the long-term and establishing a mission that everyone in the company understands and finds inspirational. Unique capabilities are also instrumental. According to Zook, only 13 percent of American business employees report feeling very inspired in or by their workplace. Companies with a bigger percentage of employees who report feeling inspired are often well-rewarded, as motivated staff will generate far more energy and innovation for a company than their unmotivated counterparts.
3. The owner’s mindset: The founder is also typically the owner of the company and sees the business as their baby. As organizations grow, however, founders and their employees often begin to lose that sense of pride and ownership, which is critical because it translates into a willingness to take responsibility, rather than hiding from blame, which can happen often in large, bureaucratic organizations. The owner’s mindset involves a distaste for all types of politics that differ from the founders’, but which contaminate businesses. It also involves an obsession with speed — to act and make decisions with a sense of urgency. When organizations begin to neutralize these integral aspects, they become vulnerable to younger, more invested insurgents.

Four final thoughts

Zook concluded his presentation with the following recommendations:

1. Over-invest in your insurgency and what makes you unique and more than “just another company.” Create mini-founder experiences that allow you to empower and strengthen your workforce.
2. Use the Founder’s Mentality to assess the inner health of your company. Bake its elements into how you measure yourself.
3. Launch periodic assaults on excess complexity, which is the silent killer of profitable growth and employee energy.
4. Use micro-battles to create microcosms of the future. Accelerate the speed of focused innovation and scale across the organization.

He also shared the “Day 1” philosophy of Amazon founder and CEO Jeff Bezos as a prime example of how to maintain a founder’s mentality: “Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1.”