Silicon Valley is a funny place. Wily investors bet fortunes on strings of code. Scheming CEOs attract cults of personality. Freemium is at a premium. For three seasons and counting, HBO's Silicon Valley TV show has captured the humour of operating in this iconic business landscape. We've seen how the show's eclectic cast have floundered their way to tech superstardom (and back again). But beyond the laughs, there are clear lessons to help entrepreneurs and their growing companies cope with some of the biggest problems we're seeing in tech today.
Know which employees are the real deal
"This is going to sound super mean, but the other night he was sleeping and I was just staring at his face and all I could think was, he's utterly useless." The plain-speaking Dinesh was speaking of his colleague, Nelson, a.k.a. "Big Head." Soon after, Richard, the newly minted CEO of Pied Piper, has to let his friend go.
A running gag then follows soft-spoken Big Head's effortless rise through Silicon Valley's top company, Hooli (a fictional version of Google). Big Head has nothing to offer, but is nevertheless promoted again and again, until he is finally let go… with a $20-million severance package.
Don't reward employees for ineffective behaviour. To avoid this, identify the employees who are truly making a difference. Engage employees in authentic conversations. Find your change agents. Next, challenge them by putting them in charge of new ideas. Push them into leadership positions, maybe even before they are ready. Hire slow, fire fast.
Focus on innovation, not competition
Hooli is constantly scheming to swallow up the competition. They spend huge efforts trying to buy out the tiny-but-promising Pied Piper startup. When that doesn't work, Hooli tries to copy their signature product. Finally, Hooli brings in the lawyers to try to sue the tiny upstart. It's petty – and worse, it's very pricey.
Truly innovative businesses don't spend any more time talking about their competitors than absolutely necessary. Instead, they build the technology that will put those competitors out of business. Getting into a cat-and-mouse game just leaves many firms tangled up in someone else's business model. Create a category of solutions that no one else is pursuing yet and define it, your way.
Be strategic about growing or selling out
As Pied Piper grew they had a choice to make: pursue the long-term vision of building their own company, or sell out for a quick payday. Early on in the series, Pied Piper gets an offer from Hooli's CEO: $4-million for a buy-out. Richard has to consider it, but soon an alternative shows up: a lesser investment of just $200,000, but for only to sell 5 per cent of the company. Richard takes the smaller offer because he knows that Pied Piper has far more potential than a quick exit.
Taking what seems like easy money could prevent you from getting the much larger pot just beyond your reach. Every business, when it reaches a certain stage, has a choice to make. Did you start the business to make money, or to "build something to change the world" (as Hooli's CEO might put it)? Know your exit strategy right from the start, before you go big.
Transitioning from the founder to incoming CEO
Finally, at the end of season two, Pied Piper is on top of the world. They've overcome a costly court case and look to be ending their losing streak with investors. Then Richard gets the call. The founder is fired.
This is one of the least-talked-about aspects of a maturing software company. Founder CEOs are rock stars, until they fail to scale. Sometimes you need to bring in an experienced outsider to grow the company.
This transition in leadership is often fraught with tension, frustration, and power struggles that come with breaking up the band. The incoming CEO needs to make sure values are aligned throughout the growing team. Roles may need to be clarified. Finally, the new leader needs to pick their battles if they're going to last.
Track the right metrics for success
As season three closed, Pied Piper celebrated a 100,000-download milestone. Unfortunately, their daily active user profile was in bad shape – and as it turned out, that's the metric that mattered. Later, a potentially fraudulent move to hide the metrics very nearly killed the company.
No one number can tell you if your business is on the right track. You have to develop a balanced scorecard that tracks separate but connected metrics, to give a holistic view of your business.
The troubles facing the team in Silicon Valley remain fictional, but these kinds of challenges can be no laughing matter wherever we're doing business. Keep these lessons in mind to avoid turning your company's story into a real-life drama.
Laurie Schultz is CEO of ACL, a firm that provides data analytics, governance, risk and compliance software.