Startup Lessons: How Stripe Created A $35 Billion Giant

This week Stripe—a top fintech payments company—raised $250 million at a valuation of about $35 billion. This was up about 50% since its prior round of funding earlier in the year.

“Every fintech startup aspires to build a product that clients love,” said Matt Burton, who is a partner at QED Investors. “Stripe has now done this in multiple fintech categories and shows no signs of slowing down. On top of this, they are winning the recruiting war with the top talent choosing them over everyone else. Truly impressive.”

Back in 2010, two twenty-something Irish entrepreneurs, John and Patrick Collison (they are brothers), launched Stripe. The main reason was the frustrations they experienced with online payment systems.

So John and Patrick initially joined Y Combinator to incubate the business and they would then go on to get $2 million in funding from Peter Thiel, Sequoia Capital, and Andreessen Horowitz in 2011.

“Stripe originally built an incredibly simple and innovative approach to online payments,” said Eytan Bensoussan, who is the co-founder and CEO of NorthOne. “A few lines of code and developers could integrate payment processing into a website or app. This was a departure from other financial service integrations that could take months or years. And it empowered the company with massive credibility and loyalty with the user base. Stripe built exponential enterprise value from that point forward by not only protecting its core offering but also by methodically expanding into new areas with the same level of simplicity. The key, however, was that each new area, be it subscription management, invoicing or lending, has been adjacent to its flagship product. This has created more points of entry for new customers and more cross-sell opportunities for existing ones.”

While having a standout service was critical, there were other factors that explain the success of Stripe. Keep in mind that the company pursued a distribution model that was obsessive on the needs of the customers.

“Stripe caught on because it didn’t sell to companies,” said Dmytro Okunyev, who is the founder of Chanty. “It sold to developers. That is, Stripe offered an alternative to PayPal and Authorize that was so much easier to implement that developers around the world were naturally inclined to use it.”

So yes, Stripe essentially built a thriving community of developers, which created many champions of the platform. “The smartest thing that Stripe did, apart from targeting the payment technology space, was to become a developer-first product,” said Sayid Shabeer, who is the Chief Product Officer of HighRadius. “They used the word-of-mouth growth engine of the developers to create a community that was self-sustaining.”

It also helped that Stripe broke down the walls of the traditional business model for the payments industry. “The company was wise to offer transparent pricing right from the start,” said Ian Wright, who is the founder of Merchant Machine. “This should not be confused with the best pricing, since Stripe is not the cheapest solution in the market. However, the payments industry was and to a degree still is stuck in an opaque pricing mindset. This makes Stripe standout as you know exactly how much it’s going to cost, which for most startups is better than trying to negotiate with a legacy payments company.”

All in all, Stripe has executed near flawlessly on an aggressive disruption strategy. “The payments industry was primed for disruption when Stripe came onto the scene,” said David Blumberg, who is the founder of Blumberg Capital. “Stripe communicated their benefits and differentiators in these categories early on and spoke directly to interoperability and ease of use, a major concern to many small businesses across many industries.”

SmileDirectClub: Lessons For Entrepreneurs

On the first day of trading for the SmileDirectClub IPO, the performance was downright awful, with the shares plunging about 28%. But things were much better the next day. The stock rose about 12%. Despite all the volatility, SmileDirectClub was still able to raise a hefty $1.35 billion.

Founded in 2014, the company has certainly been on the fast track as it has aggressively disrupted the traditional orthodontic market. According to the S-1:

“Our member journey starts with two convenient options: a member books an appointment to take a free, in-person 3D oral image at any of our over 300 SmileShops across the U.S., Puerto Rico, Canada, Australia, and the U.K., or orders an easy-to-use doctor prescribed impression kit online, which we mail directly to their door. Using the image or impression, we create a draft custom treatment plan that demonstrates how the member’s teeth will move during treatment. Next, via SmileCheck, a state licensed doctor within our network reviews and approves the member’s clinical information and treatment plan. If the member is a good candidate for clear aligners, the treating doctor then prescribes custom-made clear aligners, the member has the opportunity to review a 3D rendering of how their teeth will move over time and, if the member decides to purchase, we then manufacture and ship the aligners directly to the member. SmileCheck is also used by the treating doctor to monitor the member’s progress and enables seamless communication with the member over the course of treatment. Upon completion of treatment, a majority of our members purchase retainers every six months to prevent their teeth from relapsing to their original position. We also offer a growing suite of ancillary oral care products, such as whitening kits, to maintain a perfect smile.”

Because of this innovative model, the company is able to charge $1,895 for its services and high-quality clear aligners, versus the $5,000 to $8,000 that a dentist may charge. The SmileDirectClub also provides affordable payment plans and has insurance arrangements with United Healthcare and Aetna.

In light of all this, it should be no surprise that the company has been growing at a torrid pace. Note that last year SmileDirectClub posted revenues of $423.2 million, up a sizzling 190%.

So then what are some of the lessons for entrepreneurs? Let’s take a look:

Phil Strazzulla, the founder of SelectSoftware:

SmileDirect was able to decrease pricing due to a new supply chain and direct-to-consumer strategy that piggy backed off a nascent and underdeveloped Instagram ad ecosystem. This led to cheap and scalable customer acquisition. They were also able to expand the market due to their cheaper pricing and direct-to-consumer marketing that allowed for customer segments that weren’t historically thinking about this type of product.

Gretchen Halpin, the co-founder of Beyond AUM:

They have removed all friction points from the process, such as:

Braces are expensive – AFFORDABILITY

Appointments are hard to schedule – EASY DELIVERY

Vanity on how braces look – INVISIBLE

Quality and results – TECHNOLOGY

Point of purchase ease: ONLINE AND STORES

Price and finances – AFFORDABLE AND MONTHLY PAYMENTS

Jim Berryhill, the CEO and co-founder of DecisionLink:

When you believe there is a huge unmet need in the market and you figure out a solution for addressing that need, you ideally surround yourselves with others who believe and understand why that gap exists, how your solution can make a big difference in the lives of your target customers and then figure out the best way to deliver that solution to them. It sounds pretty straightforward, but it takes a lot of energy, determination and persistence to make it happen. You also need to get lots of great people to help you get from the idea to the actual solution and then sell the heck out of it!

Becky Beach, the owner of MomBeach.com:

We live in a “delivery culture” where everyone enjoys food, videos, clothes, and more goods being delivered to our homes. I used InvisAlign through my dentist about 4 years ago and it cost $4,000. I had to schedule several trips to the dentist, which caused me to miss lots of work when I had a full-time job. With the SmileDirectClub, you don’t need to go to the dentist every two to three weeks for a new tray anymore. The trays are sent to your door, instead.

There are plenty more openings in the market for future offerings that an entrepreneur could discover. Think of what problems exist in the market for consumers and how you could solve them.

Ways To Successfully Pitch The Media

I get a fair amount of media pitches in my inbox. I’d like to think this is due to my own inherent popularity. But of course, the main reason is that I write for Forbes.com!

Some of the pitches I receive come directly from the founder, which is fine with me. But most come from a company’s PR agency.

For the most part, the pitches are solid and helpful. But as with anything, there are times when things go off the rails.

Then what are some of the ways to boost the odds of getting coverage? What should be avoided?  Well, for me, here are some approaches that work:

Avoid Follow-Ups: I really don’t have the time to respond to all pitches. And besides, I’m pretty sure many of them are being sent to multiple writers anyway.

But sometimes a PR person will follow up with another email, writing something like: “I’m resending this to make sure you did not miss it.” Oh, and this may not be the end of it. Sometimes I get three or even four of these emails.

Note that I do check and retain all my emails. And in some cases, I revisit them. There have been times when I have gone back to an email months after it was sent and used the source for a story.

Relevancy: I think this is most important for a pitch.  Now this does not mean you need to read everything from writer.  Rather, spending time going over headlines is a good approach.

Facebook @ 15: Takeaways For Entrepreneurs

In February 2004, Mark Zuckerberg launched a fairly basic site, called TheFacebook.com, which allowed Harvard students to connect. At first, he considered it an ordinary project. But of course, the site would quickly become a growth machine.

Yet there were still many challenges for Zuckerberg. In the early days, he had to fend off fierce rivals, such as Friendster and MySpace. There were also challenges like scaling the infrastructure and dealing with privacy snafus.

Despite all this, Zuckerberg was able to win the war – and build one of the world’s most valuable companies.

So then, what are some of the lessons for entrepreneurs from this amazing journey? Well, let’s take a look:

Ronn Torossian, CEO and Founder of 5WPR:

“Right from the start, Facebook did an outstanding job of hiring the right talent. As an entrepreneur, you have to trust other people to work on other components of your business—as much as you want to, you can’t do everything yourself. Take Sheryl Sandberg for example. When Zuckerberg hired Sandberg, he gave himself the room to spend more time on his true strengths – improving the Facebook platform – while she ran more of the business operations like PR, expansions, communications, etc. A company is only as good as the people who work there, and Zuckerberg has always invested in hiring the right people to continuously grow and keep things fresh. Zuckerberg’s focus has always been on two things: having a crystal clear trajectory for the company and a great team driving it in this direction.”

Magnus Larsson, CEO of Rebtel:

“It’s impressive to see how Facebook has continued to bet on its original product, platform and vision, while adding value for the company and users. Mark wrote in a letter to his investors before becoming listed, ‘Facebook is created to make the world more open and connected. Facebook aspires to build the services that give people the power to share.’ Staying true to that vision led to two of the best acquisitions ever: Instagram and WhatsApp. Consumer tech companies should always keep an eye on the new kids on the block to avoid becoming antiquated. If someone else beats you to it, be open to partnerships or other ways of working together. Not every newcomer has to be a threat.”

From Ryan Kelly, the VP of Marketing at Nanigans:

“Facebook has truly turned into an advertising giant over the last fifteen years. What has enabled this is threefold: 1) the platform’s massive reach 2) the identity data within it and 3) the enormous internal investment around Facebook’s ad tech stack. While the first two points get most of the attention, what really enabled them to stand out from the rest of the players in the space was, and still is #3: the innovations around ad technology.

“2012/2013 was really the inflection point. ‘The Social Graph’ was unleashed in 2012 giving Facebook’s advertisers access to user behavioral data like never before. A year later Facebook introduced their conversion pixel, website custom audience pixel, lookalike audience tool, and video ads. This is where many advertisers went from trying to get ‘likes’ or ‘clicks’ to actually acquiring revenue generating customers.

“While it’s true that Facebook invented the news feed as we know it and has had many innovations on the consumer facing side of its business, the ad platform is the main reason the company is where it is today. And while the ad blueprint and tech behind Facebook’s success is often times imitated by their social competitors, it’s never been truly duplicated.”

Gil Sommer, Head of Product at Connatix:

“Facebook has shown us that listening to users, understanding their needs and adjusting products to their liking is a winning formula. Just look at Stories— this format was not invented by Facebook. Actually, they initially thought Stories wasn’t a great product and tried to provide alternatives. But their users were not happy, and Facebook listened. They understood that what makes the Stories format great is its immersive nature, and the freshness of the content. Facebook decided to react in a smart way. First, they adapted the format. Nonetheless, they still kept focus on their core competency (massive scale of visual UGC). This combination is one of the most successful stories — pun intended — in Facebook’s history and clearly they were able to outperform the original format. Facebook has shown us that adjusting course to your user’s needs is always a solid strategy. Keeping your core competencies in the process makes it a winning one.”

Robert Levenhagen, CEO and Co-Founder of InfluencerDB:

“From the relatively early stages, Facebook benefited a great deal from the environment of business and end-user applications around their platform. Their open API policies and growth attracted thousands and thousands of partners making their platform and products ever more user friendly. The downside of this open approach and hypergrowth showed when bad players took advantage of the opportunities and turned the good intention into bad results for the users and the general public. But Facebook has taken a lot of steps to right this wrong ever since.”

Rebranding Your Company: Why And How To Do It

This week WeWork announced a rebranding. The company will now be referred to as the We Company. This also has come along with a $2 billion investment from SoftBank Group.

“The We Company is an ambitious strategy to broaden the company’s aspirations from places to people,” said John Gerzema, who is the CEO of The Harris Poll. “And it’s a sound move because WeWork remains as a famous sub-brand the same way Google is to Alphabet. This strategic evolution should please both investors and customers.”

Yet it is still risky. “A rebrand tends to fail when the name has no discernable relationship to the companies beneath the new umbrella,” said Brady Donnelly, who is the Executive Director of Consumer Experience at FIG. “I think the most famous recent example is probably when Tribune Publishing changed its name to Tronc, which was an awful word. Then, after being ridiculed, management changed it back. The reaction was made worse by the fact that the business itself was failing, and the name change just seemed like an attention grab.”

Why Should A Company Do A Rebrand?

According to Joe Walsh, who is a senior partner at Finn Partners, there are three main reasons for a rebrand:

  • Your company and/or its markets have changed and the current brand does not reflect who the company is or aims to become.
  • There is a merger. In fact, this is the most common reason.
  • The company’s suit of clothes is out of date, unbecoming or otherwise out of step with the times.

An example is Logitech in 2015, when the company was in the midst of a turnaround and needed to refresh its brand. “Part of our turnaround was putting design at the core of every product we created, and it was critical that our brand communicated that shift to consumers,” said Alastair Curtis, who is the chief design officer for Logitech. “Through the rebranding process, we re-imagined our logo and established a new logomark – Logi – with bold colors and an updated look. By evaluating every aspect of our brand, its history, and where we wanted the company to go, we were able to align our business turnaround with the bold transformation of our brand that consumers know today.”

Planning For The Rebrand

A rebrand should not be done hastily. It’s just too important of a decision.

To improve the odds of success, it’s a good idea to conduct a brand audit. This means having surveys, customer interviews, brand sentiment analysis and comparisons of NetPromoter Scores.  Yet it’s also critical that the decisionmaking not get bogged down either.  Yes, it can be a tough balance to strike.

Consider Bombfell, which went through a rebrand in 2011. The main reason was that the company had undergone a transformation of its service offerings and client base over the years.

“We first conducted several valuable exercises across the entire organization to codify our core values,” said Sandro Roco, who is the Director of Strategic Initiatives at Bombfell. “We wanted to hear directly from our employees and in their voice what made Bombfell unique. That said, while it was important to include as many voices as we could early in the process, we learned the hard way that the decision on the final brand direction had to be left to just a few key decision makers. For us — and we imagine most smaller companies — this ultimately came from the founders.”

All in all, it was the right choice, as the rebrand was a key for growth.

“Our belief is that the strongest brands today stake out a unique position and rally the company, customers and other evangelizers behind that voice,” said Sandro. “Unfortunately, while well-meaning, we found the rule-by-consensus approach too often smoothed out the edges necessary to creating a distinct brand.”

Tech CEOs: This Year’s Favorite Books

While writing my posts Forbes.com, I have a chance to talk to many CEOs.  Often I will ask them what books they have read recently. If anything, this gives me a chance to check out what’s good in the market. Let’s face it, there are thousands of books that come out every year (which has accelerated because of the self-publishing revolution).

Then what are CEOs reading now? Well, I’ve put together a list. Here’s a look:

Leading at the Speed of Growth: Journey from Entrepreneur to CEO

Tien Tzuo, CEO and co-founder of Zuora:

I hesitate to give away a great secret, but “Leading at the Speed of Growth,” by Katherine Catlin and Jana Matthews, is absolutely mandatory for anyone involved in a high-growth organization. Your job changes dramatically as your company expands, and this book does a great job of identifying all the relevant priorities, skill sets and red flags by growth stage. Plus, all the personal stories from entrepreneurs in the trenches are really great. Even though it’s almost twenty years old, it’s still incredibly relevant in light of all the IPO and M&A activity we’ve been seeing lately. When you’re running a subscription-based business model, you find yourself dealing with a lot of growth-based “nice problem to have,” and this book helps answer those problems.

The Tyranny of Metrics

Sridhar Vembu, CEO and founder of Zoho:

The Tyranny of Metrics by Jerry Muller is the book I enjoyed most this year.  We live in times when metrics and data have been elevated to God-like status. This book is an excellent antidote. Metrics matter but cannot substitute for human judgment.  Goodhart’s maxim says when a measure becomes a target, it ceases to be a good measure. Anyone who has tried to institute measure and manage systems for people discover this all too soon, if they keep their eyes open. People game metrics.  That is why that ineffable quality known as good judgement is indispensable in a manager. I tell my managers that if we could reduce all management to metrics, we would need no human managers at all, and there goes my CEO job!

Team of Teams: New Rules of Engagement for a Complex World

Kate Dewald, CEO of Oncue:

At its core this book is about adapting to changing times and how to build an organization for the future. Full of real-life examples this book explains the essentials for scaling high performing teams. It provides practical advice and anecdotes for getting disparate groups to work together for a common goal.

The Score Takes Care of Itself: My Philosophy of Leadership

Vineet Jain, CEO of Egnyte 

Bill Walsh was not just a profound leader of the San Francisco 49ers organization, but he was a profound leader in life. Nearly all of the principles he applied to coaching could be applied to my leadership of Egnyte. One principle that has always stuck with me is this, “Others follow you based on the quality of your actions rather than the magnitude of your declarations.” This speaks volumes about setting the tone for the culture of your organization. As a leader, I must put forth my best effort and show the rest of my company the level of effort and professionalism I expect from them. I cannot expect my team to operate at a high level if I am showing up late to meetings, being distracted by my phone, or taking extended periods of time out of the office. This principle proved to be a real affirmation for me.

And one other principle that I took to heart and have since adopted for our team at Egnyte is this: “There is no guarantee, no ultimate formula for success. It all comes down to intelligently and relentlessly seeking solutions that will increase your chance of prevailing.” This principle applies to everything we do throughout the entire company, from HR to finance, to marketing and sales. We do not simply look for one right answer and move on, we relentlessly pursue the best possible ways we can provide value to our customers and never settle for mediocrity. In return, our customers trust us and believe in us to always be doing what is best for their business, which leads to our ultimate success as a company.

Shoe Dog: A Memoir by the Creator of Nike

Stacey Epstein, CEO of Zinc:

When we look at hugely successful businesses like Nike, it’s easy to assume that it was high growth and smooth sailing from the get go. I loved Phil’s candor and masterful storytelling as he took us through the journey of the company. The challenges they faced, from competition to manufacturing to legal battles to cash flow, even as they were thriving, made some of my own CEO challenges seem trivial. And his highlighting of the key people in the journey reinforced the importance of loyal, passionate talent. Ultimately, it was Phil’s determination and relentlessness that made Nike what it is today, and I felt more inspired after every chapter.

Grit: The Power of Passion and Perseverance

Stephanie Lampkin, CEO of Blendoor:

The most successful among us are those that have a strong sense of their internal locus of control. Inherent talent or intelligence won’t get you far if you don’t have an optimistic disposition about your ability to control the fate of your life. This has helped get me through a lot of challenging moments amidst fundraising, building a product and a team. There are so many externalities that get in the way of accomplishing these goals such that it seems easy to attribute it to one’s own inherent weaknesses or incompetence. It requires a daily consciousness of ‘grit’ to get to persevere.

Measure What Matters: How Google, Bono, and the Gates Foundation Rock the World with OKRs

May Habib, CEO of Qordoba:

I literally took the playbook and adapted the principles the next day, and it’s been 3 quarters now of much more transparency and accountability across our teams (sales, marketing, product, engineering, customer success).

The data shows that tracking what matters actually works. A study referenced in the book showed that people who wrote down their goals and shared them with others attained 43% more of their objectives than people who didn’t record them. In fast-growing startups, it’s essential, foundational work to record and track progress to objectives.

The book outlines Doerr’s approach to OKRs — or “objectives and key results,” the framework first developed by Andy Grove at Intel, where Doerr was a young recently-minted MBA, and then famously applied by Larry and Sergey at Google, where Doerr was famously an early board member. The power of OKRs comes down to 4 things, which Doerr calls “superpowers”:

  • Focusing on and committing to only the most essential priorities
  • Aligning the organization against those priorities in a transparent way
  • Tracking progress for accountability
  • “Stretching for amazing” – what it means to exceed the objectives outlined

Definitely a must-read for anyone looking to supercharge a 2019 planning process.

Algorithms to Live By: The Computer Science of Human Decisions

Clara Shih, CEO of Hearsay Systems:

It describes, in plain English, important computer science concepts and applies them to everyday life. Even having studied computer science in college and grad school, it has helped me live life more efficiently and effectively by thinking about what algorithms, which are really just recipes and best practices, could apply to everything from cooking and shopping to parenting, organizing your kitchen, and making time for friends and your spouse.

Our brains use algorithms unconsciously all the time to formulate “gut” feelings and make quick decisions with incomplete data. It’s a great read for techies and non-techies alike!

Zuckerberg: How He Can Get Facebook Back On Track

This year has been a hot mess for Facebook. It’s actually getting tough to keep track of the controversies! The latest came this week, as the social media giant admitted that photos of up to 6.8 million users could have been disclosed because of a software bug.

Granted, Facebook continues to grow its user base, despite the privacy problems. Yet Wall Street is getting antsy. Since July, the shares have plunged from $210 to $144.

“Facebook rose to success at a time when most people made clear how little they cared about privacy – we would post anything, and we enjoyed the freedom and the sense of connection,” said Dr. Mike Lloyd, who is the CTO of RedSeal. “Unfortunately, like a vine growing up a building, Facebook has spent years attaching itself to the way people used to behave.  Its business model depends on people remaining incautious, and insensitive to privacy issues. But people are changing as we encounter more of the downsides of social networks.  We are getting more suspicious and less trusting.”

Yet all this is not to imply that things are hopeless for Facebook. The fact is that CEO Mark Zuckerberg has – since 2004 – been quite adept at dealing with major challenges. He has fended off many fierce competitors (like MySpace, Friendster and Snap), pulled off smart acquisitions (such as for Instagram and WhatsApp) and made a wrenching transition from the desktop to mobile.

Then what should Zuckerberg do now? What are the strategies to pursue?  Well, first of all, he needs to focus much more on transparency. A good start would be to provide a full accounting of what happened in the 2016 election.

“Facebook’s response to this crisis — described by reporters as ‘delay, deny and deflect’ — is where Facebook crossed ethical lines,” said Eric Silverberg, who is the CEO and co-founder of SCRUFF. “There is only one way out of this: Own your mistakes, apologize, and publish a complete and candid account of what happened, who knew what, and when. Rather than openly explain what went wrong, Zuckerberg and Facebook have chosen instead to allow all bad news to drip out one story at a time, each time ignoring or attacking the story. This strategy simply adds fuel to the fire of skepticism and prolongs the public shaming they now endure.”

Next, Facebook needs to focus on clarifying and enforcing its censorship policies. For the most part, the company has been too reactive and even random – which only adds to the problems.

“Facebook needs to recognize that its mission of ‘connecting the world’ can have disastrous — even if unintentional – outcomes,” said Silverberg. “A clear content policy is the only way to achieve lasting stability for their platform, even if this means that some people will be alienated and leave. If that means radical openness with persistent harassment, fine; if that means a sanitized and restricted ‘walled garden,’ fine. Just decide.”

Finally, Facebook should aggressively leverage its technology infrastructure and talented engineers in a “moon shot” effort. In other words, look at the current situation as the company did with the challenges of transitioning to mobile.

“Facebook, like so many of the other social media giants, continues to dig itself into a hole too deep for human hands to dig themselves out of,” said Richard French, who is the CRO of Kryon. “Utilizing AI and robotics would mean that Facebook will reduce the room for human error. The company is facing a global crisis of mistrust yet still largely relies on humans to flag and review content. A quick solution would be to implement AI to automate processes and take appropriate actions without human error.”

Leadership Lessons From Hollywood Super Agent, Michael Ovitz

By far, the best business book I’ve read this year is Who Is Michael Ovitz?

Keep in mind that I was once an investor in a talent agency – so I have some first-hand experience of the challenges of the Hollywood biz.  And yes, we viewed Michael Ovitz as a legend.

He started in the entertainment business as a part-time tour guide at Universal Studios, where he was an instant success and began to put together his network.  After graduating from UCLA, he landed a job at the William Morris Agency…in the mailroom. Again, he proved to be a standout employee and quickly rose within the organization, where he would become a highly successful television agent.

But the William Morris Agency was too stifling. So he teamed up with four other employees to launch CAA (Creative Artists Agency).  To disrupt the industry, they innovated the “packaging” of actors, directors and literary clients. This approach flipped the “power equation by amassing so much talent the buyers couldn’t go around [CAA].”

Yet this was not enough.  Ovitz would further redefine the talent agency business, such as by taking the role as an investment banker (for example, he brokered Matsushita’s purchase of MCA).  He even built a successful ad business, which started with a marque deal with Coca-Cola.

Amazing, right? Definitely.

OK then, so what are some of the lessons? Well, here are my takeaways from the book:

Research: Nothing that Ovitz did was by accident. He always had a clear-cut understanding of the end-game. He also spent quite a bit of time thinking about his firm’s strategies, which involved intensive research. Before meeting a client, he wanted to know everything about the person.  Decision making was always about having complete information.

He also looked at what were the factors of success for entertainment. According to him: “I had started a private project (one that took me ten years) of watching every film that had won one of the five big-category Oscars. I discovered why Gone With the Wind had passed the test of time and How Green Was My Valley hadn’t; I learned the relationship between vision and craft.”

Image Is Everything: Ovitz definitely dressed for success. His wardrobe was impeccable, with Armani suits and Gucci loafers. He wanted to show his clients that he was very serious.

In the book, Ovitz writes: “Our focus on first impressions won us new clients before we’d uttered a word.”

Company Values: Every person in CAA had a deep understanding of what mattered for the firm. It became a part of the DNA.

Actually, Ovitz called it the Four Commandments:

  • Never lie to your clients or colleagues
  • Return every call by the end of the day (or at least have your assistant buy you a day’s grace)
  • Follow up and don’t leave people guessing.
  • Never bad-mouth the competition

Client Focus: Ovitz was obsessive with making his clients successful. He notes: “I focused intensely on you always turning the conversation away from myself.”

But he was also honest with his clients, such as mentioning the negatives in advance. He considers it like a vaccine against the flu. He writes: “The easiest way to lose a client is to make a promise you can’t fulfill; the client always remembers.”

With client relations, Ovitz also would hand write over 1,000 personal letters every year. He even had a Gifts Department, which would spend over $500,000 on clients annually. But to make this work, he had his team catalog as much as possible about the hobbies and interests of the firm’s clients. Ovitz also focused on gifts that were not disposable, like a rare edition of a book, a painting or even a car.

Team Work: This was certainly unique with CAA and allowed the firm to make quick inroads with the competition. The focus on teamwork was a force multiplier that allowed for much better outcomes for clients. Ovitz compares it to the way Magic Johnson ran the fast break with the Lakers.

In the CAA organization, there was “no hierarchy, no titles, no reporting lines, no nameplates.” Ovitz writes that it was “American team sports boosterism mixed with Spartan military tactics mixed with Asian philosophy, all overlaid by the communication spirit of the Three Musketeers.”

Amazon.com’s Eventual Bankruptcy: Why Companies Should Define Their Demise

At an employee meeting, Amazon.com’s Jeff Bezos noted: “Amazon is not too big to fail … In fact, I predict one day Amazon will fail. Amazon will go bankrupt. If you look at large companies, their lifespans tend to be 30-plus years, not a hundred-plus years.”

Yes, it’s something many CEOs don’t say. Hey, why be a downer? And besides, in the case of Amazon.com, the company does seem unstoppable – dominating strategic markets like cloud computing and e-commerce.

Then again, there are still many risk factors as well. Amazon.com is stretched across various highly competitive industries. There is also the potential government liability, such as with antitrust actions. Keep in mind that this wound up being the major problem for other dominant companies like AT&T, IBM and Microsoft.

So thinking about worst-case-scenarios is probably a smart thing to do. Maybe other companies like Sears should’ve done the same, right?

I think so.

Interestingly enough, some CEOs do quite a lot of thinking and evaluation on this topic. Just look at Nigel Travis, who is the Executive Chairman of the Board for Dunkin’ Brands. He has an exercise that he calls “define your demise” (he describes this in his book, The Challenge Culture: Why the Most Successful Organizations Run on Pushback).

He has a diverse background as an executive. From 2005 to 2008, he was the CEO of Papa John’s and also served as a senior vice president of HR at Burger King. But perhaps the most interesting post was as the president and chief operating officer of Blockbuster. Of course, he got a good view of how wrenching changes can quickly take down a dominant player in an industry (he left the company in 2004).

In his book, he writes: “The company’s eventual collapse made me realize just how important it is to consider how the future might develop in ways that could disrupt the company, throw the business off-balance, or lead to a serious bump in the road.”

This is why Travis has group exercises to define and explore how his business could face existential challenges. Part of this involves looking at well-known risks, say a hack or a food safety crisis. But he also knows that the most fatal vulnerabilities are those that are unexpected. To this end, there is a focus on looking at those exposures that relate to the “changing needs of customers and likely advances in technology.”

Actually, in his book, he goes through a list of potential risks (related to Dunkin’). Some include:

  • Delivery: The possibilities include drones, robots and autonomous vehicles. After all, it was the delivery mechanism of mail delivery of DVDs from Netflix that led to the downfall of Blockbuster.
  • Coffee Alternatives: Might Americans turn to another new beverage?
  • Amazon.com: Travis notes in the book, “If Amazon.com can move into the grocery business, can coffee shops and bakeries be far behind?”

It’s all about engaging in expansive thinking, with plenty of what-ifs. Much of this will be kind of wild. Yet the process will help guard against disruption.

According to Travis: “At Blockbuster, we clearly saw the rise of DVD delivery, vending, and online streaming, but even when those signals grew strong, they could not drown out the soothing mantra of the status quo: Nothing can ever replace the in-store video buying and renting experience. Until something did.”