A CEO needs to understand why they need to build a “platform,” not just an application.
Published in the San Diego Union-Tribune, July 29, 2024
By Neil Senturia
In the very early ’90s I was an out-of-work real estate developer, and I became interested in technology. My bride-to-be, Barbara Bry, was an executive with Connect, which was the early incarnation of an incubator without walls serving the tech and biotech community. If I were going to be successful in my pursuit of her, I was going to have to learn that the phrase “client-server” did not refer to the waiter bringing me a pizza at the restaurant.
Fast forward 30 years, and while I still cannot write code, I believe deeply in the requirement that a CEO understand the computer science principles that inform the company technology.
To that end, allow me to share some strategic thinking from Andy Wu, professor at Harvard Business School. He says that “the tech architectures inside firms are a source of competitive advantage.” Indeed. I do not think you can get your MBA and ignore the “tech stack” and how it drives your product.
Wu says a leader does not have to get in the weeds of bits, bytes and microprocessors, but rather needs to “embrace the concept of abstraction.” In other words, the leader cannot simply trust his CTO without a minimum understanding of “how the stuff works.” And even better, why it works.
I am currently running a tiny AI company. I recently attended a series of lectures by an “AI genius.” While he explained much about training models, algorithms, and pattern recognition, at the very end of the last lecture, he confessed he still can’t completely explain why it works. “To some extent, AI is a black box.” Open AI CEO, Sam Altman is quoted as saying, “Feels like magic to me.”
I was relieved to know that it was perfectly OK to feel stupid.
A CEO needs to understand why she needs to build a “platform,” not just an application, Wu says in an article from Harvard Business School Working Knowledge. Platforms attract other developers and third parties and that is how you scale. Understanding this principle informs how you make deals with both customers and vendors — and of course, sometimes they are the same.
Finance and deal making are at best only tools that serve the company’s technical skills — whether you are building software, molecules or widgets. AI is a new frontier. Think of the gold rush. You can make picks and jeans or you can go mining.
But in the end, regardless, you need customers. You need to sell.
Let’s turn Wu inside out. I have “technical founders” who come to me, admittedly brilliant, but clueless as to how to explain the problem, sell the solution or how to negotiate to close a deal.
Oh, but wait. Not so simple.
I am an avid fly fisherman, and I have been going to the same lodge in Montana for the past nine years. I love the owner, and two years ago, he asked me to help him sell the lodge.
I work the numbers, I make some calls and it is not like there is a long list of folks looking to “own a fishing lodge.” In terms of high risk, guaranteed to lose your shirt investments, this ranks right next to opening a restaurant.
But we find a guy. Only one guy. A banker. A finance guy. Knows numbers, has an MBA, understands leverage, cost of goods and fine wines.
The deal closes six months ago. All cash. The new owner inherits reams of good will and a faithful client list. But he is a banker. Customers have always come to him. He is not used to customer acquisition techniques like calling the 700 longtime multiple return guests and personally introducing himself.
Instead, he just sends out a blast email telling everyone he is the new owner. E-commerce loves the internet. He believes if you own it, they will come.
But not when there are 58 other fishing lodges in Montana. Cash flow dries up. Cuts pay to the fishing guides (they are his “technology”).
In the hospitality business it is all about heads in beds. Revenue will cure many ills. Sure, in every venture, know what the tech does (puts flies on fish in rivers), but the bottom line is always romance your customer.
The fish aren’t going anywhere.
Rule No. 817: They go together like peanut butter and jelly.