The founder’s dilemma feat. Dov Charney

I love founder led businesses.

Aside from the obvious reason that they tend to be my clients, they have certain qualities which are simply not shared by their corporate cousins.

For one thing, they take risks.  They have to, because it’s only through such risks that they are able to compete with corporate competitors who have ten times the budgets to play with.  This leads them into interesting strategic territory; the provocative and contrarian plays that make them so charismatic.  Pretty much every “sexy” brand that anyone talks about is either founder led – or failing that, a recent corporate acquisition cashing in on the credit it built up as an independent.

For another thing, what they do is personal.  The company is a direct reflection of the boss themselves.  They aren’t simply some MBA-for-hire, who will be working for one of their competitors in 3 years time.  They’re invested – in a manner which goes far beyond the financial.

Such considerations make founder led brands palpably different propositions.  And frankly, when it comes to the metrics most of us care about, better propositions.  I’d rather give my money to them than the latest brand off the GE conveyor belt – and I’d wager you would too.

Still, all that said, they aren’t without their problems.

Whilst being run in a dictatorial fashion supports brave and interesting decision making, it doesn’t exactly furnish a professional or reliable company culture.  When an entire business has been built on the instinctive whims of one or two individuals, it can be extremely hard to transition into operational maturity; where decision making can be delegated without losing the magic of the founder’s touch.

One of the best examples of this struggle could be seen in the spectacular rise and fall of American Apparel under the leadership of Dov Charney.

In a nutshell Charney was kind of like the Steve Jobs of the clothing industry: combining genius-level taste and instincts with a reputation of being difficult to work with (which in Charney’s case may be something of an understatement).

After guiding the company to the fastest American retail roll-out in history, and becoming the largest t-shirt manufacturer in the country, Charney was forced out by the board for conduct that “repeatedly put himself in a position to be sued by numerous former employees for claims that include harassment, discrimination and assault.”

Following his dismissal the brand promptly collapsed, filing for bankruptcy a couple of years later.  Perhaps trying to purge his legacy, the new corporate leadership had made a number of “un-Charney-esque” strategic decisions, missing the obvious point it was the Charney-esque that had made the business click in the first place.  Without this, it had no right to exist.

The story here is not that of Charney’s legendary impropriety (though naturally that drew the eye and the headlines).  No, it is of the company’s inability to professionalise with Charney at the helm, and its inability to function when his instincts were removed from the picture.

Put simply American Apparel – like many others before and since – was never able to codify their founder’s instincts into a strategy that others would be able to run with and replicate.

If they’d done so, things may have been very different.  For one thing, the business could have scaled smoothly – without descending into the level of chaos that allowed such scandals to unfold.  And for another, Charney’s departure wouldn’t have hurt nearly as much.  Sure, a visionary founder will always offer a sprinkle of magic that can’t be replicated.  But the crux of his vision would have been right there, on paper, in a manner that could be taken forward without him.

This then reveals the central responsibility of a successful founder:

To make themselves obsolete.

They must find a way to embed a “decision making logic” into the business which enables others to think they way they do; to call things they way they would; to see what they see.

Although this sounds a little risky for the founder in question, it’s been my experience that most are desperate to do this.  Most founders know their business relies too much on their say so, and would dearly welcome the opportunity to delegate the majority of decisions and to take more of a “back seat” – freeing themselves up for only the most important stuff.

(It also makes their business a more sellable proposition, but that’s by-the-by).

The issue they have however isn’t one of willing.

Their issue is that they don’t know the secret themselves.

They don’t know how they make decisions.  They don’t understand their own minds.  They aren’t able to unpack the underlying logic they’ve been working to; the logic that’s made their business fly.

So much strategic thinking, contra the boffin-esque image, operates at the level of the subconscious.  When a founder picks option A over option B because it just “feels right”, the decision isn’t necessarily “illogical” or purely “emotional”.  No, chances are there is a highly sophisticated logic in operation – it’s just not one they’ve ever examined.  They never had to.

Doing this examination – knowing their own minds, drawing it forth, and articulating it in a way others can understand – is what I call the “founder’s dilemma”.

It is what they all must go through if they ever are lucky enough to have a hit on their hands – one that grows so big they can no longer competently handle it in a dictatorial fashion.

(Obviously founders of unsuccessful brands have no such dilemma, since there’s no proof they have anything worth unpacking in the first place).

Looking back on it, I’d say that many of my projects were essentially exercises in solving the founder’s dilemma.  The strategies I suggested were “new”, sure, but often at the same time they were somehow recognised by the founders.  They chimed with what they knew they were already doing, but had never quite managed to put their fingers on.

Indeed I often say to clients, “we’ll know the strategy is right if it is simultaneously embarrassingly obvious, and yet also has never been said before”.  That’s because such strategies are resolutions of the founder’s dilemma.  Their “obviousness” stems from the fact they were there all along – they just needed drawing out in order to be made usable.

So if you’re a founder, don’t make the same mistake Charney did.  Not the getting sued for assault bit – I trust you don’t need my advice on that one – but the keeping the magic in your head bit.

You may not know what it is.  But if you’ve made enough good decisions in a row, and have the profit to prove it, then it’s definitely there.

Time for some introspection.

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