LinkedIn founder Reid Hoffman: The stories of Uber and Dropbox show how strategy evolves when you go from startup to grown-up
- LinkedIn co-founder Reid Hoffman points out on an episode of the podcast "Masters of Scale" that eventually startups have to transition from outsider to insider, pioneer to establishment.
- Navigating this transition doesn't always go smoothly.
- Here's how Uber and Dropbox strategized this change.
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Startups usually start scrappy and lean, eager to conquer market share and carve their names on the logs of history.
However, this pirate mentality only goes so far.
As LinkedIn co-founder Reid Hoffman points out on an episode of the podcast "Masters of Scale," eventually startups have to transition from pirate to navy, insurgent to establishment, startup to grown-up.
"Every startup needs to shed its pirate nature at some point, and evolve into something more akin to a navy - no less heroic, but more disciplined, with rules of engagement, lines of communication, and long-term strategy," Hoffman said.
To extend the metaphor, even though piracy could lead to short-term growth and accumulation of capital, pirate fleets lack the infrastructure to administer the lands they've conquered.
The tales of Uber and Dropbox are both suggestive.
How Khosrowshahi cleansed Uber of its toxicity
According to Hoffman, Khosrowshahi had to right Uber, a ship gone too far down the promise of hypergrowth at the expense of everything else, as an outsider CEO. Khosrowshahi also had to retain the aspects of Uber culture that made it successful in the first place.
"I think to some extent the pugnacious nature of the company got it into trouble but also to some extent is responsible for the fact that it's a terrific company that I've got the pleasure of being able to run," Khosrowshahi told Hoffman.
While Uber's growth may have been tied to the positives in its culture, Khosrowshahi said that the same culture deemphasized individual respect for others. That had to change.
Khosrowshahi crowdsourced the issue: He asked employees exactly what they wanted to see at the company, and labeled the most important themes that arose as "Uber 2.0 cultural norms." These norms include celebrating differences and valuing ideas over hierarchy; Khosrowshahi released them all in a public LinkedIn post.
"The simplest that I hear repeated over and over is: We do the right thing, period," Khosrowshahi said. "We didn't want to define to the employee what the right thing is."
Khosrowshahi acknowledges that now Uber's culture is far better than it was, but he thinks there are still pockets of growth to fill.
"I think the cultural transformation, it is hard," Khosrowshahi said. "It continues."
Dropbox's Drew Houston: "Strategy is not just something you put on a piece of paper"
The very purpose of a company can continue evolving too, especially as the company scales. Dropbox started out as a disruptor in the space of efficient cloud storage. It faced off the goliaths of industry, and is a $7.9 billion giant today.
At some point, it became the bulky giant it was trying to conquer.
"If you're not growing, and certainly in tech, you're usually dying," Houston said. "At the same time, if you expand into all these unrelated areas, you can find yourself fighting a battle on many fronts and winning none of them."
Dropbox was competing with Apple in the phone backup space, with Microsoft and Google on the collaboration front, and Facebook, Google, and Apple for photo sharing. It became clear that not all of these elements were working, according to Houston.
But Dropbox couldn't go back to being just a cloud storage company - and Houston didn't want to build a conventional enterprise software empire.
"That led me through this kind of multi-year process of figuring out, okay, strategy is also not just something you put on a piece of paper," Houston said. "It has to really fit with the purpose of the company and your purpose as a human being."
Houston had to find a way to stay inspired by his own company. After interviewing a former SpaceX employee, he realized that Dropbox could provide the tools, the oiled gears of communication, at groundbreaking companies like SpaceX. Since this realization, Dropbox has pivoted from cloud storage to overall workflow management, in a push to redesign the way people work. This means Dropbox has started helping users arrange their tasks and productivity tools (like workplace messaging app Slack and video chatting service Zoom).
"If I want to help cure cancer or land on Mars, address climate change - we're gonna need better tools," Houston said.
Dropbox's center of gravity shifted to allow for balance between internal perspective and external impact, creating a renewed sense of purpose that transitioned the company forward.
Putting together the stories of Uber and Dropbox
Houston and Khosrowshahi both felt the onus of leadership, the burden to steer their respective companies in a different direction, whether at a core enterprise level, like at Dropbox or on a cultural level like Uber.
They both admit that it's an ongoing process, and Khosrowshahi says transparency is key.
"The singular rule of CEO life, is that the higher up you move in a company, the less you really know what's going on," he said. "The only way that I found to figure out what's going on is by telling the truth."