What is the Secret Sauce for Top School Graduates to Convert Start-Up Ideas into Sustainable Firms?

Martin Gonzalez is a Principal of Org and Leadership Development at Google.

Martin Gonzalez is a Principal of Org and Leadership Development at Google. Previously, he was a management consultant with the Boston Consulting Group and a product manager with Johnson & Johnson. Gonzalez is co-author of The Bonfire Moment, one of Thinkers50 10 Best New Management Books for 2024.

He is also a lecturer at Stanford University on scaling organizational culture in startups, and a frequent guest lecturer on MBA programs at INSEAD and Wharton. Gonzalez is also the creator of Google’s Effective Founders Project, a global research project that decodes what makes the best startup founders succeed and shares their success formula with the world. Gonzalez holds two master’s degrees in organization psychology and behavioral science from Columbia University and the London School of Economics.

Q. With approximately 17% of last year’s graduating class of Harvard MBAs electing to start their own companies,¹ the appeal of start-up firms continues. Still, as Tom Eisenmann of Harvard Business School points out, “Most start-ups don’t succeed: More than two-thirds of them never deliver a positive return to investors.”²

Given your groundbreaking findings as a leader with Google’s Startup Accelerator on why building teams is harder than building tech, why is it so challenging for leaders to create a strong, resilient and effective team?

A. Gonzalez: Freshly minted grads from not only HBS but also Stanford, Wharton, and other top schools where I’ve taught need to recognize the cold facts of failure that await most entrepreneurs. According to the US Bureau of Labor Statistics, approximately 20% of new businesses fail within their first two years, 45% during the first five years, and 65% by their tenth year.³ Moreover, according to researchers from Harvard Business School and McKinsey & Co., 65% of startups fail because of people issues,⁴ not flawed technology, a misguided product, or a lack of cash.

And my research has also revealed how co-founder conflict is a frequent source of start-up failure. And this conflict often leads to other organizational pain points including sloppy hiring standards, the departure of talented people, and an overall toxic corporate culture. When you have these organizational dynamics in play, ineffective teams become the norm.

Q. According to your research, The Bonfire Moment can improve cohesion, focus, and effectiveness in order to tackle such challenges. What are your top recommendations for readers to execute in order to achieve such benefits?

A. Gonzalez: First, determine how your start-up might be challenged with the typical traps of:

• The trap of speed—Being aware of hyperbolic discounting and focusing on quick wins at the price of laying long-term foundations.
• The trap of the inner circle—Building teams from friends, family, and former colleagues, and consequently creating an environment that resists disagreement and productive conflict.
• The trap of the maverick mindset—Failing to see the value of management practices that have stood the test of time for good reason (e.g., that healthy hierarchy can accelerate your business, or how over-reliance on heroics will keep you from scaling).
• The trap of confidence—Overconfidence is almost a prerequisite to get started but it turns into a liability after that point.

It is important to recognize that these “traps,” like speed, are alluring as they have a lot of positives but also many unforeseen negatives which your readers need to be aware of as they build their companies. Second, consider a playbook of actions which over 10,000 founders across 70-plus countries have successfully leveraged over the past nine years which include:

• One-Day Workshop: A structured workshop that brings the team together to face hard truths, notice hidden dynamics, and gear up for the intense challenges of startup life.
• Assessment Tools: Tools to help teams identify hidden gaps and benchmark themselves against a global dataset. This includes a self-assessment and feedback from collaborators.
• Facilitator Playbook: A comprehensive guide for running the workshop, including printable materials for a device-free experience.

An interesting example of a startup whose story we explore in our book is that of a growing agritech company, struggling with conflicts among the four members of its leadership team. The two founders had difficulty understanding each other amid the departure of critical engineers, strained fundraising efforts, intense pressure from investors, and missed product launch deadlines.

Meanwhile, the two hired leaders were exhausted, feeling like collateral damage in the founders' cold war. Gossip and backstabbing became part of their daily routine.

During their Bonfire Moment, the root of their conflicts was uncovered, allowing them to bandage up the relational wounds caused by their intense sprints as a team. This moment helped them reconnect with their mission and discover ways to collaborate through tough moments, rather than pushing each other away.

If nothing else, it is crucial for founding teams to take time away from the daily task list and discuss how the work gets done. The odds are stacked against you and I hope our book provides road-tested tools to support you on your journey.

About the Author

Michael Wong is a Part-time Lecturer for the Wharton Communication Program at the University of Pennsylvania. As an Emeritus Co-President and board member of the Harvard Business School Healthcare Alumni Association as well as a Contributing Writer for the MIT Sloan Career Development Office, Michael’s ideas have been shared in the Harvard Business Review and MIT Sloan Management Review.

References

1. https://www.hbs.edu/recruiting/employment-data/Pages/default.aspx

2. Eisenmann, Tom, Why Start-ups Fail, Harvard Business Review, May/June 2021

3. U.S. Bureau of Labor Statistics. "Table 7. Survival of Private Sector Establishments by Opening Year."

4. Gorman, Michael and Sahlman, William A., “What Do Venture Capitalists Do?” Journal of Business Venturing 4, no. 4 ( July 1989): 231–48, https://doi.org/10.1016/0883-9026(89)90014-1.