Chapter 4 Department of Startup – Department of Startup

CHAPTER 4

Department of Startup

At the height of her powers, the sun never sets on the British Empire. In 1821, the Caledonian Mercury wrote of the British Empire, “On her dominions the sun never sets; before his evening rays leave the spires of Quebec, his morning beams have shone three hours on Port Jackson, and while sinking from the waters of Lake Superior, his eyes opens upon the Mouth of Ganges.” (Wikipedia 2018)

Spanning across five continents, holding territory to the size of 35,500,000 square kilometer (13,700,000 square miles) or 24 percent of Earth’s total land area, it was the largest empire in the history of humanity. By then, shy of 450 million people, would live under the policies and Governors and Viceroys out of London, so far-flung that most would have never seen or know the Kings and Queens who ruled over them. Still, all would be pledging their loyalty, and many did by involving in the wars that the British Empire found herself in and all harkens to “God Saves the Queen.”

While the legacy of the British Empire still lingers profoundly today across the 53 members of the Commonwealth Nations, an intergovernmental organization of free and equal former colonies of the British Empire, not many knew that the birth of the empire, not including that of America, was sparked by the formation of a company. It was a startup, and that startup grew from a humble beginning into a colossal enterprise which gave us the Victorian Era, Britain’s “Golden Years.” It was a time of peace but also industrialization and world trade whereby the British Empire was the sole monopoly to the wealth of nations; tin and rubber from Malaya, spices, and tea from India, gold, and diamonds from South Africa, and ports in Singapore and much more.

The British Empire to the East which began after the loss of 13 Colonies in the American War of Independence in 1783, lasted well into the 20th Century ending only with the Handover of Hong Kong, the last colonial territory back to China in 1997. The company responsible for the British Empire second act was no other than the East India Company (EIC).

Also known as John’s company, it was founded by Sir John Watts, an English merchant, ship owner and later Lord Mayor of London, on December 31st, 1600. Sir John Watts himself was a maverick; when as the owner of the ship “Margaret and John,” he answered the call by the city of London in 1588 to sail against the invading Spanish Armada. John Watts himself served in “Margaret and John” as a volunteer and saw action. And again in 1590, Watts, financed privateers, private individuals who engage in maritime warfare to profit by capturing the enemy’s property, in an expedition to the Spanish Mains; Spanish territories surrounding the Caribbean Sea and the Gulf of Mexico. In what is known now as “Watt’s West Indies and Virginia Expedition” or the “Action of Cape Tiburon,” the expedition was a success, bringing honor and significant prize money to Watts. He also earned a mention in a letter to the Spanish King when he became Lord Mayor of London in 1606–1607, as “the greatest pirate that has ever been in this kingdom”.

Founded by such a colorful character of his time, weaving in the culture of risk-taking, business acumen and the correct discernment of the turn of the tides of events, it’s of no wonder why the EIC lasted almost three centuries, transforming itself from a mercantile company to an empire builder.

To Venture in the Pretended Voyage to the East Indies
(Startup Phase)

John Watts’ initial aim in chartering the company was a modest one and that was no other than to take a bite out of the trade with the Indies, modern-day South East Asia, which had been dominated first by the ­Portuguese for much of the 16th century and later Dutch Companies in 1595 culminating into the formation of the United East Indies Company in 1612. He was starting from scratch and going up against incumbents who had the first mover advantage in the lucrative business. In a nutshell, Watts was launching a modern-day startup in the 1600s.

The company started with a simple statement in its charter as well, and that is “to venture in the pretended voyage to the East Indies the which it may please the Lord to prosper”. The group of founders led by Watts saw an opportunity in an existing market that had already been explored by their competitors. It was a calculated risk but not an entirely risky venture that would have been left to the lady luck. Similarly today, Fortune 500 must continue to inculcate within the organization the culture of risk-taking by continuously encouraging employees to constantly ask the question “How can we do better?”, to start simple yet with a strong sense of meaning and to learn from the competition. And in today’s world of social media, to understand your competitors and the associated market dynamics is no longer the work of agent “Double-O-Seven” but a click of a mouse or button on a mobile device. The risk of attempting a new venture is mitigated by easy access to knowledge and information today.

Albeit founded on a simple idea of trade, the ambitious Watts presented a bigger vision to his group of co-founders, now known famously as “The Adventurers” and that is to apply for the Queen’s support. Having failed initially, Watts rallied the group to reapply 12 months later whereby they succeeded in their second attempt, earning them a Royal Charter from Queen Elizabeth, giving the company a 15-year monopoly of the English trade with all countries east of Cape of Good Hope and west of Straits of Magellan. The significance of this charter is not lost to “The Adventurers”, as “any traders in breach of the charter without a license from the company were liable to forfeiture of their ships and cargo (half of which went to the Crown and the other half to the company), as well as imprisonment at the royal pleasure.” (Wikipedia 2018). Watts didn’t want to be just “an” English mercantile sailing to the Indies, but he wanted to be “the” English mercantile sailing to the Indies.

Leaders of Fortune 500 must endeavor to share and articulate their vision for the company throughout the organization especially to those with the leadership positions. This practice is imperative not only to enable every employee to see the meaning of their daily work but also for them to make meaning out of it. In other words, leadership today is about helping employees to see the vision of the company in their meaningful way. Meaning will lead employees to look beyond the paycheck, to take extra care in their work, to put customers’ benefits a top priority and to be motivated to come to work and to give their very best.

According to Guy Kawasaki, in his book, “The Art of the Start”, amongst the meanings of “meaning” are:

  • Make the world a better place.
  • Increase the quality of life.
  • Right a terrible wrong.
  • Prevent the end of something good.

Helping your employees to make meaning is the most powerful motivator when the going gets tough at work and not forgetting it’s also a way for them to feel valued. The programmers at Facebook would look back on the fateful day of January 14, 2011 not as day whereby they were busy maintaining the massive surge of traffic from the Middle East but how they had brought about political change to the Arab world, first by the fall of the Tunisian government and then igniting the Arab Spring. Protestors gathered in their thousands in Tahrir Square in Cairo, Egypt demanding the resignation of their president, followed by Libya, Syria, Yemen, ­Bahrain, Algeria, Jordan, Iraq, Kuwait, Morocco, Oman and minor protests in Lebanon, Mauritania, Saudi Arabia, Sudan, and Western Sahara.

Those at Facebook would have had no problem in answering what Guy Kawasaki had designed as a litmus test to make meaning for a startup, “if your organization had never existed, the world would be worse of because...”

Once, the Charter has been obtained and the desire to see England beat their enemy in their trade, Watts began to look for capable hands to execute the vision that he had in mind. He looked no further than Sir James Lancaster VI, a prominent Elizabethan trader, and privateer. James Lancaster was in many ways the right choice for the job. He was one of the earliest Englishmen who had set sail to the East Indies in 1591, making him an experienced hand for the job. Also, in his maiden voyage, Lancaster reached as far as the Malay Peninsula, settling in the island of Penang for three months whereby he pillaged every vessel he encountered. That made him not just an experienced sailor but also a person with the right temperament to face the challenges and the work that must be carried out as a privateer.

Watts’ trust on Lancaster was rewarded when Lancaster, aboard the “Red Dragon” in EIC maiden voyage in 1601, captured 1,200 tons of ­Portuguese Carrack in the Malacca Straits of the Malay Peninsula. ­Lancaster was also able to have the foresight to trade the booty to set up two factories in Bantam, Java (modern-day Indonesia) and another in Moluccas (Spice Islands) before returning to England. These factories would later become the forward station for the empire in the East Indies. The Bantam factory would exercise authority over all the Company’s ­factories in India and be instrumental in the founding colony of Madraspatnam, today’s City of Madras. As for Watts, his vision to breach the Spanish and Portuguese monopoly had come to pass, opening a new horizon for England and her countrymen.

Talent is the key to all organization success but having talent with the right competency is only the first step. Napoleon famously said, “I prefer lucky generals.” when pressed about the kind of generals he would want to serve under him. What he had really meant was that he needed not only generals who were able to execute his strategy on the field but also versatile enough to change tactics whenever the situation changed on the ground. Napoleon’s generals were to be able to discern the tide of the battle and to press for advantage, which he might not have ordered, whenever an opportunity presented itself. His generals were an extension of him on the battlefield, sharing and trusting in his vision. Only then they would be able to see the right time for the right action or the right moment to seize the day. This is evident in the case of EIC, whereby in his maiden voyage for John Watts, James Lancaster was bold and forward-thinking enough to use his first booty to set up the two forward bases for the company, trusting that his decision is aligned to Watts vision and would receive his blessings.

And to achieve that, a culture of trust must be cultivated. This culture of trust is a “two-way traffic” whereby the leader first trusts the competency of the individual to carry out the task and is reciprocated by the individual trusting the strategy that has been laid by the leader. This kind of culture was found in Nokia before it became a smartphone juggernaut in the early 2000s. The Finnish Fortune 500 founded in 1855 started as a pulp mill company. Throughout its history, Nokia experimented and ventured into various industries such as papers, rubber, footwear, communication cables, military technology and even instruments used in nuclear power plants.

However, what was common as new leaders succeed the old, Nokia researchers were always encouraged to develop their projects. Nokia leaders trust that given time and freedom to explore, and their researchers will discover new invention leading to new businesses. Vice versa, the researchers trusted and shared the vision of the company. This high trust relationship bore fruit in the early 1990s when Nokia launched the first “commercially available cell phone, the Nokia 1011” (CNET 2017). From then on, Nokia continued making handphones that everyone had, building the foundation for smartphones today while growing into the world’s largest mobile phone manufacturer before selling out to Microsoft for US $2.2 billion in 2002.

Although Nokia was caught with complacency and made the wrong decision in the face of new technology onslaught by Apple and Android, Nokia is already planning a comeback as we write. The culture of trust in Nokia between its leaders and talents have prevailed, allowing it to start up its mobile phone business once again.

To Make the World English

Twelve years into James Lancaster’s maiden voyage for EIC, saw the company engaged their Dutch and Portuguese counterparts in a significant conflict in the Indian Ocean. The company won the Battle of Swally in Surat, India decisively, marking the EIC as a formidable naval force and masters of the sea. Dominating the seas equated to monopolizing the trades from the East and the company began to prosper.

It also ignited the company’s ambition first to gain a territorial foothold and later occupy strategic territories to protect their trades. It is an innovative and ambitious approach for a mercantile company which eventually bore fruit not only for the company but also the expansion of the British Empire.

In 1612, the company requested that the British monarch, King James I to send a diplomatic mission to the Mughal Emperor Nur-ud-din Salim Jahangir seeking for a treaty giving exclusive rights to the company to reside and establish factories in Surat. The Emperor agreed when the exchange terms were to provide him with goods, valuables and precious items from Europe.

Thus began, the seed of conquest and empire building by the EIC. Trading posts in Madras (1639), Bombay (1668) and Calcutta (1690) followed. By then, in textile imports from India alone, the EIC had surpassed that of their biggest rival, the Dutch East India Company or Vereenigde Oostindische Compagnie (VOC). VOC at the beginning of the first two decades of the 17th century was the wealthiest company in the world with 50,000 employees worldwide and a private fleet of 200 ships. EIC was only founded in the early 17th century and yet within a short 50 years, and it is beating the Goliath of its day.

One of the critical aspects of any startup is the ability to pivot its business model to a point whereby it is viable and sustainable. Many a time, startup began with an answer to a question or problem and began to build a business model around that answer. On paper, the business model may look viable, but once the startup begins to go to market, the founding team would normally discover that some of the assumptions made about the business model are not tenable. It’s a critical moment for the startup as this pivoting exercise would make or break the startup. In the case of EIC, they realize very early that there will be skirmishes with their rivals and in fact, they fought at least another four Anglo-Dutch Wars after that pivotal victory in Surat.

And to secure the company’s trade, it’s imperative for the company to have a foothold at strategic locations for trades and military purposes. This practice marked the first pivot. EIC was then no longer just a mercantile company but a growing colonial power with dominion over territories.

By the time EIC celebrated its 70 years of foundation, King Charles II had granted the company “the rights to autonomous territorial acquisitions, to mint money, to command fortresses and troops and form alliances, to make war and peace, and to exercise both civil and criminal jurisdiction over the acquired areas” (Wikipedia 2018). The pivot exercised almost 60 years earlier had not only bore fruit but also brought the company to its pinnacle in centuries to come.

With the new mandate, the company needed to learn new skills and new talents for military conquests, administrative and policy making, ministering the economy and finances of new territories and above all to govern on behalf of the Crown. History would tell us that not only was EIC able to master these skills but also surpassed expectations in all departments, building the foundation for Britain’s Imperial Century of 1815 to 1914 to the East, one and a half century later.

As a company, EIC was able to steer its employees from privateers and merchants to a proper military and governing force while not forgetting its root of a mercantile. A significant culture shift took place to enable the practices of the old of privateering to be replaced, transforming the company into a discipline, cohesive and adaptable organization. Even more remarkable, the transformation happened when the company was already a grown matured company of 70, wherein most other similar companies would have huge inertia to change. Although no one single leader has been attributed to such shift, the leaders at the helm at any one point of time in the next 150 years had maintained a culture which honored the vision and values of the company; to be risk-taking with an eye for opportunity and creativity to adapt.

This transformative-leadership not only set the vision and strategy for the company but had also transformed the company into a self-learning organization. Although building a strong army and navy was not the company’s forte, but as a learning organization, EIC grew its military forces from a few hundred in the first century of its foundation to 3,000 regular troops after 1750, 26,000 by 1763, 67,000 by 1778 and reaching 260,000 in 1803; a private army that was twice the size of the British army. This growth was achieved with a smart strategy of recruiting Indian boys, and then train them to European warring capacity. Similar successes can be seen in governing; where all former colonies today adopt Parliamentary systems of governance bringing about Common Laws which allow these nations to prosper.

While having the right strategy was critical to the success of the company, its leadership realized early on that the right talent is key to success, case in point John Watts who hired James Lancaster. The company continued with this practice of hiring competent individuals to helm some of the most prominent positions in their strategic territories. One of such individual was Commander Robert Clive (1725 to 1774) whom some historians regarded as the founder of the British Empire in India. Clive joined the company as a young clerk in India for doing poorly in school. In today’s standard, Clive would be a person without a degree which would condemn him to a lowly paid position in a Fortune 500. However, he found himself in a company which valued one’s competency above academic excellence and helped by the fact that the company needed able men to expand its territories in India. With the decline of the Mughal Empire, the British found themselves headlong against the French in a tussle to exert influence there.

Clive proved himself a military genius, time and again with Lady Luck on his side, he turned the tables against the French with detrimental odds against him often heavily outnumbered in troops and equipment. His defining moment came in the Battle of Plassey, modern-day Palashi, situated about 150 kilometers north of Calcutta. With a force of merely 3,200 men, Clive defeated an army of “40,000 Indian and French troops, 15,000 cavalries, 50 artillery pieces and a force of war elephants” (factsanddetails.com 2013). The French never recovered from the Battle of Plassey paving the way for the British East India Company to cement their grip of India both militarily and commercially. Clive, on the other hand, became the first Governor of Bengal and with it making him a wealthy man and unprecedented profit for the company.

Many organizations, both Fortune 500 and startups alike, understand the needs for the right talent and even invest considerably in searching for these right talents. To give you an insight, Manpower, one of the top recruitment firm in the world boast an average revenue of US $19 ­billion per annum, servicing 400,000 clients worldwide. However, we, the authors believe that searching and recruiting the right talent with the right competency fit for the role is only the first step. The next crucial step is for the leaders of the organization to create the right culture so that these individual talents would flourish under those conditions; conditions that would bring the best out of their character, competencies, and temperament.

Startups tend to do better in that area, as many a time, they start from zero. To attract the right co-founders to form the founding team, startup founders can only sell to these talents, his or her vision for the startup, his or her leadership and the culture that they will create together in this new startup. Many a time, core founders of startups do not pay themselves and for the employees who join them, their beginning salary is lower compared to a Fortune 500. However, it is in this sort of an environment; startups build a culture that would continue to attract talents to stay and risk their careers with them. In the like of Robert Clive, he thrives in the EIC as the company recognized his potential and created a culture whereby a clerk could rise to the position of a Commander of an army. A mention of a strong founding team built on a strong culture, one would not need to look further than Paypal. Paypal was built on a simple idea to ease electronic payment replacing traditional money transfer method such as check and such. The idea was simple, but it was led by the founders and founding team who brought Paypal through the dark times of dot.com bust to a US $13 billion revenue company as of 2017. Now, infamously known as the “Paypal Mafia”, had spawned three billionaires, multimillionaires and companies that are pushing innovation and forefront of technology. Notable names would be Elon Musk of TESLA, Chad Hurley and Steve Chen of YouTube and Peter Thiel of Clarium Capital who became the first outside investor to angel invest $500,000 into then the upstart Mark Zuckerberg of Facebook.

Culture: The Cry of Man in the Face of His Destiny

The success of the British East India Company, first as a fledgling mercantile company and then as a budding empire builder, shares a commonality with successful startups of our time such as Amazon, Google, Facebook, LinkedIn, and Uber. That commonality is no other than having the right startup culture, which underpins the foundation and growth of the company.

The famous French philosopher and Nobel Prize winner in Literature, Albert Camus, famously defined culture as “the cry of men in the face of their destiny” (Parker 1965). To understand Camus definition of culture, one must understand his work and philosophical thinking. Camus, in his philosophical work of “Absurdism”, presented the idea of dualism such as the experience of happiness and sadness, dark and light and above all, the justification of life when ultimately mortality will conquer us all. Thus, destiny in Camus’ book is of something that’s meaningless like life itself, something that’s fleeting with a time stamp on its expiration.

A good example would be Camus’s fascination with King Sisyphus (Richardson 2011), who was punished with the destiny of rolling a boulder to the top of the hill, only for it to roll down again when it nears the top. Sisyphus would have to repeat this laborious and futile action for eternity. His destiny was a perpetual torment but yet Sisyphus, kept at it, walking down the hill and began pushing again. What drove him to continue and to push on? Can Sisyphus find happiness in the face of this absurd task?

Camus argued that by remaining lucid about his reality and simultaneously accepts and resists this reality, Sisyphus had gained superiority over his rock. Here is in Camus’ words, “stronger than his rock”. Although faced with eternal punishment, the punishment itself belonged solely to Sisyphus thus he remains the master of his destiny; how he would confront it. On the one hand, he understands his limits while on the other, he accepts what he cannot change and strive to the best of his ability.

Camus concludes that “this universe henceforth without a master does not seem sterile of futile to him… the struggle itself toward the summits is enough to fill the heart of man. One must imagine Sisyphus happy” (Classical Reception Journal 2012).

Therefore, we, the authors agree with Camus and opine that culture is indeed how one reacts to his or her destiny or the situation one is facing. In the case of startups, 90 percent of them according to Forbes will fail, and it’s a logical outcome as all startups start with little to no cash, a small team facing established competitors, difficulty in recruiting talents and not to mention the pressure to produce in the shortest possible time. What we believe distinguished the other 10 percent is the culture which they had embraced to the face the bleak destiny of a startup. Culture is about how one refuses to despair while facing a grim situation yet finding a way out in the absence of hope. A strong culture builds the foundation of a strong organization, be it a startup or a Fortune 500.

Department of Startup: Raison D’etre

Hofstede (1980), defined culture as “a collective programming of the mind which distinguish the members of one group from another and the interactive aggregate of common characteristics that influence a human group’s response to its environment”.

Consequently, organizational culture would then refer to the “collective programming of the mind that distinguishes the member of one organization from the others” (Hofstede 2010). Hofstede further added that organizational culture is maintained not only “in the minds of its members but also in the minds of other stakeholders such as customer, suppliers, labor organizations, neighbors, authorities and even the press”.

This organizational culture definition applies to startups aptly, as startups do possess certain unique cultural traits which are fundamental first to their survival and later their exponential growth. Furthermore, faced with a dismal survival rate, startup founders and founding team do display a set of “founders characteristics,” which dictate their responses and decision making. An excellent example would be that a lot of startup founders would be willing to work for no salary to keep the startup going, especially through the difficult startup phase.

Echoing Hofstede, startup culture or “collective programming of the minds” can also be seen extended to the other stakeholders, especially their end clients or users. Apple had through the decades cultivated a following of Apple loyalists, who wait eagerly for the next Apple iPhone, iPad or Mac for their next innovative, creative design and above all, an attitude of daring to be different.

Next, what is critical about organizational culture and specifically startup culture is that it can be learned and “it derives from one’s social environment” (Hofstede 2010). Once learned, it could change the mental programming of the minds of employees, helping them to thrive in today’s VUCA world. And just like King Sisyphus pushing the boulder up the hill, culture is about adopting the right behavior, attitude, and values when faced with a challenge, especially a tough and “meaningless” challenge.

The question as to why do Fortune 500 need to learn or adopt a startup culture has been answered extensively in the previous chapters. The authors have also justified the need for this culture to be extrapolated to other stakeholders such as consumers, suppliers, shareholders, and Netizens. The question that begs an answer now would be what are the cultural traits of a startup for Fortune 500 to learn and adapt?

By observing the contemporary startups and that of British East India Company, one would recognize that several startup cultural traits transcended through time, applicable be it today or in the 17th century. They are, in no particular order of importance, the following:

  • Calculated risk-taking.
  • Keeping things simple yet big in vision and strategy.
  • Make meaning daily in every single individual employee.
  • Cultivation of mutual trust between leaders and followers.
  • Valuing natural talents above academic excellence.
  • Hiring right believers who share the company’s mission on top of competencies.
  • Continuous self-learning and self-development effort.
  • Embracing constant change while careful of mission drift.
  • Authenticity is encouraged and shown by examples.
  • Grace-based leadership.

The Department of Startup raison d’etre would be to precipitate startup culture into organizations without fundamentally changing the core values of the existing organization. The key is to create a social environment whereby positive collective mental programming or in plain English, a change of mind can take place. The second reason for having a Department of Startup is to enable change on the individual level, both in their personality and human nature, when faced with an ever-changing business environment. In its purest form, the Department of Startup is neither a physical department nor a cognitive behavioral modification exercise, but a change of one’s mental programming in quoting Hofstede.

In the subsequent chapters, the authors look to dive into a framework which forms the core of the Department of Startup similar to Compensation and Benefits, Recruitment, Training and Development forms the heart of the Department of Human Resource. The authors opined that the pillars of the Department of Startup are:

  • Belief system
  • Startup Leadership
  • Followership
  • Startup as a sum of all constants