Friday Coffee Meetup: Feb 3, 2017
Presented by Tim Cadogan
Blog Writeup by Jan Young
Tim Cadogan is the CEO of OpenX, a programmatic advertising technology company headquartered in Pasadena, and he came by FCM on Friday, Feb 3rd to share some reflections on his experiences building a company. Tim’s Pasadena roots go back to the Idealab incubator GoTo.com/ Overture. These were the early days of internet advertising, and Overture was the first company to successfully monetize pay-for-placement search. Tim moved over to Yahoo as SVP Global Advertising Marketplaces when they bought Overture. Back then, real-time-bidding was a pie-in-the-sky idea, but when enabling technology advances came about, Tim recognized the opportunity and knew he wanted to go back to Pasadena to build OpenX.
I thought I would focus on the experience of building OpenX instead of the details of what we do which would only be interesting to 10-15% of you. But briefly, to provide some context, we started OpenX nine years ago. It’s basically digital advertising run on a real-time basis. We take an impression from a website, or now an app, we auction off that off in real time to a group of very specialized companies that run algorithms that can bid on that impression. Ten years ago, you couldn’t do that, but then as technology developed, and it started to be possible. We got in early and built our company around that concept. Now we have over 500 people—about 350 here in LA, and the rest in NY, London, Munich, Tokyo, Poland, and Palo Alto.
So, why do you build a company? Some here today are entrepreneurs, or are considering it. You need to start with that question and then everything flows from there.
To me, there are two simple reasons to build a company: 1) To be financially successful, 2) To create an enjoyable place to work. Most entrepreneurs don’t think much about the second reason, but the reason I thought that was important was because I had experienced both shitty places to work and good places to work, and the difference is life changing. It flows into the rest of your life. Who here has experienced a shitty workplace? How was that for the rest of your friends and family? When your job is rewarding, everything is much different. A friend and I wrote down 50 F’d up things we didn’t want to do at our company, and so we hoped to at least achieve creating a place that would really accelerate people’s career and they enjoyed connecting with their colleagues.
Go-to, which became Overture, an Idealab company—that was where I experienced the most personal growth and developed my deepest connections. That’s part of why we built the company here in Pasadena. Sure, I lived here, but there was also a set of people who lived here that would be effective colleagues and teammates for building a company. So, that’s the reason why overall.
Also, we always try to be really clear about our purpose, our vision, and our strategy. I was lucky enough at Yahoo to work for Jeff Weiner who later became CEO of LinkedIn. He’s a really stellar thinker. He really drilled into us to have great clarity on what we’re trying to do.
For example: The last Thursday of each month, we hold a company meeting. Every meeting we start with why are we here, what are trying to do, and what is our strategy for the year. And I repeat it, and sometimes people say “You’re going to do that again?” but it’s really important to reiterate your what it is we’re trying to do and why we’re trying to do that. We always start there. Where it gets interesting is driving that down through the whole organization. It’s easier to do that when you’re smaller. When you get to 300, 400, 500—you wrestle with it more. How do you draw that clean bright line between everyone’s daily work to what your purpose is. That alignment is hard to achieve. You do not want an employee wondering “Am I wasting my time?” There’s nothing worse.
Your strategy and purpose need to be clear, and what each person is doing each day needs to be aligned with that strategy and purpose. There are three things that we define and reiterate in our company.
- Purpose: Why we’re here. We strive to create a place where people can build their careers, and we make ourselves indispensable to our customers. This is more of a high-level goal.
- Vision: What are we trying to create. This is more aspirational three to five year goal, so it evolves.
- Strategy: How we’re going to bring that vision to life. This is much more detailed, sometimes people would say painfully so. We just went through this in detail in our first company meeting of the year.
There are things that you think are going to be hard when you start a business. And you think maybe it will be making decisions. At business school, you get these case studies, and they’re beautifully framed. But when you’re running a company, it’s not like that at all. Decisions are the easy part of running a company. But I think what’s harder is framing the decision: “What question are you trying to answer?” You are being asked a question by the market. The market is moving ridiculously quickly and competitively. And it’s hard sometimes to realize that you are being asked a question by the marketplace, and then to frame that question. What is the question, what are the pros and cons, and this is future oriented so how do you answer that question without a bunch of data to look at? And the answering of that question—who do we involve, and how do we work through that, and how do we deal with the level of uncertainty that is inherent both in the nature of the question and the information about that question. The fork in a road, that’s not difficult. I’ve found that framing the question, forcing yourself to pose it as a question, posing it so that you have to answer. When we do that we’re at our best, and when we don’t ever make a clear decision, or take a long time to make a decision. So that’s different than in school, you’re not just answering a question. You have to write the problem before you can answer it, and that’s not anywhere in business school.
Question from the audience: When was that turning point when you knew you’d make it?
Tim’s Response: Well, there are many points, it’s not like in movies—struggle, struggle, struggle then success—like Uber or Snapchat. Sure, that happens. But mainly it happens constantly, and it’s non-linear. In the first two years, it was all existential doubt. No one knew what it was that we were offering, what we were talking about. Then when we hit profitability people were acting like you’re done. But things change constantly. So you’re not done. It’s not even a marathon. It’s just ongoing. You keep getting whacked. It’s like driving a car, it’s all new and shiny at the beginning, but after nine years you’ve been in crashes, you’ve got all kinds of dents, but you keep driving it. You take a bunch of knocks. People you love leave, it happens. But you keep forging on. There is no turning point. There is always new challenges, and you keep grinding it out. There are some great moments, but then it keeps going.
People – all business is people. It’s all based on who you have and what they do. There’s two topics on people—there’s leadership and then there’s everything else. I had lunch with a guy a few years into it, and he asked me, “How’s your team? You know you’ll have to fire them.” I was like “What??” What a shitty lunch. But he was right. So, you hire the group who are great at starting up a company, but as you make progress, and you grow, they aren’t the right people any more. But you like them, and they’re your friends. Then they start not to be successful. You’re all in denial about it. It’s the last conversation you want to have. But he was right. We’ve turned over most of the people around me roughly two times in nine years. It sucks, but it was the right thing to do. A couple of times on the other side, a couple of guys have come to me and said you know, it was right—I feel better, and I’m back to what I love. But that process is difficult, and it is different for you and for them. You have to anticipate what you’re going to do in a year. In order to do that, you have to disconnect your emotion, but you need to do it with empathy. This may not be universally true, maybe some get through, but usually some or all turn over, rarely all get through to stage four. And if you have any humanity it’s a hard thing to do. (This is maybe a dark version of building a company—but I wanted to say something that was actually useful.)
The other part of the people stuff for the broader team, is creating a culture where people can work effectively, enjoy it, and get rewarded. When you’re smaller, it’s easier. When you get to 100 people and larger, it’s harder to do. So what we did, we got the company together in groups of 8-10, asked what do you want our values to be. And then we tried to breathe life into it, you need to codify it, and take actions to make it happen.
- One value: Our customers define us. When people look at company, they look at which companies you work with. If they are good quality, then you’re good quality. And at a certain point, we had to evaluate who we were working with and decided that we need to shut down some of those relationships. So, we did it, we took a hit, but for the right reasons.
- Another thing we have we call the traits – what we look for in each individual. Do people make the right decision when no one is looking? If no one would ever know, would you do the right thing. That’s a good test to try and apply.
It’s a never ending quest, and we’re still working on it to make everyone feel like it is there company. I don’t want it to feel like a place where people just come to work 9 to 5, but when you have 500 people, there’s a certain percentage and our job is to get that percentage as low as possible. We’re always trying to achieve 100%.
Finally, as a CEO, as you get bigger, you need to be prepared to work on a lot of projects that do not work. So here’s what I mean by that: When you operate the company you’re setting up an operation against your strategy, and as you get deeper into the organization, you want the probability of the work being successful to go up because you’re asking people to work on known problems. As you go up the organization, particularly you, you have to work on a lot of prospective things that by definition have a high probability of failure. Big partnerships, strategic deals, all kinds of stuff, most of which you’ll never tell your company about. You’ll never speak of them and most of them won’t come to a hill of beans. You have to get your head around that, how that works, and get used to that because it is part of the dynamic. The failure rate may be high, but you gotta do it.
There’s more! Watch the very interesting Q&A session, or listen to it on the podcast. (links above)