BOOK REVIEW. Think like a founder

On January 20, movie-goers will get a big bite of McDonald’s when The Founder releases in theatres worldwide. The film starring Michael Keaton is based on the life of Ray Kroc, a milk-shake mixer salesman from Illinois who encounters burger joint-owners Richard and Maurice McDonald, and gets impressed by their cheap and efficiently run restaurant.

Kroc spots the franchise potential of McDonald’s and helps them grow the business into a giant corporation. Over time, he manipulates things in such a way that he takes over the company from the brothers.

Though Ray Kroc was not really the founder of the world’s most famous fast food store, he was the one responsible for its super-sized growth. His autobiography, Grinding it Out , was one of the many books that Bain & Company’s Chris Zook and James Allen read while researching The Founder’s Mentality .

Think like founder What exactly is a founder’s mentality? And why is it important? According to Zook and Allen, founder-led companies performed 3.1 times better than the rest when they looked at an index of S&P 500 companies over a 15-year time frame. Clearly, there is a secret sauce. And this book tells us what it is.

Companies with a founder’s mentality, Zook and Allen say, have three distinct traits — an insurgent mission, a front-line obsession, and an owner’s mindset which is defined as a bias towards action and an aversion to bureaucracy.

It’s an interesting book for our times and especially in India when many promoters are trying to bring in professional CEOs and step away from the hurly burly of operations. It’s also a time when some promoters are kicking out professionals and returning to the field — so it’s a fascinating topic certainly.

Of course, founders can’t always helm the company and have to let go. But Zook and Allen’s contention is that no matter what your role in a company, you should embrace the founder’s mentality. And for companies that have institutional owners, the advice is to rediscover the founder’s zeal.

A wide canvas What makes the book’s thesis credible is that it is based on humongous research. To arrive at the founder’s traits, Zook and Allen analysed examples of sustained success at 7,500 companies in 43 countries, and personally interviewed many.

The examples span many geographies — from American companies such as Dell to Indian firms such as Marico and Godrej to Chinese grocery business Yonghui.

It also packs in anecdotes of companies at different stages of growth — from startup to scale-up to giant corporations.

The book begins by defining the founder’s mentality and how it interacts with the process of scaling. The first trait — insurgency — is to do with bold mission and limitless horizon.

Examples provided are of two retailing success stories — Lex Wexner and how he founded L Brands and the way the Zhang brothers created Yonghui.

Wexner’s bold mission was to build his store around the image of a precise customer — a smart, strong, independent modern woman typified by Jenny Cavalleri, the character played by Ali McGraw in Love Story . At Yonghui too the Zhang brothers had a clear vision — they wanted to create products that would appeal to the Chinese mother who simply wants safe, fresh good value food.

The second trait of front-line obsession is about treating people as the heroes of the business and customer advocacy. It’s also about a compulsive attention to detail. Steve Jobs, according to the authors, typifies this trait. As do successful Indian hoteliers, the Oberois. Current CEO Vikram Oberoi still follows his grandfather MS Oberoi’s obsession with the front-line which involves making sure that chefs themselves visit food markets rather than simply order the ingredients.

The third trait is the owner’s mindset which is relentlessly focussed on cash, roots out complexity and is averse to bureaucracy. Take the way AB InBEv, the largest and most profitable beer company, projects targets for everyone in the group, all the way to the CEO, onto a big screen in the main office. Everyone in the company can see the targets and how others are doing. The owner’s mindset is also a bias to action, which the authors find in Adi Godrej, who stresses on speed all the time.

However, what happens when the company grows, when institutional funding comes in or when professional CEOs are hired? Will the founder’s mentality gets diffused? A telling statistic is that only about 7 per cent of companies, founder-led or not, manage to maintain these traits as they grow to scale, say the authors.

What really matters The next section of the book is devoted to explaining the predictable crises of growth — overload (it happens when leaders have failed to prepare for growth and under-manage it), stall-out (slow-down due to complexity) and free fall (when a company stops growing).

But through many examples (Australian Trust company Perpetual, adhesive player 3M, e-bay), the authors demonstrate how all these crises of growth can be averted or overcome.

The book has a lot of practical advice for wannabe entrepreneurs, and business leaders in young organisations as well as mega corporations.

As the authors say, the founder’s mentality can be applied and embedded in every level of an organisation. Some of the steps are to launch a war against bureaucracy, kill layers, benchmark speed and cost, give honest feedback always, and set big but simple targets. And the onus need not always be on the CEO — you too can be a scale insurgent!

MEET THE AUTHOR

Chris Zook is a partner at Bain & Company and has been co-head of the firm’s Global Strategy practice for 20 years. James Allen is a partner in Bain’s London office. Co-head of the firm’s Global Strategy practice, he is founder of the Bain Founder’s Mentality 100, a global network of high-growth companies.

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