Dick Harrington was most recently the CEO and President of the world's largest information media company Thomson Reuters and is largely recognized for his transformation of the company from a diversified holding company to the information services juggernaut it is today. He currently serves as my Partner and Chairman at our early-stage investment firm, Cue Ball. He and I recently had a conversation about the wisdom of applying big company lessons to small ones. Here are some highlights from that conversation:
After spending about a decade running a Fortune 500 - the world's largest information media company - what motivates you to now work with early stage and small businesses?
Small businesses employ over half of all American private-sector employees and are responsible for most of the growth within the United States. Over the past decade, they have generated about 75 percent of new jobs annually. Most important, it is where our most creative thinking comes from. Still, most small companies fail because they have poor basic business practices. So I get excited about having the opportunity to mentor them and hopefully share some lessons. Think about it: it's a lot more exciting to get a company from 0 to $100M than getting a billion dollar company its next $100M.
What is the biggest misconception people have between small and big businesses?
Most small businesses think that big companies have limitless resources and tons of money, and accordingly can do whatever they want. At the same time, most large companies think that all small ones are entrepreneurial, acting quickly, and bursting with creativity. Neither of these common beliefs is true. Most big companies do not throw a lot of resources at every project, and most small companies tend to become stagnant when they are through with their initial, entrepreneurial stage.
Give some examples of how you are applying big company lessons to the small firms you are investing in today.
The questions we asked ourselves while I was at Thomson are the same ones that every small business has to ask itself. At the end of the day, business is business. The size of the organization doesn't matter. We all must understand our customers and the markets we serve, put the right people in the right places, and be sure the organization is aligned to deliver on our goals and objectives.
What strengths shold entrepreneurs focus on?
Small businesses have important competitive advantages. When founders are leading the company, they do so with an authentic passion to deliver on a vision. It's their life. They know their business and customers better than anyone else, and this knowledge can be hugely leveraged with the right operational practices. A large company may have more money for research, but the leader of a small company almost always has more direct interaction with their customers. I am a huge believer that customer-driven strategies win over the long run.
What is the most significant challenge facing small businesses?
The biggest issue is how well the entrepreneur can scale. It's important for entrepreneurs to realize that one person can't control everything, that they can't be VP of marketing, sales, operations, etc. That kind of mindset just won't work in the long run.
How can an entrepreneur meet that challenge?
It's important to let go - to trust people you hire - and to be okay with them making mistakes along the way. Even if a manager makes a decision 180 degrees in the wrong direction, it'll probably be okay. Let them learn from their own mistakes.
What other lessons have you learned that would be helpful for small businesses and emerging leaders reading this?
Years ago I started a plumbing supply company with some partners. We did not have a lot of capital so we sometimes had to get creative on how we filled orders. We went out of our way to ensure that every order was filled, always. Sometimes, this meant getting the parts from competitors or buying at retail to complete the order. But that was okay. What mattered was never disappointing a customer. We had "Yes, we can" years before Obama did.
In addition to the customer-comes-first principle, I always had the motto that the higher you get in an organization, the harder you have to work. Success rarely happens on a nine-to five schedule. Also- dive into the important issues and from time to time "work the line" with other employees. The best way to shape people's behavior is to inspire them by doing it yourself.
Finally, focus. Don't sweat the small stuff. Save the intensity and for the most important company priorities and always make sure those are done first. To help make that happen, deal at most with five things at a time, and don't put #6 on until #1 gets knocked off. You'll definitely increase your chances for success.
This article first appeared on Harvard Business Publishing on February 26th, 2009.