Founder-Market Fit: Essential CEO Skills

Here’s one frank reality: you can’t do everything. You can’t excel at (nor have the time for) everything a new innovation requires: marketing, sales, product management, operations, strategy, management, and technology. At the same time, you want to avoid overhiring and overbuilding too early. This is the fine balance all early stage innovators must tackle. The temptation to overhire and overbuild looms large because we as human beings get anchored on solutions and assumptions without testing them. It’s one of the biggest existential risks to your innovation, spurring a whole generation of books, such as the seminal work The Lean Startup. Example Despite The Lean Startup’s publication in 2011, innovators continue to face this risk. Quibi, for instance, was a short-form video streaming platform launched in April 2020 with significant hype and a whopping $1.75 billion investment. Despite hiring a large team and investing heavily in original content, Quibi shut down just six months later, unable to attract a sustainable user base. Overhiring and overbuilding without clear market fit contributed to its rapid demise. Our innovation advisory services can help you achieve founder market fit, empowering you to create financially sustainable social innovation.

So, for long-term success, what skills should you keep as the CEO? The CEO should prioritize enhancing the skills essential for achieving strong founder-market fit. (1) Identify an accessible niche with a pressing unmet need (2) Cultivate expertise driven by curiosity in that area

These roughly translate to CEO skills into the following domains: (1) Customer development Customer development involves identifying an accessible niche with a pressing unmet need. This encompasses the following essential CEO skills: • Strategy: deciding which needs and markets you should tackle • Marketing: reaching markets effectively through a variety of channels, platforms, and messages • Sales: identifying a pressing unmet need for your solution and monetizing it (2) Curiosity-driven expertise Intellectual curiosity about the need and your market niche generates the grit and perseverance necessary for effective solution development and success. This breaks into: • Product management: specifying and refining the top solutions and components generating the highest return on investment • Customer success: quickly getting customers to success, leading to retention and referrals for your innovation. The core takeaway: If you are the CEO, you stay close to your customers, often doing things that “don’t scale.” In other words, The CEO is the top expert on the customer, especially what will turn your target segment into “raving fans.” These are the CEO skills you should not neglect, otherwise your tenure may be short lived. Example Rodney Brooks, co-founder and CEO of Rethink Robotics, exemplified the pitfalls of a technical focus that overshadowed customer engagement. As a foremost expert in robotics, Brooks held a Ph.D. from Stanford University and decades of experience as a professor at MIT, but became disconnected from the specific needs of his target customer, particularly small- and medium-sized manufacturers. For instance, he overvalued flexibility in his robots, which undoubtedly took significant technical ingenuity to solve. But his manufacturing customers desired robots that could execute precise tasks repeatedly and quickly; flexibility was a secondary success requirement. This misalignment resulted in Rethink Robotics failing to gain traction in a competitive market, ultimately leading to the company's closure in 2018.

So now we know the dangers of delegating the wrong things. But if delegating is necessary for success, what skills should you delegate and when? I’ve identified five common scenarios for you. The central concept in each is this: hiring should address a critical problem that you’ve thoroughly validated. Scenario 1: You’ve validated market need for that solution You’ve realized that the only way to solve your problem or successfully capture your market is through expertise that falls outside your zone of genius. For a non-technical CEO, a common example would be hiring an engineer who has the expertise to to build an application that you’ve “pre-sold” to a customer by having them, for instance, sign a letter of intent. Two words of caution (1) Validate return on investment first Even if you have validated the need, still be careful about “overspending” on solution development. Make sure you’re investing just enough to create a strong return on investment. Common approaches to do so include: • starting with a service with manual workflows, assisted by overseas or part-time assistants • using no-code (zapier, appsheets, etc) or building off existing off-the-shelf tools • hiring overseas or part-time technical expertise

Remember, most solutions need just basic technology. For many business-to-business or consumer products, phenomenal customer development and user experience frequently outperform technically superior products. (2) Don’t get anchored on a revenue model While it’s true that your solution capabilities constrain your revenue model, avoid getting too anchored onto a specific type. Yes having a software product can set you up for a phenomenal software-as-a-service (SaaS) subscription model with a fantastic profit margin. But over-indexing on that desire can blind you to the risks of overbuilding. For many, SaaS is better as a destination rather than a starting point. This can limit your potential for success, just as getting fixated on a specific solution type can hinder you from finding the best solution to a problem. Your revenue model, ultimately, is secondary to solving a pressing unmet need and validating your solution. Scenario 2: Validated processes are breaking This often happens when you have too many customers and your workflows are about to break. It’s a great time to start building repeatable or scalable processes to meet the validated need. • Product: Hire for technical expertise that can help you scale your solution, make it more secure, or help you think of better ways to solve validated customer success requirements. • Customer development: Hire for sales, operations, or customer success support and delegate necessary and low value areas, so you can spend time on higher-value tasks.

Caution In general, be careful about delegating high-value sales activities — such as discovery or business case development — until you hit a certain stage; the CEO (as the expert on the customer) tends to be the best salesperson. Scenario 3: You need specialized expertise You’ve validated the need for specialized expertise, which is your growth-limiting step. For instance, you’ve realized to get past your growth ceiling, you need to grow teams focused on a specific advertising method or platform. You hire world-class leaders specializing in exactly those capabilities. Tip Even if you do have the resources, consider de-risking these hires first through an advisory or consulting role. Lean against hiring expensive senior talent full-time until you’ve validated fit and hit specific financial targets (see next section)

Scenario 4: You’ve hit specific financial targets before hiring senior staff

You have sufficient revenue or profitability and want to delegate away entire functions, like marketing, that fall outside your zone of genius or intellectual curiosity. Common wisdom, for instance, suggests waiting to hire Vice Presidents until you’ve hit $1-$1.5 million in revenue. Why? Senior hires quickly drain your financial resources and add organizational complexity. Scenario 5: Having a partner brings out the best in you You’ve validated working with a specific partner would bring out the best in you. If so, find a partner with complementary skillsets, which you can uncover through a skill audit.

Be cautious about prioritizing the search for a technical co-founder before you’ve validated the need for the specific solution they excel at building. Focusing too much on finding a technical partner may lead you to solutions that are too expensive or slow to iterate, ultimately hindering your learning and progress about unmet customer needs.

Founder-market fit defines the CEO skills necessary for sustained financial success. As a CEO, your foremost objective must be to become the leading expert on your customers, transforming them into "raving fans." However, here’s the hard truth: If you lack the intellectual curiosity or foundational skills to master these critical CEO competencies, it may be time to reconsider your role. Without this commitment, your tenure is likely to be fleeting. Embrace the challenge, or step aside for someone who will. In the comments, share your experiences of your challenges and successes with CEO skills and founder market fit. For more on founder market fit, see others in this series: