Start with why

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SPLIT HAPPENS
Wal-Mart started small. So did Microsoft. So did Apple. So did General Electric
and Ford and almost every other company that made it big. They didn’t start by
acquisition or spin-off, or achieve mass scale overnight. Nearly every company
or organization starts the same way: with an idea. No matter whether an
organization grows to become a multibillion-dollar corporation like Wal-Mart or
fails in the first few years, most of them started with a single person or small
group of people who had an idea. Even the United States of America started the
same way.
At the beginning, ideas are fueled by passion—that very compelling emotion
that causes us to do quite irrational things. That passion drives many people to
make sacrifices so that a cause bigger than themselves can be brought to life.
Some drop out of school or quit a perfectly good job with a good salary and
benefits to try to go it alone. Some work extraordinarily long hours without a
second thought, sometimes sacrificing the stability of their relationships or even
their personal health. This passion is so intoxicating and exciting that it can
affect others as well. Inspired by the founder’s vision, many early employees
demonstrate classic early-adopter behavior. Relying on their gut, these first
employees also quit their perfectly good jobs and accept lower salaries to join an
organization with a 90 percent statistical chance of failing. But the statistics
don’t matter; passion and optimism reign and energy is high. Like all early
adopters, the behavior of those who join early says more about them than it does
about the company’s prospects.
The reason so many small businesses fail, however, is because passion alone
can’t cut it. For passion to survive, it needs structure. A WHY without the
HOWs, passion without structure, has a very high probability of failure.
Remember the dot-com boom? Lots of passion, but not so much structure. The
Titans at Endicott House, however, did not face this problem. They knew how to
build the systems and processes to see their companies grow. They are among
the statistical 10 percent of small businesses that didn’t fail in their first three
years. In fact, many of them went on to do quite well. Their challenge was
different. Passion may need structure to survive, but for structure to grow, it
needs passion.

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This is what I witnessed at the Gathering of Titans: I saw a room full of
people with passion enough to start businesses, and with knowledge enough to
build the systems and structures to survive and even do very well. But having
spent so many years focused on converting a vision into a viable business, many
started to fixate on WHAT the organization did or HOW to do it. Poring over
financials or some other easily measured result, and fixating on HOW they were
to achieve those tangible results, they stopped focusing on WHY they started the
business in the first place. This is also what has happened at Wal-Mart. A
company obsessed with serving the community became obsessed with achieving
its goals.
Like Wal-Mart, the Endicott entrepreneurs used to think, act and communicate
from the inside out of The Golden Circle—from WHY to WHAT. But as they
grew more successful, the process reversed. WHAT now comes first and all their
systems and processes are in pursuit of those tangible results. The reason the
change happened is simple—they suffered a split and their WHY went fuzzy.
The single greatest challenge any organization will face is . . . success. When the
company is small, the founder will rely on his gut to make all the major
decisions. From marketing to product, from strategy to tactics, hiring and firing,
the decisions the founder makes will, if he trusts his gut, feel right. But as the
organization grows, as it becomes more successful, it becomes physically
impossible for one person to make every major decision. Not only must others
be trusted and relied upon to make big decisions, but those people will also start
making hiring choices. And slowly but surely, as the megaphone grows, the
clarity of WHY starts to dilute.
Whereas gut was the filter for early decisions, rational cases and empirical
data often serve as the sole basis for later decisions. For all organizations that go

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through the split, they are no longer inspired by a cause greater than themselves.
They simply come to work, manage systems and work to reach certain preset
goals. There is no longer a cathedral to build. The passion is gone and inspiration
is at a minimum. At that point, for most who show up every day what they do is
just a job. If this is how the people on the inside feel, imagine how those on the
outside feel. It is no wonder that manipulations start to dominate not only how
the company sells its wares, but even how they retain employees. Bonuses,
promotions and other enticements, even instilling fear in people, become the
only way to hold on to talent. That’s hardly inspiring.
This diagram depicts the life of an organization. The top line represents the
growth of WHAT the organization does. For a company, that measurement is
usually money—profits, revenues, EBITA, share price or growth in market
share. But the metric can be anything, depending on what the organization does.
If the organization rescues lost puppies, then the metric would be the number of
puppies successfully rescued. It is inherently simple to measure the growth of
WHAT an organization does. WHATs, after all, are tangible and easy to count.
The second line represents the WHY, the clarity of the founding purpose,
cause or belief. The goal is to ensure that as the measurement of WHAT grows,
the clarity of the WHY stays closely aligned. Put another way, as the volume of
the megaphone increases, the message traveling through it must stay clear.
The volume of the megaphone comes solely from growth of WHAT. As this
metric grows, any company can become a “leading” company. But it is the
ability to inspire, to maintain clarity of WHY, that gives only a few people and
organizations the ability to lead. The moment at which the clarity of WHY starts
to go fuzzy is the split. At this point organizations may be loud, but they are no
longer clear.
When organizations are small, WHAT they do and WHY they do it are in
close parallel. Born out of the personality of the founder, it is relatively easy for
early employees to “get it.” Clarity of WHY is understood because the source of
passion is near—in fact it physically comes to work every day. In most small
businesses all the employees are all crammed into the same room and socialize
together. Simply being around a charismatic founder allows that feeling of being
a part of something special to flourish. Although there may be some efficiencies
to be gained, for small businesses that are perfectly comfortable staying small,
the need to articulate the WHY is not as important. For organizations that want
to pass the School Bus Test, to become billion-dollar organizations or work at a
scale large enough to shift markets or society, the need to manage through the
split is paramount.
The School Bus Test is a simple metaphor. If a founder or leader of an

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organization were to be hit by a school bus, would the organization continue to
thrive at the same pace without them at the helm? So many organizations are
built on the force of a single personality that their departure can cause significant
disruption. The question isn’t if it happens—all founders eventually leave or die
—it’s just a question of when and how prepared the organization is for the
inevitable departure. The challenge isn’t to cling to the leader, it’s to find
effective ways to keep the founding vision alive forever.
To pass the School Bus Test, for an organization to continue to inspire and
lead beyond the lifetime of its founder, the founder’s WHY must be extracted
and integrated into the culture of the company. What’s more, a strong succession
plan should aim to find a leader inspired by the founding cause and ready to lead
it into the next generation. Future leaders and employees alike must be inspired
by something bigger than the force of personality of the founder and must see
beyond profit and shareholder value alone.
Microsoft has experienced a split, but is not so far down the line that it can’t
be put back on track. There was a time not too long ago that people at Microsoft
showed up at work every day to change the world. And they did. What Microsoft
achieved, putting a PC on every desk, dramatically changed the way we live. But
then their WHY went fuzzy. Few people at the company today are instructed to
do everything they can to help people be more productive so that they can
achieve their greatest potential. Instead, Microsoft became just a software
company.
If you visit Microsoft’s headquarters in Redmond, Washington, you will find
that although their WHY has gone fuzzy, it is not lost. That sense of a cause, that
desire to change the world again, is still there, but it has become unfocused,
wrapped up in HOW and WHAT they do. Microsoft has a remarkable
opportunity to clarify their WHY and regain the inspiration that took them to
where they are today. If they do not, if all they do is manage the WHAT and
continue to ignore the WHY, they will end up looking like America Online, a
company so far past the split that their WHY is indeed lost. There is barely a hint
of the original WHY left anymore.
America Online used to inspire. Like Google today, it was the hot company to
work for. People clamored to move to Virginia to work for this amazing
company that was changing the rules of business. And it was true that, like all
inspiring companies, AOL set in motion changes that profoundly altered how we
do almost everything. They inspired a nation to get online. Their cause was clear
and their decisions were governed by their WHY. Their goal was to get more
people online, even if their decisions in pursuit of that goal wreaked havoc on
their business in the short term. With their WHY in focus, AOL pulled ahead of

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their competition by deciding to change from hourly pricing for Internet access
to unlimited monthly pricing, a decision that created so much traffic it shut down
their servers. Given the impact, the decision was neither practical nor rational,
but it was the right choice to help bring their cause to life. That their systems
shut down with the additional traffic only pushed them to work harder to cope
with it, to ensure that America could, in fact, get and stay online.
In those days, having an AOL e-mail address was a point of pride—a sign of
being one of those who was a part of the Internet revolution. These days, still
having an AOL e-mail address is a symbol of having been left behind. That the
meaning of something as simple as