The authors Chris Zook and James Allen explain, in their book “The Founder’s Mentality”, that most ventures fail to achieve their goals due to factors inherent and internal to the company itself.
Achieving and maintaining a potentially profitable and stable performance are the primary goals of all companies. But how to do this and why is it so difficult?
With this in mind, entrepreneurs seek to study the external environment. In this way, they conduct market analysis and develop strategies to maintain and win new customers.
Business planning focused on the external space is very important to make it prosper and achieve success, but internal issues are also crucial.
To learn more about this, keep reading this summary!
“The Founder’s Mentality” is a work by the bestselling authors Chris Zook and James Allen, released in 2016 by Harvard Business Review Press.
The book links the growth of organizations with the increase in associated complexity. Because of this, the authors describe, in the course of the text, the three main crises that may arise as a consequence.
The first of these is overload, related to accelerated growth. The second is stall-out, which refers to slow growth. The last type of crisis, and perhaps the worst, is the free fall, with the decline of business.
Chris Zook and James Allen explain that, to avoid or overcome these crises and keep growing, companies need a visionary founder whose mentality shapes the internal organizational culture.
Chris Zook is a bestselling author and Ph.D. from Harvard University, as well as a partner at Bain & Company. Considered by the British newspaper The Times as one of the top 50 business thinkers, his work is focused on the profitable growth of companies.
James Allen is also a partner in the Bain & Company office and, like Chris Zook, is a leader in global strategy practice. Allen is the founder of Bain Founder’s Mentality 100, a globalized network of high-growth companies.
Both authors wrote other famous books, among them “Profit from the Core”.
The book “The Founder’s Mentality” is suitable for all entrepreneurs, managers, and leaders who are looking for a new way to deal with, exceed and overcome the crises that their companies face in the quest for the continued success of the business.
The key points of the book are:
This summary will show you the main insights of the authors Chris Zook and James Allen for managing crises, overcoming obstacles, growing sustainably, and achieving success and high financial profitability.
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According to numerous surveys and reviews conducted in a lot of companies, in the search for the qualities responsible for making a company grow, the authors realized that most of the organizations that maintain profitable growth are focused on the core business.
Chris Zook and James Allen found, after observing the leadership levels of these companies, that their founders were still active and holding these positions, serving on a daily basis as executives, motivating the team, and participating in the decisions.
Thus, the authors concluded that the companies led by the founders, that is, those with the “founder’s mentality”, generally have a higher level of efficiency compared to other organizations.
As it is explained in the book, thinking like a founder has a great competitive advantage for new ventures that seek to face large competitors already consolidated in the market, due to three main reasons:
The authors Chris Zook and James Allen highlight in the book “The Founder’s Mentality” many examples and real data from their research, which prove the above statements and then the functionality of the founder’s mentality, both for companies that are starting, as well as those that are already on the market.
Chris and James point out that the companies with the best results and performance are those that manage to maintain the level of founder’s mentality, including its three main aspects over time and regardless of the complexity achieved.
However, they also show that this way of thinking decreases over time, as companies grow.
The companies that allow this to happen are subjected to risks and may also be vulnerable to other emerging organizations and their new dynamic and innovative ideas.
As indicated by the authors Chris Zook and James Allen, when changes in external environments begin to overcome, in terms of speed, changes within the organizational culture, it is possible to conclude that your bankruptcy may be closer than ever.
Another point raised is that when organizations grow much and lose their strong founder’s mentality, increasing the levels of bureaucracy, with large and complex systems, they may start to have difficulty in accelerating processes.
In the second chapter of the book “The Founder’s Mentality”, the authors describe the three main causes of the problems that cause big companies to lose their way and also energy!
As pointed out at the end of the previous overview, companies that grow intensely tend to lose control and efficiency of the founder’s mentality. When this happens, they begin to face the crisis of overload.
This type of crisis is mainly faced by companies that didn’t plan their internal growth well and ended up diminishing or even losing their capacity and the characteristics that made them grow so much.
The feeling of overload is horrible, explain the authors Chris Zook and James Allen. You are growing and working hard to keep the evolution of your business, but you feel that you are getting more and more stuck. It is as if something bad is going to happen, according to them.
The book brings the case of Norwegian Cruise Line, a cruise company that was growing without precedent and came to lead the market.
Even with innovation characteristics and great growth ambitions, the company was not able to deal with the overload, precisely due to the lack of strategy and internal growth plan.
The crisis called stall-out happens when big companies start to slow down their business capabilities.
This occurs mainly when the growth methodologies and practices used by an organization have run out or don’t work as efficiently as before.
According to the book “The Founder’s Mentality”, this is a common situation that can affect companies and various branches with a margin of 2 to 3. That is, 66.66% of companies will suffer from this crisis.
The authors Chris Zook and James Allen further highlight that this can happen abruptly, without warning. Based on studies of the Corporate Executive Board, growth does not decrease gradually, but it falls like a rock.
As with overload, the main cause of stall-out is found in the internal environment of companies. Chris Zook and James Allen affirm that, as companies develop, getting bigger and more complex, they lose their agility and flexibility.
In this way, they can no longer sustain growth and decline.
The free fall can also happen at any time, especially today, when new technologies and ideas from startups are emerging and swallowing up giant companies, using innovation as their main weapon.
These crises happen when a company’s products or services become obsolete due to other insurgent technologies. Unlike stagnation, where there is still time to reflect and plan the next steps, the free fall is much more serious.
At that moment, companies discover the complete or partial uselessness of their services or products, obsolescence gains space and financial performance and expectations of growth quickly fall.
According to the data pointed out by the authors Chris Zook and James Allen, about 5 to 7% of companies are in a phase of free fall. They point out that only 10 to 15% manage to reverse this situation.
They also describe in the book that there is no time to “rediscover” a company’s insurgent mission. It is necessary to take extreme and rapid action to redefine it as soon as possible.
A classic example cited by the authors is BlockBuster. The company presented itself as a leader in the video rental market, but because it didn’t believe in the potential of the digital age, like Netflix’s streaming services, it declared bankruptcy in 2014.
All three types of crises have large and even terrible threats to the survival of a business.
However, they can also be used as opportunities for improvement. If managed in the right way, they can even add new and great value to a business, bringing innovation and new possibilities.
As Les Wexner said:
“Success does not automatically bring more success. The most difficult thing is to stay alert and keep going when you win and grow. Therefore, I refuse to accept the fact that I am mature or that the company is mature. As soon as you accept that, you start to die.”
The authors Chris Zook and James Allen emphasize that the founder’s mentality is extremely important for leaders, not just the CEO, but all types of leadership positions, to overcome crises and stand firm in the market.
There are four essential beliefs for this:
To lead is to guarantee an environment where employees can develop personally and professionally, ensuring efficiency and productivity of the system at the same step.
However, the authors stress that its most important characteristic is in the possibility of being taught, measured, practiced, and also improved.
According to the book “The Founder’s Mentality”, to preserve the founder’s ability and mentality, it is necessary for a company to have “an army of leaders”, not just the CEO with this responsibility.
The authors cite the example of the Brazilian Carlos Britos, who seeks to give new employees and younger people, interested and willing, ambitious goals and great freedom to act and improve.
It is important to use the founder’s mentality to make a business grow and also maintain it. Alienating employees and collaborators is never a good option. The authors Chris Zook and James Allen portray that this leads to the company’s vulnerability.
In this way, companies can lose space for other insurgent companies that are climbing and adapting faster lately.
As it is indicated in the book, out of every three companies, only two can grow sustainably and profitably because they are insurgents, that is, they have daring and brave missions with unlimited vision.
The authors present in the book a complete questionnaire to check and reflect on how much your company has this feature. Here are adaptations to some of these questions:
In the book “The Hard Thing About Hard Things”, author Ben Horowitz also explores leadership qualities, its relationship with overcoming challenges, and the importance of employee appreciation.
James C. Hunter, in “The Servant”, portrays concepts similar to the idea of servant leadership. He explains in his story that leadership is a skill that can be acquired and should be used to motivate, encourage, and serve employees.
Another key issue for the growth process of companies is innovation. In his book “Inove ou Morra”, Luiz Guimarães explores this concept in-depth and reinforces the idea that it is not necessary to be a startup to innovate, improve, and develop.
The founder’s mentality refers not only to the founders of a company and their individual qualities.
The concept also addresses the attitudes, behaviors, procedures, and planning practices common to all employees, as well as the forms of engagement.
Establishing and defining a clear, objective, insurgent, and long-term mission is a very important example.
Consequently, if at any time the founder leaves the company, the team remains focused and with the mindset intact!
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