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Friday, July 1, 2022

Guest Post: Nokia Startup Mistake #9 – Arrogance

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Editor’s note: Here we have a guest post by Mika Marjalaakso, the CEO of Oak Ventures, and a seasoned serial entrepreneur, angel investor and startup advisor. Marjalaakso is painting with broad brushstrokes here, but it’s true that people need to re-learn how to get things done when switching from a large corporation to a startup. Many of these points are common sense, but by saying it out loud we can either acknowledge it, or start a discussion around it.

This is part of my Nokia Startups Mistakes series. For a backgrounder, please read the introduction. This is a somewhat difficult mistake for me to write about as I haven’t personally witnessed it in my interactions with Nokia-based startups. Some angels and VCs, however, have mentioned enough times that they think quite many ex Nokians suffer from being arrogant. This behavioral trait most likely is rooted in how things were done at Nokia Corporation.

Let me first define what is understood with arrogance here.

In authoritarian leadership style a Nokia executive while still at Nokia directed his subordinates and especially external vendors to make various things happen without providing any intrinsic or monetary motivation beyond punishment in case of non-compliance. This style may work in a large corporation where an executive holds undisputed authority over his subordinates, and vendors are at the mercy of the corporation and its dictators.

When a Nokia executive who has lost his beloved badge, and the authority and recognition that came with it, continues to command external people and service providers without offering any other motivation than his lost authority – that’s what we call as arrogance.

Why can arrogance be bad?
Most startups are broke. To get things done, entrepreneurs need to leverage their own network and the networks of their co-founders, investors and advisors. Sometimes you need to get service from previously unknown service providers at below market price or paying with equity only. People don’t move their asses and do favors just because you say so but instead they want to get something in return – like feel good in helping you out, or get a pole position to offer their services later on when you can pay with real money. A startup co-founder, and this applies especially to the CEO, has to know how to ask help, and how to get people do things for him while most of the time the only instant payback is his gratitude. But make no mistake, earning someone’s gratitude and trust, and thus being able to someday ask help yourself, that’s incredibly powerful.

What then motivates people help each other?
So far we have firmly established the following two things:

  1. To get things done fast on a timely manner, and to operate at low costs in the early days, a startup needs to tap into the network of its co-founders and advisors, and once and awhile source important services while not being able to pay any significant money.
  2. Being arrogant, i.e. trying to exercise authority on people you don’t have any authority, is not going to help you win people on your side.

So, how should you then deal with people?

What are the six weapons of influence?
Robert B. Cialdini is my hero. He is the author of one of the greatest business books ever written: Influence: The Psychology of Persuasion. This book is a must read for anyone who ever needs to deal with other people, yeah – it’s like a bible is for believers. The book is fun to read and reviews many of the most important theories on and experiments in social psychology.

I have just summarized here Cialdini’s thoughts for your convenience, but to truly grasp them you should read the book.

  1. Reciprocation. We humans are unique amongst all animals as we incur debt from services and gifts from other people, and then we feel a growing urge to pay back. Likewise if we say no to someone that tried to sell us something, we become more prone to buy something from the same guy later on.
  2. Commitment and consistency. Once people have made a choice or taken a stand, they are under both internal and external pressure to behave consistently with that commitment. When you get someone to commit verbally to an action, the chances go up sharply that they’ll actually honor that commitment.
  3. Social proof. This is a very powerful shortcut that many smart and dumb people take in the times of information overload. Most investors are sheep that follow one other, and thus getting a lead investor that serves as a credible social proof will get you the rest.
  4. Liking. People love to say ‘yes’ to requests from people they know and like. And people tend to like others who appear to have similar opinions, personality traits, background, or lifestyle. More people will say ‘yes’ to you if they like you, and the more similar to them you appear to be, the more likely they are to like you.
  5. Authority. Most kids are raised with a respect for authority. Authority plays internally little role – yet it has a role – in startups which are meritocracies, and to get external people do things for you just because you say so – yeah, that’s arrogance and probably doesn’t work.
  6. Scarcity. Opportunities seem more valuable when they are less available. This, again, is a very important principle e.g. when raising funding or recruiting new people.

To summarize:

Startups should be meritocracies and thus ruling by authority doesn’t work inside or outside the company. To get outside people do favors for you, besides paying money for their services, you need to offer them incentives grounded to social psychology. Asking for help, for instance, is a very powerful way to empower people. People, in general, like to help other people when nicely asked, as long as the effort required is decent, and you pay back with your gratitude.

And, read the Cialdini’s book – you will have lots of fun, and the probability that you will be able to raise funding from investors or buy services below market rate increases.

I hope you will enjoy this series, the thoughts it provokes, and the discussion it triggers. Please do participate to the discussion by sharing your own angle and experiences on this topic, or commenting on something, anything on this post. The preferred place for discussion is the Facebook page at https://www.facebook.com/ToughLoveAngel.

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