Interview with Digital Shadows’ Alastair Paterson: a CEO’s Strengths and Challenges (2/3)

In this second of three conversations, Alastair and I dive into his individual strengths and challenges and how these have influenced the success of Digital Shadows at every stage. Here, he describes how he balances his own knowledge of the business with external resources.

To understand the role a CEO plays in a business, I think it’s important to also understand the CEO as a person. From your perspective, what strengths did you bring to Digital Shadows? Which of these have you leaned on at various stages of the company?

From a pure skills perspective, I am a generalist, and have traditionally been particularly strong on product and pre-sales of any enterprise solution. I originally came from a technical background, so I can speak the languages of quite a few levels of our prospective clients and have always worked closely with engineering teams. These existing skills were critical in getting product market fit at the start of our journey, but as CEO you rapidly have to move outside your comfort zone as the company scales.

It can be difficult to self-evaluate, but something that helped was a 360-degree feedback review that we did a little while back with our leadership team. A few things came from that, some of which I knew, some of which were surprising. I learned that, in general, people liked working with, and for me because I was perceived as authentic, approachable and genuinely trying to do the right thing wherever possible.

Quick interjection: what do you mean by “authenticity, approachability, and genuineness” in the case of Digital Shadows?

You can’t fake that – people can smell it. I think if it’s really you, these qualities help get people to follow you because they believe in you, your values and the dent you’re trying to make in the world. These were key in building out a leadership team and, in some cases, hiring people that chose to join us in spite of a number of other options they had.

Some people imagine that the startup journey is like a straight line up and to the right. The reality is there are many ups and downs with a different, complex set of challenges at each stage that requires adaptability and resilience to navigate. There is never a time where something in the business is not on fire, and you have to be comfortable with dealing with that level of continuous challenge and stress over many years.

I think emotional intelligence and empathy are huge because almost everything you do as a CEO is people-related, be it raising investment, selling to people, or hiring and trying to get the best possible people to work for you. Motivating your existing team is key because you’ve got to understand where they’re coming from, what their hot buttons are, and how you can retain them.

There are examples of key employees who are really good and have historically jumped around companies a fair bit. They’ve stayed a long time with us, sometimes longer than they’ve stayed anywhere else. However, periodically, they’ll naturally get itchy feet again. I’ve managed to keep many on our side through personal relationships. There comes a time when it’s the right time for someone to move on, but until then you have to do your best to keep them.

Let’s talk about the skills or qualities that you might have struggled with or found more difficult to develop as the company grew. How did you identify these points of growth, and how have you worked to plug the gaps?

One challenge I face is determining how a CEO dips in and out of the detail, since one has to be quite removed from parts of the business as it grows. In the early days, when the company is running on a day-to-day basis, it’s mostly about “what the most important thing today is”. I used to do this: at the start of the day, I would write down the three most important things I had to do, try to do the most important one first and drop everything else. Once the company gets a bit bigger, your focus is on slightly longer-term initiatives. You’ve got other people to do things, but there are still times when I have to own one outcome because it’s directly on my plate. So, absolutely making one area of the business where you the CEO give additional time and dig into the detail is one of the challenges I still navigate.  Focus is everything and it requires a lot of discipline from CEO down.

Also, as I mentioned before, I’ve previously done product and pre-sales well. However, I’ve never been a quota-carrying salesperson, and I think there’s probably a harder-nosed mentality than mine which you need to manage the sales team effectively. I think this quality can be at odds with some of the other characteristics you need to run the business, so I was a little too soft at the outset. I wasn’t tough enough on performance management. These days, we’re much better at this, and it’s something I’ve had to get used to, which is hard when you have personal connections and care about all the people you work with.

Can you tell us about one particularly challenging time?

I went too far after Series A. I tried to implement a pretty comprehensive OKR (Objectives and Key Results) system. I did my best, but in the end, the company effectively rebelled… in the nicest possible way! It was pretty clear that I had gone a little too far with structure, so we had to back off and reevaluate our key metrics. I’ve been careful how I introduce more structure since then because you can overdo it. As the CEO, you need to understand the key levers of the business, the metrics that are driving your growth and which ones you should encourage your team to become better at.

So which models did you use to better understand best practices at each stage? Where did you find information that’s proven to be helpful?

There’s a bunch of great startup material online that provides general knowledge: how to avoid the common pitfalls right at the very early stage. Generic stuff from the Y combinator, blogs, pages by Paul Graham and others were some resources I used in the very early days. I was part of the nascent London startup scene in 2011-2014, so I talked to a lot of the founders there, went to various events, and participated in a couple of accelerators and startup hubs there. Those were quite helpful in providing ‘how to get a company moving’ – type advice.

I do caution founders in the UK, however. There are a lot of hangers-on in the scene, or “consultants” who haven’t done this before and just take your money without really helping. I know other startups that have been burned by these. Interestingly, I see far less of this in the Valley. There’s more of a tradition of successful startups helping earlier-stage startups, and successful people going back and helping, just because it’s the right thing to do. London has come a long way in the last few years though and is a great place to start up.

And after the company’s initial start?

When you start to grow from the earliest stages, the availability of information changes a bit. After raising a Series A, for example, metrics suddenly become much more important than general points of growth. At that point, you need to start thinking through those and measuring them. There are best practices out there and books that cover hitting the right metrics very well. When you’re building your first leadership team, it’s important that you make sure they understand the metrics they are responsible for, that they are tracking them and can report against them. Then, your company will evolve from getting the concept and first few customers, to really scaling the business model.

At this point, you need a different set of materials. A lot of the VCs are pretty good at producing great writing on this: Octopus has put out great materials on a number of topics, and there are other good ones. Bessemer had a paper on how they typically set up SaaS companies and what conversion rates they see at different stages of the funnel; OpenView publishes a great set of benchmarks for SaaS companies and has some good writing on product. So actually, the VC Community, writers online, and former operators provide good writing that inform everyday Series B advice on scaling and metrics.

What materials have you relied on now that Digital Shadows has transitioned into the growth stages?

I think at Series C, where we are now, the company changes again, and there’s a bunch of other material and advisors I’d look to for advice on navigating this stage. Blueprints for a SaaS organization by Jacco Van Der Kooij is a great book for helping you think about how to set up the go-to-market. So is Survival to Thrival by Bob Tinker and Tae Hea at Storm Ventures. There are a few great books I’m reading now on wisdom and objective-setting for the business. I’m always thinking about how to do that better, so there’s a ton of stuff I’m looking to implement in 2019.

You have to keep reinventing yourself and growth engines at Series A may not work in the same way or as efficiently as the company scales.  It’s also critical that you stay aware of which parts of the business are performing well and which are not.  It’s easy when you have 50 people, but once you cross the ‘Dunbar number’ at 150 it’s impossible for you to know the detail of what’s going on everywhere. You have to trust your leadership team but also verify what’s actually happening.  I’ve learned to keep inspecting the detail in each area periodically myself, stay involved in some first prospect meetings and client onboarding and have lots of one-on-ones at all levels of the company to stay as plugged in as possible.

And mentors? Who have you tapped to fill those gaps or provide best practices at every turn?

I think the critical learning here is the willingness to learn from others, from best practices, wherever you can. Be a sponge and ask a lot of questions of people who have done this before: try to learn about the traps before you run into them.

I realize that a lot of people have one mentor. I’ve just engaged with a ton of different people depending on specific problems at specific stages of the company’s life. I try to seek out the best person or couple of people I can find to get perspective on what we’re doing or have done before. Critically, as a CEO, you also have to realize that only you really understand your business well. Whatever someone did can’t perfectly apply to your situation because it might not work for you for a number of reasons.  People often pattern-match against whatever they’ve seen before yet every scenario is different. So there’s still that need to distill advice through the lens of your business realities.

As the company has grown I’ve gotten a different set of challenges, so I have a different set of advisors and a different set of reading material and blogs that I can consume. Doing all of this requires that I’m willing to completely absorb the best practices at each stage – and be prepared to change if need be. Empathy and emotional intelligence are the key things that sustain you through rapid change.

What factors should a CEO consider when building a team to plug the company’s—or CEO’s—gaps? Is a founder CEO destined to carry the company through maturity, or are there legitimate reasons why this can’t be the case? Alastair and I tackled these topics in the next and last post of our discussion.

Read the first interview here.