The Secrets to Startup Leadership

Derek Lidow teaches entrepreneurship at Princeton University

Derek Lidow may not be a serial entrepreneur, but his experience climbing the corporate ladder to CEO of International Rectifier Corp. (IRF) and building a company from scratch have positioned him to offer key insights on a critical and often over-looked area–growing a startup into a viable company, he says. Startup mavens home in on getting companies off the ground; traditional MBA programs focus on managing established corporations–but they rarely explain how to get from one to the other. In his new book, Startup Leadership: How Savvy Entrepreneurs Turn Their Ideas Into Successful Enterprises, Lidow dives into the no-man’s land between fledgling companies and large-scale enterprises. 

Business schools are sitting up and taking note. So far, Lidow has received endorsements from Harvard Business School professor Noam Wasserman and John Danner, a lecturer at UC Berkeley’s Lester Center for Entrepreneurship and Innovation. Others have made overtures to include the text in their coursework. In San Francisco, Lidow sat down with Poets&Quants to share his thoughts on the under-recognized accelerator for startup success (leadership), the No. 1 thing students should know before creating a company, and why Silicon Valley is getting it all wrong. 

What prompted you to write Startup Leadership: How Savvy Entrepreneurs Turn Their Ideas Into Successful Enterprises? And why did you choose to focus on the entrepreneurial leader?

I’ve know a lot of entrepreneurs throughout my career, and I’ve always found that it has been easier for them to start their companies than it has been to actually grow their companies into something successful. It’s not that starting a company is easy, but it just starts the troubles and challenges. Very few entrepreneurs who have started their companies actually see them through to the point where they’re successful. Some entrepreneurs get their companies to the point where they think they’re successful: It’s growing fast. It’s making money. But even then, they’re often completely devastated when things turn around, and they don’t understand it: They didn’t build their companies to be self-sustainable. Their customers weren’t self renewing. Their company didn’t have enough invested in innovation to find and replace customers that go away through no fault of the company.

The Kauffman Foundation did a study on the Inc. 5000 list of America’s fastest-growing companies. It found that over half of them shrank after they were on the list, and another 30% of them actually had to sell. So even companies that look like they’ve got it made have a huge probability of not actually making it all. That’s just one indication of the perils that lie ahead once somebody starts a company

The reason why I wrote the book was so much of the dialogue on entrepreneurship is really focused on what you have to do to get your first customers, what you have to do to make sure you have a rational business model. These are really great insights, but they’re not the whole story.

Ultimately, nobody can be successful with a startup or in business, in general, unless they get other people to follow them. Here comes the big challenge: When it’s a startup, to be a successful entrepreneur you have to be ultimately selfish. You have to embrace your selfishness. It’s your selfishness that makes you want to change the world to accept how you want things to be done. But to get other people to follow you requires you to be selfless. There’s this balance between the selfishness required to be successful as an entrepreneur and the selflessness that’s required to be successful as a leader. How do you achieve that? It turns out that there’s not one pure formula that works forever. As your business expands and matures that balance is expressed in very different ways.

There are, however, five skills that are really important for knowing how to strike that balance at any given time: self-awareness, relationship building, motivation, leading change, and enterprise basics. I explain these in my book, and using this information, the entrepreneurial leader can know when they need to change and get everybody else to change as well.

My definition of an entrepreneurial leader is an entrepreneur who can actually take their company to the point where it’s self sustaining, where ultimately it’s something that can survive without them.