Behind The Scenes Of A Tech Company With OpenX CEO Tim Cadogan
The CEO of OpenX , Tim Cadogan, spoke at Innovate Pasadena about his experience of building a tech company and growing it from a start-up to a highly successful 500+ person entity over the last nine years. The lively discussion covered a range of topics, including: Why start a company, A process for success, Decision making, Hiring and Employee retention, Understanding your market, Growing a company, Role of CEO, Exit strategies and Recommended reading for leaders.
If you aren’t familiar with OpenX, it is one the first entrants into the digital advertising market. They developed the then novel approach of what is now called “programmatic advertising”. With this technology, operating in real time between when you click a link for a web page and when you see the web page, they can scan the content of the web page and have selected number of advertisers to bid on an advertisement for that particular page. The advertisement then appears along with the web page when it loads for the viewer. A variant of this is used in nearly all web advertising seen today – over 200 Billion digital ads each month just with OpenX.
Why Start A Company?
When asked about why would you build a company he said first is for financial success and second to have an enjoyable, rewarding place to work.His philosophy is that the difference between working in a enjoyable and rewarding environment compared with working at a bad company, can be a life-changing event. Tim has held a variety of roles at excellent, high quality companies (see the bio at the end of this article) as well as had some really horrible bosses and environments.
Creating a culture to work effectively, enjoy what you’re doing every day, and to be financially rewarded for it are really the motivating reasons for starting a company.
A Process For Success
As a new business leader or the CEO of a large company, Tim expressed that leaders must always be clear about three things: Purpose, Business, and Vision. He says that at the start of every meeting, this concept trio is reinforced by defining why participants are at the meeting, stating what is the business opportunity addressed in the meeting, and how does this match with the company strategy for the coming year. If the meeting group can clearly articulate these three things, it’s on the path to success. Missing any of these means a high probability of failure.
It’s critical for the success of any company to be able to draw a line between the daily work of the employees and the overall goals of the company. This alignment is what has allowed OpenX to grow and prosper in a very challenging industry. Tim is very clear about linking the overall purpose of why the company is there and their customers expectations, to employees individual work. Each person should know what part their contribution is to the company goals and how what they do factors into the company’s success.
Regardless of the size of the company, the founder / leader / CEO has to make many decision every day which determine the ultimate direction and success or failure. Tim’s view on learning how to be a good decision maker is founded in the real world. Business school may be a good start for critical thinking – classes have a lot of case studies with clearly defined parameters, data and limited possible outcome. Case studies can provide students a very neat and clean framework to work in. However the real world is never that clear, and the available information is never complete nor even accurate in many cases. And decision have to be made within time constraints which are often unfavorable.
Tim suggests approach decision making by first framing the decision to be made – always ask what question are you trying to answer. This can clarify the “what”, “why”, “when”, “where”, “how” or “who” of the decision and get you quickly to making a decision. It may not always be the best decision, but leaders have to work with the information available under the time frames which are given.
Hiring and Employee Retention
As a new company you hire a group of people for very specific disciplines and skills needed to launch the company. After the initial growth stages, the skills that the first employees had may no longer be what is required for the next phase of the company. Some of the employees will be able to grow in transition with the company to the next stage, but unfortunately many will most likely have to be asked to find other jobs. Some employees will have the necessary skills, but no longer be happy at what is essentially a new company from the one they started in. Tim believes that for their own careers and well being, those employees should be coached to look to transition out of the company.
His best employee success stories are those where people are continually learning, growing and experimenting with new roles and responsibilities as companies grow. These employees have the accumulated knowledge of the company and the experience of working in different functions. To foster this type of retention it’s important to anticipate what the roles and responsibilities will be for people in a year, in two years, or even three years out. Finding a balance between what people are hired for as the immediate need, and where they will be later on is crucial to retention.
Tim says that in the nine years since the founding OpenX, he’s probably had a 2X turnover for the staff around him. He cautions new founders that with a core team of about six key people that you may start with in your company, almost never will all of them go through all the stages together to a mature company. Most likely only 2 or 3 of the founding team will still be together after 5 years.
OpenX currently has about 500 employees total in the company with about 350 in Los Angeles and the remainder spread around different cities in the US as well as other countries worldwide. The main reason for multiple locations is really for market penetration and four developing talent in areas.
In hiring, Tim looks for specific traits in candidates Good character / integrity, “Spark” (both intelligence and social), Drive and Teamwork. Having a skill set isn’t enough to be successful, and each new hire has to be able to fit in with the current company.
Understanding Your Market
It’s the markets that ask the questions of the companies in terms of what goods and services they want, and what they are willing to pay for. Understanding your market is all about understanding your customers.
Tim recommends spending a critical mass of time with your customers to find patterns of the market, and to get the theme of what is happening in your industry. Talk with customers to understand what the opportunities and obstacles are in the market, and how to take advantage of these opportunities. Customers are your most likely source of information for finding out what is really going on. However it’s always important to remember, that everyone is looking at the market from their own particular viewpoint
Customers are also a great resource for understanding what the strengths and weaknesses are of your company, and also providing competitive information about the rest of the companies in the market. Particularly for technology companies, technology is future-looking and customer conversations help with how to deal with the uncertainty of the data and questionable information.
Growing A Company
Growth is nonlinear, it goes in fits and starts. Sometimes it goes in reverse. For example, there come times when hard decisions have to be made about living up to the core value values that you promote to your customers. In one example Tim talked about one customer that was using questionable practices for generating traffic to their websites. The difficult choice was to drop this lucrative client and remain consistent to the company’s values, or to accept the money and bend on some principles. Tim thought this was a clear choice, because it is the customers that you have that will determine the customers you’ll have in the future. And it’s your customers who determine who you are as a company. They dropped that client, took the revenue hit, and were actually more well respected for doing that with their existing clients.
In developing a company, it’s important to always keep in mind: There are dark periods, and there are good periods. You can read more from Tim on LinkedIn about dealing with dark moments.
Tim also confirmed for the audience that existential doubt is always part of forming or leading a company. Every good leader will have some doubt, but uses that to make better, more informed decisions.
Profitability is key to growing a company. It may seem obvious, but many founders forget that without profits there is no longer term viability for the company. And Tim pointed out that it’s always a fight to remain profitable, and it’s not a turning point where you are profitable once and will always remain profitable. I think Tim summed it up best by saying it’s really just a long road where you keep grinding it out every day.
Which brought the talk to Scalability. In order to have growth, the company must be able to scale in terms of services, products or output. This also means being able to handle an increasing number of clients for a service company, increasing the unit production for a manufacturing company or a combination of the two.
Role of CEO
As the company gets bigger, the CEO will take on many more projects than will ever be successful. This is just the result that prospecting, looking for new clients, and trying out new creative ideas all have a high probability of failure. Leaders and CEOs must be able to deal with failures, and with taking risks. In most cases the CEO will never tell the company or even anyone outside of a few select executives about what they’re really working on.
The CEO has to set the tone for the company. A key trait for all leaders is being ethical.Ethics, in Tim’s view is making the right choices when no one is watching what you do. It’s always easy to do what is right when someone is watching, but only ethical people will do what is right especially when they know that no one else will ever know of their actions.
The CEO also has the responsibility to make sure the company employs good business practices in the pursuit of profits. Business is about making a fair, good deal to all parties. As a company in the middle of both buyers and sellers, OpenX needs to have a sustainable, even balance, for both sides in every engagement. In Tim’s words, “it can’t be a zero sum game”.
Finally, the CEO must raise money to start the company and grow the company. Tim is blunt about fundraising:
It sucks. It’s a demeaning process, and no fun. To be successful at fundraising you need to have a good story, and the answers to address the common questions from all investors. Fundraising is analogous to selling a rare and expensive house. There is a unique story behind it and you need to have the right match to be able to make a deal. It’s best to cultivate relationships with strategic partners or investors you want to do business with in the future, rather than trying to find investors when you actually need the money. – CEO Tim Cadogan, on Fundraising
On the topic of an exit strategy, Tim feels that this implies you don’t like what you’re doing, or are not happy about how things are going at the company you created. This is really the opposite to building a good company and a good business. You’ve got to realize the value for the process. His strategy is not to exit at all, but to continue to build a bigger, better company where more people can enjoy what they do and be rewarded for their work.
Three books that Tim would recommend for leaders, founders, entrepreneurs and any one interested in business:
The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers by Ben Horowitz
Drive: The Surprising Truth About What Motivates Us by Daniel Pink
Turn the Ship Around!: A True Story of Turning Followers into Leaders by L. David Marquet
Tim Cadogan is the Chief Executive Officer of OpenX and Chairman of the Board of Directors. From 2003-2008 Tim was at Yahoo!, most recently as Senior Vice President of Global Advertising Marketplaces overseeing the primary advertising product lines at the company, including Display, Search and Video. Previously at Yahoo!, Tim was Vice President of Search where he was responsible for both the consumer search and paid search businesses. Prior to Yahoo!, Tim was Vice President of Search at Overture (formerly GoTo.com). Prior to Overture, he was a consultant at The Boston Consulting Group and McKinsey & Company.
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