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Operations and Leadership

Matt Harvey, Stanford University October 28, 2010

Having an exciting, disruptive technology is not enough to build a solid business. To grow scale and profits requires entrepreneurs to respect the value of solid operations. Thomas Prescott, CEO of medical technology firm, Align Technology, shares this perspective. When the company’s “invisible braces” product first appeared in August 1999, the use of plastic for custom-built braces was clearly a disruptive technology amidst the long-standing industry norm of using wires and brackets for orthodontic care.  However, Align raised $280 million in capital before making any profit. Backed by this level of capital, even companies with the most leading-edge technology are under tremendous pressure to hit milestones. Prescott believes solid operations are a key force in a company’s ability to grow scale and capture profit.

Operational Focus Makes Customers Happy

When the CEO arrived at Align in 2002, the company was shipping product, but “we were not operationally capable,” says Prescott. The company had real weaknesses in shipping logistics, product quality, and customer service, all of which hindered the company’s ability to scale. Prescott realized step was to stop making angry customers, so Align went down the list of problems and addressed the issues. With a revived focus on operations, the company improved customer satisfaction, reduced their burn rate, and turned cash flow positive in 2003.

Operator and Founder Relationships

According to Prescott, maturity is a main component to building a great relationship between a company founder and a new operations leader. This requires an operations person who wants to leverage their skills, but who will also maintain enough respect for the company to avoid trying to “fix” everything on day one.

Start with the Right Team

Leaders often think success is based on building that “perfect” strategy to achieve success. Prescott now realizes the real key is to have the right team. Having the right people also means having a team that evolves to meet current needs. The people you start with may not be the right people to scale with — and that might include you.

Make Money or Cease to Exist

Financing issues can crush even the most incredible companies. “At some point,” according to Prescott, “you have to not be a non-profit anymore.” Even if you a cash rich company, making lots of money, you may only be a few turns around the corner from disaster. “If you can’t see how you will finance it, then you got to figure out how to bootstrap it yourself and cover your costs,” says Prescott.

Execution is Most of the Game

What is execution? It’s everybody knowing what they’re supposed to be doing, and then making that happen again and again, says Prescott. As in Align’s early days, the problem might not be your strategy or product, but rather you inability to execute. “Where strategy is often about the beginning of a plan, execution is about being able to deliver on the plan you set out.”

Going Too Fast Can be a Good Thing

When you don’t make a decision, that still counts as a decision. While going too fast can create a certain type of problems, going too slow burns the one thing you can never get back — time. If you are headed in the right direction, you can make adjustments quickly. This is far better problem than going too slow and considering a problem forever.

Watch the entire Thomas Prescott seminar at eCorner.