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Key Takeaways Founder instinct is a real tool that works well, but it doesn’t scale. It can drive early success, but it becomes a bottleneck as the company grows.
When a founder’s intuition becomes the final word in every decision, it stifles the leadership team’s ability to act, leaving the organization unable to respond quickly to crises or new challenges.
Companies need formal decision frameworks, defined decision rights and leadership empowerment so decisions can be made effectively without the founder.
The founder of one of our portfolio companies created a company with approximately $200 million in revenue purely on instinct. The founder had spent a large amount of time around the products and relationships with customers, so that he could literally go out onto the production floor and identify the machine that would be broken down in a week, and he would reject a price recommendation from his financial staff because “it didn’t feel right!”
However, after buying another company and nearly doubling the size of the business, all of the things that made the founder successful initially started to work against him.
Eventually, over a period of six months, I watched the speed of the company’s decision-making slow to a crawl. What was once a strength was now a barrier that none of his senior managers knew how to overcome.
Instinctual decision making
A founder’s instinct is a real tool that works well. I have seen it often enough to know that it is not just luck. He has experienced each and every area of the business, and all of this collective experience produces a type of judgment that is faster and more accurate than any committee or group.
It is not that the founder’s instinct stops providing valuable insight. It is that it does not grow. Research by McKinsey states that 78% of companies that have successfully found product-market fit ultimately fail to grow their companies.
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