Listen to most management gurus and they'll tell you that the most important job of the CEO is to set the company's mission and values and to create a culture that attracts great people and lets them flourish.
But one CEO with plenty of success in starting technology companies believes that the most important role for a CEO is to pick the right strategy very early in a startup's evolution.
The CEO in question is Hassan Ahmed, a Stanford PhD in Electrical Engineering, who founded and runs Acton, Mass.-based "virtualized mobile architecture" supplier Affirmed Networks. Before that he was either CEO or a senior executive in three companies that created a combined value of $43.1 billion.
Specifically, he was chief technology officer of Cascade Communications which Ascend Communications bought for $3.7 billion. In 1999, Lucent Technologies paid a cool $24 billion for Ascend where he was a general manager. And in 1996, Ahmed founded Sonus Networks which went public in May 2000 and had a peak market value of $15.4 billion in July 2000 (he left Sonus -- which was valued at $430 million on September 15 -- in 2008.)
It is probably no accident that billions of dollars' worth of shareholder value get created in Ahmed's wake -- but his career as an entrepreneur departs from expectations. As he explained in a September 14 interview, "I come from a family of academics and they questioned why I would depart from the academic path -- my parents said 'The guy's nuts' -- to take on the risks of entrepreneurship."
Moreover, Ahmed's first startup did not yield a spectacular financial outcome -- although it taught him a critical lesson. "I was so bent on working on a cool technology that I did not bother with whether it met the market. It taught me that a CEO must focus on the single biggest thing -- starting a company is not the hard part, you have to build something consequential. I needed to answer 'Why does it matter? Why will a customer pay for it?' Financial success is a byproduct of answering these questions well."
In a word, Ahmed focuses on strategy. And for Ahmed strategy means placing a single risky bet on how a particular industry -- telecommunications -- will change in the next several years; how that change will alter the way the industry makes money; and which technologies the industry will need to profit from the change. He hopes that by making this bet before the future becomes apparent to his customers, he can get a leg up on rivals.
The telecommunications industry has undergone huge changes over the last several decades. In the 1990s, the rise of the Internet yielded a spike in demand for data transmission and a relative decline in demand for voice. And with the rise of the smartphone in the last decade, the business models of wireless service providers "have been turned upside down."
Ahmed bet on the first shift with Sonus -- which built network equipment to help telecommunications companies deliver voice over the Internet -- known as VoIP. He founded and ran the company for a tumultuous decade until 2008, according to Light Reading. "We figured out that networks would be disrupted and we ended up being ahead of the competition," Ahmed tells me.
In 2010 Ahmed started Affirmed Networks -- which targets a market expected to reach $15.5 billion by 2020 for software that enables operators to offer new network services at a lower cost. Ahmed saw that smartphones were driving the growth of traffic on wireless networks. As he said, "I looked at this trend and asked myself -- will this mean more of the same for operators or would it be something fundamentally different? And if so, how will that difference affect their business models?"
His conclusion was that wireless service providers would experience a change in their business models that would require them to rethink the architecture of their networks. "A huge clue was that the business models of operators was going upside down. It would no longer be about making bigger boxes. It was about redoing the way their networks look. They would need a way to reduce their costs and increase their revenues by rethinking the architecture of their networks."
Affirmed got in early but expects a payoff. "We jumped in two and a half years later. We were in the cloud. We saw that there was a move from hardware to software. It took us 18 months to build and another 12 months to make the sale. It took us three years -- we took an educated bet. If you do the right analysis, you get a very good outcome."
Ahmed sees strategy as his most important job. "What keeps me up at night is the directional decision because it gets amplified by the work of hundreds of people over years. They have to be really well deployed. Nothing is more important than getting the strategy right."
The results so far look promising. Affirmed has "been doubling its business each year for the last three years." It has increased its customer count from 30 last year to about 40 today during which time its employee base has grown from 200 to about 250.
If Affirmed files for an IPO, we will see just how well Ahmed set its direction.