T-shaped vs. Matrixed Companies
There are many kinds of building
Matt Cohler wrote this thoughtful breakdown of the different kinds of building at a company:
All three of these skills are critical to building an enduring, large enterprise. But those are very different skills. A company probably doesn’t need to be (in fact, they probably cannot be) world-class at all of them. So what core competencies should you strengthen as a founder or early-stage exec?
An analogy might help with this conundrum: the most common way for an employee or leader to succeed is to be “T-shaped” with their skill: baseline competence at a lot of things (i.e., being a generalist) with deep expertise on a given topic (i.e., a specialist).
A second way to succeed professionally, less often discussed, is to be elite (but perhaps not world class) at a number of things. This versatility means that the “matrix multiplication” of skills ends up being world-class. For example, if you are top 5% at verbal communication and top 10% at creating visualizations, you are probably in the top 1% at giving presentations.
Companies can succeed the same way.
Product-building
Being world-class at building product is tremendously high-leverage. It is also exceedingly rare; this is why very early stage investors are obsessed with technical capability and the ability to build product well.
This is also why first-time founders are obsessed with product (note: I’m using that word in a generic sense… software for a B2B SaaS, or physical goods for an e-commerce company). Most companies win or die on the strength of their product. It’s the very first failure-mode you encounter.
It goes without saying, but you cannot build this as a differentiator without having a 10x technical person on your founding team.
Companies known to have succeeded off their product quality include some of the most iconic names: Facebook, Stripe, Airtable, Notion, Figma, Linear…
As you might expect, this does not mean you can do zero work in the remaining elements of a company's journey. To be T-shaped as a product-first company, you have to be very competent at sales, basic corporate hygiene, etc.
Business-building
What do you do if your product vision isn’t particularly unique or defensible, but it still doesn’t exist (for some reason)? You will probably need to be world-class at distribution (be it sales, marketing, vitality, or something else).
Many, many successful companies have been built without a transcendent or defensible “product” but rather a unique GTM or business model that captured the world’s attention. This is often / especially the case with marketplaces that carry network effects.
Airbnb, Uber, DoorDash, Robinhood, Rippling, Deel are companies that are known to excel at distribution — even if many of them are also strong on other dimensions of product- or company-building.
Here, I have an object lesson: what happens if you don’t end up building competence at other aspects beyond one? I was an early exec at Forge, which was a marketplace for private company stock. That company’s “product” was born with product-market fit… we were going to early employees of unicorns and offering them millions of dollars in liquidity, and on the other side bringing hard-to-access private shares (with big upside) to family offices or institutions. But the “product” was something every competitor could access, too — so this was a distribution-first company. We were terrific at GTM and closing deals, and scaled very rapidly from $0 to $20M+ in revenue within ~2 years between 2016 and 2018. However, the company never built software or services with true lock-in, faced challenges with culture, and had a lot of turnover for many years — so it did not achieve the same level of success as the other companies listed above.
This is also a major distinction between Zenefits and Rippling — Parker Conrad is a generational marketer and fundraiser. But with Rippling, Parker appears to have built more product early on (there are still mixed experiences but it’s arguably good enough), and notably the company has avoided cultural issues that plagued Zenefits.
Company-building
This is a more nebulous area so I’ll characterize this to mean “being exceptional at recruiting and fundraising.” Ramp, AngelList, Opendoor, and of course PayPal are examples of companies that are known for being “talent vortexes” with extremely strong early teams, and raising a lot of money at favorable terms. These companies often spawn “mafias,” where alumni go on to start or lead companies. It’s very common for second-time founders to be effective at recruiting and fundraising, so many second acts benefit from this core competency.
Matrixing your way to Success
Finally, there are companies that are very good at many things — they picked a great market, built an excellent product, distributed well, raised money, built solid teams. They may not be industry-leading at a specific thing (or maybe they are!), but by being strong across many dimensions, they end up building a “system” where 1+1 = 3.
Snowflake built a deeply technical product but is known to be very sales-led. Coinbase was strong technically but also had to be at risk-management and compliance. Mercury is known for strong design, while also operating compliantly in a highly regulated space. Amazon was world-class at supply chain & inventory management, while excelling in storytelling and vision.
Great companies’ core competency matches their market
There are loose patterns to this:
Software startups are often but not always product-led.
Consumer, marketplace, and enterprise startups, are often but not always business-led.
Serial founders, rollups, and complex new categories are often but not always company-led.
Regulated or operationally intensive companies are often but not always matrixed.
The DNA of leadership dictates the DNA of the company
Wildly successful companies had a DNA that was an exceptional match for the problem they were solving. One of these competencies takes root early on; usually derived from the founders, CEO, and the exec team. This common theme affects the hierarchy and power centers within the company, their culture and values, and how they make decisions.
This is what early investors are trying to identify with “founder-market fit”… not just whether the founders have any particular background or experience in the relevant subject mater, but whether the founder → company’s native language (product / business / company / matrix) matches what they’re building. Will their tendencies and gifts shape an organization that will be an exceptionally good match for the problem & market the company is tackling?
This leadership DNA shapes the company. A company that succeeds by being exceptional product, sales, or company-building — or by being matrixed — can succeed in many markets, purely on the strength of their capabilities. But if the DNA of the company is an ideal match for the market and problem its tackling, something special happens.