Jun 17, 2022 7 min read EGD News

EGD News #139 — Level 5 leaders

The concept of the level 5 leader comes from Jim Collins’ book Good to Great. In this piece, I want to talk about how these leaders operate and how we can apply these lessons to gaming. These are ideas that you can take with you to develop your leadership style and skills, or help others understand their potential.

Through my work as an angel investor, I’ve had the pleasure of working with several founder CEOs who I believe are building their company as level five leaders.

Here are four characteristics of level 5 leaders, which I believe are the ones that matter the most.

It’s not about them

The good-to-great leaders never wanted to become larger-than-life heroes. They never aspired to be put on a pedestal or become unreachable icons. They were seemingly ordinary people quietly producing extraordinary results.
— Jim Collins in Good to Great

Let’s break this down a bit.

“Don’t want to be larger-than-life heroes.” This is such a great feature. The CEOs who can change their work to be about the team and not themselves will elevate their entire company.

“Ordinary people quietly producing extraordinary results.” I regularly have calls with the founders I’ve invested in. My favorite ones are the founders who have made progress in the direction they previously stated but haven’t made a fuss about it. They are intentionally and steadily progressing in a direction. If goals aren’t met, or a desired outcome isn’t attainable, they aren’t afraid to make quick decisions to “turn the boat.”

It’s not about their compensation

Being a level 5 leader is not about financial gains. Sure, they want to remove financial burdens from their lives and become financially independent, but a high salary is not the ultimate motivation for them.

The same goes for their ownership in the company. They aren’t obsessed about owning a majority of the company. When they are sharing equity in the company, they will not be scared of giving their co-founders and early employees meaningful ownership in the company. An equal split on the cap table isn’t uncommon for level 5 leaders.

Even as they lack the obsession for their equity stake, they are incredibly obsessed with having the right people owning the company. If the level 5 leader knows that certain people would be beneficial members of the company, they aren’t afraid to give them the best long-term incentive, which is equity in the company.

Clock builder, not a time teller

Jim Collins distills two concepts elegantly in Built to Last:

Having a great idea or being a charismatic visionary leader is “time telling”; building a company that can prosper far beyond the presence of any single leader and through multiple product life cycles is “clock building.”

The concept of a “clock builder” can mean many things, but I think the one that matters is how you build a company that “just” operates. You have the right people, a compelling mission, and money in the bank. In a way, you strive to become irrelevant for the business to do well.

The problem is, how do you develop an environment in which individuals can be creative?
— Dave Packard, co-founder of Hewlett-Packard

On a recent podcast, Derek Sivers, author and the founder of CD Baby, talks about his experiences of leaving the daily operations of his company to his staff and stepping away for a year:

While I was away for four years, my company [CD Baby] grew revenue from $1 to $20 million, and from 8 employees to 85 employees while I was away, like, just basically without me. You’re a true business owner when you could leave your business for a year and come back a year later and find that it’s doing better than when you left. That’s when you’re no longer self-employed. You’re a business owner.

But what if you are a charismatic leader? Should you dumb down the charisma? I would say no since, with careful use, charisma can play an influential role in communication. Externally, the charismatic CEO can sell a dazzling future to investors, hires, and the public. But inward, they use their charisma to remind people of the company’s mission, show vulnerability and elevate others.

Playing the infinite game

Based on evidence collected from countless study cases, Jim Collins points out, “In short, we found a negative correlation between early entrepreneurial success and becoming a highly visionary company. The long race goes to the tortoise, not the hare.”

Many gaming founders start by looking for a hit game. They become highly focused on proving a game. I believe the CEO must quickly transition from designing products to designing an organization. They can return to the product, but they should focus on building that organization, being the company “clock-builder” as soon as possible.

Building sustainable managerial talent was vital for companies in Jim Collins’ Built to Last study: “…the continuity of superb individuals atop visionary companies stems from the companies being outstanding organizations, not the other way around.”

The CEO is a steward of the company, its mission, people, and resources. The CEO of a great company knows that it’s not about them, and they know that to build a great company, they need to have immense humility and humbleness to want to create something that will become larger and more lasting than themselves.

As I previously quoted on EGD News, Jim Collins talks about the US Civil War in Good to Great:

Those who mistook Mr. Lincoln’s personal modesty, shy nature, and awkward manner as signs of weakness found themselves terribly mistaken, to the scale of 250,000 Confederate and 360,000 Union lives, including Lincoln’s own.

Conclusion

You might be thinking: how does one develop into a level 5 leader?

…under the right circumstances—self-reflection, conscious personal development, a mentor, a great teacher, loving parents, a significant life experience, a Level 5 boss, or any number of other factors—they begin to develop.
— Jim Collins puts it well in Good to Great.

My attempt with Elite Game Developers is to create a library for founder material, both with my articles in the newsletter and the discussions I have with leaders of game studios on my podcast. By having the material online, I hope to contribute to the success of the thousands of gaming founders out there so that they don’t need to learn everything the hard way as I did.

(Photo by Soulful Pizza)

Get my book, “Long Term Game: How to build a video games company” from Amazon. Available on Kindle, audiobook and paperback. Check it out!

Panel on ads in mobile games

This recording is from a panel I did last week with Jan Pollack from Wooga, Ross Brockman from Google, and Christian Facey from Audiomob, where we talked about ads in mobile games and how things have been changing in the recent years.

Topics that we cover include the privacy changes on mobile, what kind of future trends the panelists are seeing get materialized, and how game developers should optimally approach ad monetization.

Listen to the full episode by going here.

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Quote that I’ve been thinking about

How we spend our days is, of course, how we spend our lives.

— Annie Dillard

Sponsored by ZEBEDEE

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I hope you have a great weekend!

Joakim