Monday, March 24, 2008

Philip Rosedale Wants A World "Top 10" to Replace Him As CEO

From Virtual World News a most revelaing interview with PR on his exit and his high standards for a replacement; "Exit Interview: Philip Rosedale, CEO Linden Lab"; ""We're a company that is at the forefront of change. We're going to be, I think, one of the most important companies the industry has ever seen. Given that, for top-level coaching, we should have one of the ten best people in the world or at least someone who has the innate capabilities to become that." The original post here

"Last week Linden Lab made waves by announcing that Founder and CEO Philip Rosedale was looking for a replacement. While Rosedale has led the company through some tough times to a leading a position in the virtual worlds industry, he's decided that it's time to step aside as a manager and coach and work full-time as a strategy leader and thinker. One of the biggest questions, though, is why announce now when no replacement has been found? "Because we're looking," answers Rosedale. "We've always believed in a higher degree of internal and external transparency than a lot of firms. This is just a case where we believed it was better to be overt about it. And the job is such an incredibly opportunity that there's a benefit to being more open about it than most companies in a CEO search." Board members have said that Rosedale approached them as early as nine months ago with the idea for the transition, leading some to speculate that the company has been searching for some time or that the information only came public due to a leak. "Nobody's known about it for very long," though, said Rosedale. "We talked to Reuters just because we wanted to pick somebody to talk about it in more depth, but there wasn't a leak that I'm aware of. I've been thinking about it for a while, what my best role would be, but the actual decision has been something we've only been talking about in the last couple of weeks, so we thought it would be good to be open about it." In With The New... Only a "handful of people" have been approached about the job since the search recently began in earnest, but Rosedale says he has a very clear idea of what his replacement needs: an understanding of Second Life, day-to-day leadership abilities, and chemistry with himself. That's crucial, he says, because while come companies at Linden's size can simply "put the pedal to the metal and run the business" that's not the case for Linden Lab. "There's so much fascinating change that's still going to happen," he explained. "This market is going to grow by at least 2 categories of magnitude. When you go through two orders of magnitude of growth, your market is going to change. We have the joint challenge that we need to aggressively grow the platform—improve the system and stability—but at the same time we need to be strategic in how we grow." Right now, Rosedale is trying to manage both day-to-day activities as well as future strategy. "I don't think that's right for the company's success," he said. As for the second requirement, while Rosedale thinks that he's "a good people person" and anonymous employee surveys seem to bear it out, he's ready to admit that team-building, coaching, and mentoring executives is "not as much my thing." "I'm not bad, but this company is at a transition point that is very material for the world," Rosedale explained. "We're a company that is at the forefront of change. We're going to be, I think, one of the most important companies the industry has ever seen. Given that, for top-level coaching, we should have one of the ten best people in the world or at least someone who has the innate capabilities to become that." Rosedale has already said that the company is looking outside the company for the new CEO for someone with more specific business experience. Likewise, that day-to-day management is more important than experience from within the virtual worlds industry. "I think we're at a scale now and the business is well understood that I don't think we need to hire someone in that role who is from the virtual worlds industry," he explained. "I think as complementary skill sets, I can contribute a lot of that. I think we want to find someone with a fresh perspective. It's probably preferable to find someone not in the industry. There isn't a lot of collective experience in the space, but I suspect it's more likely we'll find someone with a lot of software experience."

While Keeping The Old

As for the last, well, Rosedale makes it clear that he's not going anywhere. Neither is Mitch Kapor, who Rosedale will replace as chairman of the board once his replacement is found. In fact, Rosedale says Kapor has increased his involvement with the platform and will continue to do so under a new title. It sounds as if the title of chairman of the board is more a formality than anything else. Rosedale's actual role within the company will feature heavy involvement, but it's not clear entirely how. "The chairman of the board role was just the right role for me," he explained. "When we find a new CEO, we'll find the right title for me internally. But when you're making that transition, you have to be very careful because your founder has a very strong, implicit authority. I didn't announce I'm going to be like Larry and Sergey and our CEO will be Eric. That should be a conversation, not an announcement up front."

The Big Money Question

With the sudden announcement--and much of the discussion around it--industry observers have wondered whether Linden Lab is gearing up for a sale, another round of investment, or an IPO. Rosedale flatly denies all three. "The most important thing, though, is that this is a change driven by my desire and the board's desire to fit me to the right job," he explained. "It's not driven by the planning process for an IPO. We don't have a schedule set, which isn't to opine about how we should do that. But, just to be clear, this isn't a case of looking for someone more suitable for that. I suppose I could do that just fine." Likewise, while Second Life has seen a slowdown in certain growth areas, Rosedale is confident that "the company's financial performance is really great. Nobody's unhappy about that." His point, and that of the board, he says, is that Linden has "a very substantial cash flow," so it doesn't need to seek funding, but it has all of its options available. "No, this is definitely not us out going in that direction [of an IPO], but that's always been something that we've never ruled out, ultimately as what we're going to do," said Rosedale. "My answer, which doesn't change at all, is that it seems that what we're working on has all the right properties to build a substantial company. We have a good revenue model, a good base of customers, and we're innovators in a category that doesn't have a lot of collective intelligence." Put together, that also means there's not an attractive reason to think about selling the company. "If we sold the company to accelerate the growth of virtual worlds, there's not a super obvious choice for who that would be," Rosedale explained. "If you asked me what's going to happen long term, I'd say most likely we'll remain our own company. Linden doesn't need a key partnership with any other company."

Looking Forward

While there's going to be shift in perspective at the top, Rosedale doesn't expect it to be radical. Second Life, he says, is already seeing particular growth in the organizational use, from enterprises to education. The company has always hired according to trends in Second Life, and that might indicate the new direction.
"That suggests correctly that getting intelligence around enterprise and organization more generally, knowledge of servicing organizations rather than just individuals, that probably is a great potential skill that we bring in with a new person," he said. "I think that's a fair observation that there is a shift for organizational use. [...] I think the direction of use here is collaboration and education is next, and beyond that is product marketing. I don't think we're there yet." That attitude will likely be reflected in new hires across the company, though Rosedale is quick to point out that that isn't exclusive and doesn't mean losing existing employees. Linden Lab's turnover rate, he says, is about half the Silicon Valley average, even as the company has grown over 100% in the last year. Likewise, while some have been quick to point out that Linden Lab has seen several high profile employees leave over the last year, including its CTO Corey Ondrejka, this isn't a response to a crisis or need for dramatic change. "Yes, Corey left," said Rosedale. "That's the big one, completely uncorrelated with this decision from me. There's no relationship with those two changes. I don't think you should expect some profound shift in staffing from Linden. The numbers show that." Rosedale isn't particularly worried about the change. He admits that there are plenty of challenges ahead for Linden Lab, and that it's important to make the right choices as the company grows, but that's an opportunity. "That's where the positive side of the transition is," he said. 'We just need to stay incredibly innovative and agile as those challenges come so we don't wind up on the wrong side of them. We need to be the leaders in the future and not the Newton to the Palm or the AOL to the Internet. "Doing that will require great innovation and strategy. For my productive output, I want to focus all my energies on that."

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