Managing with marginal utility: Paul McCarney, CEO at Data Republic

Paul McCarney

Paul McCarney is the founder and CEO of Data Republic.

Data Republic is a data exchange ecosystem and technology platform where organisations can exchange and collaborate with data. Open data is a big business opportunity, with companies looking for new ways to combine their data to get a better picture of their customers and prospects.

Paul has been founding and running his own businesses for over 20 years, starting when he was 19. As well as founding and running his own businesses, Paul is an active non-executive director – TradeMe and iiNet are two notable appointments over recent years.

As a CEO, Paul is heavily focused on marginal utility, and many of the interesting points in this interview build on this:

  • What Paul has learned from being on the board of other organisations: “Think about empowering people and making sure that you don’t get too operational” (Video from 3:52)
  • Managing with marginal utility: “As much as people have a say, there’s one steering wheel. You’ve got it, if you’re the CEO.” (Video from 7:36)
  • Saying no and aligning decisions to company vision: “Strategy is more about what to say no to than what to say yes to.” (Video from 15:00)
  • What Paul wishes he knew on day one when he was 19: “I’m much more centred now and as much as I’m passionate about what we do, I’m not the outcome.” (Video from 18:47)

The video:

The interview:

Steve Pell: I’m Steve Pell from Management Disrupted. I’m here with Paul McCarney from Data Republic, founder and CEO. Paul, could you just tell us a little bit about what the business does?

Paul McCarney: We’re a trust framework to help companies exchange data. So basically creating a data exchange and infrastructure to enable companies to exchange data.

A lot of organisations have strategies which are surrounded in the construct of personalisation. Often the views that they have of their customers are somewhat limited to the amount of time that customer spends with their company, 1, 2, 3 percent of that customer’s life spent with that company.

Most of the time the customer is doing something else. To really understand and offer the right products to the right customer at the right time is challenging. They just don’t have the information.

What we’ve built is infrastructure to enable the exchange to be done in a way which is sensitive to the consumer’s rights, privacy rights. It has globally best practice security, and a governance process that allows the company who owns the data to be able to govern and control who has access. That’s the infrastructure layer to the platform that we’ve built.

Steve Pell: How many people in the organisation?

Paul McCarney: 31.

Steve Pell: Great, and that’s grown pretty fast I assume as well?

McCarney: It has, yes. That comes with excitement and challenges.

Steve Pell: Yes. Tell me a little bit about your background before coming to this company because it’s quite interesting.

Paul McCarney: My background is mostly in marketing and technology. I am a systems engineer by training with a marketing degree. I spent a lot of time consulting after that but I’ve pretty much been an entrepreneur since I was out of school. I have a very eclectic background. I’ve done lots of roles but mostly building things.

I started off when I was 19 doing a cleaning business all the way through to biomedical science and broking. I tried a lot of things in my earlier years but when I sort of hit my later 20s, I realised that what I really loved was building businesses and controlling outcomes and not only marketing but technology.

Since then, I’ve built and sold three companies all around the platform space. Each time I do it, I sort of say, “That’s the last time.” Then my wife says, “That’s enough of you being around the kitchen. You need to go and do something else.” So I go back out and have another go. The last time that happened I started consulting for Bain and Accenture. I ended up working with private equity doing some digital asset valuation and I ended up joining some boards.

That’s been a great journey too. I think it matured me a lot in how I think about strategy and how I think about the evolution of a company. So I joined the board of TradeMe in New Zealand which is a large publicly listed company over there, Cirrus Media here which is an MBO with Catalyst Private Equity, and I joined the board of iiNet. I went through that evolution of iiNet as it grew and then obviously as it got sold to TPG and that was a good experience as well.

Steve Pell: What are some of the things that you’ve learnt that have matured you as you’ve sat on those boards?

Paul McCarney: I think it’s helped me as a CEO. This time round, this was a particularly large opportunity. I say that being at the start line. It’s a very big market so if I’m going to choose something to do next, the choice of Data Republic really got me excited just because of the scale of the opportunity. McKinsey put it at $3-5 trillion is the size of the open data market opportunity.

I guess the main thing I’ve learnt is to think about empowering people and making sure that you don’t get too operational, get too much into the weeds.

So giving people the ability to both be responsible and control their outcome. One of the definitions of stress I guess is being responsible for something but not having control of it. As you grow, you have to constantly reassess whether the people in your organisation are in control of things that they’re responsible for, which can change. You need to keep on top of it.

I’ve worked with some great CEOs. Jon Macdonald at TradeMe is a great CEO. I’ve learnt quite a bit about watching him in the way he’s operated that business.

Steve Pell: Fantastic. So most of those lessons have come from seeing these CEOs in action?

Paul McCarney: And me stuffing up over the years – micromanaging or being too much in the weeds.

When you start something, a hundred percent of the activity when you’re sitting around the dining room table is you. Then you get somebody else and you’re probably 80% working round the clock. As you grow, when you’re younger you tend to be more enthusiastic and maybe not work as smart as you do when you get older. I’m in my late 40s now and I probably work a bit smarter than when I did this 15 years ago, 20 years ago.

Steve Pell: Fantastic. Paul, flash forward ten years, you’ve written a book on management, what are you going to call it?

Paul McCarney: I started writing a book in 1999. It was called ‘Deciding Tomorrow’. It was about the cognitive changes that were going to occur because of this thing called the internet and the way that we would make decisions would evolve and change and happen much faster. As a result, the time period by which we would be able to influence those would be much more narrow, so we’d have to change the way we market to those people because the decision period had shrunk.

I kind of wish I had published it I guess because social media and the web has changed that a lot. It would probably still be called ‘Deciding Tomorrow’.

I operate out of the construct of marginal utility. A lot of my guys, they keep hearing me talk about one of our key values is not moving into the diminishing returns. The economic construct of marginal utility is a key driver for me.

When you’re in a start up, you just don’t have time to get something to 100%. As important things like security and some components of code and particularly API design are, a lot of start-up’s  managers need to think about, “Well, I just need to get it to 80% right or 70% right.”

Steve Pell: Let’s talk a little bit more about your approach to managing with marginal utility. Can you talk about how that reflects through the organisation here?

Paul McCarney: Firstly, it starts with setting the right values in the business.

One of the most important things, I think, and I guess one of the mistakes I’ve made in the past is you’re not operating a democracy. As much as people have a say, there’s one steering wheel. You’ve got it, if you’re the CEO. If lots of people put their hand on it, they can pull the company all over the place.

That leads me into values. Lots of people in larger companies, sometimes start-ups, they talk to their employees about, “What are the values that we hold dear?” I just think that’s wrong. I think that the culture and the values come from the top.

Culture comes from how the CEO acts or how the founders act or how the top management act. The CEO ultimately will define that by their behaviour. The values need to reflect the CEOs behaviour or the founders’ behaviour.

If they don’t, there’s a misalignment. It’s a bit like when you’ve got kids, which I do, they won’t do often what you tell them but they’ll always do how you act. Ultimately over time, they’re a reflection of you. You hear that a lot in parenting. You need to shine a light onto yourself often.

If you get those values out front, I think it’s an important base to evolve a business and to drive a culture that’s productive. You align them with behaviour. One of our values is around not moving into diminishing returns.

Steve Pell: Just before we go there, can I just clarify, can you create a culture or is culture simply emergent on the basis of the founders’ values?

Paul McCarney: I think culture is a manifestation of how people behave. That behaviour is set from the top down. If you behave and you coach people in an emotionally intelligent way, they’ll behave in a more emotionally intelligent way over time.

If you behave in an autocratic and dictatorial way, that culture will permeate through the business. You can’t dictate a culture but you can set a set of rules by which you hold yourself to account, and hold the people to account, and I think over time that will develop and evolve.

We’re a start-up. We do engagement surveys at least once a quarter at the moment. We show everybody the results. We shine a light to that and I think oddly transparency is another one of our values. Caring is a value too, so just being able to explain why you say something.

A lot of companies and people within companies often will dictate what they want to happen but if people can understand where that’s coming from, that’s equally as important as the edict that you’re presenting to the business.

That goes for any relationship. If I tell you to do something, often you’ll move into fight, flight or freeze phase but if I explain why I want it, you end up with a better outcome and it’s the path of lower resistance. Again, these are all things that I’ve just learnt along the way and didn’t know when I was doing this the first time round which was a while ago.

But on marginal utility, it’s kind of ingrained in me now. Every decision I make, I don’t really think about the concept of marginal utility, I just think, “That’s enough. We’re there. Launch it. Do it.” I think that with presentations. I think about it with emails. I don’t actually think about it, it’s just a construct that I’m constantly thinking about so it’s embedded between my synapses.

Steve Pell: How do you manage yourself Paul?

Paul McCarney: Sometimes badly. I have a great wife who helps me personally and is very respectful of my time and obviously I try to be respectful of hers outside the business.

But I manage the business around the concept of OKRs, so objective and key results. The individuals I try and let set their own key results and I try to act more as a coach than I am a manager. Occasionally I’ll be very directional on particular points. I hope that when I am it’s something I feel is important for the business.

My own personal time is generally taken up trying to empower people to get the outcomes and then unblocking things that I mentioned before. Then the time I spend on the business is focused on those three things that I mentioned before: strategy, people and cash. When I’m doing a redesign which I’m doing now, I’ll block out three periods of a week where I don’t have any meetings, so two mornings and a whole day.

We’re actually trying to implement that across the company at the moment to see how people go with not having meetings in those periods, no internal meetings on Monday and Friday and Wednesdays – no meetings at all just to see if we can improve productivity.

Steve Pell: Interesting. You talked a lot there about being a coach, not necessarily a manager. How would your employees describe the experience of being managed by you? What’s it like for them?

Paul McCarney: I can be quite prescriptive at times I suspect. I hope they think that they have control of what they’re responsible for, that I do talk about that a lot. I’d hope they think that when I do get involved and are prescriptive, I explain why.

It’s hard for me to say. I’m not them. You perhaps should ask them.

Steve Pell: It’s a common answer when we ask that question. You’ve talked before about one of your key roles in the business as saying no to things. Can you talk about why that’s so important?

Paul McCarney: You come in every day and sit down and you’ve got hundreds of decisions to make: large and small, and people asking questions.

A guy I used to work for when I used to write strategy for a living used to say, “Strategy is more about what to say no to than what to say yes to.” As you get larger, often there’s more scope to say yes to things and as a result you find that companies lose their way, which is why the lifespan of a company is in decline and the Googles of the world are sort of in the rare. Google could say yes to everything. They could own anything they wanted to choose to own.

So it’s very important to create a mandate or at least a framework for the business to operate within. Vision is a really important thing to get right. You need to own it. The CEO needs to own it. Everyone needs to understand it.

It needs to have parameters and it needs to be able to pivot within those parameters but it needs to be focused on a direction. Whether it’s south or north or north west or whatever it is, whether you get a bus or a train or five buses and two coaches and you walk the last mile, it doesn’t matter. That true north for you is important.

For us, that ability to have people to understand how what they do is important to that overall vision is critical. I use a simple pyramid to do that. It’s up on the wall. Everybody understands it. I review it every quarter where we might say, “Okay, we might change some of the enablers that we’re focused on,” but ultimately that helps people understand. Or if I’m driving the bit of code for this particular ticket, that ticket relates to this particular epic and that epic relates to this objective which sits under the strategy and the vision.

The last survey we did, one of the things I was most proud about was everybody in the business understood what they were doing and how it related to the overall vision for the business. We scored really highly on that and that was a small little fist pump for me.

Steve Pell: In these discussions, something that comes up a lot is the similarities between the way that you design your product and the way that you design and think about your organisation. Is that a parallel that you can see?

Paul McCarney: More and more in technology I think. Yes, more and more in technology. More and more companies, I think, are trying to align those two paradigms with technology.

It’s a challenge in Australia because there’s a lack of product people in Australia. Technical product people generally tend to go overseas. But a lot of the role of the founder is to think like that. It’s the founder’s job to set those policies and in the early days.

Steve Pell: Paul, if we go back to day one of your startup career, so back three businesses ago?

Paul McCarney: Four.

Steve Pell: Four businesses ago?

Paul McCarney: Yes, this was when I was 19.

Steve Pell: So when you were 19. What’s the one thing that you wish that you knew then that you know now?

Paul McCarney: I think back when I was 20, I thought it was more of a democracy. I thought that I would allow people to have their hands on the wheel.

I know now that there’s only one steering wheel and having too many hands on it is a problem. This is in the startup world, in the corporate world it’s quite a bit different. What I’ve learned in startup is you need to be quite definitive on occasion but also empowering.

Back then, I read a book, when I was 19, by a guy called Ricardo Semler. It was called Maverick. He ran a shoe shop in Brazil. His father died and he took over when he was 25. He allowed the company, the people to set their own wages. The work was in Brazil. He paid them to be involved in all the decisions and he wrote this dissertation, in effect this dissertation, on how he did it and what the outcome was and how fantastic it was.

It all went to shit in the end but the book he wrote was before it went to shit. I read that and thought that was quite empowering being an idealistic 20-year-old. But when you apply pragmatism to that, it doesn’t work.

I guess the other thing is just to be more circumspect and less stressed about the outcome. Sometimes as an entrepreneur, you can tend to attach yourself to the outcomes of things and your own sense of self-worth is attached to the outcome of the business or the outcome of whatever you’re trying to achieve. That’s because you’re so immersed in it all the time.

I’m much more centred now and as much as I’m passionate about what we do, I’m not the outcome. I guess that probably is the biggest lesson I’ve learnt. Having done this a few times, if I was to be bold and offer anybody advice, which I don’t really think I should, but I would say you’re not the outcome.

Steve Pell: Fantastic advice. I just want to ask you about managing the line between being definitive and empowering. How do you practically go about doing that?

Paul McCarney: I generally try to coach people into making the right decision or a decision a least they’ve thought through. I will talk to people about building a framework to make that decision so that when it comes up again, people within their part of the business can use that framework for them to make that decision themselves.

Building a framework for something or a structure for something is often important. When they do that, they often can come to that outcome that you want them to come to by thinking through it. So thinking through a problem is important. I try to hire people who can think through problems as opposed to about them. What are the drivers behind that? Okay, what are the drivers behind that? Then as a result, how can we fix that?

That part for my staff, I guess, is important. If they don’t get to the outcome as a result of that, I’ve probably done a bad job explaining why I want something. Then on occasion, I’ll just make a call and say, “We’re doing this,” or, “We are launching …” I had to do it a few months ago, “We’re launching this on this date,” and everyone was, “We can’t.” I’m like, “Well, we have to find a way.”

What mostly happens in business, I’m as culpable as anyone else, is the time you’ve got to do something generally takes up the time you’ve got allocated to it. If you’ve got yourself a deadline of ‘tomorrow at noon’, you will be able to write information memorandum in that period. If you give yourself a day in a months’ time, you’ll just take up the whole period.

Steve Pell: Paul, thank you so much for your time. Some fascinating insights. Great background. Thanks so much.

Paul McCarney: No worries.

Steve Pell: Thanks.

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