Last week marked the end of my 5-year tenure leading Datavant (I’ll continue to be on the Board and close to the company in many ways (and very excited about its future!), but will be stepping out of day-to-day operations).

Five years ago, we set out with an ambitious goal to “connect the world’s health data.” We had a deep belief that the fragmentation of health data was one of the largest problems facing the world — and that the company that solves it could become immensely valuable. In those 5 years, we’ve made great progress towards this mission, building an ecosystem of several thousand life sciences companies, government agencies, payers, and providers who use Datavant to safely exchange data. Additionally, we’ve built a great business, as we’ve rapidly become one of the largest and fastest-growing healthtech companies in the world — and through our merger with Ciox we’re very well positioned to be the foundation of the health data economy. I’m excited for what the next chapter will bring for the company.

As I’ve reflected on the transition, I wanted to list out some of the lessons that I’ve learned through the journey that have made me a better CEO. This is a follow-up and add-on to the “Lessons from LiveRamp” post that I made leaving LiveRamp in 2018.

These are some of the biggest non-obvious take-aways I have from the Datavant journey so far:

• Institutionalize time as your enemy.
• M&A can be an effective growth lever — even for a startup.
• Even with infinite capital, stay lean.
• Your leadership bench is everything during hypergrowth.
• TAM is the most overrated metric in business.
• Find the win-win-wins.
• Ensure bad news travels quickly.
• As CEO, aspire to (almost) never be the decision-maker/owner.
• Push back on tradeoffs.

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Lesson 1: Institutionalize time as your enemy.

When most people think of great companies, we usually think of incredible products and strong moats. Those are great, yet the biggest differentiator for most great companies on the rise is actually company velocity — the ability to sustainably outpace others in the market. Closing the deal a few weeks faster, pushing out the new feature a quarter earlier, and hiring the candidate a week sooner compound as a sustainably faster growth rate — and allow a company to hit “escape velocity” (which creates a virtuous cycle as clients and prospective employees and investors see the company as “hot”).

The reality is most successful businesses don’t find success in one stroke of brilliance, but rather in navigating thousands of micro-decisions effectively — so building a machine that allows rapid, high-quality decision-making and execution is a key aspect of company building. Establishing velocity as a core competency needs to be even more intentional as the company scales — by default, it’s much easier to move quickly in a 5 person environment than a 50 person environment, and a 500 person environment over a 5,000 person environment.

How do you build this? There is no silver bullet, but a few of the levers we focused on:

1. Hire great people so local decisions can be made well
2. Good transparent communication so local decision-makers are empowered to understand the big picture
3. Clear decision rights, smart org structure, strong alignment on strategy/priorities, and cross-team processes that promote rapid decision-making
4. A culture that values velocity (we wrote the Datavant Way — our culture manifesto — largely focused on velocity; we threw new hires into projects immediately to set a tone; and we assigned pre-readings for new hires like Hustle as a Strategy that make this point).
5. Systematically rewarding execution over ideation and “doers” over “strategists”
6. Personally set the pace as a leader — on small things and on big things.

Lesson 2: M&A can be an effective growth lever — even for a startup.

Inorganic growth isn’t in most startups’ tool-kits. Most startups grow purely organically, and most VCs see inorganic growth as a signal that the core business model isn’t working. And because it’s not part of the standard playbook, most founders don’t really understand how to successfully buy companies.

This was an area where I changed a lot between Datavant and my previous companies; because I had learned how to do M&A successfully when LiveRamp was public, I was able to apply this knowledge forward into building Datavant from the early days — and we obsessed over organic growth, but made some major inorganic moves that helped shape the company’s trajectory.

Over my 5 years leading Datavant, we ended up doing ~10 acquisitions — all of which were very accretive in retrospect. Eight of these were tuck-ins — generally bringing in a strong team to help us in a particular area. Two of these were transformational bets that were designed to shave years off of our journey in some way.

To be clear, there are many pitfalls of M&A — it can’t be a substitute for organic growth, and it can’t be a “portfolio strategy” substituting for a core business model. Most acquisitions fail over integration, and especially when the culture is being formed, obsessing over how a company combines with your culture is critical. But when the right target exists and the right obsession with the integration details is in place, M&A can be a very effective lever to scale non-linearly.

Lesson 3: Even with infinite capital, stay lean.

During the boom times, leanness was out of fashion — and it was not uncommon for a low burn rate (or profitability) to be critiqued as not growing fast enough. And now, as raising capital is getting more expensive, there is a rediscovery of the importance of cash flow.

This shift in zeitgeist (based on interest rates, valuation multiples, and macro-economic forces) misses the point. Beyond the profitability benefits of leanness, leanness actually helps a company run more quickly and more effectively. By not having free range to hire customer service reps, you’re forced to automate your product — which ultimately makes customers happier. By not having free range to make sales hires, you focus on improving your productivity per rep. By not giving free range to make G&A hires, you force process discipline. And by keeping the team as small as possible, you reduce communication overhead, making it easier to make quick decisions.

To be clear, we rapidly grew the team as the business scaled. But throughout the journey, we kept ARR per capita at $300–500K (while growing quickly). Culturally, we sought to ensure that hiring was seen as a failure to automate that should be avoided, not as a source of pride.

This leanness has helped us be way ahead of the market as the market turned, but even if the market never turned — the focus on leanness has allowed us to move faster than we otherwise ever could.

Lesson 4: Your leadership bench is everything during hypergrowth.

In a successful company, there are moments where your product-market fit is so strong, that the #1 thing you’re paying attention to as a leader is “how do we keep hitting the gas but not break.” Companies break from growth in lots of different ways, ranging from literally having product outages, to losing touch with customer needs, to losing the caliber of their team; there are many parables of companies that in retrospect grew too fast.

The best way to sustain hypergrowth without breaking is to have a strong leadership bench — people that you can put in 2x or 10x bigger roles and can step up to a variety of challenges. One of the most successful things we did at Datavant was to focus on hiring great generalists and encouraging “tours of duty” across different functions and teams, building a bench of really high-potential individuals who we could tap to jump in opportunistically to key roles. We leaned on this profile for everything from running M&A integrations to standing up new lines of business to running an industry conference.

Lesson 5: TAM is the most overrated metric in business.

For investors that passed on Datavant in the early days, the #1 reason they chose not to invest was Total Addressable Market (the same was true for LiveRamp in the early days as well). “Linking” and “De-identification” were not large existing markets, so it was tough to articulate with evidence how large the market would be; many folks in the industry speculated estimates as low as $10 mm and as high as $50 mm, which are both well smaller than the business is today.

While TAM is a useful metric in established/stable markets, TAM works very poorly as a metric for markets that are being created. Our hypothesis was “There has never been an open data ecosystem before in healthcare; as one gets created, the amount of data exchange will take off” — which has generally proven to be true.

The TAM metric also ignores that most great businesses win a specific market, and then use that beachhead to gradually expand and win adjacent markets; companies that focus on TAM usually make the mistake of taking on the whole market simultaneously to try to get 1% share, rather than trying to win 80% share of some niche in the market as a first step. The Facebook story, the Amazon story, and most other great tech successes start from winning ubiquity in a new market niche, and then using that to go after the next market and the next market.

Instead of focusing on TAM, companies should focus on winner-take-most business models that solve large needs near large amounts of money. As we created the linking market, we’ve been able to grow the market and focus on more and more adjacent data exchange needs — that have left us with much more room for growth than any TAM analysis has ever shown.

Lesson 6: Find the win-win-wins.

To build a successful company, there are a lot of stakeholders that matter: shareholders, clients, partners, employees, and the world at large. I believe that many of the best leaders are great at identifying win-win-wins; while we are ultimately a company focused on shareholder returns, we were able to find a high level of alignment across these stakeholders.

• Win-wins in company vision. One of the great aspects of Datavant is that not only is it a strong business, but I believe its mission is critical for American healthcare. This means that our commercial success is highly correlated with progress for American healthcare, and allowed us to attract academic, policy, and nonprofit partners and advocates for our business, which in turn massively accelerated our commercial success; similarly, we were able to attract people who cared about impacting the world, again ultimately making us more commercially successful. This is not true for all companies, but finding a business model that aligns with social benefit can unlock a faster pace of growth.
• Win-wins for the ecosystem. We set up a business model where every time a party entered our ecosystem, they became a potential source or consumer of data from other parties in our ecosystem. This meant that our existing clients prospered from our growth — setting up a nice network effect, but also making it so that the majority of our new clients are referred by existing customers.
• Win-wins between “counterparties.” The best negotiations I’ve ever been involved in weren’t well negotiated because we captured a lot of the value, but rather because we created a lot of value. The best negotiators are good at finding 1 + 1 = 8 opportunities, and negotiating to take ~4, rather than being great at finding 1+1 =2.5 opportunities and negotiating hard to take 1.49.
• Win-wins with employees. Creating a sense of implicit trust that “we are the best place to grow,” “we will treat you fairly,” and “the company’s success is your success” has been invaluable to getting the highest performers to come work for Datavant and creating an environment for people to go above and beyond.

Lesson 7: Ensure bad news travels quickly and is openly discussed.

As companies grow, making sure that the right things are communicated to the right people becomes exponentially complex.

One of the casualties is usually how bad news gets communicated: well-intentioned people want to solve an issue before it goes to the CEO, avoid just bringing problems and not bringing solutions to leadership, and generally want to avoid looking bad (or making others look bad) by being associated with a problem. That means that — as the company grows — leadership (and the team in general) hears about the victories, but hears less about the challenges facing the business. This takes away a level of customer-centricity for the whole team, and makes the team less nimble in reacting to problems facing the business.

The two levers I’ve found that are most effective at combating this:

1. A “red events” escalation process. At Datavant, we have a “red event” email alias, where people on the team are expected to send key issues impacting customers in real-time (and who the owners/what the status is), which automatically notifies key leaders across the company. Part of my job has been to constantly normalize the use of this alias; that it’s not bad to send a red event, but that I would be frustrated if I heard about an issue from a customer that wasn’t first flagged as a red event. For most red events, the email just serves as an FYI — but it helps to flag the issue, create widespread visibility, and rally support when needed.
2. Great “retrospectives.” Blameless, crisp retrospectives whenever something bad occurs are extremely healthy. Again, these don’t occur naturally (and can devolve either into cross-team complaining, or adjacent teams pulling punches to avoid making their co-workers look bad), and need some nudging to get the ritual running effectively — but institutionalizing retrospectives helps turn every issue into an opportunity to improve.

Lesson 8: As CEO, aspire to (almost) never be the decision-maker/owner.

A key part of a CEO’s job is to create personal leverage: My general attitude is that if I’m required to be the owner of a project or decision-maker on a question, that stems from a failure to create enough leverage, and should be solved by making sure I have the right team that I trust and making sure decision rights are clear. Of course, the reality is that the CEO is always involved in lots of decisions — but I view that as a symptom that should be solved via hiring, coaching, and clarity of strategy + ownership.

A CEO should have an opinion and nudge on all kinds of issues, but actually being the decision-maker should be rare. So a key part of the operating cadences I created for the company were ways to i) find spots to add my voice as “influence” — but not as a decision-maker, and ii) manage by random sampling — going deep to understand random areas of the business to ensure that I trust how processes are working.

What are the exceptions? Based on my strengths and what I believe are the most important aspects to get right as we scale, I focused on culture, communications, and macro-strategy as the three areas where I consistently wanted to retain decision-making authority, and then I would drive special projects.

Lesson 9: Push back on tradeoffs.

Many smart people are really good at laying out a constrained optimization, and understanding how more of A requires less of B. This leads to comments like “We should slow down sales until we improve the product”, “Are we willing to trade-off security for ease of use,” or “We need to hire another person if we want to add X initiative.”

These are all often very valid comments, and it’s important to listen to them seriously. But often, some of my best moves as CEO were to just reject the premise of a tradeoff.

Constraint-driven thinking is right if a company is running at its efficient frontier; the reality is it’s extremely rare for any team to be at an efficient frontier — and more often, the team will rise to the circumstances. So setting the vision for why it’s critical to have A AND B” is often the right answer when confronted with a tradeoff.

Of course, this is only true in some circumstances — and it’s critical sometimes to make tradeoffs. But 80% of the time, my job was to just raise the bar and convince the team that they can rise to the occasion.

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These are just a few of the big takeaways I had that have shaped my leadership outlook. Thank you to the many, many people who have helped me learn these lessons and helped make Datavant come so far so fast — and I’m excited for where the company goes from here.

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