An instructive lesson on “scaling” in leadership can be found in the blockchain.
Ethereum, the second largest market cap cryptocurrency, is actually much more than a currency (calling it a currency is like calling an iPhone a phone). It has the potential to be a core part of the infrastructure for the next era of the internet (Web3 - more on this in a previous post). However, as Ethereum gains in popularity, it is getting bogged down by its own success. Transactions take too long and are too expensive. In other words, it can’t move fast enough on its own and as a result, its potential is capped. I hear similar issues from the leaders I work with - “I can’t tackle all of the challenges on my plate at the pace that is expected.”
Experts believe the likely solution for Ethereum is the development of Layer-2. Here’s how to think about it:
Layer-1 = the main underlying architecture of the Ethereum blockchain. This is the single source of truth of all transactions that happen, what’s referred to as the distributed ledger.
Layer-2 = a network that sits on top of the main architecture (Layer-1) where transactions can take place in applications and then be recorded on Layer-1. In this design, the Layer-1 network is no longer clogged up, because most of the activity happens on Layer-2. Moreover, Layer-1 has the capacity is primary purpose of enabling security and immutability of the record of transactions and contracts.
(If you are curious to explore this topic more, I found this video to be a great starting point)
Layer-2’s potential impact on speed is exponential. On its own, Ethereum (Layer-1) processes 15 transactions per second. With Layer-2, it has the potential to process 2,000 transactions per second, 133 times faster!!!
Source: Blockchain Simplified
How is this parable instructive for leaders?
Let’s think about individual leaders as Layer-1 and their teams as Layer-2. As leaders take on increasingly larger responsibilities (scaling), they start to realize that on their own, they will never be able to meet the demands of the organization (i.e., on their own, they are too slow). However, too many times leaders assume that they just need to work harder to meet these increasing demands.
The solution lies in Layer-2, their teams.
Bill Campbell’s two mantra’s - “Work the team, then the problem” AND “Pick the right players” - hold the key to 100X+ impact for leaders, the same way Layer-2 will enable 100X+ speed for Ethereum.
As you think about building and developing your Layer-2, here’s a couple questions to consider:
What skills and capabilities do I need on my team to deliver our organization’s goals in the next 2-3 years?
Based on the skills and capabilities I identified in #1, how would I evaluate each individual on my team? You may find it helpful to group them into three buckets based on your evaluation: “accelerate their growth,” “closely monitor,” and “upgrade”? Practical tip alert: This exercise should be data-based and could take up to two hours depending on how large your team is. Push yourself to use specific examples to justify your assessment vs. how you feel about the person.
For the “upgrade” category, by when do you want to make the decision to replace this leader (and ideally find a role that is a better match to their skills)?
For the “closely monitor” category, what specific progress and performance do you need to see in the next 6 months? How will you communicate this to them to ensure expectations are clear?
For the “accelerate their growth” category, what actions will you take to further strengthen their skills and help them make progress on development areas that will be important to them in the future?
Just as Ethereum runs the risk of being replaced by newer, faster entrants (e.g., Solana) if Layer-2 is unsuccessful, leaders who underinvest in the development of their teams run the risk of flaming out and underachieving on their goals.
As you start to make plans for 2022, apply this lesson from scaling the blockchain, so that you can have the greatest impact next year.