The VP of Operations: The New Rising Star of Silicon Valley

Historically the toughest executive jobs to fill at technology startups have been the VP of Engineering and the VP of Product.  However, in the consumer ecommerce sector, a new leadership role has emerged as perhaps the biggest bottleneck to success:  the VP of Operations.  Daily I meet with early stage entrepreneurs at the forefront of the mobile commerce revolution whose org charts prominently feature a VP of Operations who quite often has yet to be hired.

Why are VPs of Operations in High Demand?

The growing appetite for this role has been driven by the recent resurgence of the ecommerce sector as entrepreneurs introduce innovative consumer offerings such as mobile-enabled services, flash sales, and subscription commerce.  Zulily (ZU), for example, a leading flash sales site, is particularly operationally intensive because the company made a strategic decision to carry only a minimal amount of inventory in order to grow capital-efficiently.  To get purchases to consumers in a timely manner, Zulily requires highly sophisticated inbound logistics from vendors.   In another example, ThredUP has reinvented used clothing e-commerce by creating both an easy, frictionless way for consumers to sell their clothes and a consistent, aspirational buying experience.  To deliver on both these fronts requires heavy operational lifting, particularly around the clothing inspection, classification, and photography processes.

A host of mobile-enabled marketplaces, such as Uber, have emerged over the last few years that require supply/demand balancing, as well as logistics and scheduling, at a local geographic level.  In our portfolio, EAT Club provides companies with a lunch delivery service that offers a daily, curated menu of dishes from local restaurants and commissaries, leveraging underutilized restaurant capacity to deliver great quality, value and variety.  To ensure that customers receive their lunches on time, EAT Club tightly manages inbound logistics from restaurants and outbound delivery services to its corporate clients.  EAT Club’s carefully-honed operations playbook is part of its secret sauce (pun intended!).

What does a VP of Operations do?

The parameters of the VP of Operations role vary by company but can encompass functions including sourcing, logistics (inbound/outbound), processing, customer success, and distributed, geographically-based operations teams.  In terms of financial accountability, the VP of Operations holds the keys to managing gross margin and contribution margin, as well as to optimizing the customer experience for retention.  Trade-offs often exist between the customer experience and margins, and the VP of Operations is a convenient, single choke point for managing them.  Strong VPs of Operations are typically strong people leaders and motivators, as they often manage significant headcount, and are deeply process-  and metrics-driven.

Where can strong VPs of Operations candidates be found?

The growing demand for VPs of Operations is unfortunately not matched by an abundant supply.  Whereas there are many well-established technology companies (think Google, facebook) that can provide good hunting grounds for VPs of Product or VPs of Engineering, the same cannot be said for VPs of Operations.  A few Silicon Valley companies are well-regarded for having strong operations, such as Netflix and Walmart.com, and these are consistently tapped for their talent.  Startups therefore must either import operations executives from other geographies or grow their own.  I see many startups initially grow their own by hiring strong general athletes, but later recruiting experienced executives when they hit an inflection point.

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Companies like Zulily, ThredUP, and EAT Club recognize that operational excellence can be a pivotal competitive advantage and pursue it aggressively.  Of course, an important step to achieving operational excellence is identifying an excellent VP of Operations, and savvy ecommerce CEOs will make recruiting one a top priority.  They understand that they leave that box on the org chart empty at their peril!