Exit Interview: Philip Rosedale, CEO Linden Lab

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."

Comments

[Pierre-Olivier Carles - Stonfield InWorld]

Well... That's clear !
Let's go back to business now. :-)

I don't know in the US, but journalist in Europe (specially in France) are writing tons of bullshit about Philip's decision, as an announcement of SL's death.

Lindens really need to communicate more and more - like this interview for example... at least to help us to evangelize and promote business uses of SL.

Philip's support is warmly welcome :-)

[Prokofy Neva]

Well, Pierre-Olivier, here in America, where this man is speaking English, and I even have met him a number of times in real life and corresponded with him, you'd think he could make sense.

But he doesn't make sense, and I feel as if there is some double-talk going on here, and I don't get it.

I see a basic confusion between "vision" as in "inventor's light-bulb over the head," and the passion and dedication and technical skill you need to push some thing like an invention, and "strategy" which I don't see in the same way as some sort of alchemic, magical thing.

I guess that's because I've been in hard and dull strategic planning committees my whole life, either as the head of a small organization I had to manage, or as part of larger organizations that were endlessly reforming and going through management shakeups and restructurings. So, I guess I see it as a rather straightforward grind through agendas, forcing players to convene, keeping people on task, relentlessly following up, gaining consensus element by element, making some hard calls about what to junk out of mandates or products or whatever.

Sooooo I'm not getting Philip, the vision thing guy as Philip the strategic planner.

None of it makes sense to me, but then, little of the Silicon Valley goofiness makes sense to me.

Here's what I do get about this statement, however:

""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,"

This is pretty straight stuff. This is Linden saying "We need to move to the grid, the platform, as our main effort, and get grid-level customers who buy up huge numbers of sims and wait on customers totally, so that we never even see those customers. And we need to slowly dump these singleton or small-group customers, or wean them from us over to platform, grid-level managers".

I'm wondering if studies will show some day that people online need more customer service than people offline.

[Jason Vu]

It seems that they want to put new operation guys to run the expanding business.

[Pierre-Olivier Carles - Stonfield InWorld]

@Prokofy : I agree with your last point... but may be the core business of LL is just going that way.

Actually, the support I really need from Linden Lab, as a company working with VW, is 2 things :
- An OPENED platform... improving (and we could work on this) even slowly, but improving
- A clear position and strategic vision

Really simple things... and then, we will create, invent, work, invest, etc... well, we'll help Linden Lab ?!?

[len]

Second Life is likely trying to reposition itself to create business systems such as Forterra is building with IBM now that the hot air is going out of IBM's "standards for 3D" ploy. They used SL pretty well to build themselves up, now they are playing the real hand. The "NEW" meme is Unified Communications (UC), or virtual worlds as the next generation of a kareoke business work place.

SL woke up to being the Judas Goat a little late but perhaps with time to change their business plan.

[Prokofy Neva]

Pierre-Olivier Carles:

I'm going to put this pretty starkly, but I get to do that, having helped sustain this business, along with others like myself, for 3 years, paying -- collectively -- as much or more than their venture capitalists, and paying -- collectively, along with thousands of other single end-user type customers -- 80 percent or more of their revenue.

Of course, we may be a resource that is being asked to "step down" like the CEO is being forced to step down -- we haven't quite gotten that memo yet : )

I'm not interested in an "open platform" (which in fact can be a highly politicized and subjective term) in the way you are because I can see that it means a) a threat to the existing customer base, and likely a destruction of it (either by confusion, an abrupt end of service, or a selective transition to opensim, a business started by a long-time Linden favourite) b) loss of the intellectual property rights of those who designed using its tools and permission sets; c) a damage if not removal of the land sales and rentals economy, a closing of the LindEx (this was already foreseen and advocated on the AWG Wiki months ago), etc.

Please *do* try to understand -- it can be so hard to make this clear in forums with anonymous griefers available to deliberately MISunderstand it -- that my comments here are a much larger commentary in general about how to organize the Metaverse at large -- they aren't about my little rentals business and OMGODZORZ111 it being threatened with a loss of customers going to own-hosted competitors, open sims, former-Linden spin-offs, blah blah blah. That's all understood. Yes, we get it that business is harsh, people suffer and die, like the desert, not leaving even a skull. We get all that: Death Valley is next to Silicon Valley, we can open up the map and see this.

Still, how you treat people, how you run transitions -- these things do matter.

You're coming along now and going to special Linden meetings for developers and posting comments, etc. hoping to influence LL's choice of CEO, as many are, because you are a developer and you have some vested business stake apparently (I don't know the details).

So your interest and my interests are directly, full-tilt, railroad-crash against each other's -- quite possibly.

Of course, there is no objective need for these interests to clash; Linden Lab could care as much about transitioning their existing user base in orderly fashion as they do recklessly opening their platform to script kiddies and biz devs to operate at a higher grid level. But they don't.

This could change. They could create a Transition Group that puts as much talent and resources of the Linden team as they have put into the Architectural Working Group in which they explain in non-technical terms and in timely fashion and in full what their big plan is regarding the IP and permissions set for creations, the land auction system, the community features, the economy that *they* built and advertised to us to come into, and which is now changing in ways that *we are not being informed of*. It's just that simple.

Let me give you a pro-tip: the way they treat us will be the way they treat you.

Take notes.

[Kiroy]

hmm.. This is a indication that all is not well with the company, recent reports indicates subscribers dropping off , system still unstable after 5 year of bug fixes. Corporate customers leaving 2nd life and never to come back.
New companies coming into the foray like Twinity, There.com and even a new Mirror World called AmazingWorlds.com
Linden has to change and adopt and find a business model that is sustainable.
I am personally not suprised that he left. Probably been ask to move on to get a better person to run the show.
I pity the new guy coming in to fix the mess, Things wont be easy for the new guy! since all the problems that 2nd life has created in the industry.
The worse being the bad and sour image that has been left in the minds of many of the people who tried 2nd life and wont go back.

[Wiz Nordberg]

Interesting quote, to be sure...

"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,"

While the quote is obviously good politics, the underlying intent isn't as clear as Prokofy's reaction to it. It does not mention "grid-level customers who buy huge numbers of sims".

Such a reaction represents the fear (or perhaps a cynical conviction) that the organizations Philip is talking about are IBM and CBS rather than Magrathean Technologies and Xcite. And why not? From a pure Silicon Valley business perspective this is where many investors would perceive the greatest financial leverage in the platform. It is hard for many business people to relate to how supporting Xcite could possibly yield benefits. So there is cause for cynicism about interpreting Philip's words.

Yet, it is surely true that Second Life needs more focus on groups who work together and try to achieve shared goals. Dare we call those "organizations"? Simple technical limitations like group limits and membership need vast improvement. The permissions system, for as complex as it already is, lacks some fundamental features that organizations need (such as simplicity). Moreover, Second Life's technical support lacks "organizational awareness" and is too focused on individuals.

Perhaps it is not such a bad thing for Linden Labs to focus on organizations, so long as they are not biased. Inworld organizations are in dire need of help. Unlike large RL organizations, they do not have evolved management structures. If Linden Labs focuses on organizational tools, support, and management features for organizations of all sizes, perhaps this empowers rather than disenfranchises smaller inworld businesses. They are, after all, a technology company. If such ambitions result in features that everybody can use, I see little harm and much benefit.

I know I'm being idealistic to even hope that such an impartial view or organizations might prevail in the end. Coming from any other executive, I wouldn't even bother wondering about how to interpret such statements. But Philip has surprised us in the past. Maybe he can swim with sharks better than we think and keep everybody somewhat happy in the end.

[Prokofy Neva]

Wiz,

Perhaps your business depends more on corporations that buy TV advertising or hire you to film corporate events, than on individual viewers, so perhaps you simply have a greater tendency to find something positive, and not ominous in what Philip says.

What he said was: "knowledge of servicing organizations rather than just individuals, that probably is a great potential skill that we bring in with a new person." So what conclusion can you draw from this? That they have not had enough talent with working with large corporations? Well, but they've certainly *had* the skill already, such as to bring in some very big fish, IBM, Cisco, all the rest. The question is how to hang on to them. To hang on to them, they would probably have to build a dedicated, skilled staff department to service corporate accounts with various features (the way the Concierge serves the individual island owners now with transfers, sales, technical trouble-shooting).

A new CEO oriented toward building out such a department, possible with certain limited resources, would naturally be tempted to go where he might see more lucrative or rational business, and serving a lot of people individually or in groups.

Of course, I would argue that since they already have leaders who have emerged to take care of customers, whether content-creators or rentals agents or builders, etc. they should make sure not to get in their way and support them and not trade them off in favour of newer, higher-paying customers.

To anybody who has observed SL for any length of time, they can readily see that what the Lindens need to do most of all is sell server space -- and then scramble to service it. The only way they could break away from that model -- and they can't do it in one half-leap over the abyss -- is if they open source their code and get people to host their own, and then sell features, customization, access to a broader customer base they still maintain, etc. The plan for that is very opaque and almost nothing has been said about it (deliberately).

Once again, I want to stress that my analysis *does not spring from fear*. That's silly. If I'm crushed, so what? Life goes on. But many, many other people will not take it so mildly, as they make full livlihoods from SL, and have a lot of stake in it. They want it to stay, and not change so drastically that it has no place for them anymore; social Darwinism isn't an attractive option to them when they are at the receiving end of it.

The idea that Xcite is somehow the only business of Second Life is cynical on *your* part -- and even an exaggerated reporting of Second Life.

Dare we call those "organizations"? Simple technical limitations like group limits and membership need vast improvement. The permissions system, for as complex as it already is, lacks some fundamental features that organizations need (such as simplicity). Moreover, Second Life's technical support lacks "organizational awareness" and is too focused on individuals.

Um, yeah, we dare? Because people like me are *in businesses* and *in organizations*. Do you think that someone criticizing a big corporation that may suck dry the SL small and medium business economy is somehow anti-corporation? Of course not. They are merely for diversity and the rule of law. Turning SL into a lot of company towns *has not worked*. We have actually seen this attempted, and seen it fail, and that's worth watching -- the companies that tried to give away free land, or have residents come in and create content and live for free and have their stores and take part in company events (Pontiac) or run managed communities for inworld life to associate with an outworld brand (Coldwell Banker) -- they've left. They're gone. It wasn't compelling. I don't think it was that it was too expensive.

You are talking to the person who pushed the hardest, loudest, and longest for reform of the group tools back in 2005. The group tools still need a lot of work. We have some really awful bugs creeping back in, and bugs that were once recognized as bugs now being declared "features" -- like suddenly, the ability of any member, even if he has no checkoff for this power in the group, being able to *return* any share-with-group prim. This is destructive.

I agree that the Lindens don't focus enough on groups and small and medium businesses -- I'm not sure if that's what you mean. A really huge problem is the Lindens forced egalitarianism, their utopian belief that individual creativity is the only coin of the realm, that land or business or services -- this isn't wealth or stake in this world. Their hyper-focus on design and programming and their myopic focus on just making software and not attending to the world is a HUGE hobble for them in going forward -- and they have a very hard time admitting this.

I really think they need to stop SL Views and Certifieds and Mentors and SL Devs and all these special little ingroup sort of Feted Inner Core types of things and recast it. They need tons of live, new, widespread focus groups, eating the dogfood, inworld, not spending money to bring a few friends all expense-paid to SF (which is how they do it now). They need to stop trying to pit people against each other in a free economy with an interventionist practice like "certifying" some builders (let some independent company emerge that does this fairly, without favouritism). Dump the Mentors and other ingroups -- they are only known for texture-theft and inviting all the newbies to their own stores under the guise of orienting them.

Um, inworld groups have a lot more management structures than you may be aware of. I don't know *what* you are talking about. But you should have more respect for people who have to lag out and push prims inworld instead of sit out on the Internet streaming TV from there : )

The Lindens could, indeed, focus more on groups and trying to solve their many bugs and problems and listen to the clamour of feature requests desperately needed (go review jira.secondlife.com if you think that somehow this subject is not worked, or that somehow, groups inworld "need help" and "don't know management skills". My God, Wiz, they know them. Many of these people are RL businesses, too. What needs help is Linden staffing of the P-Jira. Hey, restructuring of the whole damn thing, as it is unworkable .

[Rip]

My thoughts on groups in SL: Frankly a lot of the problems in SL are based on the idea that Linden allows special interest groups in the fist place. from a business stand point the only people that should be allowed group membership are those that have a stake in the platform (grid), basically sim owners and or grid operators. Once the opensource worlds (grids) start to grow in number, sim owner groups should be quite common, and freeplay groups will be where they belong, in the trash pile of bad LL ideas.

[Prokofy Neva]

If ever I'm in doubt about my conviction that open source=closed society, I'll get a post like this one from Rip that reanimates my conviction. A world based only on sim ownership might seem pragmatic, but it's brutal corporativism. I could see parliaments made only of sim owners, or people running their hosted sims as they like. But the notion that all the non-owners, all the users, all the residents or guests, let's say, have no standing in this harsh world of social Darwinism is death. No society on earth has succeeded using that sort of ideology.

[len]

True statement, Prok. But it is not an indictment of corporatism, it is an indictment of corporations run badly. The question you have to ask is does this market or conditions in this market require a server farm vendor with free services to crush users of those services in favor of the interests of the paying customers? Having to do that typically indicates a corporation going out of business because their margins are so thin they can no longer keep their social commitments. Nothing obligates them but decency but when that is gone, nothing but legal script obligates anyone and then only if they can afford to litigate.

Given the high cost of indemnity, both customers and casual users will move on to a more secure provider. That is how capitalism should work. Choice of choices governs options offered, but feedback on the offerings governs changes to the choice of choices.

[Rip]

Prokofy what your fighting here is evolutionary technological change not social interaction. What people do with that techonolgy will be entirely up to them. So you can reanimate all the convictions you like! But in the end, change will happen weither you like it or not, thats the nature of life. If whinning about the change makes you feel better though, please by all means continue. Heck even the dinosaurs bawled when the mammals showed up. Squeak...Squeak........!