Like a lot of people at the moment, I’m fairly glued to the news and call-in radio stations like LBC. While often a massive downer, it’s important to know the latest as it’s impacting every one of us, every day. Across the airwaves there’s a word that has been getting massively - but perhaps, aptly - overused; “unprecedented”. If you made a drinking game with this word you’d surely get hammered! But like I said, it’s fitting. These are bizarre and unprecedented times, like nothing I’ve seen before in my 33 years. It’s scary too. We’re being forced to decide between lives and jobs. I have zero authority to discuss pandemics in terms of response, strategy and vaccines etc. but I can however make some observations about jobs, and the businesses that support them.
There are obviously some companies who are shit outta luck, by default. The airlines, hotels, gyms, restaurants, pubs etc have all been dealt a really poor hand, there’s no way around that. There are however a whole raft of other businesses whose revenue was wiped out overnight once the lockdown came into play, who dare I say it, have themselves to blame.
Perhaps it’s easier to illustrate this by looking at the companies who are thriving at the moment. Granted some of them will be doing better by nature of the industry they’re in, Amazon, Zoom etc but they themselves have competitors who aren’t faring so well. This is because they innovate. Not just in what they offer but how they offer it; their business models.
I’ve kept a close eye on a particular breed of businesses who are happy-as-Larry when times are good but who are always one bad quarter or even month away from oblivion. I’m talking about project-based service and consulting businesses. If you’re a company that sells project-based work, you’re so incredibly susceptible to a down turn. I know of a variety of firms whose revenue plummeted to zero as soon as the lockdown came into force. They rely on being face-to-face for most work and because they issue SOW’s each time they do business, even with long-term customers, their receivables are diminished overnight. If these businesses would shift to long-term, annual recurring revenue models, they’d be in a much better position to weather a storm. They could protect their revenue, and even thrive. They’d be so entwined with their customers that they would be relied on more than ever for their partnership and guidance rather than seen merely as a line item on the expense balance and in turn, eliminated.
These firms have failed to innovate. They’ve failed disrupt themselves. They’ve gotten comfortable. What’s crazy to me though is that every one of them is the product of risk and innovation. At some point an entrepreneur plucked up the courage to launch these businesses. They saw opportunity and took it. Maybe they’ve gotten complacent? Or maybe they’ve been influenced by the wrong people? I’ve seen examples of a CEO’s inner circle, those long term confidants, stifling innovation in order to protect their own positions; and because they’re not comfortable with change, or simply don’t understand it. They make themselves irreplaceable because they hoard knowledge and access. They prioritize their short term gain over the companies' long terms goals. In some cases it’s senior commercial people who don’t want to position or try more efficient and scalable business model because the old ways deliver larger initial pay checks.
A CEO must have the courage not to buckle here, but to keep their eye on the future. They must go back to how it all began. Opportunity, calculated risk, and innovation. They need to become an entrepreneur again, and disrupt their own business. They need to challenge their own clients. We all know Henry Ford’s famous quote, “had I asked people what they wanted they would have said faster horses”.
For a short time I was at Utah-based, “experience management” company, Qualtrics. The place was a master-class in how a SaaS company should run. I remember the CEO, Ryan Smith, addressing the entire organization in saying that at several times over their 15 years, he and the leadership team had to bet the entire company on a new direction. It was always a risk, but it was always calculated. There were naysayers, sure, but they were shed. The gambles paid of, though. That company was eventually bought for $8 billion dollars by SAP.
Liechtenstein-based power tool manufacturer Hilti, several years ago took a decision to totally reinvent their business. They did this with one simple concept. That was to switch from selling drills, to selling holes. They were going to become a subscription business, instead of making individual sales of equipment. Users would sign up to a certain level of service that would include the tools, as well as the service and maintenance. If a tool packed in they’d be on the scene asap with a replacement. Their business boomed and continues to do so.
Another classic example illustrating an opposite fate is Blockbuster. Blockbuster were approached by an innovator who had created an online streaming service for movies and TV shows called Netflix… perhaps you’ve heard of it? Reed Hasting, Netflix CEO told Blockbuster that they could buy his company for $50 million and that they could essentially merge, with Reed running the online side of the business. He was laughed out the room. Blockbuster doesn’t exist anymore. Reed’s a billionaire.
I suppose though that this reinvention approach isn’t for all CEO’s to run with. It could be that the CEO is really meant to step back. This doesn’t mean to give up at all, but rather to identify that maybe it’s time for fresh leadership. This is disruption in it’s own right. They can take a chairman role and play the adult in the room; maybe realize when a “Reed Hastings” is knocking at the door? Use that wisdom and experience to coach another, while accepting that it’s time to move aside from the day-to-day. This is probably case by case, but look at Bill Gates, Richard Branson and many others. Just saying.
An entrepreneur, an innovator, sees opportunity where others do not, those who resist pose the threat. To you CEO’s out there who are suffering because of the lockdown, take note. I know that many will be at the helm of a business in travel and entertainment etc and thats just crappy luck but those in other areas, treat this as an experience from which to learn. How do you avoid an ass-kicking in the next down turn? There will be another, you can be sure of that. Are you innovative enough? Do you surround yourself with innovators and winners? Are you willing to bet the business on becoming something far greater, perhaps very different, than what it is now or how it began?
These are indeed unprecedented times, but out of it will come unprecedented opportunity and reward. Will you see it? Will you act on it?
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