Dr. Earl R. Smith II
Managing Partner, The Federal Circle
DrSmith@Dr-Smith.com
Dr-Smith.com
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“What happened? We were doing so well – started out with such energy and focus. What has brought us to the very brink of disaster?”
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I recently was asked to intervene in a situation that brought into focus one of the most common reasons why companies fail – the difference between knowing what has to be done and doing what has to be done.
In this case, the focus was on the sales process. The company – a small start-up – was floundering. After an initial rush of business, things had ‘flattened out’. They were still servicing the original clients but nothing was showing up in the pipeline. Well, that was not strictly true. There were lots of entries for business that was anticipated a year out but nothing for the next quarter.
As I drilled down, two things became clear. The first was that the team – and particularly the CEO – knew what had to be done. The second – and this one was the surprise – was that they just could not seem to muster the energy and focus necessary to get it done.
At the bottom of all of this was the realization that, with their initial success, the team had gone as far as they were able to go. They were still in start-up mode. They were unable to make the transition to ‘operating mode’. The skill sets required – the re-invention necessary – was beyond them. Like politicians who, after running a successful campaign and achieving elected office, cannot seem to exit campaign mode and begin to govern, the team could intellectualize but not execute.
There is a sad end to this story. The company is not going to survive. The investors have ‘given up’ on the management team and value proposition. The team has dissipated the resources that the investors provided. And the clients are starting to get uneasy – suspecting that their bet on this new company is likely to prove a bad one. It doesn’t have to be that way. And that is the saddest of things.
Shifting gears – much like driving the old stick shift – is the key. You have to prepare to shift – it doesn’t shift by itself. Failing to make the required shift is like driving faster and faster in first gear. You are going to burn a lot of gas and make a lit of noise without covering much distance. Eventually you will burnout the clutch and transmission. Teams that don’t anticipate this shift in focus are unlikely to make the journey from start-up to going business. Teams that do are far more likely to be successful in building a profitable business.
© Dr. Earl R. Smith II
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Related Articles:
- Situational Awareness
- Leadership and Descartes?
- Thoughts on Excuses
- Management Incentivization the Right Way
- Attitudes, Agendas, Interventions and Compromises
- Why Start-Ups Fail – Part Two
- Battle at the Cottage Gate
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Dr. Smith,
Is there more to this story? I get the feeling that for some companies, failure comes even if the company shifts gears. The more interesting story (for me), is to know when those running the company should make the decision to let the investors know that failure is unavoidable. I also think that no CEO or management team should run alone, instead someone on the board or the investment group should provide additional oversight and direction. Have you ever seen an example of a company that increased it business for more than a few years only to fail to shift gears when it was necessary?
Editor’s Note: In the simplest sense, no story is complete – there is always more – particularly than can be included in a short note. Investors should know in real time what is going on within the company – they should not wait until management gets around to telling them. Inadequate oversight is one of the most common reasons that companies fail. I agree that the board should be aggressively involved in such oversight. Investors that ‘call in’ oversight, get what they deserve – lots of losses.
Thanks!