I consider a company to be a living, breathing entity. A company has stages: childhood or startup looking for a product-market fit, teen or emerging growth, and maturing adult. Once grown-up, a company must continue to disrupt itself to thrive.
Growing A Company Is Hard; Turning Around A Grown-Up Company Is Harder
We hear frequent references to product life cycles and sales or buyer cycles — with fewer references to company life cycles. I will address company life cycles in this article and subsequent ones on business transformation.
Long-lasting companies are continuously adapting to change and are often ahead of the times. The only constant in life changes.
However, from what I've seen, most companies start a transformation in a reactive mode after missing key changes and opportunities in the market.
Like an amoeba, great companies remain fluid and change shape in response to environments. Macro changes like a pandemic and economic recessions have tested the survival skills of many companies. Contrast spinning gym chain Flywheel Sports filing for bankruptcy, while Peloton took off.
Frequently, I have been the leader tapped to lead the reactive turnarounds. Each turnaround is unique. However, there are typically eight keys to a successful turnaround:
1. Stop the bleeding; cut deep and once.
2. Explain why the cuts will lead to a turnaround — and a better place.
3. Listen, listen, and listen to continually adjust.
4. Constantly communicate — in many different ways.
5. Manage the expectations of employees, stakeholders, and/or the board.
6. Create a product strategy that anticipates industry trends to create disruptive innovation.
7. Celebrate milestones to create excitement about the future, but don’t claim an early victory.
8. Stay agile. Keep the company agile for perpetual transformation.
This article addresses the first key: Stop the bleeding. Let’s look at the iconic turnaround of Apple. In 1997, Apple was on the verge of bankruptcy.
In June of that year, Wired magazine published an article with the headline “101 Ways to Save Apple.” Steve Jobs, after co-founding Apple in 1976, agreed to return as interim CEO. Many business experts expected Jobs to introduce new products.
Jobs did quite the opposite since the company was bleeding cash. He reduced the number of Apple products by 70%. He pared down the products to just four.
Perhaps even more difficult, he reduced the workforce by 3,000. The cuts were deep, akin to a doctor amputating a leg to save a life.
An organization that's bleeding cash is in critical condition. Leaders must immediately cauterize the wound, cutting products and people.
Jobs explained his actions like so: “A friend of the family asked me which Apple computer she should buy. She couldn't figure out the differences among them and I couldn't give her clear guidance, either.” The bottom line was that the product lineup was too complicated.
Transformation decisions are hard but often necessary for survival. Avoid multiple rounds of cuts. It only prolongs the agony. Just like a doctor would not amputate a leg one slice at a time, business leaders must cut deep and only once.
As with major surgery, it is paramount that you are empathetic with all impacted people. Help those who are let go transition to new positions and pick up the pieces. It is hard and involves tough conversations.
When I took on the general manager of solutions business unit role at a large Fortune 100 company, it required a major transformation.
I had to cut operational expenses by 30% and eliminate 40% of the products/solutions. It required downsizing hundreds of people globally, plus shutting down several sites/offices.
I had to notify those affected since we were reducing several layers of management. I started at 2 a.m. Pacific time with teams in China and moved on to Hong Kong, Europe, and North America, round-the-clock until 2 p.m. Pacific time.
I had individuals and teams gather in conference rooms for notifications. In real life, I was doing the job George Clooney did in the movie Up in the Air.
I heard many gut-wrenching stories. One employee I notified in Hong Kong said, “Kash, I was inspired by your leadership. I believed in you for the bright future of the business.
I still do, and I am sorry I cannot be part of it.” He also shared, “I just had a new baby, and my wife and I are on a work visa in Hong Kong.” Their world was upended. It ripped my heart out to hear his story. I called HR to delay his exit by six months.
I could not stop there. I called other business unit heads to help affected members find new homes, or I helped them find jobs outside of the company and offered very generous severance packages. I treated everyone with the utmost respect.
Such deep cuts are very hard because good, talented people lose jobs. Stopping the bleeding with deep cuts is the hardest thing. Equally hard is that you will be left with a team in shock.
Just like a doctor consoling a patient, continue to communicate with the people who remain, and explain why you made the cuts. Explain that this change will lead to a better, stronger company that can choose a new direction.
There are a couple of silver linings here. First, you will become a stronger, battle-hardened leader. As the saying goes, “Smooth seas do not make skillful sailors.”
Second, if you do it right, the remaining people will likely appreciate your leadership. Right after the cuts I had to make, I was rated as a rock star manager in the company's annual employee survey.
So, back to my discussion of how a company is a living entity that goes through stages just like a person. Transforming an established business is often like getting a grown-up person to change.
To say it can be hard is an understatement. But it is the first step to breathing new life into a company to start its next life cycle.
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