Commentary

Don't Drop The Egg

Every business and nearly every businessperson can be neatly put into one of three buckets.

While we all hate being categorized, most of us fit better than we would care to admit. In business, there are three buckets: 1s, 2s and 3s.

Ones are start-up types that are trying to go from zero-to-interesting. Twos are growth company folks that are attempting to build a scalable business. Threes are large, mature company people.

1s Manage Chaos
When a company is in this first phase, everything is messy.

You are trying to become an expert in your market, grow your team, outrun the competition, find the biggest problem to solve, and build a product to solve this problem all at the same time, and before you run out of money.

Inevitably, things are going to break. Mistakes are going to be made. Tons of them. This is healthy, normal, and completely terrifying to someone who is risk-averse or loves process and order.

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What makes 1s great is their ability to do two things: make thousand-dollar mistakes instead of million-dollar mistakes, and, more importantly, correct quickly.

1s have huge energy, creativity, an extremely high tolerance for risk, and an overly optimistic worldview that often blinds them to that risk.

I am a 1. It is messy, awkward, terrifying, and the most fun I could possibly imagine.

If you are a 1, you know it instantly. You read this nodding your head, and you can spot another 1 from a mile away.

2s Create Structure
At some point in a company's evolution, the same hypomanic energy that created the business will ultimately destroy it if left unchecked.

That is why 2s are equally important. Twos love order, process, and structure. They are great at identifying broken processes and improving them. They are good at aligning an organization around a strong culture. They are experts at putting just enough structure in place to balance speed and risk.

When 2s take over, 1s start to flee. This is the healthy evolution of a business. It is why the oft-hyped employee turnover at Facebook, Twitter, Google, and others is often not a reflection of the health of the business, but rather an indication that the business has evolved and needs a new set of skills.

The challenge for a company in this phase is to retain some of the 1s that drove the innovation, and develop a culture that respects the vast chasm that exists between 1s and 2s and enables both to be happy and effective.

3s Carry Eggs
My first-grade class was given a bizarre assignment: carry a raw egg around for 24 hours.

We had to drag this egg from class to class, to our after-school activities, to friend's houses, and then back to school the next morning. It was supposed to show us how hard it is to raise a child. In reality it was just a major pain in the ass, as I had neither the desire nor the opportunity to become a father in the first grade. I was still wearing sweatpants and thick glasses, so even a first date, let alone procreation, was a stretch.

As a klutzy kid, there was nearly a 0% chance of me returning this egg intact. I broke it, cleaned up, and replaced my broken egg with one from our refrigerator three times before I got smart and just left it in the refrigerator and grabbed it on the way to school the next morning.

It is incredible how distracted you get dragging around an egg. You become fixated on trying not to break it -- and end up missing all the things happening around you.

Most large company's CE's are egg carriers.

Their No. 1 goal is to not drop the egg. Any CEO can survive an earnings call that disappoints the street, or schmooze analysts about the lack of growth -- but drop the egg, and you're toast.

As a result, success breeds a fixation on maintaining the empire, and in the process creates complacency and a huge aversion to risk.

The more money you make, the more time you spend protecting your assets and the less time you spend growing them. Ultimately, you spend all your time just trying not to break the egg.

This is what kills mature companies, and what is strangling today's media companies.

Among the many problems, they are trying to hang on to a CPM pricing model that is clearly broken. They are creating ridiculous metrics to try and defend their value. They create industry associations to analyze and reanalyze the problem. They spend their time at industry conferences debating how we got to this sad state. They cling to thousands of small ad networks, rich-media providers, ad agencies, and dynamic ad companies as potential solutions that only divide an ever-shrinking pie.

If you spend all your time and energy trying to keep the world from changing, you prevent yourself from innovating.

And in the process, you drop the very egg you were trying to protect..

9 comments about "Don't Drop The Egg".
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  1. Brad Stewart from Adjoy, October 15, 2009 at 3:55 p.m.

    Having a very "1-like" day today, balancing several eggs on various parts of my body. Had to leave an egg in someone else's hands. They dropped it, but it didn't break. Not sure where it is now, but they say it's not broken! ;) Thanks for the insight and levity, David! Great Article! Another CPM is dead article, powered by wonderful analogy. Couldn't agree more.

  2. Melissa Anderson from Wetpaint, October 15, 2009 at 4:42 p.m.

    I love this article!! Very well said.

  3. Jonas Halpren from Federated Media, October 15, 2009 at 5:18 p.m.

    Melissa, Brad,
    Why was this such a great article? OK, the breakdown of different stages of company growth was interesting and the egg analogy is cute. Bus the paragraph about cpms being broken was shoe-horned into the end of the post was a feeble attempt to make the article relevant to publishers.

    What would make a great article? Actually, telling us why the CPM model is broken and giving us some original thought as to what publishers could do to fix it would make this a great article.

    I also disagree that media companies are simply circling the wagons and not innovating. Sure, some of the big traditional media co's are doing just that. Many more (sure most fall into the 1st or 2nd category) are developing innovative ad products, targeting solutions and redefining metrics (rather than being held hostage by the click) to help move the online advertising industry forward.

  4. Tobin Trevarthen from Sparkpr, October 15, 2009 at 5:20 p.m.

    Ditto the above comments. A simple clarity of creative destruction.

  5. Jonathan Mirow from BroadbandVideo, Inc., October 15, 2009 at 5:49 p.m.

    This describes in wonderful detail every company I have ever worked for (shocker - I was a "1-for hire"). They would bring me in to create stuff, but after a while the 2s and 3s would slowly take over, the game would stop being fun and would devolve into endless meetings resulting in analysis paralysis. Big media companies often wonder what the problem is - when, in fact, the very corporate environment that they foster is it's own downfall. You can't "think outside the box" when you are the box.

  6. David Koretz from Adventive, Inc., October 15, 2009 at 8:41 p.m.

    Thanks for all the great feedback!!

    I have met some people that can competently play across multiple categories, but they are extremely rare.

    Our Chairman was able to grow a business from scratch to more than a billion dollars, but he is clearly the exception to the exception.

    David.

  7. Monica Bower from TERiX Computer Service, October 16, 2009 at 10:17 a.m.

    CPM may not be completely dead yet but it's certainly not in a nice part of town these days. Its champions always seem to be people with a personal interest in its success, not the advertisers with a truly neutral bloodline.

    That said, the 1/2/3 system does a good job describing the phases of the company and its chiefs, except that some proportion of each type is seen at all phases of growth - maybe not in its CEO but certainly in the circle of executives. I don't know a lot of CFOs that take tons of risks and I don't know a lot of CMOs who are more concerned about the financial statement than the mission statement. There are certainly a few, but I think certain types of people gravitate towards certain positions as well.

  8. Lonnie Peppler-Moyer, October 16, 2009 at 1:34 p.m.

    I agree with Jonas. We're a small media company in Michigan. At times we're ones, sometimes twos but the three is the cash cow funding the ones and twos and the transition isn't an easy one for media companies. Keep in mind, unlke the start-up companies, we have lots of long-term employees,long-term benefits and long term comittments that we can't just walk away from. I'm confident we'll make the tranisiton CPMs and all.

  9. Greg Hall from Yebol, October 16, 2009 at 6:06 p.m.

    This is excellent. I find this to be the case...I think I'm a 2;-)

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