Embrace Your Shrinkage!

For tech startup CEOs, something magical happens when the line starts to go south: that is, a test of character. Growing is easy.  Everybody loves a winner, and betting on long odds is how legends are made. Shrinking is not so fun, but in online advertising, it is likely.  

According to Terry Kawaja, only 150 of 2,000 ad-tech companies are suited for a liquidity event.  Some will grow, but most will shrink.  The underlying drivers are relentless: walled gardens with a lock on data, consumers actively rejecting advertising, subscription TV, overcapitalization, in-house production, etc. Ad tech is particularly vulnerable because technology is fungible, and legal protection for software exists only in theory.

The pathology is commonplace. A competitor emerges (willing to give away their product, funded by new money), or a critical partner reneges on the promises implicit in their API.

In any case, growth stops short. The blame game starts. The board steps in, like nervous sheep smelling a wolf upwind. Key talent bails. The bustle of optimism turns to quiet pallor.



The knee-jerk reactions are nearly universal: 1) Get Money. 2) Exit. 3) Pivot. 4) Right-size. In a hot millisecond, cowboys (of any gender) get a lesson in emasculation and a unique opportunity to become better managers.

In the next few years, hundreds of ad-tech CEOs will have that meeting.  What they do next will illuminate the true character of their leadership. Will they posture? Abandon ship? Burn the furniture? Throw a tantrum? Start using words like "journey"?  Fail to warn customers that operations might be compromised? Screw the landlord?  Some will, but others will have the courage to call it what it is, and organize a measured response.

When things go well, we don’t usually question what we may be doing wrong. We should, but nobody makes the hard choices in the halcyon days. Why would they?  

When things go poorly, we make the converse mistake: failing to ask what we doing right. These questions, asked and answered, will be at the root of a turnaround, or the means to avoid having to turn around at all.  

There is always hope. Many companies have been on the brink of collapse, persevered, and emerged to become leaders. Extreme pressure often creates the impetus to do things you should have done a long time ago, but there’s no formula.

Jack Welch told us that only the paranoid survive, but paranoia is a delusional disorder. More helpful, perhaps, is objectivity, and that’s harder than hope or hubris.

A.G. Lafley told us that the best managers face reality soonest. That's good, too, but it washes over the difficulty of committing action now to an uncertain future. Indeed, homilies and textbooks might give us clues, but leaders are more likely to find the sustenance they need deeper in themselves.

The best leaders can role-model urgency, introspection, and clear-eyed analysis in the best and worst of times. The B+ people respond well to bad news, but don’t correctly anticipate. The laggards stay in denial right up until their board fires them.  

So, when the line takes a dive, or seems headed that way, the best option is to embrace it. My friend Dave says that “aging ain’t for sissies.” Either is shrinking. So, when the day comes, look in the mirror, take a breath, be kind, think hard, stand tall, get organized -- and welcome the challenge.

8 comments about "Embrace Your Shrinkage!".
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  1. Kevin Lee from Didit, January 7, 2016 at 4:11 p.m.

    Words of wisdom from Ted McConnell.  Perfect examples of "fail fast" on an industry level basis.  Sucess is always some combination of luck, timing, execution, idea and staying power (with staying power related to available funding and burn rate.)  Not many categories are natural monopolies, so there is likley to be competition out there as money pours into anything with a chance of hitting it big. 

  2. Steve Baldwin from Didit, January 7, 2016 at 4:22 p.m.

    >>Jack Welch told us that only the paranoid survive, but paranoia is a delusional disorder.

    Believe this quote should be attributed to Intel CEO Andy Grove, not Welch. 

  3. Nicholas Schiavone from Nicholas P. Schiavone, LLC replied, January 7, 2016 at 6 p.m.

    Quoting Jack Welch or other practitioners of the via negativa reminds me of the an article:

    Narcissistic Leaders: The Incredible Pros, the Inevitable Cons

    by Michael Maccoby in Harvard Business Review, January 2004.

    Among other observations Maccoby shared the following:

    "Consider how an executive at Oracle describes his narcissistic CEO Larry Ellison:
    'The difference between God and Larry (Ellison) is that God does not believe he is Larry.' 
    That observation is amusing, but it is also troubling. Not surprisingly, most people think of narcissists in a primarily negative way. After all, Freud named the type after
    the mythical figure Narcissus, who died because of his pathological preoccupation with himself."

    Be careful out there in the real world.  Angels & Demons abound!

  4. Henry Blaufox from Dragon360, January 7, 2016 at 9:15 p.m.

    Intel's Andy Grove used "only the paranoid survive," and got most of the credit for it. But the key takeaway is that in tech, complacency is almost a guarantee of decline. A critical management attribute in tech, including ad tech, is to anticipate trouble, and have plans to handle it - risk management and mitigation. That is why SWOT sessions are routine at successful tech companies - not occasionally, but as a regular exercise. It should start as a C level priority.

  5. Ted Mcconnell from Independent Consultant, January 7, 2016 at 10:24 p.m.

    Mea culpa. It was Andy Grove. Point stands though. :). 

  6. Ted Mcconnell from Independent Consultant, January 7, 2016 at 10:27 p.m.

    Mea culpa. It was Andy Grove. Point stands though. :).

  7. Henry Blaufox from Dragon360 replied, January 8, 2016 at 11 a.m.

    Ted, not to worry. Seems that Welch, and GE, get credit for a lot of management concepts they didn't think of or act on first. I have lost count of how many times business connections tell me about how Welch brought Six Sigma to GE and they were the trailblazers implementing it among US coroprations. Not true, it was brought in first by Bob Galvin at Motorola.

  8. Nicholas Schiavone from Nicholas P. Schiavone, LLC, January 8, 2016 at 8:23 p.m.

    Henry Balfour,

    Your comments match my first-hand observations and experiences.  And your assessments of Welch & GE & GE Management Breakthroughs are spot on.

    No one in my GE Leadership Circle claimed ever to have heard of W. Edwards Deming.
    It was only All Jack, All The Time.  There was no other wisdom that could be accessed.  

    Even the "GE Integrity Code" was an exercise in "selective perception" and "standard deviations."  For the record, I am not accusing any GE Employee or Executive of anything. However, I am saying that there SEEMED to be thinly veiled disincentives of an "existential" nature to pursuing your GE Integrity Oath to the letter.  In fact, the operative oath I was taught through whispers, innuendo and silences designed to intimidate:  The mission of GE Attorneys was to turn lemons into lemonade!

    Hence, in the final analysis, the management question appeared NOT to be "Is this directive or act ethical?"  Rather, all the boss wants to know is "Whether or not the subordinate is acting legally or in a legally defensible manner."

    Jack is not a qualified candidate for Management Sainthood and GE was not Corporate Heaven.

    Onwards and upwards.

    PS This Comment comes from one once called "more GE than GE,"
    after being lectured about not be able to discern the REAL Will of THE Leader.

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