Failure is always a complex event
At some point during your life it is likely you will suffer some setback. A frustrating fact of the human condition is that people with no appropriate skills will feel fit to judge you.
The failure of a startup is always a complex event. So is its success.
I moved to New York City in 2009, and between 2009 and 2013 I worked with two major media companies whose existence was threatened by the Internet. Both companies had gotten going in the 1970s and enjoyed great profits for 3 decades. But both now faced a crisis, as the subscriptions to their print publications declined and the Web ruined their old business model.
What is the truth of the transitions that these organizations have gone through? I suspect that everyone involved would give a different answer. I’ll offer the following quick summary.
Marvin Shanken bought Wine Spectator magazine in 1979. This was to become the world’s most respected wine magazine, influential at an international level. When I worked there, casks of wine came in from all over the world, sent by wineries in the hopes that the editors might review the wine. The magazine had such an excess of wine bottles that every month each employee was allowed to take home 6 bottles of wine. The editors made a serious effort to offer objective, almost scientific wine tastings — some office interns would hide the bottles in paper bags and pour small samples, and the editors would try the samples and write down their reactions without knowing if the wine came from a famous winery or some unknown startup. Prestige was the center of the business model, and all of that was undercut when the younger generation began to rely on wine apps that relied on user-generated reviews. Populism versus wine: these two had been enemies for a long time, especially in the U.S., which lacked a culture of everyone drinking cheap wine for lunch (unlike Italy or Spain or Portugal). Suddenly, in less than 2 years, apps like Wine.com and Delectable boasted having millions of wine reviews, far in excess of what Wine Spectator had managed to do over 4 decades. The editors sneered with contempt at the ignorant tastes of the people writing the reviews, but it was a lost war: younger people who drink wine are more likely to check a review on some app than check the review on Wine Spectator.
A few people stepped forward with innovative ideas. For instance, an online school. While developing a reputation for a refined taste might take a few years, there were thousands of servers at upscale restaurants who wanted to move up to the level of sommelier, and taking a course online was at least a way of showing they were serious about studying wine. When I traveled back to Virginia, I was surprised when my friends and I went to a restaurant and our server that night said she had just completed the online course offered by Wine Spectator. Here was something that filled a real need, something that people were willing to pay for. Could Wine Spectator offer other courses? Could they shift into video and offer some kind of entertainment around wine? A reality show about running a winery perhaps?
During the years I was aware of the decisions at Marvin Shanken’s publishing firm, there was a noticeable lack of energy towards new ideas. Wallowing in bitterness at the ruination of their old business model, the top leadership was not vigorous in following up on some of the new ideas that seemed possible. Eventually the company did start doing more video, but this was years after the idea had first been suggested. Likewise, expanding the school is something that happened many years too late. Other entrepreneurs had already jumped in to colonize the territory around wine apps.
Compare that sad history to the happier story of TimeOut.com.
Time Out started in London, and then in the 1970s it spread to other big cities. Circa 2000, you could buy a copy of Time Out New York and immediately know every cool thing that was happening in the city that week: the best theater, the most interesting restaurant openings, the most provocative art shows. Likewise in Chicago, and later Paris, Tokyo, Dubai. Although for most cities it is now Web-only, with no print version, it has expanded to 328 cities in 58 countries. Some of these cities are run on a franchise model, in that local entrepreneurs put up the money and hire the editorial talent while Time Out lends the brand and the software to run the site.
By 2011 Time Out understood that its print magazines were probably going to disappear someday, and advertising on the websites would not be able to replace that revenue (since advertising in print magazines was far more lucrative than advertising on the Web). The leadership asked, what else can we do? Among other things, they realized they could sell tickets to events. So they bought a small startup that was competing against Ticketmaster and some of the other big players in that field. However, their customers complained that the graphic design was poor and the user interface was counter-intuitive. Aside from print, Time Out had not established a great reputation for innovative design. So then, in 2016, they bought YPlan, another startup that competed in the same space and which had a reputation for futuristic graphic design, plus a popular app that people had praised for the user experience. This brought the YPlan talent inside the TimeOut enterprise.
Though this book has been non-technical so far, I’ll allow myself one technical paragraph — because I want to demonstrate how open minded the top leadership was regarding the creativity of the tech team. They had previously been using the PHP/Symfony language for all of their internal tech, but it was a painfully slow system as they reached 100 million unique users per month. To deal with the scale, they built a cache system, then a second cache system, then a third cache system, and they ended up with a system so complex that no one understood it, with frequent conflicts between the different layers. (Items that were supposed to be cleared from cache were often cleared from one layer, but they stuck around somewhere, in a layer that no one could find.) Industry jargon had not yet evolved to using the phrase “microservices” but they were groping their way to the concept, pulling apart the bloated monolith and refactoring the bottlenecks in performant languages that ran on the JVM. They built a new API using Scala. I built for them a new system for delivering advertisements, using Clojure.
My point is, the top leadership was encouraging creative ferment. By buying outside talent and bringing it inside, as well as encouraging inside teams to be creative, they were empowering every part of the company to help find a way forward through the crisis.
Take the franchise model. Having built software that ran a Content Management System (CMS) ideal for this kind of publication, they could sell it to other entrepreneurs, who were only interested in offering the editorial talent for their particular city. Thus Time Out additionally became a software company, selling the use of the CMS to make money to offset the loss of print-magazine revenue.
Clayton Christensen was a business professor at Harvard in 1997, and he published a famous book called The Innovator’s Dilemma. He suggested that established players in a field often have trouble investing in disruptive innovations because at first the new product or service will bring in a tiny amount of money, whereas older products are bringing in much more money. Why would an intelligent business leader want to invest large amounts of money in a product that makes very little, when they could instead invest in the products that make a lot? Because of this kind of short-sighted thinking, many companies are ambushed by disruptive startups who have nothing to lose and everything to gain by investing in some clever new product or service.
I’m less bleak in my assessment: all the companies that I’ve worked with have survived. That is, they continue forward now, more than 10 years after I worked with them. But of the two I mention here, one stagnated for a long time and will probably never recover its old scale and significance — whereas the other innovated, moved into new fields, and transformed itself in exciting ways.
If you’re a top manager at a firm whose old business model is dying, it is easy to get whiplash as the company navigates to a new path. One year it is decided that the real path forward is to invest in technology, the size of the tech team needs to double, and it’s essential to invest heavily in building our software. The next year it is decided that the future is hip new startups that need to be bought and incorporated into the overall enterprise. But wait, no, the next year it is decided that money needs to be raised from investors, and to do that you need to prove you are highly profitable — therefore spending must be cut to the bone, there is a hiring freeze, and everyone must slash costs … but wait, no, avant-garde design will save the company, so you hire a famous designer, but then, it seems, that is a dead end, so you instead you must … and so it goes.
So long as the company emerges from this, a few years later, with a reliable business model, then all of this experimentation achieved its goal, but these years are not happy to live through. Beware of any attempt at too-easy, too-simple narratives. Like that classic Japanese movie Rashamon, I'm aware that each person who lived through these failures and successes would have a different version of events. Every organization is a complex mix of viewpoints because every person is a complex mix of viewpoints, and businesses are composed of people. No one is entirely a single thing, nor do they see their life in a single, unchanging manner. I've never met a person who was entirely a dictator or a liberal, a capitalist or a communist, but I've certainly known people who are dictators with their least responsible child, liberal with their most responsible child, a capitalist when allocating funds to their 401K account, and a communist on the weekend, when they attend church and give to charity. That same multiplicity shapes our understanding of success and failure, and such complexity should make us charitable in how we judge the outcomes.
The great French historian Fernand Braudel has suggested that the greatest advantage of capitalism is its flexibility in responding to crisis, and therefore, in a sense, capitalism needs constant crisis, as that is the only place its advantages, relative to other systems, stands forth. He did not suggest this in a joyful or utopian way. Still, there is a lesson here, sometimes exciting and always rewarding, at least for those who can view it without bitterness. If you decide to step onto this particular battlefield as an entrepreneur then, win or lose, you will learn something about resilience. You might pay a high price for the lesson, but the benefit of such a lesson is an enduring one, it pays dividends for the rest of your life.
If you are an entrepreneur then at some point during your life it is likely you will suffer some setback. A frustrating fact of the human condition is that people with no appropriate skills or knowledge will feel fit to judge you. “You should have just done _____” they will say, offering their preferred strategy, which will always be too simplistic, too obvious, too idiotic. With no understanding of the context they will still offer advice with total confidence. In absolute ignorance of the thousand variables you were juggling, they will condemn you for not making the decision that they would have made.
Tell them flatly that they lack the information needed to make a complex assessment. You were there, you know what you saw, you remember how the other people were, in the meeting rooms and on the phone, at the bar and in the streets, you know what was shouted, what was whispered, the promises that were made, the promises that were broken, the high hopes of the idealists who joined the team, the bitter sarcasm of the cynics, the knife-in-the-back betrayals from the unethical, the futility of trying to rally those who were bored, the ones who thought it would be easier somewhere else, at another company, or another city, or another country. You’ll remember most of the honest ones, who always said exactly what they meant, even when it did them no good. They are a relief to work with, at least in retrospect, because they offer the only confirmation we ever get about whether others saw things the same way we did.
Above all else, don’t let anyone take from you the enormity of the effort that you know you made. Building a business can be creative work, it can be exciting work, it is always hard work. There is no guarantee of success. There is only the guarantee that the experience becomes a part of your history, what you tell others, and what you tell yourself, about what you’ve done. No one can take that from you.