In a week of dreadful news about celebrity suicides, another obit caught my attention. I invite you to read the NYT story about Charlotte Fox, 61, a highly accomplished mountain climber. Among her many achievements, she was the first American woman to scale three summits of 8000 meters or higher, including Everest. How did she die? She fell down a 77-step staircase inside her home in Telluride, CO.
This is not an essay on morbidity and mortality. Falls can happen. At my age a routine question in any medical exam is “have you fallen?” No.
This is an essay for startup founders about the perils that can overtake you just when you think you have performed amazing feats in growing your company. You can be focused on all the right priorities and be climbing the high mountains and still be overtaken by a mishap never contemplated as one of your risk factors. Technology provides us an exhilarating industry and boundless opportunities, but it can be a “harsh mistress.” (Apologies to Robert A. Heinlein’s estate.) It’s usually the operational stumbles that cascade into a company-threatening situation. Here are five from the many I’ve witnessed over the years:
- You think your product has been thoroughly tested by your QA team, but you deploy something that doesn’t perform as advertised. Those of us veterans of the early days of microcomputing can remember well when every customer was by definition an alpha tester. We had pioneering users who were relatively tolerant and whose expectations were low. They would help us fix bugs. We could get away with such behavior because we were all learning together how to create the next great era in what was then called data processing. People could already see the ultimate benefit of ubiquitous computing at low price points. We got to that state, and now customers expect what they buy to just work, and keep working, and be understandable. If you become aware of a bug escaping your shipping docks and don’t jump out in front of that issue and do what’s right to make it good, you’re about to fall down those proverbial stairs.
- A security vulnerability can bite you in the you-know-where. Lots of heads have rolled when data breaches have occurred. The buck stops at the top most of the time. Not many CEO’s have the shareholder control that Mark Zuckerberg enjoys and can follow his pattern of explaining his way out of these situations all the way up (or down) to the US Congress. Often such security issues seem to arise from overlooked updates somewhere in the bowels of the IT department, but they can explode into organization cripplers. The City of Atlanta has still not recovered from its ransomware attack of March 22 this year, and the latest reported cost estimate for repairs is $9.5M with many departments still not at full speed and many records apparently wiped in perpetuity. President Trump may not find many people to pardon for Atlanta crimes, given what could turn out to be wholesale expungement for those prosecuted in municipal courts.
- Speaking of crime, I’ve often heard quoted a statistic that 1 out of 7 employees steal from their employer. If you have 350 employees, which 50 of them are taking from you? They’re not snatching money from the till necessarily, but it’s rather easy to abuse company credit cards or purchasing cards, to steal hours, to mess with pay rates in return for kickbacks, to walk out with saleable inventory, to abscond with valuable trade secrets, to doctor invoices for fraudulent gain, to collude with customers in a way that damages your company, or just to drink way more than your share of the fancy coffee that is customary in high-tech offices. There is considerable publicity around these types of transgression in public institutions, but there are no bulldog reporters snooping around private companies trying to ferret out crimes. They’re just not newsworthy compared to what happens at City Hall. You may have to find them the hard way, perhaps during a routine audit, but you must assume there are plenty of people in your midst that you can’t trust. (I’ve often wondered in the very early stages if the 7thperson hired is always the 1stcrook.)
- Misaligned incentives go hand-in-hand with thievery. I suppose Wells Fargo taught that concept to the general public last year when they provided a textbook example of executive leadership getting snookered by key managers under their supervision. If behooves you to a hire a very cranky, skeptical, and anal controller (or some equivalent), to be constantly on the lookout for evil behavior, whether it results from malicious intent or is instigated by your own employee incentives. Chances are as the CEO of a successful startup you have a high EQ and tend to believe that all those around you will exercise good judgment and act in good faith. You’ll get to the stage, however, where you need to add a bad cop to your executive suite to find trouble before it finds you. You’re never likely to beat the statistical averages of nefarious behavior in business; it’s not safe to assume your crack team is unimpeachable at all levels.
- Failing to provision for smooth operations is a more common issue than you might think. I constantly see companies that underestimate the headcount required to meet service level objectives or just don’t think through all the implications of the wonderful promises you have made to your customers and investors. Somebody has work to do, and if nobody is in a necessary slot on the production line, you’ve got a serious gap in meeting expectations. A friend of mine often calls those situations “self-inflicted wounds.” You can’t control the externalities of the market and customer behavior, but it’s a pretty straightforward process to match your delivery capabilities with projected or committed demand. And, that’s a process that you ultimately own. It’s hard enough to find customers and make sales, so don’t torture yourself by not preparing to deliver what you’ve sold. The only truly nondilutive sources of cash for your business are the margins on products or services you have sold and delivered and for which you have collected. It’s a lot more satisfying filling your treasury that way than going through the tortures of equity or debt rounds, or even grants.
Many more examples could be added to this list. I’ll summarize here by suggesting that you literally watch all your steps, hold what handrails there are, keep the lights bright on everything around you, and remain critically observant with respect to all your operations. Keep telling the doctor “No” when you get the inevitable question about falls.