Denial - It's a Company Killer

Over the past 30 years, I have encountered many near-terminal diseases that impact companies. Failure to embrace change, avarice, incompetence, lack of planning, the wrong people in the wrong seats on the seats on the bus plague companies. All are symptoms of denial, the company killer.

It was a SaaS company. The company had a viable solution, in many ways ahead of its time. The company attracted some very talented middle managers in key positions – customer care, operations, and marketing. The company CEO had vision. It had all the ingredients for success. Yet, it failed. Why?

Lack of sales you say. Of course – but a symptom. Easily cured. Poor financial management? Of course, still easily cured. The CEO raised more than $15 million in investments and debt. Then, burned through it all in a few years. Still, there was hope.

Yes, all the symptoms were there. Failure to embrace change; avarice; incompetence; poor planning; having the wrong people in the wrong seats on the bus were there. We came in and put in a plan to address all the failings within the company. The plan called for retooling the sales force. We replaced 80% of the sales people. The plan called to use target marketing to ramp the engine. In a few short months, sales began to turn.

But dramatic action was still needed. The plan called for the company to reduce its costs to be in line with revenues and the growth plan of the company. The company’s development team was overstaffed, as was its operations team. The company needed to address its debt and push off debt payments for six months. It needed to reduce its footprint on costly events including conferences and trade shows. In short, the company needed to manage its cash more responsibly. There was risk. Would the debt holders agree to this plan? I have addressed this specific issue more than half a dozen times. Despite push back, this approach was always successful. Afterall, we are business people. Work with us. Here is our plan. We postpone payments for six months, sometimes a year. In the end, the debt holders get all their money. The option is perhaps to get none.

Then denial stepped in. The CEO refused to believe anyone but him could save his company. He refused to grasp that his belief system was the root cause of the problems his company faced. He could not bear that we needed to downsize his company and admit to his investors and debt holders that the company was in dire need of dramatic change. He needed help to fix the problems. He drifted into deep seeded denial. And through this denial, he became the obstacle. He could do it himself. He did not need help. We left. A year later, he lost it all.

A few years ago, we encountered a similar scenario, perhaps worse. It was a construction and estimating software company with more than 2,000 customers. Its solution had grown old, so none of its customers were on support. Revenues had fallen to $1.5 million with 40 employees. Losing money, and seemingly no hope. The company obviously had battled against change. We had the wrong people in the wrong seats on the bus. Our development team refused to embrace new technology. The sales people quit. The CEO made every decision and seldom solicited input from his rank and file. The CEO and the management team suffered from terminal denial.

A venture group replaced the CEO with us. We terminated the top 4 executives and gradually replaced them. We held a company brainstorming session. It was incredible the amount of great ideas waiting for an opportunity to spring forth. We prioritized their ideas. We had one critical problem – cash. How can we come up with the cash needed to fuel the engine?

We came up with a plan. I wrote a letter that was overnighted to all 2,000 customers. In less than 6 months, we promised a new product would be introduced to the market place – at $15,000 per license. Or, the company could get back on support for $1,000 and receive the new product. Within 2 weeks, the company received more than 1,000 checks for $1,000 each - $1 million.

We replaced the entire development staff in fewer than four weeks. We rewrote 900,000 lines of code and introduced a new product in 4 months. At the same time, we ramped up our marketing engine hired new sales people and integrated an insight selling philosophy using a portfolio management process. We adopted and integrated target marketing. One year later, the company generated more than $5 million with 40 people. It was an amazing turnaround. Once denial is eliminated, almost nothing is impossible.

We adopted and integrated target marketing. One year later, the company generated more than $5 million with 40 people. It was an amazing turnaround.