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How I Used A Crisis To Turn My Business Around

Crises offer the ultimate excuse to quit at the same time that they make excuses pointless.

How I Used A Crisis To Turn My Business Around
[Photo: Martin Kucera for Shutterstock]

Editor’s Note: This article is one of the top 10 business lessons of 2015. See the full list here.

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Right now, Volkswagen’s competitors are certainly feeling a bit of schadenfreude at the “Das Auto” carmaker’s fall from grace. Fallout from the company’s emissions scandal has hit the brand hard, with stock prices plunging by up to 50%. Critics are already asking whether Volkswagen can ever set things to rights.

Without a doubt, the company is in the midst of a crisis, but that’s precisely where some of the most successful businesses find their footing. Some have more of a knack for that than others. But at least in my own experience, crisis can actually prove invaluable for businesses, for a few key reasons.

No More Room For Excuses

My company’s first brush with crisis came while we were still pre-revenue. The dotcom crash of 2000 was followed by a global downturn in the wake of 9/11. In the midst of all that, we were trying to build a new platform where people could shop online for home improvement supplies, just like they shopped for books and CDs.

It was a hard slog–even getting a shipment of flooring from a manufacturer to a homeowner was a logistical nightmare. At that point, we could’ve closed up shop and walked away with our heads held high. Our money was gone. Investment had dried up. Plenty of companies in our position had folded, and nobody faulted them.

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But there’s a paradoxical upside to real crisis: At the same time that it offers the ultimate excuse to call it quits, it also renders excuses pointless. To borrow the words of Mark Suster, during a crisis, “The excuse department is closed.” It’s either find a way forward or fold. You no longer have the luxury to fixate on what went wrong or what could have been done differently. You’re thrown into sheer survival mode.

We raised money from friends and colleagues. We took wage cuts. I had to get rid of half of the team–and at that stage, it was like letting go of family. But faced with an existential crisis, the skeleton staff that remained pulled together a viable platform, faster and cheaper than we ever imagined.

Constraints Force Creativity

A crisis will limit your options, but great entrepreneurs thrive when they’re boxed in. In fact, the best ones create their own smaller frameworks to give them the focus to beat their competitors. Under constraints, imagination has an uncanny tendency to flourish.

Take Netflix. When the logistics of mailing millions of DVDs back and forth first-class proved problematic, the company got creative and embraced new and largely untested streaming technology–ultimately leaving Blockbuster in the dust. Later, when cable TV networks threatened to withhold licensing agreements, Netflix pivoted from content distribution to content creation, launching popular shows like House of Cards. Pushed forward by constraints, the company is today valued at around $33 billion, more than CBS.

I’ve seen the same dynamic firsthand. When the housing market crashed in 2008, we went from a $50 million run rate to $20 million overnight. We couldn’t find investment to tide us over. Without a major turnaround, our days were numbered.

Out of necessity, we looked within–and discovered an accidental goldmine in the unique way we collected data. Crunching the numbers, we realized we could pretty much predict demand anywhere and sell out vast quantities of product, even in a struggling marketplace. Constrained by crisis, we saw that that data–not product, like flooring or doors or windows–was our real currency.

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Discover What’s Really Valuable

Crisis can be humbling in the best of ways. It forces you to strip away pretension and see your business for what it really is, not what you think it could or should be. There’s nothing like a brush with disaster to sober up your vision and get you focused on moving forward.

Back in the late ’90s, for example, when Apple was on the verge of closing up shop, it did the unthinkable and closed ranks with its arch-nemesis Microsoft. For a $150 million lifeline, Apple essentially agreed to load up their machines with Internet Explorer and Microsoft Office packages.

That couldn’t have been easy–not for a company that had long prided itself on streamlined, easy-to-use software. But during that moment of crisis, Apple saw that design-friendly hardware was far more central to its core value than what was running on it at the time. We’re still seeing the upside of that deal today, as Apple piles away twice as much money as what’s in the U.S. Treasury.

No one invites a crisis, but handled well, it can be what your company needs. It forces you to re-examine your mission, your timelines, and your strategy at the most fundamental level. It obligates you to find ways to do more with less. And it generates the urgency needed to act now and decisively. By forcing you to see things as they really are, a crisis can be used to create enormous value that persists long after it’s over.

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Jeff Booth is cofounder and CEO of BuildDirect. Follow him at @JeffBooth.