April 10, 2014
Understanding the Drivers of Success
Although generally business is great at Return Path and by almost any standard in the world has been consistently strong over the years, as everyone internally knows, the second part of 2012 and most of 2013 were not our finest years/quarters. We had a number of challenges scaling our business, many of which have since been addressed and improved significantly.
When I step back and reflect on “what went wrong” in the quarters where we came up short of our own expectations, I can come up with lots of specific answers around finer points of execution, and even a few abstracted ones around our industry, solutions, team, and processes. But one interesting answer I came up with recently was that the reason we faltered a bit was that we didn’t clearly understand the drivers of success in our business in the 1-2 years prior to things getting tough. And when I reflect back on our entire 14+ year history, I think that pattern has repeated itself a few times, so I’m going to conclude there’s something to it.
What does that mean? Well, a rising tide — success in your company — papers over a lot of challenges in the business, things that probably aren’t working well that you ignore because the general trend, numbers, and success are there. Similarly, a falling tide — when the going gets a little tough for you — quickly reveals the cracks in the foundation.
In our case, I think that while some of our success in 2010 and 2011 was due to our product, service, team, etc. — there were two other key drivers. One was the massive growth in social media and daily deal sites (huge users of email), which led to more rapid customer acquisition and more rapid customer expansion coupled with less customer churn. The second was the fact that the email filtering environment was undergoing a change, especially at Gmail and Yahoo, which caused more problems and disruption for our clients’ email programs than usual — the sweet spot of our solution.
While of course you always want to make hay while the sun shines, in both of these cases, a more careful analysis, even WHILE WE WERE MAKING HAY, would have led us to the conclusion that both of those trends were not only potentially short-term, but that the end of the trend could be a double negative — both the end of a specific positive (lots of new customers, lots more market need), and the beginning of a BROADER negative (more customer churn, reduced market need).
What are we going to do about this? I am going to more consistently apply one of our learning principles, the Post-Mortem –THE ART OF THE POST-MORTEM, to more general business performance issues instead of specific activities or incidents. But more important, I am going to make sure we do that when things are going well…not just when the going gets tough.
What are the drivers of success in your business? What would happen if they shifted tomorrow?