How to Predict a Company Crisis: Uber, Lego, Marvel Comics | Chris Zook

How to Predict a Company Crisis: Uber, Lego, Marvel Comics

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What makes certain companies succeed and others fail? Bain & Company partner Chris Zook has the answer. The answer lays mostly in the companies ability - or inability - to figure out what it's really all about. Simplicity of core values is key. For instance, Lego was facing a crisis when it over-extended itself by getting into theme parks and clothing brand territory, but managed to save itself by scaling back to just the toys. Flexibility is also important: 20 years ago Marvel wasn't selling comic books but understood that the characters were the real draw and that they could translate easily to movies and video games. Chris Zook goes on to explain what else makes a business successful, and espouses some great lessons for companies looking to stick around longer than a VC runway. Chris's latest look is The Founder's Mentality: How to Overcome the Predictable Crises of Growth.

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CHRIS ZOOK:

Chris Zook is a partner at Bain & Company and has been coleader of the firm’s Global Strategy practice for 20 years. He is based in Boston and Amsterdam, and specializes in helping companies find new sources of profitable growth. Zook is the best-selling author of multiple business books, including Repeatability, Profit from the Core, Beyond the Core and Unstoppable, published by Harvard Business Press. He completed his undergraduate degree at Williams College and advanced degrees in economics from Exeter College, Oxford University, and Harvard University.

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TRANSCRIPT:

Chris Zook: Y'know, overload – just think of all we see of Uber in the paper.

We found four things that we called the “west winds” that hit rapidly growing companies and push them off track, and we called them the west winds.

And one was having revenues growing much faster than you can grow talent.

And just think of Uber, which has had as many as 13 of its top 20 positions unfilled and that has been having difficulty recruiting the most talented women because of some of the cultural issues.

And when your talent is not growing at the same rate as your revenues breakdowns begin to happen.

A second element of the west winds is what we call lack of accountability. And you can look at the culture as it evolved in Uber, which has been well reported, and say, “who is really accountable for the norms and values—deep, soulful values—of a company?” And it’s very easy to neglect that in the context of growth and hype and excitement and celebrity.

Or a third one, or a third of these winds is what we called lost voices from the frontline. And if you look at, for example, the loyalty numbers that you can find all over the internet of Lyft versus Uber drivers, what you find is that the loyalty of Uber drivers is going down, because they’re a little bit frustrated with a lot of the publicity and with some of the behaviors that they’ve observed, and they’re more disoriented about the company.

And so these west winds hit rapidly growing companies. And what we found is that when we looked at these unicorns, we took 26 unicorns about 10 years ago, 10 to 12 years ago, and we traced them. And we found that virtually 100 percent of them—and two-thirds of them had slowed down dramatically and never hit what people wanted them to. Uber would be an example.

And second, we found that in virtually all of the cases the deep inner root cause was not that it was a bad idea in the first place or the market had gone away; It was actually inner breakdowns like this case.

And all of these linked to the founder’s mentality, 1) of linkage to the frontline, 2) maintaining a clear purpose versus overcomplicating what you’re trying to do and becoming greedy and doing too much, and 3) creating mini founder experiences that make people really want to become part of it.

The second crisis is the more predominant crisis, and it’s what we call a stall-out.

So if you think of a company, let’s say like Lego, which since the 1930s was a great founder company through three or four generations. The first did it in wooden blocks. The next brought it to plastic. The next created the business systems. And it was voted the toy of the year by the British toy industry.

And yet the next generation began to say “No, what our core is is the brand. We’re not a toy company.”

And so they went into many, many things that massively complicated the business from theme parks to joint ven...

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