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Surviving a Slowdown
Everyone has a bad quarter or two, it’s what you do about it that matters.
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Every company hits bumps along their journey. No matter how strong your growth, it will slow down or stop at various points. It’s not a question of if this will happen, but what you will do when it does.
The first, and most natural, reaction is panic. What is going on??! There will be a scramble to identify the root cause of the change, in hopes it’s a temporary problem that can be fixed. That is rarely the case, but if it is you got lucky.
More commonly, the problem is systemic and strategic.
To solve it, you need to get past the panic and focus on identifying and solving the problem. Here’s a process I’ve used that works well:
Step 1. Change Your Cadence
The cadence of your business is built around your status quo. If you sell enterprise software with annual contracts, you likely plan in quarters. If you make consumer mobile games, you probably plan in weeks and months.
When your engine stops working, you need to accelerate your cadence. Throw the status quo out the window. Start to think in days, because the longer it takes to identify the problem and find a solution the more at risk you are.
The easiest way to do this is to set up daily standup meetings. Not more than 15-20 minutes, they are designed to quickly summarize what you know and what actions are necessary.
Ideally, the team working on this is small as larger groups move more slowly. If your stand up meeting has less than 10 people you are in good shape, if you have more than that it’s just theater. This can be hard, since everyone wants to be in the center of the action, but if you allow that to happen your cadence will just slow down.
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Step 2. Make Sure It’s You
There are a lot of headwinds in the market right now, and many software companies are seeing flat/down quarters. Before deciding that there is a problem you need to fix, make sure it’s really a problem.
For example my first company, Flurry, was the largest analytics service for mobile applications. Every fall there was a panic when the overall activity on our network dipped, as we were worried about growth issues or technical problems. Every fall what we found was just that kids went back to school and spent less time on their phones. The solution was to wait, and a few months later it recovered.
If it’s a transient market problem there might not be any action necessary. If it’s a longer term market problem, you might need to act as the market might have changed permanently. If it’s not a market problem, then you definitely need to act. Knowing the difference between the three is the first step to making sure we solve the right problem.
Step 3. Break It Down
You need to take inventory of the business. Specifically, you need to identify:
What was working and still is working
What was working and is no longer working
What was not possible before, but might work now
You need to emphasize #1, stop doing #2 and investigate #3.
For example, maybe you previously used outbound email and advertising to reach customers. Now, outbound email is working but ads are not. We should stop our ads until we figure out what went wrong, but we should lean into outbound email and try to find other channels that might work.
That sounds a lot simpler than it is in practice! Here are a few reasons why:
Emphasizing #1 is actually quite easy, since you just keep doing things you’re already doing.
Stopping #2 is very hard, because there is a lot of momentum and commitment to the status quo in any company. Many people might not believe that something isn’t working anymore, especially if that was their responsibility. You can’t gradually phase these out, you need to stop them cold.
Investigating #3 gets harder the bigger your company becomes. It requires going back to basics and testing/iterating in the market, which is a skill companies lose as they grow.
Of the three, #3 ends up being the most important. If there really was a big shift in your business or market, then it likely opened up new opportunities that weren't possible before. For example, if you're seeing contraction in the market then your competitors are as well. You might be able to poach their customers, or even acquire their assets for a song.
As I said, panic is a natural reaction to a slowdown in your business. Strategy requires a calm and level head, so you need to find a way to relax. The nervous energy of panic feels productive, but it really is a distraction. Take a deep breath, go for a walk and make sure you can approach this process objectively.
If you can, you can turn a slowdown into an opportunity for growth. The greatest companies do, and you can too.
For more on Crisis Management, see:
Planning for a Crisis starts ahead of time
As you grow, Scaling Fault Lines appear
What to do When Customers Attack