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Iām Nico, in The Wanderer newsletter I share some learnings & experiences lived along the way of building a tech company and meeting great people. It does not constitute in any mannerĀ universal truths, far from it,Ā but moreĀ methods,Ā ideasĀ &Ā thought-processesĀ that can broaden your own perspectives when approaching your day-to-day challenges, help you advance on your goals and live a better life.
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āNever let a good crisis go to wasteā, W. Churchill.
At Spendesk, I learned the hard way during the last 2 years of Covid how much a crisis can impact a company, its people, and even your personal health. However, I believe a crisis is also an opportunity if you embrace it. It can enable your company to be better, your culture to strengthen, your team and yourself to learn & develop.
I think itās fair to say weāre in the middle of a new Crisis, an economic downturn a minima, the beginning of a Recession according to many. In any case I thought it was a good time to share a few thoughts on how to manage a Crisis. I hope it can help you navigate the uncertain times ahead of us.
Today we cover:
What I learned on the why behind todayās economic downturn. With ressources you can digest and put at work in your particular situation š
Operational tips you can use to weather the storm ā
Leadership traps & how to tap into the most impactful lever in this type of situation: Energy š
š The impacts of the economic downturn on privately held businesses
Where does it come from?
Since the beginning of this year weāve been witnessing an important fall of markets in Europe & the US. In tech especially according to many, āthe almost 12 year bull market is overā.
Covid impact on world-wide supply chain, economic slowdown in China linked to the same Covid, Ukraine war and its impact on the energy market, the end of governmental subsidies impacting consumers purchasing power, central banks tightening money supply leading to rise in interest rates. All these reasons caused the asset prices to go down and the market to turn cold first. Economic growth has slowed down these last few months in Europe, and will continue to during the whole 2022.
Iām definitely not a macro-economic expert and so turned to smart & professional people on these topics.
š If you want to go further I recommend to: read this piece by Fred Wilson on AVC, this case study on the Great Recession by Meritech Capital which explains the link between Interest rate & tech company valuation, or read or check the video on The Changing World Order by Ray Dalio š.
What can be the impact for businesses?
First, the impact for privately owned startups is the decrease in valuation and a more difficult access to capital to finance their business. The situation reshuffles the cards and definitely have an impact on any financial & growth plans.
š I recommend reading Marc Andreessen article on navigating down markets to know where you stand & what to do as well as Tomasz Tunguzās piece to analyze your own situation (the 4 types of startup states in a recession).
In the period of uncertainty ahead, we will face a tougher business environment - for any kind of business. If youāre a B2C business itās likely inflation will shrink your consumer budget and thus its ability to buy your product or service. If youāre a B2B business your end clients will also be impacted. All companies are indeed likely to:
Prioritize their current initiatives & investments. Focusing on what is CORE to their business (core geographies, core distribution channels, core products or services) and postponing NEW initiatives.
Buy less. Less products, less services. As during Covid they will seek to preserve their cash and as a consequence will prioritize must-have vs. nice-to-have products. In general they will focus their spend & budget on products & services that are directly impacting top line revenue or helping them optimize their cost structure. If your offering is not related to one or the other category youāre in a difficult spot.
Hire less. As companies revise their growth expectations, they will adjust their investment plans. In the tech industry it means directly reducing hiring plans and eventually headcount if the companyās runway is insufficient or burn/revenue ratios are too high.
These impacts are definitely risks for any activity, but also opportunities if one can adjust to this new normal and seize them.
ā Operational Tips to weather the Storm
At Spendesk we lived this during the different waves of Covid between 2020 and late 2021. We had to adjust our way of operating and below I share some general tips I think are applicable to any crisis-type situation of this magnitude.
1ļøā£ Define the Principles that will guide how you decide & how you act collectively āļø
A new Era implies to restate the leadership principles that guide every member of the organization. Clarifying & communicating them over & over is a good idea to help everyone prioritize their actions. You can communicate them for example through a written memo, a āletter of Intentā (inspired by Extreme Ownership format), that explains your intentions and your priorities during the crisis. This is an opportunity to remind what truly matters in your company culture.
š Putting people first (meaning no-layoff). Working as One Team. Being flexible on the ideas & the how. Being pragmatic & going for the simplest course of actions. These were some principles we re-iterated throughout the different cycles of the Covid crisis we faced at Spendesk.
2ļøā£ Adapt your Objectives, seek to understand what the new Unknowns of your business are š”
The crisis will impact your clients. Many things are on the line: your product or service relevance, your sales cycle length, your average contract value. Because your clients will buy less.
This is an opportunity to take a moment to rethink your positioning, sharpen your value proposition to cut through the noise and show how you can help your clients in this period as well.
This is also likely you will have to adjust your growth objectives and the boundaries of your economic equation - what are the new thresholds of financial & operational efficiency you should seek to hit?
š At Spendesk we collectively brainstormed on the potential impacts, how we would know they were happening (what KPIs to track), and built a tight feedback loop (a slack channel dedicated to customers feedback gathered by Sales & CSM) between customers & the team to act on early signals perceived in the market. We listed key leading indicators that would inform us should we deviate and displayed them in a dashboard we looked at every week.
3ļøā£ Adapt your Operating Cadence š
When the macro-environment is evolving at a rapid pace working on a quarterly or yearly timeframe may no longer be relevant. Ditch this way of working and come back to 6-weeks sprints. War rooms 3 times per week at the heart of the crisis can increase your delivery intensity and improve drastically your time-to-answer to new inputs. Share weekly updates to the wider team to ensure everyone is well informed and knows how to act.
š At Spendesk we knew we would benefit from some conditions, while other conditions we would have to adapt to. Some industries, market segments (the smallest) & verticals would be dramatically impacted. Adjusting our operating cadence enabled us to embrace change as we observe it on the field and shift our directions and plans frequently.
š To go further on what operationally you can do you can check out this article on 39 moves to survive & thrive in a downturn by NFX.
āļø Leadership traps & how to tap into Energy
When market & macro-economic conditions change, Operations need to change. Those who understand there are new market conditions can adapt faster and rise. But Operations alone donāt get you very far.
Crisis are moments where leaders need to step up. This is a good personal development opportunity.
1ļøā£ Happy Talk vs. Hard Talk
The first step is to acknowledge the situation. You cannot get out of a crisis until you admit youāre in one. Trying to make people feel better by under-selling the problem or being overly confident does not work. I recommend reading this article by David Sacks to understand the difference between happy talk and hard talk.
Present the situation with its risks and the opportunities. It will appeal much more to the Heart of the people rather than denying the reality of the financial situation your company can be in, or the challenge your clients confront you everyday with. I believe in leading with context over process, and crisis are moments where sharing context and being transparent will really serve you big time down the road.
2ļøā£ With uncertainty comes stress & pressure š
As the conditions toughen and you enter the storm, stress & pressure will arise. You can help your peers, your team and yourself by being aware of its early signals (for more on this you can refer to How to Master your Communication style š£).
Some tips you can use:
Ensure you or your team donāt overwork in this period. This is never a question of volume of work and the trap can be to compensate by spending too much physical & mental energy.
Focus your communication on the wins and the progress towards answering a few critical questions or hitting a few leading indicators.
Crafting objectives around the quality of the gesture vs. the need for results to relieve pressure. Indeed the external conditions can make you fail despite your best efforts.
3ļøā£ Performance = Problem-solving X Energy
The Operational tips described above are only part of the answer. The other part is about how to tap into the Heart of the people of your team, how to release their Energy tanksš. You can do it by avoiding negative Energy (stress and pressure as mentioned). But also by animating the business differently. Opening & closing different Chapters of the story as you progress throughout the crisis.
This is never only about KPIs, growth, efficiency. This is always about what this crisis can mean for our team development, our culture, ourselves as a group and individuals. Identifying the good that can get out of it can help put the situation into perspective. Crisis are definitely a time for authenticity, courageā¦ and well crafted stories!
š At Spendesk we first launched what we called āOperation Darwinā, with the idea that we were facing a time of adaptation, where those who adapt survive. A few sprints in we closed this chapter and opened a new one called āAct II - the months to comeā. A second chapter where we would seek to seize the opportunities we had identified.
During times of crisis, how we behave and the decisions we take, go a long way and are remembered. This is always a very exciting time to grow and develop. But keep in mind to take it easy and be attentive to your personal health! āļø
My inspire weekly selection š„
In this section I share what Iām reading or listening this week to nurture my inspiration.
šĀ Online - Marc Andreessen, Itās time to build
šĀ Book - Erin Meyer, Culture Map, decoding how people think, lead, and get things done across cultures
šæĀ Wise quote - āAbout 99% of the time, the right time is right now.ā
šµĀ Now playing... Rone feat Alain Damasio - Bora
Climate Tech š
In this section I share what Iāve read on the development of Climate Tech to contribute to our societal climate change problem. Feel free to share if you find anything interesting on this topic! š
A good video that explains Stripe Climate initiative & present projects it supports
Trend: 56% of employees care about what a company does for carbon-neutral (source: Statista2020)
ā Nico