Exitcution: The “150/100” Challenge, Part 2

Exitcution is all about how a company handles growth. Exitcution deals with not just how companies handle growth but whether they will continue to grow. It's part strategy and an even bigger part execution. With respect to those in the internet advertising space, exitcution revolves around an idea I first read about in The Tipping Point, the Rule of 150. Part 1 of this piece discusses in greater detail the Rule of 150, which in short specifies the maximum size of a group. Anything bigger and communication and cohesion can break down if not handled properly. In the internet advertising world, that Rule of 150 coincides with the $100 million revenue hurdle. When companies reach these benchmarks, the challenge of exitcution arises.

Here in Part 2, three graphs tell the story of exitcution. The first is the Static Scenario.

Figure 1.1 Static Scenario

The Static Scenario is what many of us fear. It begins with the rapid growth but ends in a flatline. It can happen for a variety of reason, especially when a company might have too great an exposure to a channel with volatility, e.g. email. A company could have had a strong presence in email but have been hurt in phases two and three by legislation and the filters. Additionally, the latter stages involve operating in a more mature market where it’s harder to find pockets of undermonetized inventory. Very likely too, in addition to product exposure / weakness, are operational issues. Companies in this state grew by the seat of their pants, but didn’t manage that growth internally. They did not develop a hierarchical business; theirs is most likely flat with one, maybe two decision makers, making them more akin to a hunting and gathering society, i.e. they hit their breaking point.

Figure 1.2 The Decline Scenario

If the Static Scenario is what many fear, the Decline Scenario might as well be a heart attack. Yet, it is a very real possibility for some. Without proper strategy, reinvestment, and a focus on building the metaphorical railroad tracks well in advance of the train needing them, a company can find it lacking the ability to keep customers and stay competitive. Especially in our space, which now, more than ever, requires a strong technology expertise.  Companies that choose not to develop that expertise can find themselves quickly outdated. Going back to the railroad analogy; so many companies during the boom were like trains going downhill trying to lay the tracks at the same time. As they hit the bottom of the hill and the frantic pace slowed, many should have started to scout ahead, to look for potential ravines and lay alternate routes. Those that coasted are those that we see in the Decline Scenario.

Figure 1.3 The Growth Scenario

Those companies that have the proper balance of strategy and execution can ride the momentum, still, and carry that into a new phase of high growth. For many companies that succeeded by not having a strategy, just executing, doing this can present a daunting task. Doing it right though, means they will control their destiny and put themselves into a position to start locking out others and consolidating the market. In my opinion, that period of exitcution defines whether they make it or not. The companies that do, have not just focused on scalable technology to take advantage of the market; they have built their internal infrastructure – the process and workflow – to be equally scalable.

Some companies that flat line and some that decline will immerge, transforming themselves into growth success stories, while some growth companies will err and join those in the flat line or decline sector. Right now, we have some huge success stories and companies that show the importance of understanding The Rule of 150. Those that do, might become the next Gore Associates - a very profitable, growing enterprise where coincidentally people want to work and turnover occurs one-third less often. For those facing the 150/100, it's all about exitcution.

Comments

[Josh Stomel]

Jay, awesome post. It's very crazy to see this, just because i know of a few companies which have been in these situations.. Very well summed up.

Thanks J