How to predict a company crisis: Uber, Lego, Marvel Comics
How did Lego survive a near-total financial ruin? Why is Lyft way more popular that Uber amongst drivers? And how did Marvel gain a second wind some 60 years after it was founded?
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.
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 ventures with Steven Spielberg in small theaters to retail endeavors to plastic watches to books, and on and on and on.
And it sucked the energy out of the core and resulted in stall-out to a point where the company had 18 months of cash left.
And the solution to that was to massively reduce complexity, exit all those businesses (by the CEO who courageously went in, Jorgen Vig Knudstorp, well reported in the press) and it gave the company 12 years.
He brought technology into the bricks.
He found out who the core customers were. They didn’t know there were 400,000 people who are obsessed with Lego, they brought them into the design process.
And they did many, many things to actually go back to the essence of what made the company great in the first place, which was the mission of learning, and the customer desire for toy systems that would help children creatively.
And they even did things like take the corporate headquarters (which was in a bright, gleaming new building) and brought it back into the factory and the distribution center.
So that’s an example of stall-out, and that’s an example of a company that then had 12 years of very, very good growth as a result of, in a sense, finding the key to it—where the Founder’s Mentality elements were part of the playbook.
The third one is free-fall, and this is where the business model really does come into question.
And in nine out of ten companies that see their business model become potentially obsolete—Blockbuster Video—never make it, never make it. But some do, some do.
When you think of what happened to Marvel Comics and the rebirth of Spiderman, that was a company where people weren’t buying comic books any more, and yet a group of investors and some of the original employees brilliantly saw that it could be repurposed around the stories and the characters for videos, for video games and for movies, and completely changed the business model.
But the essence of that also... and now owned by Disney... but the essence of that also was actually going back to say, “What is our real purpose? How do we contact the people at the front line, and how do we create new owner’s mindset?” which they did through private equity.
And so when we look at these three critical crisis periods (of stall-out, overload and freefall), we found these elements of a Founder’s Mentality where both previous indicators of losing internal health—that could have been seen earlier, and then second, there were elements of the playbook of rejuvenation.
So the first thing to me is, I realize in even our own country, America, is a country of founders. And when you lose the founder’s mentality as a country you lose something in your soul.
The second insight for me is how breakdowns occur inside first.
You know, in our bodies, if we’re not performing well in sports or at work or in our life, so much of that is not because we don’t know how to hit a tennis ball or we don’t know the mechanics of our job, more often it’s something that’s going on. We’re distracted, we’re tired, we’re not feeling healthy. Something else is bothering us in the environment. And that’s true of companies too.
I think the idea that 85 percent of the breakdowns of organizations were preexisting conditions under the surface—like an iceberg—that could have been seen is a very powerful lens and it’s reshaping how we think about strategy and the deep root causes of success at Bain.
And the third theme is complexity.
You know when uh about 12 years ago I moved to Amsterdam with my wife (and we just came back), and we lived there. And when we left we decided that our lives had been too complex. And so we sold half of our things and cleaned out all of our closets. We stopped all our magazine subscriptions. We did many, many, many things to create more of a tabula rasa, and we took nothing with us to a new country. We bought new furniture. We got a new house. We made friends there. We tried to learn the language, et cetera.
And yet now we’ve come back to America and our complexity has all crept back in. It’s like barnacles that accumulate on a boat.
And if that’s true for two people who are self-aware of this and control their lives, imagine how true it is for organizations of thousands of people, dozens of business elements, myriads of departments, thousands of products, dozens of geographies—the complexity accumulates.
And so complexity is the silent killer of growth. That’s the third, I think, big insight. Complexity is the silent killer of growth.
And it happens at the level of the company, as it did with Lego. They eliminated everything but the toys when it went back to renew itself.
It happens at level of an organization, where power flows into big corporate centers when it should be at the frontline.
It happens at the level of processes—If you read Jeff Bezos’ recent shareholder letter on Amazon he talks about when process becomes the outcome you’re in real trouble.
And very often “I followed the process” is what people say to protect themselves.
And it even happens at the detailed level of products.
We look at how some startups have taken over, or how online banking with just the simplest stick figure business model can take over—from huge gigantic multinationals—take over a lot of market share.
And so to me these are the three lessons are the deep inner root causes are often under the surface and need to be found, the roots of leadership and humility are in the great founders and we need more of them, and they’re the national treasure, and that complexity is the silent killer of growth and progress.
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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- The tech industry may be dominated by men in terms of numbers, but there are lots of brilliant women in leadership positions that are changing the landscape.
- The women on this list are founders of companies dedicated to teaching girls to code, innovators in the fields of AI, VR, and machine learning, leading tech writers and podcasters, and CEOs of companies like YouTube and Project Include.
- This list is by no means all-encompassing. There are many more influential women in tech that you should seek out and follow.
The results of this study showed depressive symptoms being highest in adolescence, declining in early adulthood and then climbing back up again into one's early 30s.
- A 2020 Michigan State University study examined the link between teen social networks and the levels of depression later in life.
- This study used data from the National Longitudinal Study of Adolescent to Adult Health, specifically targeting social network data. The results showed depressive symptoms being highest in adolescence and declining in early adulthood, then climbing back up again into one's early 30s.
- There are several ways you can attempt to stay active and socially connected while battling depression, according to experts.
The study suggested that teenagers who have a smaller social circle showed higher rated of depression later on in life.
Credit: asiandelight/Shutterstock<p><a href="https://www.eurekalert.org/pub_releases/2020-09/msu-tsn093020.php" target="_blank" rel="noopener noreferrer">A 2020 Michigan State University study</a> examined the link between teen social networks and the levels of depression later in life. The results of this study suggested teens who have a larger number of friends in adolescent years may be less likely to suffer from depression later in life. These findings were especially prominent in women.</p><p>This study used data from the National Longitudinal Study of Adolescent to Adult Health, specifically targeting social network data. This data asks students to select up to 5 male and 5 female friends and indicate how often they felt depressive symptoms. </p><p>MSU Sociology Assistant Professor Molly Copeland and lead author Christina Kamis (Sociology doctoral candidate at Duke University) published the study in the Journal of Health and Social Behavior in September. </p><p><strong>Female teenagers may struggle more with depression during their teen years but show fewer depressive symptoms later in life.</strong> </p><p>For female adolescents, popularity can lead to increased depression during their teen years. However, this ultimately may lead to lasting benefits of fewer depressive symptoms later in life. "Adolescence (is) a sensitive period of early life when structural facets of social relationships can have lasting mental health consequences," Copeland wrote, adding that "compared to boys, girls face additional risks from how others view their social position in adolescence."</p><p>Throughout this study, men showed no association between popularity and depressive symptoms, however, they did show benefits from naming more friends. As for why this is, Copeland has a theory: perhaps the expectations on young girls (compared to young boys) as well as the roles that lead to popularity can create a kind of stress and strain felt more prominently by girls than boys. </p><p>While this does create more difficult teen years for young girls, the stress and strain may lead to giving these girls a psychological skillset that benefits them later in life, allowing them to deal with stressful situations more easily.</p><p>The study also suggested that teenagers who have a smaller social circle showed higher rates of depression later on in life. </p><p><strong>Results from both men and women followed a U-shaped trajectory of depressive symptoms.</strong></p><p>The results showed depressive symptoms being highest in adolescence and declining in early adulthood, then climbing back up again into one's early 30s. This was particularly more noticeable in women, who showed a steeper decline in symptoms between the ages of 18-26, followed by a more rapid increase in symptoms in their early 30s. </p>
How to stay social while battling depression<img type="lazy-image" data-runner-src="https://assets.rebelmouse.io/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vYXNzZXRzLnJibC5tcy8yNDQ1MjA3MC9vcmlnaW4uanBnIiwiZXhwaXJlc19hdCI6MTYxNDMyNDY1N30.e1ULIJ5QYXh4H1SGUPUTJqYBCnX2XWp6InjPRr-2Bdw/img.jpg?width=1245&coordinates=0%2C22%2C0%2C22&height=700" id="832fd" class="rm-shortcode" data-rm-shortcode-id="b360bb24fb8d6025680bfffb52fd5982" data-rm-shortcode-name="rebelmouse-image" alt="depression support group illustration" />
Attending support groups, planning activities with family or even just a weekly phone call to a friend can help alleviate depression.
Credit: Mascha Tace/Shutterstock<p>Although maintaining relationships can help you cope, it can also be one of the most difficult things to do when you're experiencing depression.</p><p>As Dr. Jennifer L. Payne (an assistant professor/co-director of the Women's Mood Disorders Center at Johns Hopkins Hospital in Baltimore) <a href="https://www.everydayhealth.com/hs/major-depression/staying-socially-active-with-depression/" target="_blank" rel="noopener noreferrer">tells Everyday Health</a>: "One of the common symptoms of depression is social isolation." </p><p>Payne goes on to explain that you can "soak up some energy" by simply being around other people, moving around, and staying active.</p><p><strong>Creating a daily schedule and planning activities ensures action. </strong></p><p>While it may be easy to turn down last-minute plans, it's more difficult to cancel plans you've already committed to with friends and family. While it's important not to overwhelm yourself with a packed schedule, creating a minimal daily schedule that involves seeing friends and family or doing activities that you've previously enjoyed can ensure you stay active and often makes you feel more accomplished at the end of each day. </p><p><strong>Support groups and social networking with people who understand. </strong></p><p>While depression can very easily make you feel isolated and alone, surrounding yourself with others who may be struggling with depression as well can help in multiple ways. You will have peer support from people who relate to how you're feeling plus the added benefit of being around people, which can raise your spirits. </p><p><strong>Keeping a journal (and setting goals) can help you feel accomplished. </strong></p><p>Keep a thought journal and detail certain daily or weekly goals (such as a plan to call a friend on Monday or to visit your local coffee shop for a change of scenery on Thursday). These small, achievable goals not only get you out of the house and/or interacting with others, but they also provide a sense of accomplishment and satisfaction once they are complete. </p><p><strong>Random acts of kindness, such as volunteering, will make you feel good. </strong></p><p><a href="https://bigthink.com/mind-brain/kindness-benefits-james-doty?utm_term=Autofeed&utm_medium=Social&utm_source=Twitter#Echobox=1596517476" target="_self">Being kind is good for your health</a> in many different ways. Doing something nice for others can boost your serotonin levels. Serotonin is a neurotransmitter that is responsible for feelings of satisfaction and well-being. Similar to exercise, kindness, and altruism can also release endorphins, creating a <a href="https://www.quietrev.com/6-science-backed-ways-being-kind-is-good-for-your-health/#:~:text=Kindness%20releases%20feel%2Dgood%20hormones&text=Doing%20nice%20things%20for%20others,as%20a%20%E2%80%9Chelper's%20high.%E2%80%9D" target="_blank" rel="noopener noreferrer">temporary sense of euphoria</a> that can help combat depressive symptoms. </p>
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