Growth Pangs for a Start-up

Rajneesh Mehra, PhD

Rancho Wangdoo, a brilliant technician, started a company, Innovide, many years ago when he quit his day job to market his idea full time. He created a product that he just knew other people needed. And he was right. Pretty soon he delivered enough of the product and hired his best friend from college as VP of Sales. And the company grew. But before long, the VP of Sales complained, “We’re an engineering-led company. We need to become customer-driven.” And that sounded fine except that every new contract seemed to require custom work. Innovide signed a dozen clients in a dozen market segments and the latest customer’s voice always dominated the product plans. Senior management at Innovide concluded that “customer-driven” meant “driven by the latest customer” and that couldn’t be right. When a board member declared, “We’ve become a sales-led company. We really need to start being marketing-driven,” Innovide hired a brand specialist away from a consumer product company to be the VP of Marketing. As part of a re-branding initiative, she designed a new corporate logo with a new color scheme for the web site, new collateral, and an updated trade show booth. Everyone got new company icons on their clothing. Except that the company spent millions without any change in revenue. Apparently, branding wasn’t the answer! Soon the CFO whispered to the founder, “Don’t you think it’s time we started controlling costs?” So the company became cost-driven and started cutting all the luxuries out of the business, like travel, technical support, bonuses, and award dinners. And Marketing! The CFO asked, “What do those marketing people do anyway?” And since no one had a good answer, the CFO deleted the marketing budget and fired all the marketing people. At this point, when Finance went too far, the founder stepped back in to focus on his roots—the technology— and the cycle began again. The VP of Development said, “Customers don’t know what they want.” The VP of Sales said, “I can sell anything.” The VP of Marketing said, “We just have to establish a brand.” The VP of Finance said, “We have to control spending.” The focus went from technology to revenue to branding to cost-containment, over and over again.

Rancho Wangdoo, the ideas man, this time seemed to have run out of ideas on how to run his organization! In his exasperation, he spoke to you as his management consultant friend and asked the following questions:

1. Where are we going wrong?
2. How can we fix it?