Going Global on a Shoestring – Learning from the Successful Failure (Part 2)
The first part of this post can be found here >> Going Global on a Shoestring – The Successful Failure (part 1).
We were successful. Sales was on a steady upwards climb.
Manufacturing had a hard time keeping up with production when the support hotline for our new printers started to glow.
The printers were jamming.
We knew about the problems. They were there when we released the product for sale. We just hadn’t been able to fix them as fast as we thought we could. We shipped more and more printers with built-in problems waiting to explode in our faces.
The problem was actually two-fold. The printer jammed in the fusing unit and the toner consumption was way over specifications.
To help our customers we shipped spare fuser units they could have available for replacement on site. We also shipped toner free of charge to compensate for the additional consumption. Our pre-sales support people were transferred to post-sales support helping customers fix the problems. The pre-sales (now post-sales) people were on the road to see and help faraway customers making what we had already sold them work according to our own specifications. The support folks returned and filed expense reports that we could not reclaim anywhere. Expenses grew and sales dropped.
And we were treating headaches with painkillers.
The real problem with printers that jam is the interruption of production. Not the printer’s production, but the customer’s production! When Alitalia cannot print out work orders to their mechanics you can probably imagine that the consequences are catastrophic.
Customers became nervous and started rumbling. Resellers became nervous and stopped selling.
Your personal integrity
All products will malfunction from time to time. The meantime between failures is never approaching eternity for any product. However, the issues get critical when you cannot fix them. We were a startup. We were still in burn-rate mode. Early success has led us to believe we were heading for the tornado. Now we were heading for the abyss.
We were running out of money, goodwill and spirit.
We had been out there with our overhead presentations, posters, press releases and sales material. We had made resellers sign partner agreements and pay for demo kits and training packages up front. We had convinced customers that this was a great product. We had accepted an OEM test order from XEROX, who now had the units on stand-by until we could provide a convincing fix to the issues. We had OEM negotiations with other big corporations.
I felt terrible and guilty.
Motivating myself and my team to continue to sell this “great” product was getting increasingly difficult as we proved unable to fix the causes and make our product comply with the specifications.
Decline and fall
The problems didn’t come from one day to the other. We knew about about them from the very start. The consequences, however came creeping slowly. In the beginning you hope they will go away by themselves. You hope it was a “Monday” machine or something that can be fixed quickly. When you are in sales you must believe in your product. You just don’t want to believe that this is a design problem.
At a certain point you realize that this is critical. You realize that it is a design problem. You also realize that R&D cannot deliver on their promises. Your promises to the market are based on their promises to you. When you cannot trust R&D you are reluctant to promise the market anything. When you cannot promise the market anything business comes to a halt.
It may sound as if I am blaming R&D, but that is not the case.
Any startup must run these risks, but they should mitigate them carefully and not scale too early. We scaled far too early. We took the risk and we failed.
I have to take my share of the responsibility. I was on the executive team. I could have quit any time, but I decided to stay and drive forward. I suggested stopping sales and lay off everyone in sales and marketing until the problems were solved. However, laying off people in this country doesn’t stop the cash from flowing. There was a three month notice period. What if we could fix the problems in three months? The discussions went on and on and we lost time, trust and money.
First we ran out of trust from the market then from our investors and then we ran out of cash.
The company filed for bankruptcy.
Printers are high tech devices – you should respect them more
A printer is a combination of several technologies.
Mechanics must pick up the paper in the input tray, transport it through the printing process and deliver the sheet in the designated output tray. Again and again and again etc. without interruption.
Photo chemistry must transfer the image to a magnetic drum, which then attracts the toner. As the paper passes the drum the toner is transferred and burned in to the paper in the fuser.
Software must handle the communication with the print sources (application programs) and control the printing process including system status monitoring and reporting.
Electronics provide the platform for the software and connects to the sensors controlling the process and monitoring the printer’s system status.
All Mercante printers were set to print 25 ppm. The 15 and 20 ppm versions had a software delay mechanism that paused the printer momentarily to scale down the speed. A brilliant solution. This way we could upgrade the printers by a simple change in the firmware. The only problem was that the original design was for 20 ppm. Pushing the design to deliver 25 ppm caused all types of technical problems primarily in the photo chemical process.
We should never have embraced all four technologies. That was a big mistake. Photo chemistry for printers was already a mature technology. There was no way we could differentiate ourselves by being able to print black toner on paper. Everyone did that day in and day out. We should have sourced the entire printing engine from one of the Japanese suppliers (why did HP do that?).
We differentiated ourselves on the three other technologies and that was more than sufficient.
What did I learn?
When I was with Dataco I remember that the head of R&D Peter Videcrantz always said “stay clear of mechanics.” Peter was obsessed with avoiding field engineering changes. I could now add “stay clear of photo chemistry” to my wisdom. Never again would I get involved with a startup relying on mechanics and/or photo chemistry unless they could show off Olympic medals and world records (which a startup cannot).
Were there some other technologies out there waiting to cheat on me?
I also learned that you cannot trust people until you know you can trust them. If you trust people and they fail to deliver then it is your problem not theirs. Even though you are “just” the EVP of sales and marketing you have to dig deep down and form your own opinion. You have to take those fights and you must fight hard to make sure that the company is making the right decisions. You represent the entire company and all the stakeholders, not only yourself and your own department. Leadership is not a precise science, but I learned that I needed to be a tougher cookie in the executive team in the future.
Never take a yes for a yes!!
I also learned that I could not walk on water. I learned that success is a combination of many things and you should be careful assigning too much credit to your own person. I was extremely successful at Dataco, but only because it was a fantastic product and only because the other people on the team were extremely talented.
It was the combination, not me alone.
I learned that if you want to be an entrepreneur then you have to come to terms with failure. Take the heat, face the brutal facts and get on with life. As long as people are not losing limbs and lives and you are not behaving unethically, then there is just the business risk left.
I didn’t crash in a test flight. I just lost some money and pride. I was alive and had learned a lot, but I was ashamed of having caused other people to lose money and time believing in me. That was the toughest part. I hope they have forgiven me.
What doesn’t kill you will only makes you stronger.
And then I went on to do other things.