The last thing you see before you fall
Written by: Brad Pedersen
Suddenly, a record year in business that should have resulted in significant profits turned into red ink. This became the tipping point that would result in my venture heading into bankruptcy.
Have you ever been over-confident? Have you ever taken risks that exposed your enterprise to excessive risk? Have you ever assumed that you will just figure it out like you have always done in the past? Sadly I can boldly state… hell yeah!
One of my greatest failings in business was purely the result of hubris; an insidious sickness that can creep into a business (and business leaders) that leads to a lack of discipline and vigilance. It is at those moments when we are most vulnerable and exposed.
Back in the early 2000’s, we had just secured the distribution rights for Playmates in Canada and were launching an animatronic doll called Amazing Amanda. It was an incredible marvel of technology and it captured the imagination of both adults and kids. It was also very expensive, retailing for more than $100.
The American market had launched Amazing Amanda a year prior with incredible success. The product received accolades from both moms, media and the toy industry, winning the coveted toy of the year award. It seemed like a sure bet and so we decided to launch Amazing Amanda, and subsequently managed to secure millions of dollars of retail placement on the back of a healthy 7 figure media campaign.
The product hit store shelves, but unfortunately Amazing Amanda was not alone. Merchandised right beside her was a competitive product called Baby Alive. The doll had very similar attributes as Amazing Amanda except it was half the price.
Clearly, our competitors had watched the success of the original launch and had decided to become fast followers. They also positioned themselves to take advantage of our marketing spend, making a smart bet that their better value proposition would be the choice of customers.
Despite our best efforts to drive sales, Amazing Amanda did not move off the shelves. What added insult to injury was when we learned that the competitive product had become the best seller in the doll category. The more we marketed, the more we helped our competition move their product.
Soon, our retail partners came to us asking for markdown dollars, to lower the price and help move out the inventory. This resulted in a retail bloodbath, eviscerating all of our profits and killing the future potential for the product. Suddenly, a record year in business that should have resulted in significant profits turned into red ink. This became the tipping point that would result in my venture heading into bankruptcy.
As I look back on the experience, it seems obvious what went wrong. We had become excited about the potential of Amazing Amanda and our overconfidence kept us from engaging in the necessary vigilance to consider the risks.
A big part of any new product launch involves assessing the market potential while balancing that by identifying the potential pitfalls. Most importantly, to ensure that you never make business bets beyond what your balance sheet can support.
We’d had a great run with many consecutive years of significant growth and in the process I had developed blind optimism, falsely believing we were immune to disaster. As a result when considering Amazing Amanda, we focused on the upside potential and never stopped to properly assess the downside risk of how we could be exposed.
This experience has made me realize this possibility: At the supposed peak of our success, is the place where we are most vulnerable to the slippery slope that leads towards failure.
We make some headway, climb the ranks and then easily become susceptible to the idea that we are good instead of lucky. We begin to justify how we have worked hard and now deserve to take it a bit easier. We take our foot off the gas and begin to coast and perhaps even cut some corners in our process.
The lack of vigilance begins to creep through the organization as others witness and model our behavior. This starts to create a general malaise based on entitlement. Our egos become the enemy, believing that we deserve success and no longer need to do the necessary work to earn it.
According to Andy Grove, "Only the paranoid survive” and Jim Collins echoed this sentiment by subsequently introducing the concept of "productive paranoia”, the idea that you must stay aware and vigilant to the threats that can/will disrupt you and your industry. I prefer a less fear-based version that I call: active uneasiness.
Living with active uneasiness is about maintaining a continual awareness of the shifting market, knowing that most competitive advantages are only temporary. It means constantly questioning and reassessing your value proposition in an attempt to disrupt your own business model. It's about understanding that what made you successful in the past, is likely not what will keep you thriving into the future. This mindset encourages a culture of continuous improvement and innovation, pushing you to keep running, to stay ahead. While taking the time to stop and celebrate milestones and accomplishment; to never rest for too long knowing that your current competitive advantage is temporary and with each day slowly fades.
Consider Nvidia’s unofficial motto: "We are 30 days from going out of business." Based on this impressive company's share of market and their astonishing market capitalization, nothing could be further from the truth. However perhaps this healthy sense of active uneasiness explains their spectacular performance, in positioning themselves to dominate the chip category ahead of the ai boom, resulting in them building one of the world's most valuable companies.
The importance of maintaining active uneasiness also applies to us as individuals. Many people work incredibly hard to achieve a certain level of success in their careers, fitness or families, only to pull back and risk losing their edge. The minute you start to believe that you've "made it," in any area of your life, you are putting that area you value at risk. To grow means we are willing to get outside of our comfort zone and for many that creates resistance. It is easier to be comfortable which means as we move up societal status, we become susceptible to having our resources affect our resourcefulness.
You have likely heard it said that success is not a destination but rather a journey. It is about continuing the process of discovering the best within you, knowing that true fulfillment in life comes as a result of constant reexamination and reinvention. Then as a result of our new found learnings and self awareness, increasing our capacity to both grow and to give.
We were designed to grow, however as we increase our influence, we need to be wary that it is also the moment we are the most susceptible to ego. There needs to be a creative tension in striving for embetterment balanced by maintaining humility. We need a keen awareness that success is fleeting, instead choosing to embrace a mindset of active uneasiness. It is a key tenant in avoiding the pitfalls of complacency which is required to continually thrive in our ever-changing world.
So in reflection, consider these questions?
- In your business are you aware of the shifts in the marketplace that could leave you exposed?
- How are you preparing for potential disruption?
- Are any of your bets stretching you beyond the ability of your balance sheet?
- In your personal life, what areas of value do you feel accomplished?
- Are you more or less invested today than you have been in the past?
- Do your current goals serve you as an impetus to continually grow?
Brad Pedersen
Vijay Krishnan
Andre Oliveira
P.S. - Have you ever encountered an instance where your overconfidence led to a difficult but important lesson? I'd love to hear from you. Comment and let me know your key takeaways and how that influenced how you show up now.
