Practicing Triage for Survival

Everywhere you look companies are in crisis. If it is a new economy company, it has limited capital that needs to be re-allocated to projects that can deliver the best returns.  If it is an old economy company, it has an abundance of not-so-great “e” projects that need to be cut. In either scenario, the problem is similar: How to structure and implement a turn-around in the new economy?

Consider the following turnaround situation. Company A was a B2B marketplace with substantial funding. The company grew rapidly under the “get-big-fast” stock market regime. At its peak it had 100 employees with a burn-rate of $1 Million per month.  When the “get-big-fast” regime was toppled by a “value” stock market regime, the company was in trouble. The “get-big-fast-at-any-cost” business model needed to be transformed into “get-to-profitability-fast” model.  At the same time, the cash reserves were dwindling rather quickly with no hope of further funding at least not at prior round valuations.

Company A’s turnaround problems that resulted from shifting funding situations are fairly common in the new economy today. So, what is a manager to do in this time of crisis? What should be done to the company to ensure survival? How does one assess and prioritize which projects need to be cut? How does one make sure that valuable work in various project areas is not wasted and lost forever? 

New economy companies are going through a scenario similar to triage in medicine. The broad definition of "triage” is: "The sorting and allocation of treatment to patients, especially battle and disaster victims, according to a system of priorities designed to maximize the number of survivors." The idea is that if there aren't enough resources to save everyone, prioritize to save as many as possible. Setting these types of priorities involves making some very difficult decisions.

Think Like Your Customer: Is there Value Here?
We thought hard about crisis scenarios similar to the one facing Company A. Our objective was simple: can we provide practicing managers insight and tools to navigate through an extremely difficult time? One critical skill we think is important more than anything else is the ability to focus, prioritize and plan from the customer’s perspective. In crisis, it is time to leverage investments that tighten your relationship with customers, because it is the strength of the relationship that’s going to help in the turnaround.

Often turnarounds are done from the perspective of what is good for the company. In really rocky times, people tend to revert to short-term fixes. Most of the actions are reactive like randomly firing people --  5 people in marketing, 5 in accounting and 5 developers. This might be the wrong way to look at the problem. In many cases, it is better to look at the various projects from the customer’s perspective. Do these projects add value?  If they don’t then why do they deserve to live.

The outside in way of thinking about project value is a very different perspective than what is practiced today. Using the customer lens to look at project is invaluable and illustrates issues that might have never surfaced otherwise. In one project we surprised executives when we asked what value is this project providing for the customer? They were speechless. They said what do you mean? This project is critical for doing X,Y and Z – all things that were internally focused.
top...

Classify Your Projects From the Customer’s Value Perspective
One of the first acts in a new economy triage setting is not necessarily to begin treating various “sick” projects right away. Instead, the company’s portfolio of projects must be quickly reviewed and a command center established. In addition to scene assessment, the command center must establish the viability of the company in terms of how much cash is left for any actions.

While difficult, it is absolutely important to take a deep breath and really look at the clutter (multitude of projects) and score them.  The project scoring system attempts to help provide management with a system of appropriate triage classifications, but from a customer value perspective. 

At it's simplest; you sort the casualties into five groups. First, identify those projects that are already adding to the bottom-line. Next, identify those who'll survive if they get no treatment or extra resources. Next, identify those who if they get lot of treatment, have a good chance of survival. Lastly, identify those who, even if they get medical treatment, are unlikely to survive. Finally, identify those that have no obvious value but are really someone's “private” initiative.

If the objective is to reach profitability quickly then the prioritization scheme may look like this:  

Priority 1:  Existing projects that are generating money. It is absolutely necessary to not do anything to hurt these projects.

Priority 2:  Project is in testing or about to be deployed.  One to Three months to completion and has potential to deliver value quickly.  May survive with intervention that does not consume significant resource and personnel. 

Priority 3: Six months to completion. Projects consume considerable personnel or resources.  Likely to survive only with time consuming care, serious infusion of cash and resources.  

Priority 4: One year to completion. Projects are complex and time consuming. These projects may take too many resources from more viable projects and should be mothballed or given low priority due to limitation of resources.

Priority 5: No obvious value. Overwhelming chaos about what the project is.  Often an executive “pet” project. Project is better off declared dead.
top...

Be Ruthless, Take Decisive Action
As an ex-CEO of a failed dot com said to us: killing projects quickly before they have a chance to plant their roots is # 1 skill he wished he had. 

If many organizations are to survive, then they'll have to make these types of decisions and make them soon. When push comes to shove, CEO’s must make what is called an executive decision.  Unfortunately, most managers don’t act decisively.  They agonize over the issues while the situation keeps getting to the "point of no return".

Also, this exercise of prioritizing and pruning projects from the customer’s value perspective is not a one-time event but a continuous one. The senior management team must recognize the need to continuously review the initial prioritization and perform continuous triage to ensure that the most critical projects actually get implemented.
top...

A Final Thought
While triage sounds like common sense, it is seldom practiced. A lot of these stems from inertia wait and see, or optimism – things will get better tomorrow.

The sad fact of the matter is that for many dot com companies, it's too late to attempt any turn-around scenario.  For whatever reason, large number of companies have just let the situation get to a point of no return -- the damage has been done.   The recriminations, finger pointing, and law suits are bound to follow. 

Fortunately, this is a treatable situation. With fast response and some careful and prudent planning, the turnaround damage can be contained if the problems are spotted early and addressed quickly.
top..