In August 2019, shared workspace startup WeWork was valued at over $50 billion.
Then, the company opened its books to Wall Street ahead of one of the most highly anticipated IPOs in recent memory. And Wall Street did not like what it saw.
After firing its CEO in September and securing a bailout from one of its largest investors, WeWork is now valued at around $8 billion. Most experts believe the company is still bleeding cash and just last week it laid off 2,400 employees.
Billions of dollars and a BIG idea sounds like a recipe for success. But as the WeWork disaster shows, without these three critical corporate traits, a company can go from unicorn to turkey overnight.
WeWork had an almost limitless cash reserve and an attractive brand, around which a young and enthusiastic entrepreneurial culture was growing. But instead of using its cash to fuel actionable, measurable steps that would lead to growth and profit, WeWork started diversifying its holdings and business offerings before it had made a dime.
And what did a private elementary school and investing in wave pools have to do with workspace sharing? Nothing. WeWork didn’t just chase after shiny objects, they blew through a good chunk of their cash doing it.
WeWork also had a blurry vision of what it could actually accomplish. Part of the rationale behind the company’s astronomical valuation was the size of its total addressable market (TAM). The new generation of young entrepreneurs who are starting their own companies or bouncing around the gig economy need space to work, collaborate, and network. There were other companies offering shared workspaces, but WeWork was positioning itself to be the default office, living, and social space for self-starting millennials – a potentially gigantic market.
Unfortunately, there’s a big difference between total market size and the portion of that market that any one company can realistically serve. A huge TAM might make for good headlines, but companies succeed or fail based on how well they define their serviceable addressable market (SAM). WeWork wanted to be all things to all roving millennial workers: office, home, babysitter, social club. If, instead, it had narrowed its SAM to particular subsets of millennial workers and focused its spending on growing that customer base, it might still be sitting pretty.
But the problem at WeWork wasn’t just that it spent too much money on too many different things. The problem was that its spending wasn’t part of a clear plan to turn a profit. As companies like Uber and Slack are seeing after their own disappointing IPOs, investors are starting to care less about a company’s potential and more about fulfilling that potential. When WeWork decided to go public, investors saw plenty of buzzwords, diversified investments, and real estate holdings. What they didn’t see was a plan from the top that was going to allow the company to make money.
In our experience at CEO Coaching International, the single biggest differentiator between companies that stay small and companies that get BIG is a great team coupled with a meeting rhythm that ensures plans get executed. The best companies start every year with an annual planning session that sets a clear agenda for the next twelve months. Then, they follow up on that plan with a structured meeting process that builds from weekly leadership meetings to monthly departmental updates to quarterly planning. And along the way, they use this meeting rhythm to track their progress towards actionable, measurable, short-term goals so that the company keeps growing towards its BIG objectives.
One sign that you’re cultivating a productive meeting rhythm at your company is healthy disagreement. A CEO’s leadership team should feel comfortable playing “devil’s advocate” from time to time. If you’ve surrounded yourself with a bunch of “yes men” who never challenge your assumptions, your company will be vulnerable to groupthink and complacency. CEOs who aren’t insecure bullies know that respectful debate on the top floor is one of the best guardrails a company can have.
Without those guardrails in place, a company is liable to make some really poor decisions. Like expanding faster than it can afford to grow. Or paying its CEO millions of dollars for the rights to its own name. Or making deals with the CEO’s surfing buddies to branch out into “super foods,” all while losing over $3 billion dollars in three years.
Yep, all things that happened at WeWork.
Look, I love exercise and pushing myself. I’ve completed 12 full-distance Ironman Triathlons. But if I ever tried to get CEO Coaching International invested in sports drinks, everyone on my leadership team would be in my office calling me out. We have a strong culture of accountability here, and part of our best practices is helping our entrepreneur coaching clients build the same accountability at their own companies.
Accountability doesn’t just mean yelling “Stop!” when the company is swerving off the road. It means making a thousand smaller decisions that could be even tougher. Like moving on from a popular employee who just isn’t cutting it anymore. Or admitting that a new product or service isn’t selling. Or standing up in front of your company during a crisis, accepting responsibility, and explaining how you’re going to fix what’s broken.
Focus. Planning. Accountability. Seems incredible that a company could earn a $50 billion price tag without these three simple traits. But seasoned CEOs know that there’s never anything simple about running a successful business at any size, at any stage of its growth. WeWork is a powerful reminder that all companies need to master the basics. Otherwise, what looks like BIG success might just be a lot of hot air.
About Mark Moses
Mark Moses is the Founding Partner of CEO Coaching International and the Amazon Bestselling author of Make Big Happen. His firm coaches over 200 of the world’s top high-growth entrepreneurs and CEO’s on how to dramatically grow their revenues and profits, implement the most effective strategies, become better leaders, grow their people, build accountability systems, and elevate their own performance. Mark has won Ernst & Young’s Entrepreneur of the Year award and the Blue Chip Enterprise award for overcoming adversity. His last company ranked #1 Fastest-Growing Company in Los Angeles as well as #10 on the Inc. 500 of fastest growing private companies in the U.S. He has completed 12 full distance Ironman Triathlons including the Hawaii Ironman World Championship 5 times.
About CEO Coaching International
CEO Coaching International works with the world’s top entrepreneurs, CEOs, and companies to dramatically grow their business, develop their people, and elevate their overall performance. Known globally for its success in coaching growth-focused entrepreneurs to meaningful exits, CEO Coaching International has coached more than 350 CEOs and entrepreneurs in more than 25 countries. Every coach at CEO Coaching International is a former CEO or President that has made big happen. The firm’s coaches have led double-digit sales and profit growth in businesses ranging in size from startups to over $1 billion, and many are founders that have led their companies through successful eight and nine figure exits. CEOs and entrepreneurs working with CEO Coaching International for three years or more have experienced an average EBITDA CAGR of 66.4% during their time as a client, more than five times the national average. For more information, please visit: https://www.