Posted: December 14, 2012
Even really cool companies need directionBy Todd Ordal
I guess workdays full of dogs, tug-of-war, swag and free food is a good start, but eventually people want to know what they’re doing.
Zynga, the Internet gaming company that brought us FarmVille, bolted out of the blocks with a $9 billion IPO a year ago only to fall to a $2 per share price today and a market cap of $1.7 billion. Quite a plummet in a year’s time! (When you consider that Zynga lost $160 million from operations in the first nine months of 2012, it’s not a bad valuation.)
As reported in The Wall Street Journal, a senior manager at Zynga said, “People couldn’t articulate what the main strategy was or why they were coming into Zynga on a day-to-day basis. …” The article goes on to highlight the large number of senior people leaving the company.
I don’t know how many more virtual cows Zynga needs in the FarmVille pasture to break even, but it seems as though the horses have left the barn.
It’s pretty hard to stop investors from having wild expectations and running up your stock price. You can’t fault management for that. But at some point, real business principles must kick in or you’re just another pig at the public trough.
I believe Zynga has some wildly smart and creative people in its pasture. Unfortunately, smarts and innovation are only half the battle. If you don’t point those smart people in the right direction, if you don’t provide some meaning for what they’re doing, it’s like a flock of sheep without a shepherd. They’ll probably eat well for a while, but they’ll eventually get eaten by wolves.
Zynga is no different from many other successful start-up companies, just much more successful! However, getting beyond the creative stage (often driven by one seminal product) to become a company that has a plainly articulated strategy, clear operational systems and aligned people requires a different set of skills than developing a whiz-bang product. Companies such as Hewlett Packard, Intel (the “old” versions) and Apple not only developed great products but also figured out how to put in supporting structures and systems to maintain their greatness—at least for a few decades!
I recently held a gathering of CEOs to talk about execution. At one point, we discussed the need for a clearly articulated strategy—which most all claimed to have. After the meeting, however, one talented CEO estimated that only one or two of them could’ve actually stated their strategy.
It’s common as a leader to breathe your own exhaust and convince yourself that your path is unfolding before you and everyone should be able to see it as you do. Unfortunately, it doesn’t work that way.
Are the sheep in your flock all facing the same direction, or have they lost their way?
Todd Ordal is President of Applied Strategy LLC. Todd helps CEOs achieve better financial results, become more effective leaders and sleep easier at night. He speaks, writes, consults and advises on issues of strategy and leadership. Todd is a former CEO and has led teams as large as 7,000. Follow Todd on Twitter here. You can also find Todd at http://www.appliedstrategy.info, 303-527-0417 or email@example.com