Once upon a time, the pejorative definition of an entrepreneur was someone able to grow a business meteorically-- but then watch it fail! This description characterized many once high-flying entrepreneurs. For example, Adam Osborne, founder of Osborne Computer, was a pioneer in the developing portable personal computers. His firm reached $100 million in annual sales within three years! However, Osborne Computer went bankrupt in year 4! Today few people remember either Adam Osborne or his company.
Unfortunately, Osborne Computer is not alone in the corporate graveyard of once spectacularly successful enterprises that are now defunct. Others that were once well know high flyers but failed include People Express, founded by Donald Burr, who held an MBA from Harvard Business School; MaxiCare; and Borders. And of course there are the failed “dot.coms,” which includes Webvan.com; Pets.com; and eToys.com.
Uber is a potentially a contemporary version of this phenomenon: spectacular rapid entrepreneurial success followed by equally spectacularly rapid failure. By any standard, the success of Uber has been truly spectacular. The company has created a global footprint and served as a disruptor of more traditional businesses ranging from taxi service to car services.
However, recent events at Uber indicate a clear and present danger to the company.
“PRIDE GOETH BEFORE THE FALL”!
The traditional warning of impending doom is captured in the classic phrase “Pride Goeth before the Fall”! This means that people who are overconfident or too arrogant are likely to fail. This saying is adapted from the biblical Book of Proverbs.
“GROWING PAINS COMETH BEFORE THE FALL!”
However, from a corporate standpoint, we might recast this notion by saying that “Growing Pains cometh before the fall!” What does this mean?
“Growing Pains” are a set of classic symptoms indicating that a company is growing “out of control.” They are a warning that a company is experiencing distress and might even be on the verge of failure.
“GROWING PAINS” AT UBER
There are a number of warning signals that Uber is headed for a classic entrepreneurial fall. As discussed recently in the press, Uber suffers from several severe problems that are really symptoms of a deeper problem. Among Uber’s current problems are: 1) accusations of sexual harassment at corporate, 2) a claim of intellectual property theft, and 3) a culture of treating ill-treatment of Uber drivers. There has also been a video documented incident where the CEO of Uber, Travis Kalanick berated an Uber driver who had the temerity to complain about Uber’s fare policies. Subsequently, Kalanick admitted that he handled the incident poorly, and stated that: “It is clear that this video is a reflection of me and the criticism we’ve received is a stark reminder that I must fundamentally changes as a leader and grow up.”
Although Kalanick ought to be praised for his admission and self-criticism, his behavior is a warning that he does not yet have the skills and psychological attributes necessary for leadership of such a large complex organization as Uber.
These kinds of issues are symptoms of “growing pains” both of the company’s leadership and the company per se. Clearly the company has not developed either the leadership capabilities or the management system required to run a rapidly growing enterprise such as Uber, and convert it into a Sustainably Successful Organization!
These types of are problems as well as a classic set of other growing pains are not unique to Uber. We have identified a classic set of growing pains experienced by companies growing as rapidly as Uber. In fact many companies are victims of what we can term “The Uber Syndrome.”
THE UBER SYNDROME
As used here, the term “The Uber Syndrome” refers to a company that has achieved spectacular rapid entrepreneurial success but is in the cusp (or tipping point) of equally spectacular and rapid entrepreneurial failure! Typically, if such rapid growth is not supported by advanced managerial capabilities and management systems, the company is at risk. Several examples of companies which fell victim to their growing pains include those cited above, such as People Express, MaxiCare, and Osborne Computer, to cite just a few.
HOW TO AVOID OR OVERCOME THE UBER SYNDROME?
What can be done by corporate leaders, venture capitalists, and the corporate Board to assess and then take steps to prevent the risks of potential corporate failure? There are two dimension of this: 1) strengthening the novice CEO, and 2) developing the management infrastructure of the organization.
Strengthening The CEO
There are key differences between a successful entrepreneur and a successful leader of a rapidly growing ever more complex organization. A successful entrepreneur is someone who launches a successful business. This is not easy and it is really a herculean feat. In degree of difficulty and it is analogous to the first stage of a rocket to the moon!
But like a moon shot, the life cycle of the business has a second and third stage. In the second stage the challenge is “scale–up” of operational systems: the day to day systems to manage the enterprise. Many entrepreneurs do not make this transition to stage 2 successfully. This was one of the key the problems faced by Adam Osborne.
The third stage is even more torturous. This stage involves the development of management systems including planning, organizational structure, management development, performance management, and culture management. It also involves a change in mentality from a “loosey-goosey” entrepreneur doing this in an ad hoc free spirited way to someone capable of being a true leader and developing processes and systems.
Based upon more than 40 years of experience in working with entrepreneurs, my best estimate is that of the 100% of entrepreneurs who are successful in stage 1 (not counting those who fail before stage 1), only 50% will be successful in stage 2, and only 50% of those will be successful in stage 3. The net of this is that no more than 25% will be able to meet the challenges of stage 3 successfully! So the odds of failure by stage 3 are 3 to 1.
What can we do the change the odds?
Many venture capitalists view The CEO of a new entrepreneurship like stage 1 of the rocket—they are “disposable after launch”! They replace the CEO with a seasoned manager!
Alternately, the CEO can be coached to understand the new role, skills and psychological mid-set required of a leader of a growing enterprise. Travis Kalanick, CEO of Uber, is a classic case. I have had the privilege of coaching many successful entrepreneurs, including Howard Schultz of Starbucks, Brian Maxwell of PowerBar, Herb Simon of Simon Properties, Yerkin Tatashev of The Kusto Group, and many others. Those who are open to coaching will benefit from it greatly.
Assess and Strengthen the Organization
What can be done to strengthen the organization? A key first step is to do a “comprehensive organizational assessment.” This is much more than just a review of financial statements. It involves an assessments of the entire organization including its business foundation (business definition, strategic mission, and core strategy) as well as the key strategic building blocks that we have determine account for long term organizational and financial success. A discussion of this is beyond the scope of the current article, but interested readers can view our book-- Growing Pains: Building Sustainably Successful Organizations.
Once the assessment is completed, objectives must be set for improving the observed weaknesses, which are typically found in management systems including planning, organizational structure, management development, performance management, and culture management. Again Uber seems to be a classic example of the need for this process.
A FINAL WORD
A comprehensive treatment of the problems encountered in The Uber Syndrome would take a great deal more analysis and prescription than written here. We have provided a full treatment in our book cited above. Nevertheless, recognition of a problem is the fist key step towards its solution!
Travis Kalanick, CEO of Uber, seems to have recognized the problem. Time will tell if the problem is solved at Uber.
Meanwhile, readers can assess whether they and their own organizations might be experiencing The Uber Syndrome.
 For a discussion of the rise and decline of Osborne Computer, see Eric Flamholtz and Yvonne Randle, Growing Pains: Building Sustainably Successful Organizations, Wiley, 2016.
 Michael Hiltzik, Los Angeles Times, Business, Thursday March 2, 2017, p. 1, 4.
 See Eric Flamholtz and Yvonne Randle, Growing Pains: Building Sustainably Successful Organizations, Wiley, 2016, especially chapter 1 and 9.
 Ibid., Chapter 5.
 Ibid., Chapter 5.
 For a discussion of the classic 7 key stages of growth, see Eric Flamholtz and Yvonne Randle, Growing Pains: Building Sustainably Successful Organizations, Wiley, 2016.
Eric Flamholtz and Yvonne Randle, Growing Pains: Building Sustainably Successful Organizations, Wiley, 2016.