5 challenges of a fast-growing technology company 2018 Summary

It seems like yesterday when I was writing a summary of 2017. Back then I thought we were going fast, but 2018 was even faster in terms of projects, headcount, revenue and new initiatives. This time, let me share a few thoughts on the challenges we’ve encountered and the lessons we’ve learned this year.

What did not change from 2017 is that behind this impressive growth and success came a tremendous effort of a large team of very committed people (146 currently!) I am proud to be working with you all. It’s exactly how Przemek Orlik mentioned on our internal social site, Yammer:

I couldn’t have said it better myself.

Looking back at the entire year, one thing I noticed is that we tend to underestimate the long-term, and overestimate the short-term change horizons. I am often under the impression that what we do in a daily, weekly, even monthly cycle is not enough.

But when we look at the year as a whole, I am surprised by how we surpass our expectations.

We anticipated to grow by 40% this year. We achieved nearly double that instead! I found a great approach that I think is applicable to leaders in different businesses, in a Tim Ferris podcast with Patrick Collison (CEO & Founder at Stripe).

A matter of perspective

At Predica, we like to be long-term optimists and short-term pessimists.

Long-term optimism allows us to invest in people, R&D, innovative products and long-term customer relations. This is really necessary, as the number of issues and challenges that we face daily are huge. Without this long-term optimistic approach, it would be difficult to address them.

At the same time, we remain short-term pessimists. We prepare for the worst. We have to get good at spotting problems, as they are sure to occur.

This dual approach is rather strange and uneasy, but I think it’s an effective framework. So far, applying this approach has proven fruitful.

I don’t really want to recount our achievements in this article. That was already well covered here. Instead, I want to get into a few of the challenges of running a growing organization: the problems we faced, the setbacks that we had experienced, and the things we’ve learned on your journey.

These experiences are not typically shared. But, at Predica, we believe in transparency and continuous learning.  We strive to share our experiences among ourselves and with the rest of the world.

So here they are – the 5 main challenges we faced in 2018, how we approached them and resulting tips, that I hope you will find useful.

#1 Quality

We are always about quality. Being Predica’s founders, the biggest escalations always touch us directly. With the company growing, we engage in more projects and have more people involved at any given time. The potential for mistakes or mishaps is proportionate to our rate of growth.

The most important thing is how we face these issues. For us, it comes down to a simple checklist:

1. Understand the problem. Every person at Predica is equipped with basic, or really advanced, IT skills, an analytical mind, and common sense. One of our sayings is “everyone delivers”. We put emotions aside, avoid finger-pointing and band together to get to the root of the issue.
2. Take ownership. If the issue really was our fault, we need to always admit it. For me, it shows courage and I greatly respect that in any individual, team or company. It’s also a foundation for a trustful relation and is in line with one of the few books we treat as ‘bibles’ at Predica – Extreme Ownership.
3. Alleviate the customer’s pain. This is most important. We will go to great lengths to resolve the problem that resulted from our mistake. This might include taking on the additional cost of fixing the issue.
4. Learn from the mistake. Put safeguards in place for the issue to not happen again in the future. We are OK with failing, but we really don’t like to make the same mistake twice.

How did we do in 2018?

Did we have quality issues this year? For sure. Some of them were due to a “mis-hire” (fortunately only one), improper on-boarding to the role, a technical configuration/code issue and a lack of key project management discipline.

Did we manage to show the right attitude in resolving these issues? I believe so. None of our trusted, long-term customers left us. Our employee attrition is still below 5% and employee NPS still around 60.

Did we learn from these mistakes? We took a systematic approach to resolve them. Time will tell if they were effective.

Quality is still #1 for us, and we don’t ever want to change that.

Tip #1: If you put a big emphasis on quality in your business, make sure you have a well-prepared, rehearsed system in place to address quality issues when they come up (they inevitably will).

#2 Relationships

One of the reasons we started Predica was to work with like-minded, highly motivated, passionate people. When the company reached 100 people this year, we, the founders, lost the ability to work side-by-side with every one of our employees.

How do we address this challenge? I think the following three approaches help a lot. But nothing replaces face-to-face contact:

1. Work on projects: project teams assemble for a limited time. That way, each of us can interact directly with more people than in traditional organizations. I still exchange ideas, provide feedback and offer opinions with our junior employees who joined a few months ago. Our system for growth and learning (Grandler 🙂 ) does a great job of gathering data on this. I had interactions with 60 different people thanks to projects that I took a simple role in, even as simple as reviewing and advising on a customer agreement for 30mins.

2. Regular team-building events where take 1-2 days all to ourselves to spend time in groups. We hold these every 6 months and always like to take an unusual approach to them. Some of the finer points of the last meeting were a “gratitude exercise” by Ula, our Head of HR. There was also handing a real fire hose from a firetruck. It really did feel like working on a tough project, together, side-by-side in the line of “fire” (photo proof below).

What a day it’s been!

3. Electronic, available anywhere social space where we exchange thoughts and ideas. For us, this is Microsoft Teams and Yammer. As our team spans 3 continents, 6 countries, and over 15 cities. Face-to-face interaction is something we can really cherish and treat as a gift (gratitude again). For internal as well as external calls, we always stress to enable the camera, as seeing each other makes a conversation much more interactive.

Tip #2: As your company grows in a number of people, make sure you still address ways how relationships within your company can be kept rich and alive.

#3 Systems and processes adaptation

We have to update processes and systems to reflect our growth. What worked for a 70 FTE team doesn’t work 140 FTEs. The same goes for the number of outgoing proposals, new hires, registered cost (or sales) invoices, or truly, for any metric we track.

Lots of our systems are highly customized to our needs. They are best-of-breed SaaS applications, tightly integrated with underlying data. Here is a subset of them. There is no other way than to continuously improve them–or even replace them when needed.

This year we experienced a significant mindset shift that opened the door to process and system updates:

1. We now have a dedicated CIO role, held by our invaluable Marcin Bigos. Marcin boldly changed his role from a senior developer to this new role – a great example of a growth-mindset. He leads changes and improvements and manages their implementation.
2. We assigned budgets in Microsoft cloud services, as well as man-hours, for internal support and internal projects.
3. We treat hours spent on internal IT projects just like external customer project hours. There is no reason to shy away from investing in our organization. At the end of the day, this work benefits our customers.

Next year, we will take another big step and further improve our systems and processes by opening them up to a wider audience.

Tip #3: As your company grows, make sure you continue investing in your systems and processes to keep them relevant and helpful with increasing scale.

#4 Cashflow

We’ve always heard that growth eats cash. Somehow, we did not really feel it until last year when we noticed the gap between what we see on the financials and in bank accounts start to widen.

Fortunately, we had enough cushion from our 8 years’ hard-earned retained earnings not to draw up on costly (and risky) bank financing.

For us, keeping our promises is of the utmost importance. Not making payroll is not an option. We promise each of our 146 employees that no matter what, they’ll get their salary at the end of the month.

Consequently, we do everything we can to have a safe buffer to meet this key obligation.

We believe that a sound practice is to have at least 3 months’ worth of fixed costs in your bank accounts. Even if it means missing out on some opportunities, it relieves us of cashflow stress and allows us to focus on the business itself.

What are the steps to improve cashflow in a service business?

In 2018, we managed to half our days’ sales outstanding thanks to the practices outlined below:

1. Create and use standard agreement templates that govern invoicing and payment terms.
2. Incentivize and promote behaviors that favor early (but fair to the customer) Invoicing. Our consulting teams get bonuses only once the project is complete. Our CRM system does not allow closing a project until it is fully invoiced.
3. Have a financial controller who builds relationships with clients’ accounts payable departments, which helps to ensure that invoices are paid on time.

Tip #4: Being self-funded can give tremendous freedom provided you ensure positive cash flow. It is something which might slip under your radar if all you look at our earnings. Make sure to put tools in place to monitor your cash flow and due payments. And don’t be shy – if someone owes you money, insist on getting paid.

#5 Impact

This last point is a bit of a ‘double-edged sword’. As our scale grows, so does our impact. This means two things:

1. Bigger responsibility: every decision/action is likely to have much bigger consequences.
2. Bigger impact: we can change the world in a much more impactful way.

Is this good? For us, yes.

Is it easy? No, but we think it’s worth the effort.

The challenge for us in 2019 is to use this opportunity wisely to push forward our mission – to accelerate the transition to self-managed organizations.

On that positive note, I wish you all a very fruitful, successful and happy 2019!  (Which, as you just learned, does not mean failure-free.)