I actually had an encounter with the Escobars. Sort of.
It was 1986. Miami.
I was interested in a piece of land in North Miami Beach, around 172nd and Biscayne. The small plot was left over from the prior development of a night club next door. It was bounded on one side by railroad tracks, but I calculated that I could gain access to the extra-wide railway easement and double the value of the land in three months.
The land owner was an entity apparently controlled by Robert Escobar, brother of Pablo. Because of that name association, some people weren’t interested. But me? I didn’t care – the reluctance of others kept the price lower.
Victor was the Escobar’s point man; he said I had to speak with Robert Escobar’s lawyer who crisply told me to make a written offer. Robert was the financial guy, the banker, the accountant. My offer letter ignored the seller’s requirement that the price be paid in all-cash, up front. But the real reason the deal fell apart was because Victor was found dead three days later. The person who answered the phone after that simply said “Victor is not available to speak with you.”
Ah, yes, the good old days in South Florida.
I recently watched the final episode of the Netflix show, Narcos*.
There might be lessons for entrepreneurs to learn from the show Narcos, which is about the life of Pablo Escobar. And, yes, I realize that he was a wicked murderer and adrug dealer of the worst kind. But, nevertheless…..
….. Welcome to The Escobar School of Hard Knocks. Here’s my take.
1. Starting Small. There is no shame in starting small. Even facebook started in a dorm room. GoDaddy’s founder started out shipping homemade software from his basement.
Pablo started with small shipments and worked out the processes, methods and bottlenecks before he decided to ‘go big’. But many others failed at the same business.
Take Away #1: It’s ok to start small and grow slowly. That’s a time and opportunity to understand your business end-to-end without the pressures of a huge customer base to support or investor meetings to manage. And, it’s the time to figure out the roles and interests of your customers and adversaries/competitors.
If you don’t understand all the moving parts, you can be easily tripped up and go out of business by sudden growth, unexpected changes in your market or the regulatory environment. And you will more easily gain confidence of potential investors, if you can demonstrate an end-to-end understanding of your business and your market.
2. Can you Scale? The scalability of your service or solution isn’t top of mind when you’re starting to code, designing a logo, or trying to get your initial customers. It’s exhilarating to get your first 100 customers. And at that point, you’re certain that what you’ve built, and the team you have, can handle several times that number of customers. But, ‘what if’ you suddenly realize the demand is 10x or 100x what you initially considered? Growth is good, right?
As they say, “If you fail to plan, you plan to fail”. So plan. Plan ahead.
It’s a myth that you can handle sudden growth by simply adding more people, more equipment, and more locations. Not only for startups, but Pablo found that out as well. When Pablo tried to grab all the possible market, he grew too quickly for what his infrastructure could handle. Communications broke down and bottlenecks became more obvious. Losses ensued, enemies were created, and competition developed.
Take Away #2: Yes, too much of a good thing (demand, app downloads, customers, A/R) can actually be a bad thing. Unless you’ve planned ahead.
Expand your personal network so you already know smart and qualified people you might be able to hire. Don’t just hire more bodies.
Have a plan to expand infrastructure early on. When you’re at 95% capacity, it’s too late to expand without repercussions. Don’t allow yourself to get into a corner where you’re forced to make rash decisions based solely on the pressure to meet the demands of others.
3. Loyalty goes Both Ways. If you expect unconditional loyalty, you must give unconditional loyalty. Make a promise, keep a promise.
Pablo was loyal to his crew, but only until it didn’t suit him anymore. That was a rotten attitude. In the short run, it gave him feelings of control and power, but his disloyalty cost him dearly in the long run.
Take away #3: Customers want to be loyal; they want to believe your promises and they love to support a brand or service that is, in turn, loyal to them. They want to believe that you will be there for them (insurance, roadside assistance), or that your 3-Year Guarantee (appliances, cameras, toys) doesn’t contain small print that leaves them without coverage.
If you don’t keep up your end of the bargain, you will lose the loyalty and love your customers once had for you. And dissatisfied customers won’t stick up for you either.
Social media will then teach you a lesson. Within minutes, negative opinions about you, your company or your product can spread worldwide. You don’t want to give the impression you are not loyal.
So be loyal to what you promised, even if it costs you in the short run. See #6, below.
4. Danger of Pride. “Know when to fold ‘em” is the advice of any seasoned gambler. I don’t like the word ‘fail’ as in “fail fast and fail often”… advice often given to entrepreneurs. I understand the wisdom, I just don’t like that f-word.
But Pablo really had no sense of wisdom and ignored the facts and the reality. When it was obviously-obvious that he could not succeed, full of pride and arrogance he doubled-down using the same failed strategy. That never works in startups, either. Pablo refused to accept the facts, as plain as they were. He didn’t adopt a new strategy. If you’re failing, change your strategy. Don’t be a Pablo.
Take away #4. Keep a reality checker around you, someone who can advise you and who will tell you the truth. In Pablo’s case, as in many cases, it was the wife who gave him wise advice when Tata said “Surrender Pablo, and save me and the children. You can recover from this later.” Personal note: In my case, I have learned to listen to my wife as a good sounding board and outside advisor.
If you don’t have a ‘wife’ in your life, listen to others close to you. Pablo’s cousin, Gustavo gave the same advice as Tata, but Pablo flat-out rejected Gustavo, too. Don’t be too proud to accept advice.
Despite what you may think, you don’t know everything. (Put that on a sticky note and post it nearby.)
If you’re failing, don’t just double-down. Get advice and change your strategy.
5. Pivot Before it’s Too Late. Pivoting is a popular term used to describe a change in strategy or product offering when the original plans aren’t working out. A well-executed pivot can save the day; you can take adopt a new approach and succeed.
Unless you wait until it’s too late.
Pablo? Pablo waited too long to pivot. In the face of so much trouble and failure, it should have been obvious that he needed to change his strategy, to do something different. He needed to take an entirely different approach to business and, to his survival tactics. But ego got in the way and he waited too long to reach that decision.
I am referring to when Pablo dropped off the grid and went to live on his father’s farm. But by then, even his father was tired of him and his antics and told Pablo “You can’t live here with your wife and family, not after all you have done”. To top it off, Pablo found out he then had access to only $6,000 dollars, compared to the hundreds of millions he once had.
Take Away #5. Remain ‘paranoid-ly aware’ of your key metrics, your cash, your team and your eco-system surrounding you. Look ahead and don’t ignore warning signs. Ask for advice and feedback.
Be realistic and if the facts aren’t in your favor, admit that your original plan isn’t working out. Then change gears. Pivot while you can, before the funds are gone and before you’ve used up all your goodwill. Before your team and family are burnt out and you have no more runway left.
To successfully pivot, change your strategy early enough.
Case in point: Tote (you probably never heard of it) was developed as a type of online shopping app in 2009. But things weren’t working out. So, while they still had financing, they dropped the payment and mobile commerce aspect and focused on graphical collections and changed their name to ….. Pinterest. You probably heard of it.
Pablo should have pivoted to the rural farm life at least five years earlier, but instead held on to ego and a failing strategy. And when he decided to start his own farm and live peacefully far away from the cities, it was too late. By that point everything had fallen apart and he had no friends, no people, no money and no support from his father or his wife. He had no runway left.
So pivot early.
6. Repair Relationships Early On. Pablo ignored the people who felt cheated or short-changed and he took advantage of others in a proud and arrogant manner. But don’t blame it on the al-al-alcohol. Even when offered the opportunity to makes things right, he didn’t. And it was those people he trampled who conspired against him later on. Hurt has a long memory.
Take Away #6. It’s a small, small world after all. If for whatever reason, you find that you’ve caused a problem with someone, or trampled on someone …. You are better off to make amends early on. It’s not important if what happened was unintentional or intentional, the other person or customer still feels negativity against you.
Flashback: I recall my father driving 90 minutes each way to visit a woman who called the office of his soap company. She was furious, mad and argumentative. She claimed that the cap popped off his company’s liquid detergent bottle she had bought at the local A & P. For her to tell it, the soap had ruined her car seat and she was going to have to pay hundreds of dollars to get a new seat. That really wasn’t the company’s responsibility. But my father drove to her house, took off his suit jacket, rolled up his sleeves and asked to use her garden hose. He washed all the soap out of her back seat. Ruined his afternoon, but I’d guess he created a customer for life.
You do not want upset customers, disenchanted staff, disgruntled investors or other negativity against you out there, even if you are technically in the right. I promise you … what you don’t make right early on, will come back against you many times over.
So do what you can to make things right, whether it’s a refund, an apology or something more involved.
Relationships, and reputation, are everything.
Even for a startup.
(c) 2016 by Gregory Giagnocavo and Strategy Academy.
Your comments are eagerly welcome.
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t: @StrategyAcad or email to Gregory@StrategyAcademy.net
* (Narcos, a great show, on Netflix.)