Steve Purdham, Founder CEO of We7 and ex-CEO of SurfControl shares his thoughts on scaling a digital business in this guest blog following his talk at Thursday’s CEO Tales event, Scaling a Digital Business.
The 30th President of the USA, Calvin Coolidge once said,
‘All growth depends on Activity – There is no development, physically or intellectually without effort, and that means WORK!!!”
In my experience this sums up growth in business to me, its not something that happens by magic it needs work and quite often a lot of it.
Business have one of 4 growth profiles:-
- Hypergrowth
- Growth
- Zero Growth
- Decline
I have been lucky or unlucky enough to be involved with businesses in all these forms and in fact Zero Growth and decline is really the land of the living dead and is not a comfortable place to be. The good news however is that with the right activity and with the right resources you can move operations from one world to another.
One business I was involved with was an Internet security business SurfControl, based in the silicon valley of the North – Congleton Cheshire in case you didn’t know – which was an overnight success that just took 17 years to find the right night to be successful on. Surfcontrol went through hypergrowth and in February 2000 was worth over a £1bn with analysts predicting £3bn by the end of the year. This was the days of the tech bubble and this proved to be false growth and by March we were worth hardly anything.
Interestingly, Surfcontrol came from fear – fear of obscurity, fear of failure, fear of, ‘Is this all there is?’ It was born out of a business that with £5m turnover and 20% net profits was a good little business but had zero growth and was firmly in the land of the living dead.
A guy called Rob Barrow and myself moved the needle with Activity, focus, people and finance. You do need people and money.
Eventually Surf Control had turnover exceeding £120m. It was profitable, cash generative and employed 750 people in 14 locations around the world. It sold for around $450m in Oct 2007.
But Hyper growth by the law of large numbers and %’s is not mathematically sustainable and you need to take care as the businesses move from one cycle to another.
Now when we say, Growth’, what exactly do we mean?
Quite often people use the term growth or we are a fast growing company they are only referring to a single dimensional aspect of the business – revenue, profit, people employed (people pick the metric that makes them look best). True growth however is always Multi-Dimensional and links many aspects of the business together which need to be managed, as I demonstrated with SurfControl’s Tech bubble valuation.
So lets move up to date to We7 to look at why hyper-growth in one area alone may not be enough.
We7 is a great hypergrowth cloud based music service. It delivers Internet Radio Plus where you just go to we7.com search click and instantly play a song, a album, a personal radio station, all free as its ad funded.
Try it its cool.
Launched in November 2008 we have rapidly grown to one of the top UK websites:
- 3m monthly users
- 6.5m songs in the jukebox
- SEO – type in the most generic word Music and you get we7 and the number 1 or sometime 2 from 2.5bn entries
- #1 most accessed music site in the UK by pageviews
- In the top ten growing websites in the UK for companies with less than 25m t/o for the last 6 months.
All growth has been organic – no marketing with the exception of PR but that suggests it happens by magic. Having something consumers want is a great driver but as Coolidge said 70 years before the Internet, “Growth NEEDS WORK”.
And we have 27 great people who work really hard at all levels to make things happen.
But, growth is Multidimensional and people get really excited but I am a pragmatist.
Every song that is listen to cost money, this is not a freemium model so while unrestricted growth sounds a fabulous and for many an unattainable dream this type of single dimensional aspect has some big dangers. Giving free music away is easy but making the economics add up is the challenge.
So growth in users is brilliant.
- Which means that music consumption also goes up (good)
- Which means that Music costs and royalties go up (less good)
Which means that sales has to go up as fast or growth in financial support has to go up in line (Less good again until its achieved), now we7 has great potential. Getting the right balance in growth is the real magic against all the linked facets. And the best point in a business is when you break cash breakeven, first monthly, then annually. That’s when true growth has a real meaning.
No growth means limited choices – do you shut up shop or sell? The beauty about growth is it gives choices like at Surfcontrol do we expand into China, India, Japan or all of them? That in itself will likely encourage and sustain growth.
Steve Purdham, steve @ we7.com
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