In early 2011, Nokia faced an existential threat. The iPhone and Android ecosystems were displacing Nokia’s once dominant devices and CEO Stephen Elop realized his company was at risk of extinction. It was not a question of losing market share. If he failed, Nokia would disappear. He wrote a memo to the company with unusual candor and self-reflection
There is a pertinent story about a man who was working on an oil platform in the North Sea. He woke up one night from a loud explosion, which suddenly set his entire oil platform on fire. In mere moments, he was surrounded by flames. Through the smoke and heat, he barely made his way out of the chaos to the platform’s edge. When he looked down over the edge, all he could see were the dark, cold, foreboding Atlantic waters.
As the fire approached him, the man had mere seconds to react. He could stand on the platform, and inevitably be consumed by the burning flames. Or, he could plunge 30 meters in to the freezing waters. The man was standing upon a “burning platform,” and he needed to make a choice.
He decided to jump. It was unexpected. In ordinary circumstances, the man would never consider plunging into icy waters. But these were not ordinary times – his platform was on fire. The man survived the fall and the waters. After he was rescued, he noted that a “burning platform” caused a radical change in his behaviour.
We too, are standing on a “burning platform,” and we must decide how we are going to change our behaviour.
The entire memo can be found here.
There is serious cause for concern in the hedge fund industry. Managers may be standing on a burning platform without realizing it. For the period ending June 30, 2016, data from Hedge Fund Research (HFR) shows more hedge fund closures than openings for the third consecutive quarter. Some observers suggest this may not be a bad thing for the funds that survive. This may be true but existing firms should urgently assess their situation and develop a battle plan to endure.
The HFR data reflects the unprecedented pressure hedge funds now face. With performance lagging, competition rising, fees falling and investor demands increasing, the firms that last will have to be extraordinary – and they will be the ones to take action immediately.
The kill zone
As a Captain in the U.S. Army, my cousin learned the importance of decisive action when in danger. Jeff was Company Commander in the 101st Airborne Division, conducting convoy operations in Iraq in 2004-2005, for which he was awarded the Bronze Star for heroism, as well as Kuwait in 1997 and Bosnia in 1998. He says when you’re under fire, you have to move. If you stay still, you will die.
Imagine being in a convoy in Iraq. Suddenly, the road ahead is blocked, and you start taking fire – mortar rounds are coming in and machine guns are spraying your convoy. It’s an ambush. And you are in what is called the kill zone.
There’s a good reason it’s called the kill zone. The longer you stay there, the greater the chance you will be killed. This might be the most terrifying moment of your life, but you cannot be paralyzed by that fear. If you don’t take action, you will die. If you don’t take action, those who count on your leadership will die. If you take an action and it is the wrong one, your chances of survival are still far higher than if you do nothing. And if you survive, you can change your course of action to a better one because you are still alive. At this moment, that is the choice you have: Do something or do nothing. Live or die.
You don’t need to find the perfect course of action now; you just need to find a course of action. Come up with the best plan you can and execute the hell out of it. Survive, then adjust and thrive.
Lose the name of action
One of the most notorious examples of inaction is Hamlet. In the iconic “to be or not to be” soliloquy, he says:
And thus the native hue of resolution
Is sicklied o'er with the pale cast of thought,
And enterprises of great pith and moment
With this regard their currents turn awry,
And lose the name of action.
In other words, get on with it. Consider your plan carefully and then move forcefully. Decide. Take action or you will not survive.
Build a firebreak
Most management teams put out fires. Strong leaders build a structure that can withstand sparks without bursting into flames. They build a firebreak, creating a barrier that prevents the fire from spreading, and develop a robust team of firefighters. These responsible leaders are prepared to pounce when there’s any sign of smoke. As Hamlet says, “The readiness is all.” Be ready. Fires will come and you must be prepared with the right structure and the right team.
Break the glass
Don’t wait until your platform is burning. By that time, it may be too late. You’ll be desperate, unable to think clearly and incapable of getting others to buy in. You know the emergency signs that read, “In case of fire, break glass.” They’re wrong. Break the glass now. Right now. Move decisively to save your business before it’s an emergency, before it’s on fire.