Page 173 - 6 Secrets to Startup Success

152 6 SECRETS TO STARTUP SUCCESS

Ken Macher read Doug’s case a few days before the session and
sensed that it was the tip of an iceberg. He told J.C. he wanted to share
it with the full team to start the meeting, and J.C. agreed.

The case immediately struck a nerve. “When we handed out the
case and everybody started to read it,” Macher says, “It’s one of the
few times I can remember that a hush fell over the team. It was like . . .
uh-oh.” J.C. later joked about what the team was probably thinking at
that moment: We’re on sacred ground now. We’re really going to test these
stupid theories.

No other cases were discussed that day. The rest of the session
was devoted to detailed discussion and analysis of the Home Free sit-
uation. In the best of environments, Home Free might have stood a
chance, but the plummeting mortgage markets were causing the
startup to lose $2 million per month, and, more ominously, the same
markets were sapping D1’s core earnings with no clear end in sight.
Home Free’s management team, lost in their own feel-good bubble,
had been giving J.C. a far too optimistic spin on things. “They believed
in what they were doing,” J.C later said. “They were too inexperienced
to see that the thing had failed.” Although he had sunk a tremendous
amount of time and personal capital into the venture, J.C. knew it was
time to stop the bleeding. He met with Home Free’s management
team that night to tell them he was closing the venture down.

The Home Free tale is a story of miscalculation and loss, but it
would have been much worse had the D1 team not come clean about
the gravity of the situation. An optimist by nature, J.C. admits that his
emotional attachment to Home Free was causing him to distort the
harsh reality of the situation. His team provided a wakeup call, allow-
ing him to see the situation more objectively. Ken Macher, who has
observed a lot of leadership teams and organizational cultures, says
that the D1 team’s discussion about Home Free was a “poster child”
for a productive, high-integrity conversation. “A number of things led
to it,” he says. “The culture of the D1 team had developed to the point
that people would bring up an ‘un-discussable’ topic (with Macher’s
help, in this case) and the CEO would invite it to be discussed. And
that was only the beginning, because they had to work through a lot
of fog.” Drawing on trust and skill developed as a team, they cut

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