The Cloud Communication Platforms company Twilio went public in 2016. At that time, Uber was their key customer and constituted >10% of their revenue. At the beginning of 2017, Uber indicated to Twilio that they would start reducing their spend (as cost saving was becoming a priority for them). In Q1 2017, Twilio now a public company, disclosed the same in the earnings call. This led to Twilio's stock being dropped by 30%. Twilio leadership realized their misstep of over-relying on top few customers. The revenue contribution of top customers went down from 30% in 2016 to 14% in 2020.
How did they turned around the situation ?
No rocket science here. During this time, Twilio CEO had asked the CFO to run a blameless postmortem. Blameless postmortems focus on improving performance moving forward without putting blame on people. The question in this case was “Why did we have such a big investor-facing misstep?” It would have been easy to blame the sales rep covering the Uber account, but it wouldn’t have gotten them to the true root cause.
They asked "Why" multiple times and it came down to two true root causes. First, Twilio had a small handful of customers who, because of their usage-based pricing model, had grown too large and therefore represented risk. They figured out that they needed to manage “customer concentration” better, even if it meant proactively lowering prices. But more important, the other true root cause was that they didn’t have enough salespeople covering all of our accounts.
(Source: Adapted from the book- "Ask Your Developer")
They fixed these anomalies, leading them to objectively learn from the failure and fix the situation.
As with most situations, the true root cause of missteps is rarely technical in nature—it’s more often organizational. When things go wrong, it’s either a time to blame, or a time to learn. A failure becomes a good failure after you extract all the learnings from it (see Sketchnote). Like they say- "Never let a good crisis go to waste" likewise "Never let a failure go to waste"
What are some of the ways you have handled failures at work ?
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