Tag: On Principle

"The $5 Million Mistake"

This first episode of this season of On Principle is about recognizing when you’ve made a mistake and having the guts to face it—even if it means flushing millions down the drain.

In 2003, Alaina Maciá, BS ’98/MBA ’02, arrived at MTM, the St. Louis-based broker of non-emergency medical transportation services, to find a company on the verge of explosive growth. By 2005, she was MTM’s CEO, and since that time the company has rocketed from $30 million to nearly $700 million in annual revenue, with clients and customers nationwide.

A nagging concern she noticed as she began, however, was the stable but not particularly cutting-edge technology platform the company was built on. Yet she faced a conundrum: How do you overhaul your tech foundation while onboarding clients at a fever pitch? Can you afford to pause growth for the sake of a foundational investment? Is it possible to grow and rebuild simultaneously?

Customer demands

Increasingly, as the tech world advanced, Maciá saw that customers were demanding a higher level of self-service—apps and functionality that offer an “Uber-like” transportation experience, for example. “It’s probably been the single biggest challenge I’ve faced since I began running the company,” Maciá said. “This is big dollars for a medium-sized company.”

Knowing she didn’t have the in-house expertise to make this transition, Maciá contracted with an outside firm to work on the tech upgrade with her team.

And this is where the pivotal moment occurs.

Five million dollars into the project, she realized the work had barely scratched the surface of what MTM was going to need. She decided to scrap the project. Soon after, MTM brought Salesforce aboard to collaborate on the upgrade, but “they don’t tell you that you have to have a robust team,” she said. “We launched some projects on Salesforce, but it was clear it would be slow to get where we needed to go and it still didn’t do everything we needed.”

That was another $5 million down the tubes.

Progress begins

Ultimately, progress began when Maciá engineered the $15 million purchase in August 2017 of Reveal Management Services in Kansas City, effectively bringing in-house the expertise of technologists focused on transportation scheduling algorithms and real-time GPS tracking.

Now, she is seeing light at the end of the tunnel and MTM has already implemented a number of technology upgrades—including that Uber-like experience. The progress has her looking at adding new service lines such as meal and grocery delivery and other things.

Alaina refers to work they’ve accomplished with the Reveal technology as MTM’s “resting platform” while they fully overhaul their system, with a hard deadline of Dec. 31, 2022, to complete the transition.

“It took 20 years to move off the old platform, three years to move to the dot-net platform, and it’ll take 18 months to move to the new platform,” she said.

Listen to “The $5 Million Mistake” here.

"Taking a Punch" podcast featuring David Karandish

David Karandish’s Answers.com was a whopping success, but he was on the ropes 90 days after he began running it. How did his earlier startups teach him to take a punch?

Karandish is, by any standard, a massively successful entrepreneur. His most noteworthy transaction is the sale of Answers.com for $960 million—a “rounded unicorn,” he says, using startup shorthand for a billion-dollar deal.

But that success was hard-fought and made possible by a litany of failures and one unexpected disaster. Meanwhile, those failures—and that one big success—paved the way for what already promises to be another massive hit for Karandish, BSCS ’05. Capacity, his AI-driven customer support platform has been on a tear.

Our story hinges on a two-hour period in 2011, 90 days after David—at age 26—and his partners had engineered the merger of their company with Answers.com, taking the once-public Answers private. That day, David’s team watched the traffic drain from their site in the wake of a change in Google’s search algorithms. “Our $127 million acquisition went unprofitable in about two hours,” he said.

This is the story of what led to that moment, how David and his team responded, what in his history informed that response and how he’s carried those lessons into his next chapter with Capacity.

Along the way, we learn something about the difficulty of thinking in terms of failure—though failure was the fate of his first six startups. We learn about the danger of taking customer acquisition for granted. We learn how a successful entrepreneur can roll up the lessons into one more big win.

And we begin to understand why it’s so important to learn how to take a punch.

Listen to this episode of On Principle.

In the summer of 2017, a data breach occurred at Atlanta-based credit bureau Equifax affecting the records of more than 140 million consumers in the United States. The company announced the incursion in September, arguably one of the largest such breaches in history at the time, giving hackers access to private information—names, Social Security numbers, dates of birth, credit card numbers, even driver’s license numbers.

​“We had people being attacked publicly, people avoiding mentioning the fact that they worked for Equifax.”

Into that scene, WashU Olin alumnus Paulino do Rego Barros Jr. stepped as the company’s interim CEO, charged with managing the fallout from the situation. Employees were scared as they faced furious backlash—even threats from consumers. Systems were overloaded as consumers flooded the firm’s call centers and websites. “The building was on fire,” do Rego Barros said.

In this episode, we examine the steps he and his colleagues took to confront the situation and begin to restore trust among consumers, customers, regulators and policymakers. While avoiding the regulatory and legal issues—these won’t be relitigated in this episode—we focus on three primary decision points: Engaging with employees, engaging and reassuring consumers (e.g., individuals), and doing the same with customers (e.g., banks and other institutions).

The subject remains topical today as companies and institutions continue to be vulnerable to data breaches that expose private consumer information. What decisions had to be made in the immediate aftermath of the breach? What were the implications? How does a business re-establish trust with customers under those circumstances? Then, once the immediate fire is quelled, how do you propel the business into a better place?

Listen to more of On Principle’s first season.