Failure and Old Testament Tactics

Failure and invention are inseparable twins. To invent you have to experiment, and if you know in advance that it’s going to work, it’s not an experiment. Most large organizations embrace the idea of invention, but are not willing to suffer the string of failed experiments necessary to get there. Outsized returns often come from betting against conventional wisdom, and conventional wisdom is usually right. Given a ten percent chance of a 100 times payoff, you should take that bet every time. But you’re still going to be wrong nine times out of ten. We all know that if you swing for the fences, you’re going to strike out a lot, but you’re also going to hit some home runs. The difference between baseball and business, however, is that baseball has a truncated outcome distribution. When you swing, no matter how well you connect with the ball, the most runs you can get is four. In business, every once in a while, when you step up to the plate, you can score 1,000 runs. This long-tailed distribution of returns is why it’s important to be bold. Big winners pay for so many experiments. — Jeff Bezos Founder & CEO of Amazon

In mid 2015 I had a problem. We were months away from running out of money and needed to do something. There was no commercial solution. We needed to invent our way out of this. We had an Android app that sucked and needed to reallocate capital to product and engineering in NY in order to try and invent the future. We had just launched the channels with StarTimes and they were totally pissed at us for under performing and being a dysfunctional organisation. The deal was at real risk. Our foray into linear TV was turning into a total nightmare. Terrible start. I was living in NY, trying to lead the efforts to build our Android app. The Hail Mary move that would sink or save IROKOtv. Management got disgruntled. Then the negative press started. Irokotv Reportedly Laying Off Top Executives, Hundreds Others Axed. Below are a few choice cuts

The sources, who asked to remain anonymous, claim iROKO is facing a very high degree of mismanagement and experimentation which is turning to be cruel to employees and hurting the name of the firm and its investors. The informants also accuse co-founder and CEO, Jason Njoku of ‘indecisiveness, mismanagement, cruelty and riding the Nollywood fame’.

and

With this experiments, the insider says iROKOtv was firing in Lagos to hire in London expecting to sign up a new market for Nollywood but adds that London is expensive and makes no sense but just a sign of iROKO has fired its VP of distribution, lead of partnerships, lead of offline, lead of YouTube, its CTO and the its engineering lead plus the telesales team and content operations,”

and

“It’s basically a jungle run by an egoistic child,” claims another source also asking for anonymity. “They pull in talent but are unable to manage them in a humane manner. It’s an extremely hostile environment. Their ties to Nollywood are not unbreakable.”

And you know what? From the perspective of a middle manager or executive, IROKO appeared like that. For someone untuned to the sometime chaos of creation, IROKO was a mess. To make matters worse, I wasn’t even in Lagos. I was causing all this havoc from NY. I would drop in unannounced for a few days and retrench entire divisions. Rumours of a coup d’etat were reaching me from Lagos.

This was right in the middle of the due diligence for the $19m content and capital fund raise that closed a few months later. If I was a seasoned executive with experience, I probably would have found a way to not give people the impending sense of gloom and implosion over at IROKO, whilst negotiating the biggest deal of my life. Alas, I am not sophisticated like that. I am a simple man. I needed to reallocate capital. So I reallocated capital. I needed to rebuild my executive team. So I went ahead and dismantled and rebuilt the entire IROKO executive and management team in about 3 months. One of my board members at the time told me it’s not normal to ‘blow up your company’. I respectfully disagreed. Sometimes the situation is so dire only Old Testament tactics could work. I needed to get biblical. I truly believed (and still do) that sometimes you need to blow things up to put them back together. Interestingly, not one person from that executive team era remains on the executive team today. This period of intensity precipitated Bastian’s eventual departure. Inasmuch as I somewhat regret that, the team I built back then are the same team today almost 3 years later. I still think some of the old guard were awesome. But in the end, had lost confidence in IROKO and me. So it was time to move on. For me, it was pretty straight forward what needed to be done. So I just went ahead and simply did it. I needed to be bold.

Someone once called it a bloodsport when it came to IROKOtv’s survival. Folks got pretty emotional and animated predicting when IROKO would fall. Then they were deeply upset when we didn’t.

As sad as I was, I needed to communicate and move forward.

from Saying Goodbye

The affected departments were video quality control (nothing to do with iROKOtv consumer business), offline subscription sales (Lagos-focused activity which has been running for 13 months, unfortunately we needed to invest significantly more in above the line marketing or step aside. We are not big on marketing spend and couldn’t justify the investment so frustratingly we decided to step aside and focus reallocate capital elsewhere) free trial telesales (contract-based android app only activity) and finally linear and creative services (our distribution team is now based out of London so the senior team and junior roles were relocated to the London office).

There has been talk of executives leaving en masse. Exodus. Hardly. Only one person I talk to on a regular basis has left the company of recent. The most dramatic change happened in NY 5 months ago when we went from 5 engineers to 2, then quickly up to 17 across Lagos and NY. Sometimes you need to blow things up to get a better result. We now have a truly exciting international and local engineering team who are re-architecting the fundamental framework of iROKOtv for today and the scale we anticipate in the future. Owning engineering has to be one of the most important activities at a consumer internet company. I am glad we made the brutal transition and are about to release a slew of market-focused products to change the perspective of apps built for Nigeria. Otherwise I have been re-aligning iROKO for the last 6 months. Bringing in a new group of senior talent to address my personal deficiencies to allow us to grow beyond where we are today. FYI — in 2015 we are returning to 100%+ y-o-y revenue growth.

Timing

Look at the above. Of the 130 people we said goodbye to. 96 odd were telesales agents. Another 20-odd were offline subscription sales team. Today both of those divisions Offline agents (kiosks) and Outbound (telesales) are the core business of IROKOtv in Africa. We are currently 203 people trying to grow to 400 in Q2. I have the space, the budget, just trying to find the right people. This is driving amazing growth in Nigeria and Ghana. It failed 3 years ago. Failed so bad I had to dissolved divisions and got a public whipping. But it is core today. A core that is very difficult for most to replicate. The approach is exactly the same as 2014-2015. Just actually successful. Timing can sometimes be everything. But we institutionalised that failure. We never let it define us. We just went back to experimenting and figuring s*it out. Today IROKOtv is a well known brand across Africa, our content and channels are #1 partners for Nollywood on all major PayTV platforms. We even increased our annual price on the 5th April from N2,000 ($5.6) to N3,000 ($8.6). That’s a 50% increase. No uproar. No implosion. Still growing. IROKOtv is still underpriced (I think the real price is closer to N1,000/month).

Today we are still deep experimenting on something new. Always trying to rethink distribution. A few weeks ago when I was in the East (Enugu / Anambra / Imo) I saw Bet9ja and NairaBet and GOtv dealers / agents everywhere. I was scared and felt IROKOtv needed something to scale outside of Lagos. So we started trying to figure out how to introduce something. Today we are starting a pilot test of the IROKOtv dealer network. A mobile video club 2.0 if you will.

Dealer Network

The key thing is, there’s no shop required, just an Android phone. No requirements to invest too much money to increase your ability to earn. We are allowing anyone, anywhere in Nigeria, to become an IROKOtv dealer. To extend our services to places we cannot go ourselves. The basic registration is N50,000 but we have a 40% launch promo [now N30,000] for the first 200 dealers. We give them a gaggle of marketing materials and support.

Essentially, the all powerful distribution layer that created Nollywood was the video club. This, at the top, was organised and controlled by the ‘Men from Alaba’. At the consumer / street level, it was the video clubs which drove Nollywood deeply into the homes of the masses. I remember being in Alaba, and the buyers weren’t individuals. They were wholesalers to the video clubs. I saw first hand the devastating effects of stuffing the video club sales channel full of content, increasingly sub-par content. It reduced the margins and destroyed the consumer appetite. We obviously have a very hot product and the technology to support it.

Our ambition is for the IROKOtv dealer network to essentially replace the remaining video clubs and replicate that layer from yesteryear. Forever. Video Clubs 2.0 if you will. The big big idea is that dealers can charge customers up to N20 / movie transferred to them (100% data / direct wifi / xender — so no data issues) of which they get to keep 100% of revenues from that. So if you have 20 customers who you give 20 movies a week (not abnormal), you would get N20 x 20 movies x 20 customers= N8,000 a week. Not to mention the N1,000 per subscription commission (a whopping 33%) for any sign-up. This gives them unlimited potential to make recurring revenue from their customer ‘video club’ base. In Lagos today, we have customers who easily get 50+ movies / series per week from agents. So we know this one should blow. More importantly. You don’t need a shop. Just an Android phone and an SD card.

But hey. It could also fail. Woefully. Nonetheless. It’s all about that deep experimentation nature and being comfortable with the 90% failure rates. But what I know now is if that were to happen, we at IROKO would fully embrace it. Accept our role in it. Do a full autopsy and then institutionalise it.

Someone once asked me, where do I get my confidence from? It’s pretty simple. Inside my house. My wife loves me and my kids think I’m a super hero. Everything else that happens to me is vanity.