“The Hard Thing About Hard Things” is not your typical business book. It is also not your cliche rags-to-riches story. The book has a unique cadence and voice, and I’m not referring to the hip-hop references found throughout the 275-page odyssey.
Most business books focus on strategy, product and innovation. Although HTAHT does touch on pivots, competition and blue-ocean strategy through his work at Silicon Graphics, Netscape and especially as the CEO and Co-Founder of Loudcloud/Opsware, that is not the core of the book.
HTAHT goes where few business books venture. That is the human element of a business success or failure. Loudcloud was founded in the froth of the dot-com feeding frenzy in 1999. Coming off the highs and lows of his Netscape experience, Ben was able to raise $21 million to seed his cloud computing startup. Before Loudcloud (then Opsware’s) $1.6 billion sale to HP in 2007, Horowitz would face many sleepless nights as his company faced numerous near-death experiences.
Loudcloud/Opsware’s journey through the 7 circles of hell
Stage 1: The impossible IPO
With the dot-com crash, Loudcloud’s customer base and revenues were decimated. His 600-employee company was on the verge of becoming a footnote as one of the more spectacular failures of the dot-com era. Faced with no good choices, Horwitz decided to attempt an improbable IPO during the nuclear winter that was the dot-com crash. In the face of skeptical bankers, a nightmarish road show, a crashing stock market, and a reverse stock split, Loudcloud somehow pulled off a $162.5 million IPO at $6 per share in Q4 2000. Horwitz had to exert enormous fortitude to pull off the IPO, and it was just in the nick of time.
Stage 2: The customer implosion
As the customer fall-out from the dot-com crash continued to cycle through Loudcloud’s revenues, they were immediately faced with a revenue projection reset. They projected $55 million in revenues for 2001, down from their original $75 million guidance. The stock fell to $2, and Horowitz laid off 15% of his workforce.
Stage 3: A day we will never forget
September 11th 2001 sent shock waves that reverberated through the stock market and economy. Loudcloud was not spared. In 2002, their largest customer Atriax filed for bankruptcy. They would not be paying the $25 million owed to Loudcloud. The fragile financial state of Loudcloud required a dramatic decision.
Stage 4: What is Loudcloud without a cloud offering?
In 2002, against the urging of employees, management and advisors, Horowitz decided to sell the cloud server business to EDS for $63.5 million in cash. The server-automation software that ran the Loudcloud business was retained. The business was rebranded Opsware. Besides the cash offer, EDS agreed to pay Opsware $20 million annually to license the software. 150 employees were transferred to EDS, and 140 employees were let go. Opsware emerged as a lean and agile server software business.
Stage 5: Wall Street says, “does not compute”
After the sale of the cloud business to EDS, Wall Street did not understand what value was left in Opsware. Their share price crashed to $.35 per share. Nasdaq threatened to delist their shares unless they could achieve a $1 per share price. Horwitz went back to Wall Street to explain the Opsware story. His story resonated and their stock rose to $7 a share.
Stage 6: The 2nd best product is the 1st loser
BladeLogic was winning accounts against Opsware. The Opsware software was not initially built to be productized. It was intended to be an internal tool to manage their cloud server deployments. Horowitz had to rally their product and sales teams to close the gap on BladeLogic and win key accounts.
Stage 7: Crossing the finish line
Opsware put world-class execution into their product and sale. They earned a position as a leader in the fast-growing server automation software space. Their business and stock improved to a point where larger enterprise hardware and software companies began taking an interest. With virtual server software from companies like VMware threatening to transform the industry, Opsware was faced with a decision to sell or retool for the next battle. HP put in a $1.65 billion bid, valuing Opsware at a huge premium of $14.25 per share. Horowitz’s Loudcloud/Opsware journey had concluded.
…but that’s not what HTAHT is about
At this point in the story, we are on page 55. 220 pages to go. Here’s where the story takes a left turn. Most business books dive into the strategic decisions. The heroic CEO’s bold and decisive moves are analyzed and compared against less fortunate peers. The author will deconstruct the keys to becoming a business strategy savant in the face of an ever-changing competitive landscape.
What is left out of 99% of business success stories is the excruciating pain of the journey, and especially the difficulty in execution. Ideas are fun and magically. Execution is painful and time-consuming. No one man can build a world-changing product alone. A team of motivated humans is necessary to succeed. Horowitz does not simply throw shout-outs to key advisors and employees who helped him navigate Opsware to their successful exit. He goes deep into the process of communicating, recruiting, firing, and managing employees.
Horowitz provides examples and how-to processes for all aspects of human capital management.
- How to interview and recruit key employees.
- How to establish a winning, motivated, and productive work culture.
- How to communicate bad news to employees.
- How to build a world-class sales organization.
- How to properly fire and lay-off employees.
- How to communicate with the board.
- How to train employees.
- How to resolve employee conflicts.
The nitty-gritty of employee management is seldom explained to the degree that Horowitz takes. Less common is how to handle employees when things go wrong. Horowitz recommends clear and immediate communication, especially for bad news. Howowitz writes that there is no way Opsware should have been able to succeed considering the numerous setbacks they faced. The team should have given up on Horowitz and Opsware and chosen a less stressful and more promising career elsewhere. Horowitz’s retrospective on his team’s ability to beat the odds and overcome adversity time and again was based on an open culture of trust and accountability. They took on challenging sales targets and product deadlines to pull Opsware out of its many death spirals. No easy feat. Although he admits to making many mistakes along the way, his ability to communicate and manage his team overcame the external, competitive and strategic challenges they faced.
HTAHT counters the hero-CEO fairy tales all too common in business books and biographies. Stories that lure inexperienced entrepreneurs into believing that becoming the next Steve Jobs simply requires a good idea and sound strategic decisions. HTAHT realistically describes the turbulent and stressful process of creating a winning company. His solutions are complex and challenging to execute. Getting alignment with management, employees and the board is only achieved after long emotional, hard-fought battles. Horowitz conducted many layoffs to valued employees. Horowitz also had to terminate many mismatched executives who could not or would not deliver the results needed for the business to survive. The cost to Horowitz was high. Stress was plentiful. Sleep was scarce. Faced with the hard decisions, Horowitz did not delay. He understood that inaction would only jeopardize the remaining team members. Due to Horowitz’s courage to make the hard decisions, Opsware’s team formed into a band of brothers (and sisters) who battled to the end.
The thesis of HTAHT is that people matter most. Talented employees can thrive when faced with incredible challenges and impossible deadlines. Horowitz tapped into this epiphany somewhat accidentally. His candid and direct communication during the worst times triggered mass mobilizations of his team who then rallied to save the company. He discovered that humans want to create. Humans want to matter. Horowitz trusted his team, and allowed them to win, and they in turn delivered.
HTAHT is a great insider view on the journey to greatness in business. The path is not paved with gold; but blood, sweat and tears. Can you inspire a team to perform against all odds? Will your team back you or abandon you in your worst hour? Horowitz shares his experience in order that the sacrifices required are clear. Want to be an entrepreneur? Read HTAHT and then decide.
