Source: Imperial College Business School
April 12, 2016
Early Promise of a Powa House
[dropcap]E[/dropcap]stablished in 2007, UK payments business Powa Technologies was valued at a remarkable £1.6bn in 2014, 5 times more than just a year earlier and earning it coveted ‘unicorn’ status (as applied to any post-2000 startup valued at more than $1bn). [pullquote cite=”” type=”right”] Powa appeared to have the foundations of a worldwide disruptor. A potentially great idea on a global scale, virtually eliminating traditionally lengthy retail checkout processes – both in-store and online.[/pullquote] Prime Minster David Cameron applauded its success in providing over 250 UK jobs and investors tipped over £140m into its pockets. With its finances buoyant, the future appeared to be rosy. And in late 2015, its CEO, ecommerce veteran and tech entrepreneur Dan Wagner, was forecasting sky-high revenues of £3.3 billion over the next 2 years, boasting to the Financial Times that Powa would become “the biggest tech firm in living memory”.Unfortunate Demise
Yet, just a few weeks later, February 2016 saw Powa’s sudden death as it fell headfirst into administration, with just £174,600 in the bank and debts of £11.4 million, according to Business Insider UK. Its 311 worldwide staff were left stranded and a UK fintech industry perplexed at this most uncharacteristic failure in its own backyard.
So what was the diagnosis – where DID it all go wrong? And what is there to learn from it? Was there an unknown fault line within the rapidly-expanding UK fintech sector itself or was there a far more fundamental and underlying issue at Powa?
Management Self-destruction
[pullquote cite=”” type=”left”]The truly unhappy fact was that the Powa bubble actually burst from the inside. Its management team was living a lie, an almost mythical existence – like its unicorn label.[/pullquote] According to Rory Cellan-Jones at the BBC, money haemorrhaged out as fast as it poured in. Going to the colossal expense (possibly £2.5m annually, according to the Financial Times) of renting offices in the exclusive Heron Tower when the company wasn’t even turning a profit was just one of a number of reckless financial management decisions that were unlikely to pay off. Huge expenses bills were racked up and 80s-style lavish parties thrown while bills and invoices piled up unpaid – an unsustainable and self-destructive state of affairs for any business.Meanwhile, Wagner would be making over-ambitious claims about Powa’s core products and the technology itself, which even now has a question-mark over its true origins, according to Business Insider UK. Wagner’s own right-hand man was tasked with trying to sweep up after its CEO, asking the staff to anonymously write flattering reports on the Glassdoor review website about working for the company in return for Starbucks vouchers. Indeed, there were a plethora of negative reviews to counteract, with Business Insider UK highlighting those who describing the management as “delusional”, “incompetent”, “appalling” and “incapable”.
Mass redundancies were commonplace, according to Business Insider UK, a culture of hiring and firing that left a bitter taste for the remaining workforce. Furthermore, sudden product strategy changes at a senior management level highlighted communication breakdowns and increased frustrations, leaving staff reeling, customers without a product and – ultimately – a company without revenue.
Rory Cellan-Jones continues to demonstrate how the CEO even fiddled while Rome burned – or at least emailed his workers his bizarre Ziggy Stardust ‘tribute’ photoshoot while the company itself was entering its final weeks, which led one exasperated employee to brand Wagner a “narcissistic idiot”.
It seems the final nail in the coffin was Wagner’s triumphant boast about securing a big Chinese deal (as reported by the BBC) which backfired with almost Ratner-style effect. As any good PR management strategy would have guarded against, such posturing was something the respectful Chinese found extremely distasteful and Powa Technologies’ death sentence was all but signed and sealed.
Sustaining Success
[pullquote cite=”” type=”right”]Just as architects unpick and analyse the causes of catastrophic structural failures to learn from disasters, the fall of Powa Technologies powerfully underlines the need for all businesses to ensure their management teams are equipped with effective and relevant leadership skills to survive and thrive in a fast-paced future.[/pullquote] It’s a sobering lesson in the fundamentals of good management practices – especially for those caught in the throng of excitement over technological evolution. Stratospheric valuations on relatively new companies can quickly go to the head, inflating the management’s ego way beyond its own capabilities.Especially in the flourishing entrepreneurial sector, managing a business can often happen without much preparation. Suddenly you’re thrust to the forefront and expected to have every tool in the managerial box polished, sharpened and ready for use. Where can you swiftly hone these critical skills in order to face growing strategic challenges and lead with confidence?
And of course it’s not restricted to startups, an essential for any truly successful business is a solid management team with a clear and cautious strategy for attaining realistic and sustainable goals. A step back is often required, to take stock, reassess and keep a cautious check on the realities.
