“Looking back on it, what happend was always for the Best”
In crises, however, it is not just a matter of eliminating problems and re-establishingthe status quo, but ideally turning bad into good and emerging from the situation with newfound strength. One interviewee summed it up as follows: “Looking back on it, what happened was always for the best.” Many of the interviewees expressed similar sentiments.
This interviewee’s business originally comprised only a small number of stores; today there are hundreds. It was disagreements with a wholesaler that provided the trigger for the expansion of the business:
Interviewer: And what made you decide to expand on such a scale, with all of these stores?
Interviewee 14: Yes, well I once had a problem with a buyer in the wholesale sector. He was always telling me that he wanted our quality, but in reality he put so much pressure on us, to lower our prices that I said, “No, no, we won’t supply to you any more.” But I wanted to expand, so I said to myself, “The customer, the individual customer, the end customer, they’ll either come or they won’t, and then you’ll know. Now is your chance.” So I went and discussed it with my father, told him that I wanted to expand our network of stores. My father’s first reaction was to throw his hands up in despair. […] But he left me to get on with it and I opened between 10 and 15 stores per year and that was a complete success.
For the IT entrepreneur quoted below, a major database problem affecting roughly 1,000 customers led to an innovation that made his product suitable for major business clients:
Interviewee 33: We had a database system and the software we used wasn’t really stable for our large business clients, so we had to make a major intervention in the product, so to speak, and then install a completely new database kernel. Yes, it’s only after that that the product was really suitable for major businesses and could integrate with SAP and so on. None of that would have been possible with the old technology. […]
Interviewer: Could you give me a few more details?
Interviewee 33: Well, alongside the software’s core code, software is based on a database, which is where all of the data is stored. And there are relational and non-relational databases. The databases that we all know come from Oracle or DB2, from SAP or Microsoft SQL Server. Those are the best-known database manufacturers nowadays, but there are others, and they can also be good and certainly have their advantages and many are actually cheaper for customers. Well, we had a database that kept on causing crashes and system freezes for customers with more than 40 workstations. It was relatively unsystematic. We weren’t 100% sure if it was because of the database, or if it was something else that was causing the problem. But the suspicion was already there, because our smaller customers weren’t having the same problem, and we didn’t have that many large customers. Our business tended to involve lots of small customers. And at some point, because of the problems, we decided to make a big investment, two years of development capacity I think it was, to replace the database. It’s not like a car, engine out, new engine in and everything works smoothly again. The migration to a new database technology was a big challenge. We’re talking about more than a thousand customers. You can’t just switch them all over in one go. But we managed it. We suffered for a while, until the process was complete, but once it was finished, we were suddenly a completely different proposition and became an important potential supplier to a whole new category of customers. Interviewer: For larger customers?
Interviewee 33: Yes, for larger companies. For companies that have a more professional IT infrastructure.
The next interviewee reports how his company’s most important financing partner tore up a contract in the middle of the financial crisis, creating an existential threat to his company. Without this breach of contract, however, he would not have been able to sell his company for such a high price – for an amount that far exceeded his expectations:
Interviewee 18: It was during the big credit crunch, when [the financing partner] jumped ship. It took us two years to get things back under control; it was a really tough time. Everything I had was on the line. Everything. But I was totally sure that I would win out in the end, because I was convinced that I could get the company back on the right track. […] Before all of this, I would never have believed that such a reputable partner would just tear up contracts like that. And these contracts were worth a few hundred million. […]
Interviewer: Some of the people I have spoken with have told me that ultimately a problem or setback led to something great. Was it the same for you?
Interviewee 18: Yes, of course. When you compare the valuation xxx bank made of my company and the price I sold it for, that’s a ratio of one to three, I would say. I always knew that it was worth more, you know? But xxx bank, they naturally saw things from a different perspective, didn’t they? But I knew that the true value of the company was more than just the sum of its assets and property developments, but also our unique position in Germany. […].
Interviewer: So, with hindsight you could say that, as bad as things got, it was actually a good thing, because otherwise you never would have been able to achieve what you did?
Interviewee 18: Yes, you could definitely say that.
Interviewer: Otherwise, you might not have made your exit, and who knows how difficult things would have been.
Interviewee 18: No, I probably wouldn’t have done any of it without the credit crunch and xxx’s breach of our agreement; I would have just carried on happily as before, wouldn’t I? But whether I would have ended up with such a strong and attractive company, one that commanded such a premium from a buyer who was desperate to enter the German market, that probably wouldn’t have happened.
The following entrepreneur’s investments have had to survive three major crises over the past few decades. In one case, a multi-billion-euro investment got into serious financial difficulties. But the company “emerged stronger” out of each of these crises. New strategies were implemented to deal with the crises, and the company was left with little choice but to evolve:
Interviewee 22: And that we had to develop completely new strategies and come up with completely new ideas. That’s basically what led to us developing from a pure asset manager into a vertically integrated real estate company.
Interviewer: And that’s the basis of everything that you do now.
Interviewee 22: That’s right. In that respect, we embraced the crisis and said, we’ll have to finish the residential development at xxx ourselves, because the developer had committed suicide and the buildings were all standing there half finished. So, to do that we needed to bring in people to handle the construction management. We had to start by hiring them. And so it went on. And then we had to hire a lettings team. And that’s how we developed from an asset manager that was only ever involved with real estate at the management level, into a company that also got dirt on its hands, that was on-site, wading through the mud, managing buildings and construction, organizing the building sites and the like.
Interviewer: So that means that out of each of these three crises the end result was something positive.
Interviewee 22: Definitely. Yes, yes, definitely. We emerged stronger out of every crisis, not always financially stronger, but better organized, or stronger in other ways, stronger than when we entered the crises.
The following interviewee was forced into a product recall when a competitor secured a temporary injunction against his company. This was a major problem, but it led to growth because it opened up the Chinese market for his products:
Interviewee 37: So there you are, surrounded by these five thousand boxes of your product. Already opened, already with price labels on. The goods were worth probably EUR 200,000, plus the costs of the recall, plus the expense of resupplying new product. All in all it must have cost between EUR 300,000 and 500,000, even more if you include the court costs and lawyers’ fees. They’ve got you nailed to the wall, and all because you weren’t quite careful enough. And then you sit there and think to yourself, “So, what can we do with all this stuff?” We weren’t allowed to bring it back into circulation, were we? And then this Chinese guy came waltzing round the corner and said, “I like what you’ve got there. I’ll buy it all off you and I’ll establish a brand for you in China.” So we suddenly had a brand in China. One of the fastest growing brands in that product category in China, if not the fastest, you know? So, if none of that had happened, who would have ever had the idea to sell [product category] in China, and in such small pack sizes?
“Setbacks and catharsis have given me greater happiness,” said the following interviewee. These challenges primarily brought about a personal change, because he learned humility through such situations:
Interviewer: You’ve already said what was important to you [the interviewee had written this down prior to the interview]: “We need success, but we also need setbacks and to fail; setbacks and catharsis have given me greater happiness.” […] Can you give me an example to illustrate what you mean? A situation where you would say, “That setback was important for me.”
Interviewee 21: I have had smaller and greater catharses and setbacks. If we were to talk about the greatest, then that would be xxx. I bought the company and believed I was doing well. And the banks came in and refused to approve any more lending. In such a capital-intensive business, you need bank loans. And then the planning authorities left me a bit in the lurch, and the press got involved and wrote: “He’s doing something here that isn’t right. He’s making money off the backs of his tenants.” That made me reflect on what I was doing, because I thought they were wrong. But if I take things one step further, then I can only say that if I hadn’t bought [company] […], then I would have invested three times as much in eastern Germany, and that wouldn’t have been good. So, a setback can lead to an economic solution, or it can provide the stimulus for a personal change, create humility. And so I say, courage and humility, like a mountaineer, that’s what life is about. I need courage to approach tasks without fear, but then I need the right amount of humility because I know that when I’m doing something, there are lots of factors I need to consider that can’t be defeated with courage, but only with humility and modesty.
Interviewer: And what does that mean, defeated with humility and modesty? That’s certainly an interesting formulation. Could you explain a bit more what you mean?
Interviewee 21: Aggression grows with too much courage, with too much self-confidence. Modesty means I see people as they are, and that I don’t overestimate myself, that I recognize myself as a regular human being. Those are the foundations, I believe, of a certain modesty. That means recognizing that we won’t be successful unless fate smiles on us, and realizing that we shouldn’t just enjoy life and all of the beautiful things it gives us, but that we should also know where they come from.
Looking back on his life, another interviewee said that the defeats and existential crises of his company had been necessary for his own development process. These setbacks only matured him – “I needed to get punched in the face for three years or I would never have grown up”:
Interviewee 40: And that’s why I say it was the most important thing that ever happened to me. That immature and stubborn youth somehow transformed into someone who thinks analytically, who reduced their level of risk exposure a bit and also became more mature. It’s the result of lots of experience, so to speak. […] I needed to get punched in the face for three years or I would never have grown up. Otherwise, I just wouldn’t have learned. It was exactly that, you know?
Interviewer: So you would say that it was a good thing.
Interviewee 40: It was perfect. I mean, look at where we’re sitting today, right? […]
Interviewer: And what was the main thing, the biggest leap in your learning? You said that you matured, but if you can help me to understand it better, what was the most positive lesson you learned from this whole crisis situation?
Interviewee 40: Well, first of all, what you are naturally capable of. The strengths that you possess, the finesse. What I mean by that is the ability to win people over, to assess situations correctly. You asked me earlier on, “What is it that makes you special,” and that is it. Yes, that’s what I realized. I truly realized what it is that I am best at, and I went on to use that realization.
Interviewer: So it gave you confidence.
Interviewee 40: Yes, absolutely. I very clearly said to myself, this is what I can do best. I know today that I don’t need to be a perfectionist when it comes to using Excel, I don’t need to be a perfectionist when it comes to lots of other things. Other people can do that, can’t they?
Setbacks and crises are important, said the entrepreneur quoted below, because “when people are under pressure and cornered, they are capable of far greater achievements than if they only ever walk in the sunlight”. In the early 1990s, he experienced severe financial difficulties when his bank refused to honour a loan approval and he did not have access to sufficient equity capital to make up the difference. In the end, he found a creative solution, “born out of necessity, because we couldn’t manage it any other way”. This solution later became an important foundation and unique selling point of his company’s business model:
Interviewee 41: Yes, I do believe that when people are under pressure and cornered, they are capable of far greater achievements than if they only ever walk in the sunlight. And for me, I was also shaped by my parents. I respect my mother like no other person in the world, so I really had to help her [because of the problems, caused by his father]. That was a disaster for me, while I was studying and I spent a huge amount of money, including the money I had to earn. That made a lasting impression on me. That’s the one side of it. You fight harder than if you’ve only ever had the sun shining down on you. And the second thing was that, having seen my father’s attitude to money, I practically said to myself that I would do anything in life, but never that. That was basically my safety concept.
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