Friday, April 20, 2012

TerraCycle's Tom Szaky makes a tough decision

An undertone of this project is decision-making. Each decision point is an opportunity to make a mistake. Avoiding decisions are mistakes in themselves. Yet in a complex environment there is no playbook for assuring a decision leads to a good outcome.

It's rare to get a peek into someone else's significant decision-making process, so kudos to TerraCycle CEO Tom Szaky, who discussed a key business decision in the New York Times "You're The Boss" blog this week.

TerraCycle has been trying to add a new type of business to its existing one - collecting juice pouches and remanufacturing them into consumer goods such as purses. In this case, the juice companies (such as Capri Sun) subsidize TerraCycle's costs for collection. The new business (called World of Waste, or W.O.W.) involves engaging consumers to cover the costs to collect and recycle other products for which the manufacturers aren't willing to pay TerraCycle to collect.

Enhancing TerraCycle's information systems to support this new model has caused delays in the program's introduction. Those delays are the subject of Szaky's post. I was most interested in the section where he talked about the management debate between investing in enhancing the existing juice pouch business model versus adding this new, quite different model:

I have made a firm decision that W.O.W. will not be delayed again. Not everyone on my senior management team agreed with this decision. The essence of our debate was whether we should spend all of our resources building our existing infrastructure (which is proven but dependent on one source of funding, our brand partners) or whether we should take three or four months and improve our I.T. infrastructure so that it can handle the new demands of W.O.W. (with a new system, W.O.W. would allow us to receive funds directly from consumers and thereby diversify our revenue). Of course, W.O.W., if it works, would not start generating real revenue until 2013, because we would not be able to introduce it, at best, until late in the third quarter of this year.

The arguments on both sides are compelling and logical. On the one had, it makes sense to strengthen a proven business model and have it immediately generate more revenue, which can in turn help drive our ability to invest further in the company. On the other hand, adding a new revenue generator and a major extension of our offerings could open us up to new customers and bring a big new revenue opportunity.

So far, my experience in business (which admittedly is limited, given that I’m 30) has taught me that taking such gambles is a worthwhile endeavor — even if the odds are against you. I have also found that in such moments it is difficult to make decisions that everyone on the team will support. Perhaps this is why most organizations have a leader and are not run by committee.

Dialogue, debate, decide, fall in line. This is a classic decision process. As Szaky says, there is a leader so these hard decisions can be made. And when he says "taking such gambles is a worthwhile endeavor - even if the odds are against you," he is saying that the bold decision energizes the team and makes it work like crazy to make the decision successful. (For more on this point, check out my article on The 99 Percent.)

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