Looking for a Soft Landing

What last week's “wildly optimistic” Softbank-WeWork presentation teaches us about communicating when our business runs into a crisis.

How many of the individuals who quickly hopped on the bandwagon and belittled Softbank’s founder Masayoshi Son last week have run a successful conglomerate for nearly 38 years?

You know, I’d love to see how long that list stretches.

Last week, the CEO of Softbank, the most high-profile investor in WeWork, acknowledged in an earnings report that he had made some mistakes in deciding which companies to invest in. He made that quite clear.

“My own investment judgment was really bad,” he told The Wall Street Journal. “I regret it in many ways.”

It can’t have been an easy statement to make. 

As part of his earnings call presentation last Nov. 6, the Softbank CEO also confirmed a net loss of $6.5 billion for the quarter that ended Sept. 30. As of October, Softbank had sunk some $9.5 billion into WeWork’s rescue package, although Mr. Son emphasised that the rescue will be a one-time deal.

The reactions were swift, and most of these were cutting. 

Descriptions of Mr. Son’s presentation ranged from “bizarre” to “ridiculous.” In New York magazine’s Intelligencer, Josh Barro wrote: “So maybe Adam Neumann isn’t the only charismatic founder-CEO who needs to be paid to go away.”

You could say that intense speculation about what they do is just part of the deal high-profile founders and CEOs sign up for. And it isn’t always easy to feel empathy for a guy who’s entrusted with a $100-billion fund—then makes some bad calls with it.

Yet whilst the presentation had its flaws, it also offers some useful tips to remember for when we have to communicate amidst difficulty. Most SME founders will probably not run into a crisis as dramatic as Softbank’s founder now finds himself in. But all businesses will run into a few rough patches at some point. It could be a service interruption, an accident, a product safety issue or a natural disaster.

How should we communicate in those difficult situations?

First: Be brief but specific. 

Avoid doing this.

By the time Softbank’s latest earnings call took place, the business press had reported, opined, and speculated about WeWork’s (then upcoming but eventually deferred) IPO for at least three months. 

So much had already been said about not getting carried away by the hype around some tech unicorns and whether venture capital rewarded durable business models or merely fanned an unsustainable and often unprofitable get-big-at-all costs mindset.

So when the Softbank presentation offered up an information-poor slide like this, the critics pounced. Not particularly helpful but not surprising either. 

Don’t wait to get all the information available before addressing your community in the midst of a crisis your business is facing. Instead, arrange to speak with them within the first 24 hours of the event. 

Report only what you know at the time of your announcement, acknowledge what you still do not know as an organisation, and make a genuine commitment to finding out more. In many cases, the most important first message in a crisis is one that communicates empathy and a sincere effort to understand what has happened and what those affected by it are going through.

Second: Be accountable. 

Five years ago, a Virgin Galactic pilot died and another was badly injured when one of its space planes crashed in a test flight in California’s Mojave Desert. On his way to the crash site, Virgin founder Sir Richard Branson posted on his blog a great example of communicating in a crisis. 

It was a fairly short post, only 342 words, but it worked for several reasons.

It included this commitment from Virgin Galactic CEO George Whitesides: “We owe it to the folks who were flying these vehicles, as well as those who’ve been working so hard on them, to understand this and to move forward. And that is what we'll do.” You'll find the rest of that post here:

In Softbank’s case, Mr. Son said he had “overestimated Adam’s good side,” referring to the charismatic and controversial former WeWork CEO. But he didn’t try to shift blame. “I should have known better,” the Softbank CEO said.

Listed corporations like Softbank bear more pressure to face the public when something goes wrong—like when an investment fund burns through $72 million a day, on average, for three months. 

Yet even privately held smaller businesses that don’t have the same disclosure requirements would be wise to behave in an accountable manner, to examine not only its successes but also its failures. 

When something goes wrong, there’s often  a temptation to hide and wait until the storm blows over. It takes real courage to face the crowd at such moments and to hold yourself accountable, without arrogance or defensiveness.

Third: Be thankful for your community’s support.

There were real costs to the Softbank presentation that went beyond the mockery its founder and CEO faced on social media. 

A day after that earnings call, Softbank’s share price was down 20 percent from where it was just six months before. It was nearly 14 percent down from Aug. 14, when WeWork filed its papers for an IPO. WeWork was not the only Vision Fund 1.0 investment that Softbank had to write down in its latest quarter; there were around 20 others, among them Uber.

The reputational cost is still unfolding. This week, for instance, The New York Times all but blamed venture funds for the “financial and personal devastation” suffered by millions of contractors and small-business owners who worked with overcapitalised startups that then “operated with scant oversight and little regard for profit.”

It’s an interesting angle to approach this story from, and here’s the link:

But there’s another way to look at the situation. 

Whilst I am not an unabashed fan of VCs, it’s also obvious that they make it possible for startups (rich in vision and drive but often short on capital goods and operating funds in the early months) to accomplish much. 

Most of the attention paid to Softbank’s Vision Fund 1.o this year has revolved around WeWork and Uber, and understandably so. But the fund is also fuelling many other companies, including startups in fintech, health tech, and “frontier tech”, that work on a range of ambitious products and services, from robotics to renewables.

A crisis, while painful, presents the opportunity to reflect on the quality of relationships you’ve built with clients, suppliers, and the communities where you operate. Acknowledge them when you communicate in a difficult situation. 

Fourth: Be determined. Present a plan of action.

This is something Mr. Son actually did in last week’s presentation but which didn’t get as much attention as some of the quirkier slides such as this one:

Among the things Softbank will do to try to make WeWork more profitable is “sort out unprofitable business.” That may not be good news for some of the 18 businesses WeWork has acquired so far, five of them in the last six months alone. But it’s a necessary step.

A recommendation to reduce costs was expected and the more specific tack in Softbank’s case would be to “pause contracting new offices” in the meantime. For all the controversy it has generated, WeWork was serious about providing space as a service. It told the US Securities and Exchange Commission in August 2019 that its workstation capacity had grown from 107,000 at the end of 2016 to 466,000 at the end of 2018.

Its workstation capacity stood at 604,000 as of June 30, 2019.

Mr. Branson, in dealing with that devastating crash in November 2014, sounded all the right notes. He comforted the bereaved, promised full cooperation with investigators, expressed gratitude for all the messages of love and support, and placed the event in the right context. 

It had been “the 55th time SpaceShipTwo had flown” and had taken place only after “extensive ground testing of all parts of the spaceship.” It had been an unpredictable accident, not a preventable misstep. 

And the organisation he led, Mr. Branson showed, was ready to learn from it and pursue its mission.

"Space is hard but worth it,” he wrote. “We will persevere and move forward together."

In early October this year, about a month before his now much-publicised report, Softbank’s Mr. Son told Nikkei Business: “Companies like WeWork and Uber are criticised for being in the red, but in 10 years they’ll be making substantial profits.”

He added: “I include myself when I say it is not the time for Japanese entrepreneurs to be making excuses.”

Nearly 38 years after he began building his telecommunications conglomerate, Mr. Son has so far raised some $108 billion for the second iteration of Vision Fund. Investors include the likes of Microsoft, Standard Chartered, Taiwan’s Foxconn Technology Group, and several large Japanese banks.

This year’s troubles may have slowed Softbank’s investment activity down but clearly, Mr. Son intends to recover and move on, rather than make excuses. It’s a good mindset to sustain when communicating, in good times but particularly in bad ones: Be brief, be accountable, be thankful, and be determined. 

In case you missed it, here’s a link to that now-viral Softbank presentation.

I’d love to hear your examples about what to do (or not to do) when communicating in a crisis. It’s rarely pleasant but communicating effectively is, after all, part of what we sign up for as business owners and leaders.