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5thFinger Founder Steen Andersson says 'always go big'

09 June 2010

New-cut grass and dreams of Silicon Valley - Two things that dominate the memories of my childhood.

I grew up in country NSW, spending hundreds of hours riding a lawnmower, cutting acres and acres of tall grass, and daydreaming... While my mother dreamed of large, luxuriant gardens, I dreamed of a thriving valley, abundant with new technology! I imagined a future of designing computers, creating software, and just immersing myself in technology. (Rushing home from school each Tuesday to read the SMH’s computer section became the highlight of my week!) Looking back, it seems conspicuously clear that I would end up working in San Francisco. But, it has not been a clear-cut or easy journey and not one made by daydreaming... rather the opposite.

I imagined a future of designing computers, creating software, and just immersing myself in technology. (Rushing home from school each Tuesday to read the SMH’s computer section became the highlight of my week!) Looking back, it seems conspicuously clear that I would end up working in San Francisco. But, it has not been a clear-cut or easy journey and not one made by daydreaming... rather the opposite. 

I’ve been in the U.S. for two and a half years and my time has involved navigating all of the challenges of VC fundraising, establishing operations, helping build a team and hitting the streets to win clients. This U.S. crucible has taught me numerous lessons and there are three key ones I want to share with you:
1. Go Big or go home
2. Know when it’s time for Plan B
3. Focus, Focus, Focus – say ‘no’ more than you say ‘yes’. 

Our vision for 5th Finger, right from the start, was to create a global business. When ninemsn approached us to acquire the business in 2005, it didn’t mark the end of the journey but a great opportunity to realize some of the value we had built in the Australian market, while giving us a platform to expand internationally. This was the catalyst that kicked us into the global stage.

We had some encouragingly early wins in the USA, launching clients such as New Line Cinema, Razorfish and the US Marines (Hoorah!).  Off the back of these, we were able to secure VC funding in early 2008 to support the expansion - but then our world went into a crazy spin...

Between then and the 2008 market collapse, New Line Cinema merged with another studio, we realized that Razorfish (a seemingly significant channel) were merely using us for our ideas and expertise without passing on any real business, and as the market crash hit, we had to deal with a crisis of leadership among our founders.  Good times! Good times!   These challenges really tested our endurance, backbone and self-belief and they made me wonder if I had the right stuff to succeed in the U.S. market. We had heard of countless Aussies who had come to the U.S. for 6 to 12 months, only to be forced home with tails between their legs. This was not something that we wanted to do.

So how did we turn things around? It was a case of go Big or go home...

There I was - in the Hilton hotel in New York, 3 hours before I was meant to be on stage in front of 700 of the US’s most important mobile marketing players, including clients, competitors, carriers and media – and I was feeling very, very edgy. The panel organiser hadn’t done much preparation and so I had no clear view on the discussion topics. I pondered a big question: ‘what do I want to get out of this?’ The answer, the bottom line – I realised that I wanted everyone in the audience to leave that room knowing that 5th Finger is a key player in the U.S. market.  How do I get their attention? I go BIG.  The stereotypical American is loud and opinionated and I decide to embrace the stereotype. Onstage I introduce 5th Finger as the ‘global authority on mobile marketing’(!), then follow this up with a tirade of opinions and views on the mobile market in the U.S., and finally, challenge my fellow panelists on every issue - even if I agree with them –  just to make an impact. I give them 5th Finger – Big, Brash, Loud and Opinionated.
And, it works.

Immediately after the session, the key procurement person from Coca-Cola approaches me and says,  “if you guys are the global authority on mobile marketing, then we need to talk”. After six months of pursuing them like a rabid terrier, we found ourselves the lead mobile marketing advisor to Coke, working under 12 month contracts for brands including MyCokeRewards, Sprite, and vitaminwater.  We barked loud, went Big and got tasty rewards.
Rule #1 – Go Big or Go Home.

Old Habits Die Hard – and they can be self-destructive. Back in Oz, the majority of our marketing-related revenue came from agencies, so we entered the U.S. with this paradigm driving our go-to-market strategy for the U.S. One small problem – it didn’t work. Agencies we sold to in Oz didn’t run the same types of programs in the U.S. (due to differences in promotional legislation and the nature of the market). We tried selling them other programs but they would just take our ideas and try to do it themselves (or take the majority of the client budget and leave us with little margin). After 9 months of this, we realized that we needed to change the game. The obvious yet scary move was to go direct to the end client.

Rule#2 – Know when it is time for Plan B.

Businesses that can quickly switch to Plan B - and not get hung up on their ‘prized plan A’ - are the ones who will succeed. Speak to any VC and they will be the first to admit that very few of their investees stick to Plan A. The best ones are the ones who respond to the data points and change quickly. If you want to read more about how to manage this challenge, check out the book Getting to Plan B: Breaking Through to a Better Business Model by John Mullins & Randy Komisar.
 
So, we decided to change the strategy. Instead of being a mobile technology platform provider, we would become a platform provider, disguised as a mobile agency. We hired some agency folk to help in the change process and within 6 months, we had realized the benefit, with monthly revenues triple what they had been. We no longer had to share the revenue with agencies and we also gained the advantage of having the clients ‘ear’ (allowing us to up-sell them on the next program much more effectively than an agency ever would when acting on our behalf).
 
But, how did the market crash impact on 5th Finger?... There we were - going strong, with our new strategy driving us to our first mid-2009 break-even month – then were blindsided. We didn’t realise but there was a lagging effect of the 2008 market crash. When our clients started to experience a downturn in their revenues in H1 2009, they decided to cut their marketing budgets in H2 dramatically. (Many brands peg their marketing budget to a % of revenue). This hurt us greatly and tested our investors.

This major financial pain was a further stimulant to our thinking. It forced us to ask what more we could do to focus our sales and product development efforts.

The U.S. is a market that can support large niches (one of my favourite oxymoronic figures of speech). In Australia we had 5 lines of business (each effectively a different niche) so we could grow the company to a material size. But with the market depth in the U.S., we decided to double down and focus, focus, focus on a sub-niche.

Rule #3 - Focus , Focus, Focus. In deciding on where to focus our energies, we where drawn to the following questions: Q. Where can mobile add the most value over the internet? A. When you are out and about. Q. In what business can mobile most directly influence revenue for consumers who are out and about? A. Retail Shopping.
Based on this thinking, we have doubled-down on our sales, marketing and product development to fully target our business at the retail industry. This has helped us on multiple levels: the vision, the team’s focus, and the product’s uniqueness become clearer.

Focus really comes down to knowing which opportunities to say ‘no’ to, and for me as an entrepreneur, saying no to any potential opportunity goes against my very nature. Steve Jobs was recently interviewed and when asked what he was most proud of in his career, his response: all the great ideas that I said ‘no’ to.

A friend who fishes regularly, gave me a technique to help decide when to say ‘no’ to opportunities. When he’s spear fishing, he can’t harpoon a fish under a certain size, but when he’s been seeking out a particular species of fish for hours (or days) and he finds it, his first reaction is to justify to himself that it is over the size hurdle. He now applies a rule that if the fish is not clearly over the size hurdle and he starts trying to evaluate it and justify it to himself, then he must let it go. His brain knows when it is the right size, and he only starts to justify it when it is under size. I’ve started applying this same approach to the initial evaluation of opportunities and it is a great help.

Now, in the middle of 2010, we are starting to see the fruits of our labours – profitability, strong revenue growth and real market buzz around what we are doing. It has been an insane challenge and an amazingly rewarding journey, with still more to go.

Working and living in the U.S. is an amazing experience, and I feel lucky to have this opportunity (especially since I had to convince my wife and two boys to agree to an American adventure!)

I can highly recommend it to any Aussies who want to ‘level up’ on their leadership skills, learn how to operate at scale and otherwise sharpen their game by swimming in a bigger pond.
 
So, always remember who your mates are, really test your Plan A, stay focused, dream a little but in the end – make sure you go BIG. 

Steen

Written by: Steen Andersson

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