The Anatomy of a Turnaround
Hi there, Justin here. This week, Adia Sowho takes over The Flip Notes with a story I've been eagerly waiting for her to tell.
Adia, currently the CMO of MTN Nigeria, took over Thrive Agric in late 2020 as its Interim CEO. The company was embattled by its lockdown-induced inability to repay its crowdfunders, who were taking out their frustrations on social media and to the Nigerian authorities. But just half a year later, after teetering on the brink of collapse, the company announced that its payments to crowdfunders had been completed. And since then, Thrive's revenue has grown 3x.
So what went on behind the scenes of this turnaround? And what lessons are there for founders, operators, and investors alike? Adia's re-telling of the turnaround is a masterclass, from one of the ecosystem's most esteemed executives.
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The Anatomy of a Turnaround
By: Adia Sowho
Leading commercial operations at Migo exhausted me. After I left, I wanted to take a traveling sabbatical but the pandemic got in the way of those fantasies. I had started searching for countries with open borders when the co-founder of Thrive Agric, Uka Eje, showed up at my home asking me to take over as the CEO. This was in September 2020. The business had run into trouble and needed help. We had never met, but I was expecting him. I’d been ambushed the day before by Kola Aina, Oo Nwoye, and Kayode Oyewole who called to tell me that a darling of our startup ecosystem would fail if I didn't help. This part of the story has been told. The part that hasn't is how I ensured it didn’t.
I’d learned from working with CEOs that unlike other roles in a business, you don’t take a CEO role without a level of certainty that your particular experience and style are your leverage to be successful in that role. This extends the discussion from a simple interview to a richer, more fundamental discussion about what makes the company tick. This also puts the onus on the would-be CEO to ask questions to build their playbook for the role.
Asking questions was not encouraged during my foundational education in Nigeria, and by the time I got to university abroad, students asking their professors questions seemed like effrontery to me. Weren’t you just supposed to cram the knowledge into your head and hope for the best? I know better now, and I’ve spent the years since finding my own comfort with questions - asking them and responding to them. And as I quizzed Uka about Thrive, I finally understood the thrill that my Kellogg School of Management professor, James B. Shein, shared as he took us through case studies of his turnaround adventures. I couldn't be too thrilled though. I was still exhausted and any endeavor could break me. This meant that I had to be focused and surgical, but have clear boundaries around stress.
I stayed sane during the pandemic breaking down my decade-long obsession with critical thinking into something teachable, unpacking the activities that drained my energy but didn't have to. Basically, anything repeatable needed to be automated so that I wouldn't repeatedly summon precious energy to do X, yet again. I had seen systems and cultures that I put in place fall apart in my absence or after I left a role, so I couldn't look back with a complete sense of accomplishment. This made it more urgent to have a more sustainable solution to turn around Thrive since I was going to be there for a short time (I committed to 6 months).
I needed a different approach to my first turnaround. One that leveraged my best and rose above my worst because there would be no do-overs. Thrive was too important to fail.
Thrive defaulted on its crowd-funding obligations because the 2020 pandemic stymied its major revenue-generating business process - the harvest. The crowdfunds were raised through what we will call ‘agribonds’ to buy inputs for smallholder farmers to utilize their arable land, which would otherwise lie fallow because raising capital was challenging for these farmers. Normally, the crowdfunders cashed in their agribonds when due with a healthy interest. This time, that was not possible because of the three things that the lockdown denied - access to farms to harvest, distributing inputs for the upcoming season, and sale of harvested produce, which sat in storage waiting for a market day that did not come.
Like everyone else, no employee or partner of Thrive could work. The entire business and its supply chain were frozen but its obligations were not. Those continued to tick away until their due dates arrived and the agribond holders came calling for their money with the interest they were promised.
The story above satisfies most people. But to step in as CEO, this story was just the smoke. I need to find the source of the fire to fully understand why. Why was this incident a surprise? The pandemic surprised us all but in Thrive’s case, it really just fantastically morphed the small formative gaps of an early-stage startup into company-ending risks. As I probed - Why didn't Thrive see this coming? Why didn't or couldn't the business react? Why were the reactions met with pushback? - I paused when a friend asked me whether the business was fragile. By definition, to be fragile is to be ‘easily broken, tenuous, delicate’. Fragile doesn’t describe what I found at Thrive. The founders and team were deeply knowledgeable about the sector, and to me, incredibly innovative in reimagining farming with technology. So it wasn’t fragile, but I still had to find the words to describe the situation to Thrive’s investors and agribond holders.
These questions are not specific to Thrive and can (probably should!) be applied to any business that wants to survive a crisis that it cannot foresee - this is the crux of risk management. Startups aren’t the only businesses that don’t love governance. Earlier in my career, I didn't care for it and I internalized the general sentiment that risk managers were annoying. The responsibility of business leadership shifted that sentiment for me.
As I questioned the team, partners, and investors, I dug deep to go beyond the culminating incident, to the patterns (of behavior) that led to the incident over time. I searched for the business processes that disguised risk that seemed harmless but when whole, painted a true picture that was greater than the sum. Digging became excavation in order to identify the internal values that led to the risk-ridden processes across the business culminating in its near-collapse.
Ayo and Uka had built a solid business, but it was riddled with many small risks that any good risk manager would not rank as high. However, I believe the Ghanaian wisdom in the saying “no condition is permanent” should humble us to realize all that risk needs is a trigger to change its face. The pandemic just ‘hulked up’ these small risks into an existential threat for Thrive.
It took a few weeks to arrive at this picture of what happened with Thrive:
The Thrive business, at the time, had 3 major legs, each of which manifested a risk that led to the incident:
Social media is not Investor Relations: Crowdfunding creates a special opportunity to back the underdog. In Nigeria, it offers entrepreneurs the chance to garner our population’s belief to solve problems that we know better than anyone else. However, there is a responsibility that comes with being funded - your relationship with your investor, which in Thrive’s case are the agribond holders. The responsibility of a good investor relations process is to give your investor an accurate account of business affairs as it affects their investment. And modern-day crowdfunding just hasn’t demonstrated that maturity. The typical message shared with the Thrive agribond holder was usually farmer stories and harvest progress.
With lockdown policies differing by state, inconsistent market days, and unpredictable individual compliance to lockdown - it became impossible to manage the harvest and sale process to confirm when ROI would be returned on the agribonds. The Thrive team grappled with an ever-evolving message and the daily hope that the lockdown would end and bring back normalcy. Bad news is hard to share. The team had only recorded success historically and was not prepared when the news was not so good. This is where the gravitas of an experienced Investor Relations team matters. Modern startups that rely on crowdfunding, like Thrive, conflated social media updates with Investor Relations without grasping the rigor and difficulty of what it really means to keep your investor informed.
To harvest or not to harvest: Managing +50,000 farmers in a VUCA environment is not for the faint-hearted but this was Thrive’s business. Uka has the heart of a farmer and with that came a profound understanding of their frustrations and his vision for the Thrive business. But that understanding was challenged by the lockdown. Farmers were already managing insecurity and when lockdown came, many inevitably lost their harvest due to their inability to reach their farms. Farmers reached a fork in the road - few would choose to harvest, and others would leave the harvest in the soil to rot into fertilizer for the next season and cut their losses. Unable to physically reach the farms, there was no way to offer the farmers support to make decisions that preserved Thrive’s value.
Waiting for a market day that never came: Like the farmers, the offtakers who sold the harvest were in a frustrating holding pattern. The early days of the pandemic had markets closed. Traders had to wait to be classified as essential workers. Offtakers came after that. This happened over the course of weeks and gradually spread across the country. So while some of us were watching Tiger King on Netflix, the harvested Thrive crop was being ravaged by rot, vermin infestation, and - in the case of poultry - disease from overcrowding. Every day that passed reduced the possibility of saving the crop.
The brokenness in Nigeria’s agricultural supply chain magnified across the sector, increasing costs across the chain such that even the next harvest’s profitability was under threat. With the harvest gone, the question of who would bear the loss became pertinent. Contract enforcement is nonsensical in Nigerian small business. While critical to align with global standards it is not the bedrock of trust between businesses in Nigeria; it’s more of a nice-to-have. It does not fully align with our local systems of trust which require factors like relationships built over time and warm introductions to get relationships off to a strong start. Uka and Ayo’s youth didn’t do them any favors either and without a gray-bearded godfather, it was hard to call the older offtakers to order to pay off their debt.
Under normal circumstances, these risks would manifest individually and could be handled in the normal course of business. However, the pandemic triggered self-preservation in the entire value chain, and Thrive was left with the financial responsibility of everyone’s self-preservation.
With this understanding, I had the story for Thrive’s investors and willing partners to figure out the next steps.
Breaking the Bad News - Investor Edition
Once I had the ‘what happened’ in hand, I needed to figure out the ‘what next’. The agribond rancor on social media was growing and risked triggering a regulatory intervention that could shut Thrive down and lose the investors their money. The only thing that could quiet the noise was to pay. Explanations would fall on deaf ears without payment. So there was no point speaking to any bond holders until we could talk about payment.
The team had kept decent records, and a few pivot tables later, we laid out how much was owed by subscriber, due date, and amount. The obligation was significant, growing and much of it was overdue - by as much as 5 months. It would have been impossible to meet without a bridge loan as each day meant that new payments were due. I had to find an amount that wouldn’t discourage investors from digging to support a business that was a potential reputational risk but that was also enough to send a believable signal to agribond holders. I was energized by the supportive calls and messages from the ‘money people’ in our ecosystem whose faith in me drove their support.
I had the meetings and made the ask. It didn't take too many. The investors believed in Thrive, in me, and we agreed to terms for the bridge loan. Taking on more debt didn't feel good but it only made sense to consolidate the debt down from thousands of angry individuals to a handful of investors who understood the patience that this business required. We took on enough to make a tangible dent in the overdue debt and buy time until the next harvest. And the plan was that after things calmed down, we would figure out how to prevent the incident from recurring.
Breaking the Bad News - Crowdfunder Edition
Once the bridge loan hit the account, we enjoyed the win for just a moment, knowing the next part was not going to be far from easy. The founders, CFO, and I split the funders by the size of the obligation owed to them and started scheduling the calls. Individual calls with the institutional agribond holders and town hall-style calls with the retail ones.
We scheduled the calls with the institutional agribond holders first. My body still remembers the anxiety that coursed through me before the calls. We dedicated Fridays to communicating and I dreaded each and every one of those Fridays. As we launched each zoom meeting, I had no idea what I was going to receive from the person on the other side.
Some of the calls were easier than I expected. A few of the funders recognized me and my track record and this instantly bought us some ease in the conversations. Some allowed me to introduce myself and talk them through the changes. Some didn’t care who I was and just vented. A handful barely let me speak. But we told the story that we needed to and shared their customized payment terms. Since we led with a partial payment, all but one were amenable to terms. The one that wasn’t amenable incidentally was a friend, but our now past friendship didn’t make a difference. You win some, and you lose some.
Once we had the calls with institutions, we set up a schedule of introductory calls with the retail agribond holders. Coming out of the heat of the calls with the institutions, I knew I couldn’t take unbridled anger from the thousands of retail subscribers, so we asked participants to text in their questions while on the call rather than vocalize them. I didn’t want to risk losing control of the calls to the rabble-rousing that was already happening in chat groups and online.
The retail calls were very tough, the inquiries (and insults) came into the chat window at a fevered pace but we answered them all. We scripted answers to questions and it was invaluable as I navigated the inquiries. We committed to monthly calls, shared a kick-off date for payments, and explained our rationale - we started with the oldest obligations first. Everyone wanted their money right away, but they settled for the plan we gave them as we promised to be transparent. Some still sent the authorities after us and made their feelings known online anyway. But a generous few were rooting for us to succeed, and those comments kept me going. Interestingly, some (women) pledged their support simply because I was a woman. I felt that.
Once the plan was shared, we created a website that they could follow along with payment progress. Each subscriber was told what month to expect their payments and they also knew their place in the queue for their payment month.
We started making payments as promised and the tide started to turn. We gathered from the chat groups that people were checking that others had received their payments as we promised. Vitriol quickly turned to cheers of support when we created a transparent process of our payment progress that agribond holders could follow. We met our obligations as promised, and above all - kept communicating. The process started showing traction, so it was time for me to shift focus to ensuring the problem wouldn't happen again.
Working Myself Out of a Job
At this stage, we had the story and we were stepping through the repayment plan. This, however, was the immediate problem. The causality had been partially identified (because, problem no dey finish) but not fully addressed. I needed to turn to the next phase of the problem - restructuring Thrive so that it was better than when I met it.
I reflected on the teams I’d managed in the 10+ years prior and whether I left them better than they were before I joined. I stay loyal to my teams. I figure it’s a fair tradeoff for surviving the rigorous (re-)training so that what we leave behind is better than before. Their accomplishments and failures feel like mine, and now, as they lead their own teams and businesses, my pride in them runs very deep. I wanted that same pride in Thrive, so next, I decided to train Uka and Ayo to take the CEO ‘job’ back from me.
It has always bothered me that my employers expected me to cram company values into my psyche. The words of the company values lacked meaning and the process just felt forced to me. Ekechi, Migo’s co-founder, and I shared this disdain for the standard culture process. We wanted something better at Migo. But I had to figure out how to do that first. Ekechi’s time at Amazon left a mark on him - he often would talk about what an Amazonian would do, not what they were told to believe. The difference seemed to center on how Amazonians behaved, and the more he shared the clearer the link between organizational behavior and superior business results became to me.
I found the framework above and things crystallized for me. Culture is an outcome, not a pill you swallow!
Every business outcome is tied to a decision that a person in the organization made (or didn't make), so it was important to understand what ‘culture’ the Thrive team is guided by. Thrive’s three issues - communications, farmer management, and offtaker management - were shaped by an influence that I had to identify. Startups, like children, are often made in the image of their founders. But you don’t have years to ‘raise’ a startup, you have much less time to define how to behave.
Uka, Ayo, and I interrogated how well Thrive’s personal identities fed Thrive’s values, guided their team’s behavior, and ultimately resulted in the culture that allowed risk-ridden processes to escalate into outcomes that nearly ended the business. This goes beyond a good hire; where there is a talent deficit, this approach allows you to breed the talent you need. We found some gaps. For instance, Uka and Ayo had extended their personal humility into the business. Their relationships with offtakers were bound by goodwill and humble gratitude - even as they fulfilled some of the largest POs in the country - rather than by water-tight contracts. Credit was too easily extended and Thrive paid for that in the end. While there is always a place for humility, when partnering with older, more established businesses that happily exploit the humble nature of youthful founders, this created an unarticulated risk in Thrive’s business.
We closed these gaps with persistent soul searching to find what mattered to the founders, which created value for Thrive and could translate into team behaviors that fed Thrive’s competitive advantage every day.
As a leader, I now see that dissonance between defined values and strategy is self-inflicted value destruction. I am hyper-focused on aligning everyone to making a routine contribution to that advantage every day. To create a competitive advantage, a business must configure itself to do something unique and valuable, with the ultimate goal being profits, of course. I have found that this advantage does not come overnight, but with a little effort, every day, in every process.
So we spent more time unpacking how each activity in the business fed that competitive advantage. How did each outcome add to our desired competitive advantage? If we onboarded a farmer, could he get us two more? If we rented transportation how could we make it cheaper next time?
As we paid subscribers and the tide turned, we spent the majority of my 9 months at Thrive excavating every major activity for its contribution to or from our competitive advantage. We rebuilt the organization and productized Thrive’s major processes into the Agriculture Operating System (AOS) and created two important opportunities. Firstly, Thrive has created a platform business and productized itself as a service for other companies who can now quickly build a smallholder farmer aggregation business like Thrive’s across Africa. Secondly, we have captured all of Thrive’s major processes, those ones that broke during the pandemic, and fixed most of them in the AOS.
Uka returned as Thrive CEO in mid-2021, with Ayo and their team energized once the crisis was behind them. Not enough credit is given to Uka and Ayo, and there’s much for founders to emulate from them. Many founders might have abandoned a business in the face of a pandemic, but they didn't. The mission was too important. They humbly asked for my help, Uka stepped down as CEO for me to lead rather than hire me as a consultant. Most importantly, they listened. And in the year since I’ve transitioned into my advisor role, Thrive has onboarded and aggregated nearly 6x more farmers, and has increased its revenue by 3x.
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