When you’re the boss of a potential tech unicorn, Graham Donoghue’s approach to failure is refreshingly honest.
He’s been the CEO of Chester-based Sykes Holiday Cottages since 2016, which is tipped to be the region’s next unicorn.
Since joining, the company has gone from managing around 5,500 properties to over 22,000 with plans to grow to 35,000 by the 2023.
Speaking at TechBlast’s latest Going 4 Growth roundtable he says failure is needed in order to be successful.
“I joke about using technology but the team will say ‘every time Graham comes up with an idea we’ll test it and it will fail’,” explains Donoghue with more than a hint of self-deprecation.
“Most of the ideas that fail in the company are the ones that I come up, particularly around the customer experience.
“When I was the running TUI’s businesses it was a set play book and things were done in a certain way.
Is this the tech unicorn you didn’t realise was a unicorn or even a tech business?
“Now most of the time I come up with ideas they fail but I say to my team ‘85% of your ideas have to fail’. That’s the metric. It forces a velocity of failure.
“It sounds a weird language but the more they fail the better they become because it allows them to try different things and polish the ones that are gold-plated. Also remember that what failed last year might not fail this year.”
Mid-market private equity firm Livingbridge first invested £54m in Sykes Holiday Cottages in 2015 and when Vitruvian Partners got on board in 2019 it’s thought the cheque size was closer to £400m.
Data in vital
Donoghue says data has been a key part of the company’s success.
“I used to work at MoneySupermarket.com and we embedded data into everything we did,” he says. “The decision-making was data-backed. You create a culture of data running through the organisation.
“We went out and we just hired data scientists, data engineers, data analysts and we paired them up with our commercial people.
“We started building products, we gave them really complicated problems to solve using the data.”
Donoghue says data will win over ‘gut feel’ every time.
“My gut has helped me for many years but as things have evolved and consumers have got more complicated I’ve learned to trust the data more than I trust my own instincts,” he says.
“The key thing for us is the data, then it’s the insight from the data and then it’s the action. It’s about marrying these three things up and closing the loop using data. We embedded that from day one.”
Sykes Holiday Cottages was founded in 1991 by Clive Sykes, who eventually raised private equity investment.
Donoghue joined in 2016 to accelerate the growth and the original plan was to grow the company’s portfolio of properties to 10,000 by 2020 but they ended up doubling it to 20,000.
Be open to debt
They now take 2.4m people on holiday and handle around £300m of transactions a year and recently acquired their first international business in New Zealand.
He says in order to grow they had to acquire similar businesses to themselves and the only way to do that was to take on debt.
“I had to get comfortable with taking on the debt,” he recalls. “I realised the only way we would reach our original target of getting to 20,000 properties was to buy other businesses.
“I got comfortable with it when I understood the perimeters we needed to work within.
“That allowed to us to buy businesses smoothly and be really disciplined in how we synergise those businesses and create value within a 12-month period.
“We turn down a lot of things because they didn’t quite meet our model but when you’re a fast-growing company you have to be comfortable with laying down a lot of bets and hoping that a few of them come off, we are fortunate that our hit ratio is very high on M&A.”