In my final 2 posts, I first looked at Yahoo, inwards the context of the challenges associated alongside turning some an aging applied scientific discipline company, as well as hence argued inwards my minute postal service that the life wheel of tech companies is compressed, relative to non-tech companies. As some of yous receive got noted, at that topographic point are non alone exceptions to this rule, but at that topographic point are actions, some good for yous as well as some not, that managers of tech companies can, as well as oft do, bring to deal aging.
The Tech Life Cycle: The Manager's Handbook
The hyper speed at which their firms motion through the life wheel tin upend conventional rules on how to deal as well as finance businesses as well as at that topographic point are 3 strategies that managers at these firms tin adopt to hold upwards as well as each has both a proficient as well as a nighttime side to it.
The Tech Life Cycle: The Manager's Handbook
The hyper speed at which their firms motion through the life wheel tin upend conventional rules on how to deal as well as finance businesses as well as at that topographic point are 3 strategies that managers at these firms tin adopt to hold upwards as well as each has both a proficient as well as a nighttime side to it.
1. Acceptance/ Denial
In the good for yous version of this strategy, equally a tech theatre (and its managers), yous bring the fact that your life wheel volition live curt as well as yous deal accordingly.
- During your ascendance, its all nigh growth: Since your current of growth volition live steep as well as short, yous receive got to maintain your focus on delivering that growth. You equally good cannot afford distractions, whether they come upwards from fights over command or from having to brand debt payments.
- When mature, purpose debt alongside restraint as well as maintain it curt term: The conventional wisdom is that mature companies should avail themselves fully of debt, as well as purpose its taxation advantages to augment value. The same advice is oft doled out to applied scientific discipline firms, but they are exposed to far to a greater extent than danger from debt, since their mature phases may final alone a few years, rather than decades. Thus, tech firms volition live ameliorate served if they borrow less than non-tech companies as well as maintain that debt curt term.
- In decline, homecoming cash alongside a vengeance: Your cash returns, whether inwards the shape of dividends or stock buybacks, should reverberate the speed of your decline, as well as to those advisors who worry that yous may live signaling to the marketplace position that yous receive got no investments, remind them that it is never incorrect to dot the truth.
All of these suggestions, though, are built some accepting the speeded upwards tech life wheel equally a fact of life as well as working within its constraints.
In the unhealthy version of this strategy, yous do nix to alter the life wheel dynamics for the firm, but deal the firm, inwards denial, breaking i or to a greater extent than of the 3 rules listed above. During your growth phase, yous allow yourself to diverted yesteryear fights over command or debt financing as well as lose a portion of your growth potential. As your theatre matures, yous either choke on to human activity similar a growth company, pursuing growth (at whatever cost), and/or borrow coin similar a non-tech company. In decline, yous attempt to contrary the procedure yesteryear going after the corporate equivalents of stomach tucks as well as human face upwards lifts, corporate do-overs that do non modify the goal game but enrich others inwards the process.
2. Reseed as well as regrow
If yous are the director or possessor of a tech company, it is natural to await for an anti-aging serum, something that volition allow yous extend your life. After all, yous do receive got the exceptions to the curt life wheel rule, companies that receive got managed to non only hold upwards over long periods, but choke on to grow. This strategy is built on the premise that it is tech products that receive got curt life cycles, non tech companies, as well as that if yous tin maintain coming upwards alongside novel tech products, yous tin extend your life equally a company. Your administration strategy, if yous choke alongside this option, volition live to advance the society along 2 tracks. While nurturing your principal product, yous volition await for opportunities to extend what yous run across equally your strengths (technology, design, user base), yesteryear offering novel products as well as services. In your dream scenario, your initial success gives yous a leg upwards for hereafter successes, leading yous to receive got an extended life wheel equally a company.
Promising though this selection may look, at that topographic point are 2 caveats as well as they are what characterize the darker version of the strategy. The starting fourth dimension is that whether the strategy pays off for your stockholders volition depend inwards large business office on what yous pay to extend your production portfolio. If the cost yous pay to add together novel products as well as extend your life wheel is greater than the benefits of doing so, yous volition receive got a long life cycle, but yous volition lose value along the way. The minute is that the new products that yous offering receive got to scale up, equally yous choke larger. Put differently, a novel production that adds l 1000000 inwards value is a giant pace forward, when yous are a hundred 1000000 dollar company, but makes alone a pocket-sized departure if yous are a billion dollar company. An added as well as related implication is that the to a greater extent than successful your initial production is inwards delivering profits as well as value, the to a greater extent than hard it becomes to observe novel products that brand a substantial growth contribution.
3. Reinvent
The tertiary as well as maybe most promising route for high tech firms that desire to stretch out growth periods is to modify the concern model. Having used depression cost entry, piece of cake scaling upwards as well as customers switching to climb the growth ladder quickly, yous receive got to run at removing those advantages for the firms that follow you. In particular, yous receive got to attempt to do i or to a greater extent than of the following:
The "Right" CEO
The corporate life wheel construction comes alongside a subtext on what type of administration skills are needed at each stage.
Put briefly, the "right" CEO for a society inwards the growth stage volition involve vision, charisma as well as story telling skills to attract employees, investors as well as customers to the company. As growth levels off, yous involve a dissimilar gear upwards of skills inwards your CEO, to a greater extent than dependent inwards seeking out growth as well as recognizing its limits. In decline, yous desire a CEO alongside express ambitions, who is swilling to shrink the society as well as sell its assets, at the correct price. While this is truthful for all companies, the procedure is easier for non-tech companies alongside long life cycles, where each phases lasts long plenty to allow the procedure to locomote on naturally (where the CEO ages alongside the society as well as hands the reins over to a novel one).
The Rest of the Story
With tech companies, alongside speeded upwards life cycles, where a society tin choke from ascent star to declining society inwards a current of a few years, at that topographic point is a much greater adventure that the start-up CEO (often a founder) volition withal live at the helm when the society enters its mature as well as maybe fifty-fifty declining phases. The qualities that made the CEO a proficient tally inwards the start upwards as well as growth phases volition choke a liability equally the society matures as well as declines. There are 3 implications:
In the unhealthy version of this strategy, yous do nix to alter the life wheel dynamics for the firm, but deal the firm, inwards denial, breaking i or to a greater extent than of the 3 rules listed above. During your growth phase, yous allow yourself to diverted yesteryear fights over command or debt financing as well as lose a portion of your growth potential. As your theatre matures, yous either choke on to human activity similar a growth company, pursuing growth (at whatever cost), and/or borrow coin similar a non-tech company. In decline, yous attempt to contrary the procedure yesteryear going after the corporate equivalents of stomach tucks as well as human face upwards lifts, corporate do-overs that do non modify the goal game but enrich others inwards the process.
2. Reseed as well as regrow
If yous are the director or possessor of a tech company, it is natural to await for an anti-aging serum, something that volition allow yous extend your life. After all, yous do receive got the exceptions to the curt life wheel rule, companies that receive got managed to non only hold upwards over long periods, but choke on to grow. This strategy is built on the premise that it is tech products that receive got curt life cycles, non tech companies, as well as that if yous tin maintain coming upwards alongside novel tech products, yous tin extend your life equally a company. Your administration strategy, if yous choke alongside this option, volition live to advance the society along 2 tracks. While nurturing your principal product, yous volition await for opportunities to extend what yous run across equally your strengths (technology, design, user base), yesteryear offering novel products as well as services. In your dream scenario, your initial success gives yous a leg upwards for hereafter successes, leading yous to receive got an extended life wheel equally a company.
Promising though this selection may look, at that topographic point are 2 caveats as well as they are what characterize the darker version of the strategy. The starting fourth dimension is that whether the strategy pays off for your stockholders volition depend inwards large business office on what yous pay to extend your production portfolio. If the cost yous pay to add together novel products as well as extend your life wheel is greater than the benefits of doing so, yous volition receive got a long life cycle, but yous volition lose value along the way. The minute is that the new products that yous offering receive got to scale up, equally yous choke larger. Put differently, a novel production that adds l 1000000 inwards value is a giant pace forward, when yous are a hundred 1000000 dollar company, but makes alone a pocket-sized departure if yous are a billion dollar company. An added as well as related implication is that the to a greater extent than successful your initial production is inwards delivering profits as well as value, the to a greater extent than hard it becomes to observe novel products that brand a substantial growth contribution.
3. Reinvent
The tertiary as well as maybe most promising route for high tech firms that desire to stretch out growth periods is to modify the concern model. Having used depression cost entry, piece of cake scaling upwards as well as customers switching to climb the growth ladder quickly, yous receive got to run at removing those advantages for the firms that follow you. In particular, yous receive got to attempt to do i or to a greater extent than of the following:
- Increase the cost of entry: To scope this, yous tin await to legal protection (perhaps through patenting) or yesteryear creating gate keepers that tedious as well as maybe halt novel entrants. In my view, both Microsoft as well as Apple receive got been helped inwards their life wheel lengthening efforts yesteryear controlling the operating systems that are the standards that competitors oft receive got to follow to acquire inwards their respective businesses.
- Increase the cost of scaling up: To the extent that depression upper-case alphabetic quality intensity allows competitors to grow fast, yous tin run to increase the upper-case alphabetic quality needed for growth.
- Increase the stickiness of client preferences: If customers are quick to switch alongside applied scientific discipline products, yous receive got to acquire inwards to a greater extent than costly to switch. This tin live accomplished inwards many ways, yesteryear adding features to the production or service that choke to a greater extent than user-customized alongside purpose (eg. search engines that retrieve your searches as well as online retailers that larn your preferences) or yesteryear creating run production that volition live degraded or rendered useless yesteryear switching. As someone who has been frustrated alongside MS Office (for the Mac) at diverse times inwards the final few years, I receive got considered switching to competitors (Keynote as well as Pages, for instance) but receive got held dorsum because I receive got thousands of Office documents from closed to 3 decades that may or may non hold upwards the switch.
In the darker version of this strategy, the roadblocks yous create to contest may give away yous non alone to bad populace relations (as a groovy or unfair competitor) but to legal jeopardy, equally anti-trust regulators target as well as attempt to modify your practices. Google as well as Microsoft, 2 companies that receive got adopted this strategy alongside extraordinary success over the final 2 decades, receive got faced this backlash, equally a number of their success.
The corporate life wheel construction comes alongside a subtext on what type of administration skills are needed at each stage.
Put briefly, the "right" CEO for a society inwards the growth stage volition involve vision, charisma as well as story telling skills to attract employees, investors as well as customers to the company. As growth levels off, yous involve a dissimilar gear upwards of skills inwards your CEO, to a greater extent than dependent inwards seeking out growth as well as recognizing its limits. In decline, yous desire a CEO alongside express ambitions, who is swilling to shrink the society as well as sell its assets, at the correct price. While this is truthful for all companies, the procedure is easier for non-tech companies alongside long life cycles, where each phases lasts long plenty to allow the procedure to locomote on naturally (where the CEO ages alongside the society as well as hands the reins over to a novel one).
The Rest of the Story
With tech companies, alongside speeded upwards life cycles, where a society tin choke from ascent star to declining society inwards a current of a few years, at that topographic point is a much greater adventure that the start-up CEO (often a founder) volition withal live at the helm when the society enters its mature as well as maybe fifty-fifty declining phases. The qualities that made the CEO a proficient tally inwards the start upwards as well as growth phases volition choke a liability equally the society matures as well as declines. There are 3 implications:
- Denial is to a greater extent than deep set: The potential for value devastation from going for growth, when it no longer makes feel to do so, is greater at tech companies than an at non-tech companies, because the administration inwards house is oft the same i that nurtured the society through its high growth phase. The employment gets worse if the CEO happens to live the founder of the society as well as views its decline as well as failure inwards personal terms.
- Making the backlash stronger: The natural reaction to administration denial is investor anger which volition live manifested inwards activist investors pushing managers to change, as well as if they refuse, force them out.
- Which is ground to worry nigh voting rights: In the final decade, applied scientific discipline companies receive got moved away from the "one share, i vote" epitome that governed the States companies for decades. That trend, started yesteryear Google, but extended yesteryear the social media companies, has been ignored equally these companies grow rapidly but volition choke an number for investors, when growth slows at these companies as well as the founders/insiders choke into denial model. If yous are a stockholder inwards i of these immature tech companies alongside unequal voting rights, yous volition regret your inability to receive got a country inwards how these companies are run, sooner rather than later.
YouTube Video
Tech Life Cycle Series
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