What Makes Companies Great? Surviving Competitive Crisis
It's by no means easy to grow a company or a career. I know this firsthand. But the true measure of strength, character, and indeed, greatness, is how our companies and we as managers perform under intense competitive pressure.
I skimmed the surface of this in How to Manage a Crisis, Any Crisis. But I think I've been studying the behavior of companies and their managers for too long and failed to see the big picture.
Look out below
Yahoo experienced a meteoric rise for the first ten years of its existence. But all that changed when Google began taking huge chunks out of Yahoo's search market share. Now sales have flatlined and profits are dwindling.
Yahoo's board's response to the threat is most revealing. It hired a CEO - Jerry Yang - incapable of executing a much-needed turnaround, presided over one of the most impressive executive talent exoduses in corporate history, and botched the company's only plausible exit strategy - a merger with Microsoft.
What the board does next - in hiring a new CEO and deciding the fate of the company's search business - will indeed determine whether the company survives or not. In any case, I think it's safe to say that "greatness" is off the table.
Sun Microsystems suffered a similar fate. Its rise was less meteoric and its decline, less precipitous, but the company has somehow managed to do a stellar job of doing nothing about its broken business model. It's sad; the company that put the dot in dot-com is now irrelevant.
The corporate graveyard is filled with companies once heralded as great. But because they failed to survive competitive and market pressure, they never were. Innovative, yes. Great, no.
Survivors
Now let's look at the flip-side, the survivors of competitive and market crisis.
It's easy to forget that Cisco was in dire straits after the dot-com bust. Numerous skeptics predicted its demise. But CEO John Chambers and his executive team flawlessly executed a bold and, more importantly, rapid restructuring plan. As a result, Cisco was first to rebound.
Amazon, AMR, Apple, HP, IBM, Texas Instruments, and even Intel faced similar competitive crises. But with extraordinary leadership and execution, they all emerged stronger and more resilient than before. These are all great companies.
The Future
While many companies survive, many more fail. I don't know if a quantitative analysis exists, but I'm guessing there's an order of magnitude or two difference between the number of survivors and failures.
Today, there's a long list of big-name companies experiencing competitive and economic troubles, either for the first time or as never before: AIG, Alcatel Lucent, AMD, Citicorp, Dell, eBay, Electronic Arts, Flextronics, Ford, GM, JDS Uniphase, Motorola, Nortel, Sprint, Starbucks, Sun Microsystems, Tribune, Tyco, UAL, and of course, Yahoo, to name a handful.
Which will survive and what will make the difference? Good question.