8 ms·

In the words of Scott McNealy, "Everyone likes to hold hands while circling the drain." (I believe he made that comment when SGI agreed to acquire Cray.) It is

In the words of Scott McNealy, "Everyone likes to hold hands while circling the drain." (I believe he made that comment when SGI agreed to acquire Cray.) It is interesting to me as a technologist to remember these companies as both powerhouses in their domains and failing enterprises. What I don't know is what allows a company to successfully 're-invent' itself or to recover its core values and return to a previously powerful position. IBM did that once transitioning from PCs, Microsoft seems to have done it, and Apple pulled it off when Steve Jobs returned. SGI died, MIPS is nearly dead, Sun is dead, Compaq died, Dell might be considered a comeback, National Semiconductor died, AT&T Bell Labs died, Northern Telcom died, Polaroid died, Kodak is nearly dead. There are obvious issues when the accountants take over and start squeezing the cash out of a company, and companies that just keep getting deeper and deeper into a technology that isn't going to survive when something new has come along. But why are these events so crippling that companies that have the resources to re-invent themselves seem to so often fail to do so?

dman 7y ago
Think it comes down to incentive structures and what kind of behavior is rewarded. In a well functioning company people creating value bottom up see an upward trajectory in their careers. Companies that lose their way end up in a limbo state where power brokers, star communicators, coordinators end up capturing all the value and the act of creating bottom up value becomes an irrational act. An employee will do exceptional work if they have some kind of belief that they will be able to monetize it by capturing some of the value created. Once this belief evaporates doing great work becomes a fools errand. We (humans) appear to be hard wired to reverse engineer the incentive structures both explicit and implicit in any given situation.
- ChuckMcM 7y ago
  I think there is a lot of truth in this. It was certainly the case at Sun when my friends started leaving that they had lost hope of being able to "make a difference." I expect that is an expression of the condition you describe.
- deleted 7y ago
  [deleted]
- MichaelMoser123 7y ago
  Is it possible to get some sort of measure for that? Is it possible for an outsider to understand if creation of value is a priority at a given company?
- mtgx 7y ago
  And at a company-wide/divison level, look at cost structures. A company like Intel may be incentivized to make chips with $50+ margins, but will run away from making chips with 50 cent margins.
- dreamcompiler 7y ago
  The older I get the more I believe this. Everything about a company's behavior can be explained by their incentive structures. Mission statements and grand visions mean nothing. Incentive structures are everything.
- snarfy 7y ago
  I've basically seen this happen at my former employer. They started an industry, made hundreds of millions, but instead of investing in development, the executives all receive massive bonuses. Competition is now creeping in and they have no way to compete. What was once new and innovative tech is now legacy enterprise. Instead of a cooperative relationship with customers it has become adversarial. Instead of hiring engineers and building better technology that sells itself as it once did, they hire salesmen to negotiate multiyear reoccurring contracts.
  - mcv 7y ago
    I have often thought it would be a good idea if employees had a voice in the salaries of their bosses. That would prevent mediocre executives from looting a company like that. If an executive is really good and benefits the company as a whole, sure give them a high salary to keep them on board. But if they're mostly profiting from the hard work of the rest of the company, and don't want to reinvest the profits back into the company or share it with the employees, then why should they be getting these massive salaries?
- rahulnair23 7y ago
  This is absolutely spot on. A good deal of resources in some large organizations are wasted on vanity projects initiated by mid-management specifically for such value-capture.
gumby 7y ago
> What I don't know is what allows a company to successfully 're-invent' itself or to recover its core values and return to a previously powerful position. IBM did that once transitioning from PCs... By the way IBM did it at least four times before: once when they Computing-Tabulating-Recording company reinvented themselves and their focus and became IBM; once after WWII when they made a push into electronic computing and once in the 60s with the phenomenal 360 project and finally in the 80s when PCs dominated revenue. Thomas J Watson’s autobiography is a must-read and covers up through the 360.
- kwanbix 7y ago
  They re-invented themselves as a services company in the 2000s. For good or for worse.
  - agumonkey 7y ago
    so far it didn't pan out greatly, but I stopped hearing about that in 2010
seminatl 7y ago
I'm not sure if Nat'l Semi died or not. They became a division of TI which is currently trading near its all-time-greatest valuation. TI is one of the most valuable companies on earth. Before the acquisition National had healthy profits.
- dbcurtis 7y ago
  The Nat Semi & TI merger is an interesting case. They both had huge numbers of parts in the same categories, but little actual overlap in actual part catalogs. They complemented each other nicely in terms feature-space coverage. At the same time, building a modern semiconductor fab is so capital intensive that only huge companies can do it. So the economics of that merger were uncommonly attractive.
emayljames 7y ago
Photocopy and Copy & Paste finally become one.
basch 7y ago
In this case though, HP isnt the former powerhouse, which is alive and well, as HPE, reinventing itself and on quite an acquisition spree. HP is the printer and pc business they shed to keep themselves from bleeding out. HP is the kind of thing Lenovo likes buying, some scrap somebody else wanted. HP may have the larger market cap, but HPE is the company building itself for the future.
- simonh 7y ago
  Yep, the old HP is alive and well as Agilent Technologies. They’re no technological powerhouse, but a respected and successful scientific instruments business. Just the sort of business Bill and David set out to create in the first place.
- oblio 7y ago
  HP Inc has higher revenue than Lenovo. Just sayin' :-)
  - basch 7y ago
    I was only painting it as the discarded "we dont want this legacy business" that HPE shed. Lenovo likes those scraps of companies reinventing themselves. And if weve learned anything from this post, the much smaller company can apparently buy the larger one.
gretch 7y ago
The popular theory which explains why this happens is documented as the innovator's dilemma: https://en.wikipedia.org/wiki/The_Innovator%27s_Dilemma https://en.wikipedia.org/wiki/The_Innovator%27s_Dilemma Basically to become that successful, companies have some hit product that becomes their golden goose. All data in the world says that a dollar invested in keeping the golden goose alive and healthy is the optimal way to invest that dollar. No one in the company (not execs, or accountants, or engineers) would want to disrupt this good thing that's going on. Like, suppose that technologists/engineers make rational data-driven decision - look at this huuuge pile of data that validates the decision to continue doing the same thing over and over again. At that point the business model and original product are baked into the companies DNA, and despite new things coming along, they really can't even imagine what it's like to do anything else. The ability to reinvent is truly the secret sauce to business. Very few execs can do this for their organizations. If someone could do it reliably and predictably, they'd instantly be compensated $100M+ and dropped into any of the companies you mentioned to 'turn it around'
- sumanthvepa 7y ago
  This used to be true for the old line of tech companies. The new tech behemoths have learned that lesson well. Their senior management and boards are paranoid about disruption. They are extremely agile with new opportunities. See Alphabet's range of investments, ditto Amazon, Microsoft, Facebook and Apple. In many cases, the founders separate themselves from the day-to-day management and short term revenue pressures that Wall imposes. This allows them to focus on new areas of growth. The share structure, allows this to happen -- class B stock give the founders the ability to ignore short term revenue pressure to some extent. This generation of tech companies are different beasts.
  - bluGill 7y ago
    Everybody thinks they are different until proven otherwise. This generation is risking that there won't be a next big thing, and so someone smaller but more focused comes from behind and slowly takes over while they are focusing too much energy on looking for a next big thing that never happens. A more focused organization would better look after the core business and not be disrupted by someone who does their core business just a little better. I can't tell you which answer is right (ask me in 30 years), but I can see possibilities.
simonh 7y ago
It’s timing. When a technology is only just starting out, the cost of entry is peanuts. Linus started Linux in his student bedroom, Zuck did the same with Facebook. The Apple I was a spare time project. The original HP was a bit more organised, they started in a garage but did intend it to be a business from the start. When a technology is at the point where it is maturing, the cost of entry is bank-breaking. By then the first movers have attracted serious capital, but more importantly they have network effects on their side. Everyone can see this is the way to go and they are way ahead of you. There’s a decision point, spend billions to probably be an also-ran anyway, or essentially give the money to the shareholders. Everybody focuses on the technology, but it’s the network effects that really matter. This is why WebOS and Windows Phone failed, why couldn’t HP and Microsoft buy their way into the mobile phone landscape? Their technology was excellent. The problem was the weren’t competing with Apple and a Google. They were competing with them, plus all the companies that had invested in the iPhone and Android ecosystems. The carriers, device manufacturers, software developers, service companies, all with huge investments in those platforms. Add that all up and it’s maybe 10x as much as just Apple and Google on their own. By now, probably a lot more. So it’s all about timing. Google knew this, which is why 20% time happened. You pretty much have to invent the future to have any chance of owning it, or even getting a slice. Google was just incredibly lucky that Android fell into their laps at just the right time, and was powerful enough to compete with iOS. So the problem is, how do you keep genuinely innovating?
- tonyedgecombe 7y ago
  On the other hand Apple wasn't in the phone business at all a decade ago, it was dominated by Nokia. Windows CE was on a lot of devices. The opportunity came because the whole industry was moribund, they couldn't see the wood for the trees. Most of us hated our phones.
  - pmontra 7y ago
    Did we? I was happy with my phone back then. It made calls and received SMSes. Having to use T9 was not so good but not even so bad. Of course my phone does much more now, calling and texting being the least of it. I wouldn't go back ( * ), but I also won't go back to the cars of the 70s. This doesn't mean I hated my dad's car. Apple invented a new phone which is not a phone as intended before 2007 and one that people liked. That's why they got so successful. HP and Xerox are probably still good at what they used to do (I'm happy with my ZBook and LaserJet) but they are probably not where the bulk of the market is nowadays. So they seem to be fading away. (*) Except that phones got so light and small around 2000 that they could almost fit in a closed fist and I'm missing that.
mashgin 7y ago
You can add Yahoo to that list as well. I was using Yahoo mail, music, briefcase, messenger, chat, daily 'only' like ~15 years ago!
foobar1962 7y ago
> What I don't know is what allows a company to successfully 're-invent' itself or to recover its core values and return to a previously powerful position. An excellent article about Fujifilm, and why it survived but Kodak died. Kodak is dead. Today's Kodak is basically just a brand. The film division is a different entity. https://petapixel.com/2018/10/19/why-kodak-died-and-fujifilm-thrived-a-tale-of-two-film-companies/ https://petapixel.com/2018/10/19/why-kodak-died-and-fujifilm...
- jacobush 7y ago
  The film division is really not dead though, which must be pointed out.
  - foobar1962 7y ago
    The current film company is not the original Kodak. It appears the Kodak imaging division was bought by the UK Kodak Pension Plan (I kid you not) and they still privately own the business. They share the "Kodak" brand name with the Eastman Kodak Company, and the HQ is in the UK.
    - jacobush 7y ago
      Yes, I know. It's even weirder than that though. From the perspective of the people who work at the plant though, it's the same. They do (very, limited compared to way back then) research and development, and run the production of film. Same people and the same things as has been going on for decades. These people, Eastman Kodak, produce the film. They also sell motion picture film. What the UK Kodak Pension Plan bought is Kodak Alaris - they sell still image film. And they buy that film from Eastman Kodak.
big_chungus 7y ago
> MIPS is nearly dead In the embedded systems space, MIPS is alive and if not kicking, at least twitching a bit. ARM has grabbed a lot of marketshare, but MIPS will likely hang on to some of the very low-clock systems.
lukego 7y ago
Is attempting a re-invention an efficient use of capital? Maybe those companies that went gracefully into the night were able to pay out dividends for their owners to reinvest in Google, Facebook, etc and nobody lost much of anything from their decline?
chadlavi 7y ago
Lack of vision at the top.

dman 7y ago

Think it comes down to incentive structures and what kind of behavior is rewarded. In a well functioning company people creating value bottom up see an upward trajectory in their careers. Companies that lose their way end up in a limbo state where power brokers, star communicators, coordinators end up capturing all the value and the act of creating bottom up value becomes an irrational act. An employee will do exceptional work if they have some kind of belief that they will be able to monetize it by capturing some of the value created. Once this belief evaporates doing great work becomes a fools errand. We (humans) appear to be hard wired to reverse engineer the incentive structures both explicit and implicit in any given situation.

ChuckMcM 7y ago
I think there is a lot of truth in this. It was certainly the case at Sun when my friends started leaving that they had lost hope of being able to "make a difference." I expect that is an expression of the condition you describe.
deleted 7y ago
[deleted]
MichaelMoser123 7y ago
Is it possible to get some sort of measure for that? Is it possible for an outsider to understand if creation of value is a priority at a given company?
mtgx 7y ago
And at a company-wide/divison level, look at cost structures. A company like Intel may be incentivized to make chips with $50+ margins, but will run away from making chips with 50 cent margins.
dreamcompiler 7y ago
The older I get the more I believe this. Everything about a company's behavior can be explained by their incentive structures. Mission statements and grand visions mean nothing. Incentive structures are everything.
snarfy 7y ago
I've basically seen this happen at my former employer. They started an industry, made hundreds of millions, but instead of investing in development, the executives all receive massive bonuses. Competition is now creeping in and they have no way to compete. What was once new and innovative tech is now legacy enterprise. Instead of a cooperative relationship with customers it has become adversarial. Instead of hiring engineers and building better technology that sells itself as it once did, they hire salesmen to negotiate multiyear reoccurring contracts.
- mcv 7y ago
  I have often thought it would be a good idea if employees had a voice in the salaries of their bosses. That would prevent mediocre executives from looting a company like that. If an executive is really good and benefits the company as a whole, sure give them a high salary to keep them on board. But if they're mostly profiting from the hard work of the rest of the company, and don't want to reinvest the profits back into the company or share it with the employees, then why should they be getting these massive salaries?
rahulnair23 7y ago
This is absolutely spot on. A good deal of resources in some large organizations are wasted on vanity projects initiated by mid-management specifically for such value-capture.

gumby 7y ago

> What I don't know is what allows a company to successfully 're-invent' itself or to recover its core values and return to a previously powerful position. IBM did that once transitioning from PCs... By the way IBM did it at least four times before: once when they Computing-Tabulating-Recording company reinvented themselves and their focus and became IBM; once after WWII when they made a push into electronic computing and once in the 60s with the phenomenal 360 project and finally in the 80s when PCs dominated revenue. Thomas J Watson’s autobiography is a must-read and covers up through the 360.

kwanbix 7y ago
They re-invented themselves as a services company in the 2000s. For good or for worse.
- agumonkey 7y ago
  so far it didn't pan out greatly, but I stopped hearing about that in 2010

seminatl 7y ago

I'm not sure if Nat'l Semi died or not. They became a division of TI which is currently trading near its all-time-greatest valuation. TI is one of the most valuable companies on earth. Before the acquisition National had healthy profits.

dbcurtis 7y ago
The Nat Semi & TI merger is an interesting case. They both had huge numbers of parts in the same categories, but little actual overlap in actual part catalogs. They complemented each other nicely in terms feature-space coverage. At the same time, building a modern semiconductor fab is so capital intensive that only huge companies can do it. So the economics of that merger were uncommonly attractive.

emayljames 7y ago

Photocopy and Copy & Paste finally become one.

basch 7y ago

In this case though, HP isnt the former powerhouse, which is alive and well, as HPE, reinventing itself and on quite an acquisition spree. HP is the printer and pc business they shed to keep themselves from bleeding out. HP is the kind of thing Lenovo likes buying, some scrap somebody else wanted. HP may have the larger market cap, but HPE is the company building itself for the future.

simonh 7y ago
Yep, the old HP is alive and well as Agilent Technologies. They’re no technological powerhouse, but a respected and successful scientific instruments business. Just the sort of business Bill and David set out to create in the first place.
oblio 7y ago
HP Inc has higher revenue than Lenovo. Just sayin' :-)
- basch 7y ago
  I was only painting it as the discarded "we dont want this legacy business" that HPE shed. Lenovo likes those scraps of companies reinventing themselves. And if weve learned anything from this post, the much smaller company can apparently buy the larger one.

gretch 7y ago

The popular theory which explains why this happens is documented as the innovator's dilemma: https://en.wikipedia.org/wiki/The_Innovator%27s_Dilemma https://en.wikipedia.org/wiki/The_Innovator%27s_Dilemma Basically to become that successful, companies have some hit product that becomes their golden goose. All data in the world says that a dollar invested in keeping the golden goose alive and healthy is the optimal way to invest that dollar. No one in the company (not execs, or accountants, or engineers) would want to disrupt this good thing that's going on. Like, suppose that technologists/engineers make rational data-driven decision - look at this huuuge pile of data that validates the decision to continue doing the same thing over and over again. At that point the business model and original product are baked into the companies DNA, and despite new things coming along, they really can't even imagine what it's like to do anything else. The ability to reinvent is truly the secret sauce to business. Very few execs can do this for their organizations. If someone could do it reliably and predictably, they'd instantly be compensated $100M+ and dropped into any of the companies you mentioned to 'turn it around'

sumanthvepa 7y ago
This used to be true for the old line of tech companies. The new tech behemoths have learned that lesson well. Their senior management and boards are paranoid about disruption. They are extremely agile with new opportunities. See Alphabet's range of investments, ditto Amazon, Microsoft, Facebook and Apple. In many cases, the founders separate themselves from the day-to-day management and short term revenue pressures that Wall imposes. This allows them to focus on new areas of growth. The share structure, allows this to happen -- class B stock give the founders the ability to ignore short term revenue pressure to some extent. This generation of tech companies are different beasts.
- bluGill 7y ago
  Everybody thinks they are different until proven otherwise. This generation is risking that there won't be a next big thing, and so someone smaller but more focused comes from behind and slowly takes over while they are focusing too much energy on looking for a next big thing that never happens. A more focused organization would better look after the core business and not be disrupted by someone who does their core business just a little better. I can't tell you which answer is right (ask me in 30 years), but I can see possibilities.

simonh 7y ago

It’s timing. When a technology is only just starting out, the cost of entry is peanuts. Linus started Linux in his student bedroom, Zuck did the same with Facebook. The Apple I was a spare time project. The original HP was a bit more organised, they started in a garage but did intend it to be a business from the start. When a technology is at the point where it is maturing, the cost of entry is bank-breaking. By then the first movers have attracted serious capital, but more importantly they have network effects on their side. Everyone can see this is the way to go and they are way ahead of you. There’s a decision point, spend billions to probably be an also-ran anyway, or essentially give the money to the shareholders. Everybody focuses on the technology, but it’s the network effects that really matter. This is why WebOS and Windows Phone failed, why couldn’t HP and Microsoft buy their way into the mobile phone landscape? Their technology was excellent. The problem was the weren’t competing with Apple and a Google. They were competing with them, plus all the companies that had invested in the iPhone and Android ecosystems. The carriers, device manufacturers, software developers, service companies, all with huge investments in those platforms. Add that all up and it’s maybe 10x as much as just Apple and Google on their own. By now, probably a lot more. So it’s all about timing. Google knew this, which is why 20% time happened. You pretty much have to invent the future to have any chance of owning it, or even getting a slice. Google was just incredibly lucky that Android fell into their laps at just the right time, and was powerful enough to compete with iOS. So the problem is, how do you keep genuinely innovating?

tonyedgecombe 7y ago
On the other hand Apple wasn't in the phone business at all a decade ago, it was dominated by Nokia. Windows CE was on a lot of devices. The opportunity came because the whole industry was moribund, they couldn't see the wood for the trees. Most of us hated our phones.
- pmontra 7y ago
  Did we? I was happy with my phone back then. It made calls and received SMSes. Having to use T9 was not so good but not even so bad. Of course my phone does much more now, calling and texting being the least of it. I wouldn't go back ( * ), but I also won't go back to the cars of the 70s. This doesn't mean I hated my dad's car. Apple invented a new phone which is not a phone as intended before 2007 and one that people liked. That's why they got so successful. HP and Xerox are probably still good at what they used to do (I'm happy with my ZBook and LaserJet) but they are probably not where the bulk of the market is nowadays. So they seem to be fading away. (*) Except that phones got so light and small around 2000 that they could almost fit in a closed fist and I'm missing that.

mashgin 7y ago

You can add Yahoo to that list as well. I was using Yahoo mail, music, briefcase, messenger, chat, daily 'only' like ~15 years ago!

foobar1962 7y ago

> What I don't know is what allows a company to successfully 're-invent' itself or to recover its core values and return to a previously powerful position. An excellent article about Fujifilm, and why it survived but Kodak died. Kodak is dead. Today's Kodak is basically just a brand. The film division is a different entity. https://petapixel.com/2018/10/19/why-kodak-died-and-fujifilm-thrived-a-tale-of-two-film-companies/ https://petapixel.com/2018/10/19/why-kodak-died-and-fujifilm...

jacobush 7y ago
The film division is really not dead though, which must be pointed out.
- foobar1962 7y ago
  The current film company is not the original Kodak. It appears the Kodak imaging division was bought by the UK Kodak Pension Plan (I kid you not) and they still privately own the business. They share the "Kodak" brand name with the Eastman Kodak Company, and the HQ is in the UK.
  - jacobush 7y ago
    Yes, I know. It's even weirder than that though. From the perspective of the people who work at the plant though, it's the same. They do (very, limited compared to way back then) research and development, and run the production of film. Same people and the same things as has been going on for decades. These people, Eastman Kodak, produce the film. They also sell motion picture film. What the UK Kodak Pension Plan bought is Kodak Alaris - they sell still image film. And they buy that film from Eastman Kodak.

big_chungus 7y ago

> MIPS is nearly dead In the embedded systems space, MIPS is alive and if not kicking, at least twitching a bit. ARM has grabbed a lot of marketshare, but MIPS will likely hang on to some of the very low-clock systems.

lukego 7y ago

Is attempting a re-invention an efficient use of capital? Maybe those companies that went gracefully into the night were able to pay out dividends for their owners to reinvest in Google, Facebook, etc and nobody lost much of anything from their decline?

chadlavi 7y ago

Lack of vision at the top.