The Secret Rules That Govern the Success and Failure of Tech Companies

Rob Enderle

Over the last three decades I've worked as an inside (ROLM/Siemens/IBM) or outside (Dataquest, Forrester, Enderle Group) technology analyst. I thought it would be interesting to share the 16 immutable rules that most people actually running tech companies don't seem to know.


These rules define the differences between a company that is doing well like Apple, and a company that is failing like RIM. They anticipate the mistakes and suggest fixes to major financial, operational and PR problems the firms experience and provide a primer for anyone wanting to be successful in this segment. Many are not segment-oriented and could apply to any business at any level, but some are specific to technology.


Let's get to it.


Rule 1: Focus Groups Aren't Predictive


This is one of the things Steve Jobs seemed to get intuitively. Focus groups are only good (if done properly) for determining past behavior. They are worthless in determining future behavior. This is because there are too many variables in the future that you can't control in the group. As a result, they generally just provide a way for a low-level employee to manipulate upper management into a decision or, if used without an agenda, they will generally drive the wrong decision. The rule of "garbage in, garbage out" applies here.


Rule 2: Success Has a Cost


Most executives appear to believe they can accomplish something with the available resources they have. This is seldom true and is why most companies and most new products fail. You would think it stupid too if you saw someone with $20,000 in resources try to build Disneyland. Yet, for some reason, executives will generally take an estimated budget, cut it by some arbitrary amount or simply start without a real estimate of the cost of success, and move to plan execution. Most failed projects are massively underfunded by design.


Rule 3: Employees Aren't Universal


There is a common belief that someone who is successful in one area can be successful in another. Executives are moved from sales to HR, from manufacturing to marketing, and from operations to line management and back again. People develop skills and competencies, and these skills and competencies rarely transfer well to completely different areas. You wouldn't, for instance, take a pediatrician and toss him or her into major surgery without retraining. Yet firms make moves like this all the time and then wonder why things aren't going very well.


Rule 4: Team Balance Matters


Success is rarely attributed to one person, though one person may be a critical element in a team. If you don't analyze the team before making an employee change you will likely ensure that the team fails and the removed employee fails. This is often why CEOs who were successful in one job are unsuccessful in another. The new team isn't equivalent in the new job and the CEO is not aware of his, or her, own dependencies. Successful companies are generally not made up of successful sole contributors; they are made up of successful teams where the weaknesses of one individual are offset by the strengths of another.


Rule 5: Marketing Matters


Perceptions surround the company and its products and can be manipulated. If you don't manipulate the perceptions that surround your company and products, someone else may. There is a general belief that marketing is a throwaway practice to fund when there are excess funds and to cut when funds are shot. It is actually the mechanism that assures investor confidence and new buyer acquisition, and it plays a major role in customer satisfaction because it helps set expectations. It requires an expertise and can become a money hole if that expertise isn't there. It goes beyond the paint on the car or the makeup on the woman and plays a major role in how the firm is viewed broadly.


Rule 6: Experience Matters More than Education


A person with a degree (and I have three of them) showcases a potential for competence. A person who has demonstrated that competence is a more assured choice because that competence is proven. Three years of successfully accomplishing a task is more valuable than a Ph.D. in that task. Degrees provide status and they do enhance an individual's income, but they don't ensure success. Education teaches a person how to learn and provides them with a series of rules that mostly will turn out to be inaccurate or out of date in practice. It is no more than a jumpstart. Firms that focus on education in experienced employees generally pay more for lower-quality work in practice. Generally, the non-degreed competent professional will cost less and be harder to recruit away from you than his/her degreed counterpart.


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