8 Warnings That Your Company is Toast

Last month I reminded you that no big-brand company lasts forever, and few of today’s technology phenoms last long at all. One of my readers emailed to ask if I might dare to note some of the warning signs that suggest company extinction might be zeroing in on your own workplace.

Of course if I knew the full answer to that, I would spend the rest of my career shorting all those imminent losers traded in the public markets. Creative destruction is difficult to see in its earliest phases because it often begins simmering silently in the background when your company is riding a wave of enormous good fortune. Funny how that infecting vulnerability sneaks its nose under the tent precisely when a business seems to be at its healthiest peak.

While the corrosion can be deceptively invisible at first, there are usually festering symptoms we can observe, watching the makings of a crash in slow motion long before opposing forces collide. Here are eight thumbnail questions to help diagnose the severity of your company’s illness and whether it’s likely to be terminal.

What is the company’s R&D budget as a percentage of sales?

If research-and-development spending is declining as your company matures, it’s possible that company is being harvested by its owners as a cash cow. While strong cash flow is an indicator of company health, take notice of how much of your business is being driven by recent successes vs. legacy brands. If new products aren’t breaking, sniff around and see how much of that cash is being invested in next-generation ideas. If increasingly more cash is going to ownership and less to building your company’s future, you may have reason to worry.

Is your CEO surrounded by people who hold the same views of the company’s excellence?

Without gadflies who question everything, you’re likely to keep doing the same things. That could make you a cash cow, a one-hit wonder, or any number of limited-thinking results. Great senior leadership in a company encourages constructive conflict, because no single viewpoint in management can possibly see around every corner or predict a competitive threat. If lots of ideas are flowing, you have a much better chance to reinvent yourselves. Where dialogue is limited and funneling to a singular point of view, trouble is coming.

Does senior management actually use the product or service you produce?

This is the old argument for eating your own dog food. If the people who make and sell something only talk about why it’s great rather than obsess over what will make it even better, it’s likely to stay the same. If there is cynicism around your success and products become passionless widgets, customers will see that soon enough. Your customers can’t reinvent your products, just reject them. If you’re not a fan of what you’re doing, why should they be?

Does senior management regularly sample, investigate, and dissect competitive products?

If you think what you’ve got is the best and don’t even bother to see what could soon be eating your lunch, your lunch will soon be eaten. Be paranoid, be aware of everything competitive, commission and dissect research, never be comfortable that your moat is impenetrable. It’s okay not to use your competitor’s products day-to-day. It’s not okay to ignore them. If you happen to like them better than your own, wake up, the nightmare is about to become real.

In your company’s last earnings crunch, was marketing expense an early and severe casualty?

Marketing is an investment spend. If the money you are spending on marketing doesn’t add value to profitable sales, it should be cut now. If it’s driving profitable sales, it’s downright irresponsible to cut it. Marketing should be seen as a profit center, not a cost center. If there is no measurable return on your marketing spend, you’re already killing the company from within. If the return can be quantified, cutting it in bad times is senseless and irresponsible.

Is great marketing intended to help a mediocre product perform better than it deserves?

Said another way: outstanding marketing helps a bad product fail faster. If the product is garbage, all marketing can do is get it in the hands of early adopters. Once these market influencers trash the product, all is lost. If the product needs refinement before you invest to take it to market, take the extra time to get it right. If the product stinks and can’t be saved, kill it without a dollar of marketing spend.

Does your company culture resist rather than embrace change?

Also earlier this year I suggested that you keep your ears open for the phrase “But we’ve always…” whether it’s uttered in the break room or a key milestone review meeting. If your colleagues have unending excuses as to why you should stick with tried-and-true ways to fail because your company has always utilized a set of urban legends in your planning, you’re going to find it hard to carve a new path into the future. Doing what you’ve always done simply because you’ve always done it that way is a great way to succeed in any business that isn’t dynamic. Go make a list of businesses today that aren’t dynamic and tell me you should remain set in your ways.

Are you patching your platform or re-envisioning a new one?

Never confuse maintenance with progress. Think about just how fast industries are moving. I recently had the pleasure of watching the movie First Man. One of my favorites lines reminded me that it was a mere 66 years from the Wright Brothers first motorized biplane flight at Kitty Hawk (1903) to Neil Armstrong walking on the moon (1969). If you’re anywhere in the vicinity of 60 years old, that doesn’t seem like much time at all. If you’re fixing your biplane while your competitor is building a Saturn V rocket, it doesn’t matter that you’ve happened upon some world-class glue. When the rocket launches, you’re toast.

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Image: Pixabay

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Do I Have To Eat It?

A recent opinion piece in the Wall Street Journal by Jesse Kornbluth, a onetime devoted and inspired employee of America Online, pondered the question of “How AOL—aka Facebook 1.0—Blew Its Lead.” Kornbluth does a good job acknowledging the irony of overlap between the fallen angel and the rising star—the staggering power of community, the seduction of the walled garden, the financial reward of vast momentum—but more importantly, he gets his head around what he believes to be the downward turning point for his former employer. It was not so much the bursting of the bubble, nor even the distractions of failed promise in the historic merger with Time Warner. As a product person, Kornbluth saw the blood start to flow when those who loved product began to be overruled by those who lived by argument. Those arguments were not the healthy tension of developers debating the relative merits of features and benefits. The conflict shifted to initiatives in product strategy that were driven by individuals who had assured themselves their creative ideas would lead to success, even though they did not much have time to embrace and use AOL they way its creators had previously.

When the consultants arrived, strategy was not driven by those who embraced the product and its audience; strategy became a set of theoretical suppositions evidenced by the competitive landscape. There were only two problems: 1) the consultants were no more obsessively using competitive products than those of AOL; and 2) the competitive landscape was crumbling because it was just as inorganic in construct, itself no more than the conclusions of observation. Using a product is not trying it once, it is using it every day and using competitive products to fully internalize how bad becomes good and good becomes great. Data, analysis, reconnaissance, and interpretation are all essential in responding to hyper growth, but if you aren’t eating your own dog food, all bets are off.

Yes, you must Eat Your Own Dog Food.

Alpo Lorne GreeneSome people trace this edict to the television commercials for Alpo in the 1970s and 1980s where Lorne Greene made a point of showing us that he fed the very product he endorsed to his own dogs. No, he didn’t actually eat it himself, but the way he looked at it, you could tell he might be considering it. His dogs were an extension of himself. That love made it clear he would only feed them a product he trusted, and he would only endorse it publicly because he trusted it. I am not saying he was right. I am just noting than his conviction was visceral.

In the software spectrum, the phrase “Eating Our Own Dog Food” is more commonly traced to a 1988 memo from then Microsoft Manager Paul Maritz, encouraging his team to obsess over use of Microsoft’s products. His basic tenet was that to win a category and perfect your work, you had to be the consumer. The memo spread widely throughout Microsoft, over the gate and through the industry. It resonated with many of us, and began being accompanied by such observations as, “If you won’t use the software when it’s free, why should anyone pay you for it?”

Soon after came the dawn of the Dot-com age in the mid 1990s, quickly followed by the implosion of Web 1.0 known as the Dot-bomb era circa 2000. Interesting to note, a few of the companies that survived the turmoil and went onto become the great first generation brands of the Internet like Amazon and eBay made it a point to eat their own dogfood. While third-party consultants poured into corporations to sort out their tanking business models and rationalize their value propositions, far too many of those consultants were busy writing decks and compiling spread sheets. When you asked them what online products and services they loved, they often couldn’t respond, because they were too overwhelmed by time commitments to use the products they would evaluate, let alone love them. For those who had already been through a product development cycle or two, the writing was on the whiteboard.

The absolute necessity of eating your own dog food is anything but limited to software. If you design cars for a living and are not planning to drive your own creation when it comes off the line, how can you attend to every nuance and detail that sets apart your vehicle from the vast number of choices already available for sale? If your team designs a new line of workplace apparel intended to be marketed as more comfortable, durable, and stylish than everything else already hanging on the rack, will you not be planning to wear what you have produced proudly at least a few days each week out of pure joy? When you have the privilege to be creative and innovative in your occupation, you are quickly humbled by the fact that an idea for a new product or service however inspired and brilliant is in fact almost worthless. Customers seldom buy or become loyal to the ideas you pitch. Until a concept is executed expertly and embraced by those who will champion it, it really is just a first draft—perhaps filled with promise, but nonetheless in need of refinement, iteration, and polish. There is a long and winding road from pitch to product, and all along the way details have to be vetted first by those who most love the work, the creators.

Apple long ago coined this notion as Evangelism, and no Apple Evangelist in his or her right mind would try to get you excited about a product they weren’t already using themselves. To be fair, Evangelism is a beginning, not an end, after which customer feedback must become part of the process, but if our goal in social marketing is to engage our community in a supportive and seamless dialogue, then we owe it to them to initiate the dialogue with honesty, commitment, and passion. There will always be pain to share in early releases, but the more defects we extract ahead of release because we already know they are there, the more our customers can trust us to take them seriously in allowing our own needs to be met before we presume to address theirs.

Design is not cynical; its true elegance is purely self-reflective because form and function are easily evaluated in day-to-day use. If something is good enough for your dog, it might be good enough for someone else’s dog. Now imagine if you ensured it was good enough for you before you topped off the can. That would be some seriously tasty dog food. Go on, take a byte.