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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Learning from Mars

If you went to elementary school circa the 1960s, you remember that one of the few times TV was brought into the classroom—likely a dusty, early model, enormous 21-inch Zenith B&W CRT with bent rabbit ears, strapped to a prison issue, grey steel rolling wheel cart—was for the Apollo lift offs, splash downs, and moon walks. During those turbulent years of hard-won civil rights and compounding economic expansion, you might have dreamed about growing up to be the next Mick Jagger, but it is equally possible you aspired to have The Right Stuff and be the next Neil Armstrong.

The Space Race captured our imaginations. We watched in awe as the first boot imprint and an American flag were planted in the Sea of Tranquility. We lost sleep with the good people at Houston who had “a problem” bringing home Apollo 13. It was all so captivating, the science in our textbooks was made real, technology was cool, and the Warp Factors of Star Trek seemed someday plausible. I’m glad I got to experience that as a child—it made childhood more childlike and less childish. The Little Prince would have been proud.

Much has been written about the fall off in public enthusiasm for the space program after the tapering Apollo missions and the less grandiose but still near miraculous Space Shuttle missions. As we left The Cold War behind with the collapse of the Soviet Union, we came to worry less about controlling our Solar System. Satellites became our path to better television and radio entertainment, not so much a magic portal to the future as a manufactured bridge to enhanced convenience. It all became ordinary, and then expensive, a difficult pair to keep at the high-end of federal funding without public enthusiasm. We moved on, to the information age, to the PC revolution, to the wildly lucrative internet. NASA was scaled back year after year, and although we knew that wasn’t optimal, we were largely okay with it.

Too often we forget all the ancillary learning that occurred as part of space exploration—not just the nifty consumer products like cordless power tools and vastly improved athletic shoes, but the processes of working together in high function teams. Getting tonnage into and out of space safely has never been a job for individual heroes as much as it sets the tone for working together in groups, combining scientific work methods that emphasize cooperation, breaking down gigantic projects into manageable tasks. Engineering is a profession of shared ideas, where the accuracy of each single contribution matters immensely, but the compiled knowledge of all participants matters even more. We take so much of that kind of process for granted now when we bite off big chunks. I wonder if we take appropriate time to digest just what the process of doing the incredible really means.

As we took a brief intermission from the Games of the 30th Olympiad these past few weeks to observe the otherworldly, never before tried jet-softened hard landing on Mars, I was left pondering if perhaps we were being a bit too casual about the successful parachuting of the Curiosity Rover. No, there were no astronauts on board, and yes, we had landed on Mars before—but not this way, and not with a nuclear powered craft of such immense size and scale. I think everything that involves operating with precision at distances of this magnitude is astonishing, and no matter how clear the physics, we should celebrate with the geniuses at JPL and NASA anytime they pull off the near impossible. Getting to Mars and sending back data to Earth is not a little thing no matter how many times we do it.

This one left me thinking even further. In the midst of a floundering economy and awful recession, precisely the opposite of the Apollo climate, our national tech teams did more with less and made us proud. What were the business lessons, I wondered—more ancillary byproducts of this adventure in science—from which we can additionally benefit in learning by example? I am sure there are many, but three leap out for me:

  1. Difficult is Good.  Paraphrasing President Kennedy’s challenge to set an arbitrary deadline without a known roadmap, the Curiosity team chose their path not because it was easy, but because it was hard. This was wide-eyed enthusiasm for a mission about something other than personal gain. Want people to rally around a task? Give them something where they need each other, where failure is acceptable in concept, but not in approach. Big problems are always worth solving.
  2. Resilience is Rebound.  Here was a team that had just put the Shuttle in mothballs, experienced colossal layoffs, and had no choice but to accept for the immediate future that our astronauts would have to hitchhike across the galaxy in the form of renting seats from former competitors. They put this behind them by committing to the project at hand.
  3. Sharing Triumph is Personal.  How do you get a team fired up and motivated? Bypassing cynicism is a decent route. This mission was about proving what was possible, about intrinsic meaning as much as the survival of equipment. The Curiosity team built pride because they did something together they will forever share, advancing progress, continuing exploration. Often you forget the details of a project, but you don’t forget people who matter. This is where emotion has a clear role in that which is otherwise objective.

I hope enough people at home were paying attention, partly because the landing was worthy of our attention, but more because when you think about it in the abstract, there is more application than meets the eye. Getting out of this recession is no small task, and it won’t be our government who gets the job done. It will be teamwork, commitment, creativity, motivation, and entrepreneurial spirit. Our move forward will be economic, but satisfaction has come from more than that. It will be of the human spirit, with celebration in the process of innovation as well as getting some problems solved.

I like that they named the rover Curiosity. It’s a good, real world metaphor. It sings aspiration. It’s worthy of our attention, a form of pedagogy that really does come from another planet.