Why do successful tech companies fail so often?

http://www.thestar.com/business/article/1240320--why-do-successful-tech-companies-fail-so-often

by jamesbritt • 14 years ago

11 13 14 years ago

My pet theory is simply that the technology sector moves much faster than anything in the past. Historically, companies rise and fall all the time- so then, it shouldn't be surprising if companies rise and fall quickly in tech.

shyn3• 14 years ago

I don't think we can leave it to the Toronto Star to think of this idea. Good point.

wh-uws• 14 years ago

My pet theory is that those companies lose the ability to retain, much less attract, top talent as more mba's and business types who are just looking at the bottom line takeover.

They can't recreate the early magic because they couldn't have created the conditions for it in the first place.

They just came in later to help monetize after the business models were in place.

SatvikBeri• 14 years ago

The ideas in this article are weakly argued and poorly researched. The theory of disruptive innovations in The Innovator's Dilemma by Clayton Christensen provides a much better explanation of why successful companies fail. We see this happen more rapidly in the tech industry than others, but it happens everywhere-just at different speeds.

Looking at the graphs at the top-Hewlett Packard, Nokia, and RIM all took heavy hits from not recognizing disruptive innovations until it was too late, and lost a huge chunk of their marketshare as a result.

defilade• 14 years ago

> The ideas in this article are weakly argued and poorly researched.

Dude we're talking about an article in thestar.com, not an academic journal or a book. The business phenomena he's describing are not new and have been researched elsewhere.

But you're absolutely right in that it's not unique to tech, it just happens more slowly elsewhere.

dennisgorelik• 14 years ago

Beautiful ending: “Growth for its own sake is the logic of the cancer cell.”

Gustomaximus2• 14 years ago

I read a great book on this topic: "In Search of Stupidity: Over 20 Years of High-Tech Marketing Disasters"

While there are many lessons in there one theme stood out for me. Companies grow by listening to their users and providing what they want. They then fail when managers start to believe the products success is due their brilliance so stop listening and start telling the customers what they want.

PakG1• 14 years ago

That goes against all the popular rhetoric that's been about these days ala Steve Jobs.

I think listening to customers is fine when you're trying to provide a better version of something that already exists. I don't think it works when you're trying to create something that doesn't exist yet.

Gustomaximus2• 14 years ago

I was waiting for this comment. And I think this is one of the, there is always an exception to the rule. And why many people regard Jobs as a genius. Outside of a select circle of visionaries, and for the vast majority, a company will perform better by listening to users rather than dictating to them.

fleitz• 14 years ago

Because tech companies don't get bailed out to the tune of trillions of dollars, or really any other populist rhetoric.

This article isn't data it's anecdotes, there's no serious comparison of tech companies vs. everyone else.

Also, it focuses exclusively on public companies, software companies aren't steel manufactures, they don't need billions in public money to create profitable businesses. Software is for the most part a cottage industry. eg. Instagram (yes, it's $1 billion but it's 11 people)

If you look at any of the players involved in the article and examine that case in depth it has a lot more to do with obvious mismanagement than being a tech company.

Q: What killed HP? Carly Fiorina.

Q: What killed RIM? Two CEOs and three CFOs.

Facebook is hardly dead it's got $10 billion in the bank, and the largest company in the world is a tech company

chasm• 14 years ago

Because they lose their entrepreneural edge, hire managers VS. Leaders and focus mostly on generating installed base revenues VS. Competing for and winning new business

madrona• 14 years ago

I don't know why this article says that Microsoft was 5 years late to the web search party. Microsoft had a search engine in the late 90's, MSN Search.

molecule• 14 years ago

Tech is an industry where success is based on disruption, and eventually the successful become the disrupted.

Why do successful tech companies fail so often?

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