“Think about a company like Eastman Kodak – it was the leader in its market, and now it’s gone. HP may be next. How can a $100 billion company go out of business? The answer is, easily and quickly.”
Don launched venture capital firm Sequoia more than three decades ago, and he has had a hand in some of Silicon Valley’s biggest successes: Apple, Cisco, Google, et al. He’s been around the block a few times, so he knows what separates successful companies (and venture capitalists) from unsuccessful ones.
We were eager, therefore, to hear what Don had to say about today’s business landscape. His main point? Disruptions can come from anywhere, and companies of all sizes – large players like Microsoft, midsize outfits like RingCentral and small start-ups – must gird themselves for change.
“Did anyone think GM was going to go bankrupt?” Don asked us. “Disruptions can sneak up on you or any other company.”
Even Microsoft – which, Don noted, has a cash hoard of $70 billion – may not be immune from the rapid pace of change within the tech industry. Less than a decade ago, the company sold more than 90 percent of the world’s personal computers. Microsoft’s dominant position has been whittled away by both Google and Apple, who have the lion’s share of the fast-growing mobile-device market.
Research in Motion, the Canadian company behind the BlackBerry, has seen its star fall even further. RIM effectively created the smartphone, and for a time it was the only serious player in its space. Now, Don said, it is fighting to keep its head above water.
While the companies Don cited were technology names, he emphasized that the conditions in Silicon Valley are being replicated across the country.
“Creative destruction is happening,” Don said.
So, in an era of constant change (and a marketplace where barriers to entry are lower than they’ve ever been), how can a company stay relevant?
First, Don suggested, it must strive to stay on top of the market it’s in. “Being proactive and paying attention are critical,” he indicated.
Second, firms should take pains to listen to their customers. The importance of listening is acute for businesses in fast-moving industries like software, where a product can become outmoded in a matter of months. But even industrial stalwarts can falter as a result of an inability or unwillingness to be attentive.
Third, there must be a concerted effort to stay lean and agile. Creative destruction, Don advised, invites an approach to business that is small-scale and entrepreneurial. Concomitantly, managers must be unafraid to eliminate offerings that are losing relevance.
“Uncompetitive products need to be killed,” Don said. “The ultimate alternative is, you go out of business.”
Do you agree with Don’s points? Have you changed your approach to business in the past several years as the pace of change has quickened? Share your stories with us!