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Author: slackler Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 10413  
Subject: why do start-ups fail? Date: 7/31/2000 9:54 PM
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I jsut read this article, and I can tell you from experience, that is exactly right. I worked for a 12 man startup from 94-97, I was the twelfth guy. When I left, the infantry was moving in (which is essentially why I left). And I was one of the last commandos to go. All but one member of upper management had already left. That article was right on!
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Author: TMFOak Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 4806 of 10413
Subject: Re: why do start-ups fail? Date: 8/1/2000 1:36 PM
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>I jsut read this article, and I can tell you from
>experience, that is exactly right. I worked for a 12
>man startup from 94-97, I was the twelfth guy. When I
>left, the infantry was moving in (which is essentially
>why I left). And I was one of the last commandos to
>go. All but one member of upper management had already
>left. That article was right on!

This doesn't necessarily mean the company in question was doomed, per se. More that it's a likely acquisition target.

Without commandos, it'll probably have trouble diversifying its product line, entering new markets, and reacting to competition. Still, with a profitable product line and room to grow in their market they can continue along their established trejectory for quite some time.

Unfortunately, it's almost guaranteed to top out. Commandos are pathfinders. When you hit the end of the current road, they're the ones that can find a new direction. The infantry play "follow the leader", when they head off in a new direction they're only going to find anything by blind luck, most of the time they'll hit a brick wall or wind up in a desert or simply end up back where they started.

Infantry MIGHT be able to find new uses for a well established product in a well established market. (I'm talking about the level of "using stereo speakers for PC sound cards circa 1995" here.) If it's a REAL OBVIOUS job with no disagreement about what the right thing is to do, then maybe.

But trying to get infantry to do a commando's job usually gives you a "beaches of normandy" type situation, where you have to throw insane amounts of resources at the project to make any progress, and usually it succumbs to the "too many cooks" effect. It can be done, but governments are more likely to use this kind of tactic than corporations. (Normandy itself, and of course the NASA moon launches, which actually managed to have a few commandos because it was that compelling of a project (and it attracted enough infantry to insulate neil armstrong and buzz aldrin from the bureaucrats...) Come to think of it, I guess that's how a lot of the big "massive corporate effort" type things succeed, sneaking in a few commandos (naieve new hires in the right place at the right time) in the confusion. :)

Of course if a third wave company tries to do this, they'll probably never make it out of england. They'll spend forever arguing about the design of the boats in committee. Then again, they have more resources to throw at the problem. (Windows 2000 is left as an exercise to the reader. Whether MS is second wave or third wave I'm not quite sure. Seems to be second wave desperately trying not to become third wave. Could be in transition...)

A company with no commandos but a valuable product is the kind of thing third wave companies eat for breakfast. They wave money at the owners, buy a controlling intrest, and bingo, they have a new product line.

Strangely, when this happens this way it's pretty much good for all concerned.

Second wave companies that focus on growth for too long tend to stall and crash: once their market is saturated they have no IDEA how to proceed, and do dumb and desperate things trying to squeeze 10% more out of the product than it's prepared to produce. (Raising the prices too high is a common way to get customers to abandon your product line. Slashing costs until you kill the quality is another. Bloat and feature creep in order to sell new versions. Etc.) Given long enough, they kill the goose that lays the golden eggs.

Third wave companies know all about maintaining existing momentum: it's what they do. They don't care so much about growth per se, they care about sustainability and avoiding risk. Their existing product lines produce a steady stream of cash, which they can use to grow by acquisition. They don't have to make product X produce more, they can use the profits from product X to buy a mature but undiversified second wave company, and boom, they have product Y with its additional revenue stream.

This only works if the commandos have left anyway. Commandos won't leave while there's still something useful for them to do. When the commandos get bored and leave of their own accord, it's time to sell out to IBM or AT&T or GE or wherever.


But if MegaGlobal Inc. comes courting while the commandos are still around, EXPECT A DISASTER. The product still has room for improvement, and if you don't take it to its logical conclusion your competitors will (quite possibly using your own commandos, who still have unused ideas they want to find a home for). The commandos may try to stick around a while out of project loyalty, but it won't last long and middle management won't let them redesign a successful product from the ground up anyway, just because "it could be better". (Commandos ARE loose cannons. Proud of it. Middle management's JOB is to stop people like them from doing anything unanticipated, which is virtually a synonym for "creative"...)

So a second wave company sans commandos should be bought out by a third wave company (or occasionally a larger second wave company, but that's more an exception than a rule I suspect). A second wave company that still has commandos is -not- a good takeover target, although a merger with another second wave company might be made to work, done REALLY CAREFULLY so as not to upset the commandos...

That's my guess, anyway. Hmmm... Wonder if I should do a follow-up article? (Or if I just did. :)

- Oak

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