Why Are So Many Seemingly Great Companies Failing?

Recently, I blogged about an idea I called geek cred. There were those that disagreed with me when the article ran on Center Networks, but what is interesting is that the central concept of the article is being played out in a more accelerated basis even as you read this with the implosion of Motorola and the Yahoo fire sale.

A company has geek cred because the geeks look at it and say “they know what they are doing.” The boil down of it is that companies that have geek cred have great technological leadership and über geek ground forces, and geeks can see that. Hence geek cred.

A number of people responded to the Center Networks placement of that article, saying, in essence, that what really matters regarding whether your company is successful is whether your product is selling. But this is like looking at the cancer patient who looks healthy and saying “how could you be dying, you look great!”

What happens is that the geeks see the problems before the general market sees them. The geeks are the canary in the coalmine. The stock market analysts only see it after the product starts to fail in the marketplace. But geeks can see that a company is *going* to fail.

The geek can smell it.

And so it was clear that Motorola would fail way before the general market figured this out. So too, Palm. So too Yahoo. So too eBay. So too IAC.

My primary argumentative commenter was Drama 2.0. Yeah that’s his online name. I think he is like Batman, living an alternate secret identity.

His simplistic analysis was that all the companies that are successful are successful because they make products that people like. Therefore, geek cred is irrelevant. I can't comment on all of his comments because it would be too long. But I have picked a few representative comments that I believe tell the story.

Regarding my comments on HP Drama, 2.0 said:

Does anybody believe that the average consumer is sold on buying an HP printer or digital camera because they recognize HP's geeky history? Of course not. People buy based on perceived quality, selection and price.

The problem with this is that getting to quality, selection, and price is primarily about being amazing geeks and having great technology. HP *owns* imaging. They have the best people. And the scientists that are great at it want to work there. A management consultant cannot walk into a boardroom and say “our mandate is offer the best quality selection and price” that is trivially obvious. If all you had to do was *want* for that, then every market would have parity. In fact even *defining* quality is a geek issue. What does it mean? How do we prioritize features based on our capabilities. In the area of imaging, as in all other tech related fields, success is all about having the best geekocracy.

Regarding my comments on Yahoo, Drama 2.0 Said:

Claiming that Yahoo's lack of geek cred is going to do the company in has to be one of the most amusing comments I've read recently. Yahoo's problems have a lot more to do with mismanagement than lack of geek expertise.

This is one of the most amazingly stupid comments I have heard in a long time. People who think like this are the reason all of these companies suck. Because if it was all about management, then Terry Semel should have lead Yahoo to greatness. And though they have had awesome intermediate term success, by most measures, the world sees nothing but bad times ahead for Yahoo. Why? Very simple: they failed at search.

Search is perhaps the geekiest thing you can do on the Internet. It is incredibly hard. And Yahoo doesn’t have the best people and they don’t have the best technology. They are not thought leaders in search. As a result, they are losing market share every month. That will continue forever until they hit zero, whether they are part of Microsoft or not. They are just not good enough. So I guess if not being geeky enough is all about management then by that measure, *everything* that every company does wrong is all about management since managers make all the dumb decisions. How insightful.

Regarding my comments on eBay, Drama 2.0 said:

Meg Whitman led eBay to where it is today - a company with a $40 billion market cap. It's the leading auction platform on the Internet and one of the most recognized consumer Internet brands. The Skype acquisition may have been dumb, but overall, the people behind eBay are laughing all the way to the bank.

This, for me, is the Pièce de résistance.

By most accounts, eBay is in big trouble. Why? Because their technology has lagged woefully, while Amazon, a true geekocracy, is about to eat their lunch. Amazon understands that they are not a retailer, or a marketplace. They are a platform. They figure out how to connect buyers to products in the most efficient way possible. That means putting products in front of people in the optimal manner. It means creating technology that maximizes transactions. These are hard problems. It also means creating systems that allow others to do the same thing while taking ever smaller pieces of the transaction, but for massively larger numbers of transactions.

Amazon sees itself as the ultimate Internet transaction system. And they are winning. The reason for this is Jeff Bezos and his team had the vision and they realized that they needed to have serious computer scientists working on the really hard problems associated with Internet transactions.

Meg Whitman never understood that that could or should be eBay’s role. This is because non-geeks running public companies generally can’t see beyond next quarter. Google is to Yahoo as Amazon is to eBay. Eventually both Yahoo and eBay will shrink to total irrelevancy because they could not create successful *platforms*, whereas their competitors did.

The bottom line is we are now in the age of the geek. Non-geeks don’t realize this - because they are not geeks, and so they resent it. And they can’t smell the CO. Too bad. Companies not lead by geeks in tech driven marketplaces will fail. What we are seeing now is a radical clarification of what kind of organizational DNA leads to tech success.

Non-geeks, beware.