As they grow older, they lose some of their charm. Their products seem less unique and amazing. We start seeing mistakes, even failures and become disappointed. How could it happen? Who’s to blame?
Ah! It must be bureaucracy! Those kafkaesque, small minded suits throwing wrenches into the gears of innovation!
It’s easy to blame bureaucrats. People who fill out forms for a living seem deserving of our ire. After all, they can’t code, sing or dance. However, the notion that they bring down tech companies is not only a myth, it’s a cop out.
The Microsoft bugbear
Every techie loves to hate Microsoft. Just mention the name in certain circles and you will inevitably hear about bloated, messy code, crappy user interfaces and mediocre products. Every self respecting tech entrepreneur worthy of the name vows to be different.
Really? Would it be so bad?
Let’s take a quick look at Microsoft as a business. With a market cap of nearly $250 billion, they are one of the most valuable companies on earth. Last year they had profit margins of 30% yielding them $20 billion. They have over $30 billion in cash and return on assets and equity are an absolutely stellar 20% and 47% respectively. The horror!
And their products? Windows and Office still dominate, of course. The XBox, Kinect, Windows 7 and even their new mobile operating system have received reviews ranging from good to positively gushing. Bing, of course, has emerged as the only serious competitor to Google. Not exactly a tale of woe…
The Google impasse
The more recent darling of the tech world, Google, has now become a target. No longer the precocious love child of idealism and an algorithm, it has become a global behemoth with over 20,000 employees. Already active in virtually every country in the world, growth in its core search business is beginning to slow.
In their quest to find success in new lines of business, they have begun to stumble and some are wondering if they’ve lost their mojo. Their android operating system had an embarrassing SMS bug. Google Wave, Google Buzz and the Nexus One phone were all flops and talented people have left the company. The culprit: Bureaucracy.
However, how does that explain Google’s successful product launches like the Android mobile platform and the Chrome browser? Moreover, it must be said, if there ever was a company that needed more bureaucracy it was Google. Anybody who has ever done business with them can attest how frustrating and confusing it can be.
Tech companies, just like in any other industry, run into problems as they grow, but it has nothing to do with bureaucrats and everything to do with a failure to scale management.
Realities of increased scale
As a business grows, the challenges change. When you’re young and lack resources, everything is potential. If success comes quickly, you feel invulnerable. The team is small and esprit de corps is buzzing with enthusiasm.
However, as rapid expansion gives way to the realities of running a business, some basic facts of corporate life rear their ugly head:
The “Nut”: As revenues grow, so do expenses. Mature companies need to strive not just to win new customers, but to keep existing ones. That entails spending lots of time servicing core products rather than dreaming up exciting new launches. That might seem boring, but it pays the bills.
The Dunbar Dilemma: Once teams grow significantly larger than 150 people, organic connectivity is lost. Management needs to find new ways to communicate and inspire. What used to feel like a family starts to take on an institutional feel.
A Culture of Hiding: Another consequence of growing big is that it becomes easier to deflect responsibility. If no one steps up and makes a decision, things don’t happen. Many of the gripes in personal accounts of stagnating companies refer to the final result being a product of the “lowest common denominator.” That’s what happens when people hide.
Monday Morning Quarterbacks: Once you become successful, everybody has an opinion about what you do. You try to block it out, but it’s difficult. Every decision is second guessed, which makes decisions harder to make.
Fear of Failure: When you have a breakout success, it’s natural to expect that everything that comes after will be successful too, but, that’s unrealistic. Seen in this light, Google’s readiness to fail should be seen as a strength, not a weakness. Especially since theirs are cheap failures that have negligible effect on the bottom line.
Begging the question
At the heart of the issue is the logical error of begging the question. Bureaucracy is assumed to be bad, as companies get bigger bureaucracy expands and therefore it must be bureaucracy that humbles companies that were formerly juggernauts.
Yet who says bureaucracy is bad? As businesses develop, they take on staff that perform mundane tasks like organizing health care coverage, making sure the rent is paid and arranging for the office to be cleaned. People who do these things allow others to focus on their core jobs.
The tendency to put the blame on faceless “bureaucrats” is nothing more than a ruse put forth by those who wish to avoid taking responsibility.
If software developer teams are bloated, software developers need to fix that. Bad decisions are made by bad managers. Poor marketing is done by poor marketers. You have communication problems? Pick up a phone or send an e-mail (and do be civil!).
All of the griping that goes on obscures the real issue: A change in scale creates new types of problems. The way to solve them is to stop avoiding them.
Greg Satell is a senior media executive with extensive strategic and digital marketing expertise and experience leading large media operations. You can read his blog entries at http://www.digitaltonto.com
