How should the "Life curve" of start-up companies be extended?

2011, IBM has finally become a century-old shop. On birthdays, IBM published four pages of ads in the Wall Street Journal, the Washington Post and The New York Times. Our grandparents ' generation, the company that everyone admired, no longer exists. Of the top 25 companies in the world's top 500 companies in 1961, only 6 are now left. "The ad may have been designed to promote IBM's resilience and quality, but it also highlights the entrepreneurial world today, with new companies springing up like bamboo, not just in Silicon Valley but around the world," he said.

Think of the recent bankruptcy of Kodak and the dying BlackBerry company. Before that, both had dominated in their respective fields. They all have a leading technology, but in the face of the real crisis, the company failed to make corresponding adjustments. Why did they fail? Why is it that everyone pays attention to the rapid progress of the brand, but there are so many entrepreneurs forget to constantly innovate?

In this article, I'll tell you about the company's "Life Curve", which will give us an analysis of how the company cleverly avoids the platform and recession, and explains the significance of this to emerging companies looking for long-term success.

The life curve of the enterprise

Successful businesses always experience some sort of fixed cycle pattern. The entrepreneurial team first developed products or services to penetrate the market and attract customers. Once through this hurdle, they will enter the growth stage, annual profits and the proportion of the market share of the rapid growth. After that is the platform period. The team continues to develop and improve products, but revenue growth is shrinking and profits are stabilizing at a lower but still modest level.

As these companies mature, their growth slows down further until they stop. At this point, however, the company's operating costs continue to increase, as they compete with the novice in the market. Finally, the company failed to keep pace with the market, the fiscal deficit in debt, gradually into negative growth, followed by layoffs, capital consumption rate remains high until the company bankruptcy, liquidation.

That sounds like a cold blanket, especially when it comes to the inevitable. But you have to recognize that the cycle still exists, even if the company is different and the timeline is quite distinct. Many successful companies have only extended their recessions, some even for a century. Technology companies are no exception, but they have a shorter lifespan, so each stage of development will accelerate.

The secret of a great company: to be able to "renew your Life"

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The secret to prolonging the company's life is strategic transformation. If a company can give up the "good way" to continue to develop and mature on the original route, give up the steady growth and market leading position, take the potential risk choice transformation, it may be a higher level, achieve greater success, broaden their horizons and the size of the company.

Whether a company can reach this step depends largely on its leader. Most leaders can be divided into two categories: the opportunity Doctrine and the Practice doctrine. As will be noted below, the leaders of the opportunities doctrine will bring great advantages to the company in the transition. And the advocates, while commendable in terms of predictability and efficiency, are likely to put the company at risk in the long run, or, better still, keep the company in the life-cycle curve, unable to break through.

Oracle and its leader in opportunity

Founded in 1977 as a software development laboratory, Oracle is now one of the world's largest and most influential software companies. From 1977 to 1982, the company devoted itself to the investigation of product harsh fit, that is, the market positioning of the products, and finally decided to commercialize the relational database system and lock the target customers into an enterprise-class domain. At this stage, the company is officially named "Oracle", into the long-term. Interestingly, most employees point to their nerdy Ellison (Larry Ellison) when they think about what they have given their competitive advantage in the early days of the company's establishment.

Bruce Scott is the original three-version joint designer and co-author of the Oracle database. "I've thought a lot about why Oracle is so successful," he said. But I owe it to Larry Ellison, his extraordinary charisma, his keen insight and his decisiveness to make every seemingly unworkable thing work. Larry's mode of thinking is really peculiar. For example, we are in a space where our task is to connect the terminal with the computer room next door. But we don't have anywhere to tie the rope.

Then Larry picks up a hammer, chisel a big hole in the middle of the wall, and calmly says to you: ' That's good. ’”

Oracle, Larry Ellison
Scott's description of Ellison is an alternative, shortcut-taking adventurer who can get everyone moving and solve problems in the shortest possible time. And this trait is precisely what the longer-lived companies have in common: the CEOs of these companies are often opportunities. This type of leader is characterized by the ability not only to foresee the future, but to seize it, not to take the usual path, to often put forward unconventional strategies, and to have their superhuman adventures. They disdain to take rankings, quarterly earnings or liquidity event as a measure of success. They have ambition, want to change the world, build world-famous brand, completely overthrow the existing industry.

This kind of leader is good at attracting others with personal charm and unique personality, changing the pattern. This is not so much their business model as the "gravitational effect". Companies need this kind of person to lead the company to a very, very risky, not intuitive direction. Their presence is not just about convincing employees or listening to them; they will make all the "unreliable" decisions or set "unreliable" goals for the company.

The best period of transition

When Oracle companies are just starting to develop portable, scalable database systems, many start-ups are trying the same thing.

Most of Oracle's competitors have the versatility and high performance as a competitive advantage, but Oracle is dedicated to creating a common industry-wide platform. It focuses on making your own database systems compatible with more computing platforms (IBM, Digital equipment, UNIX versions and NT, and so on). By the middle of 1980, Oracle's software could have been used in more than 80 enterprise systems. This means that Oracle software can be used for almost any enterprise.

The wide range of uses of Oracle has successfully become a major selling point for its products, favored by application developers and resellers, as Oracle allows them to penetrate larger and more markets.

Demand for apps is growing in the marketplace, and Oracle's sales are soaring. By 1987, Oracle had become the world's largest database management company, earning more than 100 million dollars and having more than 4,500 customers in 55 countries. Ellison, aware of the company's success, made an astonishing decision: he decided to set up an application department within the company and put Jeff Walker under his command to take charge of the project. Jeff Walker is the founder of a top accounting program developer.

Ellison is so self-willed: knowing that Oracle relies on the database system business can be stable growth of the sitting profit for many years, he still insisted on doing so; knowing that Oracle's own applications will be launched at the earliest 90 years, he insists; He does it like Bridges, Oracle's former customers, and Oracle-enabled app developers (arranges Soft, SAP, etc.) are now going to turn against Oracle. For them, Oracle turned from a broker to a threat, an advantage to "open up" competitors. Ellison This is bound to make painstakingly built market at risk. But Ellison saw the opportunity. He seized on the opportunity and then took advantage of the company's growing momentum to achieve this magnificent transformation.

In a company's life curve, there is a point in growth and maturity, with the risk reaching its maximum value. This is the best point of corporate transformation and innovation. How can we judge this point?

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1. Your company is finally out of the start-up phase, with ample resources or a strong appeal.

2. The group has reached a stable standard: a promising future, profit growth and a business model.

3. You have mastered the full human resources, capital and market influence, while maintaining the core business growth and the ability to create new business.

If you reach the above three points, the time has come for you to open up new markets!

As an emerging company approaches the pinnacle of its growth curve, leaders have two choices: one, let the company take advantage of this momentum and the initiative to try the unknown areas-can be a series of new products, can be a business category, or a new industry; Rely on the existing business can earn as much as how much, can go as far as how far.

When the company develops, the vast majority of leaders will cling to the dominant position in the market, unwilling to take "unnecessary" risks. This led them to blinders, ignoring the immediate "success" behind the latent platform period and the fading period. Even if the ecosystem of the mall revolves around them, the opportunities are in front of them, and they cling to the familiar business of the past, unwilling to risk innovation to meet the new needs of their customers.

The leader of the opportunity doctrine is diametrically opposed. When the risk reaches its peak, it seems to them that it is not a danger, but an excellent springboard. Their vision will point the way for the company, break the road, and their strong belief that their core subordinates will willingly follow them on their journey, even if the outcome of the matter is not yet clear.

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A leader can find a winding place

In retrospect, the importance of reform is sometimes obvious, and even reform itself may not be difficult. But the real decision to go this way, out of the box of life curve, that is not easy to say.

At the time, Oracle's foray into the application industry was quite radical. Not only has the attempt surpassed any project it has tried before in size, it also means it is declaring war on those applications. Oracle software is like the lifeblood of the application business. Fundamentally, Oracle is forcing other applications to choose between its own company and its competitors, and is threatening to finance the revenue streams of the new business of application development.

Despite the many challenges Oracle has faced, it has succeeded in taking on a niche in the application market.

However, many people believe that the company's huge investment in application development is reckless and will have a negative impact on the development of the company, especially the company's core business (database system) revenue is increasing year by year. They did not see, however, that the concession benefits of Oracle database systems had gradually ceased to grow and were accelerating into the platform period.

"Yet it is not yet realised that the application business will lead Oracle to the next peak." Even the company's in-house staff have not found this. ”

But Oracle's path to hegemony also has a stumbling block. In the C/s structure (client-server) application market, there is SAP company this "giant". Oracle has no way to bypass it. It cannot defeat SAP as the first supplier of the enterprise application market, unless the big picture changes. Developing and applying this strategy is inherently dangerous, but Oracle is betting on it. Of course, Oracle won, and it succeeded in rewriting the big picture for industry.

Matthew Symonds in the biography "Softwar:an Intimate portrait of Larry Ellison and Oracle" (software: Larry Ellison and Oracle Company Legends) described in this way: " Many colleagues and customers dismayed that Ellison decided to give up the development of C/s (client-server) applications, the company all the engineering technology and resources used in the network establishment. ”

Oracle's performance began to slide, and the volume of customers gradually lost. But Ellison did not flinch, he is still full of confidence in the new route. "They don't see the future--they must be wrong. C/S application is already dead. Sooner or later, the people on this boat will realize that--of course it's too late for that, they're dead. He knew Oracle had to change course.

When other companies are busy developing web apps, Oracle is the only company that gambles on the entire company's business for Internet strategy. Ellison said: "If the end of the Internet is not the future trend of computer technology, then we are finished." But if it is, then we are in the right. ”

In 2000, the company launched the Oracle E-Business Suite (Oracle E-business Suite), the first integrated suite of business applications. It eliminates the expensive system integration for the enterprise, also because of its use convenient and high efficiency in the industry quickly obtains the widespread favor.

Oracle continues to be committed to strategic transformation. It has never bought any other company in 25 years, but it began to focus on a large number of purchases, thereby stabilizing the company's position in the enterprise application market. First PeopleSoft (PeopleSoft) was acquired by Oracle in 2003-the first and only malicious takeover by Oracle. Oracle then acquired BEA and several other companies. Oracle finally swallowed up all the competitors outside SAP, consolidating the market dominance.

Oracle's latest bet is to acquire Sun Microsystems (Solar Microsystems) and hope to become a comprehensive system provider. Of course not every bet will win. As for the latest acquisition, winning or losing is not easy to say. (It's interesting to focus on a bet that's been wiped out.) Larry Ellison is the principal investor of the acquisition and a major shareholder of NetSuite. NetSuite does the same business as Oracle, but has a low market position. )

Oracle's relentless pursuit of market position has also been an important lesson in the life curve of an organization: changes in the size, timing and impact on business are inevitable.

But all in all, a series of successful transitions, big or small, will in the long run be summed up into a complete transition history, extending the company's average lifespan.

It looks like this:

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The Oracle curve looks like this:

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Another example of a transition-backed company is Amazon, a leader of the company who is also a--jeff Bezos. Over the past 20 years, Amazon has cleverly exploited the highest levels of risk, exploring new areas to try new business, and developing products other than core competencies. However, these products have been implemented in the form of online transactions.

One of the biggest turning points in Amazon's transition is the launch of Zshops. Zshops is an online shop platform where small businesses can set up virtual storefronts to sell goods on the site. Although Zshops is not a "big Boss" to reverse the situation, it has led Amazon to launch a cloud computing Service (AWS), encouraging the company's in-house software structure to provide a range of services based on affordable cloud computing. Amazon is a small adventure that leads to great success in the time. Today, Amazon's cloud computing services are growing faster than its customer-facing retailer.

But note that not all transitions can change the world. Some attempts can only result in subtle images or create an opportunity. The truth is, not every attempt to make an earthshaking transition succeeds. If you want to gamble, it is up to the opportunity leaders to measure the odds and costs of failure and success. Does your company have a solid economic strength, employee loyalty and extensive support to survive the crisis of failure? Or is it too expensive for the company to afford? Sometimes companies have to make a leap, even if the latter is true.

The leader of the practicing doctrine

Behind this article, hundreds of thousands of companies fail to adapt to changes in the environment, as if they were the last mammoths to dominate the ice age.

The success of Oracle and Amazon is an absolute few exceptions and a legendary story in the industry. In fact, most CEOs will be quite responsible for focusing on the company's metrics approach and growing on the ground. On the way, they either deliberately avoid the highest point of risk or do not grasp the opportunity to introduce new ideas to the company.

Such leaders tend to be better and more efficient in practice; they tend to be obstacles to opportunities. They pursue a down-to-earth, measurable, more traditional definition of success.

When the company completes its major transformation and needs to be meticulous in its operations and maintenance, it is a perfect fit for this group of people to lead the company. They are probably also good at bringing a clear vision of the future to the company. But the future they are planning is usually conservative, small-scale, and less risky. Ironically, Wall Street advocates this type of CEO because they can run the company in a solid and secure way, ensuring that the company is stable for another quarter. Of course, such a scene is just a fleeting sight. Soon, the company's growth curve will go downhill and be forced into a desperate predicament.

When an implementing leader sees the best of the transition, it is likely that they will miss the opportunity because of their tolerance for risk, the power to rebel against the critics, and the charisma that drives the organization. If the leader does not have the guts to pursue, the company's vision of the future is no good.

"If you want to keep the company on a long, clear route, it will be a duck for the practicing leaders," he said. But if they are going to carve out a new road, they don't have the guts or the ability. ”

Under the leadership of the executive, a company can enjoy many years of stable and practical growth, into the mature stage. But failure to create a new growth curve at the right time is the culprit for the most successful companies to escape bankruptcy.

Once arrogant to guide the whole market, but now has a struggle to survive-to talk about such a company, Nokia is a precedent. Like Oracle, Nokia was quite successful in its early transition, laying the groundwork for its future success. Many people do not know that Nokia was originally a Finnish paper company, and its history dates back to 1871 years. Nokia was one of the best examples of companies that have evolved to adapt to the changing environment.

In the era of automobile popularization, Nokia set up a rubber processing field, including tires, rain boots and so on. When the phone became the mainstream product, it became the first telecoms company to develop radio telephones for the army. Nokia also continued to adapt to the environment by transforming itself into the first portable car phone in the late 80. Nokia in the 90 's brink of bankruptcy crisis, the company's top and president decided to split and sell traditional industries, leaving only the electronics sector, which entered the mobile era. At this point, Nokia has become the global mobile phone technology industry pioneer, since 96 for 14 consecutive years to stabilize the mobile phone market share of the first position.

But today, the handset market is largely divided between Apple and Samsung, and Nokia has lost its share of the market over the past four years. The reason is simple-it stops reform. Nokia's leaders are no longer willing to gamble so much, risking a transition, and the dilemma that Nokia has caused without a new growth curve has barely surfaced for nearly two years. In particular, in 2013, the company's equipment and services sector (Nokia mobile phone business) was acquired by Microsoft, Nokia withdrew from the mobile phone market. Unless Nokia's top brass and president are willing to gamble on a big, massive transition, as they have done in the past, the company is probably going to stop.

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Think of the companies that were once brilliant. Kodak (Kodak), BlackBerry (BlackBerry), Digital equipment, Data general,silicon Graphics (Silicon Valley graphics), Sun Microsystems (Solar Micro System), Yahoo (Yahoo), AOL, the United States online, has many names. And a new generation of iconic companies are also facing a crisis as the industry collapses: Ibm,cisco (Cisco), Emc,netapp,juniper (Juniper Network), Dell (Dell), and so on.

And the result?

No matter what excuses, how to escape, a once brilliant market-dominating company, will eventually go to the end of the life curve, downhill, finally sell sound. It is doomed. No organization or group can escape such a fate. Only a handful of survivors have survived the transition to prolong their lives as long as possible, surviving more than their rivals for decades.

While a company's trajectory can be influenced by factors such as market forces, political climate, economic booms or busts, and trends, there is little doubt that nothing can be more important than the vision and route that the company's leaders have set.

To achieve long-term success, directors and investors should look for and hire the CEO of a lucrative opportunity, like Larry Ellison, who is willing to carve a big hole in the wall and venture out of a new road before the company reaches the platform and is scheduled to die in the future. Because with the company's growth, profits will be guaranteed, valuations will rise, the market position may also be strong, but these immediate successes can not guarantee that the company will continue to develop.

It's a long way to repair. It sounds sad, but that's the truth. There is no end to this road, and the only way to stop and rest is to die.