The two reasons why tech companies fail (Part 2)

Recap of Part 1

Technology companies fail for one of two reasons: inferior strategy or inferior implementation relative to competition. Strategies built on the foundation of the 3 Cs – Company, Customers, Competitors – lead to effective and durable outcomes. The model illustrated in Part 1 (Michael Porter’s 3 generic competitive strategies coupled with a customer-driven marketing approach) provides a useful framework. Read Part 1 here.

Good business strategies are hard to design

Military and competitive sport strategies are generally easy to grasp: one rival against another rival, winner takes all. (Progressive elimination – in professional sport and poker tournaments – always make the final contest a battle of two rivals.) They are convenient bilateral contests that, though they can be complex to wage, make score keeping easy.

Business strategy is not as straightforward. There are three groups at the table:

- Company – yours, perhaps
- Competitors – rivals that can easily number in the hundreds or thousands, be small or large, formidable or merely a nuisance.
- Customers – they are both the prize (winning their purchase dollars) and scorekeeper (their spending choices determine winners and losers)

Importantly, there is not one winner or loser – they are several of both (see table below). Of special note is the notion of what makes a ‘winner’ and a ‘loser’ among a Company and its Competitors. The answer: it depends on chosen goals. Though market capitalization and market share may be popular measures of success among the largest tech rivals in an industry or segment

There is a vital point about business strategy that cannot be overstated or unduly emphasized: business strategy is the performance of activities either different from or different than those of competitors.

Implementation is the companion to strategy

The notion of performing activities is important. The value of an effective strategy does not lie in formulating a strategic plan, but in implementing the plan. Business strategies on paper do nothing. It is the performance of activities that adhere faithfully to a business plan that delivers customer value, confers competitive value, and can achieve a company’s goals.

In the technology sector, product differentiation that creates significant and sustainable buyer value is rare. Out-implementing one’s competitors usually wins the day.

Businesses – especially technology businesses that operate under conditions of a rapidly moving clock and continuous emergence of other new and potentially disruptive technologies – cannot fair well on the basis of effective and durable strategies alone.

Superior implementation derives from:

- - Creating innovative practices (differentiation)
  - Adopting best practices of competitors (parity)
  - Managing all practices and activities better (superiority)

Here is a suitable overarching framework for managing and monitoring implementation, using the example of a B2C software company.

Bottom Line

High performing technology businesses win on the merits of having both effective and durable strategies and accompanying implementation. Focusing on both, through frameworks based on sound fundamentals, is the best recipe for producing pleasing outcomes.

Written by Michael

Michael Douglas has held senior positions in sales, marketing and general management since 1980, and spent 20 years at Sun Microsystems, most recently as VP, Global Marketing. His experience includes start-ups, mid-market and enterprises. He's currently VP Enterprise Go-to-Market for NVIDIA.