If..Else Log

It is said that a week is a long time in politics; in the world of business, time can be just as punishing. That said, it can still be surprising to suddenly find formerly successful companies in a lathargic and weakened state and when that happens, the common temptation is to attribute it all to bad management. However, there are times where companies are let down by the very values that made them successful. The actions and thought processes that lead Sun Microsystems to release anti-climatic announcement earlier this week are a case in point.

The rising and setting of Sun

10 years ago, Scott McNealy took a gamble; it's big rivals were all working hard to develop new servers to run Windows NT and industry consensus urged Sun to follow suit. Instead, McNealy ignored the crowd and invested substantial resources in developing Solaris. Sun was heading to their doom, pundits decried; instead Sun found themselves in an advantageous position as the companies flocked to Solaris due to its reputation for speed, stability and security. As the 90s boom brought waves of optimism, it also brought profits into Sun's coffers as sales rocketed.

In a similar vein, Sun bucked the trend when it came out with the development and release of Java. Platform independent, security, portability and significantly, its syntatic similarities with C++ ¹ meant that it also rode a wave of hype²; the subsequent support by Netscape and the clever marketing of Java led to a strong takeup by the industry and academic community.

Fast-forward to the aftermath of the dot-com boom. Sun's position as leading technology is significantly more precarious. Following 2001, Sun was hit by the double whammy of falling profits and high expenses. The initial positioning of Java as a platform for rich and platform-independent client-side applications has all but disappeared³. And Solaris is under significant threat not just from Microsoft but from the unforeseen threat of Linux.

So what went wrong? In a sense, Sun was (is) a victim of its own success. Successful companies benefit from strong direction. A successful management will direct resources efficiently to best serve its goals and use its strengths to differentiate itself from the competition.

Success changes the way you see the world

When you're successful, you naturally feel that you must be doing something right. And the more success comes your way, the more it reinforces your belief that what you're doing is correct. And when things start going wrong, then there is a temptation to step up the pace of what you're doing and cling to the things that brought success in the past. Call it the business world's embodiment of trying to dig yourself out of a hole.

Scott McNealy garnered great success in ignoring industry advice and sticking to his guns. The whole industry has been moving to AJAX for developing rich client solutions. When rumours emerged that Sun and Google were cooperating on developing an online office suite⁴ built on top of AJAX, many in the industry were waiting with bated breath. Alas, it was not to be and the announcement was that little more than the thinly veiled promotion of it's proprietary solutions.

The problem is that while the rest of the world has moved on, Sun has not and still believes in the products that it has created despite the distinctly lukewarm response to its offerings. A world without Sun developed technolgy is unthinkable; following the footsteps of others is just not in Suns DNA. Sun demands respect and Sun demands to be diferrentiated from the rest of the industry.

The world has changed since you were successful

The technological landscape has changed. AJAX and Web 2.0⁵ is now the hot new buzzword. More importantly however, the environment in which Sun made its killing no longer exists. The dotcom boom is over; Solaris is no longer the premier choice for server platforms; Linux has matured; Agile frameworks have arrived.

It's not just the case that competitors have arrived but the fact that the very advantages that enabled earlier successes may no longer exist or may have gone down in importance.

Success makes it hard to maneuver

The larger you are, the less nimble you are. It can be difficult for large established companies to respond to changing climates as quickly as smaller or younger companies. The resources that you have on offer may not be the same ones equipped to deal with new challenges. The decision to move away from previously profitable cash-cows may mean you pass over a potential opportunity. The established frameworks and infrastructures may be as much of a burden as it is a help. Internal politics, ethos' and values may mean that certain paths are closed.

In the same way that it'll be hard to imagine MS moving onto Linux platforms, it's equally hard to imagine Sun abandoning J2EE and moving forward with RubyOnRails or any of the other emerging web frameworks. Even if it conferred a significant advantage, internal politics may trump technological arguments.

Moving away from Sun

Sun is not the only victim of this "Successful Burden" syndrome. Let's revisit the lessons with other companies.

Success changes the way you see the world

Google has been the beneficiary of competitor's tunnel-vision. Consider the online advertising models of the past. Back in the infancy of the graphical web, the predominent form of advertising was the lowly banner ad. A simple rectangular box, the natural evolution of the print ad, was the premier form of advertising. However, certain advertisers saw the need to make sure their adverts stood out from others and so they took advantage of animated adverts. In a classic case of cold war mentality, other advertisers moved to pop-ups to gain the upper hand and then flash adverts, pop-unders…

Google moved in with their text-ads, largely non-obtrusive advertisments with minimal annoyance and a modified incentive system. And now, Adsense is the number one advertising scheme on the web, kick-started and changed quite a few online business models, and made a few millionaires.

They did it again later on with their webmail offering. Yahoo and Hotmail, the leading webmail providers had been practicing the scrooge with their storage offerings, slowly cutting back which allowed GMail to step in and astound with it's Gb level offering. By the time they could fashion a suitable response, it was too late; the damage was done and GMail had grabbed the attention of many⁶.

The world has changed since you were successful

When you examine the list of successful Airline companies, you would begin to see the likes of Easyjet, Ryanair and other budget airlines, a thought which was unthinkable a decade ago. How did the likes of British Airways and Lufthansa allow their marketshare to be eroded so quickly and easily in a market with supposedly high barriers of entry. It's because the value of their apparent strengths had changed and the market itself had changed. The larger airlines had considered that the strength of their businesses was in their size; the ability for them to own the biggest routes, the richest customers and the best land pickings at the airports.

So when the low-budget upstarts started stealing the smaller routes, they weren't particularly worried. And when they cut prices, they snorted as air travel is a luxury and not a bus ride. But in doing so, they failed to see that a whole new market had been created and that this was a market which was stealing their own customers. When events caused frugality not extravegance to be the image to cultivate, they were in a poor position to adjust.

Success makes it hard to maneuver

The success of high street banks made it difficult for them to respond to rise of online banks. Online banks (like many other online businesses) were able to offer significantly better rates because they don't have the cost of brick and mortar. Whilst the allure of online banks were clear to see, the conventional high street banks found it difficult to compete because of their very nature. They couldn't significantly increase rates because that would cut into their profits which was damaging because of their larger costs. And yet, if they start making too many cuts in their costs, their very advantages would also be cut making it harder for them to differentiate themselves.

Blockbuster videos suffer from similar problems; immensely successful in the past because of their size and prevalence, they're finding themselves under attack from the double whammy of netflix (wider range, no cancellation fees, lower subsciption fees) and online retailers (lower cost of ownership, wider range, longevity of DVDs). Its interesting to see that whilst DVDs have benefitted video-rental shop (greater durability and reliability), it has probably hurt them more than it had benefitted. Blockbusters finding themselves caught in the middle of a rock and a hard place. They need to cut costs, need to scale back and need to reduce prices. However, in doing so, they will find themselves hurt by falling profits, and reduced presence.

Common problems and common hopes

Many of the problems faced by the above listed companies fit into all 3 headings which is no surprise as they're all symptomatic of the same root cause. However, there's a glimmer of hope. Many companies have pulled themselves out of a rut by taking the problem and approaching it head on; IBM are a case in point. Initiatives by companies what BT have done with O2 have garnered success. Whilst Yahoo and Microsoft are commonly accused of copycatting Google, their size has not hindered (in fact, it's benefitted) their ability to mitigate and respond to new trends and threats. And whilst it was a big disappointment to not see an online office solution, it's not at all certain that it may not be on the horizon⁷.

The lesson is that being large carries with it strengths and weaknesses. There's a danger that one or the other can be overlooked in the face of success or failure.

1. I've intentionally left out talking about other important features such as OOP, automatic garbage collection, well developed APIs and libraries though these are arguably equally significant aspects [back]
2. I'm also a Java developer in my day job so I'm aware of it's strengths and weaknesses. [back]
3. It's interesting to note however, that on the server-side, Java has had far greater success. [back]
4. Unfounded rumours, but there was an air of believability due to Jonathan Schwartz (President of Sun Microsystems) claiming that "the world is about to change this week", Suns OpenOffice suite, Googles work with AJAX technology and the build-up to the announcement. [back]
5. Or should I be talking about Web 2.1 or perhaps Web 3.0? [back]
6. Note that whilst the storage space was important, I personally find the other features more compelling. Labels, a fast and clean UI and lots of AJAXian loveliness are why I wouldn't go back to Yahoo/Hotmail. However, the point stands. Had Google not been given the opportunity by its competitors to brand itself onto the public consciousness with its storage offering (and in the process, removing space as a worry), it's debatable as to whether it would have made the same impact. [back]
7. Though, it doesn't look likely in the near future [back]

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