Urlocker On Disruption

Careers: Should You Pack Your Parachute?

Following his recent article "Are You A Sitting Duck?" guest columnist Zack Urlocker shows the steps you should take to improve your own position if your company is being disrupted.

Just because it's time to pack your parachute doesn't mean you should jump immediately.  But you may need to at some point.  Let's face it, it's a heckuva lot more fun to be a disruptor than to get disrupted. 

Five years ago, back when I was in the enterprise software business, I saw a repeated pattern whereby customers would go for the least complex solution using open source technology.  Customers would readily admit that the open source solutions weren't as good as the commercial products we were trying to sell.  But they still made their choice.  I realized that there were several key trends in the software industry that were likely to wreak havoc on the old model of selling expensive perpetual licenses.  (And let's be clear, it was a good model for 20 years!)  The new trends were:

• Open source software
• Hosted software as a service
• Distributed and offshore development

And even back then it was clear that the force of these trends would be unstoppable.  Some companies would succeed and some would fail, but it seemed obvious that it was better to be competing with the force of change on my side. 

While it's clear that jumping to a new disruptive company has its risk, there's also risk in staying with an old line business model.  You don't want to be the last person selling IBM Selectric typewriters, no matter how good you are at the job.  At some point, if you stay too long in the old world, you fail on the basic IQ test and are considered damaged goods.  Many times I've seen hiring managers pass over the resumes of candidates that were in companies that were considered to be "the walking dead."  You may think that 15 years loyalty to a company will impress a new employer, but not if its because you were asleep at the wheel. 

And even if you don't leave your current position, you can be more valuable if you've got an awareness and understanding of what the disruptors are doing and how you can apply some of those techniques in your existing company. 

Here's a set of steps you can take to improve your situation:

• Make sure you're up-to-date with your skills. In many cases, disruption is based on a significant shift in the market place.  That could be a technology shift or a change in market dynamics or distribution.  The most important thing you need to do is make sure you have a real understanding of the underlying changes.  You can't just be an buzzword compliant either.  You need to have hands-on experience with the new way of doing business, even if it's on a limited basis outside of your main duties.  In new industries no one expects you to be an expert, but they won't necessarily pay senior level salaries for someone with old school experience either.  If there are courses or workshops available to help you learn the new skills, sign up.  Even if your company doesn't foot the bill.  After all, it's your career, not theirs.
• Get involved in the disruptive projects in your current company.  Many incumbents will experiment with disruption.  They may kickoff a skunk works project or some kind of business partnership, licensing or reseller deal to get them in the game.  Make sure you're a part of these efforts so you can get some exposure. By being open to trying new things, you may be able to help your company maintain its revenues by starting a new disruptive business inside the organization.  Don't expect a lot of others outside the new group to go out of their way to help you.  You may even view you as unwelcome competition.  The likelihood of a disruptive business coming out of a large incumbent is not thigh, but you'll at least get some exposure that can be helpful.  But make sure it's real action, not just a task force to study what disruptive firms are doing.
• Start disrupting -- even if you aren't getting paid for it. If there's no sign of disruption going on in your company, it may be time to suggest to your boss that you kick something off.  Don't expect that you'll get a cushy budget to make things happen.  In fact, be prepared to do this on top of your current assignments and within your existing budget.  And if you still can't get the approval to do it on company time, all the more reason to start doing it on your own.  If you're in publishing get involved with new media.  If you're in software, start experimenting with open source software like the LAMP stack (Linux / Apache / MySQL / PHP).  Don't try to boil the ocean and change everything in your company.  Rather, figure out how to take small, incremental steps that can help build momentum and experience in new areas. 
• Build a new network. Most likely your old contacts are going to be in the same situation you're in: trying to come up to speed in a new skills while putting on a brave face.  While you don't need to abandon your old contacts, you will need to develop new ones.  Get out to the conferences and seminars and start building bridges.  Meet people from the disruptive firms.  Understand what's going well and why.  Don't be critical or defensive.  And don't tell them why they've got it wrong or why they will fail.  Ask lots of questions and you'll likely learn some ideas that will help make your current company more successful or may be useful down the road.  If there are panel sessions on conferences that mix the old and the new, get involved.
• Learn it, teach it, write about it.  Even if you don't have the opportunity to take part in new disruptive efforts in your current position, you will need to demonstrate to others that you grok the new model.  One way to do this is to explain the new model to others.  You could become "the disruptive guy" inside your organization by helping explain to others.  You don't want to be a zealot or naysayer about how your current model is broken, but if you can give input to others in the organization, that's a great way to build experience and credibility. 
• Do your homework before you jump. If you've developed an in-depth understanding of the changes that are taking place in your industry and you've got some visibility outside your organization, sooner or later you'll be in a position where you can cross over to the disruptive side. But don't just jump to the first opportunity.  Make sure you evaluate carefully the risk in any new venture.  You'll want to have a good understanding of their finances, existing customer base, as well as actual and projected growth.  Talk to their customers, the management. These elements will help you get a feel for what stage the industry is in and whether the apparently disruptive play is really taking hold in the market.  Most candidates will spend a lot of time negotiating compensation and trying to hold out for their "old school" salaries and bonuses.  In my view, much of that is misguided.  The biggest determinant in your overall compensation will be based on performance incentives (options, bonuses) that depend on whether the new business is successful.  So you are better off spending time to assess the risk level of the firm rather than worrying exclusively about your compensation.   

Zack Urlocker is a software executive and regular blogger on open source technology at TheOpenForce and InfoWorld and about music at GuitarVibe. 

Careers: Are You A Sitting Duck? 13 Unlucky Questions to Ponder

Most of the articles and resources at The Disruption Group focus on corporate strategy and ways to use competitive disruption to grow your company. But what about your own career strategy?  What should you do if your company appears to be a target of disruption?  Guest columnist Zack Urlocker shows how to know if your company is being disrupted and what you should do about it to save your career.

Whenever I think about companies being disrupted I can't help but recall Michael Bedard's iconic poster from the early '80s "Sitting Duck." It says it all. 

There you are, a hard working employee, doing your job and next thing you know someone's taking shots at you.  The sad thing is most employees never really take notice or what's going on until it's too late. 

Of course, from the outside, it's a whole lot easier to be objective.  Most people outside of the music industry would not now consider a career in the record industry.  And the magazine publishing and newspaper industries have been in trouble for years.  Enterprise software?  Outside of hosted on-demand offerings, it's not exactly a barn-burner.  All of these sectors have seen seismic changes due in large part to the disruptive effect of the Internet.  But would you recognize such changes in your own industry? 

Here's a checklist of 13 unlucky questions to consider:

1. Is your company consistently unprofitable?  A failure to generate profits is the first and most significant sign that a company is in trouble.  While there are times when companies will run unprofitably as they invest enter new markets, in most other cases, lack of profitability indicates a more fundamental problem in strategy or execution.
2. Has revenue growth stalled or even declined?  To most investors, if you're growing at more than 20% a year, you're considered a growth company. In tech stocks, it's not uncommon to see growth that is 40 - 100% per year.  If your company used to be growing and is now flat, watch out. This was the biggest warning sign I saw when I was at software maker Borland in the late-90s and it caused me to write up a checklist similar to this one to benchmark our turnaround. Guess what? We failed the checklist and I was saw similar troubles across the sector.
3. Is everyone in your market having trouble?  If your company is the only one suffering, that's one issue. And it may be fixable with changes in leadership, product strategy or better execution.  But if all or most of your competitors are also suffering, then it's an indicator that the entire market is in trouble and likely being disrupted. 
4. Do people routinely say "Are they still around?" when you tell them where you work? This sounds tongue in cheek, but its a sign that your company may have become irrelevant.  Similarly, if industry analysts and editors frequently write about the demise of your industry, they may be closer to the truth than you realize.  When Marc Benioff, CEO of Salesforce.com declared the "End of Software" few people took him seriously.  But if you worked at Siebel or PeopleSoft or dozens of other traditional enterprise software companies, you probably should have.  Similarly if the "death pools" predicting the demise of magazines have been scarily accurate.  These social indicators draw on the wisdom of crowds and can be more accurate than you might think. 
5. Is there high turnover in the executive ranks?  While some turnover at the executive level is normal, if you've had three CEOs in as many years, or if your exec staff have all left "to spend time wiht family" those are red flags.  When Ed Zander retired from Sun it was along side several other high-profile departures. While bad execs get fired, good execs leave if they don't see a financial upside.  Since most executives have stock that vests over a 4 year period, it's not just about short term prospects either. If your company has a problem retaining executive talent, it may mean they believe the situation is unfixable for several years. 
6. Is your company strategy zig-zagging every six months to catch some new wave? That could be a sign that the core business is in freefall and management is distracted looking for the next big thing. Consider the tenure of Carly Fiorina when she was CEO at HP. She was out promoting a strategy based on multi-media convergence, big screen TVs and iPods.  Naturally she was out at CES and Davos hobnobbing with the likes of Gwen Stefani, Sherly Crow and Matt Damon.  So who was minding the store?  Oh yeah, no one.  But when she got sacked, she took a severance package with her worth a minimum of $21 million.  If your job gets cut, you'll be lucky to get a couple of extra weeks paid.  Good CEOs focus on operational excellence and strategy; not gimicks. 
7. Are you losing deals to competitors that are a fraction of your size?  Often new entrants to the market are much smaller and their products have far less functionality, but they do enough to get the job done.  If your company is losing deals to companies that weren't even on the radar a couple of years ago, that could be a sign that the market is changing rapidly. 
8. Do customers complain that your products are too complex? That may indicate that your product has become overkill.  The next step is if customers sideline your products only for existing implementations and start using simpler solutions for new projects.
9. Is your company half pregnant? Sometimes companies that are disrupted will try to show that they too can play the disruption game.  They may launch a high-falutin' project or acquire a small startup to show that they too can be nimble and responsive.  Media companies were among the first to create web sites, but they never figure out how to make money with them.  And lots of enterprise companies introduced on-demand offerings, but none had the kind of focus Salesforce.com brought to the table.  If the CEO refers to your company as being "like the largest startup ever" with hundreds of millions of dollars in the bank, he's omitting a few key points.  Like the fact that your company is proabably too bloated to compete with hungry startups and that the corporate culture kills innovation. 
10. Is your company a bottom-feeder? Larry Ellison joked about CA years back by saying "Every healthy ecosystem needs a bottom-feeder."  While that's true, you don't necessarily want to work for a company that keeps acquiring companies and stripping out the costs.  You can prop up a share price for quite a while with revenue through acquisitions, but unless there are significant prospects for growth, it's not much of a strategy for the long haul. 
11. Is your company obsessed with cost cutting?  You can't cost-cut your way to growth. So when companies are focused only on reducing expenses it may indicate a lack of attention on growing revenues.  Pay particular attention to short-term cost-cutting measures that hurt long-term prospects.  Elimination of employee benefits and training programs are particularly bad signs. 
12. Have layoffs become a regular occurance?  While regular performance appraisals and even dismissals to cut "dead wood" are healthy, you should be wary of companies that are routinely engaged in layoffs.  And again, if the same is happening at other companies in your space, it's double wammy. It means that if you are laid off, your prospects at finding a new job are going to be slim.
13. Are you hoping for an acquisition to be your savior? Sometimes employees will think that if things really go poorly the worst case scenario is that the company will be acquired. This is like waiting for a knight in shining armor.  While acquisitions can be good for shareholders, they are no picnic. If you're in Finance, Sales, Marketing, HR or other "non core" areas, your position is a good candidate for elimination if there is an acquisition. 

While you should not panic if one or two of the items above conditions are true, these may be symptomatic of bigger issues.  These are warning signs.

Consider using these questions as a score card that you check a few times a year.  And if more than half are true, it may be time to pack your parachute.

Whatever you do, don't jump without a plan.  I'll cover that topic in the next post.

Zack Urlocker is a software executive and regular blogger on open source technology at TheOpenForce and InfoWorld and about music at GuitarVibe. 

** Other Sources **

Podcasts: Career Coach Alan Kearns, author of Get The Right Job Right Now, has a series of career-oriented podcasts. 

Podcast 2: The Cranky Middle Manager (website, mp3 download 31 min) looks at how middle managers can execute disruptive innovation without damaging their careers.

Fortune magazine writes about how the Washington Post is responding to disruption.  The bottom line: If CEO Donald Graham can't figure this out, no one can.  The good news for the Post is they've hedged their strategy. While  competitors were doubling down by buying money-losing newspapers in order to gain share, the Post investing in and acquired companies with far greater growth prospects.  I'm amazed that more companies that are disrupted don't do what the Post has done to reinvent themselves and get out of dying businesses.

More of Michael Bedard's art is is featured in his book Sitting Ducks.  Examples of his work are also available on line at his blog.

Cranky Middle Manager: How to Get Disruptive Without Getting Canned

Wayne Turmel, host of the Cranky Middle Manager show, interviews Michael Urlocker on disruption for middle managers.

Turmel draws on lessons from history, including the epic battle of Agincourt, to set up the discussion on disruptive innovation and how managers can use this methodology today. Highlights from the 31-minute podcast:

• Disruptive innovation is a repeatable management method to produce new growth and to help fight commoditization;
• Typical characteristics of disruptive innovations: Initial inferiority, initial marginal market segment; new attributes that are highly valued in a marginal segment;
• Not just for CEOs: Middle managers can create and manage disruptive innovations, if they avoid the common pitfalls of would-be disruptors;
• Typical (self-defeating) reactions of succesful companies as they are being disrupted;
• A discussion of tools and resources for managers to learn about disruption.

** Resources for Managers**

From The Disruption Group 's set of tools for managing disruption:

1. Getting started: Download a CEO Guide to the Benefits of Disruption (pdf).
2. Communicating: Download a presentation on achieving the benefits (pdf) on disruption strategies.
3. Developing disruptive ideas: Download the Disruption Brainstorm Tool (pdf).
4. Scoring: Download the Disruption ScoreCard (xls) to rate your idea or business.