| Most executives would agree that the last thing | | | | have often done this by burning their boats and |
| they want to do is to leave behind the company's | | | | bridges behind them so that survival could only be |
| original business, and go off serving another | | | | accomplished by going forward. |
| market and need. In many ways, taking on a new | | | | Both companies were also employing a venture |
| market and need is like being a start-up all over | | | | capitalist's perspective in making decisions, looking |
| again except with higher costs (unless you can | | | | at choices in terms of opportunities lost as well as |
| acquire a business or some talent to help you | | | | profits and cash flow gained. |
| implement) while moving more slowly. | | | | What else could these two companies have done |
| Consider a fish pond. If there isn't going to be | | | | that would have provided even more ways to |
| enough water to support fish, the future looks | | | | harvest from their efforts? Take a moment to |
| bleak. You had better pack your fishing gear and | | | | think about your own answers before looking at |
| head elsewhere, even if it means having to learn | | | | some possibilities below. |
| to fish in a new way. | | | | First, since each company is betting on becoming |
| PMC-Sierra's predecessor company was focused | | | | a leader in new applications, the companies could |
| on providing personal computer modems, a | | | | have expanded their ability to learn how to solve |
| marketplace where it was the third largest | | | | more kinds of related customer problems. Then, if |
| supplier in 1994. Storm clouds were forming for | | | | part of a solution wasn't as robust and helpful as |
| that business as new technologies would require | | | | another part, the company could still have created |
| Digital Subscriber Line modems, which could cut | | | | a lead that reflected both efforts. |
| the future demand for the company's products. | | | | The technology evolution could have focused on |
| At the same time, the company's leaders were | | | | delivering more kinds of advantages from the |
| very excited about the Internet becoming the | | | | same development activities. As a simple |
| killer application for broadband as a technology. | | | | example, both companies could have looked for |
| Mr. Bob Bailey, PMC-Sierra's CEO says that the | | | | how to make wireless and wired networks work |
| company was guided by a thought often shared | | | | more smoothly together from the end-users' |
| by Mr. Don Valentine of Sequoia Capital, "Great | | | | perspective. That might have involved teaming up |
| markets make great companies." | | | | with people like Mr. Bernard Liautaud from |
| In the company's viewpoint, the chance to be | | | | Business Objects to create better ways to |
| number one in making chips for enabling the | | | | access data. |
| Internet would be just such an opportunity while | | | | Many will object that neither company could |
| being a follower in modems for personal | | | | probably have afforded to do more. But with the |
| computers would not. The decision was "not as | | | | right timing, PMC-Sierra and Centura could both |
| hard as it looked." By 1997, the company left the | | | | have sold enough additional stock at a low cost of |
| modem business, and never looked back. | | | | capital during the height of the Internet craze on |
| Having made that decision similar to what a | | | | Wall Street to have permitted such an expanded |
| venture capitalist would, PMC-Sierra continues to | | | | focus. |
| look at development projects for new products in | | | | Second, talent is a key ingredient in these kinds of |
| the same way. The investment can easily be | | | | new-product-driven business models. By directing |
| $30-50 million to create a new product that will | | | | some of the applications for the new technologies |
| start a new market. If you do this particular | | | | to exciting problems, the companies might have |
| project, then top talent and money are not | | | | upgraded their ability to get better ideas. For |
| available for another project. | | | | example, there could have been a contest on the |
| Even with the company's success, it could only | | | | Internet to find problems that would encourage |
| afford to pay for a few of these as the | | | | many top people to leave what they are doing to |
| technology recession of 2001 hit. | | | | work on the challenge, much as Earthwatch |
| Down the coast from PMC-Sierra's Vancouver | | | | attracts talented people to support scientific |
| base, Mr. Scott Broomfield, CEO of Centura | | | | experiments all around the world. |
| Software, was wrestling with another, similar | | | | Third, adoption risk could have been greatly |
| challenge in 2001. Although the company had been | | | | reduced by lining up lead steer customers to |
| leader in developing software for client server | | | | invest in the new technologies in order to help |
| technology, Centura had missed the boat for | | | | them develop their own next generation of |
| morphing its offerings into the Internet. Next? | | | | improved business model. With many wireless |
| Mr. Broomfield decided to move the company into | | | | carriers worldwide to choose from yet providing |
| a totally new business model, that built from the | | | | few differentiated offerings, both companies could |
| lessons of its earlier experiences in developing | | | | probably have found at least one willing partner |
| client server software. This new business model | | | | from the wireless industry. Such a partner would |
| would also be employed in a new marketplace, | | | | have been helpful for application knowledge, |
| wireless communications. With a band of 20 good | | | | financial resources, and access to their customers |
| people, the software could be created at no | | | | who wanted to solve specific problems. |
| greater cost than rebuilding the company's | | | | Fourth, the companies are planning to provide |
| existing base in its current market. | | | | products to create solutions. Yet, when |
| The only remaining risk for the new model was | | | | companies succeed the biggest value will be |
| one of getting adoption. To help deal with that the | | | | provided to the services that are enabled by the |
| company was relaunched with the name Mbrane | | | | new technologies. |
| (as in membrane) around the idea of using | | | | Part of the business model could have examined |
| technology to solve customers' problems in terms | | | | at where the most value would be accrued by |
| that customers who were not technologists could | | | | working with those who use the products or the |
| understand. Further, Mbrane would focus on | | | | services they make possible. Also, they could |
| empowering workers in organizations to make it | | | | have looked at ways to create value through |
| easy to get the information they needed through | | | | technical solutions that are primarily captured as |
| wireless technology. | | | | intellectual property, rather than as whole |
| Pricing would be done in ways to make it easier | | | | businesses. In fact, it might have been cheaper to |
| for customers to choose to use the software. To | | | | take that route than to actually design the next |
| pay for the new developments, the majority of | | | | generation of products. Certainly that's the |
| the old business was sold. Only time will tell how | | | | circumstance for PMC-Sierra. |
| well this will turn out, but Mr. Broomfield feels that | | | | What other ideas do you have? |
| he has taken a risk with a favorable ratio of | | | | Is the current recession just a blip for your |
| risk-to-potential-reward. | | | | industry . . . or a sign that you had better move |
| As you can imagine from both cases, it probably | | | | to a new opportunity? |
| helped focus attention on the new activities to | | | | Copyright 2009 Donald W. |
| eliminate the older ones. Military commanders | | | | |