EMR Online

John D. Trudel
The Trudel Group

This edition's sequence of columns is for IEEE's Graduates Of the Last Decade (GOLD) members. My purpose is to share some insights that may help you better manage your career.

Great firms that dominate their markets are "falling from grace" with increasing regularity. The very things that they evolved to enhance profits (e.g., metrics, controls, procedures, reward systems) makes it hard for them to innovate and change [i]. Between a quarter and half of the Fortune 500 list disappears every decade. Most are assimilated by stronger firms (Resistance is futile...). Sometimes brand names continue long after the company and its products are gone. A few large firms actually go bankrupt, though not many. To pick some examples, Fire-stone, though still much in the news, hasn't existed as an independent company for years. Netscape and Chrysler still exist as brands, but both are under new management, now owned and controlled by others from different cultures and with different goals. Even the most hallowed names like Hewlett Packard, Motorola, Lucent (the custodian of what used to be Bell Labs and its legendary technology) are not immune.

The turmoil is even greater at smaller firms, ofcourse. Our children are educated, successful professionals, but all have changed jobs in the past few years. A Silicon Valley friend of mine worked for four companies in 18 months without changing jobs. My typical consulting engagement lasts less than six months, but it is increasingly common for clients to reorganize in mid-stream. In today's markets, this is the norm.

Profits have shifted from "typical firms" to innovators or monopolists. The average companies in most industries are just trying to survive, and traditional business methods lead them to try to be "faster and cheaper" with standard products. The problem with that strategy is that there is no bottom. The machine age, which ended in about 1990, was about the mass production and marketing of generic products. In today's world, that leads to razor thin margins. Commodity products, and their design, inexorably move to third world countries with low wages [ii].

These "old economy" companies have been, for the most part, going out of business, though profitably. Even when the market was booming, the typical stock lost about 5% per year. Let's call these firms Group A. These "average", companies account for most Jobs and most layoffs.

Group B firms are essentially monopolists. Since in the United States monopolies are (or may be) illegal, most markets are actually controlled by oligopolies with a small number of firms totally dominating the market. Examples would be Microsoft, AOL, and the local telephone companies. These wealthy firms contain the bulk of the good jobs. They also tend to accumulate competitors and enemies. Everyone likes to see David beat Goliath, but for some the animosity goes deeper. Some think Bill Gates' most astonishing accomplishment was getting so many high tech managers to dislike him more than they did the government. Hence, Microsoft's recent problems. Monopolies are disliked because organizations without competition may serve their customers poorly. An extreme example of this is K12 education in the United States, where from 1960 to 2000, a 350% increase in spending per student failed to improve student skills [iii]. In a similar manner, from 1996-2000, telephone rates and Internet access fees increased by about 20%, while service got worse [iv]. Some say this blockage helped to collapse the Internet economy [v].

Any time large numbers of customers are dissatisfied there is a chance for opportunity. That inspires the creation of new firms. Thus, talent and capital shifts from Group A and B companies to the innovators, whom we will call Group C. These are the insurgents. The United States has a tradition of creating such new ventures better than anyone. These firms are exciting in that they create most of the new jobs and wealth. The interesting question is, "What will the future be like?" Which group will win in the near future, and what options does this present for your career? We'll talk more about that next time.

Footnotes
[i] Clayton Christensen, The Innovators Dilemma, Boston, MA: Harvard Business School Press, 1997.
[ii] William Greider, One World, Ready or Not, New York: Simon & Schuster, 1997.
[iii] Reported by Wall Street Journal, graph with citations available at no charge upon email request.
[iv] The Big Telecom Disconnect. (May 3, 2001). Wall Street Journal. Section B1.
[v] Frank Rose. (May 2001) Telechasm. Wired, pp. 128-135.

ENGINEERING MANAGEMENT REVIEW
A publication of the IEEE Engineering Management Society