14 Apr 2010

Why some technology companies fail and others succeed

6 Comments finance and economics, internet marketing training, local advertising, people management

Many folks speculate why Google has overtaken Yahoo! in search or why Facebook has dominated in social networking, versus Friendster. I believe there’s one key factor— if you’re running a technology company, you need a technologist at the helm.  Larry and Sergey of Google were Ph Ds (or about to be) in Computer Science.  The last few folks who have run Yahoo! were anything but technology people– one was a film executive, one was a financial analyst, and another is a professional manager.  Running a technology company requires a deep understanding of what’s coming next in a rapidly changing world.  And to not have a keen pulse is to drive in a dangerous fog.

Facebook was founded by Mark Zuckerberg, a young computer science genius– not a 55 year old male who is good at manipulating spreadsheets.  If you see a social networking start-up being founded by 55 year old males who are probably not even on Facebook– run the other direction as fast as you can.  The folks who can best guide a company are those who connect deeply with their customer base.  How can you start and manage a company if you don’t use the product yourself?  Even the guy who runs Hair Club for Men is also a client, so the commercial goes.

Of the technology companies we see fail, it’s not just age.  Often it’s also a lack of having a balanced core team.  Salespeople hire salespeople.  Engineers tend to like to hang out with other engineers.  It just works that way somehow, as people hire folks who are like them.  But to operate a technology firm, you need folks who are experts in sales, engineering, marketing, finance, and other disciplines.  And the technologist should be king in the technology company, in the same way that Nike was started and run by a star athlete, Phil Knight.   Does Frito Lay have a technologist at the helm?  No, they have a marketing person, since that’s the firm’s core expertise.

So watch out for technology companies that don’t have any engineers in sight or believe that engineers are commodity products that can be contracted out or hired offshore.  If you are a business person and are thinking of starting a company in the Internet space, my advice to you is to quickly find a technical co-founder.  You’ll thank me later for this advice.  

A great entrepreneur knows what he knows- and more importantly, knows what he doesn’t know– finding someone to complement him or her.  If you’re an engineer, find a strong marketing/sales ally and make him a business partner.  Your freelancer will give you great results for a couple months, maybe longer– but eventually will flake out on you, which is why they’re freelancing.  

Are you a technologist— and if not, do you have a technologist that is part of your founding team or is at least a CTO level person?  If you are one of these companies that’s lacking a technologist, but wondering why you may be having trouble executing, I hope this article helps shed some light on why.

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Facebook data and ads geek relentless in measuring real ROI. Chief Technical Officer of BlitzMetrics. Google+
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6 Responses to “Why some technology companies fail and others succeed”

  1. Reply Use This Attraction Marketing Technique And Be Among 3% Of The Top Marketers In Mlm Companies. says:

    [...] Dennis Yu: local online marketing, facebook advertising, internet guru » Why some technology c… [...]

  2. Reply Rahul Sutar says:

    Yes, technologist is very necessary to run a technology company. Important aspect is to have an excellent team consisting of professionals from various fields for the company to stay at top of the competition.

  3. Reply David says:

    Dennis,

    I couldn’t agree with you more on your reasoning. This is something I’ve been saying for years regarding technology companies.

    Here’s my favorite quote from your post above:
    “Running a technology company requires a deep understanding of what’s coming next in a rapidly changing world.”

    The best tech leaders tend to invest before the spreadsheet tells them the new product or market is a proven winner.

    • Reply Dennis Yu says:

      Hi David,

      Thanks! I was making an indirect reference to Yahoo! and how they’re in trouble now. Carol Bartz had an embarrassing interview with Mike Arrington, where she got destroyed. A tech leader wouldn’t be caught like that– he or she would have answers on mobile strategy, what to do about social, etc…

  4. Reply David says:

    Hey Dennis,

    Yes, sad isn’t it. Has Yahoo ever had a technology leader???

    At my prior company (major Silicon Valley software maker), I experienced a similar leadership challenge. Not having a tech CEO who knows where the market is going at their heart is a big handicap.

    We had one CEO say that he could run any company just from the financial controls. Naturally this didn’t work in the long term even though in the short term the earnings numbers appeared better as the result of cost cutting and margin tweaks.

    Dennis, it sounds like you think Facebook will remain relevant due to their CEO.

    • Reply Dennis Yu says:

      Hi David,

      I don’t think I could say it any better than Mike Arrington on TechCrunch here. But really, Facebook is is going to eventually have to face (no pun intended) up to the issue of user privacy versus effective advertising options. These two go hand in hand. So long as they don’t get sunk by privacy, they’ll keep growing.

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