Managing Growth at High-Technology Companies: A View from the Top

Abstract

Technological developments open opportunities for new products, new markets, and sometimes entire new industries. Entrepreneurs frequently discover ways to apply new technologies profitably and found new companies based on them. Some achieve success quickly. Compaq Computer passed $100 million in sales in its first full year of operation. Eight years after its founding, Apple Computer was a multibillion-dollar international corporation. Not all high-technology companies do so well. Many fail to get off the ground and quickly disappear. Some reach a level of financial viability but fail to grow further. Still others achieve significant growth for a time, only to fail later when they cannot seem to take advantage of their initial success. Flashes in the pan such as Osborne Computer, Sinclair, and Coleco's Adam Computer have been all too common. Even high-tech companies that have thrived for years are subject to buffeting from the fast-changing environment characteristic of the high-technology industry. Digital Equipment Corp. experienced serious organizational and marketing problems in the mid1980s before its recent dramatic resurgence. HewlettPackard, another of the most successful high-technology companies, ran afoul of the winds of marketing and technological change,' as did Wang Laboratories in 1985. None of these three leaders of the computer industry was able to match the performance of newcomers such as Apple, Compaq, and SUN. The types of problems encountered may be a result of the failure of management to address successfully the vital connection between strategy and technology.2 Or they may be a result of other causes such as errors in implementing strategy in the marketplace or in not choosing the right managers to carry out plans. What distinguishes successful high-technology companies from those that make little or no progress? One essential factor is surely management competence. In their study of high-technology companies Madique and Hayes noted that leadership reinforced by proper strategy and management practices is a key to success in those firms.3 But what are the specific characteristics of the managements of the growing firms? Are management problems in high-technology companies different from those in other enterprises? How have the more successful ones solved their problems? Are the management shortcomings that have led to stagnation or failure of high-technology firms different from those that have led to similar results in other types of companies? And what distinguishes successful management of high-tech companies with niche strategies from larger companies? To find the answers to these questions, we interviewed the chief executive officers of 10 high-tech companies. The selected companies represent a range of sizes and technologies, but are all relatively small niche competitors in dynamic high-tech industries. The largest company is, in fact, a corporation made up of small niche companies. Exhibit 1 profiles the CEOs and shows their firms' annual sales and growth rates.