Stories about Silicon Valley companies that nimbly changed course on their way to success are nearly as prevalent as stories about Silicon Valley companies that started in garages. Netscape started as a gaming company. Apple was strictly a computer maker. Twitter was going to be podcast platform. None of them ended up where they started. The truth is, markets change, competitors emerge, customers move on and technological advances disrupt and destroy business models even as they make our lives better. Ten years ago, there was little need to contemplate how big data, the cloud or social networking might enhance or threaten your business. Today, if you’re not thinking about big data, the cloud and social networking, chances are you aren’t around. In the rough and tumble of rapidly-evolving business today, only the nimble survive. “The bottom line is the world is accelerating, everything is getting faster and faster, so threats come quicker than ever at you -- changes in demand, changes in customers,” says Silicon Valley historian Michael S. Malone, who with Forbes publisher Rich Karlgaard will publish “The New Science of Teams,” early next year. “Now you have to be able to make amazingly fast turns.” I had the chance to talk recently with BloomReach co-founder and CEO Raj De Datta about the importance of being nimble.
“It’s hugely significant,” De Datta says. “The controversial thing is not whether it matters. It’s how do you know when to do it? How do you do it in a way that doesn’t drive your team crazy?”
In fact, he says, one of the most important roles for a CEO is to be the person who’s prepared to recognize when it’s time to disrupt the best laid plans. Knowing when to make a significant move is not one of those things that is more art than science. It’s a science, all right, but one that comes with an emotional side. Think about it: Entrepreneurs start out to tackle problems that they are convinced they can solve in ways that no one else can -- or at least with a solution that is better than anything anyone else has thought of. They might well put everything they’ve got into getting those solutions off the ground. Can you imagine how hard it is to turn back -- or turn left, or right? “You invest a lot in it,” De Datta says of a company’s core ideas. “That’s why you have to remain objective. The creation process is a combination of will and objectivity.” All of which can be easier said than done. When historians talk about companies zig-zagging, they reach for the Intel story. In the mid-1980s, the world’s largest chip-maker, faced a do-or-die inflection point. Since its 1968 founding, the company had made its living selling memory chips for computers. But by the 1980s, Japan was fiercely undercutting American chipmakers’ prices on memory. The U.S percentage of the semiconductor market, at 60 percent in 1976, was on a course that would see it drop to just over 30 percent by the end of the decade. Meantime, Japan’s share of the market rose from just under 30 percent to more than 50 percent in the same period. After years of declining fortunes and disputes about what to do about them, Intel CEO Andy Grove ultimately asked company co-founder Gordon Moore what a new leadership team would do if faced with the same set of facts. Moore famously answered that a fresh team would move the company out of memory, which lead Intel into microprocessors, the brains of personal computers. “It required reconceiving what the company was,” says Leslie Berlin, project historian for the Silicon Valley Archives at Stanford University. “They saw themselves as a memory company. They were founded as a memory company. They’d made a great majority of their money on memory.” But memory simply wasn’t going to work anymore. “It’s still an incredibly hard thing to do,” Berlin says, “but it’s an easier thing to do if you’ve got the viability of your company on the line.” Sure. Why change when things are going great, as they appeared to be early this year for electric-car maker Tesla? Production was ramping up, two models were on the road and the company’s stock was on fire. So, what does CEO Elon Musk do? He announces plans to build a $5 billion North America-based “giga factory” to manufacture the sophisticated lithium-ion batteries his cars depend on -- a factory big enough, in fact, to double the world’s output of lithium-ion batteries. Musk, who’s been known to think big (Remember the Hyperloop?) wasn’t nimbly moving into a field that the U.S. had all but ceded to Asia because Tesla was in trouble. He was launching a whole new line of business so that it wouldn’t get into trouble by having to rely on a third-party for the very heart of his product as he ramps up production many times over. “If we are to produce 500,000 vehicles a year,’’ Musk said on a November call with analysts, “we need cell capacity commensurate, which is bigger than all lithium- ion production today.” The jury is still out on whether Musk’s move will pay off. Needless to say there is no guarantee that dramatic shifts lead to success. Just ask companies like Intel, National Semiconductor and Fairchild that in the 1970s rushed into consumer products such as watches and game consoles to provide new markets for their chips. Or consider Cisco’s more recent foray into consumer products with the 2008 purchase of Pure Digital Technologies, maker of the Flip video camera, for $590 million. Sure, more video means more digital traffic, meaning a bigger need for Cisco’s core products. But cameras are not Cisco’s business and the company gave up on the initiative within three years. Cisco’s experience, in fact, is an expensive lesson in how hard it is for companies to make a change by staking a claim in what seems to be a complementary industry segment. An exhaustive study by Bain & Company of 1,850 companies that pushed into adjacent industries found that 75 percent of those companies failed to succeed with their new idea. And changing course isn’t just difficult for company founders and leaders. De Datta, who’s on his third start-up at BloomReach, points out that moving in a new direction can be hard on employees who have dedicated themselves to a company’s original vision “It’s a hard emotional choice,” De Datta say. “It’s very emotional for the team members involved.” The key is communication. De Datta, who worked four years at Cisco, says one thing he learned from CEO John Chambers was to clearly articulate the big picture, the overriding mission, and then at every opportunity explain how it is that what the company is doing seeks to serve that mission. He’s also learned that while overlooking the need for change can be fatal, shifting to a new strategy prematurely or too often can be as deadly. “I think it’s a thin line between visionary and suicidal,” says De Datta, who helped launch BloomReach in 2009 after a meeting of the minds with Ashutosh Garg, who also was convinced that Internet search could become much more relevant. “You have to have an intuition for when to be aggressive and when to be practical.” De Datta’s test came in the summer of 2011, when he and Garg decided to expand beyond the company’s core BloomReach Organic Search product and come up with a way to harness the power of social networks to help drive online sales for customers. “We tried a bunch of plans in social that just didn’t work,” De Datta says. BloomReach is all about understanding consumer intent and retailers’ inventory in a deep and data-driven way. Social media, it turns out, was not a good candidate for the way the company tackles problems. “In the social case, we figured out that BloomReach’s core DNA was more about solving, I would say, left-brain problems than right-brain problems.” Social is about community and curating; creating experiences that drive traffic to retailers. Right-brain stuff. Meantime, De Datta says, there was a left-brain problem out there: Consumers reliance on mobile devices was exploding. It was the dawn of the mobile age -- a time which now sees more than half of all searches beginning on mobile devices. But shoppers learned that finding what they wanted on mobile was difficult -- small screens, tiny keyboards. Few wanted to click through page after page in an effort to get the products they were really after in the first place. “That’s an engineering problem,” De Datta says. And so BloomReach shifted from social to mobile, where it put a concentrated team on the job of unleashing on mobile platforms the company’s expertise in creating relevant search for consumers. The company took the time to get BloomReach Mobile market-ready. The result has been a hit for e-retailers like Deb Shops, which sells clothes and accessories for juniors and plus-size females. David Cost, the retailer’s vice president of e-commerce and digital marketing, points to Mobile as one reason page views, time on site and revenue per visit have tripled on the store’s site. That’s a sure sign, I’d say, that knowing when to make a move from the established course can make all the difference in the firstname.lastname@example.org and follow him on Twitter at @mikecassidy