Creative destruction creates carcasses

Veteran tech journalist Therese Poletti this morning looks at the tough choices facing the new(ish) CEOs of three established tech companies. The double-deck headline in Marketwatch says it all:

April 3, 2012, 12:01 a.m. EDT
Can new CEOs fix H-P, RIM and Yahoo?
Commentary: H-P has best hopes, future grimmer for RIM and Yahoo

She begins the story by quoting Clay Christensen from his talk last week at Xerox PARC — a nice touch and obviously a point of view I wholeheartedly endorse.

But then she gets to the money quote:

Once companies have lost their edge, can they ever climb back? In the case of H-P, RIM and Yahoo, the outlook appears to be the best for H-P, worse for RIM, and Yahoo could eventually just be sold, or cut up into bits.

“They have moved to the carcass phase of the business,” said Stephen Diamond, an associate professor of law at Santa Clara University. “That is a very bad sign. That is very interesting for lawyers and vulture funds. But to expect those companies to turn around technologically is all but impossible. H-P may have narrowly averted that,” he said, adding that he believes the tech giant needs to eventually find a more visionary CEO with more tech or engineering creds, or it too will lose its way.

Carcasses? Ouch!

The pessimism on Yahoo seems conventional wisdom. Yahoo was listed among “four dying companies” over three years ago, and the other three have essentially been carved up: Palm bought and essentially killed by HP, Sun swallowed up by Oracle for its patent portfolio, and AMD making a bold (i.e. risky) shift to a fabless/outsourcing model.

Meanwhile, the travails of RIM and HP have been well chronicled. All three companies are at a point — as Apple was in the mid-1990s — where their troubles are so great that they have trouble attracting a top tier CEO. In offering the most optimistic view of HP, Poletti sees CEO Meg Whitman as a savvy corporate politician and transitional figure, who sets the ship aright but then turns to the reins over to a technologist (possibly inside) leader.

This plays to a conjecture I’ve been trying to nail down for my book on engineering entrepreneurship: great technology companies have to be led by great technologists. (Steve Jobs might be an exception to this rule, but he was an exception to nearly every rule).

Still, these are companies that have hit a difficult time, having lost (or in the process of losing) their once certain moneymaking franchise to commoditization and other market turmoil created by creative destruction. As Prof. Christensen notes, this is the inevitable way of the technology-enabled world.