I was thinking about the subject of failure today, with things like HP’s Touchpad (and Pre 3) disaster being highly publicised, it made me wonder about when a company moves from being a success, to starting to fail. While I don’t think HP are going to end up bust in 6 months (or even 10 years), they’re definitely walking a difficult path right now.

I’ve worked for a couple of companies which have turned from success to failure. One was an old software company which failed to move onto newer technologies until it was too late, it made the switch only when the employees had become stuck in a rut, unable to move from using the technologies they’d been using for a decade or more building an application which relied on green screen terminals. At first, rather than make the difficult choice to move onto a newer platform, they used a bridging technology of a application which scraped the terminal output and prettified it into something that looked like a modern Windows application in a demo, without the real usability improvements.

Eventually they moved to an Oracle database backend with a Java based web front end, but by then it was too late, and it was taken over by a competitor who’d made the switch before us.

The second time was a rapidly growing telephone company, bringing real cost savings to customers and who were about to deploy a new combined billing and CRM application which was scaled in advance to support quadruple the existing customer base. The customer base never got that high – we doubled the base, broken even, but then a well funded competitor launched a deal we couldn’t match, backed by network infrastructure investment we simply had never considered feasible. The new customer sign-ups slowed, and eventually we were taken over by one larger competitor then another. Eventually (as seems obvious now), we ended up as part of that competitor who made the large up-front network investment, which let them deliver services at a price that others still can’t match today.

I don’t think either company failed because of individual people, or individual actions, but looking back it seems like a failure of vision – company one failed because the vision didn’t consider where software technology was moving, and company two failed because the vision didn’t count on the possibility of a competitor rolling out an entire phone network costing more in advance than our company’s life-time revenues probably came to.

What I don’t yet really understand is why the companies actually started to fail – was it 20 years earlier when they failed to make the first upgrade in the case of the software company, or would a more aggressive switch just 2 or 3 years before the end saved them? Was it just easier to resell the same product month after month and not move on, or was it a real belief that the product remained competitive and would still be in another 5 years?

In the case of the telephone company, the failure seems to have been caused at the start, of not thinking big enough when it came to the possibilities – no matter how well the plan was executed, as soon as a competitor thought bigger, we were done for.

As someone who owns their own (rather smaller) company, I wonder about the causes quite a lot, and read a lot about business, but it seems like the fundamental challenge for any business is to think bigger, invest more, and focus on what seems impossible while your competitors work on what’s going to be easiest to deliver by the next annual reports. If you can do this, the worst that will ever be said about you is that you did stuff no one else believed was possible, and that next time you’ll do even better things.