I’ve been thinking about the corporate world, how it operates, and the effects of corporatism on our lives. If you’re a network engineer and think this is boring, pay attention. Corporate culture, the influence of Wall Street, and the rise of a non-skilled management class have direct impact on your work and personal life. The products you use are heavily influenced by corporate culture. Why vendors release certain products, when, and how, are all controlled by corporate culture. When a company tries to sell you something that doesn’t work and doesn’t serve your needs, when the company discontinues support for a product you bought after crashing and burning with it, when companies force products down your throat with buzzword messaging that means nothing to you, corporate culture explains it.
If you work in a corporation, the culture creates politics which affect what projects you work on, your career trajectory, and how you interact with your team. In your personal life, the food you eat and drugs you take are very much explained by corporate culture.
I wrote in a previous post about the lack of anything permanent in the corporate world. Everything seems to be temporary, everything is always in flux. Companies are afflicted by short-term thinking, and short-term thinking is killing everyone.
One way this manifests itself is quarter-by-quarter thinking. We all know sales people are judged on a quarterly basis, but corporations in general are as well. Publicly traded companies have to present results to analysts, and thus to investors, every single quarter. The results are compared against the last quarter, against the same quarter the previous year, and against other companies in the industry. The results have a huge impact on stock price, executive compensation, and even executives’ jobs.
The effect of this trickles down to all levels of a public company. Business units are judged by the quarterly performance of their products. This means product managers are judged by the quarter, much like sales people. Product managers are not commissioned directly like sales people, but they live and die by quarterly numbers. As a result, they want to do everything possible to ensure quarterly numbers shine.
Now, imagine you are a product manager. You have a deal worth, $20 million on the line if you deliver specific features the customer wants. You are going to do anything possible to win the deal, so your quarterly numbers look good. Now it probably is the case that the $20 million customer’s feature requests are specific to their environment. That is, adding the features will help that one customer, but probably very few others. So, instead of trying to build a product that caters to a broad range of customers who might bring smaller deals, you end up building a product that caters to a narrow set of customers that make you look good in your quarterly business reviews.
Now this type of short-term thinking might be an obvious problem if you planned to spend twenty years at your company. But instead you spend two years at a company, so you only have to pull this off for eight quarters. You can put big happy numbers in your LinkedIn profile (“successfully drove record quarter of $100 million in sales!”) and then exit stage right to repeat the process elsewhere. And the folks left-behind have to clean up the mess. Keep in mind your success within the company is also being judged by non-technical MBAs who are looking to do the same thing you are.
The companies that do the best long-term are those that eschew short-term thinking. Apple is a great example of this. They’ve had some disasters, but have generally taken risks to build products with long-term appeal. I often mention Zappos founder Tony Hsieh, who while he had serious personal problems, forsook short-term gain for long-term performance. Even within a company, quarterly thinking can vary by business unit and leader.
At the end of the day, however, it’s Wall Street that encourages this. Like any metric, execs end up chasing their stock price like a dog chasing its tail. It doesn’t get you anywhere, however much progress you may think you are making. Meanwhile, you may get rich, but you leave disaster in your wake.
Excellent observation. This short term thinking is one of the main reasons I dont usually recommend buying from smaller vendors. The product and its aproach is often very promising but has a few rough edges and lacks some (basic) functions you would need. They will promise to fix all of that in a couple of “quarters” and you trust them because they built this awesome product in such a short time so this cant be a problem. After seeing completely unrelated superspecific features being released all the time and almost no improvements to the base product you realise its never going to happen and start to look for a replacement after a meaningfull time so the management wont get crazy about having to replace this “awesome” new technology you were so heavily advocating for just a couple years ago. Happened to me multiple times and it always hurts because it kills great products and ideas by trying to please the one big customer instead of having the courage to focus on the long-term success.
Well, as I said large vendors are quite susceptible to this as well. It’s a problem I’ve seen growing worse and worse as what I call “corporatism” has taken over. Quarter-by-quarter thinking is often combined with short-term syndrome. (“I’m only going to be a product manager here for 2 years, so let me pump up the next couple quarters and who cares about the long term!”) Small vendors are often just trying to get acquired, so they have to build the logo slide with a few large customers and cater mostly to them. To what extent is a smaller customer valuable? As one fraction of a number on a slide (“we’ve gotten 300 deployments so far!”). Larger companies are interested in keeping Wall Street optimistic about their futures. (Stock price, as Cisco’s old CFO liked to point out, is a view of future value, not present value.) Either way, incentives are wrong and companies are often thinking about anything but their customer.