Who Wins and Who Doesn’t – Jason Meyers

Who Wins and Who Doesn’t – Jason Meyers, March 8, 2015

What’s the difference between a company that succeeds and company that doesn’t? This is a question everyone wants to know. Is it strategy? Execution? Management? Proper funding? Planning? Market demand?

It is all these elements. But what if you have all these elements and still experience a failure? Let us take a look at history for a moment. What are some of the biggest failures in business that you can remember? How about Polaroid and Kodak? Can you identify the elements that converged that lead to its failure? I’ll bet all of you are thinking “they didn’t keep up with the pace of technology” or “they couldn’t adapt”. But why? Didn’t they see what was coming?

I don’t mean to be confined to imaging to illustrate but there is a coincidental pattern. There are many more famous accounts of business failure. So why is it that some companies who seem to have every advantage fail?

Take the example of Shockley Semiconductor. Some readers may not be familiar with this name. In 1956 Shockley Semiconductor set up shop in what became the first technology company in Silicon Valley. It was headed by William Shockley, a brilliant Nobel Lauriat and physicist. The first transistor was invented at Shockley. They employed the most brilliant physicists on the planet and enjoyed success for a time. Think about it.. It was well financed, well staffed, it had the perfect product at the perfect time and yet it seems that it was doomed from the start.

So what happened? As history accounts, William Shockley was somewhat of an egotist who second guessed his talent. 8 of the company’s top engineers became infuriated with its founder and demanded that he be fired. These 8 engineers eventually departed and Shockley called them the “Traitorous Eight”; that they would never succeed. Shockley would never recover from the departure of the Traitorous Eight.

So it seems that an innovative company who was well financed, staffed with the best personnel who had every advantage…failed. Are you getting the picture? If not, read on.

In 1957 Arthur Rock, who at the time worked on Wall Street for Hayden Stone received a letter from the 8 individuals explaining what types of talent they each had. The group was seeking employment with another company. As the story goes, Rock made the suggestion that the group start their own company. After being rebuffed by as many as 35 corporate investor prospects, he found kinship in Sherman Fairchild who funded the group and Fairchild Semiconductor was born.

Where was the business plan or the strategy? How about a product? The group had nothing. Are you getting this yet?

Fairchild Camera & Instrument was an innovator in the field of imaging. Fairchild Semiconductor seemed to be another Shockley but for another reason. One of the reasons was that the wealth created from the invention of its Integrated Circuit was benefitting its parent company and no one else. In addition, profits began to erode as a result of emerging competition and entrenchment ensued. Fairchild Semiconductor was run by absentee executives based in Syosset, NY.

In 1968, 2 of the original Traitorous Eight visited Arthur Rock to express disdain for the environment at Fairchild and inform Rock of a new product they “thought” they had. The 2 men were Robert Noyce and Gordon Moore. Alas, Intel was founded with $2.5 million in funding and Andy Grove soon followed.

There was no business plan, no strategy, no capital, no nothing! Just a product idea yet Intel became the most successful semiconductor company in the world. Noyce, Moore and Grove ran a meritocracy and encouraged its employees to run with their ideas. Get the picture now?

People run companies. They don’t run themselves. Rock saw chemistry in a group of people. How they worked together, how they played together, how they collaborated and how they treated other people and how they handled success and failure together. People change the world, companies do not. Although these examples are somewhat dated, they illustrate one of the most famous examples of success and failure.

I read approximately 50 business plans per month. Some are exciting and some are not. The one thing I look for is chemistry between people.

A company can have a great product, a great plan, fantastic projections, a great marketing strategy, seemingly perfect market timing and a perfect market need. If the chemistry isn’t right and I don’t feel a spiritual bond between the people in the room, none of these advantages will matter.

I have considered matching great products and great strategies with the right people but I will save that for another blog.

Jason Meyers is a venture capitalist in New York City.