The High Growth, High Value Technology Company
Suppose you want to build a high value professional services technology firm. How would you go about it? That’s the question that Mike Daniels took on at a recent presentation to the Association for Corporate Growth.
Now, you may not be familiar with Mike’s bio, but you are probably familiar with some of the organizations he has helped build. He started his career at DARPA, the government entity that has brought you such key technologies as the Internet, video conferencing and stealth technology. He has also been involved in a range of technology success stories at standout companies such as SAIC and Network Solutions. To say that he has created billions of dollars in company value is no understatement.
What principles drive Mike's success? I was fascinated to discover how closely his personal experience paralleled the results of our research into high value professional services firms.
Here are his 4 keys to building a high value technology firm:
- Get involved in a technology wave that can be expected to continue for 20-30 years or more. These are by definition large, far-reaching changes that occur on a global scale. The Internet is a good example. Other examples include personal computers and the deveopment of mobile devices. It may seem difficult to spot these trends in their infancy. But many very successful companies have not enjoyed first-mover status. But they got involved early enough to leverage the new technology.
Moving forward, Mike sees cyber security as a good bet. So is the evolution of health care and the long-term need for data analytics to make sense of the growing flow of information.
- Hire the right people. This is a very well known and widely acknowledged prescription. But what makes someone right? Of course smart is a great start. But it’s only a start. Mike feels that you must find people who are passionate about the work that they do. The very best people feel so strongly about what they do that the dedication and drive it takes to build a leading firm comes naturally. You don’t need to motivate them. They motivate themselves — and you too.
- Have a product or service that people are going to buy. Mike made a big point that many firms fall so deeply in love with their technology that they lose sight of what real customers want. While we all pay lip service to this principle, it’s very easy to lose sight of it in the midst of day-to-day operations. I was struck by how closely this point parallels our own research findings that indicate firms that conduct formal research on their target clients grow faster and are more profitable than those that do not.
Mike observes that many entrepreneurs have a misguided but strongly held belief that they understand their customers, so they resist bringing in outside experts who can help them understand the realities of the marketplace. Our own research supports this point exactly.
- You have to love what you are doing. Just as you should hire people who have a passion for what they are doing, you have to love what you are doing, as well. Building a high value firm is not easy. If you don’t feel strongly about it, you probably won’t succeed.
So how does this advice play out in the real world? Mike gave the example of Sybase, a database firm that was perpetually stuck as an also-ran in the super competitive database field. They were able to develop a specialty in enterprise mobility, a long term trend. The result of this focus was a dramatic surge in firm value.
You may want to check out Hinge's research studies on high value firms and high growth firms. Also, here’s a link to a free download of Spiraling Up: How to Create a High Growth, High Value Professional Services Firm. It’s a good summary of how some of these principles apply to the reality of building a firm.
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