Better Off Dead?

You’ve got to know when to fold ’em. Is it possible to innovate endlessly, or do some businesses just have a natural expiry date?

In February 2015, RadioShack filed for bankruptcy and announced that it was closing thousands of its stores. The electronics chain outlasted competition over nine decades by jumping on new technologies, particularly cell phones, and catering to tinkerers and the DIY crowd. But in recent years, all that faded away. Bloomberg’s Joshua Brustein described its demise as “an obituary for someone you thought was long dead.” Scott Galloway, a professor of marketing at New York University, told Brustein: “I wouldn’t even call this a failure. I’d call it an assisted suicide. It’s amazing it’s taken this long for this company to go out of business.”

Call it an extended epilogue. Or maybe just human nature. Montaigne once chastised humans in one of his essays for doing precisely as RadioShack did: avoiding all talk of death until it was unavoidable. We had to train ourselves to do differently, he argued. “All the wisdom and reasoning in the world,” he wrote, “boils down finally to this point: to teach us not to be afraid to die.” And so the question looms: Do businesses need to learn how to die?

Not necessarily. Not every kind of business, at least. In the tech world, start-ups are rarely afraid of death—death is ingrained in their DNA. Investors know that businesses are born to die, hopefully in a high-priced sale, but most of the time in failure. In a 2013 New Yorker article, Nathan Heller described the philosophy as the “three-business-card life.”

“People might give a lot of their time to one start-up while keeping a substantial equity share, and maybe a nominal job title, in one or two others that are just getting off the ground,” he explained. “They might help fund-raise for one company while investing in another one. Entrepreneurialism is a high-failure business, the thinking goes, but if you keep a few pots on the burner sooner or later something will boil. Then you can live off that payoff for a while or invest it in other things.”

A similar mentality underlies the theory of disruption, a term that Clayton M. Christensen coined in his now-infamous 1997 book The Innovator’s Dilemma to describe how small firms developing marginal technologies eventually put larger companies in their field out of business. Big companies, Christensen wrote, “find it very difficult to invest adequate resources in disruptive technologies—lower-margin opportunities that their customers don’t want—until their customers want them. And by then it is too late.”

Two decades later, disruption has become a painfully over-recited business mantra. It values death, but only for others. It has also been the source of much anxiety. Two years after buying the New Republic in 2012, Facebook co-founder Chris Hughes handed the editorial reigns to digital native Gabriel Snyder. The magazine, which had already moved from being a weekly to a bi-weekly in 2007, started publishing on a monthly schedule. The result was that two-thirds of the century-old magazine’s masthead resigned or was let go.

To many of those who left, and to other former editors and writers who spoke out afterward, the shake-up presaged the death of print, ideas and good journalism through disruption. It’s a sentiment that likely felt vindicated when Hughes announced that he would be putting the magazine up for sale, writing on Medium that he “underestimated the difficulty of transitioning an old and traditional institution into a digital media company in today’s quickly evolving climate.” Shortly after the mass staff departures in 2014, Leon Wieseltier, the magazine’s former literary editor, wrote that a new reality was emerging where “journalistic institutions slowly transform themselves into silent sweatshops in which words cannot wait for thoughts, and first responses are promoted into best responses, and patience is a professional liability.”

Lost Glory, Never Found Again

No matter how you feel about the old guard’s sentiment, the controversy around the New Republic and the precarious state of media companies in general suggest that while welcoming death is possible in the case of smaller start-ups, when the companies or industries get bigger, things can get messier.

It’s not just print journalism and RadioShack. For years BlackBerry has been losing ground to Samsung and Apple in smartphone sales. Its market share currently sits around 0.5%, down from about 20% in 2009. To the pessimists, the company’s many attempts to stave off extinction—the release of the PlayBook tablet, the hiring of turnaround specialist John Chen as CEO—have looked like the last throes of a survival instinct.

“BlackBerry way back when was the scrappy upstart and giant killer,” says Sean Silcoff, a writer for the Globe and Mail and coauthor of Losing the Signal: The Spectacular Rise and Fall of BlackBerry. But the arrival of the iPhone and the success of Google’s Android operating system presented an almost insurmountable challenge. “BlackBerry basically would have had to do everything right to maintain a strong competitive position,” Silcoff says.

The company’s trajectory bears similarities to Yahoo, which at one point in the late ’90s tripled its revenues over the course of one year, but has struggled to seize back even a fraction of its former glory since the dot-com crash and particularly since Google became the world’s dominant search engine.

In a New York Times Magazine piece about Yahoo’s most recent resuscitation attempt, centered around the hiring of former Google star Marissa Mayer as CEO, Nicholas Carlson argued that these revitalization efforts might not only be in vain, they might be unnecessary.

“Dynamic and wildly profitable Internet companies like Facebook and Google may get most of the attention,” Carlson wrote, “but Silicon Valley is littered with firms that just get by doing roughly the same thing year after year—has-beens like, a search engine that no longer innovates but happily takes in $400 million in annual revenue, turning a profit in the process.”

That kind of steady, unostentatious profitability is not the story we expect to hear from the business world. The old mantra in business is that if you’re not growing, you’re dying. Adapting is permissible; it might even be required, according to someone like Christensen, who points to IBM and Apple as examples of companies that have managed to maintain their status as disrupters. But compromising, staying still, accepting a niche—these are all unacceptable. They are, ultimately, equivalent to death.

The paradox here can be elucidated through BlackBerry. In two March 2015 articles, Silcoff noted that BlackBerry, despite recently announced profits, was “still a shrinking company,” shedding phone sales, employees, and revenue. Chen “has delivered on half of his promised turnaround,” Silcoff wrote, but “whether he can come through on the more difficult half by stabilizing and increasing revenues is anyone’s guess—including his own.”

The company’s latest quarterly results, announced in December, have not resolved the guessing game. Revenue is up from the year before but, as Shane Dingman pointed out in the Globe and Mail, hardware sales continued to decline despite the launch of a new device and weren’t even mentioned in the company’s press release.

Chen did use the December results announcement to emphasize Blackberry’s move toward developing software, the kind of rebranding and reshaping that can save an established company in decline, if it’s not too late.

What if the up-and-comers have already made their move, though? Then the odds are against you. “The fact is there aren’t many tech companies that have been market leaders, fallen way back, and then returned to recapture their lost glory,” Silcoff says. Instead, he cites cases like Xerox and Sony, former tech giants that have taken “their considerable intellectual property—patents and such—and [built] a lucrative licensing business by getting other companies to pay for using their patents.”

In a December 2014 article for the Globe and Mail, Silcoff wrote that BlackBerry’s “patent portfolio could be worth much more if it stopped making smartphones than if it continued, as has been the case for other over-the-hill tech companies.” But, as he told me, “some would argue that that’s a throwing-in-the-towel strategy.” For now, it seems, BlackBerry is looking to fight for glory until the end.

In our conversation before the results were released, Silcoff expressed BlackBerry’s basic predicament. On the one hand, Silcoff said, referencing Innovator’s Dilemma, companies can “fool themselves into thinking they’re safe because they’re seasoned, mature, they hold leading positions in the industry. But that kind of thinking can make them sitting ducks for up-and-comers.”

Abandoning Growth

Sometimes the barriers to a company’s timely death are external. Silcoff has written critically about the Quebec government’s decision to continue providing aid to Bombardier, and the aerospace industry in general. As a use of taxpayers’ money it seemed increasingly like a bad investment. “Governments that spend money to prop up uncompetitive businesses aren’t doing their economy any favours in the long term,” he told me. Still, Silcoff notes that you can’t generalize about whether businesses tend to hold on too long and refuse to accept their demise. It depends largely on the company, the industry, and the context.

Furthermore, promoting more death in business can be a dangerous game. The idea that market logic must determine the fate of companies, that anything which doesn’t prove its utility is dispensable, can quickly take a turn toward a pernicious, ruthless capitalism, particularly when you move away from cell phones and search engines and think instead of an industry like the arts.

A piece published last year on Medium by Devon Smith argued that we should “pull the plug on perennially failing arts organizations,” by which she meant ones that “aren’t meeting the needs of their community” or whose art “is no longer relevant to their audience.” But tying cultural production to popularity dangerously ignores how great art is often made.

The point here isn’t to disregard failure but to approach it correctly. In that vein, the Toronto dance company Dancemakers recently committed to supporting artists-in-residence for three-year stints based on the idea that it may take a failed performance or two to hit upon a great work of art. That kind of security is absent when the pressures of ticket sales or reviews can define your ability to get more work.

Embracing failure in the right way can be also part of a more humane economy. Cities like Detroit and Youngstown face declining populations from the loss of auto industry and steel mill jobs. In light of the problem they’re considering a radical solution: embracing shrinkage. The concept is as new to urban planning as it would be to business. “We have two predominant planning models in this country,” Virginia Tech professor Joseph Schilling told Governing magazine. “One is growth, growth, growth. The other is redevelopment. That third approach—rightsizing cities—is not something that we’ve done a lot with.”

That third approach, the middle way, helps counter the notion that our choices are all-or-nothing, life or death. “All breakthrough companies… will eventually plateau and then decline,” Carlson wrote in his New York Times Magazine piece. But, as with cities, that doesn’t have to mean accepting immediate death. One NYU professor who Carlson interviewed suggested that sometimes “companies have to act their age,” which in Yahoo’s case would mean abandoning its efforts to become the hundred-billion-dollar company it once was and settling for a new, smaller identity. Even BlackBerry’s current strategy, Silcoff points out, could lead them to sell a relatively small number of phones, but enough to serve a niche and make a profit. Resigning yourself to that eventuality is difficult, for people and for companies. And in both cases, it involves a double-sided lesson: that learning how to die may not only entail recognizing when to tap out; it may also mean learning to accept more modest ways to live.

As Garrison Keillor wrote for Robert Altman’s film version of A Prairie Home Companion, “The death of an old man is not a tragedy.” A life well lived can be enough. Businesses should heed this too (we can’t all be Zildjian). Whether a business is young or old, it faces its most profound existential crisis when the thing it presumed would always be there is casually replaced by the next thing. See Mathew Ingram's piece Existential Vertigo in this issue for further insight into how cycles of innovation and disruption can be near impossible for the old guard to navigate, or Jay Cousins's "Death by design" — AR

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