One More Thing
At the intersection of Consumer Pl and Enterprise Blvd, Tech City

• Home
• About
• in|vest
• in|vest: participate
• RSS

January 5, 2009

The future is already here - it is just unevenly distributed. —William Gibson

• MidtownNinja on Twitter

Breakfast with Scott McNEaly: keeping it lightweight

I was invited to a breakfast with Scott McNealy, the former CEO of Sun Microsystems this morning. The theme of the breakfast was entrepreneurship and Sun’s efforts to support startups via its programs like StartupEssentials.com. Although part of the reason for McNealy’s visit was to gather feedback on how Sun could better support startups, he also mentioned a few items of advice for startups, which go well with themes we have discussed on this blog. So, without further ado, here are some pieces of advice for entrepreneurs from the gentleman who co-founded Sun Microsystems:

• Buy spot market offerings. As much as possible, buy products and services at going short-term rates, even if it means you end up paying a premium for not agreeing to sign on for a longer term. McNealy said that things change too quickly in our world and that locking in a profitable long-term contract rate might prove to be an impedance down the road. He said that signing on more resellers rather than more salespeople during the dot-com era would have been one example of this principle at work; he added that Sun should have preferentially grown its reseller network over its sales force.
• Minimize fixed costs and overhead. As a parallel to a supposed Japanese business maxim "all inventory is bad", McNealy said "headcount is bad". He exhorted entrepreneurs to keep fixed costs low and concentrate exclusively on their startup’s unique value proposition where they differentiate themselves. In most build vs buy decisions, entrepreneurs should only build that which will enable them to erect barriers to competitive entry by other players.
• Get someone to think you’re crazy. McNealy said that the mark of a good strategy is someone thinking that its creator is crazy. Eliciting a vehemently skeptical reaction means that there is a controversy somewhere in the business plan, which in turn is an opportunity for the entrepreneur to differentiate themselves and their startup.
• Create barriers to competitive entry. McNealy emphasized the importance of creating unique intellectual property (IP) such as patents and trademarks that will inhibit competitive entry into an entrepreneur’s market niche. He was of the opinion that a portfolio of this kind should not be used predatorily but that it is nonetheless a good defensive measure. Sounds like the IP version of the Reaganesque maxim "Speak softly but carry a big stick".

I was struck by the extent to which McNealy’s advice resonates with the themes of Atomized Enterprises that we have discussed at great length on this blog. McNealy does not perhaps espouse atomization to the same extent; for instance there was limited commentary on outsourcing or cloud computing. In one instance, he even wondered why management consultants exist at all because an enterprise should never ‘outsource thinking’.

Nonetheless, the idea of keeping overheads and fixed costs low is an important idea I took away from the breakfast. Do you think enterprises can still create value while outsourcing the effort behind core value creation (rather than the ideation behind core value creation)? Join the discussion in the comments below!

comments

• Feeds

   Subscribe in a reader

  

  

• MidtownNinja on Facebook

• Email Me