Don’t let the Sun Go Down on Me

Volume 14 Letter 9

Hockey is a brutal sport! To the uninitiated it can look like a bunch of goons racing up and down the ice crashing into each other. If skating at 50kph and hurling a puck at someone at 150kph doesn’t get your juices flowing, just wait… down go the gloves and the players start to fight.

Scott McNealy, former CEO of Sun Microsystems, was a big hockey fan and a frequent player. He admired the hockey culture – the teamwork, the sweat, the grit and the occasional fight needed to get things done. He built his company culture around the notion of teaming up with customers. However, as the market shifted, Sun struggled with the transition. First, they resisted supporting their operating system, Solaris, on other hardware platforms until it was too late. To compound the problem, the similar open-source Linux operating system supported those other platforms.

Next, Sun developed the Java software platform, but clung to the idea that they would sell more hardware by making Java run best on their hardware. Ironically, Sun had designed Java to “run anywhere”, and failed to see that the real opportunity was in selling related development tools and business services based on Java. Other companies including IBM filled that void, leaving Sun simply as the un-trusted maintainer of Java.

“Teaming up with customers”, or in other words “locking them in” to one hardware supplier, was counterproductive to the new market direction. After Sun was sold off to Oracle, McNealy stated, “The mistake we made was putting it (the software) on our own hardware. If we hadn’t metal-wrapped it, it would have been more widely adopted”.

Like most companies, Sun Microsystems started with a unique, strategic position in the marketplace and owe their initial growth to that strategy. Over time processes and plans were aligned to better drive the strategy but, eventually, growth slowed and profit margins flat lined. The business sweet spot had moved while the company remained still. It’s at these points in time that companies must re-invent themselves. The rough, tough, hockey culture that Sun used to hold on to its ‘locked in’ server and operating system market share turned into its Achilles heel when the market moved to mainstream hardware and open software platforms. In the new reality, the opportunity was in tools and services delivered on top on those common platforms, and had nothing to do with hardware. For Sun Microsystems, it was game over in 18 months.

As many of you start to prepare your 2015 plans; ask yourself a few tough questions:

  • What are the distinctive capabilities that make our company unique?
  • In what ways do these distinctive capabilities bring value to the customer?
  • Where is the market sweet spot – is it moving?
  • Will future changes in the market make our distinctive capabilities less valuable or obsolete?

The answers to these questions can often expose flaws in your present strategy. Sun Microsystems no longer had a clear value proposition for their target market and without this it was impossible to press a competitive advantage.

At the end of the day a company must outperform its rivals. It can do so by either offering a significant differentiated product or service that is valued by the customer and defendable against the competition, or by creating comparable value at a lower cost – or some combination of both. Teamwork, hard work, grit and determination are admirable qualities in hockey and in business. But they’re not enough! If you watch hockey more closely you’ll see a game of strategy, of quick thinking and constant adaptation. Create a strategy and outperform your rivals!!

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