The unending tech boom hasn’t veered too close to the sun
Tech now has a toehold on its third decade of largely unabated growth.
On reflection, the bubble that exploded in Y2K looks more like a gut check and reset than a true emptying out of support for the sector — the needed recalibration before a decisive launch beyond the stratosphere. “Nothing important has ever been built without irrational exuberance,” said Fred Wilson, quoting a friend.
If there’s truth in that quote, the successes and innovations of the Silicon Age owe as much to the crash as anything else. Yes. Companies failed. Investments were lost. But that gigantic early stumble was followed quickly by a refocusing of resources and radically improved models for gauging organizational potential in the industry. Burn rates and runways became the canonized measures by which companies live or die, and VCs stopped throwing money at any old idea with a pithy moniker preceding the TLD. The money got smart and the sector responded — smartly.
By pre-burst standards, investment may have seemed sluggish after the fall. But it wasn’t long before funding rounds were again rocketing to the moon and the valuations were topping previous records. Many that survived the Dotcom Bubble now rank among — or at least alongside — today’s Big Tech superpowers. Even the industry’s pilot fish — the small fry feasting in the eddies of the leviathans — have market caps that companies in other sectors can only dream about. Proven investments with proven value.
During the rough years of the pandemic, when other sectors reeled, Tech thrived. 2021 was a banner year. If you’re reading this, you probably know why. There really did seem to be no limit to how far it could go. And maybe there still isn’t — for the long haul.
SETTING THE STAGE FOR THE GREAT RIGHTSIZING
In late 2022, the sector outlook isn’t looking quite so irrepressible. The globe is in the midst of an awkward belt-tightening exercise. Interest rates have climbed to check inflation, much as they did in the late 90s. Those of us in the tech industry are taking note this time.
After years of hiring sprees, many organizations have now shifted onto a layoff footing. For some, this has been accompanied by hiring freezes as well. But that posture seems overly cautious, defensive rather than proactive. Companies with real foresight are paring those layoffs with spurts of strategic hiring.
After all, momentum for the sector hasn’t stalled. At worst, it’s slowed, a not unreasonable reaction to an uncertain economic climate. But progress works at a clip and competition in tech remains high. So, yes, some reflection is warranted. But this isn’t a time to seize up and lock down. It’s an opportunity to regroup, refocus, and reignite. Rockets need to throw off their boosters before they blast off to the great beyond.
RIGHTSIZING FOR THE RIGHT PEOPLE, NOW AND TOMORROW
Smart money will always be focused on talent management. That means knowing when to let go of the twenty people who don’t push us closer to our grand objectives, to make room for the two or three that do.
Knowing where to find “the right people” will always be seen as the hardest part of that effort. But the factor that will have the greatest impact on your organization is understanding what it takes to attract and retain those people once they’ve been found.
When founders find each other, it’s often a kind of miracle of circumstance. That’s part of the mythology of our sector. But building a great leadership team around those founders isn’t something that should be left to chance. When it is, those decisions are often ones that will need to be course-corrected later.
With competition for executive talent higher than ever, it’s best not to be complacent about finding the right people to fill an organization’s most critical roles. The massive digitalization efforts we’ve seen over the pandemic years — the cross-sector shift towards Industry 4.0 — has turned practically every sector into pseudo-tech industries. More than ever, they are vying for a pool of talent once reserved for us.
To secure the best talents in this new reality, we have to be unconventional in where we go to find them, aggressive with our enticements and inspired in how we hold onto them once they’re in the fold.
Every negotiation should be treated as part of an ongoing campaign of persuasion. People have long memories. Failing to leave the right impression of your organization on the first occasion could set a bias against overtures in the future. If a candidate aren’t a fit in one instance, that doesn’t mean they won’t distinguish themselves on a subsequent search. The candidate who doesn’t work out today (for any number of reasons) could be your dream CFO two years down the line.
TALENT MEANS LITTLE IF THE CULTURE ISN’T A FIT
Filling a leadership vacuum will often have an organization looking outward. To be sure, there are great people out there. Too often, though, proximity blinds us to the incredible talent within our own ranks — the next generation of leaders waiting for us to give them the opportunity to shine.
It can be helpful to bring objective eyes to these talent searches, both to look outside the company — beyond the sector even — and to ferret out the champion candidates from within. It’s also important to understand that even great talent isn’t a substitute for a great culture fit. Someone with a long track record in leadership could easily be a worse choice than one with less experience but whose cultural affinities are more attuned to those of the organization.
Whatever the course taken in the interim, we should always be looking to identify, nurture, and groom the talent we already have. Today’s unrefined talent will often be our best bets for filling the leadership vacuums of tomorrow. Today’s rough gems can be tomorrow’s superstars.
POSITIONING FOR THE UNENDING BOOM
The tech sector may be in the process of taking a cooldown lap. And that has some of us feeling less than bullish about our prospects. But the tech boom is far from over. Anyone holding the long view knows the truth of that. It’s undeniable.
Cooldowns only make sense in one context — as the inevitable prerequisite to another race. Those of us who use this time to improve our positioning, streamline our operations, and optimize our teams are going to be exactly where we need to be to blast off again when the time comes.
Michael Chui, Roger Roberts, and Lareina Yee, “McKinsey Technology Trends Outlook 2022,” McKinsey, 2022.
“Lessons from Microsoft and the Dot-Com Bubble,” SeekingAlpha, 2022.
“Fred Wilson (Financier),” Wikipedia, 2022.
Colleen McClain et al., “The Internet and the Pandemic,” Pew Research Center, 2021.
“The Tech Winners and Losers of the Pandemic,” The Economist, 2022.
“Innovation of Businesses, and Digitalization during Covid-19 Pandemic,” SpringerLink, 2021.