Why do companies fail?

March 1, 1997
With all the companies you`ve started what, in your opinion, is the reason that companies fail?
1304qa Chang New

Q: With all the companies you`ve started what, in your opinion, is the reason that companies fail?

A: My worst experience was one where the founder decided to sell his company too early. There was a constant turnover of good people because he wanted to make all the decisions. Each departure slowed down the project and also hurt him deeply on a personal level. This also resulted in criticism from the Board, which made it unpleasant for him. Eventually he threw in the towel to get away from the stress. The lesson reinforces the wisdom that control is an illusion.

Companies succeed or fail for a number of different reasons; there really is no good generalization. Successful companies generally have a good sense of "self." Business school puts it as "understanding your core competence and driving constantly to reinforce that competitive advantage." It was quite possible for this founder to have built a small but successful company where he would have been happy running a "tight ship." The problem was the mismatch between wanting to control and wanting to build a big company quickly. I think companies fail because of a mismatch between some aspect of the resource and the goal. And usually ego is what causes people to make the wrong judgment call.

Q: I have worked about 12 years and am being promoted to engineering manager. In the back of my mind I also want to start a company. Should I go to a top business school to get an MBA full time, part time, or just take their three-month executive course? There is also an evening MBA program in a local private school. I have three children, but my wife is very supportive.

A: There is credibility in a name, and the reputation of this school is deserving. So it is definitely worth the 45-minute extra drive to go to the better school. I would pick the part-time MBA program because you won`t have the loss of income. Also, if the current job is important to you, a lot could happen in the two years during your absence, and you would be out of touch.

An executive program is a quick way to get exposure to a wide range of core topics. I personally benefited tremendously from taking such a program, although I wish I took it when I first made the entrepreneurial plunge (about 20 years earlier). Actually, this would probably be just as helpful to start your own company. On the other hand, you are sure to get more benefit from a real MBA if you work for a big company. My suggestion is to think through what you really want to do and proceed with a plan working backwards from that goal.

Q: I have an idea that`s not patentable, but an existing company could turn it into a big business quickly. Is asking 2% royalty reasonable?

A: First of all, I`d get an expert opinion to verify that your idea is really not patentable. Most of us think that patents are only for breakthrough inventions. Sometimes simple ideas are also patentable if they are not obvious. It also doesn`t have to be a new technology. It can be a combination of existing ideas put together to perform a new solution. I am reminded of MicroFridge. Instead of plugging a microwave oven and a refrigerator directly into an outlet, you can plug them into a switch box that turns off the refrigerator when you use your oven. This avoids blowing a fuse in older buildings. These people built a $60 million company around this patented idea.

Assuming your idea is really not patentable, then it is reasonable to get a royalty for a short period. You are not licensing a technology, rather you are "licensing" a market window, and that will expire quickly when competitors jump into the act.

Q:I had an invention years ago. The owner of the small company I worked for patented it without naming me as the inventor. I`ve felt very hurt all these years. How can we prevent such injustice from happening?

A:I am really sorry to hear what happened to you. This is not about financial reward because the patent would have been assigned to the company anyway. But feelings are hard to fix.

Legally, anything untruthful in the filing invalidates the patent. That includes inventorship. You can petition the patent office to take corrective action if the patent has not expired. They can decide to invalidate the patent or to reflect the correct inventorship.

But technically it is all over if the patent has already expired. I can`t offer you more of a tangible solution, except to point out that your feelings are within your control. You can feel just as proud knowing the truth: you invented it and it was good enough for a patent award. The less we depend on others for approval, the more control we have over our own destiny. I wish you well.

About the Author

Milton Chang

MILTON CHANG of Incubic Management was president of Newport and New Focus. He is currently director of mBio Diagnostics and Aurrion; a trustee of Caltech; a member of the SEC Advisory Committee on Small and Emerging Companies; and serves on advisory boards and mentors entrepreneurs. Chang is a Fellow of IEEE, OSA, and LIA. Direct your business, management, and career questions to him at [email protected], and check out his book Toward Entrepreneurship at www.miltonchang.com.

Sponsored Recommendations

Request a free Micro 3D Printed sample part

April 11, 2024
The best way to understand the part quality we can achieve is by seeing it first-hand. Request a free 3D printed high-precision sample part.

Motion Scan and Data Collection Methods for Electro-Optic System Testing

April 10, 2024
Learn how different scanning patterns and approaches can be used in measuring an electro-optic sensor performance, by reading our whitepaper here!

How Precision Motion Systems are Shaping the Future of Semiconductor Manufacturing

March 28, 2024
This article highlights the pivotal role precision motion systems play in supporting the latest semiconductor manufacturing trends.

Case Study: Medical Tube Laser Processing

March 28, 2024
To enhance their cardiovascular stent’s precision, optimize throughput and elevate part quality, a renowned manufacturer of medical products embarked on a mission to fabricate...

Voice your opinion!

To join the conversation, and become an exclusive member of Laser Focus World, create an account today!