Eventually, most companies become Twinkies
Larry Walsh says predictions about Microsoft and HP may not be so half-baked
Chances are that the Twinkie, the iconic sponge cake enjoyed by generations of Americans, hasn't seen its last day. Someone, somewhere will pick up the snack cake brand and revive its presence in the market even as its maker, Hostess Brands, goes out of business.
In November, attempts to mediate a settlement between Hostess and its unions to avert a company shutdown failed. Neither management nor the unions would yield concessions, forcing the debt-laden baker to seek bankruptcy protection and liquidation.
Set aside the allegations of greed and the inflexibility of both management and workers, and focus on the viability of a company: Hostess was already in trouble when the contract negotiations soured. Increasingly health-conscious consumers have been shifting their snacks to low-calorie, low-fat alternatives for years.
The sugary, high-calorie, low-nutrition Twinkies and their cousins simply no longer suit the palate.
The real lesson here is that most companies will eventually meet their viability limits because of changing market dynamics, costs and an inability (or unwillingness) to change.
This is particularly true in the technology space -- which continues to see a number of companies teeter on the edge of oblivion because they're facing the Twinkie dilemma.
Consider HP, which this year alone has written off nearly $17bn (£11bn) related to the bad acquisitions of EDS and Autonomy.
Following the dotcom bust in the early 2000s, HP took on a hyper-growth posture with the goal of becoming the world's largest technology company. It bought Compaq in a merger, eliminating an iconic PC brand that most people thought had sustained viability.
It went on to spend on Mercury Interactive, 3Com, Opsware, 3Par, ArcSight and dozens of other companies.
Despite nearly $30bn spent on acquisitions in the past five years, HP is openly seen as facing the same fate as the Twinkie. Some Silicon Valley whispers about HP not surviving the next five years have erupted into loud disdain.
Some are calling for the company to break up into smaller components, so the more viable divisions could survive the looming crash.
The same is being said of Microsoft. While no one is predicting the imminent demise of the Redmond giant, many say the software maker is losing both market dominance and relevance at an alarming rate. Sales of Windows 8, the latest iteration of its flagship operating system franchise, have so far been less than stellar.
Microsoft's Surface, its entry into the tablet market, is bringing it into conflict with OEM partners. And the vendor continues to struggle for traction in the cloud and services market.
Some analysts predict Microsoft could go the way of Novell, which suffered a slow and agonising decline to become a subsidiary of Attachmate.
HP isn't alone in facing the Twinkie dilemma. Every company must make choices to maintain relevance or arrive at the ultimate destination.
Some companies will evolve to meet changing markets, just as IBM has over the last 125 years, from making industrial scales to becoming the world's largest enterprise technology company.
The magic of IBM is that it continues to evolve and produce steady growth despite the size of its sprawling global operation. Evidence of IBM's choices: its 2005 divesture of PCs to Lenovo, in which it got out of that business to focus on enterprise systems.
Compaq was a great example of management recognising the need to punch out. Rather than investing in its future and evolving to a new state of competitiveness, Compaq took HP's $25bn offer and folded itself into a larger organisation.
That merger is widely cited as one of the worst deals ever, despite propelling HP to become the global PC leader.
The number of technology companies -- vendors, distributors and resellers -- older than 50 years is small. This exclusive club is reserved for those who have chosen to evolve, change their value propositions and accept periodic setbacks.
As Twinkie demonstrates -- and HP may soon reinforce -- the only guarantee in business is that the failure to make choices and adapt will result in those choices being made for you.
Larry Walsh is president and chief executive of Channelnomics
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