Tuesday, April 21, 2009

A Simple Question. Wait ... Not So Simple

I've been following the "high stakes contest," per the Wall Street Journal, to acquire Sun Microsystems. Any time an executive has written for me, I tend to follow their careers and keep track of major events and transactions in their lives. 

I published an article by Sun CEO Scott McNealy back in 1995, titled "A Winning Business Model for the '90s." McNealy did have a winning model for that last decade, and Sun's stock was a supernova in the late '90s dot-com era. (For the 2000s, not so much.) 

In his Directors & Boards piece he made the case for what he termed the "leveraged alliance model" — by which organizations would form strategic alliances to leverage their respective expertise and specialty products. Not a new idea now, but McNealy traced how it was an innovative model when Sun embraced it as a start-up in the early 1980s, back when closed systems and proprietary products ruled, and how by the mid-90s it should be gaining more adherents. "The central premise of the leveraged alliance model is that no one can do it all alone anymore," he wrote. Fair enough. And still holding true — witness yesterday's agreement to be acquired by Oracle. 

But there was something else McNealy stated in that article even more enduring. It's such a fundamental principle, almost a truth of Biblical proportion, and yet one that so many organizations have not come to terms with. Here it is — "The first step [in determining what strategy to pursue] is to ask a very tough question: What is the company good at?"

What is the company good at? It sounds like it should be a simple question. It could be, if only it is asked ... and answered honestly ... and then acted on. But that's what makes it not so simple. "Tough" indeed, as McNealy recognized. 

We can all think of organizations, perhaps our own, that could have been spared untold anguish, value destruction, damaged reputations (institutional and individual) and just pure spinning of wheels if the board and senior management had come to an honest (i.e., nondelusional) answer to that question — and acted on it. 

Scott McNealy asked the question in the pages of Directors & Boards almost 15 years ago. He seems to have asked the question again this year, first with IBM and now finding his answer in a $7.4 billion tie-up with Oracle. Good for him. And good for you if you as a board member ask the question. Just be sure to get an answer that satisfies your strategic sense of the organization and its management's capabilities. No delusions, please.