Defining Success of [Tech] Companies

Let’s face it: we all love making comparisons. It’s an easy way to simplify a point. The problem, though, lies in the implicit assumptions and interpretations that go along with a comparison. Meaning, as soon as you make your comparison, it’s as if you’re holding all else equal while at the same time elevating your comparison to a higher level of credibility as compared to any of the unspoken alternative comparisons involving the two things you’re comparing.

And so it happened today with a post over at TechCrunch entitled “Is Google at Risk of Becoming the Next Microsoft?” Guest author Peter Sims makes some interesting commentary about Google (after sharing an intriguing story) but then sidetracks an otherwise good read by trying to simplify his point via a comparison of Google to Microsoft (see title above). As a result, that’s probably all this article is going to be remembered for.

Ironically, this comparison is coming from a tech blog that found it necessary to discuss Apple passing Microsoft in market valuation in three separate blog posts. Interesting. Perhaps someone should remind Sims that Google needs to come up with $70+ billion of market worth before it can experience the dreadful risk of becoming like Microsoft.

Sarcastic simplified comparison rebuttal aside, here’s my real point (quoting myself with emphasis added, a comment I left on the post at TechCrunch after Sims defended his comparison based on Microsoft’s 10 years of flat stock performance):

This whole title/question is based on just one angle and flawed as a result: it’s only the shareholder’s perspective. Why not link to MSFT profits or revenues over the past 10 years? Why not link to the growth of computers in households over the last 10 years? Oh right, because we’re talking about success as defined by stock market investors… Is that really the best measurement? For them, maybe, but for the rest of us who don’t actually short or buy millions of shares of certain stocks… not so much.

Bottom line: we need a more holistic measurement when comparing success of companies like this.

Oh, and you forgot to mention (like most do) Microsoft’s not-so-sexy billion dollar businesses in Server, Sharepoint, etc. when listing Microsoft’s “struggles” over the years.

Don’t get me wrong, market valuation, stock performance, and other financial metrics projecting the future have their place in defining success of a company. But what else should be considered? In my comment, I suggest revenue and profit trends (which, in theory, are supposedly accounted for in stock price). But that’s still financial-only thinking.

What about cultural contribution? Innovation? Research? Economic impact? Job creation? Employee satisfaction? Societal improvements? Each of these is difficult to measure for comparison sake (i.e., a bit of an apples to oranges issue both in how we define the parameters for each metric and in how we weigh each metric against the others) but most are still very relevant.

Microsoft, Google, Apple, plus plenty of others have done much for the world here. But saying it that way is bland and boring. We need a way to compare! (Or do we?)

And what about philanthropy? Microsoft’s clearly the winner on this metric. There’s the Bill & Melinda Gates Foundation plus the recent news of co-founder Paul Allen giving most his money to charity. None of that would be possible without Microsoft. I’m sure carbon foot print is something else to throw into the success metric mix for good measure.

Even then, I know I’m missing plenty of other good metrics in my quick-and-dirty attempt to redefine how we measure success. But I’m a bit tired of finance being the de facto metric for making company comparisons. Does anyone (with power and influence, i.e., not me) want to take a stab at coming up with a better metric? Or are we stuck, for better or for worse, with financiers ruling the day once again?

*Update* Uh, so for some reason, the TechCrunch post has been taken down (at least for now, as I write this). I’m not sure why. I’m glad I captured my comment (quoted above) before its disappearance with the post!

*Update 2* And now the TechCrunch post is back.

*Update 3* TechCrunch now has a new guest post entitled “The Many Bottom Lines of Businesses” which addresses some of the same issues I talk about above.

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  • peskypescado

    The “market” reaction to Microsoft and Apple's quarterly results has been really interesting. Apple's stock went up after their financials came out, but Microsoft went down after their's, even though MSFT had more more revenue, more earnings, and higher margins.

    I think a lot of it is a perception problem:

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