Dedicated to Alfred Chuang, CEO, BEA Systems

Last week we were accidentally copied in on an internal e-mail from a software company with a market cap in excess of five billion dollars. As I read through this long e-mail thread, which included references to our company, I couldn't help but reflect on the past. I forwarded this e-mail to their CEO and he acknowledged its receipt. History is repeating itself, I realized, and I wanted to share my thoughts with our readers and with the CEO of this software company.

In 1985-86 I worked at IBM as a market research analyst in White Plains, NY, at the company's Information Systems and Communications Group headquarters. Our big boss then was Mike Armstrong. He often held staff meetings in our building at 44 South Broadway. On the day we found out from the Wall Street Journal that he had been appointed the head of IBM Europe, he held his last staff meeting there, a farewell meeting. Michael Armstrong was a well-spoken man who inspired his staff. We all speculated that one day he would be the next chief of IBM. He didn't get the top job at IBM, but after a long and successful career he took the helm of another giant ship - AT&T - as the chairman and CEO. After a five-year tenure at AT&T, he is now the chairman of Comcast Corporation.

I learned a lot from Mr. Armstrong and tried to apply this knowledge to my life and career over the next 19 years. Ten years ago when I founded SYS-CON Media, one of the rules I had learned was that arrogance could kill any company in any stage of its life. At the next industry conference, if you don't see me handing out sample copies of our magazines on the show floor, please feel free to accuse me of arrogance.

Over the past 10 years as we've served our i-technology markets, we have seen it all. We've worked with giants who were arrogant; we've worked with giants who were focused on their business goals and didn't have time for arrogance. We've worked with very sharp people from organizations both large and small. We've worked with arrogant and stupid people in organizations of all sizes.

What typically happens is that a small startup company comes up with a great new product and gets funding that helps them attain a hockey stick growth curve. In a couple of years they move out of their basement office, go public, and hire thousands of new employees. By all means they deserve their success. What usually goes wrong in the process though is that while the top management remains focused, the company finds itself with a new layer of middle managers. Too young to have an established corporate culture, the new middle managers with fancy new titles are now in charge of implementing the company's vision. In reality most of them have one goal in mind: When can they cash in their newly acquired stock options?

A few years ago, I remember receiving a phone call from a partner contact in Boston. I drove to his office from New York in three hours rather than simply returning his call, only to have the receptionist tell me that my contact was too busy to see me. I remember stepping into his office and seeing him playing Solitaire. He didn't even recall why he'd left me a message. This incident took place right after this company's IPO and right before their stock options lock-up period ended.

Since we have seen this movie over and over again in the last 10 years, here is how the story line usually develops.

The executives and managers and the company they represent are now too good to do what they had been doing before they found themselves in the midst of this incredible success. Arrogance kicks in. They start treating their partners with arrogance. They start treating their customers with arrogance. They start treating the world with arrogance. Arrogance is the beginning of the end. When the company starts realizing that they are the new miracle golden child of their industry, they also start finding out that they are surrounded by giants. If you look at the history, right after the arrogant phase come two options: either the company gets bought by one of the giants, or they experience a long period of decline and then get bought by a giant at scrap value. This rule doesn't change in hardware, software, anywhere.

I'm not implying that behind the mergers and acquisition news of every software company lies arrogance. I'm saying if you can't really afford to be arrogant, don't use the arrogant giants of your industry as your role model. If you analyze the successes and failures of the giants, you will see that most of their failures come from their arrogance too.

If you lose focus on how you came this far, you'll be faced with the two options I outlined above rather than becoming one of those giants you aspire to be. Don't treat your partners and customers who brought you where you are today with disrespect. Don't let your new middle managers lose your perspective. We would like to see you and your company grow to become one of those giants rather than read rumors everyday about which giant fish will be buying you soon.

- F.K. October 28, 1999