Silicon Valley Companies should NOT be Role Models for Management Systems

It seems many companies these days use Google or Facebook or whatever well known Tech Giant as a model. I think this is a huge mistake. For most of the FAANG businesses, they tend to be Outlier businesses whose situations are not applicable to most companies.

They have Structural advantages and many tech markets are natural monopolies. They have tremendous moats which could be technical, distribution or whatever. As high margin software driven businesses with an excess of 40+ percent (usually more), they end up throwing off a lot of cash. This is why they end up with higher margin of error, an ability to try more things and have more products fail until they get things right.

In fact, if you want to learn more on good management, do that from companies in low margin businesses that have a lot of complexity, higher cost structures, ie. thin margins. Ie. the very challenging Airlines or retail businesses.

This is why I posit that out of Big 5, Amazon is the best managed organization. They have built an amazing business despite the complexity of their business (different business lines that also include extensive offline operations) and razor thin margins in the beginning. They are also in highly competitive sectors (retail, groceries etc.). I should also note that Amazon Web Services is a massive cash flow business that helps subsidize their other lines of business although it was started 2006, 12 years after Amazon began.

Markets matter a lot. Even if a company is poorly run, they may still succeed in a massive fast growing market despite themselves. High growth also leads Peter Principle at higher velocity. Growth hides a lot, including crappy managers. Especially as many founders mistakenly think they are the next Steve Jobs, acting & managing like jerks but without his talent. AGAIN growth hides a lot. Until it doesn’t but this can take a long time before it shows up.

Most Silicon Valley companies, even the famous ones are grossly mismanaged. Just pick any well known later stage startup or Big tech company and check their Glassdoor reviews. My point should become very clear.

Remember: An amazing business model and growth covers up a lot, so be careful who you make as your management role model.

Written by

Ever curious: Tsundoku, Reader, Aspiring Shokunin, World traveller, Investor & Tech/Media exec interested in almost everything! www.marvinliao.com

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