The Maelstrom Effect: The Next Generation
by Dr. James Bowen

Technology companies have long been noted for their R&D expertise. Now there is a new paradigm for building technology based product companies. Going beyond the management ideas of earlier linear approaches, entrepreneurs are building companies that can anticipate marketing and technology trends, and are preparing their companies to be flexible and adaptable, and, create the market - all at the same time. Recently several technology based executives were asked about their approach to thriving in today's market and technology turmoil, the resulting approach was quickly labeled the Maelstrom Effect and has been published as a book.

This new approach is based on some simple observations. The successful development and marketing of technology based products requires a different approach than one for non technology based products due to the simple fact that technology based products evolve quickly over time while non technology based products evolve slowly (if at all). This evolution takes the form of a life cycle. Life cycles have a beginning, middle and end. Each segment of the life cycle should be treated differently.

Consider the Personal Computer (PC), the technology within the product has changed drastically over the years. The increase in storage and CPU speed is well known and appears to follow the pattern dubbed "Moore's Law".

Generations of some PC products are for example, comprised of various technologies that are individually following a life cycle. Usually each technology generation is better than the one before, unlike a soap or cereal product that experiences relatively little change in capabilities as the years go by.

This simple observation leads us to the basis of the Maelstrom Effect:

  • Technology based products differ from other products due to the necessity of moving the product through the technology life cycle and dealing with the uncertainty associated with technology.

  • It is the three-way pull of the technology, product and adoption of innovation/technology life cycles that create such a complex situation for technology based product companies.

The technology life cycle creates continuous change in the market - both evolutionary and revolutionary. An understanding and the proper utilization of the life cycle provides the technology based product company the capability necessary to create the opportunity to switch (induce) the market from the existing technology base to the new one. This opportunity to change can only occur if the technology product company has anticipated the potential to change and prepared for it.

But companies don't anticipate, prepare and create the market as a sequential linear process. Now companies realize that we need to do all three at the same time. In addition, anticipating, preparing and inducing are by nature continuous, overlapping, synergistic and parallel activities without a defined beginning and end point. This makes managing technology based product companies really difficult. So the Effect is a set of strategies and tactics that companies are using to thrive in a Maelstrom.

Gone is the business plan with the "hockey stick on its side" approach to revenue forecasting. In the technology based environment forecasting sales revenue is difficult because we may not have historical data to examine, sometimes we can find data from similar products but it's difficult to say that the situation that the similar product was in is the same as now. What this means is that a "hockey stick on its side" forecast can only be considered in situations where our product is a critical mass product. In other words, a product where its benefit comes from other people also having the same product. For example, the telephone becomes more useful when people we want to talk to also have a telephone. So unless your business plan is discussing a critical mass product then sales can only be a linear type growth or more realistically one that levels off from time to time, as we increase our coverage and gain traction in different markets.

Current technology resides on an infrastructure of other technologies. Many years ago when developing a new software system, the developer only had to interact with the computer's operating system. Now the developer may be working with purchased software, a web server and a database server along with various programming tools. This underlying technological infrastructure is called "technology primitives" - those technologies within a technological infrastructure that we need to make our product work. Senior executives need to be able to monitor both the market trends and the technology trends. Because it is understanding how combining technology primitives together that help define a company's product.

All this makes uncertainty a constant companion to folks who live in the technology based product environment. But to paraphrase the ancient saying: there is both danger and opportunity in uncertainty.

Maelstrom Effect checklist:

If your company:

  • Uses other technologies in the product
  • Develops technology to go into the product
  • Completes initially on functionality to leading edge customers
  • Is undergoing constant change due to technology

Then:

1) We need to show that our external relations (alliances, etc.) are set up to gather and disseminate information.

2) We need to understand that our definition of who are our alliance partners, suppliers, customers and competitors will shift over time.

3) We need to classify competitors by their ability to induce the market. Competitors who can induce are the ones to watch.

4) In our business plan we need to identify and monitor direct markets and adjacent markets. For example, the insurance and legal industry might be adjacent markets if your product deals with automating paperwork. Thus a plan aimed at the insurance industry must also be ready to expand into the legal market and/or monitor it.

5) Unless a technology is a critical mass technology it should not show the "hockey stick" on its side approach to revenue forecasting. In other words, sales begin slowly (horizontally) and then at some magical time (for no known reason) sales start upward at a 45% angle. If we do show such a "hockey stick" we need to demonstrate that the technology is a critical mass technology and how we will reach that magical time when critical mass is reached and sales just take off.

6) We need to see our company as being permanently in a transient position always evolving and moving.

7) We need to see the future as always rushing towards us. In a sense we must always live in the future. Trying to understand the way the world will be in a year of two years from now. Thus, we must concentrate on maximizing our potential to be in the right position given a number of possible future scenarios.


Dr. Bowen has had a wide variety of in-depth experiences in both management and technology over the last 18 years. His management experience has covered all aspects of an organization including operations, business development, project delivery and strategy. His technology experience has included software development and consulting with a broad range of software technologies. He is the author of The Maelstrom Effect - Building Hi-tech Product Companies and also teaches MBAs as a Part-time Professor at the University of Ottawa. He has also obtained the Project Management Professional (PMP) certification from the Project Management Institute. Contact Dr. Bowen by e-mail: jbowen@ces.on.ca .

The Maelstrom Effect
Building High-Tech Product Companies

by James Bowen
South-Western
March 2003

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Copyright 2004 by James Bowen. All rights reserved.

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