Kevin Ryan was CEO of DoubleClick until it was acquired by a private equity firm, in 2005, for $1.1 billion.
QHow do you know when to invest in a new technology that has the potential to replace the product you currently sell?
Charleston, South Carolina
When you run a technology company, you sometimes need to take steps to cannibalize your own business. That sounds harsh. But the business you have may disappear in a few years. You can anticipate and adapt to this by having quarterly strategic planning meetings with your top managers to discuss how your business and your industry are going to change in the coming years. The key in strategic planning sessions is to avoid any discussions of what your company is doing this year; instead, look three to five years into the future.
At DoubleClick, we had to cannibalize a division of our company that made up 90 percent of revenue. When the company was founded, in 1996, it had two main divisions: an ad network, through which we sold ads to hundreds of customers, and a smaller division, through which we sold our ad-serving technology. We were never profitable selling ads through our network, but we had 60 percent market share. On the other hand, we were tremendously profitable selling our technology to other companies. Just after we went public, in 1998, we made the difficult decision to focus on selling our technology to large companies like AOL and The Wall Street Journal instead of competing with them in the ad-selling business. Employees told me, "You just took our competitive advantage away. You sold guns to our enemies." But the decision was crucial. Today, the vast majority of DoubleClick's revenue comes from selling its technology to other companies.
Making the decision to reorganize your business is never easy. It has to come from the top, from either the CEO or the founder. The unfortunate fact is that most senior people in a company will resist this type of change because they've spent years building the business up to this point. But think of disrupting your own business as a strategic maneuver. It may also be a chance to disrupt the businesses of your competitors. And keep in mind that there are a lot of talented entrepreneurs out there. If you don't cannibalize aspects of your business, one of them will probably do it for you.