Wednesday, March 10, 2010

On the Dot-Com Bust's 10th Anniversary

Ten years ago today the dot-com bubble burst. I never drew much from the tech sector for authors for Directors & Boards. Rightly or wrongly, I guess my feeling was that Silicon Valley was not a hotbed of "thought leadership in corporate governance" (the tagline of our journal).

One author I did turn to from the tech sector to write a piece for me is Regis McKenna. This was a no-brainer to invite this tech expert into our pages. He has been a longtime technology industry marketing consultant who helped launch important innovations, including the first microprocessor (working with Intel Corp.) and the first personal computer (working with Apple). In addition to his marketing counsel, he has been a venture partner with Kleiner Perkins Caufield & Byers and has done boardroom duty. There was no question in my mind that he was the kind of thought leader who would have something of consequence to say on corporate governance for the Directors & Boards audience.

So in 1995, as the tech boom was entering blastoff stage, we connected on an article, titled "Boards of a Different Breed" — in which he addressed the set of issues facing early-stage companies and the character and capabilities needed to be a good director in such a situation. Here was one extremely important point that he made that has application far beyond the confines of Silicon Valley's boardrooms:

"The board must allow management to make mistakes and, at the same time, keep the company from turning mistakes into catastrophic failures. An entrepreneur told me once that he woke up one day with a $500 million company in trouble. But no one had ever taught him how to manage trouble. Entrepreneurs do not often admit to weakness, and boards too often are little more than monthly or quarterly financial review sessions. Entrepreneurs need training as well as everyone else. This is one of the chief responsibilities of the board — educating the president and CEO."

How many CEOs have woken up over the past two years with a company in trouble? On this 10-year anniversary of the rolling over of an entire sector of risk-taking entrepreneuralism — that admittedly inflated into a sphere beyond the absurd — this is a worthy reminder of, again in McKenna's words, "each board member's responsibility for helping the CEO and management learn, grow, build relationships and alliances, raise capital, and compete more effectively."

[Regis McKenna pictured in 1995 at the time of his article's publication.]