Eventually, Most Companies Become a Twinkie

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The Twinkie, the sponge cake loved by generations of Americans, is destined for oblivion as Hostess Brands opts to shut down. The demise of this iconic brand reminds that no company is guaranteed success or viability in perpetuity; being the exception requires evolving thinking -- particularly in technology.

Chances are the Twinkie, the iconic sponge cake enjoyed by generations of Americans, hasn't seen its last day. Someone, somewhere will pick up the snack cake brand and revive its presence in the market even as Hostess Brands goes out of business.

Earlier this week, attempts to mediate a settlement between Hostess and its unions to avert a company shutdown failed. Neither management nor the unions would yield concessions, forcing the debt-laden baker to seek bankruptcy protection and liquidation.

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Set aside the allegations of greed and the inflexibility of both management and workers, and focus on the viability of a company: Hostess was already in trouble when the contract negotiations soured. Increasingly health-conscious consumers have been shifting their snacks to low-calorie, low-fat alternatives for years. The sugary, high-calorie, low-nutrition Twinkies and their cousins simply are no longer a part of the palate.

The real lesson here is that most companies will eventually meet their viability limits because of changing market dynamics, costs and an inability (or unwillingness) to change. This is particularly true in the technology space, which continues to see a number of companies teeter on the edge of oblivion because they’re facing the Twinkie dilemma.

Consider Hewlett-Packard Co., which has written off nearly $17 billion this year alone related to the bad acquisitions of EDS and Autonomy. Following the dot-com bust in the early 2000s, HP took on a hyper-growth posture with the goal of becoming the world’s largest technology company. It bought Compaq in a merger that eliminated an iconic PC brand that most people thought had sustained viability. It went on to spend on Mercury Interactive, 3Com, Opsware, 3Par, ArcSight and dozens of other companies.

Despite nearly $30 billion spent on acquisitions in the past five years alone, HP is openly seen as facing the same fate as the Twinkie. Some Silicon Valley whispers about HP not surviving the next five years have erupted into loud disdain. Some are calling for the company to break up into smaller components, so the more viable divisions could survive the looming crash.

The same is being said of Microsoft Corp. While no one is predicting the imminent demise of Redmond, Wash.-based giant, many people say the software maker is losing its market dominance and relevancy at an alarming rate. Sales of Windows 8, the latest iteration of its flagship operating system franchise, have been less than stellar. Microsoft’s Surface, its entry into tablets, is bringing it into conflict with OEM partners. And Microsoft continues to struggle to find its footing in the cloud and services market. Some analysts predict Microsoft could go the way of Novell, which suffered a slow and agonizing decline to become a subsidiary of Attachmate.

HP isn’t alone in facing the Twinkie dilemma. Every company must make choices to maintain relevancy or arrive at the ultimate destination. Some companies will evolve to meet changing markets, just as IBM has over the last 125 years, from making industrial scales to becoming the world’s largest enterprise technology company. The magic of IBM is that it continues to evolve and produce steady growth despite the size of its sprawling global operation. Evidence of IBM’s choices: its 2005 divesture of PCs to Lenovo, in which it got out of the notebook business to focus on enterprise systems.

Compaq is a great example of management recognizing the need to punch out. Rather than investing in its future and evolving to a new state of competitiveness, Compaq took HP’s $25 billion offer and folded into a larger organization. The merger is widely cited as one of the worst deals ever, despite propelling HP to become the global PC leader.

The number of technology companies -- vendors, distributors and solution providers -- greater than 50 years old is slim. The exclusive club is reserved for those who have made choices to evolve, change their value propositions and accept periodic setbacks. As Twinkie demonstrates and HP may soon reinforce, the only guarantee in business is the failure to make choices and adapt will result in those choices being made for you.

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