Vol 16, Issue 34

August 26, 2002

The Upside to the Downside

By Markus Levy

It hardly needs repeating that these are tough times for technology companies. We are all concerned for the companies that have failed or been forced into big layoffs, but I'm confident the talented people who recently lost jobs will soon be snapped up by other employers or will become involved in self-initiated ventures. We confront an inescapable irony. This is a great time to start a company, because of abundant professional talent, lower office rents, and 40-year-low interest rates. Unfortunately, this is also a time when there is a shortage of venture capital. Not that there isn't any money, because there is always some money for startups with a solid fundamental business plan and not just a unique product idea. But the plan must emphasize tighter financial controls to keep costs in line, and, perhaps most important, outline a clear path to profitability.

In addition to the financial challenges associated with forming a startup company, this recession seems to be emphasizing a return to the dominance of companies that are larger, better established, and more highly integrated. Combine this corporate-level consolidation with the crisis of confidence in accounting practices, and it's no wonder customers are now more inclined to purchase from larger, more stable companies that have traditionally held themselves to higher moral standards. For example, people rarely question the integrity of AMD, IBM, or Intel, even though some may question their sales tactics.

This return to traditional operating practices represents a reversal of the goals during the dot-com bubble era when, too often, pursuing a quick, lucrative buyout of the new company was emphasized. Not all individuals involved in startups followed this path; I know many dedicated professionals who dreamed of building a product and company that would last. These professionals should not be discouraged, as dedication and perseverance will eventually bring reward. Furthermore, despite all the lost value in our capital markets, the talent out on the streets, and the bad news in corporate financial management, this may still be the best time to start that company you dream of or to improve the market position of the one you're struggling to keep afloat.

Regardless of your position (i.e. within a stable corporation or a challenging startup), there's no time like the present to think more about the nature of business ethics. I started thinking more about business ethics when my friend Dave asked me to join his advisory board for a startup business and management practices consultancy. Although he is a former employee of huge semiconductor companies, Dave's skills are in the highest demand by small-to-midsize high-technology companies, where he has the potential to provide the greatest benefits. In today's business environment, these benefits frequently derive from understanding ethics as a business process rather than as purely the domain of an individual's moral judgment. In other words, corporate operating practices should be established, maintained, and enforced, by the corporation and not the individual employee. Furthermore, corporate operating practices must be carefully constructed in a logical manner as a process or procedure, rather than being led by emotion.

Viewing ethics as a process or model, whereby we choose between competing business and moral values, allows us to understand that our decisions are, and must be, situational. That view allows us to change our process or model as the business environment changes. In short, we can first develop the basics of our ethics processes and then update them in the light of new information, technologies, laws, and competitive environments.

Dave believes that if companies treat ethics the same way they treat any other business process, they will begin to reshape their cultures to the way business ought to be conducted instead of accepting without question the way it is conducted. We'll get back to business practices that are more in line with the expectations of our customers, although at times, economic and political pressures make it easier to take an alternate route. This idea suggests that now is a good time for individuals and corporations to tune their business processes for the anticipated economic upturn.