For nearly 20 years the industry lived with, and accepted, a classic four-year semiconductor cycle. Over the last two decades, we saw these major cycles float on an upward trend and lengthen to about 10 years, with a few minor setbacks in between. Officially, economists have tagged the last four recessions at 1974, 1979, 1981 and 1990. Now, we see ourselves in another recession, which is par for the course.
I see a major business model shift — defined as the model of doing business — that I believe will affect the winners and losers in the coming economic recovery. Economists say that this is the worst technology recession in 50 years. However, in 1974 things seemed just as bleak. No one was spending, interest rates were at 18 percent, gas lines started at 4 a.m. and in California you could only drive your car on odd or even days, depending on the last digit of your license plate. Times were bad, but there was one significant difference between then and now. Then, most of us did not lose our jobs!
Prior to the dramatic economic uptrend of the last decade, companies invested in their employees. They trained them, they bit the bullet during downturns, they invested in the future. The business dynamic I see today is a major shift from those basic strategic business models to a more tactical, short-term, instant-gratification business model. Core elements of business organizations today are being sacrificed for the quarterly, Wall Street dominated, bottom line. Sales and marketing departments are being decimated, engineering teams developing next year's products are being eliminated. Hiring is only for the "perfect fit" and then those individuals can be tossed at will. Professionals today view employment at most public companies as a revolving door.
There is a positive twist to this story. The other side of the coin is that there is a new wave of entrepreneurial endeavors, fueled by a huge number of talented technology people who are disenchanted with current corporate America. I see an unbelievable number of new technologies from engineering startups. I see new independent marketing and sales companies springing up in all parts of the country. Venture capital is not necessarily a critical path for these new enterprises. Business plans are no longer written around exit strategies. I talk with founders who want to build companies for the long term. They are altruistic in nature, wanting to provide environments for creative employees to thrive and feel safe. And, most importantly, they are partnering with other entrepreneurial ventures for strength. They are outsourcing marketing, they are outsourcing sales and they are outsourcing manufacturing.
The emerging business model is one where startups team with startups to make the whole larger than the sum of its parts. I believe that when the recovery arrives, we will see a significant shift in market share from those leading companies that have not invested in the future to a consolidation of second- and third-tier companies that have partnered for success.
