As demand for software engineering talent continues to increase, many companies have started to brand themselves as tech companies. One of the biggest challenges today for engineers looking for new positions is to understand if their prospective employer is a tech company or a tech-enabled company. A tech company requires technical input in critical strategic discussions. This empowers engineers to take a seat at the table while ensuring the company continues to innovate and deliver value to customers. The differentiators between tech companies and tech-enabled companies can be subtle, and I’ve mistaken the two myself. Here are some stories from my experience¹ to help you distinguish between them.
A tech company considers technology to be an essential input for key strategic decisions and provides makers a seat at the table.
Amanda was a newly hired client-engagement associate on my project. Eager to prove herself, she took on lots of client meetings alone and made commitments without consulting anyone. I often found out about the promises from engineers on my team:
Me: “Hey Sarah, how’s user data integration coming along?”
Sarah: “Oh, I took a break from that. Amanda asked me to make our demo client accessible for tomorrow.”
Me: “Hm…did she say why?”
Sarah: “The clients liked our demo today, so she offered to give them access.”
For many teams, this familiar scenario would lead to engineers staying up all night to deliver on such promises, even when what was promised did not create real value for the client. Fortunately, our team had engineers in the field assessing customer needs, and important strategic decisions were jointly made between the tech lead (myself) and the business lead (Kris). This enabled us to prioritize team efforts and maximize value for our clients. Back to the story:
Me: “This demo is just a proof-of-concept; I doubt clients will actually use it. We need to get this data integrated so we can show analytical results at the executive presentation. I’ll check with Kris, but for now, let’s optimize for the presentation.”
Sarah: “Sounds good, I’ll get back to data integration.”
As a result of integrating user data right then, we had enough time to do analysis which determined that the client’s original premise was flawed. We recommended that the executives optimize on a different metric, which helped us secure a big win early on in the partnership. (We eventually enabled client access to our demo at the end of the week. No one ever did log on…)
A tech company considers technology to be an essential input for strategic decisions and provides makers a seat at the table. This is imperative when the company relies on technological innovation or engineering talent to produce value for customers. For example, one of the critical reasons Facebook beat out Myspace was because it had stronger software talent and an engineering culture focused on building features and improving user experience. On the other hand, Myspace, after being bought by News Corp, put a group of professional managers in place who were more concerned with font sizes on a Powerpoint deck than how to scale their technical infrastructure.
On the contrary, there are many tech-enabled companies that are confused with tech companies: for them, tech may be a component that maintains or enhances their market position but it is not a fate-determining advantage over their competition. Case in point: Warby Parker is often referred to as a tech company by the media, but they chose to hire cheap web developers because tech is just a means to further their position as a lifestyle company. Lloyd Blankfein, former CEO of Goldman Sachs, insisted that Goldman Sachs is a technology firm, yet consistently underpaid technologists relative to their finance counterparts. At these companies, engineers too often find themselves left out of key discussions around product decisions or customer promises. A friend of mine who worked at a self-branded “tech” company once found out his team was on the hook for a new set of features from reading the news because the marketing director, in an effort to drive publicity, boasted about non-existent functionality!
The allure of the tech company label isn’t purely cachet, it’s also dollars and cents. In addition to its appeal to millennials, the tech label attracts more funding and garners higher valuations. For example, IMS Health had a market cap of 2.7 billion dollars before taken private by TPG² and resurfaced a few years later at a 7.5-billion-dollar valuation as a healthcare “tech” company.
The contrapositive is also true: if technologists are not included in key strategic discussions, then tech is not a factor in making important decisions for the company. As such, it is not a tech company.
When I was starting out my career, I too, fell for the allure of the tech company label. The moment I realized that not all self-proclaimed tech companies were true tech companies went something like this¹:
A client requested that we integrate with one of their vendors, a self-branded tech startup. We scheduled an in-person meeting with some of their team, including Sean, a C-level executive.
Me: “We’ll give you documentation for our data schema and the relevant APIs so you know which fields to use to build the customized dashboards.”
Sean: “No, no, no. We don’t care about the content of the data. Just give us a universal API that spits out all your data, and we’ll take care of the rest.”
Me: “Are you sure? Different tables have different schemas; won’t you need to know about them?”
Sean: “Nope, we’re data agnostic. We can handle it.”
A few months rolled by and it was time to do the integration, so we scheduled a call with Terri, one of their engineers tasked with building out the customized dashboards. The entire call consisted of Terri frantically trying to understand our data fields. As it turned out, they needed our documentation on our data schema and relevant APIs.
The IT vendor above is clearly not a tech-driven company. The executive had no clue how their technology worked, but repeatedly assured clients and partners that they did not need to know about the shape of the data in order to build customized dashboards. He made promises at key business meetings while the engineers were held accountable for the consequences.
In a vacuum, neither operating model is inherently better or worse. If a company believes technology is key to driving the company forward, then technologists need a seat at the strategic table. The contrapositive is also true: if technologists are not included in key strategic discussions, then tech is not a factor in making important decisions³. As such, it is not a tech company.
Ultimately, it comes down to expectations: an engineer that’s done her research does not join Goldman Sachs’ back-office operations expecting to drive key strategic decisions. Similarly, a well-informed marketing associate from IBM does not join Google expecting to take the wheel like they did previously. We can minimize surprises around strategic involvement and ownership by reducing the difference between expectation and reality, which has been shown to directly correlate with happiness. I urge companies and hiring managers to be transparent about their culture and decision-making framework during the hiring process. I also encourage you, a prospective employee, to do your research beforehand so you know what you are signing up for.
[1] Names and identifying details have been changed to protect the privacy of certain individuals.
[2] A previous edition of this article mentioned that IMS was taken private at $4B. IMS had a market cap of $2.7B prior to the acquisition announcement. TPG paid $4B (a 50% premium) and assumed $1.2B of debt, so some reports called it a “$5.2B acquisition”.
[3] Here’s a short video where the salesman agreed to a project that involved drawing 7 red lines all perpendicular to each other with green and transparent ink. Hey, at least they brought the expert doing the actual work to the client meeting — the IT vendor in the story above did not!
If you enjoyed this article, check out the next articles in this series:
- Part 2: Tech Differentiation
For more musings on tech culture, organization building, and management, follow me on Twitter @kenk616.
