The Blog of Burgher Jon

The other day over lunch a friend and I were discussing technology companies and we came to, what I thought, was an interesting conclusion; all the tech companies in the world can be broken down in to four categories.  Knowing which category your company fits in helps inform funding and hiring decisions, as well as strategy.  The types of companies are:

• Companies that are trying to Change the World – These are companies that are producing a product that is relatively useless unless they are broadly accepted.  These companies can make a ton of money, but require a lot of adopters.  These kinds of companies also frequently take years to become profitable, and therefor pose significant risk.
  Revenues: Billions
  Maturation Time: 10 Years
  Risk: High
  Historic Example: Microsoft
  Current Success:  Google Search, Google Talk
  Newer (not yet successful) Examples:  Twitter, Google Apps/Docs

• Companies that innovate on existing technology – These are companies that produce a product that extends a world changer.  They don’t have nearly the profit potential, but they can become profitable much more quickly.  Their value is generally obvious from the very beginning but the competition is usually very strong.  This sometimes allows early innovators to grow beyond their means before competition sets in.
  Revenues: Millions to Hundreds of Millions
  Maturation Time: 2-3 Years
  Risk: Medium
  Historic Example: AOL (not the first ISP and definitely didn’t invent the internet, but took the concept and added chat, keywords and common email on top of it.)
  Current Success: WordPress (didn’t invent blogging, but innovated on it.)
  Newer (not yet successful) Examples:  Seesmic, FriendFeed, Yammer

• Companies that fill a niche market – These are companies that provide a product or service to a small market segment, typically a segment with very specific needs.  This type of company is, in some cases, a subset of the innovating on existing technology.  Yammer for example both satisfies the business niche and innovates on Twitter.  They may also have a wholly unique product.  Many small businesses are founded on this type of model.  They frequently require little capital, are profitable very quickly and frequently lack competition.
  Revenues:  Hundreds of Thousands to Millions
  Maturation Time: Months to 2 Years
  Risk:  Low
  Historic Example: Microsoft Visio
  Current Success:  None came to mind right away
  Newer (not yet successful) Examples: Go Tribal

• Companies that attempt to displace a market leader – These companies might fit in any of the above three categories.  The difference is that they are attacking an established market leader.  Some do it just to take some market share, some are attempting to be giant killers.  Either way, it is one of the riskiest maneuvers in all of business.  The reward can be great when its done, but most companies fail at this.
  Revenues:  Varies by the type of company they are attacking.
  Maturation Time:  Varies
  Risk:  Extremely High
  Historic Example:  Microsoft displacing Apple as the OS leader
  Current Success: Facebook
  Newer (not yet successful) Examples: Google Buzz

So what kind of company are you?  What are the threats because of it?  Can you think of some other examples?  Counter-Examples?  Let’s see some comments.