Always be ready for a change of cheese Inside Track: Always be ready for a change of cheese: Why a parable about adaptability has struck a chord with business and become a bestseller Financial Times; Apr 18, 2001 By LOUISE KEHOE (Edited version) Who Moved My Cheese?, the latest homily written by Spencer Johnson, is a parable about coming to terms with change. In better economic times it might quickly have been relegated to the "remainder" bin but amid the uncertainties created by plunging stock prices and mounting job losses it has been flying off the shelves. The message of the book is that if the rewards you have come to expect suddenly disappear, it is time to look for new sources of "cheese" - whether cheese be income, revenues, relationships or status - rather than wasting energy on finding somebody to blame. As the mice in the story learn: "Change happens. They keep moving the cheese. Anticipate change . . . Monitor change . . . Be ready to change quickly and enjoy it again and again. They keep moving the cheese." This is an easier lesson to give than to receive. It flies in the face of the "empowerment" credo that has been a tenet of the internet age. Yet it also deals with the realities that many companies and individuals are facing in technology industries today. Moreover, it is not difficult to find examples here in Silicon Valley of businesses and people who are adapting with varying degrees of success to the movement of cheese. Take, for example, Cisco Systems, the giant of the networking equipment industry. This week Cisco warned that it expects a 30 per cent drop in revenues in the current quarter, ending April 30, compared with the previous three months. With sales slowing, Cisco's inventories of components have piled up, leading to a $2.5bn (£1.7bn) write-off. Lay-offs and other provisions are expected to cost an additional $800m to $1.2bn in one-off charges. For about 8,500 Cisco employees whose jobs will be eliminated over the next few months, the cheese has been moved a very long way indeed. This is a difficult situation for any company. But for Cisco, which has never before faced such a setback, it is extraordinarily severe. Cisco has been accustomed to a rapidly growing supply of cheese, cultured by the growth of the internet and corporate networks. Although the company has built a strong reputation for adapting quickly to new technology trends, it has been caught off guard by a sudden and simultaneous decline in demand in both of its primary markets: the telecommunications service sector and enterprise networking. However, John Chambers, Cisco's chief executive, has his own theories about change. In a recent interview, he talked at length about the need to change during the "good times" while maintaining a steady course when life becomes hard. "I believe that you change during the good times because change slows you down. If you are already in an economic slowdown and then you make dramatic change in organisation structures and strategies, you spiral. That is the classic mistake that an inexperienced management team makes. My view, very strongly, is that you make your changes during the good times and you position yourself to move right through the tougher times." So according to Mr Chambers, anticipating change is not enough. You must prepare for difficulties, even when you are struggling to keep pace with rapid growth. In other words, the mice in Dr Johnson's story should have been wary that their cheese might disappear at any time, even when they were gorging on gorgonzola. Unfortunately, this seems to undermine Dr Johnson's more palatable proposition that adaptability reduces stress. Instead, according to the Chambers school of management, anxiety about potential problems would seem to be an essential element of running a company, even when your business is flying high. Companies of Cisco's stature are not the only ones to suffer. There are more than 1,600 start-up companies in California that received venture capital investments last year. Where is their cheese? The dotcoms must have seen their fate coming but for pure technology start-ups the changing climate in venture capital funding came as a nasty surprise. Harry Quackenboss, chief executive of Brightlink, did not expect to face problems raising venture capital funds. His three-year-old company has developed technologies for use in a new generation of optical network switches. It takes courage as well as flexibility, he says, to accept that the rules have changed. Brightlink is close to agreeing its next round of funding, which should see it through the critical stage of product evaluations by potential customers - but this will be a "down round" in which the valuation of the company declines. "The trick is to adapt," says Mr Quackenboss. Most companies that refuse to accept the reality of lower valuations will not survive, he predicts. Then there are the venture capital groups that power the Silicon Valley start-up engine. How are they adapting to the new economic realities? Some, such as Walden, are looking for new cheese abroad. The venture capital group just closed a new $1bn fund for start-ups in Asia, as well as the US. Others are pulling back. Crosspoint Venture Partners, one of the leading technology investment firms, cancelled plans for a $1bn fund a few months ago. Some of the biggest venture capital investors during the internet boom are dealing now with the unpleasant problem of cheese that has gone off. Lured by the promise of rapid profits in dotcoms, they find themselves with a portfolio of companies that are running out of funds, with little prospect for short-term profits. Whoever moved the cheese no longer matters. The issue for venture capitalists may not even be finding new cheese. Perhaps, for now, cheese is off the menu. Who Moved My Cheese?: An amazing way to deal with change in your work and in your life Spencer Johnson, M. D. Putnam,1998 Copyright: The Financial Times Limited Human resource management trends (may 2001) Change management a corporate challenge (april 2001) Demands become more complex (april 2001)