The ADC Connection

A few thoughts on Wednesday’s announcement of ADC being acquired.

I’ve done a couple of pieces (this one’s from December 2008) on the Eden Prairie telecom equipment provider. All told, it struck me as an upbeat, quietly innovative operation, and the top managers were always open about the rollercoaster ride the company experienced during the last decade.

However close to the brink they often came, they always found inventive ways to save the business. And it wasn’t just about cash management. They had many creative ideas for improving wireless telecommunication. In short, I liked ADC.

ADC’s probably does represent the end of an era, as Steve Alexander’s thoughtful little story in today’s Strib notes. Ah, the days of Control Data and Seymour Cray! Gone the way of Wendy Anderson’s Time-cover fish.

Steve’s Strib piece strikes me as expressing the traditional view of high-tech innovation. Namely the Twin Cities needs Big Companies in order to become a high-tech center again. Otherwise, VCs won’t invest, and talent won’t be lured to our frosty realm.

It’s probably true—or truish. But does it have to be?

Take ADC. It got “big” because of the late 1990s tech bubble. After the passage of the 1996 federal telecommunications legislation, start-up phone companies shot up like dandelions in spring. Investors spread all sorts of fertilizer, allowing these newbies to buy millions in telecommunications equipment. ADC’s stock price went insane, allowing it to build its beautiful, oversized Eden Prairie HQ and to use its stock to buy numerous companies, many of which had nothing to do with its core business.

After the bubble burst in all its appalling carnage, most of those over-funded telecoms went away or got bought up by much larger firms. In wireless, AT&T, Verizon, and T-Mobile dominate. Bob Switz and his team worked hard to repair the damage, and they made a lot of headway, especially overseas. But it sounds as though the realities of the industry were working against them.

I’m no expert in technology investment, but I can’t help wondering: Is that 20th century Big-Company, Big-Payout model sustainable? Is that the way we should look at digital innovation—or innovation in any industry—in these times?

Frequent TCB contributor and local seemingly-everywhere business writer Dan Haugen has smart thoughts on this subject, also using ADC as a springboard. One of his upshots: Think smaller. Smaller is the new bigger.

My take: It’s probably better to have a lot of small and midsizes than a few bigs. Data storage company Compellent is one of those midsize companies (it may be upper-midsize) that could be one of the bases of a new tech scene. I could see a potential boom for tech start-ups that, for instance, can help facilitate better health care experiences—like improving electronic health care record keeping.

Compellent is also a useful model because it has tapped into another Twin Cities strength—marketing. Minneapolis agency Barrie D’Rozario Murphy has helped create a lively strategy that sharpens Compellent’s message to the B2B tech marketplace.

But one thing’s for sure: Start-ups are going to need access to capital. Local investors and advocates need to step up. There’s some movement in that regard. But we all have to understand: It’s a new era.

Comments

[DanHaugen]

Well put. Your hunch is probably more accurate than mine: that we should strive for a healthy mix of small, midsize and big companies, because each type has their own strengths and specialties.

I've heard theories from various folks in the startup/entrepreneur scene that one reason we may lag in that area is because so many of our talented people are employed at larger companies. That doesn't seem like a bad thing, but it's interesting to wonder whether our economy would be more stable or robust if we had a few less Fortune 1,000s and a few dozen more thriving startups.

I, too, am no expert in technology investment, so I don't know the answer.