Are Small To Medium Companies Serving Lots Of Big Customers In A Short Time A Red Flag?

Let’s say that you’re running a small/medium software vendor targeting the retail industry. Those who have worked in this field knows that the retail industry itself is constantly pressurized by increasingly demanding customers, and the “customer is king” mantra especially applies to there. When a big retail company offers you a contract, you’d need to think twice before rejecting it no matter how unrealistic the requirements and budgets are, or you can quickly end up losing that customer and risk being out of business, as many such customers are like that.

Of course, it doesn’t mean you’ve to accept the contract no matter what, so you’d negotiate with that customer. As it wants to behave reasonably, it’d stress that it wanted to help you and simplify the requirements and increase the budget, but the contract is already the best they can offer, due to them facing incredibly fierce competition and suffering from a bad global economy. Also, as the customer knows that your company needs such contracts in order to survive, it can covertly urge you to sign off quickly before it makes the deal with your competitors.

Now you’re in a tough spot — Normally you should at least conduct a brief feasibility study before signing off any nontrivial contract as the opposite would be a recipe of a death march, but you don’t even have the budget to do so. By the time you’ve done that study, the contract would already be signed off by your competitors. On the other hand, by signing off the contract while preparing for a death march, you can end up damaging your reputation severely.

So, you will likely end up using this “standard” practice — You sign off the contract, prepare for the death march, employ all sorts of dark management tactics, and hunt for another contract from another big customer before you’re asked to compensate for the losses of the original one. Let’s dig deeper on why you’d be inclined to do any of these:

  1. If you don’t sign off any such contract, you’d probably lose more and more customers and you’d become harder and harder to find any source of income. Eventually your company, and even yourself, can become bankrupt. That’s usually not what you want.
  2. If you sign off that contract, it’d most likely end up in a death march, so you need to prepare for the worst, including facing the dreaded lawsuit, as you’ve been effectively set up to fail. But most of your employees won’t expect any of these(otherwise many of them would have resigned). If they realize they’re going in for another death march, their morale can quickly become dangerously low. That’s why you’ll have the incentive to employ all sorts of dark management tactics to “stabilize” the company internals.
  3. However, no matter how proficient your dark management skills are, they’re still not magic that can automatically create income for you, so you’ll still have to ensure that you’ve some real sources of income. As you’d expect your company to lose the current customer after this signed off contract, you’ll need to find a new source of income before losing the current one, and that means finding a new big customer that’ll offer you contracts. This way, your company will still have a remote chance to survive.

Of course, such vicious cycles cannot last in the long term, as there are not many big customers that will buy your lies so happily, no matter how good your lies are. Therefore, entering this cycle is meant to be a delay tactic, so you can hope that you’ll have enough budget to make more permanent changes that can make you become able to run your business in more sustainable ways(or in extreme cases, sell your company to someone who’ll believe in your frauds so that you can abandon your employees and bail out).

Similarly, if your employees do figure out they’re in endless death marches, you’ll want to sell them this lie — Without sacrificing the long term, we’d not survive the short term and the long term will vanish. The long term can only be assured by sacrificing it long enough. Obviously, such lies won’t work for reasonable employees who can think clearly, but one of the aims of dark management is to cloud their judgment with fear, obligation and guilt.

One may ask, however, if you’ve betrayed a big customer, why will it remain silent for your predatory practices? Your game will be over the moment it calls you out. One of the answers is this — By keeping its mouth shut, you’ll continue to find new big customers, which are usually its competitors, meaning that your treacherous behaviors can be highly beneficial to the original customer by letting you harm its competitors drastically.

But then the same can apply to that original customer too — How can it know that it’s not facing a vendor like you? If the entire retail industry plays this game, it’ll just end up harming every retail company, which is clearly the worst case for all. Again, one of the answers is this — There are subtle hints that can barely indicate whether a vendor is like you:

Think about what the portfolio of your company would be if you keep cheating more and more big customers — Your company will remain in the small or medium size while it’s serving more and more big customers in a short time. Therefore whenever a customer or employee finds such companies, he/she should raise an extremely sharp red flag, as the most sensible explanation for a small/medium vendor to be able to serve so many big customers in such a short time is that the vendor has been losing more and more old customers while hunting for more and more new ones, all in an unhealthily fast pace.

As a corollary, it’s also a reason why some big retail companies prefer small/medium vendor companies that are relatively new — In addition to them not being experienced enough to realize that they’re signing off contracts with unrealistic requirements, their internal morale is also likely to be higher due to not having faced many death marches.

To sum up, the whole game is like this:

  1. Big retail companies will secure as many big and honest vendor companies as they can.
  2. The formers will generally prefer small/medium vendor companies that are relatively new as they’re less likely to be able or motivated to become predatory or treacherous.
  3. The former, after being suffered from vendors employing dark management, will be inclined to remain silent so those vendors can then harm the former’s competitors.