Transformation at Work – Part I, Courage

In my post Three Essential Ingredients of Transformation we talked about how sustainable transformation requires three essential ingredients operating at full capacity all the time. They are courage, conviction and leadership. What do they look like in real life? This is the first of three posts citing such examples. First up: Courage.
We defined courage as choosing what needs to be done versus what can be done. Courage is plotting the right course even if it’s the unpopular one. Courage is realizing old ways aren’t working well enough to grow the business.
Such was the situation in 1999 at Red Hat, the open source software company. Red Hat Linux, its core product at the time, was available in two forms. One was free, downloadable code, which appealed to technically advanced people like developers. This method attracted 2.5 million users, but it generated zero revenue. The other option was to buy Red Hat Linux in a pre-packaged, easy-to-use CD. The CD package set was sold at computer stores for prices ranging from $49 to $149. Neither the free, downloadable code nor the low-priced CD represented a scalable business model. Furthermore, neither directly integrated with Red Hat’s growing services business.

The company faced a critical decision. It needed to transition from a ‘boxed’ software company to one that drove software delivery (along with services, data and communications) through redhat.com. It was not only more scalable, but it was much more profitable. The mantra of “Red Hat is redhat.com” was difficult and challenging. It was a new way of doing business for customers, partners and employees. But it was right. The company has grown from $8 million in revenue in 1999 to nearly $800 million today.

Have you seen courage at work in driving transformation?
What did it look like?

One Comment

  1. Tom Butta says:

    While Red Hat needed to change its business model in order to scale its business, it also had the challenge of remaining true to the critical open source community. If Red Hat's actions were seen by this incredibly influential body of zealots as 'selling out' then it would lose all credibility for word would spread like wildfire. Fortunately, Red Hat not only stayed close to the community, it also did right by the community whenever and wherever it could.

    Have you had to stay true to your most loyal early users while transitioning your business? Tell us what that was like.

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