April 4, 2012
I’m involved in a bunch of different cloud startups – either as a founder, an investor or an adviser. Many of these startups are actively working on disrupting more traditional incumbent players, while many face competition from other entrants in the space.
A recent blog post from Neil Ballard was a really interesting glimpse at the differences in the way traditional vendors and startups view competition. It was especially interesting for me since I have done a bit of consulting with large organizations, and have often been surprised at just how worried they are by the tiniest of competitors. I’ve also been amazed at just how that worry often leaves them incapable of responding.
Ballard was reflecting on the focus that Sage, a massive global company with hug momentum, gives to KashFlow a small (albeit vocal) startup targeting a sub set of the space Sage plays in. As Ballard pointed out;
Time and again, Sage employees at various events shared their fear and awe of KashFlow with me and others. A very reliable source even shared with me the tendency of Sage North America reps to bring the ‘KashFlow latest’ to meetings over a period exceeding 12 months! Incredibly, all seemed convinced that KashFlow existed purely to annihilate Sage. Like a seventies era anarcho-terrorist cell. On more than one occasion I even pleaded that KashFlow staff did not spend every waking hour plotting the downfall of Sage; they did not spend their waking hours muttering their hate and loathing like possessed madmen, complete with wide-eyes and salivating like devil-dogs! But each time it just would not be believed! This paranoia had spread and had gripped the organisation.
Why was an entire organisation of such magnitude allowed to be gripped by such terror? Why (and how) are thousands of employees of a multi-billion pound organisation all obsessed with one guy and his tiny company. I repeat, why? WTF??! This company claim to be the world’s 3rd largest ERP vendor, amongst many other things. They have fingers in plenty of pies. Why oh why?
It’s an interesting trait and one which I believe isn’t specific to Sage – in corporate rooms all across the world, highly paid strategy analysts are spending time agonizing over the impact of a tiny player in their space. That in itself is bad enough, but the flow on effects are far worse.
From my observations, it seems to me that the organizations who are most concerned by the moves of their competitors take this concern and turn it into a kind of paralysis. Large organizations are generally less nimble than startups, but when faced by perpetual fear of competition, the agility they do have can be wiped out. Ballard contrasts with with startups where;
Every single SaaS vendor with any measure of success cares little for what others are up to. Even the closest of competitors. This is a time of fundamental change in the delivery of IT services. The potential market is massive, whatever the niche. They just want to get their share and then some! There’s no time to waste worrying about others. There’s plenty of land for everyone. Of course, common-sense means be aware of what the others are doing, but it doesn’t distract from the total confidence that is all-pervasive in a real SaaS org. Their culture is more concerned by there only being 24 hours in the day!
I’m asked on almost a daily basis what the prognosis is for large technology businesses. My answer is generally the same – the incumbent vendors have the money, the access to smart people, the patent suite, the customer base, in fact everything necessary to continue to prosper on an on-going basis. The one factor that impacts upon their ability to do so is an organizational paralysis caused primarily by fear – fear of change, fear of risk and fear of competitors. Again as Ballard points out;
Single-mindedness, focus and confidence in the mission – all traits common to successful SaaS vendors. A singular belief in what all involved are doing as a team – as a collective – is what drives those that thrive. Disrupting the old ways of doing things, yeah, but more so improving the customers lot and gaining commercial success as a by-product.
The one lesson to drive home for those of us who have the dubious honor of consulting within large technology vendors is that only by focusing on the opportunity at hand, and not at the people biting at your heels, will you continue to thrive and prosper.