SmoothSpan Blog

My title is a bit of a play on ReadWriteWeb’s title about the Risk of a Free Service, but I raise the issue in all seriousness because I think we should be looking not at the seller (hey, at this price, this was not exactly a sale from strength) but at the buyer.  Dennis Howlett, in writing about the transaction, is doing a little bit of looking at the buyer, but I want to go further.

The way a company handles the customers of an acquisition is an indication of how they may someday feel about their own customers.  When you buy the company, you bought the customers too.  Sure, it’s all fine and well to argue that you bought the technology and not the customers and it’s not your fault that the customers don’t fit in with your plans and so won’t be treated well.  But when you hear that rationale, ask yourself,  “What happens if I’m a customer of such an organization and suddenly I don’t fit in with their plans either?”  There’s not really a difference, particularly not if you are a just one customer among many of a large company.  If Salesforce was going to do what I’d want it to do if I were a Dim Dim customer, they’d be grandfathering me in and extending me full benefits of being a Salesforce customer.  They’d be welcoming me to the family instead of disinheriting me.  I’d be 10x more likely to want to buy something from them if they did, and I’d be 10x more likely to sing their praises and those of Dim Dim going forward regardless.   Unless I miss my guess, Salesforce is going to be doing a lot more acquisitions, so take note of the tone they’re setting.

There are really two kinds of successful businesses out there:  There is the business that would do anything for its customers, and then there is the business run by the numbers that is without soul or pity for their customers.  I won’t be disingenuous by claiming the soulless kind doesn’t work, neither will I argue that one is better.  We have big and successful examples of companies that do as they please with their customers–Oracle and Microsoft have both been accused of such more than once so it should be no secret.  We also have examples of companies who have put their customers above all else–I like companies like Zappo’s and Nordstrom or maybe Amazon and Apple (in a curious way, they do care, they just think they know best).  Some of Hurd’s problem at HP may have been putting a numbers guy in charge of a culture driven more by ideals.  We will see whether Apotheker is a better fit.

When the pure numbers companies make an acquisition, it’s pretty clear how things will work.  Fellow Enterprise Irregular Naomi Bloom has a wonderful post out about fairy tales in the land of HR software that describes some of the goings on you should expect:

– We (the acquirer) will continue to support all product lines fully:  Of course we really won’t, we can’t afford to, but we don’t want to tell you that too soon.

– We (the acquirer) are delighted with our new colleagues and expect to retain all of them:  Even if we do retain them, and we won’t, they will be disempowered and will be bent to our culture and management.  Expect many to leave as soon as the handcuffs are off.

– Our customers can expect to see only improvements in their support, product roadmaps, and overall happiness as a result of this event:  Well, maybe, if it’s a technology acquisition.  If it is a market share acquisition, we are reducing the competitiveness of the market so that we may extract more profit while delivering less.

To those Fairy Tales, meaning if you hear them you should see them as red flags, I will add that if you see one of your vendors acquire a company and fail to welcome its customers with open arms to the family the way you would have liked to have been treated, that’s a red flag too.

There’s another thread I want to pick up on before I leave this one.  When we look at the two types of companies, ironically, making the customer King often leads to excellent profitability and shareholder value, but focusing on short-term numbers tweaking does not.  One of the disappointing things for me is how often products that were once great and companies can fade into obscurity.  I asked one of my favorite mentors one time what he was proudest of about the company where we had worked together.  His answer was very telling–his biggest accomplishment, he felt, was in creating a great culture.  This was a company that cared foremost for customers, and that culture resulted in an employee base that was very resilient to adverse conditions and very talented.  Later, the company got numbers focused and it has since lost that culture and most of those people.  Culture is the currency for a company that cares about its customers, but what is the currency that makes a big company out of one that cares for numbers?  Looking around for that answer I can only conclude that it is monopoly, customer lock-in, and the inertia that comes to all things big.  These are the only reasons for customers to put up with a company that cares more about its profits than about the customer.

Last point:  I read with interest Chris Sellend’s (lots of us Enterprise Irregulars with something to say!) prediction of a coming Social-Media-in-Marketing backlash.  Riffing on @pgillin, he calls for a Social Marketing Hangover.  I think folks calling for this backlash are right, but perhaps not in the way some of them are thinking.  Think about the two kinds of companies then think about what Social is.  The answer is obvious (to me at least):  companies that have a culture that cares about customers can be wildly successful with Social while customers with cultures that only care about the numbers are doomed to fail.  There is some question in my mind about whether they should even try, though there is a sentiment that feels opening themselves up to customers will let the customers rehabilitate them. 

The real tragedy is it will never occur to the number crunchers what is wrong and the pundits will watch the train wrecks and simply conclude Social was more hype than reality.  The customer-centric crowd won’t notice anything big either except that they can suddenly do what they do best a whole lot easier.