I write this post right after Autodesk announced the acquisition of a CAM (machining) software technology from a software company in Copenhagen – HSMWorks. For my team – the Autodesk Developer Network – an acquisition like this means dozens of uncomfortable discussions with a number of partners around the world. In today’s specific case of HSMWorks, I know over 20 CAM partners we’ll be having this discussion with. What is Autodesk doing? Are we competitors now? What happens to our partnership? What do I tell my staff? What do I tell my customers?
Dancing with an elephant will at times make you feel “exposed” – not being in full control of your destiny. This is never more true than when the elephant you are dancing with acquires one of your competitors. It is one of those times when you start to think if dancing with the elephant is worth it. Would you be better off “going it alone”.
Having helped numerous Autodesk partners work through this stressful - acquisition driven – market change, I have found there are typically four responses (strategies) you can pursue moving forward.
So let’s walk through them.
Whether betting the elephant’s acquisition will fail, or just not being sure what to do, one continues on with business as usual. This strategy (or lack of a strategy) usually doesn’t work very well. Almost immediately both your employees and your customers will want to know what your plans are around the elephant – continuing to dance or? They want to hear from you and they want some basic answers. I have seen a number of companies take this approach – making no change in direction – but this usually only works for a few months. If you don’t have a strategy and answers for your employees and customers on how you will (or won’t) be working with the elephant in the future, the uncertainty will start impacting your sales. Customer orders will start getting delayed. Purchases will slow. You really need a long term strategy that includes a communication and investment plan based on your long term strategy. The sooner the better.
Embrace the Elephant’s Technology
This is about researching and learning where the elephant is going with their new competitive market offering, and making investments that strengthen your partnership with the elephant. There are many different ways to embrace the elephant – such as learning what solutions are being pursued and not pursued so you can invest in complementary solutions. This could mean shifting R&D to niche solutions the elephant is not currently pursuing – but their customers will need. This potentially sets you up to be acquired by the elephant in the future too (which I have seen happen a number of times). This could mean building up your integration services capabilities so you can profit on helping customers use both your and the elephant’s solutions together. This strategy is not easy to execute on if the elephant’s acquisition overlaps with most of your solutions.
If you are already a “tertiary” player in the market the elephant has just decided to enter – you are not the number 1 of number 2 player – do you have a clear and compelling technology advantage that will enable you to compete head to head with the elephant? If not, you should consider repositioning your business to deliver Sales and Services for the elephant – evolving away from being a developer of commercial software. This is can be a very emotional and difficult decision to make – giving up development of a code base that has been “your baby” for a number of years. If you already have a significant revenue stream from services, this change from software developer to sales and services provider may actually not be all that hard to make. You have valuable customer relationships, a broad understanding of your customer’s needs, and deep solutions expertise. These are exactly the skills and assets the elephant will value most as it invests in developing their entrance into what for them is a new market. At Autodesk, many of our largest and most profitable VARs started as software development partners – but later repositioned their business as a sales and services organization as Autodesk extended its product line into several vertical markets. I know several partners that became quite wealthy pursuing this strategy – truly turning sour lemons into lemonade.
Most elephants will continue to provide software partners basic support even though they have become competitors - so you likely will have continued access to the elephant’s technology you need to compete with the elephant. For example, both Autodesk and Microsoft continue to partner with companies they also compete with. Competing with an elephant is hard – but there are successes from time to time. Anyone remember Microsoft Money going after Intuit’s Quicken? Intuit won that battle against the much larger Microsoft. This strategy could also lead to acquisition discussions with the elephant’s competitors and even some day with the elephant itself.
This is all about changing the direction of your company to pursue different markets where there is no elephant – typically going after a market niche or developing a specialized services business. This can also mean selling your business to the highest bidder and using the money to retire or start a whole new business.
Every company that dances with an elephant needs to spend a bit of time thinking about what they would do if the elephant became their competition. This doesn’t need to be a detailed plan. It is a healthy exercise that forces you to think through where you are going with your business long term. Just a wee bit of “disaster planning” can really pay off later – such as positioning your company to be the company the elephant acquires – or enabling you to quickly act upon an elephant’s acquisition of a competitor in a thoughtful effective way that best protects your people, your assets and your customers.