The Elephant Just Acquired Your Competitor… Yikes!

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.

Ignore the Change

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.

Embrace the Elephant’s Sales

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.

Aggressively Compete with the Elephant

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.

Go Elsewhere

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.

So…

Don’t Wait

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. 

Comments

[Jeff Jaje]

What is different at Autodesk now, regarding a perceived need for a CAM solution, that is different from 20 years ago when they acquired Micro Engineering Solutions and let the CAM development of that drop?

[John Evans]

I asked similar questions, but did not get a response that satisfies the "what changed?"
part.
http://designandmotion.net/manufacturing-content/cam/autodesk-acquires-hsmworks-cam-on-the-cloud/

I'd like understand this aspect too.

[Jim Quanci]

This post was really not about HSMWorks - but about how to manage your relationship with an "acquisitive" elephant... but you ask an interesting question...

What has changed in the last 20 years?
A lot.

The Internet. The Cloud.

At Autodesk, over 10 years developing and selling software targeted at manufacturers (Inventor, Vault, AutoCAD Mechanical and Electrical), and so on. Customers frequently asking "why not CAM like your competitors already deliver - Dassault, Siemens, PTC...". As you have also asked. :-) Autodesk is today a very different place then the company that acquired Micro Engineering Solutions 20 years ago.

Then there is the way design, engineering and manufacturing have become highly mobile - enabled by the increasing ubiquity broadband - design and engineering in one country, manufacturing in another country, and sales in yet a third country.

And then there is the consolidation in the machine tool industry that has taken place over the last 20 years that is removing some of the historical hurdles to "democratizing" CAM. There is the ever increasing "smarts" in today's machine tools too.

So there has been lots and lots of change in the application of technology to manufacturing over the last 20 years. We want to help our customers take advantage of the changes enabled by ubiquitous bandwidth, cheap computing and the Cloud.

We'll be going there with our partners too as our customers need the freedom, power and flexibility partners deliver.

[Scott Moyse]

Jim,

Nice write up by the way, I enjoyed reading it. However, your comments above Stating Broadband & bandwidth are ubiquitous is mildly worrying since they certainly are not. I would seriously question Autodesk if they also shared this opinion as an internal policy.

I'm intrigued by CAM in the cloud will bring & services in the cloud is genius. But High Speed Broadband is far from being ubiquitous for some time to come, so movement to the cloud should be limited in some areas.

off topic I know.

cheers

Scott.

[Jim Quanci]

Scott - yes broad band is today not "everywhere at an affordable cost" - such as in Australia. But for an increasingly large part of the world's population, broadband is available at a reasonable cost. Being in a technology business, and playing football, means running to where the ball is going to be, not where it is today. And for much of the world, affordable broadband is not where the ball is going to be but is already where the ball is today. This quickly becomes a political discussion on why some countries have cheap broadband virtually everywhere(Germany, Korea, USA, etc) and some don't. It dies feel odd at times seeing a number of "developing countries" like China and India with "good enough" Internet connections at a very modest cost - while some "developed" countries don't. With the heated political climate in the USA at the moment, I'll avoid getting into the politics around why this is. :-)