Thoughts on acquisitions, heroes, and purpose

Acquisitions

I was on a thread about acquisitions yesterday.  Chris Williams observed that only Berkshire seems to do them well.

I’ve lived through acquisitions of tech companies on both sides, as the acquirer and as the acquiree.   And I’ve lived through acquisitions that were successful and ones that were abject failures. 

Acquihires, where the target is being acquired just for talent, can work out great, if all the target people are on board with the plan and enthusiastically jump into helping the acquiree.  I’ve been on both sides of this, and the results have been good.   Everyone does need to understand and agree that this is the plan.

The Berkshire Hathaway model works great.  Berkshire buys companies that are running well and doesn’t impose a new management regime on them.   Berkshire lets them operate and offers them access to lower-cost capital for expansion.   It doesn’t have to be just providing capital; providing any asset that helps the acquiree go faster works just as well — a new channel, for instance.

What doesn’t work is when the acquirer buys a functioning business, attempts to force a new management model or regime on it, and expects that the business will continue to operate well.   This can take many forms; here are a couple I’ve lived through:

• The acquirer is a company managed for quarterly earnings and cash flow, buys a pre-profit growth company, and then attempts to manage that company for earnings and cash flow.   The acquiree needs cash for growth; trying to operate it for cash will kill it.
• The acquirer tries to load a bunch of strategic requirements on the acquiree.   “You are still independent but need to support our three key strategic imperatives”.  This slows down and confuses the acquiree.   Berkshire doesn’t make Dairy Queen support the NetJets strategy and vice versa.
• The acquirer tries to dramatically slash costs across both organizations by “rationalizing” operations.  The GE/Neutron Jack model.   Works great for a quarter or two until it doesn’t.

In my experience, if it is not an acquihire or not a Berkshire hands-off style acquisition, don’t do it.  

Heroes

We all want to be the heroes in our own story.  And that underlies so much of how the best products are designed and how they gain traction.

In my first full-time professional job, back in the last century, I was a consultant for Booz-Allen & Hamilton.   As part of our client assignments, we would have client meetings every 2-3 weeks to review our work and findings.

BA&H employed a bank of typists and graphic artists to create great-looking presentations.  We would create hand-written slides with hand-drawn graphics or crudely printed dot matrix computer output and hand these off to the typists and graphic artists.  The typists would type our headlines onto blank pages, and the graphic artists would turn our crude graphics into nicely drawn graphics, which would be pasted onto the blank pages.  

I am not kidding; this is how the system worked.   We did a lot of physical cutting and pasting.  Usually, we would be up very late the night before a client meeting, getting new art drawn and pasting it onto the pages.   Content had to be frozen 12-24 hours before the meeting.

I became a hero in that job by dragging my 1st generation Mac and LaserWriter to the client job sites.   This allowed us to do our analysis, create slides with nice-looking graphics, print them out at the site, and present them immediately.   A dramatic cost reduction and a dramatic improvement in iteration time.   We still used the traditional model for significant presentations, but using the Mac on-site made me a hero.

I love this adoption model — create a product that an individual can drag into the office and stand out with.   Word of mouth starts working, more people adopt, and before you know it, 100s of people are using and the company starts to take notice.  Eventually the company will license, but it all starts with selling to an individual and making them a hero.   This is how Excel was introduced to companies.  This is how the Blackberry got its start.  Many cloud services have penetrated the market this way.  Make it easy and nearly free for individuals to try, and if the product is good, they will become heroes, and more sales will follow.   

The major software projects in my life had this characteristic.   Windows 95 had great consumer demand — end users wanted it, the best apps worked with it (Excel, Office, games), and individuals wanted it at companies, which all drove corporate demand and OEM demand.   Brad Silverberg built and led the team to create this kind of product that consumers loved, his attention to detail and his love for great products inspired us all.

Eventually, as a product becomes more and more successful, an enterprise-selling model can kick in.  And you will have to do all kinds of work on the product to make enterprise customers happy — deployment tools, controls, integrations, admin tools, etc.  But you don’t start there!

I suppose some products don’t sell into businesses this way.  ERP systems, for instance.  That is why I chose never to work on those.

If your product can help a person to analyze data with less effort, create more meaningful insights, have a higher close rate, create presentations that really stand out, or accomplish some set of tasks with many fewer steps, then you have a good shot of having your product pulled in the back door of companies.  And this is an evergreen opportunity, there are always new generations of workers who want to be heroes.  

Our role in the universe

One summer evening as a kid, I found myself lying in our yard, looking up at the stars.  I grew up in the Apollo era, I voraciously read science fiction, I loved to look up at space and imagine the strange and novel things that might be out there.  

That evening, as I looked up, I was overwhelmed with the scale of space.  200 billion trillion stars in the known universe, stretching on forever, over billions of years.  I came to realize how meaningless my life was relative to the overall universe.   Nothing I could do would have a material impact on what I saw up there.   My greatest successes would affect approximately 0% of the universe.  My most significant failures and faux pas would not create even a ripple.   Perhaps some would find this depressing, but it was incredibly freeing to me, it allowed me to quit worrying so much about what others would think, and quit worrying about failure.

Later in life, I discovered the poetry of Percy Bysshe Shelley, particularly Ozymandias, which resonated with me in the same way:

I met a traveller from an antique land,
Who said—“Two vast and trunkless legs of stone
Stand in the desert. . . . Near them, on the sand,
Half sunk a shattered visage lies, whose frown,
And wrinkled lip, and sneer of cold command,
Tell that its sculptor well those passions read
Which yet survive, stamped on these lifeless things,
The hand that mocked them, and the heart that fed;
And on the pedestal, these words appear:
My name is Ozymandias, King of Kings;
Look on my Works, ye Mighty, and despair!
Nothing beside remains. Round the decay
Of that colossal Wreck, boundless and bare
The lone and level sands stretch far away.”

There are multiple ways you can respond to the vastness of time and space and to the relative unimportance of our lives.   You could become a complete hedonist and spend your days chasing personal enjoyment.  You could decide to live without regard to anyone else, grasping everything for yourself.   We all have those temptations inside us.  

Or you could choose to do the best you can to make life a little better for everyone around you, trying to chip away at the hurdles and frustrations of life and leave the world a little bit better than you found it.  You may not always succeed, but you will feel better for the attempt, as will people around you.   And that is good enough.