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How Chimp-Sized Software Companies Can Survive Against Gorillas

By March 31, 2012Article

In a meeting in 2004, Jonathan Schwartz, president and chief operating officer of Sun Microsystems asked George Colony, CEO of Forrester Research, what he thought of Sun. Colony replied, “Sun risks becoming the Data General of the decade. The company could easily slide toward becoming a zombie – a lot of cash but no life, staggering and lurching with a fading heartbeat at each step.” Like many other hi-tech companies, Sun’s battling for survival against an eight-hundred pound Gorilla: IBM.

Whether it’s IBM, Microsoft or Oracle, every market space has a dominant vendor also known as an 800-pound Gorilla. So how can smaller chimp-sized companies survive against Gorillas? A look back into Silicon Valley history actually provides part of the answer.

In 1991, Informix Software was just one of many database suppliers in a market that included companies such as Sybase, Ingres and Progress. Together, they were competing against Oracle, the 800-pound Gorilla. In only four years, Informix was able to challenge Oracle’s dominance, moving past all these other companies in the process. This was a truly remarkable feat and provides seven business lessons that are applicable to surviving the battle against Gorillas today.

Seven lessons in competing in the market

1. Change the measuring stick of success. From 1991 through 1996 Informix Software’s stock was ranked number one top performer by the Wall Street Journal. The reason behind this impressive feat was not solely revenue growth, but equally important, revenue-per-employee growth (calculated by dividing total revenues by the number of employees).

Measuring financial success based upon individual employee contribution is critical for long-term survival. While it’s doubtful you’ll catch up to your gorilla’s top-line revenue, you can beat them financially by staying lean and mean. Like boxers in a prize-fight, a well-conditioned challenger is able to last all 15 rounds and sometimes even defeat the bloated champion.

2. Don’t fight the battle alone. When understaffed and technically outclassed, you must carefully choose the battles you fight, and it makes no sense to fight them alone. You need to surround yourself with partners that have a vested interest in your winning.

Unfortunately, many software companies today practice “partnership by press release” that is totally disconnected to the sales force’s actions in the field. However, this was not the case at Informix. The sales compensation plan and field promotion programs encouraged partnerships. Informix truly believed in partnering because it was the only way to compete with the super-sized Oracle and technically superior Sybase.

3. Create an internal “tipping point.” After Informix had won a $28 million deal against Oracle in 1992, every employee, more than 1,300 at the time, from receptionist to vice president, was given a check for $1,000. The gesture electrified the entire company, created an esprit de corps, and fostered a new “anything is possible” culture within Informix. It was Informix’s internal tipping point and the company took off. A company’s most powerful competitive weapon is its employee’s energy and enthusiasm.

4. Focus, focus, focus. Informix reaped the benefits of years of single-minded focus on the UNIX marketplace. Informix was the UNIX database company. This simple single message was easier to communicate to all critical audiences (customers, partners, the press and analysts) and easier to ingrain in employees. Gorillas are not “wired” to defeat organizations with pin-point focus.

5. Have a strong “hall monitor.” Jim Collins’ best-selling business book, “Good to Great,” explains the differences between mediocre companies and great companies. One of the book’s principles was the cornerstone of Informix’s success: “Good-to-great companies did not focus principally on what to do to become great; they focused equally on what not to do and what to stop doing.”

While Informix’s success was due to the focus on relational database technology for the UNIX marketplace, it could be argued that its success was also the result of a company that stayed out of trouble. In the simplest terms, Informix didn’t jeopardize its future with unnecessary mistakes; and when mistakes were made, the company quickly reacted and reoriented itself.

The Informix “hall monitor” was Phil White. He was the authority figure who kept people in line and projects on track. Even when he wasn’t physically present at meetings, his presence was felt. “What would Phil think about this?” was always in the back of the participants’ minds. It was a legitimate question since Phil was the ultimate decision maker and the final approver of every issue of importance. A xhimp-sized company needs a strong hall monitor to keep the company from veering way off course.

6. Mind Your Culture. The four thousandth Informix employee hired was very different from the four hundredth. A big-company “nine to five” mentality had replaced the “get it done at any cost” attitude of the early days. Along with all the success the company had enjoyed came an attitude of entitlement. It seemed all the employees were now solely looking out for themselves. Instead of rallying together to solve problems as in the past, people sought to condemn and punish scapegoats. The fun of working for Informix was gone and, in turn, many of the most talented employees left.

7. There’s no such thing as a friendly merger. From 1991 to 1995, Informix refused to make any acquisitions. Meanwhile, Sybase and Ingres went through megamergers with Powersoft and Computer Associates. As a result, Informix rose to become the sole challenger to Oracle’s dominance. There’s a big difference between bolstering a product line through a point-specific product acquisition and a megamerger that shakes a company’s foundation. Informix would learn this valuable lesson the hard way with its acquisition of Illustra at the end of 1996.

History repeats itself. Many of the business strategies that enabled Informix to survive and succeed against Oracle are directly applicable today. History is also full of surprises. Informix would be crushed and its CEO end up in jail when it later tried to go toe-to-toe against Oracle.

Studying the rise and fall of companies like Informix Software provides valuable lessons for any company that must compete against a gorilla. As former president Harry Truman said, “The only thing new in the world is the history you don’t know.”

Steve W. Martin’s latest book is titled The Real Story of Informix Software and Phil White: Lessons in Business and Leadership for the Executive Team.