Why Software Companies Don’t Grow


Recently I was encouraged to write a book about the technology market. In discussions with publishers about writing this, I began to realize how long it would take to get some of these thoughts into the market. It might be too late before you read this.


Recently I was encouraged to write a book about the technology market. In discussions with publishers about writing this, I began to realize how long it would take to get some of these thoughts into the market. It might be too late before you read this.

It’s not that this is the first time I have tried to advise software firms how to grow. Many of you know me, and those who have taken the advice have generally prospered. And those who have not, well, the record speaks for itself. I remember seeing a presentation of one of my heroes – Demming (around 1980} – and witnessing his frustrations that the Japanese were listening to him and his own countrymen were not. It is frustrating when good firms and good ideas miss their mark, lose market share and miss the opportunity for a lasting leadership position. And I am incredulous at some of the deals that have gone down. Really – what were they thinking! 

I have been encouraged by my existing customers to clarify some of these core tenets. Here is the essence:

  1. Own the whole process – transaction, translating and point-to-point delivery of the data-THINK BIG! 
  2. NEVER NEVER NEVER let an existing customer buy from your competitor – what ever it takes! Never let anyone in your space. 
  3. Over achieve on Customer Sat. 
  4. Activate. Don’t Implement. 
  5. Stick to Your Message – if you have many customers, you must be doing something right – but don’t let others redefine your space with you out of it!

Here are a few examples – names withheld to protect the guilty.

Missed it!

  • Company A was over $100M in sales – a public company. They had a decent run in the market, but only owned a portion of the process, as a data intermediary. It would be easy for customers to switch. I recommended they form 2 strategic partnerships (company B and C) that would put a worldwide lock on the global transaction. This company had failed to move forward on this strategy. Today their stock is very low, their revenues are down and Company B is the hot topic of the industry. What is this costing company A? What’s it worth to be a $12 stock vs. a $3 stock? Company A will probably now not be ablet to attract company B because they now lack market appeal or capital to attract either company B or C to work with them. 
  • Company M entered the US market with several hundred customers to its credit. EAI was its hallmark, but that’s not what it was called in 1995. They could have been the BEA, WebMethods, etc. But, lack of positioning, poor vision, etc. plagued this firm. This company has redefined itself, and gone through several mergers. I had the opportunity to advise several management teams here. They did not consider the onslaught of EAI vendors who came later a threat. There are more chapters to this story, but space does not permit. This week, after more than $180 million in investments, and several repositionings, its was sold for $1,000. Really! The phrase is “nominal consideration to the stock holders.” Really nominal! Like point .000001! 
  • Company J is a similar story – world-class capability in Order Management and Fulfillment. In the very early days of the Internet, it was clear that ordering on-line was going to be the core application. My team encouraged this company to web enable their application and educate these ‘e kids starting on-line shopping about their solution. And once on-line ordering was working, the issues would quickly move from ordering to fulfillment. After the e wave was already in force, they (rather than web enabling) bought an adjunct web module (not core to on-line ordering). New companies came into the market to deliver on-line order managemen – with very little functionality at the outset. Today, they power some of the world’s biggest sites. The management of this company told us they did not see their role on the web. Too bad, they don’t have too much of a role in the market now, either.


An article of this size doesn’t allow a full disclosure of a blueprint. And there are many positive examples of firms who built quality companies on these principles. But here are some thoughts about these core ideas or rules to consider. 

Core Ideas to Consider
The Rules
Own the Whole Process Complete the product road

Complete the product roadmap. Think of the future and lead your customers there. End to end processes, verticalization, utilities to enable and manage/maintain the software, etc. If you are making acquisitions, don’t buy businesses that have huge debt, customer sat problems, etc. Taking on water may sink your boat. I can think of a list here!

Never Let Your Competitors In

Be the expert – support quirky needs of the customer. If you just focus on short-term costs and give them a reason to go elsewhere – they will, and might never come back. I can think of several companies that denied the user certain needed functionality. They aren’t here now.

Over Achieve on Customer Satisfaction

Make sure implementations are focused and fast – the first rollout should be less about consulting profitability than market share. You can make a lifetime of money with a customer if you satisfy them right from the beginning.

ActivateSix Sigma in implementation will give you phenomenal bragging rights in the market place! The opposite may bury you. If you live through it, the cost of digging out will be very dear, and damaging for life.


  • For Users – who is advising you about the health and future of these companies?
  • For Investors – think about the return to your investors!
  • For Software firms – warning Opportunity without response? Procrastination is a Killer!


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