The Perils of Partnering in Enterprise IT – A Sad, True Tale
October 20, 2011 3 Comments
Note– this article is presented as an actual business case much like dozens of private organizational audits I have performed earlier in my career as a business consultant–for boards, investors, courts, and others. Those without experience as executive board members, audit, governance, and finance committees, or serving as an expert adviser to same, may not be in a position to understand and appreciate this case. Readers who are not expert on these issues (such as IT consultants) should learn from the case–that’s the reason for sharing it–market education surrounding the structural issues in enterprise software. While we cover technical issues in this blog, we also cover macro economics, business, governance, innovation and organizational management (among others). This article deals with advanced organizational issues; directed at corporate directors, CEOs, COOs, CFOs, the few CIOs who serve on boards of large organizations and their most trusted advisers. — MM
About a year ago I contacted an old friend at a large multinational enterprise software company who has been following our work for many years with an update on Kyield, and asked what the best method might be to form some kind of alliance. Due to a combination of our emerging technology, macro trends, and discussions with many of their customers and partners, a near perfect match appeared to be forming.
My friend said that their company culture (company x) doesn’t deal well with IP, small companies, or entrepreneurs, so suggested that we start through official channels and attempt to work our way through the maze. We began with the certified partner route even though our company is an innovator with key IP, not an integrator or reseller, which was understood from inception.
Due to the importance of emerging technology and innovation, most companies have high level relationship managers who report to the CTO and/or CEO, including for managing relationships with universities, venture firms, national labs, and legal with IP licensing. In some cases to include competitors of company x, one email has resulted in a quick response from the appropriate corporate officer, which provides a good backgrounder to this story. For anyone attempting to better understand what’s wrong with our economy, this should be instructive.
Following is a summarized, accurate description of our attempt to partner with this company with minor narration intended to better communicate reality.
1) Our initial effort was with the certified partner process in the form of a conference call with young, inexperienced people who clearly had no authority and had no choice but to follow the rigid rules in partnering through the certified reseller process. They were pleasant people I enjoyed speaking with, but from a business perspective a complete waste of time, so I suffered through it.
2) We regrouped, I repeated what Kyield was and was not. My friend asked several people internally what our next step should be. Apparently, at that time our efforts were elevated at company x to senior management, although the identity of the individual was never confirmed. My assumption then was that it was a senior competitive intelligence manager, and that they had a file on us all along. Given past history, I would have been surprised and a little disappointed in company x if they did not.
3) A few weeks later my friend suggested that we contact SVP (a) on the business side who shared acquaintances in customers, partners, and staff at company x. I made contact. SVP (a) responded that he was “the wrong person to pitch this to”, suggesting an office on the tech side, but did not make an introduction or provide a name or contact of the person we should be talking to, only that my friend could make the introduction if appropriate. My friend didn’t know who else to contact.
Consider as I did during this time that this is a company that makes and sells software that a significant portion of the world’s economy depends on for operations, yet internally they had no idea who to contact for which reasons (or so they claimed); a problem basic software cured long ago. It was becoming quite clear that titles and stated relationships were much different from authority and decision processes. We were left sharing thoughts internally: “if their high-profile SVP doesn’t know who to contact for issues in areas they are responsible for, who does?”
4) I recalled multiple overlapping relationships with a board member of company x dating back many years to the person’s university days, did a search in my own address book and found the contact, so sent a brief email. In the message I described our challenge in partnering with company x and mentioned that tens of thousands of customers of their company had demonstrated various levels of interest in our IP, from downloading white papers to one on one discussions with chair of their board. Many of our prospects have said that they would prefer that company x partner with us to reduce cost and complexity. Some have blatantly told us that this company needs to work with us.
The board member at company x forwarded my email to another SVP (b) within the hour on a weekend who then responded the following Monday with a meeting request.
I accepted the meeting request a few weeks out and invested substantial time and money on the trip only to find that the meeting was not really with the company, but rather the one individual. In my extended meeting with this individual, who is a very likable in person, it became clear that he was challenged with his role, appeared to be looking for external opportunity, and seeking what appeared to be free consulting at our expense. He asked strategic questions that were the most important issues facing their company, representing potentially tens of billions of dollars in answers. I was polite, but deflected the questions. I am a former business consultant, but restrict pro-bono services to worthy causes, not multinationals (obviously), and my role here was as CEO of Kyield.
5) The following day, unknown to anyone at company x, I had a meeting with an old friend who was a director of one of their largest partners and customers. We spent a lot of time discussing the situation at company x. He suggested that I copy their director on every communication from then on, which I have done.
6) After returning to my office I followed up with the SVP (b) individual I met, copying their board member. No response, no follow-up. A couple of weeks later I sent a fairly detailed proposal to SVP (b) and the board member that clearly outlined a partnership that could be potentially worth billions of dollars to their company, and importantly provide much-needed functionality such as crisis prevention and enhanced innovation to their customers, which are not areas this company is known for, nor were we made aware of any competing products. Several months later I have never had a response to that proposal.
My friend at company x seemed as confused as we were, as did several others who were current and former managers. Something was clearly wrong. My reasoning and proposal was based on solid business logic, global business culture, and the rule of law with IP in our system of governance and international treaties—this was logic-based partnering driven by customer demand, matching IP, and optimizing alignment of interests. This situation was win/win/win, but it didn’t seem to matter.
7) Over the following weeks, we reached out to many current and former company x executives, including another SVP (c), customers, partners, etc. in attempt to navigate the confusing culture. Several weeks later we were told by one of several of company x partners we were in contact with that the person I met with—SVP (b)—had left the company.
8) After several more weeks with no coherent response from company x, I sent a follow-up message to the board member describing our challenges. About a week later we heard from a new person from company x who the board member had forwarded my message to. This person wanted to talk to me to learn more about our challenges in partnering with their company, but failed to offer any business reason for us to do so. They wanted me to spend my money and time to visit them and consult for free about their structural problems and our technology, but offered no value to us. It looked to me like a major competitive intelligence effort, not an attempt to partner in any way.
So I declined and suggested they talk to my friend at company x, who was on their payroll, a long-term employee and had been in the loop all along. This person did so, responded in email a few days later in the most decisive manner to date, saying that part of the problem was that we were dealing with the wrong people (we were dealing with the people company execs suggested, of course). This person copied a group of new contacts to include SVP (d) we had not talked to yet, suggesting that this was the right person. SVP (d) immediately responded and copied yet another SVP (e), suggesting that he was indeed the person who we should be talking to, and that it was “his job”. SVP (e) responded immediately in a decisive manner saying that he would do the leg work internally and then get back to us.
9) SVP (e) and I exchanged several emails that would be considered more professional between experienced executives trying to find a path to work together for the benefit of their respective companies and customers. However, after a couple of weeks, he did say that he and his group normally only work with other multinationals, not smaller companies—signaling that he either didn’t want accountability or wasn’t the right person after all, so he suggested that we meet with a person who worked very closely with two of the others we had been in contact with during the past year, including the SVP (b) I met with. I sent this new person a private message in an attempt to expedite. He has yet to respond.
10) About a week later, I received a meeting request from an executive assistant of SVP (e), but it had no proposed name, location, or agenda. I responded that I was flexible on dates as partnering with their company in some manner was a priority (it wasn’t essential for integration, just preferred), but I would need this information before confirming or making the trip. A week later the EA of SVP (e) responded, ignoring my request and copied another person we could not verify (the discussions had included multiple offices–without a location it wasn’t even possible to confirm meeting, obviously).
I repeated my request more firmly saying that I don’t normally meet with anyone who doesn’t mutually agree on names, location, and agenda, and I was surprised that they did (in fact it was the first time I had ever received such a blank meeting request and I’ve dealt with senior execs at most leading companies in this industry and many others).
(e) responded within 24 hours suggesting a phone conference, providing clarity on proposed agenda, but the agenda was to learn about our company and product which one would expect of a sophisticated CI operation, not a legit attempt at partnering. I responded in a positive manner, thanked him for his professionalism, and agreed to a phone conference, suggesting that I could work around their schedules and to please just send me an invite. It never arrived.
Several days later, I contacted the lead executive for partnering who reports to their CEO, suggesting they had major problems in the partnering process, and that I would discuss if interested as he claimed privately to mutual acquaintances. I received a five word reply, followed up, and never heard back.
About a week later I received an email from SVP (e), copying SVP (d) and several of the others who had recently been in the loop, saying:
After further discussion with internal stakeholders, I wanted to reach back with some closure on our earlier email thread regarding company x/Kyield partnering opportunities. At this time, a (relationship) with Kyield does not make sense for company x due to overlaps with (our) offerings and ongoing collaboration we have had with customers over the past (many) months to deliver products in this area.
Thank you for your patience as I worked to track down internally the stakeholders with whom you engaged, and the resulting point of view from our (delete) organization. As I began setting up a follow-up discussion, it became clear that such a meeting did not make sense based on conclusions that had already been drawn.
We appreciate your interest in partnering with company x and wish you the very best success.
I appreciate your response. It would have been ethical and perhaps wise for others to inform us that company x was in collaboration with customers in competing products during the entire time they were talking to us.
To not do so is a very serious mistake. Frankly you confirmed our worst fears. We’ll review with our attorneys and look forward to inspecting your future products for patent infringement.
One of the reasons I reached out to company x was in part because I don’t see how it’s possible for company x to thrive in the future without our IP, and I thought they would be smart enough to see it. Some of the individuals clearly were, but apparently the company shares the broader culture in enterprise software: “Why pay for something you can beg, borrow, or steal?”. The answer to that of course is that beyond what their parents should have taught them at a young age about doing the right thing, there are repercussions for our actions, even if some are too blind to see it. Granted, perhaps our system and their company lack sufficient accountability and penalties for this kind of behavior, but consequences still exist–legal, market, economic, trade, regulatory, relationships, careers–the list is long. More importantly is that this type of culture and behavior erodes our entire global economy, one experience at a time.
From a business consultant’s perspective, company x has enormous opportunity to improve the bottom line, functionality, and efficiency by reducing the number of VPs and SVPs significantly, and installing a functional internal address book with clear responsibilities. They badly need to install Kyield, which would cure this problem, but I’ve lost trust and respect for the company so we’ll focus our energy elsewhere.
In addition to poor morale and operational issues, not least of which is bloat, like many other multinationals in recent years, this company has an enormous liability problem, confirmed by very large legal losses. The aging business model still kicks off sufficient cash flow that (apparently) the board doesn’t care enough to change.
While many of the individuals are ‘nice’ people, the culture and governance is frankly toxic—the only word that comes to mind, not just to David and Goliath in this story, but frankly this experience drove a wedge in-between several important relationships with both companies. I observed no respect for the property of others, tested often but gained no trust, and witnessed systemic lack of accountability in what is obviously a dysfunctional governance structure. After this experience it’s easy to see why this company has suffered so many operational problems. Company x is a classic case of the type Bob Herbold discusses in his book What’s Holding You Back, which I reviewed in my previous post.
Note that speculation on who company x is may be wrong. Also of note, I offered this story to CIO Magazine (through an editor) and Forbes (through contributor/columnist). CIO Magazine declined and Forbes contributor did not respond. I suspect conflicting relationships is the underlying reason, but we’ll save that topic for another day.