Like many others, I have often used Salesforce / Siebel as a classic example of Innovator’s Dilemma style disruption. Several months ago, in response to this article about Host Analytics, I received a friendly note from former Siebel exec and now venture capitalist Bruce Cleveland saying roughly: “nice PR piece, but the Salesforce / Siebel disruption story is a misconception.”
So I was happy the other day to see that Bruce wrote up his thoughts in a Fortune article, Lessons from the Death of a Tech Giant. In addition, he posted some supplemental thoughts in a blog post Siebel vs. Salesforce: Lessons from the Death of a Tech Giant.
Since the premise for the article was Bruce gathering his thoughts for a guest-lecture at INSEAD, I thought — rather than weighing in with my own commentary — I’d ask a series of study guide style questions that MBA students pondering this example should consider:
- What is disruption? Given Bruce’s statement of the case, do you view Siebel as a victim or disruptive innovation or a weakening macro environment?
- Are the effects of disruptive innovation on the disruptee always felt directly or are they indirect? (e.g., directly might mean losing specific deals as opposed to indirect where a general stall occurs)
- What does it feel like to be an executive at a disruptee? Do you necessarily know you are being disrupted? How could you separate out what whether you are stalling due to the macro environment or a disruptive innovator?
- What should you do when you are being disrupted? (Remember the definition of “dilemma” — two options and both are bad.)
- While not in the article, according to friends I have who worked at Siebel, management could be quoted in this timeframe as saying “Now is the time to be more Siebel than we’ve ever been” (as opposed to emulating Salesforce). Comment.
- What should Siebel have done differently? Was the over-reliance on call center revenue making them highly exposed to a downturn in a few verticals? How could they have diversified using either SFA or analytics as the backbone?
- What should Siebel have done about the low-end disruption from Salesforce? Recall that in 2003 Siebel launched Siebel CRM On Demand as an attempted blocking strategy in the mid-market and acquired UpShot as a blocker for SMB. How could Siebel have leveraged these assets to achieve a better outcome?
- To what extent should external environment variables be factored in or out when analyzing disruption? Are they truly external or an integral part of the situation?
- To what extent do you believe that Oracle’s acquisition of Siebel left Salesforce unopposed for 8 years? To what extent was that true in the other categories in which Oracle made large acquisitions (e.g., HCM, middleware)?
- After hearing both sides of the argument, to what extent do you believe the reality of the case is “Salesforce David slaying Siebel Goliath” versus “Siebel getting caught over-exposed to a macro downturn, selling to Oracle and giving the CRM market to Salesforce?” In effect, “they didn’t kill us; we killed ourselves.”
I deliberately will offer no answers here. As an old friend of mine says, “there are three sides to every story: yours, mine, and what really happened.” Real learning happens when you try understand all three.