Category Archives: Endeca

Endeca and The Butterfly Effect

Let’s go back to July of 2010.  Imagine you’re having coffee with Endeca’s CEO, Steve Papa, a brilliant guy and someone for whom I have great respect.

But let’s say we’re having a coffee with Steve in July, 2010 and say the following:  “Here is what’s going to happen over the next 18 or so months.

  • Hurd will expense those dinners.  Someone at HP is going to look into those expense reports and launch an investigation.
  • Hurd will — and I know you’re not going to believe this — basically get fired over those expense reports, which are the monetary equivalent of stealing Post-It notes relative to his salary.
  • HP’s board is going to appoint — and I know you’re really not going to believe this one — former SAP CEO Leo Apotheker to the HP CEO slot.
  • Leo is going to miss financial targets  — OK you can believe that — and then one day he’ll announce that he’s spinning off the the PC business and acquiring Autonomy for an astronomical $10B.  Yes, that’s right $10B for the meaning-based M&A leader.
  • And, as a strategic response to that, Oracle is going to buy Endeca for what I’m guessing will be a very nice multiple as well.”

This purpose of this post isn’t to slight either Endeca or its CEO.  I think Endeca was a fine company, I am a big fan of founder CEOs who build their companies, I have even greater respect for those few who make it work over extended time periods (Endeca was founded in 1999) and with a pivot or two along the way.

But I’d say that the average (largely perpetual) enterprise software company is worth 2-4x revenues and I’m guessing / speculating that Endeca got more like 6.  What accounts for that 50% uplift?  You could say it’s market dynamics and demand.  Or, looking at the above chronology, you could say it’s The Butterfly Effect.

But, either way, timing is everything and I believe Endeca did the right thing at the right time for the right price.  And making the wise decision to say yes wasn’t random.  Well done and congrats.  But remember the butterflies.

“In preparing for battle, I have always found that plans are useless, but planning is indispensable.” — General Dwight Eisenhower.

Five Rules for Competing with Giants

I’ve spent my career competing, for the most part successfully, against companies from 10 to 1,000 times bigger than my own.  Thus, over the years, I’ve developed some rules that can help maximize your odds of success when competing against giants.

  • Concentrate force.  The easiest way to be bigger than your competitor is to focus.  While Oracle was around 100x our size when I joined Business Objects,  our BI team was bigger than theirs; in 1995, we had nearly 300 people who did nothing but BI.  Focus can be about either product or market.  At Mark Logic, I believe that Endeca is around 2-3x our overall size, but by my estimation Mark Logic is 3-4x bigger than they are in our core markets of media and government.  While Autonomy is more than 10x our overall size, I believe that we may be bigger  in media and government (for relevant use-cases), and I’m nearly positive that we’re bigger in the dead center of our markets:  STM in publishing and intelligence in government.  Focus is hard because there are always people who are more obsessed with the opportunities you’re not pursuing than with those you are, so have a clear sense of your growth goals, decide rationally if you can meet them with your chosen focus areas, and then jettison those who can’t get with the focus program.
  • Be the best.  I like to say that no sane person wants to buy software from a startup.  Most IT folks sleep much better at night buying from the mega-vendors, even if they feel like they’re getting gouged on price.  People buy from startups not because they want to, but because they have no choice.  How can you give people no choice but to buy from you?  Solve one problem better than anyone else in the world.  Those are easy words to say, but they’re very hard to do.  Ask yourself:  what is the one problem that we can really solve better than anyone else in the world.  That’s what the VC cliché “world class” means.  Most startups aren’t honest with themselves in this department; they tell themselves white lies about where they can realistically be the best.  The result is they overextend and end up with three or more mediocre products instead of one great one.  Sometimes this is driven by greed for more addressable market; sometimes it’s driven by fear and the desire for diversification.  Remember the Andrew Carnegie quote:  put all your eggs in one basket and then watch the basket.
  • Split pins.  Most technology strategists are familiar with Geoffrey Moore‘s “bowling alley” model which says that startups should view markets as bowling pins, using one market to knock down the next.  This model encourages startups to skip through markets hastily, like American travelers skipping through countries in Europe (e.g., If this is Tuesday, it must be Belgium).  Instead of skipping pins, startups should split pins.  Without sounding too cosmic:  look for micro-alleys within bowling pins.  When I started at Mark Logic, I thought “publishing” was a pin and that all publishers were basically the same.  When I focused on publishing and looked not just for similarities among publishers but also differences between them, I learned that STM, education, news, market research, credit/financial, legal, trade, and B2B publishers were all different.  I like to say that all beagles look the same unless, of course, you’re a beagle.  By splitting pins instead of skipping them, you learn more about your customer’s needs, can serve them better, and — best of all — typically discover that the market you were about to skip over is about 10-100x bigger than you originally thought.
  • Hire stars.  Giant-fighting startups are not places for the weak or mediocre.  You need a team of aggressive, high-energy people who understand the mission and are ready to make the sacrifices required to win.  High-growth startups are lousy places to learn on the job.  That’s why the VC model gives nice chunks of equity to experienced managers with safe jobs in big companies.  They want to lure them into the startup and compensate them for the risk in so doing.  In the end, VC’s are not risk takers; they are risk eliminators.  They try to isolate all risk to the fundamental innovation and do so by setting every other lever of the business to standard. (See Chris Dixon’s recent post, Don’t Be Creative About the Wrong Things, for more.)  That’s why you need to build an A-team and be sure the people on it are scaling with the company.  Rest assured, even if you’re not asking the “can they scale” question about your team, the board is asking it about you.
  • Work together.  I’ve seen too many startups with divisive, prima-donna-laden cultures where staff meetings devolve to finger-pointing contests.  “I was the top salesperson at SAP and I can’t sell this stuff unless it works.”  “Well, I was the smartest guy at Harvard and my technology is so wonderful that a monkey could sell it.”  On and on.  This doesn’t work.  When you’re competing with giants you need the extra advantage that comes from brilliant people — working together — to solve problems.  All of us, when working in a functional group, are indeed smarter than one of us.  It took years to get this lesson through my head.  I first got it doing an exercise at a leadership program where each individual rank-ordered a list of items required for wilderness survival.  Then we broke in about 8 groups of 6 and re-did the exercise.  The worst group score beat the best individual’s score, and one of the individuals was a Brigadier General in the US Army.  Years later I discovered The Wisdom of Crowds and learned it again.  While it may sound hokey, teamwork is an amplifier of talent.  That’s why All-Star teams don’t do well in sports:  while each individual may play superbly; they just don’t play together.

IDC’s Definiton of Search-Based Applications

Sue Feldman and the team over at IDC are talking about a new category / trend called search-based applications, and I think they may well be onto something.

Because I believe that IDC puts real thought and rigor into definitions, I pay attention when I see them attempting to define something. From past experience, IDC was about 10 years ahead of the market in predicting the convergence of BI and enterprise applications with — even in the mid 1990s — a single analyst covering both ERP and BI.

Here’s how IDC describes search-based applications.

Search-based applications combine search and/or text analytics with collaborative technologies, workflow, domain knowledge, business intelligence, or relevant Web services. They deliver a purpose-designed user interface tailored to support a particular task or workflow. Examples of such search-based applications include e-Discovery applications, search marketing/advertising dashboards, government intelligence analysts’ workstations, specialized life sciences research software, e-commerce merchandising workbenches, and premium publishing subscriber portals in financial services or healthcare.

There are many investigative or composite, text- and data-centric analysis activities in the enterprise that are candidates for innovative discovery and decision-support applications. Many of these activities are carried out manually today. Search-based applications provide a way to bring automation to a broad range of information worker tasks.

Some vendors are jumping whole hog into the nascent category. For example, French Internet and enterprise search vendor Exalead has jumped in with both feet, making search-based applications a key war cry in their marketing. In addition, Exalead’s chief science officer, Gregory Grefenstette, seems a like match to the “Ggrefen” credited in Wikipedia with the creation of the search-based applications page.

Another vendor jumping in hard is Endeca, with the words “search applications” meriting the largest font on their homepage.

While you could argue that this is yet-another, yet-another focus for Endeca, clearly the folks in marketing — at least — are buying into the category.

At Mark Logic, we are not attempting to redefine ourselves around search-based applications. Our product is an XML server. Our vision is to provide infrastructure software for the next generation of information applications. We believe that search-based applications are one such broad class of information applications. That is, they are yet another class of applications that are well suited for development on MarkLogic Server.

So, if you’re thinking about building something that you consider a search-based application, then be sure to include us on your evaluation list.