What is “x” competitor’s achilles heel?

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In the course of owning a business you get a lot of phone calls from investors and venture capitalists. It’s a game, but a fair one if played correctly in that whatever your revenue, their criteria is just about twice yours. When we were 1M they were looking for 2M companies. When we were 2M they were looking for 3. When we were over 3 they were looking for 5, etc…. But they knew that when they contacted. So why?

Because knowledge is power. In an industry like membership management software there isn’t much transparency because so many companies are private. So they call. The calls are always polite. It’s important to remember they are frequently just due diligence by the firm as they negotiate to purchase a competitor in your space. Again, there is nothing wrong with this if knowledge is shared both ways.

Business Owner action item: as the business owner it’s up to you to ask the questions as well. Start with the simple stuff like “where do you see the industry going in 5 years?” etc. Trading information can be helpful, for both parties and if you are the smaller fish you better be more nimble anyway

How do most of the calls end? Typically the same and both parties knew it when the call started.

“well let’s stay in touch and touch base in a year.”

If you did your job and asked questions of them as well, then hey, that’s fair. In the VC world the “it’s not you, it’s me” breakup equivalent is “we are looking for someone a bit larger and with higher profits so call back”. But both parties knew that when the call started, it’s just the polite way to end the call. What highly profitable business owner wants to sell? Not many that I know of. It’s an attempt to be polite.

But, sometimes something interesting happens. Specifically I had someone ask me an interesting question recently about a competitor. It was a bit out of the blue which tells me it was on their to do list more than mine. The investor rep asked:

What do you see as company-x’s Achilles Heel besides being on the Microsoft platform?

I have to admit that I wasn’t expecting the question and I prefer to not say bad things about competitors. Usually they are good people trying hard in a competitive environment. We hang out together at NTEN, SXSW and for some of us OSCON. They really are good  people. So I didn’t answer the “Achilles Heel” question fully. This is me correcting the record.

Yes, they have a problem. Why? Because in one of my History classes while getting a BS in POLS from Texas A&M University we studied Carnegie Steel. Given I like history,  let’s look at it through the lens of “what would Andrew Carnegie do?”

In 1870 Carnegie decided that instead of being a “capitalist” with diversified interests he was going to be a steelman exclusively. Using his own capital, he erected his first blast furnace (to make pig iron) that year and the second in 1872. In 1873 he organized a Bessemer-steel rail company, a limited partnership. Depression had set in and would continue until 1879, but Carnegie persisted, using his own funds and getting local bank help. The first steel furnace at Braddock, Pa., began to roll rails in 1874. Carnegie continued building despite the depression—cutting prices, driving out competitors, shaking off faltering partners, plowing back earnings. In 1878 the company was capitalized at $1.25 million, of which Carnegie’s share was 59 percent; from these policies he never deviated. He took in new partners from his own “young men” (by 1900, he had 40); he never went public, capital being obtained from undivided profits (and in periods of stress, from local banks); and he kept on growing, horizontally and vertically, making heavy steel alone. From 1880 onward, Carnegie dominated the steel industry.

Still with me? Because from that dominance he sat at the top of the food chain. And then inexplicably they poked him. Why? WTF?

Carnegie had thought of selling out and retiring in 1889: his annual income was $2 million, and he wanted to cultivate his hobbies and develop the philanthropic program that was taking shape in his mind. But the threats that now came from the West as well as the East were too much for his fighting spirit and his sense of outrage, and he took the war into the enemy camp.

Sooooo… Carnegie then did NOT retire but rather took the fight to them. He took the fight to them with the advantages and business knowledge of his industry that he possessed. Now back to our story…

He (Carnegie) would not join their pools and cartels; moreover, he would invade their territories by making tubes, wire and nails, and hoop and cotton ties and by expanding his sales activities into the West. He ordered a new tube plant built on Lake Erie at Conneaut, which at the same time would be a great transportation center with harbors for boats to run to Chicago and a railroad to connect with Pittsburgh.

The competition surrendered, but at a much higher price than they would have otherwise.

Thus originated the U.S. Steel Corporation in 1901, through the work of J.P. Morgan. The point was to buy Carnegie off at his own price—as he was the only disturbing factor that held back “orderly markets and stable prices.” The Carnegie Company properties were purchased for almost $500 million (out of the total capitalization of the merger of $1.4 billion); Carnegie’s personal share was $225 million, which he insisted upon having in the corporation’s first-mortgage gold bonds. At last Carnegie was free to pursue his outside interests.

Why, how, could the competition have so badly misjudged things? They missed the megatrends/macroeconomics and underestimated their competitor. Realize one dollar of capital in the hands of experience is far more powerful than ten dollars in the hands of bankers.

It’s quite simple really. Carnegie had lowered his costs and built up his capital to the point that the competitor’s moves were an “event” and his response was simply a “choice”. A freaking choice. If that doesn’t make you nervous then I didn’t explain it well.

From the start Carnegie was willing to pay the price to win. Who knows, maybe he was just bored? Regardless the competition was in over their heads with a combined company run by bankers without the institutional knowledge of a steelman.

The bankers accepted their losses. But their misstep meant they paid a significant price for not researching the market, researching the trends, and especially for not understanding the machine Carnegie had built. It wasn’t just the capital, it was years of best practices developed by Frick and Carnegie that allowed him to win. A business is complex. Business practices are maintained by people, not Viseo flowcharts or Powerpoint.

Pick your fights.

Further – the only thing more complex than a business is communities of people like the open source community. You can’t buy them off or learn the social norms in a year or two.

[redacted]

Back to the phone call – in this case, the competitor the investor asked about is one we see occasionally in the sales process. They have some aggressive affiliates but I can’t say I’ve had a bad encounter with their CEO or one of their employees. So yes, I know them. I know how our product is differentiated with greater functionality. (having a better product does help – but they would say the same thing).

SWOT analysis if it got aggressive?

Well I can back into the competitors costs using the usual methods like salary survey sites and looking at their network. There are people who will research these things for a very reasonable price. Add to that the fact that they are proprietary AND require two year contracts just makes it easier. You wouldn’t want to sign your nonprofit up with a proprietary solution if you knew there was a better solution that was also open source, right? (data says 90% want use open source or “roll their own” – NTEN).

Maneuvering around their market positioning would be as strategically challenging as going around the Maginot line. Easy pickings – IF someone wanted a fight.

If this sounds arrogant, it isn’t. It is just me acknowledging how the future would put the very existence of our company in question if we hadn’t changed. I did what any self-aware responsible and knowledgeable CEO would do. We did a pivot. And WordPress and Drupal are great examples to follow.

The bigger question is why other leaders didn’t see open source coming?

Our competitive position – Tendenci has driven our costs down and gone open source in a group of competitors trapped with huge employee expenses, high proprietary licensing costs, shared servers which amplifies security risks, and constant turn over in their work force. Meanwhile hack attacks are sky rocketing and insurance and benefit costs climb.

Add to that programming isn’t something you can throw money at – it just takes time and adding more keyboard-monkeys just slows down the innovators.

To the person who asked the question – my answer is this:

Company X’s achilles heel is they exist at the whim of a better positioned open company with an aggressive strategy. You don’t have to win every prospect, you just have to force the competitor to sell below their cost. And wait.

The rest is details.

Tendenci will continue to rise because it is exactly what nonprofits and government agencies are asking for. Freedom. Respect. Dignity. Openness. Love.

Tools to help the cause first and our company second.

PS – if you are an investor in that company, don’t worry. I have no intention of implementing the above strategy right now as this is a case of “there is no spoon.” What is next is far more interesting to me. There is some amazing stuff on the horizon. I just wanted to come clean on how vulnerable some companies are. And yes, in a SWOT analysis or a prospectus, you should probably cross reference their technology with tech trends. I guess that is a question for the attorneys and IANAL.

setting up vmware fusion 7 for tendenci development

Tendenci install docs – latest version – are in the git repo here: https://github.com/tendenci/tendenci/blob/master/docs/source/installation/installation.txt  Please note that Tendenci is a FAST moving project and you should update your install before submitting issues given the rapid pace of change.

I am adding this as a blog post instead of a help file as things change so quickly it might be outdated in a week. Anyway, part 1 of probably several on setting up vmware fusion with Ubuntu 14.04 to develop Tendenci Open Source Software for Non Profits and NGOs. (disclosure – I work there, blah, disclaimer, blah, etc….)

First – install vmware Fusion 7. They have a 30 day trial so you can start with that.

Second – download ubuntu 14.04 from the official distro. Given Ubuntu appears to be heading towards the dark side lately, you will be fine just using Debian Linux as almost all commands are identical. In fact as one of the lead developers on Tendenci I can tell you I’ll be testing it on Debian, CoreOS in Dockers.

(As an FYI – you can also spin up a demo site of tendenci right now at https://create.tendenci.com if you just want to kick the tires. But I’d much RATHER see you join the community to provide future-tools to change the world.)

Now in pictures setting up vmware with ubuntu (14.04.2 and 14.04.3 are both fine – 14.04.3 will save you time on updates. So do that first after install:

sudo apt-get update && sudo apt-get upgrade -yy

1-vmware-fusion-tendenci

2-vmware-fusion-tendenci

  1. 3-vmware-fusion-tendenci

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This is mostly a useless graphic saying to install your preferences as you see fit. Other stuff happens before and after this. Carry on.

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Not a useless graphic. VMware’s console is a pain so you are definitely going to want to have openssh installed. 9-vmware-fusion-tendenci

stuff

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more stuff8-vmware-fusion-tendenci

confirm you did stuff

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now do more stuff – in this case install vmware tools so you can share the file system and don’t have to suffer through VI/Nano or whatever. Sublime is way better.

10-vmware-fusion-tendenci

In this image it says “reinstall vmware tools” but on yours it will probably say “Install vmware tools” – pick that one.

Next, what SHOULD be simple is definitely NOT simple. You have to configure Ubuntu guest machine to support vmware tools. Vmware exposes the tools into the guest OS but you still have to mount the drive, install, configure. What a pain in the arse. Anyway, Some helpful commands and from there you have to google your way.

Note at this point I’m assuming you are SSH’ed into your VM on the local and have done a “sudo su” so you are operating as root.

In the properties of your virtual machine make sure the CDROM drive is set to “mount”. In the guest OS you should then be able to do this:

sudo mount /dev/cdrom /media/cdrom/

and

cd /mnt/
ls
cdrom hgfs

This mounts your drive from vmware into the host. The fact that you don’t have a cdrom drive on a mac is irrelevant – it still maps it and gives you access to source files for vmware.

Next add your debian package keys or nothing else will work. Again, it is up to YOU to check if the paths are still correct as time changes everything. As I type this today these are correct

wget -qO - http://packages.vmware.com/tools/keys/VMWARE-PACKAGING-GPG-DSA-KEY.pub | sudo apt-key add -
wget -qO - http://packages.vmware.com/tools/keys/VMWARE-PACKAGING-GPG-RSA-KEY.pub | sudo apt-key add -

Verify they installed correctly

apt-key list

Add/create your files. Maybe check if they exist first so you don’t overwrite but the basics are:

touch /etc/apt/sources.list.d/vmware-tools.list
nano /etc/apt/sources.list.d/vmware-tools.list

Next edit your vmware-tools.list file to include the repo

deb http://packages.vmware.com/packages/ubuntu precise main

NOTE- if you aren’t on “precise” that won’t work so check your distribution (‘trusty’ etc…). Now install.

apt-get install open-vm-tools-deploypkg
root@tendenci:/# cd ~
root@tendenci:~# ls
vmware-tools-distrib
root@tendenci:~# cd vmware-tools-distrib/
root@tendenci:~/vmware-tools-distrib# ls
bin doc etc FILES INSTALL installer lib vmware-install.pl
root@tendenci:~/vmware-tools-distrib# ./vmware-install.pl

From there I take all of the defaults except for this one which I answer yes (it’s just vm after all.)

Would you like to enable VMware automatic kernel modules?
[no] yes

Check your mount points if needed

ls mount-point

If everything worked, which is unlikely out of the box as vmware has unfortunately not gotten along with Mac’s lately, but hey, if you got lucky you should now have a mounted drive at

cd /mnt/hgfs/ with vmware in it.

NOTE – several points in there, it doesn’t hurt to reboot your vmware host os. I apologize for not being more precise in this post but I know if I get the basics out there google or ddg will solve it for you. That is my only goal – to point you in the right direction if not perfect.

Lastly if the above, or a derivative of the above worked, then you should be close to doing something like this.

Clone the git repo down to your mac. For me I put it on my Mac in ~/Documents/code/webapps/repos/

then inside of the guest machine, assuming the above worked for you (test test test people) then you should be able to FIRST install tendenci the normal way using the instructions here

THEN, and only THEN, move your dist repo on the host (after you can pull up the site in a browser) to a different folder and sym link in your cloned repo.

For my dev environment this is done with:

ln -s /mnt/hgfs/webapps/repos/tendenci/tendenci /usr/local/lib/python2.7/dist-packages/tendenci

I’ll try to tighten these instructions up over time but wanted to get them out there as I honestly lost hours and hours getting just the basics working with VMWare. I get that it is faster than vagrant, but almost not worth the grief with the difficulty of getting the vmware tools working.

Helpful source links used in the creation of this wonderful blog post. Categorize this one as “something is better than nothing” and use your google fu (or is it “foo”?) to fill in the details. I’m only sharing it because my google fu ain’t bad, and it was a challenge for me. So…. helpful further links:

Tendenci issues: https://github.com/tendenci/tendenci/issues

VMWare file sharing: http://hplgit.github.io/teamods/ubuntu/vmware/mac.html

Ask Ubuntu notes: http://askubuntu.com/questions/29284/how-do-i-mount-shared-folders-in-ubuntu-using-vmware-tools