A few years ago, I worked for a large company that acquired a series of software startups it planned to integrate into its hardware portfolio. My product team was responsible for the integration, product management and transition of the software startups. It was a painful process which taught me a lot about sales behavior.
Imagine a Fortune 100 company: large, established, incumbent. Also stale, bogged down in red tape, and struggling to innovate. Large companies typically innovate by acquiring smaller companies. This often makes great sense on paper – larger companies gain access to technology and talent they don’t have, and smaller companies have an opportunity to cash in on their hard work and take their products to a much larger audience using an established sales channel. But what looks good on paper can quickly go astray if you don’t understand sales and the tools they use.
In this case, my team was responsible for integrating the products and portfolios of the four or five smaller companies we’d acquired. Luckily, these products complimented one another and the larger company’s hardware devices. In essence, our new software portfolio provided ongoing systems management for hardware that was the mainstay of the larger company’s business. We had a great opportunity for success by piggybacking our software on the millions of dollars in hardware deals that were in the works.
To make this picture even more attractive, the larger company’s hardware business was undergoing a long, slow decline in revenue and profitability. Hardware sales averaged single-digit gross margins while software sales achieved typical margins of 40 to 60 percent and higher. We anticipated an easy win … until we began training the larger company’s sales teams.
Our decline wasn’t this pronounced…but it was close!
We knew we had an issue the first time we trained one of the new sales teams at a “lunch-and-learn.” While the sales team ate pizza and spaghetti, John, one of my product managers, explained how a new software item complimented the products they