111th Edition – March 21, 2021
We’re planning to do what no other industry leader has ever done before: spend tens of millions of our own money to develop what could become the most advanced and valuable technology in the industry–and then give it away.Rod Canion, co-founder and former CEO of Compaq
Can David Truly Defeat Goliath?
Everyone loves a great David and Goliath story. Just ask Malcolm Gladwell who wrote, David and Goliath: Underdogs, Misfits, and the Art of Battling Giants. Nearly 6,000 Amazon reviewers have given the book an average rating of 4.5. Nearly 21,000 reviewers have posted a similar rating at Audible.
While most of those stories center around individuals, how about small businesses? Can a small business topple Amazon, Google, Microsoft or some other behemoth in the future?
What public company was the first to achieve $100 million in revenues in its first year? What company was the fastest to $1 billion in revenues as of 2015? How many years did it take? The answer is below.
Compaq Did What No Other PC Maker Would Do
I started my business career at KPMG in St. Louis where every junior auditor lugged around a Mac and printer, a weight that seemed like 5 heavy bowling balls.
After graduating from my self-inflicted term in auditing boot camp, I immersed myself in the sane world of private industry where my employer spent thousands over the years on Gateway computers, the company with the funny logo and corporate colors. Accordingly, I never knew much about Compaq’s impact on the PC industry until now.
Three bright and energetic visionaries who left Texas Instruments decided they would not let IBM dictate industry standards. Compaq went against the grain by developing the PC open industry standard. Every other PC maker except for IBM and Apple followed along. Compaq won. IBM never finished the race.
A Simple Business Plan
Compaq’s business plan was short, a 4-pager sketched on a restaurant placemat in Houston.
While the execution of the plan was another matter, the key points of the Compaq start-up included a customer avatar that …
- would pay a premium for quality
- would want a machine running IBM-compatible software with backward compatibility
- would buy the PCs through a broad network of PC dealers
You may know the rest of the Compaq story. The start-up CEO was ultimately let go as competition intensified and after failed acquisitions. HP acquired Compaq in 2002 through a merger agreement. The Compaq brand name was finally dropped about 5 years ago.
Whether you work in banking, healthcare, Fintech, software as a service, eCommerce, or some other industry, does the Compaq story matter? Is it relevant?
I believe it is for several reasons:
- Strategy does not have to be complicated. Compaq was entering an industry with excess competition and a wild-wild west of industry standards. Yet, the product strategy generally stayed the same from year to year.
- Values were never compromised. From Day 1, Compaq held true to its promise of never selling direct to customers. When a large dealer bullied them to lower prices, Compaq walked away because that could harm other retailers selling their product. Other dealers took note, and loyalty levels soared.
- David got help from key allies – those allies included Bill Gates, Andy Grove, and other leaders in the PC industry. Compaq set themselves up to where it wasn’t them against IBM. Instead, it was an industry against IBM. In short, they chose their friends wisely.
- Culture never took a back seat during the crazy-growth years where sloppiness can take hold. Compaq emphasized a family-like culture where all employees were treated with respect. All staff members were included in company-wide meetings where they were told the big picture and were reminded that their jobs made a difference.
- Over-confidence is real, even in big companies. IBM was so successful that it missed what was happening as open architecture was gaining momentum. First, they ignored this philosophy, then they dismissed it. They paid a high price for that arrogance.
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Title Photo by Bruno Cordioli