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> All companies that grow really big do so in only one way: people recommend the product or service to other people. This is a bad opening premise. Time Warne

by pak 13y ago

> All companies that grow really big do so in only one way: people recommend the product or service to other people. This is a bad opening premise. Time Warner and Comcast are huge and they don't seem like word of mouth companies to me. Boeing is pretty huge and they don't sell anything directly to ordinary consumers. I would never run around marketing Pfizer products to my friends. Take a scan down the Fortune 500 and "viral" growth companies are in the minority. Even limiting yourself to tech companies, which I presume is all that the author was thinking of, the principle is no less general. Epic is a gargantuan EHR vendor and they grew via acquisition of other vendors, not word of mouth. Cisco did much of the same, and consider Oracle. The list goes on and on.

droid_w 13y ago
Right. I suspect the post is mostly valid to "consumer" type companies.
deleted 13y ago
[deleted]
lwf 13y ago
He explicitly excludes monopolies, like TW and Comcast.
- dmazin 13y ago
  This comment needs to be stressed. Altman's article simply doesn't make it clear enough that he's excluding companies such as Time Warner. Military contractors are a whole other issue, of course.
  - gk1 13y ago
    A more realistic title, "Here's One of Many Ways a Some Companies can Grow, or Not", probably wouldn't have made the front page. This is a few paragraphs mentioning a fairly obvious point about growing companies, but trying too hard to seem groundbreaking.
- bananacurve 13y ago
  You cannot become a monopoly without having a better product at one point, unless you are friends with a dictator.
  - dredmorbius 13y ago
    Or you can take the route of Standard Oil: negotiate special rates with railroads (through rebates, a process later made illegal), force out your competition, and where that failed, literally blow them up. Microsoft got itself lucky with an exclusive licensing arrangement then played that hand for all it was worth. Court documents largely from the Novell lawsuit (though there were numerous others) reveal just how cut-throat the company was. In general, finding some initial advantage and leveraging it is what has tended to work. Government contract, sweetheart deal with an existing major player (Google's search deal with Yahoo early on, for example), patents, strategic lawsuits, FUD, and others. Altman's premise really doesn't hold water.
jpeterson 13y ago
Yes, this article seems to live within the silicon valley echo chamber.
not_that_noob 13y ago
On the contrary, it is absolutely correct. You forget these huge companies were once small upstarts. As upstarts, their growth was propelled by buyers recommending the product to other buyers. (You can substitute users for buyers here if it is an app). So his point is valid. If you go back to the early days of Oracle for example, they were providing a highly flexible database and would do it on (mostly) any computer platform you had. The competition was databases that were glorified flat files on mainframes, and IBM dominated that market. It took a few to take the plunge, but the others followed. Overall his point is very valid.
- adamb_ 13y ago
  Agreed. All the companies @pak mentioned have matured past the rapid growth stage.
- gk1 13y ago
  > You forget these huge companies were once small upstarts. As upstarts, their growth was propelled by buyers recommending the product to other buyers. (You can substitute users for buyers here if it is an app). So his point is valid. That's pretty forced. There are plenty of ways for companies to grow, and word-of-mouth is just one of them. For example, a company can grow by getting a military contract, thus being infused with cash and lots of credibility. You don't get a government contract because Sally told Jim at the DoD about how great you are. Edit: I noticed many of the comments that share my sentiment are being downvoted. Why?
  - 8_hours_ago 13y ago
    My experience with government contracts differs from that. Most of the contracts we get are because we have worked with the Contracting Officer previously and had done good work, or were introduced to them by a mutual contact. Of course that's just my experience, and one anecdote does not make good data.
- sjtgraham 13y ago
  Is that how enterprise sales work? I don't have any experience there but given how highly paid sales sharks seem to be inextricably linked to ES as opposed to social sharing buttons, I'd say no. There is always more than one way to skin a cat.
mef 13y ago
Another broken premise is his implication that in order to be "a great company", a company needs to be a "really big" company.
tlb 13y ago
Cable absolutely became huge as a result of word of mouth. It's been a mature business for 25 years so you may not be old enough to remember, but when it started people were pretty excited about 50 clear channels instead of 2 staticky ones. They told their friends and invited them over to watch shows they otherwise couldn't get. Boeing became huge in the 1920s and 30s. I imagine pilots talked to each other a lot about what planes they liked flying, and they could not have succeeded if those conversations didn't favor them.
- smoyer 13y ago
  I'm an almost 25-year veteran of the cable industry and I can tell you that Comcast and Time-Warner didn't grow huge via word-of-mouth. The benefits of cable service grew community systems by word-of-mouth, then Comcast and Time-Warner grew by acquiring and consolidating systems. For example, Time Warner Cable Oceania now provides cable service to the entire Hawai'ian island chain, but they had just bought out the last two systems (by island) in 2002 when I visited. Where I live, Comcast acquired Adelphia, who had acquired AT&T, who had acquired TCI, who had acquired Telemedia. The Robber-Barons of the 1920s consolidated steel, railroads and banking. Edison and Westinghouse (with Tesla's AC) consolidated small utility companies AND supplied most of the equipment. I think acquisitions played a huge part in the growth of airplane companies too (McDonnell-Douglas was originally two companies) ... there are very few car companies now compared to the early part of the 1900s and most recently we've watched banks become huge through acquisitions. Unfortunately, I think the premise of the article is completely wrong, but I wasted my time reading until the end and wondered how so little content could consume so many words. You grow big by knowing a market could be huge and then having the confidence to buy when the price is right (even if the indicators aren't in your favor at the moment).
  - pg 13y ago
    Most of the companies you mention are not counterexamples, because they were already big when they started acquiring and merging with other companies.
    - 13y ago
mikkelewis 13y ago
I'm curious if there was actually (implicit) word of mouth between businesses. I don't think of Cisco being good because of their marketing, I think of Cisco because I see their successes within other companies.
jacques_chester 13y ago
It's sample bias. We think of examples of consumer companies because we are all consumers. I wrote about it a while ago: http://chester.id.au/2013/01/05/on-selling-to-consumers/ http://chester.id.au/2013/01/05/on-selling-to-consumers/
pbreit 13y ago
I think many of your examples are wrong. Time magazine, Warner Bros, TBS and HBO all benefitted immensely from excellent products and word of mouth. Regarding Comcast, I know you're hung up on the use of "only" but being a government-issued monopoly probably makes it a less interesting example for this topic. Despite that, we would need to go back in Comcast's history to really understand how it grew. Oracle and Cisco are terrible examples since they originally produced market-leading products and gained very strong word-of-mouth. From a cursory reading of Epic history, it also sounds like a bad example for you since it relied heavily on reference customers. Drugs obviously have huge word-of-mouth spread.

by pak 13y ago

droid_w 13y ago

Right. I suspect the post is mostly valid to "consumer" type companies.

deleted 13y ago

[deleted]

lwf 13y ago

He explicitly excludes monopolies, like TW and Comcast.

dmazin 13y ago
This comment needs to be stressed. Altman's article simply doesn't make it clear enough that he's excluding companies such as Time Warner. Military contractors are a whole other issue, of course.
- gk1 13y ago
  A more realistic title, "Here's One of Many Ways a Some Companies can Grow, or Not", probably wouldn't have made the front page. This is a few paragraphs mentioning a fairly obvious point about growing companies, but trying too hard to seem groundbreaking.
bananacurve 13y ago
You cannot become a monopoly without having a better product at one point, unless you are friends with a dictator.
- dredmorbius 13y ago
  Or you can take the route of Standard Oil: negotiate special rates with railroads (through rebates, a process later made illegal), force out your competition, and where that failed, literally blow them up. Microsoft got itself lucky with an exclusive licensing arrangement then played that hand for all it was worth. Court documents largely from the Novell lawsuit (though there were numerous others) reveal just how cut-throat the company was. In general, finding some initial advantage and leveraging it is what has tended to work. Government contract, sweetheart deal with an existing major player (Google's search deal with Yahoo early on, for example), patents, strategic lawsuits, FUD, and others. Altman's premise really doesn't hold water.

jpeterson 13y ago

Yes, this article seems to live within the silicon valley echo chamber.

not_that_noob 13y ago

On the contrary, it is absolutely correct. You forget these huge companies were once small upstarts. As upstarts, their growth was propelled by buyers recommending the product to other buyers. (You can substitute users for buyers here if it is an app). So his point is valid. If you go back to the early days of Oracle for example, they were providing a highly flexible database and would do it on (mostly) any computer platform you had. The competition was databases that were glorified flat files on mainframes, and IBM dominated that market. It took a few to take the plunge, but the others followed. Overall his point is very valid.

adamb_ 13y ago
Agreed. All the companies @pak mentioned have matured past the rapid growth stage.
gk1 13y ago
> You forget these huge companies were once small upstarts. As upstarts, their growth was propelled by buyers recommending the product to other buyers. (You can substitute users for buyers here if it is an app). So his point is valid. That's pretty forced. There are plenty of ways for companies to grow, and word-of-mouth is just one of them. For example, a company can grow by getting a military contract, thus being infused with cash and lots of credibility. You don't get a government contract because Sally told Jim at the DoD about how great you are. Edit: I noticed many of the comments that share my sentiment are being downvoted. Why?
- 8_hours_ago 13y ago
  My experience with government contracts differs from that. Most of the contracts we get are because we have worked with the Contracting Officer previously and had done good work, or were introduced to them by a mutual contact. Of course that's just my experience, and one anecdote does not make good data.
sjtgraham 13y ago
Is that how enterprise sales work? I don't have any experience there but given how highly paid sales sharks seem to be inextricably linked to ES as opposed to social sharing buttons, I'd say no. There is always more than one way to skin a cat.

mef 13y ago

Another broken premise is his implication that in order to be "a great company", a company needs to be a "really big" company.

tlb 13y ago

Cable absolutely became huge as a result of word of mouth. It's been a mature business for 25 years so you may not be old enough to remember, but when it started people were pretty excited about 50 clear channels instead of 2 staticky ones. They told their friends and invited them over to watch shows they otherwise couldn't get. Boeing became huge in the 1920s and 30s. I imagine pilots talked to each other a lot about what planes they liked flying, and they could not have succeeded if those conversations didn't favor them.

smoyer 13y ago
I'm an almost 25-year veteran of the cable industry and I can tell you that Comcast and Time-Warner didn't grow huge via word-of-mouth. The benefits of cable service grew community systems by word-of-mouth, then Comcast and Time-Warner grew by acquiring and consolidating systems. For example, Time Warner Cable Oceania now provides cable service to the entire Hawai'ian island chain, but they had just bought out the last two systems (by island) in 2002 when I visited. Where I live, Comcast acquired Adelphia, who had acquired AT&T, who had acquired TCI, who had acquired Telemedia. The Robber-Barons of the 1920s consolidated steel, railroads and banking. Edison and Westinghouse (with Tesla's AC) consolidated small utility companies AND supplied most of the equipment. I think acquisitions played a huge part in the growth of airplane companies too (McDonnell-Douglas was originally two companies) ... there are very few car companies now compared to the early part of the 1900s and most recently we've watched banks become huge through acquisitions. Unfortunately, I think the premise of the article is completely wrong, but I wasted my time reading until the end and wondered how so little content could consume so many words. You grow big by knowing a market could be huge and then having the confidence to buy when the price is right (even if the indicators aren't in your favor at the moment).
- pg 13y ago
  Most of the companies you mention are not counterexamples, because they were already big when they started acquiring and merging with other companies.
  - 13y ago

mikkelewis 13y ago

I'm curious if there was actually (implicit) word of mouth between businesses. I don't think of Cisco being good because of their marketing, I think of Cisco because I see their successes within other companies.

jacques_chester 13y ago

It's sample bias. We think of examples of consumer companies because we are all consumers. I wrote about it a while ago: http://chester.id.au/2013/01/05/on-selling-to-consumers/ http://chester.id.au/2013/01/05/on-selling-to-consumers/

pbreit 13y ago

I think many of your examples are wrong. Time magazine, Warner Bros, TBS and HBO all benefitted immensely from excellent products and word of mouth. Regarding Comcast, I know you're hung up on the use of "only" but being a government-issued monopoly probably makes it a less interesting example for this topic. Despite that, we would need to go back in Comcast's history to really understand how it grew. Oracle and Cisco are terrible examples since they originally produced market-leading products and gained very strong word-of-mouth. From a cursory reading of Epic history, it also sounds like a bad example for you since it relied heavily on reference customers. Drugs obviously have huge word-of-mouth spread.