Leo Who? Lessons for a Startup Gleaned by Watching Industry Titans

HP announced last week that its new CEO will be Leo Apotheker, a 20 year veteran of enterprise software company, SAP.  Almost immediately, the chorus began – Leo Who?!!?

For those of us who have been involved in enterprise software, the reaction was closer to: Huh?

Over the next two days, the world learned that Leo Apotheker was instrumental in significantly increasing SAP revenues during his tenure as head of Sales, and was a key proponent of the Business Objects acquisition.  Unfortunately, he ran into the industrial sized wood chipper of the Great Recession and was fired by the SAP Board in Feb, 2010.

What can a Startup learn from this?

Firstly, all is not as it appears.

Somewhere in the resume reading, the PR dept at HP forgot to mention that the SAP Board concluded that the Business Objects acquisition was a mistake and the introduction of mySAP ERP in 2007 was, well, a disaster.  Business Objects is currently viewed as a successful acquisition, but it was not without some significant work.  Apotheker had significant operational roles in both as the head of sales, and as CEO.  The lesson: your castle will always be a “fixer-upper” for someone new.

Secondly, the culture at HP will be undergoing another massive, multi-year re-structuring.  Most people generally acknowledge that Carla Fiorina was a disaster to the engineering culture at HP, even though her decision to move HP down the path of a services company should be viewed as correct.  Mark Hurd had a very low bar to exceed expectations, and did so with a bold acquisitions strategy and subsequent cost cutting aggressiveness.  HP already sells hardware, software and services, but the proportionate contributions of each to revenue, and hence, the relative important of each will be changing under Apotheker’s leadership.  The ship of state called HP may pivot a couple of degrees in 12 months. The lesson: A nimble and responsive startup must always be learning from its customers and its market, and can pivot multiple times in 12 months.  Don’t forget that.

Thirdly, it looks like HP will be focusing on software acquisitions to begin the strategic pivot.  Given Apotheker’s relative experience in enterprise software, but relative inexperience in acquisitions, we believe that he will want to get his feet wet with some smaller acquisitions that represent incremental features to existing software stacks, rather than strategic software acquisitions that he may not understand or fully appreciate.  He won’t want to be fired a second time from such a high profile position and will probably be somewhat gun shy given criticism surrounding Business Objects.  Apotheker will need to rely entirely on his subordinates for their advice – the same subordinates that just got passed over for CEO.  If you are a software startup that can utilize the buzzwords cloud and storage when describing your products, then HP should be among your first calls.

Fourthly, a weak Board trying to act disruptively will maintain its weak reputation.  Without a strong Board, or parents reminding you to cut the grass and take out the garbage, you will make business decisions that you may subsequently regret.  As a startup CEO, there is a tendency to believe your press regarding your vision and intelligence.  In other words, when you add key members to your team, make sure that they are more experienced and smarter than you.  Your Board members will appreciate that.

Lastly, if you do have a strong board, make sure that you use them as frequently as you can for counsel and guidance.  Those Board members really are there to help grow the company.  You may be afraid to call them with a problem because you don’t want them to realize that you are not another Einstein.  No one is.  Call your board members for advice.

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By Richard Piotrowski CFA is a former #1 ranked securities analyst, and the Managing Partner of Outram Research LLC, which focuses on assisting startups and prospective turnaround companies define an executable product strategy, competitive strategy, and an exit strategy.  You can follow Richard on Twitter: @Angelpitchdoc.  He can be reached at richard@outramresearch.com, or at his blog: angelpitchdoc.wordpress.com.  Also check out our website: www.outramresearch.com

About Richard Piotrowski, CFA

Richard Piotrowski, CFA, is a formerly a #1 ranked securities analyst, who has 20 years of experience building, dissecting, and fine tuning presentations, business models and valuation models of all kinds. The experience has been gained working in the investment community on both sides of "Wall Street", on "Bay Street" (Canada), as well as on "Main St." as Chief Financial Officer, Chief Operating Officer, as well as Evangelist and Marketing Director, where he focused on building messaging for solution sales opportunities based on value positioning, high ROI and fast payback. Richard joined Canada’s investment banking community in the early 1990s as an analyst following technology companies. He was recognized within two years by the Street, and was ranked "First" for Quality of Research in the survey of institutional investors conducted by an independent advisory firm – Brendon Woods. Richard was also the founding member of the internet technology research practice at two boutique investment banks.
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