When Amazon Threatened Its Business, This Company Decided to Work With the Enemy -- and Revenue Grew 500 Percent
Entrepreneur's New Year’s Guide
In 2012, Amazon was starting to become a real threat to our continued success. I was the newly-minted CEO of an IT services company, Logicworks, a top complex managed hosting company in an industry that was about to be completely overturned by Amazon Web Services. Our sales executives were struggling to sell our more “traditional” hosting services. Our engineers admitted (grudgingly) that Amazon’s product was not only a viable alternative, but a technically superior platform to anything they’d ever seen before.
What do you do when you realize your company faces near-unbeatable competition? We had two options: Keep selling the same products, which would probably sustain us for another few years, or take a big risk, stop defending our install base and transform the company’s business model.
So we took the scarier option and decided to partner with Amazon rather than trying to beat them, something that seems obvious now in retrospect. Five years later, our revenue has grown by nearly 500 percent and we just completed a $135 million recapitalization investment with Pamplona Capital. And while pivoting saved the business, it was not an easy process. We got through it better than most because of a few key structural and cultural values:
1. Respect the expertise of your existing team.
When we decided to become an AWS partner, we could have hired from the outside to ramp up our expertise. We could have pushed aside our existing team and devalued their experience.
Instead, we asked our existing team to become AWS experts. I’ve always believed in a “people first, process second, facts third” approach to business. Doing the right thing for your people and your customers leads to success. To make this a reality, I instituted “rituals” by creating regular touchpoints and increased accountability across all teams. Translated into regular staff meetings, one-on-ones, off-site strategy sessions and regular social gatherings, these rituals helped continuously establish and communicate strategic goals to keep the company focused and the employees well-integrated into the culture.
Today, our team has real-life experience on hundreds of AWS projects built on top of a strong background in traditional IT, and that diversity of experience makes them more valuable than any external hire we could ever make. We improved our business by becoming AWS experts and our staff improved their value, too. That said, we’ve had to hire like mad to keep up with our growth, and we’ll always make room on the roster for cloud experts across the business, with cultural fit as the key criteria.
2. Grow or die.
When we began transforming the business, “grow or die” became our mantra. But, this growth isn’t just about revenue; personal and professional growth are equally important.
Every individual at your company must take responsibility for developing themselves professionally and personally. Managers must set a clear professional growth path, but every individual must find opportunities to learn new technologies, business trends and grow within our ecosystem. We were fortunate; the clear majority of our staff decided to embrace AWS and the vast ecosystem and opportunity it presents in order to grow their careers with our business.
The “grow or die” mentality also means that every individual has a responsibility to tackle operational issues when they encounter them and wear a “sales” hat to help drive revenue through improved retention and willingness to go the extra mile for customers (existing and prospective). When you launch a new product or radically change your business model, there will be growing pains. Things will fail. If people beyond the c-suite are empowered to make process improvements, your business, your people and your customers will thrive.
In order to make a growing staff personally vested in your business’ growth, you need to be transparent about that growth. When I became CEO, I began sharing revenue and profit and loss numbers with everyone on staff regularly. Some staff members -- accustomed to companies where financial results are a closely held secret -- were surprised at the level of financial information I shared. But, for the sake of Logicworks’ growth, it was essential. How can everyone be invested in growth when they don’t know if they’re succeeding or failing?
3. Don’t stick your head in the sand.
When your industry is changing rapidly, it’s easy to stick your head in the sand and keep doing what you’re doing. How many businesses have gone under by thinking their competition was just a “fad” that their customers would ignore?
Just look at what most traditional IT players did in 2012: They said the public cloud was “not secure” and “not enterprise-ready”. Their marketing teams turned to differentiating themselves from AWS based on one or two minor values. Yet, it was perfectly clear that AWS was a superior technologically and growing by double digit year-over-year, and their customers knew it. We focused on customers instead of competition and still iterate our products and services based on what customers want vs. what competitors are doing.
If your industry is changing, don’t rely on clever marketing to try to seem cutting-edge. Build products that are cutting-edge. We not only began reselling AWS, we built a software platform that helps our customers automatically deploy and manage their AWS infrastructure. It turns out that this approach has better long- term economics than our core hosting business ever could with a larger addressable market and the ability to partner with the most interesting technology companies in the world.
In the process, we learned an important lesson -- a lesson that every industry is now learning -- that software, not hardware, is what differentiates businesses today, helps them scale and is what truly delights customers when executed well.
I encourage every entrepreneur to remain dedicated to their core values, even while your business or industry is facing big challenges. That’s worked for us and our success as a team speaks for itself. When you listen to customers, are honest about what’s working and what isn’t, hire the best, trust your team and dive headfirst into new technologies, you can keep your business relevant -- and if you’re fortunate, you can even blow expectations out of the water.