Death due to market share

I worked with company not too many years ago that woke up one day realized they had a problem.  Too much market share.  Over a 15 year period they had experienced phenomenal growth.  The company had started out as a decent size fish in a pretty big pond, they had about a 30% market share and were generally recognized as having a product as good as or better than most of the competition.  After some success with their research and development and probably some sharp marketing they launched a series of products that were generally recognized as market leading.

This period jump started several years of very healthy growth as they grew from 30% to over 80% market share.  Leaving the competition in their wake, their sales and profits continued to grow at impressive rates.  Even in a corporation success tends to breed ego and no one noticed that the technologies in their markets were changing.  Maybe they just just chose to ignore the change, but the technology was changing in such a way that you if you looked another 10-15 years down the road their products would eventually be obsolete and they were left with a huge share of shrinking market.

I give you that background because if you had asked me last week did I think Intuit, the makers of Quickbooks, was headed down that same path, I probably would have said 'yep', followed by Microsoft which was right behind them and might even get there first.

I know what you are thinking and I am certainly not saying that either of these companies were going to go away any time soon.  That is the problem with business today, we have too short of an attention span.  If it is not going to happen in the next month or year, we don't think of it as going to happen at all.  Technology and especially the internet have reinforced this view, because markets can change very rapidly these days.  The truth however is that well established markets with large players tend to die very slowly, a little bit at a time over a period of more than a decade.

Then on Friday I read the announcement that Microsoft and Intuit have agreed to join together their cloud efforts at developing new applications aimed at the 27 million small businesses using Quickbooks.  The truth is both players are showing up kind of late to the game.  Over the past 1-2 years, there have been a lot of really good web based applications released and they are aimed straight at those same 27 million small businesses using Quickbooks.  Very much like Intuit was seen when it released Quickbooks in 1998, these new upstarts are probably on to something.  The best products in the world are created because someone recognized a need and came up with a novel way to meet that need.  Unfortunately large companies that already have significant market share are often very slow to recognize needs and even slower to come up with revolutionary ways to meet those needs.  They usually prefer evolutionary rather than revolutionary change.

Give Intuit and Microsoft credit, they did show up and both companies have a huge established user base, but I think the ultimate success or failure of this new partnership is going to depend on just how far outside the box these two established players are willing to go to meet needs.