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Comment by pak | Hacker News Reader

> 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.

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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.

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).

Most of the companies you mention are not counterexamples, because they were already big when they started acquiring and merging with other companies.

Big but I wouldn't say "huge" ... and they did tend to be bigger than the companies they were acquiring (Time-Warner was huge in other businesses before the acquisition spree really started). I mentioned "aggression" in your market as a requirement for becoming huge, but was it also something that led to them being big in the first place? I think there are people who act convincingly larger than they are, and the world grows to fit them.

There are a whole host of business requirements that can sink the process of becoming big. Adelphia failed because the Rigas family aggressively expanded the company, took it public but continued to treat it as though it was still family owned (I shouldn't say more). So the business acumen to run an enterprise at different sizes is important - I've seen leaders fail to hire appropriately, then delegate kill promising companies too. I think we could make a long list of reasons for failure.

larrys:

I'd love to hear your audio ... Jerrold was purchased by General Instruments who was in turn purchased by Motorola. Motorola added Jerrold's set-top boxes, to GI's trunk amplifier and line extenders (and other head-end equipment), then Motorola added both to their cable modem business and that conglomerate was ultimately bought by Google. Cisco purchased Scientific Atlanta who was the main competitor.

I will try to dig it up. Another person I interviewed was Ed Moldt who ended up years later being the head of the Wharton Entrepreneurial Center. At the time he was working on telemedicine a way that doctors could remotely diagnose patients by video.

At Wharton I interviewed the founder of Jerrold electronics.

Iirc (this was a long long time ago) his Philadelphia connection to Ralph Roberts (comcast) was how he built Jerrold (they made cable boxes).

Comcast of course grew large by starting and getting it's first cable franchise in a small town in Mississippi. Nobody chooses their cable company the cable company chooses you.

(I actually have an audio tape of that interview that I made.)

Time Warner is Time magazine, Warner Bros, HBO and TBS. All having massive word of mouth spread.

I should have specified Time-Warner Cable (which is now a separate company - http://www.nasdaq.com/symbol/twc).

"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."

With respect to Boeing one of the first things actually was a government contract that they received for the war effort. Then they nearly went bust after the war ended.

This is some of the story. There is also an excellent documentary on Boeing.

http://www.boeing.com/boeing/commercial/boeing_bio/chapter3....

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.

> 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?

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.

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.

Actually in the enterprise market Sam's point is even more true. The greater power of incumbents means that you can't get customers unless your product is better by a large margin.

Incumbents do have an advantage, but the other key in enterprise markets is that you have to recognize you're selling to executives who won't generally use your product, so you have to sell based on they perceive important, but deliver what the company actually needs. I have a lot of stories (those funny/ironic/sad ones) that I won't go into!

It is much, much easier to sell something that the buyer has already heard about from industry peers and generally sees the value of than to cold-call prospects and push products on them that they're indifferent to.

Companies can limp along for a few years with the latter strategy (I worked at one once), but they don't grow, and eventually they get sick of selling stuff that nobody wants to buy and close up shop. For the examples given (Cisco, Oracle), everybody who's in a purchasing position in the industries they serve has heard of them, and they go into a sales cycle "warm". The salesperson's job is to iron out the details and explain how to integrate the product into a customer's existing workflows to make them more efficient.

Reference customers are absolutely critical in the enterprise.

Agreed. All the companies @pak mentioned have matured past the rapid growth stage.

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/

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.

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

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.

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

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

He explicitly excludes monopolies, like TW and Comcast.

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.

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.

You cannot become a monopoly without having a better product at one point, unless you are friends with a dictator.

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.

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