Episode 8 Acompli, Sunrise, and Wunderlist (w Kurt DelBene)

In this episode of Acquired, hosts Ben Gilbert and David Rosenthal, along with guest Kurt DelBene from Microsoft, discuss the strategic acquisitions of mobile productivity apps Accompli, Sunrise, and Wunderlist. These acquisitions, totaling nearly half a billion dollars, underline Microsoft's commitment to dominating mobile productivity and maintaining leadership in the Office suite ecosystem. DelBene emphasizes the importance of retaining the acquired teams' talent and culture, keeping them in their original locations, and integrating them into Microsoft's broader strategy. He also highlights that success metrics for such acquisitions are not strictly financial but focus on user engagement and product excellence. The acquisitions are positioned as a proactive move to ensure Office remains the go-to productivity suite across all platforms, despite the potential tensions between different business segments within Microsoft.

• Pilot is a comprehensive accounting service for startups and growth companies.
• It is the largest startup-focused accounting firm in the U.S.
• Pilot handles accounting, tax, bookkeeping, and CFO services like investor reporting and budgeting.
• They service a wide range of companies, including OpenAI, Airtable, and Scale.
• Pilot's services allow startups to focus on their core product and customers, outsourcing non-core activities.

"Pilot is the one team for all of your company's accounting, tax and bookkeeping needs and in fact now is the largest startup focused accounting firm in the US."

This quote emphasizes Pilot's role as a one-stop-shop for financial services for startups, highlighting its position as the largest in its niche in the U.S.

• Startups should focus on what improves their product and customer experience.
• Non-core activities, like accounting, should be outsourced.
• Accounting is essential but does not directly impact the product or customers.

"Jeff's AWS inspired axiom that startups should focus on what makes their beer taste better."

The quote refers to Bezos's philosophy that companies should concentrate on their unique value propositions and delegate secondary functions.

• Pilot provides a full suite of financial services.
• They have years of experience across thousands of startups.
• The firm can scale services as companies grow.

"Pilot both sets up and operates your company's entire financial stack."

This quote explains Pilot's role in managing the entire financial operations of a company, from basic bookkeeping to high-level financial strategy.

• Pilot offers a discount to listeners of the Acquired podcast.
• The discount is 20% off the first six months of service.

"All acquired listeners, if you use that link, you will get 20% off your first six months of service."

The quote provides a specific promotional offer for the podcast's audience, incentivizing them to try Pilot's services.

• Kurt DelBene's career includes time at Bell Labs, McKinsey, and a 20-year tenure at Microsoft.
• He was the president of Office until December 2013.
• Post-Microsoft, he worked on repairing healthcare.gov.
• DelBene returned to Microsoft as EVP of Corporate Strategy and Planning.

"Kurt started his career actually at the very famous and renowned Bell Labs and spent five years there and then went to booth and got his MBA at Chicago, went to, did a short stint at McKinsey after that, and then went to Microsoft and had an over 20-year career at Microsoft that culminated when Ben was there in Kurt being the president of office, which he was until December 2013."

This quote outlines Kurt DelBene's professional background, highlighting his extensive experience and leadership roles.

• Microsoft acquired Acompli, which became the mobile Outlook on iOS and Android.
• Acompli was founded in April 2013 and acquired by Microsoft in December 2014 for $200 million.
• Microsoft also acquired Sunrise, a calendar app, and Wunderlist, a to-do list app.
• These acquisitions were strategic to enhance Microsoft's productivity suite on mobile platforms.

"The main focus is going to be Acompli, which is now the mobile Outlook on iOS and Android."

This quote introduces Acompli as the primary focus of the acquisition discussion, now known as mobile Outlook.

• Microsoft is transitioning to a mobile-first, cloud-first company.
• The shift involves providing excellent cross-platform experiences and services.
• The strategy includes offering free mobile apps on various platforms.
• Microsoft looks to tiered services and subscriptions to generate revenue in the mobile space.

"Microsoft shifting from the windows and office company to a mobile first cloud first."

The quote captures Microsoft's strategic pivot towards prioritizing mobile and cloud services over traditional software sales.

• Office 365's cloud versions are strong revenue streams.
• Microsoft offers a free mobile experience with additional paid features.
• The company packages client experiences across devices into subscriptions.
• Microsoft aims to provide the best office experience on all popular devices.

"You've got to have a certain free experience and then you can think about having a paid experience incremental to what the expectation in the market of what is free."

This quote discusses the business model of providing a base free experience with the option for users to pay for additional features.

• Microsoft emphasizes a seamless user experience across different devices.
• The development of Office for iPad and Office 365 was part of this strategy.
• A unified inbox experience is important to consumers, as seen in the adoption of Outlook and the Accompli acquisition.
• Historically, email and calendaring were separate products; Microsoft integrated these into Outlook.
• The integration of different functions like mail, calendaring, and tasks into a single user experience has been a successful approach.
• The mobile paradigm differs, with distinct applications for different use cases.
• There is no current plan to deeply integrate Wonderlist with Accompli, as each has its unique personality and use case.

"Well, we did get around to shipping that."

This quote refers to the successful launch of Office for iPad, exemplifying Microsoft's commitment to cross-platform integration.

"Yeah, I think that accompli does a great job of giving you a single unified inbox, Windows Phone also on its client."

Kurt DelBene highlights the unified inbox feature of Accompli, which was a strategic part of the acquisition and reflects the user's expectations for integrated experiences.

"But this notion that things come together and become unified, it really just follows how people expect to use the product."

Kurt DelBene explains the evolution of user expectations that led to the integration of separate functions like email and calendaring into a unified product like Outlook.

"I think you find calendaring deeply integrated. That's why Sunrise got integrated into comply."

Kurt DelBene discusses the integration of calendaring into mobile email applications, citing the integration of Sunrise into Accompli as an example.

• Retaining the talent and personality of acquired teams is crucial for Microsoft.
• Microsoft avoids fully assimilating new teams, instead using the acquisition to accelerate the team's objectives.
• Acquired teams often remain in their original locations, leveraging Microsoft's global presence.
• The skills and vision of the acquired teams are recognized and utilized, as seen with Javier Soltero's leadership role in Outlook.
• Balancing synergy with existing Microsoft products and maintaining the unique aspects of acquired products is a delicate process.
• Feedback and agility are encouraged within teams, even after acquisition.

"It is super important for us to retain both the particular talent, the fact that they're a team as well, but also the personality of the organization itself."

Kurt DelBene emphasizes the importance of preserving the unique characteristics and talent of acquired teams within Microsoft.

"The wonderless guys are in Germany, and they love being there, and we're just as happy to have them there as well."

Kurt DelBene explains that retaining the original locations of acquired teams is often beneficial and supported by Microsoft's global structure.

"And so we definitely look for cases like that as well."

Kurt DelBene indicates that Microsoft actively seeks opportunities to leverage the expertise of acquired teams, such as promoting Javier Soltero to lead Outlook.

"And it seems like that team, and I'm not certain, but I think he was at Microsoft pre acquisition. So it seems like some of that DNA sort of bleeds into the existing team and kind of lights a fire."

David Rosenthal comments on the positive influence of acquired teams on existing Microsoft teams, suggesting a mutual benefit and exchange of culture.

• Integrating leadership from acquired companies into Microsoft is generally well-received.
• New ideas and teams are embraced by Microsoft employees.
• The promotion of Javier Soltero to a significant role at Microsoft is seen as a genuine recognition of his skills.
• The success of an acquisition often hinges on the talent and vision of the leadership of the acquired company.
• Microsoft's due diligence process includes assessing talent and ensuring key people are retained post-acquisition.
• Acquiring the best product in a category can be crucial, as it aligns with Microsoft's goal of providing leading solutions.

"It's not as hard as you might think."

Kurt DelBene suggests that integrating new leadership and teams into Microsoft is smoother than expected due to the company's openness to new talent.

"It truly was a recognition that he has skills that we want to leverage more broadly than just within the Accompli team per se."

Kurt DelBene discusses Javier Soltero's promotion, acknowledging his abilities and the intention to utilize his skills across Microsoft.

"I would not say that there are times when we actually do look for talent. As I discussed earlier, talent as the primary reason for doing an acquisition."

Kurt DelBene clarifies that while talent is a consideration in acquisitions, the primary reason is the product itself, which was the case with Accompli.

• Acquiring leading products like Accompli, Wonderlist, and Sunrise is strategic for Microsoft.
• Microsoft recognizes the importance of individual applications' pull in the market.
• The acquisition of Accompli allowed Microsoft to boost its mobile email presence and leverage Accompli's growing user base.
• The talent and background of leaders like Javier Soltero from acquired companies can influence the decision-making process.
• The broader vision and potential market reach are key factors in Microsoft's acquisition strategy.

"It's a good question. I think above all, we now live in a world where individual pull of applications is in particular categories like email is incredibly important."

Kurt DelBene acknowledges the significance of leading applications' ability to attract users independently of Microsoft's influence.

"It just makes a ton of sense and it works out super well."

Kurt DelBene expresses that when the acquired company is a leader in its space, the acquisition is logical and tends to be successful.

"Why is it so important to have the absolute best clients?"

David Rosenthal questions the importance of acquiring the best applications even when they are free and can access services from Microsoft and others. Kurt DelBene's response highlights the pull of individual applications in the market.

• Acquisitions can be strategic moves to obtain the best products in a category, especially in competitive markets like mobile.
• Overcoming a leader with strong end-user pull is challenging, making it less desirable to settle for second best.
• Acquiring a client app can be crucial as it is the front door to the consumer experience and owning it secures the customer relationship.

"And in that case, if you're also having to overcome the fact that there's a leader in front of you that's got incredible end user pull, it's just not worth settling for that second best app."

The quote highlights the importance of being the market leader in consumer applications to avoid the struggle of competing with established brands that have strong user engagement.

"So I guess there's always that risk that that client app could start prioritizing a different service. You don't own that customer relationship at that point, unless you're the leader with the client interface."

This quote emphasizes the risk of not owning the client app, which can lead to prioritization of competing services and loss of customer relationship control.

• Acquisitions are not typically made to keep products away from competitors but rather for the product's inherent value.
• Microsoft focuses on product and technology-driven acquisitions rather than strategic moves to block competitors.
• Acquisitions involve risk, and companies prefer to be driven by positive product development rather than defensive strategies.

"It is a kind of nice byproduct in some cases where we think there's a good reason to have this application. And by the way, we'd rather the other guy didn't have it."

The quote suggests that while preventing competitors from acquiring a product can be a secondary benefit, it is not the primary reason for an acquisition.

"At the heart of it, the other thing I would say is Microsoft is we are a product and a technology driven company."

This quote reinforces Microsoft's approach to acquisitions, focusing on enhancing their product offerings and technological capabilities rather than making strategic plays against competitors.

• The success of acquisitions can be debated, with varying opinions on their outcomes.
• YouTube's acquisition by Google was speculated to be partly driven by the motive to keep it away from competitors.
• Acquisitions are complex and their success can be measured in various ways, including financial performance and strategic fit.

"We gave it a c, or at least I did."

The quote reflects a critical evaluation of the YouTube acquisition, suggesting it may not have been as successful as hoped in terms of financial returns or strategic goals.

"YouTube ten years later is a break even business."

This quote presents a perspective on the financial performance of YouTube, indicating that it may not have been highly profitable over the years.

• Acquiring products that align with a company's vision is essential.
• Acquisitions should be driven by the desire to improve and integrate the product into the existing ecosystem.
• The goal is to enhance user experience by providing seamless integration between different applications.

"That would have been really messed up."

The quote from Ben Gilbert reflects the potential negative impact of acquiring a subpar competitor product and the importance of strategic fit in acquisitions.

"At some point, you don't want to mess with success and there's a certain set of legal things you got to do to make it a Microsoft product."

This quote by Kurt DelBene indicates the balance between maintaining a successful product's core functionality and fulfilling legal requirements to integrate it into Microsoft's offerings.

• The focus on mobile productivity is critical, as mobile devices are used differently from desktops.
• Acquisitions can reenergize business lines by providing a strong presence on mobile platforms.
• Understanding and catering to the primary use cases of mobile users is key to successful product strategy.

"You want to fire up word to read that attachment."

Kurt DelBene's quote illustrates the importance of creating integrated mobile experiences, such as being able to open email attachments with Word on a mobile device.

"It's not just that you imagine doing the same things on a mobile device that you do on your desktop. They're just different."

This quote underscores the necessity of rethinking product usage scenarios for mobile devices, as they differ significantly from desktop usage patterns.

• Innovation is not confined to a specific location; it is a global phenomenon.
• Quality products can emerge from anywhere, and companies should focus on the product rather than the location.
• The mobile-first, cloud-first world has enabled distributed innovation, allowing companies to tap into talent and ideas worldwide.

"Innovation can come from Redmond and Mountain View and San Francisco and Seattle, but also Berlin and also London and also New York."

David Rosenthal's quote encapsulates the distributed nature of innovation in the technology sector, highlighting that high-quality products can originate from various global tech hubs.

"What's important isn't so much the location, it's about the quality of the products."

This quote further emphasizes the primacy of product quality over geographic location in the context of technological innovation and company acquisitions.

• The concept of Bring Your Own Device (BYOD) has evolved to Bring Your Own Client (BYOC).
• BYOC reflects the consumer expectation to choose how data from mandated services is presented.
• The choice extends to software used to consume services, not just the hardware.
• Owning the unified experience across best-in-class applications is advantageous.

"The one for me is translating a theme that we heard about over and over and over again five years ago, kind of one level up the stack. It's been out of the news cycle recently, the phrase bring your own device. Because we all know that, yes, the BYOd world is here to stay."

The quote explains the transition from the well-known BYOD trend to a more software-centric approach, emphasizing the permanence of this cultural shift in technology use.

• The desktop OS wars have ended, and no single mobile OS has emerged as a clear winner.
• Consumer interest in technology has shifted from operating systems to applications and may soon move to the messaging layer.
• This shift signifies a change in where technology meets consumer needs.

"Certainly the desktop operating system wars have been over for a long time, but the mobile operating system war is over too, and nobody won."

The quote highlights the end of the intense competition between operating systems and suggests a new focus for technological innovation and consumer engagement.

• Good products with deep user consideration rise to the top.
• Successful acquisitions include keeping teams energized and located where they are most effective.
• Microsoft aims to improve its acquisition strategy continuously.

"It's that good products rise to the top inevitably."

The quote emphasizes the natural success of well-crafted products in the market, which is a key consideration in Microsoft's acquisition strategy.

• Acquisitions must be supported by both product group leaders and the CEO.
• Cross-platform compatibility was a fundamental premise for certain acquisitions.
• The goal is not to balance priorities to mediocrity but to strive for excellence in all areas.

"And in this case for these apps, it was clear that cross platform was a key part of the acquisition premise."

The quote identifies the importance of cross-platform functionality as a central factor in the decision-making process for acquisitions.

• Not all acquisitions are measured financially; user engagement and category progress are key metrics.
• Goals for acquired products focus on monthly active users and product engagement.
• Customer sentiment and the value of multi-product users are also analyzed.

"You can't. And we don't look for a financial measurement on everything that we do."

This quote clarifies that Microsoft does not solely rely on financial metrics to judge the success of acquisitions, focusing instead on user engagement and progress in product categories.

• The success of acquisitions is measured differently depending on the situation.
• It's challenging to attribute financial value to recently acquired properties.
• The discussion highlights the opacity of acquisition goals and outcomes.

"Yep. Definitely differs by acquisition."

The quote acknowledges that Microsoft uses different metrics and approaches when evaluating the success of various acquisitions.

• Personal experience with Microsoft's productivity tools reflects positive outcomes from acquisitions.
• The contrast with less successful ventures, like Apple's Siri, highlights the importance of strategic acquisitions.
• The success of productivity tools like Wonderlist and Outlook for iOS is acknowledged.

"And here we are several years later, and I am 100% an Apple guy and I love my cloud services and Dropbox and Slack."

The quote provides a personal testament to the effectiveness of Microsoft's productivity tools, despite the speaker's preference for competing platforms, underscoring the impact of Microsoft's acquisition strategy on consumer behavior.