More on Retention Vs. Acquisition – Sycamore Story

Right after my article on customer retention vs. acquisition (which was triggered by several live tweets I saw from certain loyalty conference) I saw the story of Sycamore networks,

Sycamore Networks: From $45 Billion to Zilch

The fifteen year old company known for its high flying stock from the 2000 bubble days ended the day with the decision to close down and liquidate remaining assets.

What went wrong? According to the WSJ article

analysts say the company’s demise also reflects strategic missteps—sticking with its initial product line as the market declined

It had one product that was relevant only to its original customers and failed to see how the market was evolving or where the new needs are arising.

They never kept pace with market development and never got customers.

In other words Sycamore failed to acquire new markets and in that process lost existing customers as well.

Engineers had figured out how to send much higher quantities of information by routing pulses of light down fiber-optic cables rather than relying on electrical signals sent across copper wires. Sycamore’s niche was to help network operators manage those pulses of light more efficiently.

Sycamore was loyal to its product and happy with its original customers. Even there it seemed to have failed to ask, “what job customers were hiring its product for” (i.e., the real need).

This is one just story and likely suffers from hindsight bias and selective recall. So do all the positive stories you hear about customer retention and loyalty. But one thing you need to care and apply diligently is the need for actionable business strategy rooted in data.

If your strategy is wrong it does not matter what rating your customers say on a 0 to 10 scale.