The single metric Larry Ellison obsessed about when building Oracle

Larry Ellison built Oracle from a scrappy 3-person startup into a 200 billion dollar tech mammoth by obsessing over a single metric.

Doing this helped them beat IBM (and other competitors), whom all had more resources and way better products.

Here's the story.

It's 1977, and Larry Ellison reads a research paper by IBM and sees a new product category emerging - relational databases.

He discusses it with 2 colleagues, and they decide to enter the space.

They put together $1,200 & found Oracle.

Relying on that IBM research, they build their 1st product.

It's like a model plane assembly.

IBM gives them the pieces. They put it together.

Fast.

Oracle launches its first product faster than IBM gets theirs from the research department to the development department.

The first product is faulty, buggy, and doesn't work correctly.

But that's not a problem.

Larry Ellison knows that to compete against (bigger & better funded) competitors, they must be faster and nimbler.

The goal is to grow market share as fast as possible.

The idea is: ship something, sell it, grab market share, win

This becomes the culture of Oracle.

Market share growth becomes the single most important thing the whole company strives for.

Not the best product, nor innovation.

Oracle becomes obsessed with gaining new customers at all costs.

Larry knows that if people associate Oracle with the category, it'll play out in the long term.

"How much does it cost Pepsi to get one-half of one percent of the market from Coke once the market has been established?" - he says

Over the years, Oracle keeps building products, but they are never as good as they claim to be.

Resources are poured into sales & marketing.

Acquiring new customers, rather than making current ones happy.

The market keeps growing. So does Oracle.

What helps them is that a lot of the customers are early adopters & technophiles.

They don't mind if everything doesn't work properly. They love new tech. It's better what they have now.

Also, the competitors aren't as good at customer acquisition.

For 15 years, Oracle is doubling every year.

But in 1992, it crashes.

They miss numbers, and the stock drops from $28 to $4.87.

Due to the crazy pressure of growth, the company is in a chaotic state.

Financials are a mess.

A lot of uncollected invoices, "too good" payment terms - lack of cash flow.

The company has been so focused on market share growth that everything else is duct-taped together.

The system has rewarded making deals "no matter what."

Larry brings in professionals to get the company organized.

They start emphasizing product development & customer support.

They stop chasing such high growth numbers.

They organize finances.

They have enough market share now.

They become a real business.

And they succeed at it.

Today Oracle has a $232.88 billion market gap.

But based on what I've heard, Oracle's products aren't still as good as competitors...

But their sales & legal teams are way better.