The technology used to conceive, design and fabricate the objects around us is complicated. It may be difficult to understand if you're not a practitioner, yet businesses routinely entrust their most important processes to these tools. Our Hot Topics blog tries to clear up some of the confusion.

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Hot Topics

Stratasys to acquire GrabCAD

I’m at the Autodesk #AcceleratePLM14 conference about PLM 360, so can really only reblab the press release — deeper analysis to come. But you knew something like this was the endgame, right?

The juicy parts of the press release:

“Stratasys … today announced that it has entered into a definitive agreement to acquire privately-held GrabCAD, Inc. in an all-cash transaction. Terms of the transaction were not disclosed. The transaction is expected to be completed by the end of September, subject to the fulfillment of customary closing conditions. Upon completion of the transaction, GrabCAD will operate as a unit within the Stratasys Global Products and Technology Group. Hardi Meybaum, Co-founder and Chief Executive Officer of GrabCAD, will continue to lead GrabCAD within the group.

The acquisition is expected to enable Stratasys to provide its customers with enhanced collaboration tools and improved accessibility relating to 3D CAD content. The addition of GrabCAD Workbench provides Stratasys with an opportunity to drive communication and ease of use throughout the 3D printing process and grow its technology solutions and user communities.

“The addition of GrabCAD provides Stratasys with a leading cloud-based collaboration platform for engineering teams to manage, share and view CAD files,” said David Reis, Stratasys Chief Executive Officer. “By increasing the collaboration and accessibility of 3D CAD files, we believe we can further accelerate the adoption of 3D printing solutions and Stratasys’ product offerings. Together with GrabCAD, we believe that we will accelerate innovation and provide increased value to a growing universe of customers seeking to utilize 3D printing solutions. We also welcome GrabCAD’s active and important community to the Stratasys family. The potential within our 3D ecosystem is very exciting.”

Through its acquisition of GrabCAD, Stratasys expects to gain:

Knowledge: With the addition of GrabCAD, Stratasys gains an industry leading team of software professionals with a deep understanding of the needs of designers and engineers.
Products: GrabCAD’s cloud-based collaboration platform, Workbench, will enable Stratasys to offer customers a solution to drive communication and ease of use throughout the design and 3D printing process. GrabCAD also provides Stratasys with the opportunity to further partner with CAD vendors and other ecosystem partners while offering innovative collaboration tools related to 3D CAD.

Community: GrabCAD has built a global, leading and fast growing community of mechanical engineers and designers, with 1.5 million users who are passionate about design. This includes a large online community of M-CAD users and a significant public online repository of free CAD files, with more than 500,000 CAD designs available for download and nearly 50,000 file downloads per day.”

You can read the whole press release here.

Quick update: Tech Crunch, usually pretty reliable, says the deal was for “around $100 million.

ESI’s Q2 down due to currency, realignment, deals pushed to Q4

EarningsThe second report in a few days shows that it’s getting tougher out there. On Friday, AVEVA reported that currency was taking its toll and that its sales force realignment was taking time to prove positive benefit. Yesterday, ESI Group reported that FQ2 2014 revenue fell 1% as reported due to exchange rate effects, changes in its services go-to-market and the postponement of deals to FQ4. They may operate in very different parts of the engineering continuum, but we’re starting to see a theme: deals postponed, currency, caution.

ESI’s FQ2 details:

  • Total revenue was €22.5 million, down 1% as reported but up nearly 2% in constant currencies (cc).
  • License revenue was €15.5 million, up 1% as reported as up 4% in cc.
  • ESI said that new business (as measured in products and customers) up 6% y/y as reported and up 9% in cc (though no real numbers were given).  ESI said this growth was driven new accounts in the United States, Japan and South Korea, focused on virtual manufacturing and virtual reality (IC.IDO).
  • Service revenue was €7.0 million in the quarter, down 5% as reported and down 3% in cc. ESI said this is due to a refocusing on high-end services, chiefly in the US.
  • By geo, revenue in cc was 41% from Asia; 42% from Europe and 17% from the Americas. Revenue from the BRIC countries fell from 14.3% to 13.3% of total as contracts in Russia and China were pushed out to the end of the fiscal year. Last year, revenue was 40% from Asia, 41% from Europe and 19% from the Americas.

CEO Alain de Rouvray said that he expects the impact of currencies and the repositioning of the services offering to attenuate during the rest of the fiscal year: “These effects … are not expected to undermine the Group’s business momentum, leaving intact the potential for revenue growth over the full year. We will therefore continue to follow with confidence our roadmap.”

That last bit, the confidence, was missing from AVEVA’s statement last week. ESI may release more information in a few week; AVEVA’s holding an investor day on Wednesday — is this a trend or are these isolated instances?

AVEVA’s H1 update = uh oh

EarningsAVEVA issues periodic trading updates in between the more formal and detailed announcements every six months. These interim press releases typically don’t say much — but every so often something interesting slips through. This time, the nuggets aren’t joyous.

In the 12 September 2014 update, AVEVA said that it expects to take a £14 million hit in H1 2015 because of unfavorable currencies and the fact that its license renewals are weighted towards the end of the year. Add in a sales force reorganization, and revenue expectations fall. But that’s not all. The company reports “a reduction in demand in South America and parts of Asia, set against double-digit growth in China … [lead us to expect] reported first half revenue in the range of £84-90 million, dependent on the timing of contract signings.”

That’s a 20%ish decline from H1 2014 revenue of £109 million, itself an 11% increase over H1 2013. AVEVA had warned of currency issues, and had made public the sales reorg, but the news was worse than expected and sent shares down nearly 25% in Friday.

I’ve heard rumblings that there is a slowdown in offshore platform work going to shipyards in Korea; it’s possible that this is part of the problem AVEVA ran into. AVEVA also indicated that it has seen no change in the competitive environment. That’s investor-speak for “these problems are macro-economic or of our own making; a competitor isn’t taking deals away”. That, at least, is good news since it means AVEVA may be able to fix some of the underlying problems.

H1 ends on September 30, so we won’t know exactly what happened in H1 until mid-November. In the meantime, AVEVA is hosting an investor day on Wednesday and we should learn more about the problems in Asia and South America and AVEVA’s response.

Siemens PLM grows into the AG — a good thing

Every year, Siemens PLM holds an analyst event to talk about its strategy, how it sees the PLMish industry evolving, and its product and go-to-market plans. It’s wall-to-wall PowerPoints, from the company, its partners and customers. A couple of general highlights from the event, in no particular order:

  • The bond between Siemens PLM and its customers is real. We all know that Siemens wouldn’t pick clients to address us who weren’t strong proponents but even so, I was impressed by how often they used expressions like “our partner”, “couldn’t meet our objectives without”, and “[technology, solution, etc.] matches our needs and direction”. The speaker was often talking directly to Siemens PLM CEO Chuck Grindstaff about his company’s gains as a result of the relationship with Siemens PLM — strong endorsements from the biggest manufacturing concerns in the world.
  • Cloud, social, mobile and big data are still the main topics — nothing new. Mr. Grindstaff and Paul Sicking, SVP, Chief Technology Office, told us how those four technology areas inform Siemens PLM’s focus:

Screen Shot 2014-09-14 at 12.37.27 PM

  • The “smart innovation platform” is Teamcenter — but not the monolithic thing you may be thinking of. It’s being streamlined for small to large companies, app-ized for specific purposed like supplier management, and “catalyzed” for specific industry processes. Siemens PLM’s targeted verticals use Teamcenter and the rest of the portfolio to create intelligent models, the digital representation of every facet of a product design and its manufacturing process. After manufacturing comes services; before detailed design comes concept creation and alongside it comes simulation and test. It hangs together.
  • The brands tend to get a bit lost in all of this, so it was good to hear that each continues to fill out capabilities and take advantage of new compute and cloud capabilities. The most interesting presentation was by Jan Leuridan, CEO of the Simulation and Test Solutions Business Segment (fka LMS). Mr. Leuridan said that the integration of LMS with Siemens PLM on track, and that the business is seeing “double digit [revenue] growth” (but no more details than that). Mr. Leuridan quickly moved on, talking about how STS boosts Siemens PLM’s offerings in the strategic automotive, aerospace and energy verticals because it enables closed-loop, systems-based views into design.  He said that Virtual.Lab and Samcef feed into 3D systems simulation while Amesim (aka Imagine.Lab) is used in 1D system synthesis, all supported by Test.Lab and SCADAS for test-based engineering. Integrating all of this with Teamcenter and NX takes time, but is proceeding well and will ultimately result in scalable 1D to 3D simulation with real-time virtual to physical and back again. It’s unique — no one else can boast the combination of CAE/simulation and physical test; 1D, 2D and 3D.
  • On the business front, Siemens PLM stayed stumm. Tony Hemmelgarn, EVP, Global Sales, gave a few tantalizing hints that I still haven’t had time to parse: Total revenue is up 7% on a compound annual growth basis from 2009 to 2013; organic license revenue is up 13% on the same basis. Mr. Hemmelgarn believes that Siemens PLM grew faster than PTC and DS in 2013 — though I need to check on the numbers and basis of presentation. We’ve got calendar vs fiscal, Dollars vs Euros, organic vs acquired — it’s a mishmash that will take time to detangle.
  • The lack of numbers is frustrating but typical of mega conglomerates like Siemens. I can imagine that the company is more forthcoming when customers demand answers … I’ll get into the details and try to write more about it soon.

Siemens also spent a lot of time covering its strategy in various end-industries. I attended as many sessions as I could and it’s clear: Papa Siemens , the AG, is finally figuring out how to combine the PLM assets with his vast array of industrial machinery, medical imaging and other products to create tailored solutions for select industries. At the analyst event and then at the SMM conference in Germany (more on that soon), Siemens PLM spoke about delivering digital models to designers and owners along with the actual, physical generators to help in layout and simulation –not there yet, but coming– as a harbinger of future interaction between systems designers and their suppliers. That’s a good thing, and a differentiator for Siemens among its competitors and for the PLM business, too.

My takeaways: No big product announcements or wins so the message was continuing focus and execution, ongoing customer successes and moving each product forward. Incremental, perhaps, but strong nonetheless. Incorporating the intellectual property of other Siemens divisions into PLM solutions (or soliciting their input into the solutions, as internal customers) creates best practices that are proven before they even hit commercial air. Someone said that Siemens PLM is “mining” the AG — seems to me a golden strategy.

More on SMM and the Siemens marine/shipbuilding offer soon — it’s a crazybusy time of year. In the meantime, check out this eye candy: ships, props and machinery. Oh my.

Image courtesy of Siemens PLM.

Note: Siemens graciously covered some of the expenses associated with my participation at the event but did not in any way influence the content of this post.

Trimble consolidating AEC at DS’ expense

EarningsTrimble Navigation today announced that it has acquired Gehry Technologies (GT), a venture created by architect Frank Gehry a decade ago to build design and project collaboration technology to help bring his big, complicated, signature building projects to completion.

You may recall that GT also had secured investments from Autodesk and Dassault Systèmes (DS) … And that Trimble already has Tekla which sells BIM (Building Information Management) and collaboration solutions, and Prolog for web-based construction project management, as well as SketchUp for lighter-weight design processes. It’s all a bit of a mash-up, so let’s see if we can make sense of it.

The majority of Trimble’s business is solutions for the construction, civil engineering, and farming industries — from GPS devices for tractors and backhoes that make sure that rows of crops are straight and the right amount of soil is taken out for a foundation hole, to steel detailing software and project planning. The architectural and design software is a smaller part of the business to date, but Trimble has never been shy about its intention to create value by smoothing out the AEC supply chain.

Gehry Technologies created GTeam, a Web-based 3D file management and project collaboration platform, and Digital Project, a BIM solution based on DS’ CATIA. Both were created with architect Frank Gehry’s needs in mind — practical AEC solutions, implemented on Mr. Gehry’s often unusual projects as well as sold commercially to third parties. GT has a global team of architects, engineers, builders and computer scientists fine-tuning these offerings. When I’ve spoken to GT representatives, they always turned the conversation back to project delivery, the need to optimize the creativity of architecture with the realities of engineering and high-precision fabrication and assembly.

Steve Berglund, Trimble CEO, said that this combination was interesting to Trimble because of the potential “for transforming the entire design-build-operate continuum. Gehry Technologies has been key in allowing [Mr. Gehry] to realize the potential of his designs without compromising cost or schedule. Together, we expect that our common commitment and our combined capabilities will accelerate the adoption of technology in this trillion-dollar industry with resulting breakout benefits.”

What does it all mean? Trimble is snapping up players in AEC at an incredible clip. This one happens to have been a DS and Autodesk stepchild. Autodesk has a solid AEC product set of its own, though not with the caché Mr. Gehry’s name brings. DS is bringing AEC products (aka experiences) to market, too, currently emphasizing construction planning and façade fabrication and not (yet?) full-up BIM. If DS invested in GT with an eye to an eventual acquisition, it clearly lost out.

Financial details weren’t disclosed, and we don’t know whether or how much Autodesk and DS were paid for their original investments. Gehry Technologies will be reported in Trimble’s Engineering and Construction Segment.

Wrangling your simulation data

CCR_Mai-Juni_2012_08_PLM-T.inddSimulation is incredibly powerful. It can help us create better, more durable and useful products. Simulations save money during product development because we’re not making and breaking physical prototypes. We can try out more designs virtually than we ever could if we had to manufacture them — but too many design teams are wasting both time and energy on simulation because they’re not tracking what they simulate, the results they see and the decisions they make based on those runs.

How can you capture that value? By keeping tabs on what you’re doing and why. Depending on your industry, you may actually have a regulatory mandate to do this; even if you don’t, it’s a great idea.

Head over to the PTC Creo blog to read more.

Image courtesy of PTC.

Solid Edge subscriptions: affordable, professional CAD

The Siemens analyst event is chockfull of content and I hope you’re following #SPLM14 on Twitter for live updates. There’s more to come from me after the final presentation has faded to black, but I’d like to quickly focus on Solid Edge, a brand that’s often overlooked in the massive portfolio that is Siemens PLM, and the subscriptions now available in an online store.

Earlier this summer I attended Solid Edge University, where feature enhancements and cool toys almost but not quite overshadowed how Siemens PLM is working to bring Solid Edge to more, new customer types: subscriptions. Today, Karsten Newbury, SVP and GM of the Mainstream Engineering part of the PLM organization, gave an update on the Solid Edge online store and customer adoption of subscriptions.

Mr. Newbury said that Siemens PLM wants to make Solid Edge accessible to even the smallest of companies or project teams, and to provide a cost-effective way for larger groups to add Solid Edge licenses for temporary peak users without incurring the full cost of a perpetual license. The subscription program fulfills that vision.

I’ve been working on a brief to help customers understand subscriptions and the Solid Edge store and interviewed a number of subscribers to get their reactions. Every customer I spoke with had only good things to say. Take a look:

SE Subs CoverMr. Newbury said that the subscription pilots have been so successful that Siemens recently started rolling out the online store in Europe, which means it’s now available in over 20 countries. Siemens is also working on a rollout Asia. This isn’t as easy as you might think: the online store handles the transaction, so needs to process credit cards and comply with local merchant practices. Each transaction also starts a chain reaction that connects the buyer to a reseller for support — that means a lot of behind-the-scenes work to connect channel partners into the online store ecosystem.

There’s a lot more to say about Solid Edge, and I’ll try to recap that next week along with the rest of the Siemens PLM analyst event. There are app stores, offerings for everyone from students to “makers” to startups to established businesses, a portfolio that runs from CAD to simulation to data management — the Solid Edge story is all about creating “easy solutions for productivity and innovation”.

More soon …

Note: Siemens PLM sponsored the creation of this brief but did not in any way influence the content of this post.

Exa Q2 revenue up 17% y/y as projects turn into license deals

Exa announced EarningsQ2 results on Thursday that showed solid revenue growth across the board. Total revenue was $14.8 million, at the very top of the company’s guidance and up 17% year/year (y/y). CEO Steve Remondi told investors that Exa “experienced an increased pace of customers converting from projects to license subscriptions [and] continue to expand our license revenue pipeline with strong project growth”.

Mr. Remondi said that passenger cars continues to be Exa’s largest market even though he believes Exa (and CFD in general) is still under-penetrated there, which creates significant opportunity. The global heavy vehicle market is showing signs of a rebound but, said CFO Richard Gilbody, the segment continues to be growing more slowly than Exa overall, across all regions.

Mr. Remondi sees the highway truck market strengthening, and increasing activity with off-highway and machinery customers. Finally, aerospace is Exa’s newest vertical, and Mr. Remondi is optimistic Exa’s capabilities for high-lift aerodynamics and airframe noise.

The details for the quarter ended July 31, 2014:

  • Total revenue for Q1 was $14.8 million, up 17% year/year (y/y) as reported and up 15% in constant currencies (cc).
  • License revenue was $12.3 million, up 15% as reported and up 13% in cc. The company said the increase was “driven almost entirely by increased utilization of simulation capacity by existing customers”. Mr. Remondi added that long-term customers, especially the bigger ones, are adding new departments into the deployment, which requires Exa to add applications beyond the core PowerFLOW.
  • Project revenue was $2.5 million, up 27% as reported and up 25% in cc. Mr. Remondi sees this expansion as crucial to Exa’s long-term success, saying “project revenue growth has averaged well over 20% in the last four quarters [which] primes the pump for future license subscriptions”.
  • Mr. Remondi said growth was strongest in Asia, followed by North America and then Europe. Growth in North America was heavily driven by the passenger car segment.
  • Exa breaks out revenue by country in its filing with the US Securities and Exchange Commission. Revenue from the US was $3.4 million, up 22%; from Germany, $2.8 million, up 16%. Other markets were up, too, but not uniformly.
  • Last quarter, Mr. Remondi told investors that Japan was rebounding after a slow 2013 and 2014: “we saw Japan really take off [in Q3 and Q4 last year. In] Q1 we saw that continue, especially in the heavy vehicle and off-highway segments.”

Exa guided to Q3 revenue of $15.8 million to $16.6 million and slightly increased its FY15 forecast of revenue between $6.3 million and $63 million, a $0.3 million increase in the lower end that comes on top of a $0.5 million increase last earnings release. In total, Exa is looking at top line growth of 12% to 16% — so will probably report something below its five-year target of 15% to 20% annual growth until business picks up in heavy vehicles and the aerospace market becomes more material.

Autodesk adds 74k subscribers in Q2, way more than anticipated

EarningsA few weeks ago, Autodesk announced results for its second quarter that beat expectations, caused Wall Street to go all giddy and then pull back once the exuberance bubble burst. Why? It seems that most analysts grabbed onto 74,000 subscribers that were added in FQ2, more than twice the expected 32,000 adds, but then realized that most of these were existing customers using upgrade promotions. There’s also a lot of gnashing of teeth about how customers will respond to the end of upgrade promotions; that seems misplaced, since many customers on subscription likely renew automatically and Autodesk will find other types of promotions to engage with customers and channel partners. It’s a transition, which means a lot of unknowns.

A quick refresh: Autodesk used to sell software in boxes. It then bundled those individual boxes together in suites. Now, you can buy the individual products and the suites, as well as other purpose-built products, in myriad ways: monthly, quarterly and annual subscriptions; flexible enterprise licensing; straight-up purchase or upgrade; perpetual + maintenance; cloud credits … It’s a confusing picture but CEO Carl Bass told investors that the company certainly is seeing new subscribers, especially for AutoCAD LT and some of its newer offerings: “In some cases, we are offering a new technology platform. We are finding people who really like being on cloud and mobile” — he said that BIM 360 “continued to grow rapidly” in FQ2 and that PLM 360 “nearly doubled its billings compared to Q2 last year”.

Mr. Bass also talked about what Autodesk seeing in the consumer market: “We’re getting close to more than 200 million users in the consumer space … this is turning into something substantial. We’re also kind of bridging the gap between some of the consumer stuff and what’s going on in the more industrial markets. On many ways, they’ve been a great leading indicator of the other stuff, much more willing to adopt cloud and mobile stuff ahead of the enterprise.” Autodesk’s focus on consumers fascinates me. Everyone I talk to at Autodesk mentions how user interaction, pricing and other decisions are informed by what they learn from dealing with consumer apps. 200 million people have a lot to say!

Some of the earnings details (look here for the press release and prepared remarks):

  • Total Q2 revenue was $632 million, up 13% year/year (y/y) and in constant currencies (cc), as compared to the company’s forecast and analyst consensus of around $600 million. Revenue from Delcam was $11 million; excluding that acquired revenue, Autodesk’s revenue grew 9.5%. (Because of the number of companies Autodesk seems to buy every quarter, we can’t really call this “organic”.)
  • By geo, revenue from the Americas was up 11% y/y to $223 million. Delcam last year saw 20% of revenue from the Americas; while it’s likely a focus for Autodesk going forward, Delcam probably didn’t affect growth much here in Q2.
  • Revenue from EMEA grew 21% to $244 million (up 16% in cc). Delcam typically got 40% of its revenue from this geo so, although Autodesk declined to break it out, Delcam probably accounted for a point or two of growth in this region. Looking more broadly at the entire portfolio, Mr. Bass says that Southern Europe has “hit bottom” and that instability in Russia/the Ukraine and the Middle East were the only weak spots.
  • Revenue from Asia Pacific was up 8% in Q2 to $170 million (and up 13% in cc). Autodesk again highlighted South Korea but added India to the mix. Delcam saw 40% of revenue from this region, so likely accounted for a good chunk of this growth in Q2.
  • Revenue from emerging economies was up 14% to $98 million (up 13% in cc) and represents 16% of total revenue in Q2 — though no one country in this category represents more than 3%.
  • By category, license and other revenue was up 12% to $350 million on increases in upgrade revenue. Subscription revenue (which includes maintenance for perpetual licenses) was up 15% to $287 million.
  • Revenue from suites was $232 million, up 20% y/y, on growth in AEC and now represents 36% of total revenue in Q2 (as compared to 35% of total last quarter).
  • By business line, revenue from the Platform Solutions and Emerging Business segment was up 5% y/y at $208 million. It’s been hovering around $200 million for the last year as customers opt for suites and not standalone products like AutoCAD and AutoCAD LT.
  • Revenue from the AEC segment was up 23% to $218 million. Revenue from AEC suites increased 40% y/y; the company again highlighted demand for the Building Design Suites and Infrastructure Design Suites. Mr. Bass said that Autodesk closed several large AEC transactions in Q2, including one where Autodesk Advance Steel (from the Graitec acquisition) was a deciding factor.
  • Revenue from the Manufacturing business grew 17% to $168 million, including $11 million from Delcam. Excluding Delcam, revenue was up 9%. Revenue from manufacturing suites, especially the Product Design Suite, was up 9%. Mr. Bass said that growth in this segment was driven by demand in industrial machinery, consumer products and automotive.
  • Revenue from the company’s Media and Entertainment business segment was flat y/y at $44 million.
  • Finally, Mr. Bass said that Autodesk closed twice as many large deals in FQ2 as a year ago — but didn’t give any more details. SO?

Autodesk guided to Q3 revenue of between $590 million and $605 million, and F15 revenue growth of 7% to 9% — far more than the 4% to 6% growth projected during the FQ1 earnings call. Part of the key is the boost in subscribers, by 50,000 to 200,000 to 250,000, part of it is increasing adoption of the cloud technology … But I think part of it is how many levers Autodesk can now pull to meet customer needs: lots of licensing and delivery options, new products, a 3D printer (demo coming in October). You want something? Autodesk probably has something to sell you.

Creating the “Market Basket effect”

downloadI travel a lot which means that every so often I lose track of local news and run low on groceries. Earlier this summer I found myself at a local market, stocking up, when I noticed just how crowded the store was. I don’t usually go shopping at that time and had seen a bus from the local senior citizen’s community in the parking lot, so chalked it up to coincidence. I grabbed what I needed and headed to the checkouts. Mobbed. Crammed. Lines intersecting one another. In the longish wait, I got to chatting with other people and discovered that they were boycotting a local supermarket chain because the long-running dispute within the family that owns it had come to a head. In late June, one family member ousted another as CEO; in July employees backing the former CEO started walking off the job and asked shoppers to boycott the stores.

For the rest of the summer, the 71 markets in the Demoulas family chain (operating under the Market Basket brand) were empty. Employees, sometimes joined by customers, picketed out front. Suppliers stopped shipments, so shelves emptied and weren’t restocked. Signs appeared about greed versus loyalty. The governors of Massachusetts and New Hampshire tried to intervene. Newspaper and radio pundits, academics and even former US Secretary of Labor Robert Reich weighed in on how the ousted CEO was able to create such loyalty, how the saga could end —after all, what white knight would step into such a mess— and how anyone could turn this situation around.

Last night, Market Basket’s shareholders announced that the former CEO has been reinstated and that he and his sisters are buying out the relatives that ousted him. (Many of them are named Arthur, and I’m trying to keep it simple. Bottom line: guy everyone loves, in. The one portrayed as “the rival”, out.)

What happened here is remarkable. Supermarkets are big business (the agreement reached yesterday is a deal worth more than $1.5 billion), yet the company leadership created incredible loyalty among both employees and customers. According to news reports, the former/returning CEO offered reasonable pay and benefits as well as profit-sharing and provided career paths in an industry that doesn’t typically do that. One report said that a typical supermarket employee lasts just 100 days; Market Basket employees often work there for 10 years or longer. Clearly, treating employees well creates the kind of loyalty that leads to some of them being willing to sacrifice their jobs if needed to keep the company running as it was.

But how did the company build this incredible bond with its customers? I mean, would you boycott products if the manufacturer’s CEO were ousted? Would you even know? One key, certainly, is that Market Basket employees always seemed empowered in ways that people on a job for less than 100 days could never be. They gave a face to the corporation that was personal and personable. I can’t speak for anyone else, of course, but I shopped at Market Basket because they tended to have more traditional and ethnic foods that the other, “yuppy”, supermarkets in my town didn’t have. Too, the fish monger, butcher, and grocery manager all were grown-ups who knew what they sold, where it was and what to do with it.

The deal signed last night signals the end of one phase of this debacle, but probably changes the company forever. Will customers come back? Will the family “feel” of the stores change, now that there’s a significant debt to service? We might not know for months.

Outside the supermarket, there’s much to think about. How can we create this kind of bond with employees and customers? What can we do in our business operations, with product design, in the sales process and in after-sales service to show them how much they matter?

This “Market Basket effect” has been amazing to watch. Employees rallied colleagues and customers using traditional and newer, social media to change what had been a done deal (the original ouster) and generated tremendous community support. They risked their jobs and paychecks for an uncertain outcome. This ended the way Hollywood would want, but now the hard work starts, of putting it all back together.

The Boston Globe did a great job covering the story and has a lot more detail on the 25 years leading up to this announcement.