I agree whole heartily with this post and have posted similar comments in response to a post around how Google is dealing with their “brains” leaving and setting up their own start ups. I believe the successful execution of an innovation is just as important as the innovation itself.
Small “start ups” do well at getting ideas off the ground, proven and to market. A small group of highly motivate people whose very survival depends on the successful development of their idea has a natural advantage, it’s do or die. And while sheer grit and determination are great for getting the product into existence, if they are traditional (enterprise) applications the struggle is the “execution” of the go to market strategy, that is the pavement pounding, product support, sales, marketing, pre sales, account management, relationship building. You might have these requirements nailed for customers in your immediate vicinity, but grit and determination aren’t going to get you a worldwide sales, implementation and support teams anytime soon. Trying to build this organically will take years and will cause much distraction to the core competency, the innovation itself.
Larger, especially public companies, have a responsibility to be risk adverse. They need to protect their market position, their shareholder value and can’t be continually “betting” this by undertaking high level of risk through the developments of new and unproven innovations. But why would you? If you have the cash flow, the market position, the distribution channels, global sales and marketing capabilities, why undertake lengthy and risky new innovation development, when instead you could be rapidly acquiring and fully commercializing proven innovations. Does it matter that you may pay more than if you developed it yourself? If the numbers are still in it, then isn’t the premium a reasonable cost for time to market and a level of risk reduction? Doesn’t it serve you better to maintain a strong product strategy, maintain development teams for existing product development (which may include integrating acquired innovations), building and maintaining the customer relationship and running a successful model for filling the gaps in your product strategy through acquisition?
This is largely happening now as most of the big software companies are working hard to protect their positions while continuing to remain competitive and increase their customer base. But as I found out in a meeting with one of the worlds largest software companies some time back, it isn’t necessary a talked about or accepted strategy (the opening of one meeting went along the lines of “Well obviously we could have developed this ourselves…..” in my head my response was “you could of, but you didn’t and you probably shouldn’t have anyway”). Maybe the aversion to acknowledging this as a valid business model is fear of external perception of the company (they have 10,000 employees but they buy all their ideas…) or a fear of upsetting their existing development employees, I am not completely sure.
Anyway, what I do know is that many great innovations (in traditional applications) will continue to happen in start ups, the only way they will become successful is through acquisition by a partner with a global reach and over time the best people in those organisations will typically move on to pursue their own ideas in start up form.