Can a Gorilla Innovate?
I religiously read former colleague Bruce Richardson's First Thing Monday and his blog. A recent entry about software innovation generated a lot of comments from both the vendor and user communities. It reminds me of a commentary I wrote last June about the survival of the independent vendors after the mass consolidation in the BI and PM markets. I wrote that one of the main reasons I believe independent vendors will continue to survive is their ability to innovate faster than the mega-vendors. I continue to believe that is true, most innovation comes from smaller more nimble vendors who can provide deeper, targeted solutions while mega-vendors focus on the needs of the masses.
Many of the acquisitions by the big gorillas in this market were done because of the innovation of the companies they acquired. The key to continued innovation is to let that small company innovative culture thrive in the larger environment. Becoming part of "the machine" can suck the creative juices from the acquired company and soon the best resources move on in search of an innovative culture.
Can the Big Gorillas Innovate?...I believe they can.
The acquiring company should nurture the creative environment they acquired rather than push to assimilate. Yes, the back office and other areas need to be assimilated to take advantage of cost savings. Yes, marketing strategies need to be redesigned to take advantage of the combined entity . Yes, R&D leadership needs to ensure that there is symmetry across the entire development team and integration across products. However, individual contributors and teams should be shielded from this as much as possible and left to continue to innovate. A mega-vendor with vast resources and a huge client base provides advantages that can not be found in smaller companies, if the culture is retained the company gets the best of both worlds (my 6 year old daughter would appreciate the Hannah Montana reference).
An Example
Bruce Richardson blogged about Oracle's 100 Days of Innovation campaign as an example of a mega-vendor focusing on innovation not just integration. Another example comes from SAP BusinessObjects. Prior to their acquisition by SAP, BusinesObjects had released a BI search product called Polestar. Since the acquisition they have continued to innovate this product and as part of SAP have combined that innovation with technology from SAP's BW Accelerator to create SAP Business Objects Explorer for fast, self-service investigation against very large BW data stores. In my opinion SAP would not have been able to provide this solution to their BW customers without continued innovation from the BusinessObjects team.
So yes, the gorillas can innovate but they need to work hard to keep from suffocating innovation with their bulk, bureaucracy, and politicking. They must nurture the creative culture and resources of acquired companies and let the mothership focus on integration, efficiencies and leveraging their vast resources to support and fund innovation.
What do you think? Can the gorilla's innovate? Are they innovating? Can they innovate as quickly as smaller vendors? Is your acquired vendor innovating as effectively as they did when they were independent?
Many of the acquisitions by the big gorillas in this market were done because of the innovation of the companies they acquired. The key to continued innovation is to let that small company innovative culture thrive in the larger environment. Becoming part of "the machine" can suck the creative juices from the acquired company and soon the best resources move on in search of an innovative culture.
Can the Big Gorillas Innovate?...I believe they can.
The acquiring company should nurture the creative environment they acquired rather than push to assimilate. Yes, the back office and other areas need to be assimilated to take advantage of cost savings. Yes, marketing strategies need to be redesigned to take advantage of the combined entity . Yes, R&D leadership needs to ensure that there is symmetry across the entire development team and integration across products. However, individual contributors and teams should be shielded from this as much as possible and left to continue to innovate. A mega-vendor with vast resources and a huge client base provides advantages that can not be found in smaller companies, if the culture is retained the company gets the best of both worlds (my 6 year old daughter would appreciate the Hannah Montana reference).
An Example
Bruce Richardson blogged about Oracle's 100 Days of Innovation campaign as an example of a mega-vendor focusing on innovation not just integration. Another example comes from SAP BusinessObjects. Prior to their acquisition by SAP, BusinesObjects had released a BI search product called Polestar. Since the acquisition they have continued to innovate this product and as part of SAP have combined that innovation with technology from SAP's BW Accelerator to create SAP Business Objects Explorer for fast, self-service investigation against very large BW data stores. In my opinion SAP would not have been able to provide this solution to their BW customers without continued innovation from the BusinessObjects team.
So yes, the gorillas can innovate but they need to work hard to keep from suffocating innovation with their bulk, bureaucracy, and politicking. They must nurture the creative culture and resources of acquired companies and let the mothership focus on integration, efficiencies and leveraging their vast resources to support and fund innovation.
What do you think? Can the gorilla's innovate? Are they innovating? Can they innovate as quickly as smaller vendors? Is your acquired vendor innovating as effectively as they did when they were independent?
Dave - I believe the big gorillas can innovate, if they head your words, and continue to let the creative minds within their development and services organizations do their thing. The big challenge for these gorillas, of course, is retainment of these creative minds, once acquired. It's big challenge. The smaller, innovative companies (or management) ultimately need and want to be consumed by these larger companies, to capture larger market share, attain R&D infusion, and, let's face it, make some money for management. BUT, that usually comes at a cost for the real creative minds that no longer have their small company culture and independence. So they usually move on to the next appealing technology & company. So...the Gorilla gets the innovative technology without much of the innovative thinking.
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Great point Greg. It is especially hard after management of the acquired company meets their earn-out requirement of a year or two. If they leave the culture and the creative resources usually follow.
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Small step evolution is a form of innovation, I will give you that. But the points above are more about integration of ongoing projects and fortitude of existing management not to kill promising initiatives. Polestar is a great example of this -SAP should be recognized for it.
But IMHO true disruptive innovation will never come from the Mega Vendors. Larry Ellison invested in SalesForce and Netsuite not because Oracle didn’t have the technology, they did, but because he could not make a SaaS platform work in his existing business model without cannibalizing his own installed base. Even Larry would have a hard time with his BOB with that one.
When the majority of a company’s revenue comes from the installed base, Mega Vendors have to address predictable upward compatibility not only for their customers but for their business as well.
New innovative companies don't have this hubris to deal so they can look to innovate both on a technological and business model level. Today’s innovators are offering new technology combined with leaner go to market strategies based on the realities of today economic realities. That is why I believe innovation from smaller and more agile companies will continue to the main incubator for next generation innovation.
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Dyke. Thanks for jumping in on this one. Your point that the innovation for Polestar was pre-SAP is valid but it is a strong example of taking innovation further than it could have gone in the smaller company.
I would also agree with "your humble opinion" that we see more innovation from smaller vendors, it is the key to their survival. For the smaller vendors it comes down to the value of their innovation in the market place. Is their innovation enough to sustain the business and grow market share or does it need to be subsumed by a larger company in order to achieve critical mass?
To date the strategy has been to let the "little guys" innovate, test the waters, and if they get some traction, acquire them. It's like test marketing a new product without having to do the development and launch. They pay a significant premium when they acquire but they get to watch the market for the innovation develop and shake out. They can choose from several available options in that market and end up with a market tested solution for less cost and less risk than it would have taken to develop themselves. Their resources are spent on platform and integration of the acquired innovation rather than on specific product innovation. Oracle is certainly the poster child for this strategy. Larry and team have found acquisition more attractive than organic innovation on many, many occasions and have taken the acquired innovation to a much larger market than it could have as part of an independent entity.
I expect the acquire vs. innovate strategy to continue to be prevalent among the mega-vendors. Part of my reason for this entry is to extend the challenge to the mega-vendors to prove they can at least supplement their acquired innovation with organic innovation and for the smaller vendors to continue to push the innovation envelope to stay ahead. Ultimately the clients of both will benefit from a competitive environment that stimulates innovation.
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