organic growth: the technical challenge

June 10, 2008 at 5:07 pm | Posted in Business, Technology Trends | 8 Comments

Ever checked the prices on organic groceries? Pretty pricey. Turns out that to grow stuff organically isn’t nearly as cost effective as using non-organic means. To me, a non-farmer, that initially didn’t sound right. I thought what could be more cost effective, than taking the bare minimal approach to growing stuff. Turns out I was wrong for lots of reasons and the bottom line is that mass producing food organically can be quite expensive, indeed.

Technology isn’t all that different, especially for an established company. As I discussed earlier, I used to wonder why anyone would go through the cost of an acquisition when you could develop the same product organically for what seemed to be a fraction of the cost. And nobody fortifies that thinking like developers! Ask your development teams about an acquisition and they will typically tell you they can do it for 10x less the cost, with a team of dedicated developers internally, and deliver within an extremely reasonable time frame!

Trouble is, they are almost always wrong, and they typically greatly underestimate the effort. Costs rise, delivery dates are pushed, features dropped, over-engineering ensues, scope-creep dominates, and a year and a half into the six-month project, everyone is wondering if the thing should just be canceled. I know that’s being a bit harsh on developers, but remember, I WAS ONE! It’s not necessarily that the developers are incompetent but there are many other factors at play. Here are a few that top the list that I see over and over when it comes to trying to develop a product similar to one that exists in the market instead of acquiring it:

1) A single, zealot, charismatic developer (or manager) over commits on behalf of the whole dev team

2) Poor due diligence on what’s really there that they are going to try and build

3) Not understanding the “heart and soul” of the product that made it successful in the market

4) Not accounting for the breath of the product, usually in terms of platform support

5) Over-engineering a product in an attempt to better the one already in the market, and spending an inordinate amount of time on features that the masses do not want or need

The amount of work required to make the decision to build something organically is often an order of magnitude more than folks realize. There are many trap doors waiting for you, any one of which can absolutely derail the effort. Make sure your eyes are as wide open as possible and push your discernment to its limit before deciding to organically build something that’s already in the market as opposed to acquiring. It can be done successfully, but that usually only happens when a company completely understands the entire strategy and then plans and implements accordingly.

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  1. Good post. I think some folks are concerned about acquisitions because, when they sometimes fail, they draw so much negative attention to the company that it makes a bad impression on the whole process. A good CEO and management team can successfully integrate a piece of technology without toppling the whole house of cards.

  2. […] June 11, 2008 at 12:58 pm | In Business, Technology Trends | In addition to technical challenges of organic growth, there are also a substantial number of business challenges to growing organically as well.  […]

  3. thanks, Mike. One of your comments actually spurred a tangent thought that I will post tomorrow.

  4. […] am | In Business, Professional Development | Mike made the following comment on my post about technical challenges to organic growth: I think some folks are concerned about acquisitions because, when they sometimes fail, they draw […]

  5. The Role of Acquisitions…

    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 a…

  6. Tried to post as a track back, didn’t appear to (work so sorry if duplicated)

    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, I think 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.

  7. well said, Tony. Enjoy your feedback. thanks for posting.

  8. […] June 25, 2008 at 11:45 am | In Technology Trends | Tags: software, technology A while back I posted some thoughts on the technical challenges of organic growth that generated some good discussion. At […]


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