We all know and understand the “death by 1000 cuts” metaphor; Andy (our COO) recently coined a new and more modern metaphor, “death by 1000 acquisitions.” Making the wrong acquisitions is more risky and potentially more deadly when companies are dealing with disruptive market transitions. Leading of existing technology companies should pay careful attention to not make this mistake.
I was recently chatting with a corp dev executive from a large tech company and he was telling me that his CEO tasked him to find low-cost (small) acquisitions that would leverage their current products and fill existing gaps. Under most scenarios, this sounds like a reasonable plan but, in the face of a disruptive force, it could be a very poor strategy.
Essentially the incremental/leverage strategy works well for evolution (incremental change) but not for revolution (disruptive change). If your technology space is plodding along and not undergoing a disruptive phase then the evolutionary strategy is sound. On the other hand, within disruptive technology cycles, incremental additions that seek to pseudo-modernize legacy products are probably worse than doing nothing at all.
An analogy here might be the print vs. digital media. The revolution of digital media is upon us and yet some players have sought out incremental evolution (of print media) as the solution to this disruptive change. Arguably, this only prolongs their decline and makes it even less likely that the existing company will find a way to thrive in the next era.
This is one of the reasons that unlikely players tend to dominate new categories. Given the cash and technology capabilities across companies like IBM, HP, EMC and Cisco it is surprising that “a bookseller,” Amazon, now clearly leads the market in public cloud computing technology. This disruption has been visible for many years so this is not an issue of execution, it comes down to strategy.
When faced with disruption, I believe companies need to have a revolutionary acquisition strategy that seeks out the best new technology to win “the next fight.” Preferring something cheap and looking for legacy compatibility (vs. disruptive capability) will only lead to a Death by 1000 Acquisitions….