Microsoft, Growth through Acquisition, and Smart Business Strategies

I admit it, after working for years at HP’s Palo Alto R&D Labs in California, I have always had a very strong case of NIH Syndrome. NIH = Not Invented Here. We used to joke about it at the lab while we were, for example, wasting thousands of man-hours creating a “better” LISP instead of just adopting Common LISP, or, most famously, “fixing” TCP/IP when it was first released by Hewlett-Packard, just to be darn surprised when the industry stayed with the standard TCP/IP protocol stack and… we didn’t interoperate properly.
I’ve been working with a Very Big Publishing Company on a business book that’s going to be cobranded with a Fortune 50 company (can’t be more specific than that at this juncture) and unlike almost any business book I’ve read, this one has really dramatically shaken up my thinking, particularly about a company that I love to despise, Microsoft.


Yes, I’m an Apple and Open Source guy through and through and only run Windows under duress in typical situations, enjoying the anti-Microsoft sarcasm and even sharing in the evening repartée about how Microsoft just isn’t worth admiring because they had to buy all their technologies instead of inventing them.
Total Not Invented Here syndrome: if Microsoft didn’t invent Office, WinXP or anything else from scratch in their own labs, surely them having to buy the company that did invent the core technologies or functionality is just a sign of weakness, a sign of a company that’s bought their way to success rather than inventing and innovating. Right? You might well think the same way, for all I know.
That’s why I’m so surprised that my thinking has done a complete flip on this matter and I’m now convinced that companies trying to invent everything are the losers in this race for dominance. They’re the companies that just can’t keep up and while the have the marketing muscle to push aggressively, they’re doomed to introduce yet another Netware, another Betamax, another insular technology that doesn’t actually meet the needs of the marketplace.
And how can I predict that internally-invented companies are more likely to miss the mark in this way? Because it’s the little companies, the inspired engineers, the bright marketing folk who are the true innovators, and by the very nature of small business, to get on the radar screen they have to be doing something very, very right.
Think of it this way: when Steve Wozniak went up to his managers at HP and said “I have this idea for a “personal” computer: is that something HP might be interested in pursuing?” it was inevitable that HP would say “no” and Apple Computer would be born. Large companies cannot be sufficiently nimble to employee the best of the entrepreneurial bunch, and therefore while they might have more money, manpower and marketing, they just don’t have the neurons firing like mad that a small businessperson does, the burning desire to Make It Work and the visions of a tremendous upside if they do.
I’ve been working with entrepreneurial companies for years, and it’s amazing to me how even helping with mergers and acquisitions, even evaluating companies for investors, I still never really got it, never figured out that acquisition is the real pot of gold at the end of the rainbow for both companies: the big company for buying its innovation from the open marketplace (the only place where you should and can get it) and the little company for birthing something that grows up and, hopefully, becomes big, strong and important.
So, Microsoft, my apologies for always scoffing at your acquisition strategy and expecting the companies I work with to “invent everything cool”. I was wrong and I’m just starting to really see the light. And it’s a bright and obvious one.
Now I just have to ask instead why Apple continuously steps on the toes of its developer community instead of acquiring more of them to bring the brains in-house, not the ideas. I’m thinking of Konfabulator vs. Dashboard, for example. I know, I know, one didn’t necessarily beget the other, but I’m sure that if Konfabulator wasn’t so cool that Apple’s engineering team wouldn’t have been motivated to create Dashboard in the first place.
It all seems to boil down to what the open source community has been evangelizing for years: open things up, let go of control, and let the marketplace create and innovate together.
Isn’t that ultimately the seed of democracy too? United we stand – and innovate – and divided, and with a blind obsession to proprietary, secret development, we fall?

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