Innovation Through Acquisition

Big Company Innovation Struggles


Large companies do tend to struggle with innovation and are at a disadvantage versus a start-up due to many challenges such large organizations face. Such large companies tend to be bureaucratic and are heavily influenced to meet financial targets and make decisions solely focused on this. Another aspect a large company faces, it must focus on protecting is market share dominance for a specific industry to allow for appropriate cash flow and profits to keep the company viable. It becomes challenging for management to allocate capital in supporting new ideas or possible entry into new market segments if have competitors continuously threatening you. To this end, a large company tends to be conservative to allow a market to mature (being risk adverse) in order to avoid bleeding capital on a quarterly bassis in supporting such innovative initiatives. Large companies do not like such risk without a good understanding of the return.

Innovation Through Acquisition

I feel the new approach for large companies is to acquire innovation and avoid the capital and uncertainty in supporting such projects to create or enter new industries. By letting start up companies or entrepreneurs dedicate their energy in developing a new technology and building a successful business model, it allows a large companies monitor such activities and look for the clear winner in a maturing market segment and acquire them. This avoids the uncertainty regarding innovation and sinking capital into such innovative ideas that you do not have the appropriate culture/people to be successful in.


We see this activity commonly used in the IT industry and continuous to gain more and more momentum. EMC Corporation (I am employed by) transformed the data storage industry with the introduction of visualization/cloud computing, data analytics, and data duplication. These innovative products were not developed within the engineering teams at EMC (we actually tried, but unable to gain considerable share) but were acquired through companies such as VMware, Isilon, and Data Domain. It has been a great success and has proved a model allow large companies to leverage their capital in such away to become risk adverse.