How Would They Know?

I didn’t intend to write a whole series of posts on folly in innovation, but there seems to be a lot of it about.  Today’s folly is about excessive due diligence.  Don’t get me wrong.  I think a certain amount of diligence is, well, due.  You need to know what you are investing in, if you are an investor.  The problem is that too many investors think they are investing in software or whatever the project happens to be and not in the makers.

When the innovators are seasoned and very experienced, excessive due diligence demands by potential investors can be nothing more than posturing.  If it becomes just a show of power, telling the makers that the real clout lies with the money, not with the technologists, so that they don’t ever forget it, then the excessive due diligence is worse than useless.  It’s harmful.  Why?  Because it wastes time and causes delay, it annoys the makers, who the investors want to work hard to enrich them and the due diligence team, in their relative inexperience, compared to the mature makers, may draw false conclusions.  In many cases, the people that are doing the due diligence, asking the innovators to jump through hoops and provide endless rewrites of plans and projections, can’t tell a good innovation investment from a bad one.  That’s the tragic reality.

There is a tacit assumption, in venture funding, that the investors are the wise party and the technologists are stupid, ignorant kids.  With more mature technologists, however, the truth is that things are often the other way around.  If they’re trying to second guess or trip up people that might have been planning their innovation over a period of several decades, while doing credible things elsewhere the entire time, then they are definitely not buying into expertise and experience.  They’re buying an opportunity to pump and dump or engage in some other financial engineering ruse, or else they’re trying to look high and mighty (i.e. they’re intellectually dishonest).  Such power plays don’t seem to be about fostering a relationship with an established, accomplished artist in the field, do they?  If they were looking for technical experience and expertise, they would treat the innovators and makers with much more due respect.

It’s ludicrous to ask youngsters who don’t have that ability to make things, or the experience and expertise of the more mature innovator, let alone equivalent vision and passion, to sit in judgement of the innovation, weighing the project proposed by the experienced maker.  They’re simply not adequately qualified to look both the project and the makers over and reach a sound judgement about the venture.  They haven’t been at the coal face for enough years, for one thing.

Too many venture funders are seeking the “sure thing” feeling, but there is a baseline of risk with all innovation that cannot be removed by more spreadsheets, slide decks and predictions.  You have to do the work to really understand the risks.  Even if the risk is understood and accepted by the investor (at least to a first approximation), a good technologist can change the complexion of the innovation, mid-stream, to adjust to current market conditions.  That’s why they’ve lasted so long in the industry.  Those are the guys you want to back.  They’re experienced navigators.

When you assess the risk of investing in a technology project, what you have to measure is how adept the makers are at shaping the product to the opportunity.  How agile are they, at that?  How do they mitigate the baseline risks of doing something brand new, for the very first time in human history?  Compared to the swindles that many investors are used to backing, innovation (and especially technical innovation) is always more risky than what they have become accustomed to, in say the halcyon days of the property market, to give just one example.  In an innovation venture, you’re not duping the trusting or waiting patiently for the inevitable valuation inflation, you’re actually trying to do something nobody has ever done before.  You’re creating brand new intellectual property.  There are no assurances of safety and guarantees of success that can be given, in such a venture, by anybody, unless they’re cynical and dishonest.  You don’t want to back people like that with your money.  You want somebody with more integrity than that.  All you can do is make sure the makers you back know how to sail these treacherous waters and to navigate the usual rocks that lurk below the water line.

Investors that clobber a mature technologist’s proposed venture to death, with demands for detailed predictions and excessive due diligence documentation, actually do more harm than good.  If you are a mature innovator, that already knows what they’re doing, who has been doing it for decades, avoid them.  They’ll waste your time and distort the project.  These are not the investors you’re looking for.  Move along.

It turns out that more innovations are actually destroyed due to bad investor behaviour (control freakery, cheapness, cheating, withdrawing too early) than because of any short sightedness, dishonesty, indolence or incompetence on the behalf of the makers.  The real due diligence, at the beginning of the venture, ought to be into the character and track record of the investors, with respect to their funding of previous innovations.  Do they stay for the long term?  Do they panic?  Do they have realistic expectations, grounded in a real working knowledge of the technology, or are they emotional, irrational and flighty; too scared to spend money to make money?  Are their pockets deep enough to reach the critical investment tipping point, where the venture will make money under its own momentum, or will they starve a perfectly viable project to death, out of ignorance, fear and greed?

The real reasons why most technical ventures fail are similar to why many marriages fail – control freakery, cheapness, cheating and withdrawing too early.  If you are an innovator, bear that in mind next time you select an investor.  And do your due diligence on them.

Due diligence should always be accompanied by due respect.  It works both ways, too.

On Making and Selling

It occurs to me that we’ve become so conditioned to a default state of affairs, we haven’t really looked at the alternative and how that might be favourable to us.  Consider the following:

There are companies that make things and they desperately seek other companies that sell things, hoping that the sellers will make a place for the things they make on their shelves, sell some and split the proceeds of the sales with them.  They make less money, but they move more product, so the theory goes.

There are also companies that sell things that wish they could find things made at cheaper prices, so that they could sell more things, hopefully without sacrificing quality (though that’s a secondary concern – if they can pass off shoddily made goods as if they were quality ones, they can get away with it – at least for a while).

Here are two sorts of companies believing in the equivalent of the tooth fairy.  Manufacturers hope that sales based retailers and distributors will move their goods to consumers in sufficient quantity to achieve economies of scale and resellers wishing they could get product to sell at lower prices, without having to pay distribution and other hidden, middle man margins, so that they can achieve the necessary scale.

What if a company had a large retail presence, but then also made the things they sold?  Imagine what that would do to cost advantage.  Instead of being a maker and sacrificing some of the purchase price to the retailer or being a retailer and being squeezed on the margin they can charge, due to consumer price sensitivity, they could combine forces and preserve their margins, relative to their competitors.  They would also have much better forecasting of production quantities required, a single distribution system that they controlled the costs on and a method of taking what they sell directly to their own retail customers.

Companies have done this online for years.  It’s the old catalogue sales model.  However, now that the High Street is under threat, the idea of selling what you make yourself has certain cost advantages, especially if commercial property rents begin to reach a realistic, rather than artificially inflated level.

Sports Direct, a retailer of sporting goods, bought up struggling sporting goods manufacturers and now has a ready outlet for everything they make.  They also have guaranteed supply, without middle man charges for everything they sell.  They can release a new, premium model every year of ever sporting good they make but sell last year’s models at a discount to those less fashion conscious, while clearing their warehouses and still making a margin.  It’s like magic.  They’re succeeding in undercutting retailers and out producing other manufacturers in both cost and shipments.

We used to have retailers that made their products in the room behind the shop, on the High Street.  We could again.  Separating the makers from the sellers just added cost and supply chain uncertainty.  It made it more difficult to provide exactly what the customer demanded, when they required it.  Sure, there may have been economies of scale, but if you have a chain of retail outlets, the scale is there to manufacture more cheaply.

The most important benefit of selling what you make, directly to customers, is that the feedback that you get directly from customers goes into the next model and into production line improvements.  With a distribution and reseller channel in the way, the message is lost, like so many Chinese whispers.  Not only can you preserve your margins, but you can learn to make better products, more suited to the customers’ demand.  That, alone, is a valuable thing.

I wonder when this old fashioned idea of manufacturers being their own retailers, at scale, will become popular once again.  It seems that it is already viable.  Apple is already proving it.

The Problem with Privacy Policies

It used to be the case that every web site that held your data would post an elaborate privacy policy, telling the user how the company operating the site was going to protect your data and keep it away from prying eyes.  Not many people read these policies in detail, but it was supposed to be reassuring to know that the site had a policy and that they stated they were going to do the right thing in writing.

Then we heard the revelations about the NSA and Prism.

Now, we discover, all those privacy policy reassurances were worthless.  They were lies.  Your data was not protected and certainly not private.

Understandably, there has been a backlash and now companies like Microsoft and Google are issuing weasel worded statements denying complicity and claiming they had no choice but to follow orders.  They are issuing new privacy policies, with new, more rigorous promises in them, so that they can continue to operate in Europe.

The problem is that, like before, we only have their word for it.  We have to trust in their assurances.  Well, we took their word for it before, accepting their solemn oaths that they were protecting our data, but their word was no good.  Their word is no good now.  Their privacy policies hold no more weight today than they did before the truth was revealed.

The only kind of acceptable privacy policy is a verifiable one.  How are companies going to permit ordinary people to verify that their data is private and safe?  Therein lays the challenge to the entire industry.  How are they going to make it possible for plain folk to prove to themselves, by direct observation, that their data is safe?

Because that’s what they’re going to have to do.  The genie is out of the bottle.

Technology Tourists and Imposter Investors

This is something that is both new and old.  It used to be the case that technology companies were lead by technologists that knew some good investors.  When the investors trusted the technologists, the engineers got on with the making and the investors treated their investment placement as if they had put their money with a reputable hedge fund manager or stock broker.  The investor didn’t try to interfere too much in how the makers got on with the making.  It wasn’t their field of expertise.

If the technology venture did well, the entrepreneurial product maker walked away with enough money to invest in other start ups.  Because they were technical people and could make things, they were good investors for technology start-ups.  They could see when things were going wrong and knew how to correct the situation, before it got too expensive.  More importantly, they could tell when a venture was going well, doing the right things and moving at the right technological pace.  They were intelligent technology investors.  They added value beyond their money.

Then things started to go wrong.  The sorts of deals that were struck with makers, in an investment climate where other forms of investment paid better returns (property, stocks, bonds), were pretty disadvantageous to the technologists concerned.  This meant that even if their venture succeeded spectacularly and a liquidity event ensued, they walked away from the table bruised, worn and not all that greatly enriched.  This meant that the next round of makers couldn’t really rely on the previous round of successful makers for investments in their crazy new ventures.  They had to go to money people and play by the money peoples’ rules.

This inevitably lead to more and more technology start ups being funded by investors that had no clue whatsoever about what it takes to make a successful product or technology.  However, they wanted to be hands on.  Now, it was all about their money and not about the intellectual property or product development stream at all.  Could they engineer things to get in, pump and dump their investment, before anybody else cottoned on?  Many tried.  This lay waste to many talented technologists and their product innovations.  Suddenly, nobody cared about the customer, the product or the intellectual property that was the subject of their research and development.  It became all about the money and some outrageous games were played in pursuit of a quick, easy buck.

Meanwhile, makers became even less wealthy and even less inclined to invest in technology ventures.  Pretty soon, you had money people calling the managerial, tactical and strategic shots in technology companies, but without the vaguest understanding of what the company actually did or how it was done.  They didn’t care to know about the technology, the real risk profile of their investment or whether or not they were getting reasonable outcomes for the money and work expended.  All they knew was that, for each unit of investment they placed, they wanted more.  More growth.  More returns.  More profits.

That resulted in a contraction of genuine innovation and a resort to silly projects, with trivial purposes, which could be inflated in the press and sold on as quickly as possible.  Nobody much cared that these companies became intolerable places for makers to work in.  Nobody seemed to care that all those man hours, all that sweat and all the sacrifice was in the service of making valueless, gimmicky, transient, ephemeral toys, not lasting engineering.  We were into the era of bin-ware, with all the wastefulness that goes along with that.

Pretty soon the non-makers running these technology companies lost their way.  They had no yardstick.  They couldn’t tell if the engineers were being slackers or highly productive.  It wasn’t their field.  They couldn’t tell what they were looking at and were so risk averse that they stifled any real risk taking by the makers.  The money guys always assumed their engineers were holding back or messing up and so development sweat shops appeared, eventually replaced entirely by offshore development sweatshops, where the engineers worked for peanuts.  The products got buggier, did less and were less innovative.

The threat continually made against the technology entrepreneurs and their engineers was that faster, bigger, better returns could always be made by taking the investment out of research and development and placing it in some other more lucrative, easy money scheme, such as derivatives, credit default swaps, junk bonds, bundled mortgages – you know the stuff.  It was the stuff that was so value-free that it almost brought down the banking system, until the people bailed them out.  The sword of Damocles that hung over every technology entrepreneur’s head was that if they didn’t do what the money people said, they would turn the supply of money off.  Money people called the shots.

Since the banking collapse, we have entered a different era.  Easy money investments are harder to come by.  Non-technologists have lots of cash burning a hole in their pockets, but nowhere reliable to invest it.  They can’t find simple ways to make a return on their money, so they have had to resort to investing in technology start ups.  Now we have the phenomenon of the technology tourist.  They have money to invest, but no idea about what they are investing in.  Sure, they want to maintain control (interference) and punish mistakes severely, but they have no appetite for the ordinary risks that are always involved in research and development.  They don’t understand that the baseline risk in R&D is not “a sure thing”.  There are variables.  Things can take longer.  Sometimes, brilliant ideas prove to be impossible to bring to market in a working form.  The technology tourists don’t get any of that.  They want the same sure bets they were getting with futures and derivatives.  Dream on, guys.

It’s dangerous to take the money from one of these tourists, because they have no way of knowing if you are doing a good job with their money or not.  They always assume not.  You can be doing the greatest job, as an engineer, for one of these tourists and they will still whip and excoriate you.  They never see the value of technology and intellectual property developed along the way and get hysterical about controlling budgets and burn rates to the last penny, on schedule.  Research and development doesn’t work that way and never did, but this class of investor is not aware of any of that.  It’s not their field, after all.  They’re only in technology because no other investment is worth doing, any more.  They make bad decisions.  They treat people badly.  They will abandon viable projects on a whim.  Like tourists, they walk around in loud shirts, speaking condescendingly and insultingly to the natives, complaining about everything, thinking their money makes them sovereign and wise and yet they have absolutely no intention of staying, once the weather in their more usual investments improves.

Added to this is the imposter investor, who pretends to have money to invest and keeps you endlessly rewriting and reworking business plans and projections, instead of spending time and money on making prototypes and products.  When pushed up against the wall and asked to put some of their money up, you discover that their cupboards are bare.  They don’t have the money they said they had, or access to investors that would back their venture on the strength of their lead investment alone.  Those guys are toxic because of the time they can waste.  You can still be creating presentations and PowerPoints, while a competitor beats you to market with your own brilliant idea.

So beware the technology tourist and the imposter investor.  There are a lot of them about, with the drying up of easier investments.  This is why we don’t have sustainable energy, in large part.  Such projects don’t fit the technology tourist risk profile.

Today, as always, the best investor trusts the technologists to do what they do best.  They have some reasonable working idea of what it takes to make things and what’s really going on in their companies, but they know that the right people to make the technology decisions are the people that actually do the making.  They are comfortable with a normal risk profile for discovery and invention and they know that innovation is one of the best investments you can make, in terms of return on investment.  The very best investors are rich former technology entrepreneurs and engineers.  Unfortunately, there are very few of those left.

Self Confident Agile

The thing that bothers me about a lot of agile processes is that they seem so uncertain about what to build or design.  The practitioners all admonish and warn against arrogance, hubris, thinking you know better than the customer or predicting what the customer wants, but they go too far the other way.  Agile software processes seem to be for people that have been parachuted into the problem domain without a clue about the customers, the previous successes and failures in that market, the competitive landscape and about the job of work the product will perform.  They seem to barely know its purpose.

What are we?  Product designers or zombies?

I think that many people who are passionate about a product domain and the use of products in that domain, who have lived and breathed their solutions in the market of real, paying customers, over a large number of years, know precisely what to build and how to build it.  There is no guesswork.  Validation by agile process, in this case, is just wasted time.  Worse still, if your product design happens to be visionary, then there are few people qualified to actually validate it.  Those products happen to be the best products, by the way.  Works of genius come initially from the mind of somebody with a veritable talent for astonishing product design.

So the task of the software development process, agile or not, shouldn’t be to insert fear, uncertainty and doubt into the process, so that the pronouncements of the product owner and designer are mistrusted at every step of the way and painstakingly (and often wildly inaccurately or incompetently) “validated”, soaking up masses of time and resource in the process.  Just because you are on the development or management team doesn’t mean you have equivalent insight, experience, attitude or passion for the problem being solved.

What happened to trust?  What happened to recognising when somebody has some genuine expertise and insight into the problem and has come up with a ground breaking solution?  Does it hurt those, with less insight and vision, to admit that they’re in the dark?  Is all the validated learning really a thin disguise for jealousy?  Does it get abused to shore up the hierarchy, making it clear to all who is really boss in the organisation?  Is it a way to devalue the contribution of the product visionary, in an attempt to dissuade him from asking for more of the spoils of the win in the marketplace?  A really good product designer is actually worth far more to the company, in actual dollar terms, than what he is being paid.  Always.

Everybody that participates in the design of a product wants to feel that their contribution is valuable.  The problem is they all want to feel that their contribution is in the overall creative direction of the concept.  That, I submit, should be left to specialists that have bothered to spend years passionately immersed in thinking about great solutions.  Contractors or new development hires, who have come from some alien problem domain, shouldn’t expect to have the same weight of creative input as the passionate, inventive, innovative product visionary.  That just dilutes the brilliance and novelty of the product.

It’s how we get camels, instead of horses.  It’s where the committee mentality now resides, though cunningly disguised as an agile process and aggrandised by buzzwords du jour.  It might be validated learning, but if that learning has been pre-validated, through a process of informal, but nonetheless important, thinking about the problem over a long period of time, in front of customers, learning from every expert they encounter, every day, with a number of iterations of the solution already under their belt, then to re-validate the learning is pretty wasteful.

I think that the real role of agile processes should be to find a way for people that already know the story to tell the story to those that don’t know it and who will be involved in the faithful rendering of the story into an actual, shippable product.  It’s about fidelity to the vision, when you have a strong product owner and designer.  It isn’t about second guessing and doubting what they have spent years coming up with.

You can’t replace the hours spent becoming an expert in the problem.  You can’t compete with sincere passion.  If you want to have an equivalent say in the product design, you have to have spent the hours and immersed yourself in thinking about the solution, body and soul, over a long period of time (several years).  That’s what earns you your place at the product validation table.

To take a six month contract with a company you have never heard of before, land in their development department and expect to be calling the creative shots, based on some agile process you use to pretend that you are now the resident expert, or worse, to pretend that nobody is an expert, so that every opinion is equally valid, renders the product insipid, vague, ill-defined, incohesive, conservative, irritating to use and illogical, while taking a much longer time to build it.

I thought agile processes were all about reducing waste and producing better products, quicker.  Too often, they are used to massage the egos of people that just blew in, so that they feel their opinion on matters they know precious little about get the same weight and attention as the product visionary.

Agile is too often usurped by ego.

Internet Predators and Prey

The problem with the internet and social media is that they say they are one thing, but they have become another.  While the tacit agreement between users is that the internet is primarily for finding stuff out, making connections and publishing your thoughts and ideas, there are an awful lot of users out there that are trying to take your money.  They also want to steal your data and content.  In fact, it’s their sole purpose for having a presence online.  They want to sell you something and they want to use your every waking moment to find an opportunity to do that.  They view the internet as a marketplace, with anybody that is just there to browse around as potential prey.

Similarly, with social media, the idea that you are there to make friends and maintain human contact with like minded individuals is somewhat antiquated.  Social media is full of companies analysing your profiles, click streams, tweets, posts, followers, likes, posts and every word you post for indications of a sales opportunity.  When they engage with you, they are again, like predatory hunters, trying to reach your wallet and extract currency.

The absurdity of the situation is that the internet and social media are only useful to people if they provide what they originally promised – an antidote to loneliness and isolation.  When it becomes a place that is merely populated with ravenous, hungry predators, or a place where corporations with the biggest servers steal your every creative contribution to profit from themselves, without rewarding you, or where every “persona” online is actually merely a large server trying to hunt for customers, then where will all the customers come from?  When the online world reaches saturation point, where every avatar disguises a company with something to sell, who is shaking you down for your data, then it will reduce to a place of calculating, cunning sales people selling to other sales people, exactly the same as them, neither of whom has an intention to buy anything from the other.

The internet and social media could, in extremis, become overrun by a large number of huge, automated marketing machines, sponsored by vast corporations, targeting each other through robotic campaigns, to buy things that nobody actually wants.  How futile would that be?

Money and attention are finite.  People are generally pretty sure of how they want to spend their money and time.  If you attempt to subvert that, by seeing every conversation or comment posted online as part of an elaborate and stealthy sales lead nurturing process, then you’re going to get a lot of false communications, false leads and wasted time.  People who come for the human contact are going to flee.

What all the technologists forget and what the people using these incredibly invasive technical tools to mine the online world for business don’t want to acknowledge is that behind every interaction there are people.  If one of the people in the interaction has a perpetual, persistent, relentless focus on extracting a sale from you, that’s a pretty weird relationship.  Eventually, any normal human being would step away from a person like that, who only wants to sell, never wants to talk, never wants to connect at anything other than a superficial level and never wants to listen.  There is no fellowship or companionship on offer.  It’s a sterile human interaction.

If every online interaction finally disintegrates into a sales conversation, as if the whole world is only all about commerce, then we will have lost an essential part of our humanity and transformed the online world into a barren wasteland, populated only by hucksters and advertisements.  In viewing every spoken word and human discussion as an act of commerce, with a single-minded monetary agenda, we lose the ability to love, empathise, help, console, commiserate, explain, rant, laugh and connect with people as human beings.  There is no creativity or collaboration.  There is no cooperation or community.  We all become commodities – just one more lead to nurture in a giant customer relationship management system.

I doubt that was what the designers of the internet had in mind, when they first built it.  I also doubt that it’s what most normal, functional, emotionally literate human beings want, too.

The Software Is Never Finished

I seem to be writing a series of posts on the subject of folly, lately.  Here is another in the series.  One of the most ludicrous things I see or hear in business plans or in corporate planning sessions is the idea that the software can be written, once and for all and then the company spend the rest of its existence simply using the software to make money.  The software development engineers can be made redundant and the company can simply operate the software for all time, from a lower cost base.

This is nonsense for the same reason that believing all the laws can be made and then all the politicians sent home is nonsense.  Conditions will always change.  The competitive landscape will keep changing.  Expectations of what your company does will keep changing.  The platforms that the software runs on will come and go.  It’s a moving target.  The software is never finished.  You can’t pretend that the world your software operates in will stay static and unchanged, just because you have declared your final release finished.

Imagine if Henry Ford had declared the state of automobile design to be complete, after the release of the Ford model T.  Where would we be today?  Where would Ford be, if they were still trying to market the model T up against the Audi R8s of the world?

The fact is that anything complex we design, but especially software, is the embodiment of the skills and experience of the makers.  Without those makers, it becomes a museum piece.  Nobody else knows fully what it can do, what it can’t and how to change it.  The most important piece of any large and complex software programme is the understanding that went into it, the mental record of all the design decisions and compromises that resides only in the wet ware memory of the developers, the intricate mental model of how all the current and future pieces should go together and work together and the heart and soul of the people that froze their understanding into executable code in the first place.

On the balance sheet, the software “asset” is valued, as if the compiled binary had any intrinsic worth.  That is a little like valuing a ventriloquist act on the basis of the cost of the dummy, ignoring and devaluing the ventriloquist.  In fact, running the software forever, without the software developers that created it, is a little like buying a ventriloquist’s dummy alone and expecting it to speak.

So many business plans I have seen have utterly ignored the need to maintain the software they have (it won’t be flawless…there are always defects and removing them protects the value of the software).  They also fail to factor in the cost of keeping their software competitive and relevant in the market in which they operate.  They fail to factor in the cost of renewing the technology underlying the design, at intervals, because the platforms become obsolete.  All of these hidden costs have to be included in the price that is charged for the software, but frequently aren’t.

Finally, they never account for the cost of needing to build a better one, next year, and every subsequent year, ad infinitum.  That’s the only way you can proceed and grow.  You have to learn from your first efforts and make an improved one.  The market accepts no less.  That means you also have to retain the people that made the first one, or all the experience you need to make a better second version simply walks out the door.

I’ve seen many companies attempt to make an improved version of a software application using people that had no involvement whatsoever in making the first one.  That results in another first effort, not an improved, evolved, better-designed second version.  The tendency for companies to fire or fail to retain the people that made earlier versions is so common that it’s ridiculous.  Every few years, a new bunch of people that have no idea of what went into the earlier version have a go at making a new version.  The result is something often less good than the thing it replaces.  They’re virtually starting from scratch, after all.  They’re no smarter about solving the problem than the first crew were, when they started.  They’re also a lot less educated about the problem domain than the people that they replaced.

So if you ever see a plan to make the software, and then fire all the developers, or to rewrite the software with newer, younger, smarter people, run a mile.  It is pure fiction and people that execute on such plans are delusional or cynical.  Those plans never work out as promised, in reality.

Product Development through Company Acquisition

One of the more risible methods of putting a fully featured product into the market goes a little like this.  A bunch of motivated people, with a real problem to solve that they know how to solve, get together and design, and then engineer a solution to the problem.  It might be an enterprise level thing that they have decided to solve, or something else.  Anyway, it goes well.  Their product offering is pretty good.  It has several important features, confers real benefits on the users of the solution and it has a consistency and unity of design.  The company has a hit on their hands.

Then the money people who funded the venture get impatient about making some money out of it.  To make serious money, the company has to grow big and fast.  They have to solve bigger, related problems.  They have to go outside of their fields of experience and expertise to solve them.  They might not even care about those related problems, if they were truthful.

Rather than do what made them successful in the first place, which was to carefully consider the problem and devise a good solution to it that preserves the design integrity of the product offering as a whole, panic sets it.  Doing the good design and engineering is deemed to be too slow and too expensive.  There are competitors already out there solving those extended problems, in much the same way as the team solved their first problem.  If they want to grow, those competitors will have to be outsmarted.

So, the CEO goes on an acquisition spree.  Armed with venture funds and the revenue from the company’s first success, plus a whole pile of leveraged debt, underwritten by the projections of sales growth, the company decides not to design and engineer a solution that is compatible with their first offering.  Instead, they buy other companies whose technology is near enough (if you close one eye) to the solution to the bigger problems they are now trying to solve.

The acquired people were good at what they did too.  They solved a problem of importance, different to the acquiring company’s problem, also by good design and engineering.  But there is a new problem.  Now, the merged company has twice as many designers and engineers as they had before and the two teams are philosophically worlds apart on their approach to solving problems.  They might not even understand each other’s problems or the reasons why their respective solutions worked.

The people at the acquiring company take charge, own the problem of integrating two very different products and alienate the designers and engineers of the acquired company.  Those guys all leave.  Looks good on the balance sheet, because costs are down and the merged product offering has expanded capabilities.  What’s not to like?

Meanwhile, the first customer of the newly expanded solution notices that something is not right.  The two parts go together clumsily.  It doesn’t feel like a good product anymore.  The thing is riddled with compromises and bizarre shifts in design that leave the user feeling frustrated and lost.  You can easily see the joins between the two original solutions.  The integration, rather than being deep and comprehensive, was rushed and superficial.  Consequently, the thing performs like a dog.  Having sunk cost into the merged solution, the customer just grins and bears it, for a while.  After all, it still does some of what they wanted, just not in a smooth and seamless way.  Sure, it costs the customer more to live with it, but less than the cost of abandoning it, at least for now.

The CEO, flushed with the apparent success of his acquisition, decides to buy more companies and their solutions.  Pretty soon, the acquiring company’s flagship product is called a “platform”, but is in reality a mash up of disparate technologies and approaches.  On paper, it is feature rich.  In operation, it’s a nightmare to maintain and a nightmare to use.  This is just a bunch of different things, pushed closer together, with the acquiring company’s logo glued to each part.  The benefits are now harder to prove, even as the feature set has mushroomed.  Nobody actually likes using the product, anymore. It has become unwieldy, inefficient, too hard to learn, too hard to live with and expensive to own.

When it comes to adding small incremental features, nobody knows how to do it anymore.  The parts of the system that were acquired are never touched.  All the engineers and designers that knew anything about the inner workings of those acquired parts have long since left or been made redundant.  Nobody remaining in the company knows how these parts work anymore.  Adding or changing anything becomes slow and risky.  Innovation grinds to an ignominious halt while software stability degrades with each new release.  The cost of maintenance is now astronomical, eating any margins that the company made from selling the merged hotchpotch solution.  Customer dissatisfaction is at an all time high.  Nobody can understand why, with such a rich feature set, customers are defecting in droves and nobody can make the solution work as required, despite heroic efforts to do so.  Even the feature set is beginning to look a little tired and so last year.

Meanwhile, another bunch of motivated people, in a start up somewhere else, realise that the problem to solve is to make a good version of the aggregated solution that was assembled by the acquiring company.  With a model to follow, these guys make good design and engineering decisions and arrive at a fully featured solution which actually does more, with less.  It’s simpler, more fully featured, more elegant, more reliable and cheaper.  Users find it more consistent to use, more intuitive, easier to learn and more satisfying to work with.

And then the first company we spoke about, who assembled their go to market solution from acquired companies’ technology, goes bust.  And so the process repeats, ad infinitum, leaving a trail of broken hearts, broken people, broken promises and broken dreams in its wake.