Hmm, while these may be the emotional pangs of going through the process, there is a much greater failure that destroys much more value (both monetary and tangible benefit).
Joining a large company prevents expanding total addressable market.
The acquirer wants to tap an existing resource. While growth is commendable, it's only perceived as an option within a narrow customer base or market segment. It's increasing ROI, not capitalizing on new changes in the market.
This looks like a failure to innovate, but that's correlation not causation; not the root cause. There's plenty of innovation, it's just constrained by a limited business model.
I've never seen a company break out of this trap. If you make money from ads, b2b users (Slack), or b2b management (Oracle), it's impossible to change those stripes.
Microsoft could make a video game unit because they think "software in a box." Amazon never will.
It's not usually the giants where this really plays out, but the middle tier. Adobe, Atlassian, Intuit, PayPal, Salesforce, Walmart labs. Like trading Bitcoin for pizza in 2015, they made a great financial deals that paid off, even legitimized the space and were ahead of their time, but lost out on underpinning entire future markets.
> Microsoft could make a video game unit because they think "software in a box." Amazon never will.
Amazon literally has a video game unit. The game on Steam with the 5th most online players (as of the time of posting this comment) was made by Amazon: https://steamcharts.com/app/1599340
Disclosure: I don't think it really biases anything about this comment, but AWS is my current employer.
Lost Ark was developed and published by Smilegate in Korea for three years before Amazon published it in the west. Saying that they developed it is not really accurate.
Better examples of games developed by Amazon Game Studios would be Lost World or Crucible.
I was thinking of "new world" when I wrote the comment. It's essentially the most "design by committee" MMO possible, and the reviews reflect the poor attempt.
Weirdly, MMOs actually fit Amazon's business model better than off the shelf games. You pay for access, like Amazon prime. I'm surprised they didn't bundle in new world into prime membership as a way of catapulting their video game unit expansion. That's much more their modus operandi; expand first and just the intense scale to force improvement over time.
I've never played it, so I can't comment personally, but New World has allegedly gotten significantly better recently (according to people I know who do play it) and has "Very Positive" recent reviews on Steam.
Also, AGS is making a single player game, at least according to this press release:
> ...but lost out on underpinning entire future markets.
It's worth a fairly recent reminder[1] what could happen when big companies with acquired ambitions bet big on pinning down future markets but fail to meet expectations before market sentiment decides to swing.
In addition to that, acquisitions often break up (performing) teams, and burden successful IC with additional „enterprisey“ workload which they might not be suited for.
If you exclude the M&As involving large software companies, which seem to be the usual topic around here, then I could tell you that such processes - if companies are, for example, in segments such as manufacturing, finance, insurance, consumer products or media (that I know of), one of the most difficult parts consists/ed in systems (back end, front end, end users) convergence or absorption, with people aligned and committed to assist/support the efforts. In all scenarios, without exception, I was part of an M&A (and even divestitures, at time), on the IT side, the companies lost quite a few players (on the "acquired" side), due to frustration of not being able to create or produce as prior to such events, allegedly because of new IT environments. We tried everything - from spending days at the side of critical engineering or R&D or Sales & Marketing departments, to attempt to comprehend and create similarly supported new systems, to preserving parallel systems, for a while - and some people still didn't feel compelled to "change" how they were doing things. Unfortunately some of those were the ones in critical positions, which may have originated the ideas behind the desire for acquisition, and also able to choose alternatives, outside, i.e. changing jobs - as individuals - even if to then change IT systems in a new company, appeared as more acceptable than learning alongside the "acquiring" teams.
Genuinely interesting, my employer's primary business is acquiring companies, typically we do not subsume them and expect them to adopt our systems/products, we just support their existing and offer alternatives that will ultimately be cheaper because we have more clout when it comes to contract/licensing negotiation.
The downside is the enormous list of products the support team must familiarise themselves with.
At least in the defense business, selling means "I'm Done". Whoever is buying is hoping to get some prefunded R&D - it is damn hard to fund R&D in a traditional contractor - and whoever's selling is all done developing and is ready to cash out. It's value extraction and destruction, nothing more.
There's a dark side, of course. If you're a small contractor, and you deny the offer, you're going to get chased out of the marketplace by not just the guy with the offer, but by all of his friends as well. They've got their corporate office within driving distance of every whorehouse servicing Logan Circle, and you have a research block and maybe an airfield lease. Unless you've been squatting on a personal fortune, in which case maybe you can run some Towncars to the Circles yourself.
So if you're ever in the situation, just sell the thing. Yeah, they'll crush any value left in your magic widget, but the whole edifice is effed, and it's not worth trying to fix a house from the bottom of the shitter.
15 comments
[ 2.8 ms ] story [ 46.1 ms ] threadJoining a large company prevents expanding total addressable market.
The acquirer wants to tap an existing resource. While growth is commendable, it's only perceived as an option within a narrow customer base or market segment. It's increasing ROI, not capitalizing on new changes in the market.
This looks like a failure to innovate, but that's correlation not causation; not the root cause. There's plenty of innovation, it's just constrained by a limited business model.
I've never seen a company break out of this trap. If you make money from ads, b2b users (Slack), or b2b management (Oracle), it's impossible to change those stripes.
Microsoft could make a video game unit because they think "software in a box." Amazon never will.
It's not usually the giants where this really plays out, but the middle tier. Adobe, Atlassian, Intuit, PayPal, Salesforce, Walmart labs. Like trading Bitcoin for pizza in 2015, they made a great financial deals that paid off, even legitimized the space and were ahead of their time, but lost out on underpinning entire future markets.
Amazon literally has a video game unit. The game on Steam with the 5th most online players (as of the time of posting this comment) was made by Amazon: https://steamcharts.com/app/1599340
Disclosure: I don't think it really biases anything about this comment, but AWS is my current employer.
Better examples of games developed by Amazon Game Studios would be Lost World or Crucible.
Weirdly, MMOs actually fit Amazon's business model better than off the shelf games. You pay for access, like Amazon prime. I'm surprised they didn't bundle in new world into prime membership as a way of catapulting their video game unit expansion. That's much more their modus operandi; expand first and just the intense scale to force improvement over time.
https://www.metacritic.com/game/pc/new-world
Also, AGS is making a single player game, at least according to this press release:
https://www.amazongames.com/en-us/news/articles/amazon-games...
It's worth a fairly recent reminder[1] what could happen when big companies with acquired ambitions bet big on pinning down future markets but fail to meet expectations before market sentiment decides to swing.
[1] https://seekingalpha.com/news/3896521-meta-dives-24-after-st...
In addition to that, acquisitions often break up (performing) teams, and burden successful IC with additional „enterprisey“ workload which they might not be suited for.
The downside is the enormous list of products the support team must familiarise themselves with.
There's a dark side, of course. If you're a small contractor, and you deny the offer, you're going to get chased out of the marketplace by not just the guy with the offer, but by all of his friends as well. They've got their corporate office within driving distance of every whorehouse servicing Logan Circle, and you have a research block and maybe an airfield lease. Unless you've been squatting on a personal fortune, in which case maybe you can run some Towncars to the Circles yourself.
So if you're ever in the situation, just sell the thing. Yeah, they'll crush any value left in your magic widget, but the whole edifice is effed, and it's not worth trying to fix a house from the bottom of the shitter.