Being a Cannibal Isn’t Easy
- Posted by Leigh Drogen
- on June 13th, 2012
I’m in between meetings on a ridiculous day of meetings that just got more ridiculous a few minutes ago. But I found a Starbucks to duck into and chill for a few seconds while I collect my thoughts.
I’ve been learning a lot about my industry the past few weeks from some very smart people that we are either about to partner with, bring on as advisors, or take investment capital from. And the more I learn, the more I understand why we are succeeding where others can’t, or won’t.
Apple is massively successful, as a business, partly because they are willing to eat their own. They are willing to cannibalize their own products in order to innovate, in order to build new markets. They aren’t afraid of disrupting themselves. Look at what the iPad is doing to the MacBook. Look at what the iPhone did to the iPod. Someday Apple might invest something that destroys all of them. And that will be just fine with them, because they will find a way to sell it, and most likely they’ll find a way to sell more new widgets than they sold old widgets.
Until now I understood that companies needed to cannibalize themselves. They need to have intrepreneurs, people within the company who’s job it is to develop new products which may or may not disrupt their own existing products. Eric Reis develops this thesis in the book all of you should read, “The Lean Startup”. It’s not just about startups, it’s a philosophy for developing a business.
But I never understood why it was so hard to do this within large companies. And here’s why.
When an intrepreneur wants to develop a product that will potentially cannibalize other existing cash generating products within an organization, he must fight a massively uphill battle against many entrenched interests.
First, his idea goes up the chain to the top, where someone is going to question whether or not it will even work. Most companies do not allow lean methodology and testing, which makes it difficult to begin with. Then if the guy at the top feels this is something worth building, other interests within the company are going to realize that it’s inherently competitive. That’s going to get down to the product VP or head of sales, who is going to throw a fit at the fact that his product, which is his job, which pays his bills, is going to be disrupted, not by someone outside the company, but by his own team! The sales guys are all going to be like, WTF, you’re going to screw me over too?
It comes down to the fact that there’s really only a few people happy in the organization that they are innovating, and that sucks. Unfortunately there really isn’t much way around it, unless the guy at the top is a great leader and is willing to say to his team, “unless you innovate now and cannibalize yourselves, none of you are going to have a job soon because a startup is going to eat your lunch.”
Guess what, there aren’t that many great leaders willing to do that.
And that’s what allows startups to step in to a market where you would think a larger company would just throw 20 people and a few million dollars at and crush them immediately. There’s a lot more to think about than just can we build the product. And in today’s world, where it’s so easy and cheap to build something if you have the right team, technology just moves at light speed and will leave you in the dust faster than ever.
And that’s why I love running a startup, because we have no conflicts, and hopefully as we grow I will be willing to be that leader who is willing to cannibalize his business.
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Leigh Drogen is the founder and chief investment officer of Surfview Capital, LLC, a New York based investment management firm employing an intermediate term long/short momentum strategy. More »
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