Monday, June 25, 2012

Fear the middle manager

Today while pondering Microsoft's pending acquisition of Yammer, I came across another corporate acquisition story: how WinAmp went from the cusp of domination in the digital music market to where it is now -- basically forgotten in the continental U.S. -- because of interference and indifference from its corporate overlords at AOL.

Whenever a story like this comes along, it's tempting to rant and rave at just how stupid corporate leaders can be. I mean, they thought highly enough of the company to buy it, but not enough to give it any air to breathe. That explanation doesn't really hold water, though; the managers at AOL didn't wander in off the street, and neither did the ones at Yahoo, Microsoft, HP, or any other major corporation. They got where they are because they're hard-working and reasonably astute. So how is it that, time after time, small companies with momentum get sucked up by larger units only to be destroyed from within?

As I was reading the article, I kept thinking back to a post that Seth Godin made some time ago, on the "hierarchy of business to business needs." Seth makes the point that, with the exception of the CEO and anyone who holds a lot of stock, the people who work there are not immediately focused on growth or profits. Instead, their highest needs are largely personal: the reduction of hassle and the avoidance of risk.

I could be wrong, but this is what I think tends to happen: startup companies are purchased at the instigation (or at least with the approval) of company leaders, who see the company's potential and want to add that to their own company's bottom line. Once in the door, though, those companies become subject to mid-level managers whose primary drive is avoiding risk and trouble. Those are two completely irreconcilable goals: you can't grow or disrupt or evolve without creating trouble for somebody, and now you're reporting to someone whose primary intention is to stop that from happening within his neck of the woods. From that perspective, it's not surprising that fast-rising companies sometimes fail when they're bought out. It's surprising that sometimes they succeed.

The way out of this scenario would seem to be the one that Amazon took when they bought Zappos: they left it running as a quasi-independent company, and it seems to be working out OK. If Yammer was able to negotiate a similar relationship with their new insect corporate overlords, things might go similarly well. You do have to wonder, though -- considering that Microsoft bought the company because they were beginning to disrupt the market dominated by SharePoint, how much room for disruption is there going to be now?