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Corporate acquisitions of startups usually fail. Here’s why...

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For decades, large companies have gone shopping in Silicon Valley for startups. Lately, the pressure of continuous disruption has forced them to step up the pace.

More often than not, the results of these acquisitions are disappointing.

What can companies learn from others’ failed efforts to integrate startups into large companies? The answer: There are two types of integration strategies, and they depend on where the startup is in its lifecycle.

Most large companies manage three types of innovation: process innovation (making existing products incrementally better), continuous innovation (building on the strength of the company’s current business model but creating new elements), and disruptive innovation (creating products or services that did not exist before.)

Companies manage these three types of innovation with an innovation portfolio. Either they build innovation internally, they buy it, or they partner with resources outside their company.

Five types of innovation to buy

If they decide to buy, large companies can:

  1. license/acquire intellectual property
  2. acquire startups for their teams (and discard the product)
  3. buy out another company’s product line for the product
  4. acquire a company for the product and its installed base of users
  5. buy out an entire company for its revenue and profits

Read the rest here:

Stashed in: FAIL, startup

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A good integration strategy is key to making an acquisition work.

They forgot to mention, companies in the "searching" box have really low millions-per-engineer metrics including fractions.  Companies in the "executing" box have really high millions-per-engineer metrics including multiples. 

Good point, Greg.

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