Poor product strategy might be a cause of failed acquisition
As a result of Google’s much publicized failed acquisition of fast-growing, group buying startup Groupon, Internet pundits are soul searching on Google’s recent inability to capture top startups. These startups include Facebook (according to certain rumor), Yelp and Twitter, just to name a few, despite having a huge cash pile to use. Perhaps these targets possess a much more ambitious company exit strategy, or they are so well-funded by venture capital funds that they do not have the immediate needs for liquidity, or maybe Google’s M&A team is not on the top of their game or aggressive enough?
However, this string of failed acquisitions might also suggest symptoms of issue within another important function of the business: product development and management. Innovation at big firms like Google, though young when compared to other big corporations, is necessarily stifled somewhat by its scale, its multiple levels of hierarchy, and its multitude of interests and markets. Unlike a small nimble startup that can focus all of its best brain, resources and capital onto a selected target segment, carrying out a set of business growth strategies built for that market, Google has to balance its product line, maintain growth in its core markets and then find new markets or product lines to develop, all at the same time. Acquiring startups is a “shortcut” to a new product and a new market. However, that strategy only works if the startups are attracted and the integration of the acquired product into the existing technology and product line is successful.
Clearly, Google has lost some of its acquirer flusht over time, and acquisition targets are also questioning whether their products will continue to flourish within the bowels of the behemoths. Google has a mixed record on this and Yahoo!, another big acquirer in the past, generally did a really bad job of this. The entrepreneurs are taking notice of this phenomenon and are justifiably more cautious when entertaining acquisition bids by such hungry but lumbering giants.
Thus the rejections of Google’s ambitious bids could possibly be foretelling the decline in Google’s product management capability, or at the least, its product managers’ inability to incorporate and integrate new technologies/products successfully into its product line and core business model.
While these are not typical issues for expansion stage software companies, they still serve as a good reminder of how product management is a key business function that affects the company in all stages of its lifecycle.