Why corporates, who want to acquire a startup culture often fails!

Let me start with a small interesting story of Mohan Ram, who lived in New Delhi, the capital of India.

It’s the year 2005-2006, (yes, you can call it once upon a time now!), Mohan and his colleagues sitting in their tiny cubicles in a remote city in National Capital Region (NCR), along with his 15 other colleagues, then their office head, announced to them to come to office in ‘formal dress’ for next day. He mentioned that few folks from some other organization will visit the office and they should be dress-up well for the visitors. A silent shockwave ran through the room and people, seating in T-shirts and faded jeans, started calling up their friends for borrowing formal dresses.

The following day, few people in their late 50s, came in black suites and mostly contained themselves in the only meeting room in office. Few, days letter, they had a town-hall, which were nothing but 15 people leaning onto a desk VOIP phone that is on speaker and were told that the start-up Mohan was working were acquired by a fortune 500 company! Mohan and his friends were only worried about do and if they have to come in black formal suits to office every day!

After a few months, Mohan and his colleagues had a big party or office get-together, when the chief executive from the fortune 500 company, told them, they acquired the start-up for their start-up culture and they want to replicate the culture in the entire organization.

Although, they were a 100+ years old company but there were getting too bureaucratic and wanted to introduce a startup culture and mindset! Woo, few hundred million dollars to acquire a culture!

A different journey started from there, the VOIP ‘speaker phone’ town-hall were replaced by video calls. One office became fragmented, the same person, who were in research work, no more need to order for toilet papers or plan travel routes. The office hired some folks to do only these activities. Their weekly office party venue changed from small bars in downtown to 4-5-star properties but the frequency went down (not that bad).

Mohan and his friends no more need to be extra careful about buying software license or purchase new server to store additional data.

They grew larger and larger, they could now afford to hire someone in HR, their office cabs no longer looked like cattle transports. The headcount grew too and the cubicle size got bigger, and they could afford to have few cabins for Head of the Departments. The individual team sizes were growing and it was no longer everyone knows everything. So far it looked like a small flourishing economy.

Then came the risk and controls, they could no longer pick up an office pen or writing pad to take notes like before or sketch a new diagram, since it’s public company, they need to get managers signatures on a printed format to get a pen. Due to various regulatory compliance, their lower salary band was increased from the minimum wages (not that it was raining money but it was better from what it used to be).

As a startup Mohan and his friends could read-write on the database, correct error and design new products fairly quickly and ship it to the customer. However, real-estate was still less considering the growth after acquisition. So, they used to manage the space efficiently by putting people of different shifts (creating highly efficient processes so they can work with less headcount.

Some folks also started traveling to other offices to United States, Europe, and many other western counties that used to only one way before.

With new work practices, Mohan’s almost flat organization structure was made hierarchical. Almost every year HR, added layers after layers like Jr., Asst., Sr., Dy. etc. When HR were out of these variety of titles, they were introducing even 1,2,3,4 before and after job titles. The good part, Mohan could now receive emails on handheld devices at certain level (yes, you are right, it’s Blackberry).

It was no longer a single person trying to solve client questions and do the research too. They could not release their software versions as they need to go through a long approval chain, they are now a public company after all!

Years keep passing by and the structure became more complex, they moved into a matrix organization. All the reporting was crisscross and literally someone need to be a forensic expert to figure out the reporting line. Now, they got more space as they got funds to acquire a large office space and they were starting new processes, moving people to management level. The parent company then hired new division CEO!

The new CEO hired consultants to see what their clients would like in future had lot of surveys filled and finally decided to move towards becoming the new Apple! Amazon was still behind as a goal!

Everyone geared up, office was designed as if they are in Google, why not that’s the best thing we are inventing in the industry. The few employees, who were from the first batch like Mohan, were still thinking, which industry are they in? Who cares, when they are moving up! Almost all subway stations in United States had their company name.

Then comes another change, their then new CEO moved on to another company and someone else from the company took charge. The new CEO again hired few consultants, who told them the new product that they were building for last few years were not the one, clients would like to use (come on, he and his friends was were told that this is what they will love a couple of years back!).

The company hired few more firms to look at their business processes, who told them, people are overpaid, project management techniques were too outdated, hierarchical structure was too bureaucratic, if they need to sustain they need to adapt to a start-up culture. Few months later they acquired another company, this time it was for few billions (inflation affects culture cost too!).

In the first town-hall (this time definitely video in old offices and surely people leaning over speaker phones in the startup), the new CEO said, they acquired this company to adapt to the startup culture. This time Mohan and his friends were sitting on the other side of the table, fortunately or unfortunately? What he learned from history is no one learns from history!

So, after so many years of experiences Mohan kept thinking what’s there is startup and why the big companies try to acquire startup to become a giant startup and the story continues.

When I heard about Mohan’s story first I felt this is not story for a specific company, you can keep changing the company names and the story would continue… At least, I know 10 more companies with the similar story. Now, since, I have my own startup, I probably now resemble it better from Mohan's story.

It seems the when are you working for a startup, there are few constraints that comes with it, firstly “limited resources”. You have limited seats, software licenses etc. so irrespective of you are LEAN six sigma certified or not, you make process efficient as much as you can. It’s not mandates but it’s same as you want to survive for tomorrow. You meet everyone every day to plan for the next day but don’t call it a scrum standup. You speak in English but don’t want to call your brainstorming as Kaizen or Kanban!

When you have a flat hierarchy, you don’t gossip much with you colleague about why someone is a level 1 vs. 1.1. When you talk to your clients and make changes in your software as soon as you can, you don’t need consultants to tell you something different.

A startup means a new joiner can ask a question (not planted) to the CTO or CEO, without being penalized for their views. When we all do these tasks through basic project management tools like MS Excel, we do not call it an Agile certified process. We run macros, basic VBAs to manage processes or Selenium web browser to do things quickly, we don’t call it automation team. All these startup does not because they have the magic culture tag called ‘startup’, they do it because they are basic economics demand and supply, limited resources, and thinking that it’s their own business.

Now, can you acquire a startup to become a startup? I don’t know, just think of the need. What are you not a startup? Did you do this experiment before and did it work? Can you buy a culture or you need to change the DNA of how things work from within?

It’s not that startups are great and fully matured organizations are bad both are equally good in their ways but if you think buying a culture will change your culture, that may not be true and as Peter Drucker rightly said “Culture eats strategy for breakfast”, and if this is true, your strategy to became a startup can be eaten up by your existing culture!

Disclaimer: The views expressed are mine and don’t necessarily reflect those of my past or present employer. Names, characters, businesses, places, events, locales, and incidents are either the products of the author’s imagination or used in a fictitious manner. Any resemblance to actual persons, living or dead, or actual events is purely coincidental.