Technical innovation and the Department of Revenue Prevention, Storage Soup blog by Randy Kerns

By Randy Kerns, Tuesday, July 19th 2011

Categories: Analyst Blogs

Tags: storage vendors,

All new storage technology doesn’t come from startups, although you might get that impression by reading about industry acquisitions.

The reasons most often listed for acquisition of a start-up company are:
• Technical infusion (technology acquisition)
• Expansion into a new business area (new technology and staff)
• Complementary solutions (filling in a product line hole).

These reasons would lead to the conclusion that startups bring new technology to customers more effectively than large established companies. Considering that popular technologies such as data deduplication, thin provisioning and iSCSI storage were originally brought to market by startups, there is merit to this line of thinking. But it is not such a simple issue. Large vendors do have brilliant and dedicated people, but developing and bringing a product to market in these companies can be a complicated process. That’s because they create a corporate structure that often makes it difficult to take a new idea or approach and bring it to reality.

Large companies have processes that their people are required to follow, making it difficult to innovate. Any initiative or idea must conform to their interpretation of the company process, and there are organizations and people inside each company that can create enough resistance to hinder realization of the new ideas. I call these people and processes the Department of Revenue Prevention.

If a large company has an entrenched Department of Revenue Prevention, it is easier for people with ideas to take them through the startup route. That route has less resistance, and innovators’ time and efforts are not spent battling the department but actually moving the innovation to market. Unfortunately, the rewards may be limited based on what must be given up to get the funding necessary to take the technology innovation to a product stage. Ultimately a startup may not be successful for a variety of reasons, including:

• A bad board assigned by investors that do not understand the market, the technology, or what is required to bring the technology to fruition
• Missing or subpar key people in areas such as strategy, marketing, and sales.
• Technology that may not meet customer needs at the right time -– either being too early or too late.

Large companies that understand how to nurture and develop the ideas of their talented people will be more successful than those that succumb to the bureaucratic sprawl and paralyzing Department of Revenue Prevention structure. Even inside these great companies, things change over time and bureaucracy spreads. To re-invigorate a company requires periodic review and change to enable innovation. It’s either that, or continue to acquire other people’s ideas.

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