How Big Businesses Kill Startups (They Acquire)

Leaders of big businesses rarely ask themselves: “How can we become more like this startup that we acquired?” Instead, they wonder: “How can we make this startup more like us?”

Kashi was a pioneer in health foods and growing rapidly. So, Kellogg snapped them up and things went OK for a while, but eventually Kellogg chipped away at the things that made Kashi different. They moved Kashi’s headquarters. They changed ingredients. They tarnished the Kashi brand while the health food movement marched on.

Flickr was one of the largest social networks in the world and it was beloved. So, Yahoo! scooped them up, but Yahoo! inflicted their processes on Flickr and innovation ground to a halt. Loyal users fled, but they didn’t have to run far. Instagram was waiting in the wings.

iStockphoto disrupted the stock photo industry by offering cheap, simple pricing along with a vibrant community where buyers and sellers could meet. So, Getty Images acquired iStockphoto and complicated pricing. They stripped away things that the iStock community loved. Meanwhile, Shutterstock grew rapidly.

This pattern plays out over and over. It happens because business leaders don’t understand something important: They have to change. At minimum, business leaders should give their newly acquired company the freedom to continue doing what made it successful in the first place. Even better than that, large companies should understand why they were losing market share, then, adapt to the changing needs of their customers.

Remember: Startups don’t threaten big businesses; new ideas threaten big businesses. 

You can kill the startup—many companies do so, intentionally or not, when they acquire a growing upstart—but you can’t kill the idea that made it a threat. Another competitor will take that idea and run with it. This leaves the big business in worse shape than before: They’re still threatened and they have less capital.

Keep an open mind if you’re looking to acquire a company. If you pull the trigger, resist the urge to say: “This is how we do things.” Instead, use the opportunity to ask: “Why do things this way?” There are lessons to be learned whether you make the acquisition or not.