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Can anyone tell me why large corps do this ? Compete with every new product or buy companies instead of sticking to the core product. I like Slack and all but i

Can anyone tell me why large corps do this ? Compete with every new product or buy companies instead of sticking to the core product. I like Slack and all but if Slack started implementing Google Docs I would be surprised.

vikramkr 6y ago
Two things, ecosystem and diversification. For an ecosystem, build a suite of products that all work together so you solve a complete set of problems and lock customers in. Anyone can easily switch to a new video call provider, but it's far harder to do that when that provider is linked to your email and your calendar and so on. And diversification is just that - dont put all your eggs in one basket. Grow the business. AWS is immensely profitable and has nothing to do with buying books online, but amazon is a stronger business because of it. And if you just stick to your core product, you'll find yourself going the way of blockbuster or Kodak. And for the slack point - Really? I would be surprised if they didn't. Collaboration is pretty much the core of slack and they already let you share documents, making it possible to edit them seems like an obvious next step.
- foobar_ 6y ago
  That makes sense. But why diversity needlessly ? Isn't google's core search suffering ? Red Bull / Coke don't diversify but they are not exactly ecosystems either.
  - saaaaaam 6y ago
    You say that, but Coca Cola apparently owns more than 500 brands globally https://en.m.wikipedia.org/wiki/List_of_Coca-Cola_brands https://en.m.wikipedia.org/wiki/List_of_Coca-Cola_brands
  - vikramkr 6y ago
    Coca cola is really diversified. Just because they're all drinks doesn't mean that they haven't diversified across sectors of the refreshment industry - it depends on how you define a core product. Google sees themselves as "organizing the worlds' information" which is a core that lets them do pretty much whatever they want. I don't know if they've done anything as offbrand as Coca Cola purchasing Columbia Pictures, which was a thing they actually did for some reason. And a counterpoint to red bull and coke is pretty much every other consumer packaged good company out there, like P&G or Pepsi, who are also the companies that might find themselves aquiring red bull once the founders move on. And in terms of diversifying needlessly - obviously, nobody doing the diversifying thinks its needless. Everyone is convinced that it's positive NPV, lowers overall risk, allows them to unlock "synergies," etc etc etc. There's been a swing away from that as conglomerates like GE are dismantling, but especially if you get financial analysists involved, it's nto hard to come up with a model that shows diversifying will lower your risk. And also, in case this isnt obvious, the most important thing here is more money equals good. If your bonus is based on hitting a sales target, why not acquire a company to boost division revenues and meet that target? And if you can make money (or think you can make money) by entering a new business area, why wouldn't you? Google doesn't see search as suffering or think their moonshots are the reason for that, otherwise they'd be redirecting investment towards saving their cash cow. They might be wrong, but they think this will make more money.
    - foobar_ 6y ago
      You are right. This thinking is finance thinking as opposed to product thinking. It seems corporations are acting as hedge funds once they hit this stage of quasi monopoly / oligopoly. In reality it's just squashing the competition and increasing sales numbers. It's just a quirk of the law that it seems legal. I literally can't think of one silicon valley acquisition that actually ended in synergy.
      - vikramkr 6y ago
        They probably literally brought in hedge fund people to be their CFO. And it's not hard to hire McKinsey to make a slide deck backing up your strategy to acquire a company for whatever reason. Interestingly, actual hedge funds tend to not like companies that act like hedge funds. They want companies that are focused on one area since they think they're better at diversifying their portfolios than the management at these portfolio companies. They'd rather have fine grained control over what markets/products/industries/regions they have exposure to, and you cant do that with these messy conglomerates. That's why fiscal discipline being imposed at Google looked like separating business units and providing insights into the individual business units of the company, so even if investors in alphabet can't control what alphabet diversifies into, they can at least understand and evaluate it.
        foobar_ 6y ago
        That's probably it, the CFO. I've mostly been sold on Jeremy Corbyn's ideas on worker cooperatives. I like open source based economies, they seem to encourage innovation and are fairly similar. The concept of hedge fund is completely fine as well. Messy conglomerates though! Ughh it's like a code refactor gone wrong 90% of the time. I guess I like my naive capitalism of build a product, sell, make money and keep everyone happy.
- bhl 6y ago
  I'm for ecosystems but not for closed ones. Slack already has an ecosystem with their plugins and integration with other apps [1]: if they were to build documents as well, then they would be competing with documents app that are already integrated with Slack (see [2]). I also wouldn't think it'd be a good documents app. Most companies don't have the resources or focus to build two _good_ products. As a counterpoint to Amazon, look at Dropbox and their Paper app. And then look at their stock price: the engineering resources put into Paper would've better been spent improving their core product. [1] https://slack.com/apps https://slack.com/apps [2] https://slack.com/apps/search?q=notes https://slack.com/apps/search?q=notes
recursivecaveat 6y ago
Often its agency issues. Managers are usually paid in proportion to the size of the thing they manage. So if you have a core product that returns more money than you can reasonably invest back into it, what do you do? You write up a plan about how much synergy you'll unlock by buying/building XYZ and go off empire-building.
thehappypm 6y ago
Slack implementing a Slack-themed, Slack-UI-consistent document product would totally make sense to me. It’s nice to have fewer platforms — it can be annoying to have specs hosted here, have technical docs hosted there, communicate here for email, communicate this other place for quick messages.. fragmentation is annoying.

vikramkr 6y ago

Two things, ecosystem and diversification. For an ecosystem, build a suite of products that all work together so you solve a complete set of problems and lock customers in. Anyone can easily switch to a new video call provider, but it's far harder to do that when that provider is linked to your email and your calendar and so on. And diversification is just that - dont put all your eggs in one basket. Grow the business. AWS is immensely profitable and has nothing to do with buying books online, but amazon is a stronger business because of it. And if you just stick to your core product, you'll find yourself going the way of blockbuster or Kodak. And for the slack point - Really? I would be surprised if they didn't. Collaboration is pretty much the core of slack and they already let you share documents, making it possible to edit them seems like an obvious next step.

foobar_ 6y ago
That makes sense. But why diversity needlessly ? Isn't google's core search suffering ? Red Bull / Coke don't diversify but they are not exactly ecosystems either.
- saaaaaam 6y ago
  You say that, but Coca Cola apparently owns more than 500 brands globally https://en.m.wikipedia.org/wiki/List_of_Coca-Cola_brands https://en.m.wikipedia.org/wiki/List_of_Coca-Cola_brands
- vikramkr 6y ago
  Coca cola is really diversified. Just because they're all drinks doesn't mean that they haven't diversified across sectors of the refreshment industry - it depends on how you define a core product. Google sees themselves as "organizing the worlds' information" which is a core that lets them do pretty much whatever they want. I don't know if they've done anything as offbrand as Coca Cola purchasing Columbia Pictures, which was a thing they actually did for some reason. And a counterpoint to red bull and coke is pretty much every other consumer packaged good company out there, like P&G or Pepsi, who are also the companies that might find themselves aquiring red bull once the founders move on. And in terms of diversifying needlessly - obviously, nobody doing the diversifying thinks its needless. Everyone is convinced that it's positive NPV, lowers overall risk, allows them to unlock "synergies," etc etc etc. There's been a swing away from that as conglomerates like GE are dismantling, but especially if you get financial analysists involved, it's nto hard to come up with a model that shows diversifying will lower your risk. And also, in case this isnt obvious, the most important thing here is more money equals good. If your bonus is based on hitting a sales target, why not acquire a company to boost division revenues and meet that target? And if you can make money (or think you can make money) by entering a new business area, why wouldn't you? Google doesn't see search as suffering or think their moonshots are the reason for that, otherwise they'd be redirecting investment towards saving their cash cow. They might be wrong, but they think this will make more money.
  - foobar_ 6y ago
    You are right. This thinking is finance thinking as opposed to product thinking. It seems corporations are acting as hedge funds once they hit this stage of quasi monopoly / oligopoly. In reality it's just squashing the competition and increasing sales numbers. It's just a quirk of the law that it seems legal. I literally can't think of one silicon valley acquisition that actually ended in synergy.
    - vikramkr 6y ago
      They probably literally brought in hedge fund people to be their CFO. And it's not hard to hire McKinsey to make a slide deck backing up your strategy to acquire a company for whatever reason. Interestingly, actual hedge funds tend to not like companies that act like hedge funds. They want companies that are focused on one area since they think they're better at diversifying their portfolios than the management at these portfolio companies. They'd rather have fine grained control over what markets/products/industries/regions they have exposure to, and you cant do that with these messy conglomerates. That's why fiscal discipline being imposed at Google looked like separating business units and providing insights into the individual business units of the company, so even if investors in alphabet can't control what alphabet diversifies into, they can at least understand and evaluate it.
      - foobar_ 6y ago
        That's probably it, the CFO. I've mostly been sold on Jeremy Corbyn's ideas on worker cooperatives. I like open source based economies, they seem to encourage innovation and are fairly similar. The concept of hedge fund is completely fine as well. Messy conglomerates though! Ughh it's like a code refactor gone wrong 90% of the time. I guess I like my naive capitalism of build a product, sell, make money and keep everyone happy.
bhl 6y ago
I'm for ecosystems but not for closed ones. Slack already has an ecosystem with their plugins and integration with other apps [1]: if they were to build documents as well, then they would be competing with documents app that are already integrated with Slack (see [2]). I also wouldn't think it'd be a good documents app. Most companies don't have the resources or focus to build two _good_ products. As a counterpoint to Amazon, look at Dropbox and their Paper app. And then look at their stock price: the engineering resources put into Paper would've better been spent improving their core product. [1] https://slack.com/apps https://slack.com/apps [2] https://slack.com/apps/search?q=notes https://slack.com/apps/search?q=notes

recursivecaveat 6y ago

Often its agency issues. Managers are usually paid in proportion to the size of the thing they manage. So if you have a core product that returns more money than you can reasonably invest back into it, what do you do? You write up a plan about how much synergy you'll unlock by buying/building XYZ and go off empire-building.

thehappypm 6y ago

Slack implementing a Slack-themed, Slack-UI-consistent document product would totally make sense to me. It’s nice to have fewer platforms — it can be annoying to have specs hosted here, have technical docs hosted there, communicate here for email, communicate this other place for quick messages.. fragmentation is annoying.