cdixon blog

Seth Godin on “organizational momentum” acquisitions

Seth Godin left an insightful comment on my post yesterday (“Three types of acquisitions“) describing a type of technology acquisition you might call an “organization momentum” acquisition:

I think the most common form of tech acquisition is a variant of the [business acquisition], in which the acquirer wants to inject forward motion into the organization. It’s far more difficult for a public company to rally around a launch into what might seem like a small sector… it just doesn’t seem worthy of the biggest brains and bravest folks, so it gets shunted aside.

On the other hand, once a smart tech company acquires a smaller company with momentum, it gives the company permission to drive, perfect, polish and grow that business. I’d argue that this what actually happened with YouTube.

The logic underlying organizational momentum acquisitions can be found in Clay Christensen’s disruptive technology theory. Smart CEOs of large companies realize how hard it is to shift internal momentum away from developing sustaining technologies. As a way to avoid this trap, Christensen recommends that large companies set up internal startups that are as organizationally separate as possible. But, as Seth points out, acquiring startups with momentum is another way to get the same result.