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Whenever I hold a conversation with a group of techies, the issue of Kenyan corporations stealing ideas from young techies comes up for discussion. We all know how it happens; you come up with an idea that is useful to a big corporation, say a mobile banking platform for a bank, or a payment platform for a mobile service operator. You spend some time building a basic prototype and trying to get a meeting with the technology decision maker in the company, the CTO (Chief Technology Officer). You finally land a meeting, and your excitement is palpable as you prepare a presentation and demo, ready to convince this CTO that they should contract your company to build and support this solution for the company. The material day arrives, you present and dazzle him and his team. They ask you to leave your documents and they request access to your demo so they can present to the senior guys, and promise to get back to you in a week or two.
He gets back to you with a counter proposal. He is offering you a job. He wants you to leave your “one man show” start up. The company will give you a budget to hire a team of developers to build the system within the corporation. You are required to cede all rights to it, in exchange for a fantastic salary. You are an entrepreneur, so you turn down the job offer.
He makes another offer, for you to build the system, and sell it to them and hand over all rights to the system to them. Your dream is to build a business and not be a “gun for hire” briefcase system developer, so you turn that down too, hoping that they will go with your proposal. They promise to get back to you in a week’s time.
A week passes and you don’t hear from them. Then another week. Then the CTO stops picking your calls or responding to your emails. A few months down the line, you to see a huge billboard from said corporation, launching the solution you proposed to them. You see tweets about a fancy ad that corporation ABC has released about their new product. They went ahead and hired a team to build the system. You have officially been hung out to dry.
We can argue that this makes business sense for the corporation, and that it is cheaper for a bank or mobile operator to build solutions in-house instead of outsourcing to tech companies ( I do not think it is cheaper long term). We can argue that an idea does not mean anything, execution is everything. We can take the high moral ground and ask the techie why he did not patent/sign NDA etc (insert legal jargon here) to protect his idea, ignoring the fact that he can barely afford house rent, leave alone a lawyer who would stand up to full time legal teams housed by these big corporations.
The fact is, whatever justification we may use for this, it is not right, and it is not even good value for corporations. Ethics and legality aside, I do not think it makes business sense to have a bank (for example) invest in a team of developers and an entire department to build a mobile banking or online banking platform. It makes sense to have an innovation or technology strategy team, which is quite different from a developer’s team. See no matter what they say in ads, a mobile banking platform for example is just that. There is little differentiation between bank A’s platform and bank B’s platform, so a bank cannot build sustainable competitive advantage by developing an in-house mobile banking platform. This is the case in almost all technologies, especially in this era of open information. You can invent and build a system, but it gives you a couple of months’ advantage before your competitor does the same. Companies stay ahead because of the other softer aspects that complement the technology, such as superior customer experience, brand building etc.
In addition to lack of clear competitive advantage, these systems are support-heavy, and require constant work to remain updated and relevant. While no one notices when a platform is up, every one notices when it is down. You need staff monitoring and working 24 hours a day. Is this the corporation’s core business? Instead of trying to keep a system up, shouldn’t they be focusing on things that matter like being the best at delivering great customer experience?
Jim Collins introduces the Hedgehog concept in his book “Good To Great“, which I think is a great way for businesses to evaluate their tech strategy. According to Collins, the best leaders and corporate strategists reach success because they have identified their company’s unique hedgehog concept. Identifying such a concept starts with three separate assessments. First, leaders must ask themselves what the company is deeply passionate about. This might be customer service, or selling a certain product. Next, there should be a frank assessment of what the company realistically can and cannot be the best in the world at.
http://www.rookie-manager.com/wp-content/uploads/2014/07/hedgehog2-300x234.gif
Image Credits
Finally, there needs to be a determination of what drives the corporation’s “economic engine” — that is, an identification of the relevant profit structure and where it is rooted. The hedgehog concept is where these three assessments overlap. A corporation’s “one big thing” can be found in the intersection, Collins says. Business leaders following the concept will devote resources and energy to pursuing that one thing and doing it well, rather than always searching around for new strategies and solutions.
Using the above assessment, non technology companies have no business developing technology solutions inhouse. They can discuss ideas and innovations, but the actual building should be done by technology companies. This would leave corporations to focus on what they’re the best at, and give a chance to technology companies do what they are passionate about, and what they can be the absolute best at, which is building great technology solutions.
In my opinion, until Kenyan corporations move from “let us undercut this techie”, to let us trust the techies to do a good job, we will be known for varied and increasingly mediocre technology. We will have brilliant techies developing what are called M-Vitus because they do not want to invest in enterprise solutions that big corporations will copy.
Is my view valid? What can be done to move from where the sector is currently, to a point where corporations can confidently outsource technology to tech start ups? One of the reasons corporations give for outsourcing technology to small companies is because these companies are not known for excellence and professionalism. Is this true? Let’s debate this.
[B]4 Comments[/B]
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M • July 3, 2014 at 1:34 pm •Reply
Nicely written article.
Well articulated points. I agree 1000% with you that companies should identify what their core business / competitive edge is and sink resources and manpower into that, rather than try and do things that they lack expertise / competence / experience in.
I am a firm believer of this myself and have outsourced everything not core to our core mandate – developing software. This includes not only the obvious things (cleaning, legal etc) but also many IT related things like system administration, email, etc.
I agree that it (generally) does not make strategic of fiscal sense for a bank to start investing manpower and resources in building software from scratch, unless it is some very niche requirement.
With regards to protecting ideas … i do not believe it is possible to do this.
For one thing, it is almost statistically impossible for your idea to be truly unique. We are closing in 7 billion people on earth, and chances of an idea being truly unique are remote.
Secondly, even if you hypothetically were able to do so, once you launch your idea – everyone will see it and how it works. Then what? IT and software in particular abounds with first movers being eclipsed by guys who came later. Think Google, Facebook, MPesa, Microsoft, etc.
So i do not buy too much into the ‘stealing of ideas’ narrative. The industry is dymanic and ideas are a dime a dozen.
Perhaps the failure is in most techies to package their execution in such a way that it makes sense for their product to be purchased / licensed rather than copied.
Going back to your example … having been in this industry for a while, most techies package themselves, by accident or design, as one man shows. The same guy is the business development, designer, programmer, tester. He has no offices. No business cards. Usually no company.
If you are in a decision making capacity, this raises several red flags in terms of risk.
Compare and contrast this with a techie who has organized himself as follows:
– Registered a company, and all the legal requirements thereof
– Acquired offices (does not need to be swanky with mahogany desks) – just somewhere you can be found and visited
– Put together a team consisting of development, quality assurance, documentation, support and perhaps finance and sales
– Demonstrates processes and methodologies that indicate productivity, quality, succession, capacity etc
If somone like this presents a solution (product + support + documentation + continuous improvement) then it makes little financial or strategic sense for an IT manager to attempt to replicate the same – the risk is considerably reduces.
That is where I think the problem is. Packaging and demonstration of capacity.
Also there is usually the issue of the techie requiring some obscene payments (a la Instagram Whatsapp) completely out of touch with reality. Under such circumstances most people in decision making capacity will either opt to build it themselves or find someone else to do it.
Finally i’d like to mention Safaricom in particular. Anyone doing anything around the MPesa ecosystem should quickly realize that Safaricom’s end game is to make it ubiquitous. So it is just a matter of time before they do payment for EVERYTHING over and above sending money to grandma and school fees. It is not going to be personal.
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Shiroh • July 3, 2014 at 1:45 pm •Reply
M, yours is officially another blogpost. But i agree with you entirely.
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Becky • July 3, 2014 at 3:13 pm •Reply
Kellie,
I agree with Rad entirely.
We are all big fans of outsourcing what is not our core business. It grows businesses and I am a major beneficiary https://s.w.org/images/core/emoji/11/svg/1f642.svg
Let me digress from your point; I work in an industry dominated by cowboys and others who would make you employ internally instead or outsourcing. How do I make sure that when I go to Rad’s office to pitch for business, he takes my offer, even though its more expensive?
What is the value proposition?
You see, when someone offers this one man show a job, what does this man say? Is its arrogantly that they cant work for someone, have worked hard to build it etc or do you explore ways that make a partnership better?
I will emphasize Rad’s point on cost. Yes, you may not have the money or the market path to scale, but how do you make it a partnership vs me working for you? How do you make that software, hard to replicate? Or run it in a way that its so efficient, the big ape would find it hard to run it like you do?
Now, I may be going round but most people who claim ideas were stolen, at times they dont even have a prototype. Some have. But not many. If I have a working system/idea/prototype and all it needs is a little push and it makes money, why would I hire a team to develop from scratch?
I know Safaricom is vilified in this aspect but I sat with a guy from there and of course I was channeling all the anger by techies who feel wronged. The guy mentioned examples of tech companies they were working with, who came with an almost finished product and they found ways to partner. Of course the guy can also be full of it.
I think also some start ups need a few hard lessons; explore what works, working or developing for the ape as you finalize setting up your company manenos and gaining market insights or stick to your original idea?
As a journalist, I have auctioned or given up my rights to a story just to achieve an end goal? Is that a lack of ethics? Could have achieved much if I stuck on my own? No?
Its a market thing and its full of shirks…… you got to adapt…… somehow….
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Kachwanya • July 12, 2014 at 6:54 pm •Reply
Great article.
For me I have written two articles in the past which summarizes my thoughts on this issue.
http://www.kachwanya.com/is-safaricom-being-greedy-by-launching-services-to-compete-with-start-ups/#sthash.DxZqGwef.dpbs
and
http://www.kachwanya.com/lessons-start-ups-can-learn-nairobi-news-shut/#sthash.P5j3jODd.dpbs
But you have brought up some points here that are very important.
- Idea
I will never understand why people first run to Safaricom or big banks when they think of something or come up with idea. First, idea is not patentable and second, how much does one sell an idea for ? I mean 100K, 1 Million? How much? And when you approach the likes of Safaricom what type of engagement are you expecting from them, to partner? To buy the idea? Or to wait for you to build it and then they buy it ? Or to fund the development process but at the same time you remain the owner? For me I think at the ideation stage there so many variables which are still unknown, making it impossible to quantify how much an idea is worth. That is why one would be advised to develop and come up with tangible product or service from their so called ideas. It is only after that, that they should think of approaching people to buy, partner , invest in, or distribute their products. - The Cost of Engagement Vs Internal development Vs Getting a another party to do it
So if you are an IT manager and a guy walk in your office with an idea and he/she is demanding like Ksh.1Million for that idea , while you as IT manager understand that or think that what he/she is talking about can be done at Ksh.100,000 internally, what do you do? You definitely go through those stages you have described above, give the guy an offer and even sweet talk him to join your organization. Remember some of the acquisitions done in tech world are done purely to acquire the talents. So if you can convince the talent at an idea stage why not? Then next question would be if one is sincerely interested but unable to agree completely what do you do? Some time it is not that these guys develop the system in house, sometime thy just ask another start-up to do it for them but at their own terms. That is the reason why before approaching these people you need to have ready made product and not an idea
I believe Big Companies should not steal ideas from start-ups but we also know that we are not living in a perfect world, so the start-ups need to be smarter. I also believe that start-ups should never worry about companies like Safaricom when they try what one would call horizontal integration approach. Start-up A for example with vertical integration approach will beat them hands down
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