Synthetic vs. Organic Companies

Most product-lines and companies start “organically” – a team that knows a business comes together and create something new.

A few start “synthetically” – someone in the marketing department of a large organization decides that a product is needed to address a particular opportunity, and has enough power to order that it be done; or an investor finds a particular “space” attractive and manufacturers a company to play in it.

Instinct/prejudice suggests that “organic” companies or products are much to be preferred. Is that correct?

A fairly typical example of a “synthetic” product is the HTC “FaceBook” phone. It’s easy to see HTC marketing thinking:

FaceBook is the heart of the new Internet. There’s a substantial segment of users who are FaceBook users first, web/Internet users second. Let’s make a product that targets those ‘FaceBook First-ers.’

All perfectly reasonable. Why then is the result pointless?

The product doesn’t cohere. It lacks real innovation / imagination. It hasn’t been thought-through from the ground up by people who can conceptualize what a FaceBook-centric phone would really be like. The press release was probably written before the core facets of what the product could be were properly understood. It was likely delivered to an artificial timeline.

These HTC-FaceBook-phone issues are fairly typical failings of “synthetic” products.

Synthetic companies can often fail in similar kinds of ways. There was one company, in the same space as my previous venture, which generated a lot of press when it was started up by investors. It was the feel-good story of the month. But the lack of in-depth feel for the market and product that was found amongst its venture investors doomed it in the end. Being right in general wasn’t enough, the company’s leadership needed to be right about the particulars, too – and, whatever management was brought in, the investors were really in charge, so that the “synthetic” leadership was too far removed from the details for the project to succeed.

Are there counter-examples? Zynga is sometimes described as an example of a company invented by its investors to target the “FaceBook games” (or social games) opportunity. But Mark Pincus, co-founder and CEO, is a serially entrepreneur in the space. If Zynga was in part synthetic in its foundation, it became quasi-organic fairly quickly – led by a team who were pursuing the idea, not by financially-motivated folks trying to achieve market coverage.

This is probably true of most successful “synthetic” companies – they transform themselves into companies pursuing a particular proposition, i.e. become much like “organic” startups, and the earlier the better.

To further bias the comparison in favor of the “organic” approach, there are a great many more organic startups, so, simply by normal Darwinian randomness, most successful startups will be organic. And it is common for organically conceived startups to acquire the advantages of synthetic startups – professional management in areas like marketing and finance; strong funding support; and the determination to go after a “hot” opportunity.

There will be exceptions, but in almost all cases companies that form themselves are the ones to watch.


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