Sensible people can make thousands of hours of work & spend huge dollars to accomplish what has already been done because of the mantra “the work must be done in house”.
Whether seeking market share, technology, distribution, or other growth options, the not invented here syndrome can be a defensive and high risk position.
Recently, Company A was in high gear readying their company to pick off the dissatisfied customers that were leaving their competition in several key markets.
The plan was to create an entity, and a presence in new markets. While the investment was substantial, the risk was low, management assured me.
That the time and capital investment of entity creation (management, sales, organizational help, locating and building out real estate & everything that goes into “Startup”) could have been minimized substantially by walking into an existing entity (even on favorable terms) was not on their horizon.
By not casting the net to find which of the (more than one hundred players in each of the) markets they were entering might be open to merger, Company A has guaranteed that
Company A will:
Invest more time and money than they would have by buying/partnering with an existing competitor,
Start in the market with zero sales & a much longer time to break even and to capital recovery.
*Increase their risk of failure on several fronts;
1) Knowing what the market you are entering really consists of is critical. By investigating known sellers much is learned that is very difficult to find out otherwise.
2) The window of unprofitability is the window of death. The time it takes a startup to attain profitability is impacted by many uncontrollable factors. Owning a profitable entity is much less risky than making a startup profitable.
The cousin to the Not Invented Here syndrome is the aversion to experts pattern. Many disciplines require years of learning and to watch an inexperienced person tasked with managing a process not well understood and expect superior results is impractical. Weighing the risk/cost/benefit can add great clarity to the process.
Not doing so is the root cause of much business failure.
* Companies that don’t have the expertise and won’t hire out side for the talent to guide them through the process of search, acquisition, and integration may be better off sticking with internal growth.