Sunday, June 5, 2016

Going with What You Know

If I had to categorize the “theme” for the coming week, I would say that it involves an organization being brutally honest about what it’s good at, looking for opportunities to leverage core competencies, and recognizing early warning signs.

I recently worked for an organization that could be categorized as a well funded startup.  This organization’s core competency lied in the life sciences arena, specifically generating and interpreting human genomic data.  Given that this organization, at least for it’s first 18 months, was hyper-focused in two areas:  creating a high-throughput genomic sequencing capability and research to interpret genomic data in ways that could benefit society.  
 
The organization’s board of directors, rightfully so, began to wonder when revenue would be generated by all of the sequencing and research work that was generating an increasingly high run-rate.  In an effort to generate revenue, the organization looked at acquisition targets and one was identified.  The target organization was a subsidiary of a much larger, publicly traded, organization and had a modest monthly revenue.  There was also some potential synergy in that the target organization had a large bank of genetic material that could be used to expand my company’s ever-growing set of genetic data.

In an effort to satisfy the BoD’s revenue mandate due-diligence activities, as part of the acquisition process, were rushed.  The target organization’s level of reliance on it’s corporate “mothership” and it’s complex business work-flows were severely underestimated.  

This target company was acquired and, as the technology teams began to do a full accounting of what would be required to build in order to maintain the existing revenue stream were completed.  As can be expected, the estimated vs. actual costs were way off.  

In hindsight, my organization should have focused on leveraging it’s science and research capabilities to drive revenue instead of looking at an acquisition.  Additionally, greater scrutiny of the acquisition target should have been done to better understand the technology and business process investments required in order to complete the acquisition.

As a contrast to this, my organization completed a successful acquisition which served to complement our deep research and science capabilities.  We acquired a company that had a very capable and automated genomic reporting capability.  This enabled a capability that we had previously struggled with: automating and packaging reports related to our scientific research and genomic sequencing pipelines.  The technology stack used by this organization and mine were virtually identical and the expertise that the target organization’s staff had was nearly 100% complimentary to what we had “in-house”. 

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