Is It Right For Kenyan Corporations To Steal Ideas From Tech Start Ups?

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.

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.