How To Kill Innovation

The Wall Street Journal careers blog section has a post called Want to Kill Innovation at Your Company? Go Public. It suggests the tech entrepreneurs' quest for a bigger cash cow ends up killing the sacred cow of innovation.

A study by Shai Bernstein, an assistant finance professor at the Stanford Graduate School of Business, analyzed 1500 companies between 1985 and 2003. Some of the companies went public during this period, and some decided against it. The study measured the rate of patents and their content. While the rate didn't change between public and private companies, the study found that the awesomeness did.

An IPO didn’t affect the rate at which a company obtained patents, but Bernstein found that public companies’ subsequent patents were far lower in quality, as measured by how often each patent was cited in other patent applications.

Post-IPO companies saw an average 40% decline in such citations per patent in the five years after going public relative to the firms that remained private, the study found.

And while the study focuses on patent filings, the same findings can and should be applied to the ad industry. The bigger the shop, and the more owners (managing partners, holding companies, shareholders and the like) there are, the greater the chance creativity will be stifled in favor of keeping the cash flow coming in.

And just as in the tech world, (or gaming world, or academic world, or any field inhabited by a sizable percentage of creative personalities) when the realization sets in that no matter how creative you are the people in charge have a completely different motivation than you do, only one thing will happen: you leave. No one wants to feel like a cog in a machine they didn't want to build.

It shouldn't be a surprise to agencies when they consistently lose their best talent. And deep down it isn't. As long as the shareholders make their money, then the job is being done so every one on top gets a treat. Isn't that nice? But on the other side, it shouldn't be a surprise to creatives when they feel like they're leapfrogging from one big agency disappointment to another.

At the end of the day, despite what they might profess, the best creatives out there are the ones who care more about actually "making cool stuff," than "making butt tons of money." Not that we wouldn't take a bunch off you if you have some to give. You know what I mean.

I guess it's a double edged sword. Companies want to grow bigger, be more successful, hire more people. But with few exceptions, whenever an agency or tech company grows too big too soon, or goes public, it's the beginning of the end. Because it almost certainly means whatever magic that made the company worthy of going public will mutate. And the worst part is, this evolutionary backsliding will most likely continue with the majority of new hot shit shops that get swallowed up.

At least the above study confirms what we already know. Still it never hurts to repeat it, especially for people just starting their careers:
The more hands that own you, the more you end up owing.