The Mob Effect on the CEO

I've been witness to a recent phenomenon. I don't know what to call it, but I'll attempt to describe it to you.

Software companies have been hiring huge teams (Mobs) of programmers in India and other low cost labor supply areas. The purpose for these hires is to 'create more software, faster'.

When the CEO goes to see the Mob they get excited. They see dozens of cheap bodies lined up and ready to work on whatever brilliant idea is floating in the heads of the executive team. They become drunk on this new, cheap power. They get 'beer muscles'. At the sight of all of these cheap bodies they feel like they have their own little army and can take on the world (or at least a larger competitor). And this is where it begins.

Mob Mania has struck more CEO's than I can count. With their new perceived power they begin to do the unthinkable. They build products in spaces where they know very little. They create a 'portfolio of checkmarks'; that is, they build products purely for the sake of rounding out a portfolio and checking off products. Checkmark Portfolios are never about having the best product - they are about having all products. It is almost an acknowledgment that the executive team was too stupid or lazy to do their homework and determine which products really needed to be built and which should have been OEM'd or left out of the portfolio all together.

Checkmark Portfolios lead to an interesting destination. Buyers see dozens of vendors all claiming to have the exact same set of products. They look under the covers and find that the products were designed with minimal depth while maximizing breadth. The amazing similarity of the products being offered by direct competitors leads to a new buying process.

Now, the focus is moving off of: 1. Having the product or 2. Having the rounded portfolio and since the product was built at dirt cheap prices, the focus usually isn't on the price. The focus is on 'trust'. Said another way, the focus is on brand.

Like all products that are easily commoditizable, the focus moves off of product differentiation and to brand awareness and brand identity. However, it is an interesting time to create brands. With the low investment model required to create a Mob, more and more small companies are sprouting up determined to get a piece of the action (many of these companies are now based in Europe or South East Asia).

The room of vendors is crowded and everyone is yelling for attention. The CEO sees this and thinks two things:
1. "It's going to cost some serious money to get my message above the noise level."
2. "Oh shit, what an awful time to have a commoditized product."

Life has taught me that heard mentality pays for the few. I've seen it over and over again. I watched the VC's pull a heard model and now I watch another. The leaders of the heard will win. The followers will be left in the dust. Second and third tier ISV's will be crushed in a battle whose outcome is so obvious that it is almost uninteresting.