Culturally-Induced Information Impactedness: A Prescription for Failure in Software Ventures

The impact of effective information flow in software ventures is analyzed through a recent case in which a hot, lucrative technology was lost on its way to the marketplace. The failure occurred despite the fact that the venture had many components crucial to success, including a proprietary intellectual property position, enormous market demand, a well-qualified, committed team and sufficient funding. One reason for this failure is the lack of information flows among several parties critical to the success of the venture. This case suggests that in software markets which operate at breakneck pace and have short development cycles, effective information flow is a first order priority. These blockages in information flows can stem from the nature of the cultures that are created to produce software ideas, especially proprietary technologies. The case also suggests that information can become impacted by the clash between US software market characteristics and Japanese business culture. Fortunately, there are inexpensive solutions that can substantially improve the return on investment, especially foreign investment, in new software technologies. 1. Missing the Mark: A Lost Proprietary Security Technology The explosion in digital media technologies and the Internet has catalyzed a shift in creative assets from the analog to the digital realm. These multimedia assets: images, audio, video, text and software, have new creation tools and distribution channels that allow them to reach vast new markets. Yet these digital assets also face unprecedented exposure to theft. Mechanisms to protect these assets are in great demand. From a research laboratory owned by a global Japanese corporation came a hot new technology for multimedia asset protection. The technology was to be embedded in software products. A software venture was slated to commercialize the new technology. The venture had many things going for it: an extraordinary team, financial back1060-3425/98 $10.0 ing, huge market demand, and a proprietary intellectual property position. Despite this, the technology failed to reach its commercial potential. This case explores one important reason for the failure: the inability of critical information to flow between the venture and the consequential governing parties. The communication channels were insufficient: to the market, to the funding agent, to the parent and to the research subsidiary management. The result was a significant loss of revenues, investment resources, human capital and technology. This case illustrates how cultural issues can impact information. First, the commercialization process had to enlist the cooperation of two cultures, a research culture and the culture of a Japanese parent corporation. These cultures have attributes that clash with the demands for commercialization of software in the domestic market. In particular, they did not facilitate the high bandwidth information flows that the software venture needed. Software ventures demand large information flows because the field changes rapidly and development cycles are short. Also, the juxtaposition of two different cultures created a boundary that acted as a barrier across which information had to flow in both directions. The discontinuity created by the different cultures slowed information flow. Since these cultural juxtapositions (research integration and strategic Japanese alliances) will likely endure in the process of technology development, it behooves vested interests to better understand how to enable critical communications channels. This is particularly important for software technologies that have high information demand. Fortunately, this case also suggests that reasonably simple strategies may exist for alleviating such culturally induced blockages. The larger objective of this study is to better understand the critical role information flows play in the commercialization of proprietary software technology. This will not only help maximize potential gains, but help reward many millions of dollars of research investment and lifetimes of scientific work.