by David Hoffman

"Groupon clone" is perhaps the biggest Silicon Valley meme of the decade. News of a company merger illuminates why you should avoid getting anywhere near the clone wars.

Joking about the cancerous decay of daily-deal marketplace companies has become something of a Silicon Valley past-time, so we hardly need to point out just how insipid the online-coupon business has become. But news today may provide a slightly different teaching moment for entrepreneurs: Clones are bad. Really, really bad.

Today, AllThingsD reported that CrowdSavings, a discount marketplace start-up founded in Tampa, Florida, in 2009, will be acquired by Half Off Depot, a coupon start-up founded just a year earlier. The two companies will be rebranded as "nCrowd," and will be headquartered in Atlanta.

What's remarkable (and sort of depressing, really) is that the merger of the two companies ends the culmination of 19 previous acquisitions, a disproportionately massive share of total recent M&A activity in the United States.

But even now that newly-formed nCrowd has become the ultimate matryoshka doll of Groupon rip-offs, the entity will only represent a "fraction of the size of Groupon or LivingSocial."

That's not particularly suprising, but this is: According to the CEO of CrowdSavings, which acquired 15 daily deal companies over the past three years, most acquisitions cost him only "$100,000 to $400,000 apiece." The acquistion of CrowdSavings itself only netted the founders some $6.4 million in cash and stock. Probably not a very good ROI for a 29-person company that raised $1.3 million in debt.

The lesson here for entrepreneurs seeing dollar signs in copycatting the dailly deal market--or, really, any other already-duplicated-to-death space is obvious: Clones suck. They don't just suck because they're "stifling for innovation" and bad for consumer (which, of course, they very often are), but they suck for simpler reasons that should be more obvious--but that we don't always consider in the current buzz-heavy start-up ecosystem.

Start-up clones rarely, if ever, become fast-growing businesses, create sustainable jobs, or help push GDP forward. They are also not to be confused with late entrants into the market, as Google was with Yahoo. They are simply copycats, the result of irrational start-up froth, and they serve little use in our economy.

And, well, that sucks.

From IS Research Assistant Professor Lisa Anthony, PhD:  We have recently made available a reference implementation of our $P recognizer in C#, which you can find on the $P project page. This version augments our original online demo and implementation in JavaScript, both still available as well. When you download the C# .zip file, you receive (1) a DLL of just the recognizer which you can use in your C# applications, (2) a canvas drawing and recognizing demo in C# equivalent to the online JavaScript demo, and (3) a “How To” document explaining how to incorporate these versions in your own projects. Try it out and let us know how it goes!

A reminder: if you implement $P in a new language or in a new way, feel free to let us know and we will link to it from our page as well! Don’t forget to cite us!

New research looks into the real effects of flattened firms and comes up with results that will surprise you.

In the world of start-ups, flatter is generally better, and middle manager is almost a dirty word. Want examples? GitHub managed to make it to 60 employees with "no managers," while gamemaker Valve has generated huge buzz with its radical employee manual describing its leaderless organizational structure.

These may be among the more extreme embodiments of the flattening impulse, but they speak to a real fervor for flat structures as up-and-coming companies try to keep their teams cohesive, responsive, and agile.

Does this enthusiasm for flattened companies hold up to careful study, though?

That's the question asked by Julie Wulf in a new Harvard Business School working paper. Through quantitative research and more qualitative interviews and CEO time-use surveys, Wulf and her team looked into the actual effects when larger companies eliminated layers of management.

She concedes that the impulse behind this delayering sounds sensible. By pushing decisions downward, flat companies aim not only to boost accountability and morale but also "to remain competitive in the face of increased competition" and "pursue a streamlined, efficient organization that can respond more quickly to customers."

The only trouble is that things don't work out as advertised. In fact, the effect of flattening an organization is, in many ways, the opposite of these stated intentions. Wulf writes:

In line with the conventional view of flattening, we find that CEOs eliminated layers in the management ranks… But, using multiple methods of analysis, we find other evidence sharply at odds with the prevailing view of flattening. In fact, flattened firms exhibited more control and decision-making at the top. Not only did CEOs centralize more functions, such that a greater number of functional managers (e.g., CFO, Chief Human Resource Officer, CIO) reported directly to them; firms also paid lower-level division managers less when functional managers joined the top team, suggesting more decisions at the top. Furthermore, CEOs report in interviews that they flattened to “get closer to the businesses” and become more involved, not less, in internal operations. Finally, our analysis of CEO time use indicates that CEOs of flattened firms allocate more time to internal interactions.

When middle management is stripped away, then, the powers it once held don't necessarily flow down to frontline team members. Instead, these decisions often get relocated to the very top of the organization. Or, in other words, flattened firms often look less like a democracy of empowered citizen-employees and more like a monarchy, with "a more hands-on CEO at the pinnacle of the hierarchy." The findings may have come from studying large companies, but small-business owners and founders are probably not immune to these unintended effects.

If you're interested in reading more about flat organizations, several other studies have also looked into the idea and found there are often negative consequences when firms go flat.

Have you ever experienced CEO control freakery masquerading as a flat organization?

Nickolette Hanzigiannis - Good ride on the flat Adv. W/T/C

Reminder: Team meeting this Wednesday, February 13th from 12:00-1:00 p.m. in Commons 327

Ice
Skating Bus Trip

(seb)

Saturday, February
16, 2013

Bus departs The
Commons Circle @ 7:00pm

All Guests = $10

Ticket #: 29 of 48

Philly
Bus Trip

(seb)

Saturday, February
23, 2013

Bus departs The
Commons Circle @ 9:00am

All Guests = $20

Ticket #: 12 of 50

Kenan
Thompson Comedy Show

(seb)

Sunday, February
24, 2013

7:00pm

Retriever Activity
Center (RAC)

All Guests = $12

Ticket #: 1218 of
2700

New
York City Bus Trip

(seb)

Saturday, March 2,
2013

Bus departs The
Commons Circle @ 8:00am

All Guests = $30

Ticket #: 18 of 103

OZ Midnight Premiere

(seb)

Thursday, March 7,
2013

Bus departs The
Commons Circle @ 11:00pm

All Guests = $5

Ticket #: 3 of 260

Medieval Times Bus Trip

(seb)

Saturday, March 9,
2013

Bus departs The
Commons Circle @ 6:00pm

All Guests = $35

Ticket #: 5 of 49