On Innovation: The Facebook-WhatsApp story, IBM-SAP and the rise of Corporate Venturing

Welcome All to In Praise of Dull…and Gordon Ramsay,

For the very first post I am being a bit “derivative”, i.e. simply commenting on somebody else’s blog, i.e. Richard Huntington’s Adliterate. Thought provoking as it always is (no lips service, neither the first nor the last to say so…), the latest post deals with “Innovation”, a subject very close to my heart and brain.

So I took the opportunity to write the very first post of my own blog and here it goes.

In his latest post “Nineteen billion admissions of defeat” http://bit.ly/1o3pFRs Richard Huntington expresses his disappointment with the inability of innovators to innovate with regard to the purchase of WhatsApp by Facebook.

In relation to that, I would like to add the following:

In my opinion (a bit of a trade mark of this blog here, you are always going to find this before I say what I am going to say…)

1) Besides showing failure to keep nurturing innovation, the FB and WhatsApp story, shows where they and other Internet giants are heading, quickly and at any cost.

2) Thank God, it is not all doom and gloom for innovation. Corporate suits might have learned some lessons from the past so they are devising an interesting, more civilised, albeit sanitised, way about creating and spreading innovation and it is called Corporate Venturing.

1) Where the Internet giants are heading, quickly and at any cost.

The list of “innovators failing to innovate” is long and the one brilliant example that immediately occurs to me is the IBM and SAP story. Two German engineers come up with the simple idea of writing accounting software for corporations, there is a huge hole in the market. All IBM should do is to push this boring, effective piece of software through their captive market (surprise, surprise blue-chip corporations) to make some hefty cross-selling.

But guess: the idea is turned down by “those in the know” (sounds like your typical meeting, innit?). Thank Got the two guys live in Germany, not in some oil/banana republic (thinking of Nigeria or my poor motherland Sicily…), so they are free to move on to create SAP, I mean SAP not “Trotter Independent Trading” in Peckham.

In fact, I am still trying to work out why Big Blue has not tried to buy them back…and that is probably the interesting question…I will come to that later…

So yes, the FB & WhA deal is indeed another story in the “IBM & SAP” or “Anita Roddick & Body Shop” list.

After all if everything is going faster these days, FB has simply become a giant faster than IBM and just as fast it is getting old, short sighted and conservative, like everything human. (no offence taken IBM, Adcontrarian would say in fact you are the new old, restyled and in great shape).

But the Dorian Gray-like express-ageing of Facebook has got further short-term and long-term implications.

In the short term: yes they need to keep users within the fence and yes they need to monetise them.

After becoming too big too quickly in Nasdaq as well, if FB are not seen to be at least capable of making money, investors will pull the plug and it might be 2001 again (the first Internet burst I mean), and the world cannot afford that right now.

But then again, 99c x 400m users looks like peanuts so there must be something else, and way bigger. That leads us nicely to the long term.

In the long term: I agree with Martín Varsavsky, CEO of Fon http://linkd.in/1cx64Hx who argues that dominance of Media and Telco is the possible endgame.

So FB simply had to do it, buying WhA, before Google or someone else did. And if we accept for a moment that Google is striving to make the Youtube acquisition profitable by making deals with Netflix and other movie and content providers, the argument sounds reasonable.

My conclusions? Three

1) Nineteen billion admissions of “we got überich selling smoke, now we have to rush to build a real business somehow before the shit hits the fan”. Or, more politely: A company that is only 10 years-old and is hardly profitable today, today bought potential, projected, all-to-be-proved earnings in a market (Telco) only partially related to its core business (and I beg you to tell me what the FB core business is or was anyway)…After all IBM had shoulders broad enough, for real, to survive the SAP blunder and it did.

2) Irony no.1: Forget about people “following a brand”. If it is reasonable to assume that FB snatched 400m users from Google+, far from attracting users two of the biggest social media are in fact hurrying to follow users to where they really go (WhatsApp in this case, well until Telegram came up…). If you follow you will always lag behind, truism but true…

3) Irony no. 2: After all the hype and idiocy about users engagement, brand conversations, phigital world blah, blah, blah,  the giants of social media are rushing to converge (familiar to all marketers?) towards the same business model of Media-possibly Telco company, i.e. good old sofa/surfing entertainment and talking live to other humans.

2) CVing: “possibly” the best way about innovation in this world.

Bad news make the headlines but more encouraging things are bubbling under.

A very interesting and relatively new pattern for creating and spreading innovation is going mainstream, just with a catch…

They call it “Corporate Venturing”. A brilliant oxymoron no marketing person could ever come up with.

Imagine IBM told the two accounting engineers: go out and do it. I will raise some money with a little help from my friends. If it flies you are golden (while I am platinum and diamonds), if it crashes you are fired (and no one will know I screwed it).

No-nonsense, normally boring corporate guys are saying: let’s learn from the SAP lesson, bring on the visionaries from within and keep the fire alight, just let them play with fire, at their own risk and danger, in a controlled area, start small and see if it can go big (not the fire, the business idea).

Both an antidote against corporate ageism and against silly IPOs, and bubble bursting.

If have curiosity and time for more detailed and professional comments on the subject, have a look at http://bit.ly/1poQTFC, from Marketing Magazine and http://bit.ly/1htZtxy, from Harvard Business Review. It suggests that the CVing model is coming to age. Possibly not a bad thing.

Where is the catch? Lots of relatively safe money for the innovator BUT  forget about becoming platinum and diamond, just gold (and a promotion). It looks a bit sanitised, almost Chinese-style controlled capitalism BUT it might be just as well soothing after the excesses and the scars of the latest years and those of the years to come, I am afraid.

P.S. There is one wilder, “home made” variation of this model, which good old Larry Ellison called the “Hollywood Studios model applied to IT”, it might be the subject of another post sometime.

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