June 7, 2011

71) Google Wave

危 wēi  danger

A couple of weeks ago an entrepreneur I respect told me that Google had “lost it”.  He pointed to the high profile failure of Wave, which was released to the general public in May last year as clear cut evidence. At the time, Wave was heralded as the future of communication.  It was billed as a web-based platform and communications protocol that would merge the best features of e-mail, instant messaging and social networking, enabling users to communicate both synchronously and asynchronously. Its launch was hotly anticipated, invitations were even sold for up to $70 on auction sites.

But, despite this initial buzz the uptake was poor, and Google announced that it was going to suspend the product’s development in August, just 3 months after launch.  As my friend said, surely this was clear evidence that Google was losing its way?

机 jī opportunity

I see the failure of Wave differently.  Firstly, I respect the fact that Google is still failing with product launches, albeit a high profile one in this case.  It appears that its Innovation Time Off programme (in which employees can use 20% of their time to work on any project that interests them) is still alive and kicking.  It would be easy for Google to sit back on its laurels and focus on its core business, after all its most recent quarterly profit was $2.3 billion.  But instead, it seems to retain its hunger: some launches end in failure but many of Google’s successes, such as Gmail, Google News, Orkut, and AdSense originated from Innovation Time Off.

Secondly, with the benefit of hindsight, I like the way that Google handled the ‘failure’ of Wave.  It made the decision swiftly, even though it had sunk significant resource into the project, and looked at the residual value in the product before choosing to retire the code absolutely. Much of the code was handed to the Apache Software Foundation and turned into Wave-in-a-box: it made sense to open up code that Google couldn’t obviously benefit from to the open source community as any developments would probably drive the usage of Google tools. In addition, Google held on to some of the code and I have started to see Wave functionality appear in other Google products.  Most obviously is its use in Google Docs “Discussions”. Discussions happen alongside documents, they can refer to selected parts of a document, and can be accessed both in the Google Docs interface and also by email.   You can watch a video on the product here.  Given that Google is now benefitting from many of the Wave features that were well received it seems odd to call it an total failure, and even more odd to point to it as an indication that Google has “lost it”.

At IDEO we enjoy developing sacrificial prototypes which we put in front of consumers to test hypotheses.  We call them sacrificial because they are designed for learning rather than as the final solution, we are never too emotionally wedded to them.  With the rapid compression of time and costs to launch startups the Wave story and Apple choosing to discontinue Mobile Me yesterday make me wonder if we will see a trend toward ‘sacrifical startups’ – launched to learn and test approaches with successful aspects rolled over into new startups or folded back into the core business swiftly even if the startup fails?

How About…

  • Judging companies not by their failures but by the blend of successes and failures and how they handle the latter?
  • Failing fast and looking for the value in the embers?
  • Launching sacrificial startups: specifically to learn from consumer reaction to individual parts of the offer?

–

April 13, 2011

70) Pure Technologies – remember option value

I was a little surprised yesterday by Cisco’s announcement that it would shut down its Flip video business and make 550 employees redundant – in part because I love the product and in part because I imagined that there must be an alternative, for example to spin the business out of Cisco.  It made me think through what made Flip previously great – to follow is a blog post on that and I’ll close out with some reflections on yesterday’s announcement…

危 wēi  danger

Pure Digital Technologies launched a line of disposable digital camera products in 2004 – customers would rent the cameras through drugstores, return them and pay for prints.  The product initially did well, however as the price of non-disposable cameras dropped Pure Digital’s sales tumbled.  “The market demand for that product just melted away, we found ourselves selling disposable cameras into a market that was shrinking by the hour” said Michael Moritz, an investor in Pure Digital.

The company pivoted into single-use digital camcorders, also distributed through drugstores but the customer uptake was poor.  Surely the company would continue to feel pricing pressure from the Asian manufacturers and would be forced to wind up gracefully?

机 jī opportunity

Jonathan Kaplan, the company’s CEO refused to roll over so easily.  Instead, he looked for option value in this apparent failure – he wondered if he could use his market learnings and company’s skills to identify a new opportunity.

Firstly, the company noticed that hackers were removing the memory chips from the single-use cameras so they could put videos onto their PCs.   Secondly, drugstores had been asking the company to limit the accessories it shipped with its cameras. With these market needs in mind Pure Digital’s staff hit upon the idea of creating a cheap, easy-to-use digital camera with a built-in USB connector.

The company initially launched a ”Pure Digital Point & Shoot” video camcorder in 2006 and then designed an even more minimal product – launching the Flip line of products in 2007. The device’s success was primarily attributed to this minimalism while all other camcorder manufacturers raced to add more features. As a result, the Flip grew the camcorder market: it held close to one-fifth of the total market at its peak.  It was announced in 2009, that Cisco Systems had acquired Pure Digital Technologies for $590 million USD in stock – it was on a roll.

The launch of the single use digital and video cameras hadn’t been an absolute failure – it had created the option for the company to iterate its strategy and develop the hugely successful Flip.

    —

    Fast forward to yesterday’s announcement.  Flip had succeeded previously by radically changing its strategy, I suspect this capability was lost once the business was folded into Cisco and so perhaps yesterdays announcement – to reverse years of efforts at diversifying into consumer products – might be the right one.  Not because there is no potential value in the Flip business but more because Cisco is not well designed to capitalise on the option value that the current challenges might hold.  After all, given the rise of the smartphone, the value in Flip must be in moving into offering services.

    Cisco failed to integrate Flip into its core vision of a networked world or to enable it to stand alone and retain its entrepreneurial spirit.  Had it chosen the latter Flip may just have found some new areas of opportunity and we might have seen entrepreneurs lead a management buy-out – instead the business fell between two stools…

    –

    How About…

    • Taking time to analyse market failures – examining what opportunities the learning opens up?
    • Observing the users that you do have – how are they really using your product?
    • If making an acquisition, assessing whether you need it to retain autonomy / ability to shift strategy?

    –

    Sources NYT article and yersterday’s announcement

    March 16, 2011

    68) Quora – innovation from recombination

    危 wēi danger

    Adam D’Angelo quit his position as CTO of Facebook to create Quora, an online knowledge market that aggregates questions and answers on various topics and allows users to collaborate on them.  He explained at the time: “Q & A is one of those areas on the internet where there are a lot of sites, but no one had come along and built something that was really good yet.” He’s right that Q&A has been around for a long time, with sites such Answers.com and Yahoo! Answers both receiving over 40 million unique visitors a month.  In addition there are more specific solutions such as Stack Overflow (for professional and amateur programmers) which has 250,000 users. Surely Quora would struggle to differentiate?

    机 jī opportunity

    On the contrary, Quora has had continued strong growth: since receiving funding from Benchmark Capital last year (valuing the start-up at a rumored $86 million) it has grown to nearly 500k users. This is all the more interesting because none of its components are revolutionary, instead the Quora team seems to have done an excellent job of spotting and tapping into emergent online behaviours and trends. Robert Scoble wrote this great post on why he thinks Quora is the future of blogging, in it he references some of the things that Quora learned from other sites, for example:

    1. Quora learned from Twitter – if you ask your social network a question they’ll answer it.  Twitter also taught us that alerts when new people follow you or answer questions you follow are a great way to pull users back to the site
    2. It learned from Digg – a voting mechanism (in which you can vote an answer up or down) enables you to have the best quality answers rise to the top
    3. It learned from Facebook – if you build a news feed that pushes new items to the user their average time on site and page views increase
    4. It learned from the best apps – we all want a sense of community instantly so it imports yours from Twitter
    5. It learned from RSS readers – curation is a valuable service so it allows users to follow topics in addition to people
    6. It learned from blogs about how to do great SEO – it’s amazing how often Quora shows up at the top of Google searches
    7. It learned from instant messaging clients – it shows who is answering a question while they are answering it
    8. It learned from Wikipedia – people are willing to suggest edits and the whole process can be predominantly user-administered

    Although none of these features are necessarily groundbreaking the combination is completely novel. Often innovations are just a recombination of existing features to create a new offer – in this case the Quora founders call their offer “reverse-blogging”. In other words, it’s a content system that starts with an interested audience and then fills in the content to serve that audience. The question is whether Quora can maintain the quality of answer as it grows beyond its Silicon Valley early adopters – when the numbers of questions outstrip the capacity of the informed to answer them.  But that’s a whole other blog post.

    How About…

    • When launching a new venture – look for emergent trends in adjacent industries?
    • What features can you recombine to create a completely new offer?

    —

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