“If the rate
on the outside
exceeds the rate
of change on the inside,
the end is near.”
~ Jack Welch
Threats are Ignored
Kodak, Blockbuster, Blackberry, Motorola, Blackberry, Zocor, Nokia ignored real threats.
Understanding Competitive Threats, by Tim Calkins, author of Defending Your Brand ...
33% Chance of Delisting
Public companies have a 1 in 3 chance of being delisted in the next 5 years.
Harvard Business Review: The Biology of Corporate Survival
4X More Failure
Compared to 1965, 4 times more public companies fail each year.
Misreading a threat
Blockbuster's CEO, John Antioco (left), passed up an opportunity to acquire Netflix for $50 million. He and Blockbuster determined that Netflix was a "very small niche business," and they ended the negotiations, not buying Netflix. At the time, Netflix was mailing DVDs to consumers. This story was published in Variety.
Source: Business Insider
Decisions happen 20% slower vs 2010
The average time it takes to deliver an "office IT project" has slowed down from 8.5 months in 2010 to 10 months in 2015. This slow down has happened as the speed of technology change has increased.
Read Fortune Magazine: If this is truly the age of disruption, why has decision making slowed down?
Companies respond 2 years late
Why incumbents' respond slowly
Decision cycles lag technology cycles. Successes cause complacency. Fear of disrupting oneself. Resources are misaligned to respond. New margin structures prevent progress. All are issues.
Kodak feared internal cannibalization. Kodak owned most digital photo patents, but did not commercialize them as Kodak feared harming its core film business.
Source: When Digital Disruption Strikes,
How Can Incumbents Respond, by Capgemini Consulting
Acknowledge threats. Resist inertia.
We that are playing chess with action-oriented, highly competitive and experimental cultures... one's that don't recognize industry boundaries...
1,976 Weblab Tests in 2013
Jeff Bezos writes: "We have our own internal experimentation platform called “Weblab” that we use to evaluate improvements to our websites and products. In 2013, we ran 1,976 Weblabs worldwide, up from 1,092 in 2012, and 546 in 2011.
300 Pods per page
300 separate Web Services (Pods) feed into an Amazon web page ... that's the claim made in The Connected Company (book published by O'Reilly Media on Oct 17, 2012). At Iterate, we call these 300 services "Point Solutions" which are often built by startups. Each "Pod" can be tested and replaced. Amazon operates with a high degree of modularity and an ability to shift from one test to another.
"Demonstrate why a start-up environment is right for you." - Amazon
As of a 2014, Amazon still told new hires that Amazon is a Startup (a $200 billion Startup). This is the mentality of Amazon.
Iterate is often asked, "What is a Startup?" Well, to us a startup is really a frame of mind. You can spot it when you see the actual behavior (intentional innovation activites and fluid test environments) that flow out of that frame of mind. A startup can be a year old, or it can be a $200 billion Amazon.com.
Failure & Invention: Twins
From Amazon's 2015 Investor letter:
On culture: "One area where I think we are especially distinctive is failure. I believe we are the best place in the world to fail (we have plenty of practice!), and failure and invention are inseparable twins."
"To invent you have to experiment, and if you know in advance that it’s going to work, it’s not an experiment."
"Most large organizations embrace the idea of invention, but are not willing to suffer the string of failed experiments necessary to get there. Outsized returns often come from betting against conventional wisdom, and conventional wisdom is usually right. Given a ten percent chance of a 100 times payoff, you should take that bet every time. But you’re still going to be wrong nine times out of ten. We all know that if you swing for the fences, you’re going to strike out a
lot, but you’re also going to hit some home runs. The difference between baseball and business, however, is that baseball has a truncated outcome distribution. When you swing, no matter how well you connect with the ball, the most runs you can get is four. In business, every once in a while, when you step up to the plate, you can score 1,000 runs. This long-tailed distribution of returns is why it’s important to be bold. Big winners pay for so many experiments."
Four GAFA themes
Passion is paramount
Breakthroughs don't always start with a master plan
Experiment (a lot)
Money can stifle innovation
Passion and the "requirement to innovate" due to lack of resources is why many entrepreneurs succeed. It's probably one reason why 76% of all tech acquisitions in 2012 (CB Insights) were not funded professionally by VCs.
Excess money can encourage lazy tendencies. Tight boxes force creative thought. Too much money can make you stupid.
Still, within this construct of small invention teams and experimentation, the GAFA drives massive amounts of capital. Amazon's "two-pizza" teams. iPhone's 60 person launch team (which our Brian Sathianthan was fortunate to be part of -- working inside Apple's Secret Products or NPI Group).
GAFA invested $35 billion in R&D in 2014
GAFA speaks about innovation with their investments and actions. Source: Google Finance
GAFA is increasing R&D
To your left is a 4 year history of R&D spending done by the GAFA, which some people refer to as the 4 horsemen.
It's not on the chart, but Alibaba (the Chinese counterpart to GAFA) invested more than any of the 4 horseman in 2015.
GAFA loves Startups, too
Despite billions invested in internal R&D, the GAFA acquired roughly 300 Startups over the past decade.
Amazon, Apple, Google and Facebook have each acquired roughly 65, 62, 130 and 50 startups over the past 10 years.
GAFA monitors Startups into which $100 billion is invested each year. As part of this, GAFA also tracks the self-sustaining Startups which represented 76% of all technology acquisitions in 2012. Source: CB Insights, Most Acquired Tech Companies Don’t Raise Outside Institutional Funding
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