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Can Big Companies Innovate?

There are some interesting points in this article and some flaws.

I don’t believe skunk works projects say anything about the organization. They are an indication of passionate, creative individuals who are working together on something that they consider important. I’d be more worried about companies who have zero skunk works projects.
People try to resolve their irrational behaviors with rational explanations. Therefore, I don’t think any customer can tell you exactly what they want in a product. True innovation occurs when a latent, undiscovered need is unearthed.

I absolutely believe that large organizations squash big ideas through compromise.

We are just now starting to see the ‘Free’ models working:

Jingle Networks Proves Their Free Business Model Works

Nokia is on their way to being a platform company in mobile.

Breaking: Germany’s Plazes Acquired By Nokia

The State of Open Mobile OSes

I always take pause when I see a lawsuit against a huge company.

Suit accuses Google of trade secret theft

The story is written in a small business David and Goliath tone, where Google has unfairly terrorized a small business and they just want to be compensated.

In my experience, this situation could have easily arisen almost accidentally.

First, the API change. Software APIs change all the time. That’s not a real argument to me. On the other hand, the protection of trade secrets and sharing of confidentiality is a big deal. But you have to wonder about the exact circumstances at the time of those meetings.

If Google entered my market, I’d start sweating. Lots. Yet these guys invited them into their office. Did the small company really have an open discussion about future competition. I don’t know.

I can imagine the company, LimitNote, seeing dollars falling from the sky after receiving a call from Google. So they may have overlooked some of the more salient details like, “Holy crap, Google is entering my market. What am I going to do!?” I suspect they expected to make millions of dollars and neglected to realize that Google has an overall strategy.

Of course they were going to move into your market.

It seems unreasonable to have a tiered pricing scheme for Internet access.

A Meter On Your Internet Service?

I doubt this effort will succeed. If they try to roll it out in larger areas, customer’s will run to the nearest competitor yelling and screaming in the blogosphere. Internet access has always been a competitive market.

Where’s the real threat? Here – Virgin Mobile Jumps Into Flat-Rate Fray

The article above is for voice plans, but you can bet that they are getting ready for the ‘Mobile Internet’ data plan. I’m sure there is an agency somewhere working on a campaign to use your mobile service as your primary Internet connection.

It’s not enough to have a good idea.

At some point, you have to start producing product and making money. You start hiring people and hopefully creating more money.

I recently overheard a start-up discussing why their team would small forever. It’s very unlikely. You’ll need to start supporting your users while keeping up development while at the same time marketing your product. Your growth will force you to hire more people, which will force you to grow, etc.

Ronald Coase, a brilliant economists, predicted that the growth of a firm would decline at some point. In the early stages of a company’s growth, it makes sense to start hiring internal resources. While it may be initially fruitful to outsource most of the work, at a future time in time, the associated transaction costs of the outsourcing will be higher than hiring internal resources. So, you’ll start hiring.

However, he also noted that at some point further in the future, there will be diminishing returns on the hiring. Like an upper limit on the size of corporations.
There are also market structural advantages to being larger. More money, more production, more labor, more opportunities, etc.

Forget about the economics. There’s an easier, albeit more primal reason.

Most entrepreneurs are driven by the dream of big money. They want the big win at the end. A business consultant once told me, “The difference between a small business owner and entrepreneur is easy. A small business owner is content making a living. An entrepreneur wants to make a killing.” Of course, he was referenceing the big payout that comes from an IPO or an acquisition.

Without big companies, the big money isn’t there. In turn, the incentives for entrepreneurs are non-existence. So, if nothing else, big companies exists to motivate entrepreneurs.

The release of the iPhone made big news a few weeks ago. Most people failed to realize the biggest point of the release. No, it wasn’t the 3G.

For the first time, a smartphone will be priced well within the range of a mass market phone user. The first release at 500 was a little too much out of pocket expense for all but the most ardent geek tech. Now, at the price of $199, the new iPhone has the ability to spread it’s Apple/Jobs super-cool cache to a whole new class of users – those who aren’t uber-geeks.

The smart phone market, of which the iPhone is considered part of it, represents about 10-15% of the total cell phone market. The remaining number of cell phones are mass market phones, many of them with limited features and functionality. That means there are many several million phones being used other than smartphones. The biggest issue smartphone users had was gaining more marketshare. In the past, the same pool of users were demanding smart phones. However, there were limited new customers. So new smartphone purchases usually meant some type of replacement or upgrade of an older smartphone.

The price of $199 puts the phone at a reasonable level for mainstream purchase. It allows a new group of people to buy the phone. As with the original release, they are not buying features -they are buying the Apple cachet.

The magic is that Jobs and AT&T have managed to open up the market and created new demand by lowering the price.

The Spore creature creator was released. Link: 250,000 ‘Spore’ Creatures in One Day

The online version will only have 25% of the features. Does this matter? Not in the slightest.

This is an excellent strategy. EA is building up momentum, creating buzz, and gaining users. I haven’t signed up for the software, but presumably it requires contact information. Think those folks will get an email when the full version is released?

There is upside for the customer also. The enthusiasts can preview the software while the hardcore users will put it through its paces. The users will provide comments and suggestions for the design team, not to mention helping to draw out any software bugs.

I think this is a great example of product release strategy in today’s software platform world.

Thought provoking article from Umair on the next generation of revolutionaries.

A Manifesto for the Next Industrial Revolution

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