As is often the case when I'm preparing a blog post, I have it almost done, polished to a reasonable level, ready to launch then I read something in the paper, the day of, that I think is a way better idea. So today I ran across a piece in the National Post that they filched from the Deccan Herald called, Innovation isn't easy, especially for a giant.
The gist of the story is about Instagram, that billion dollar darling now owned by Facebook, and why didn't Kodak come up with it. Kodak had the money. They had the talent. They had the marketing muscle. Of course the answer is Kodak didn't and they're gone-ish and the 13 employees of Instagram are partying somewhere warm. There have been other stories echoing this sentiment that so over-simplify things that I want to eat the inside of my cheek. But let's forget about that for now. As it is also written in the story, "Hasbro didn’t do Farmville, or why McDonald’s didn’t start Whole Foods." Good points. The short answer is that these properties are not their focus. Their culture is designed to extract maximum value from the products that are making from money now.
The point is that it is really hard to change fan belts on your engine while it's running and the car is careening down the highway. I first heard this snappy rejoinder while I was a member of a TEC startup group. Bruce Hunter, our chair and incredibly smart biz type mentioned it to me. It nicely encapsulated what we were doing transitioning from a custom website development shop to Your Web Department, an annuity-based website service. Let me tell you, it was a bloody hard thing to do.
First of all you're no longer looking for several $75,000+ jobs. You're looking for hundreds of $50/month clients. That's not just a money thing but a business and sales model adjustment. The sales and compensation process for large one-off jobs is totally different than the YWD model. Not just that but you can't convert an elephant hunter to a mouse trapper.
The banks treated us differently, also. No longer was our line of credit a percentage of the value of invoices that were in the hundreds of thousands of dollars, now all we had was a cash-flow projection of when we thought our annuity-based business model would be in the black. Banks didn't like that. They liked seeing large invoices.
Your Web Department is a successful example of our willingness to see a future and go for it because we just didn't see a future in what we were doing especially with the trend towards moving large-scale programming offshore. Not just that, we felt as a team we were happier working with many small business owners rather than a few VPs stuffed between layers of larger management structures. While these managers displayed plenty of commitment to their corporate masters, their positions were often transitory and they could never duplicate the emotional commitment small business owners had for their own businesses. We liked that. It maked us feel like we were helping people who really needed our help.
In conclusion I think shifting business gears is doable but it can't just be a 'strategic money greed thing', if you figure you will be happier doing the new thing then you will succeed.
Addendum: It has been pointed out to me that Instagram has never, is not now and will probably never make money. People are in a frenzy over the amount Facebook paid for it. Why would Kodak create a division that didn't make money? Get real people.