The "what if" of innovation

The "what if" of innovation

Since economists rarely have the luxury of laboratory experiment, they look to the world (as every economist you've ever met has told you).

One key idea in modern business that impassions everyone is innovation. At McKinsey it was a huge deal that people spent a lot of energy on, and rightly so.

I was one of them: we worked on a study for a major technology and communications company, spending quite a lot of time on innovation.

And what did we learn? Well, innovation is fragile. The bit I want to point out is independence.

When big companies buy small ones, they are often chasing the innovation of an attacker and trying to bring it in. And they usually try to assimilate the innovation (Cisco integrating some optical routing idea, Time Warner buying AOL, whatever) and bring that exciting DNA into their own products.

The key idea is not to stifle the key capability of innovation, not just the bright idea the target already has. So Nextel buys Boost Mobile or AOL buys Winamp....and what happens?

The contemporary thinking is: keep them separate, let them wear jeans, check in with them occasionally. Don't change the culture, don't give them annoying daily routines.

But....you end up managing them to the overall corporate goals, protecting the corporate incumbent businesses, whatever.

For example, one of the creators of Winamp who AOL shrewdly retained after the acquisition was Justin Frankel. They kept him! The guy who created the leading app in the PC-based mp3 player revolution. It was a big deal - it's like hiring the guy behind the iPod.

So they brought him in and didn't kill his company. Check out the winamp.com site -- it's spunks and rude and youth oriented. They have a flourishing skinning and other content community.

One of the latest innovations before the acquisition was Shoutcast - a music streaming platform for web radio.

That thrived....but was one among several and still is. And in the end never made the transition to "paid service/store" that Yahoo Music or Real have managed for their services.

And after the acquisition, there were ideas that totally drifted off. The creator of the most pervasive file sharing protocol in the world, Gnutella, is Frankel! He wrote it, AOL got pissed, and a whole community of other developers picked up the open source ideas and went with them.

If Winamp had been independent...could it have been an innovation that built furthe upon Winamp's lead as the "iTunes" of its era?

Later still...Frankel released a perfectly encrypted, anonymous filesharing protocol. Let's see how far that goes. He released a Shoutcast for Video as well, to create TV streams -- more than 2 years ago. Only now, Google and others are making personal video publishing possible.

Independent, yes, but the corporate-subentity barely functions as a laboratory of innovation.

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