Google’s Acquisition of Waze: A Triad of Benefits

Most analysts have hailed Google’s recent acquisition of Waze for $ 1.3 billion a masterstroke (a minority thinks that this is going to be a botched overstretch, a la Motorola). [See some nice reports here, here and here and the Waze blog announcement here.] However, there seems to be no agreement on whether this is a strategic M&A, a pure technology acquisition or an acqui-hire. Different folks have differing opinions; IMHO, this acquisition offers Google a few advantages of each of these.

Waze navigatiescherm

Waze navigatiescherm (Photo credit: Henk-Jan van der Klis)

A Pre-emptive strategic move: It was reported that there were several suitors for Waze, including Facebook and Apple. By spending a small part of its $50 billion plus cash pile, Google has managed to keep a key technological advancement out of the hands of the competition and this been able to maintain its pre-eminent position in the Maps market.

A technology acquisition: By definition, a technology acquisition provides the acquiring firm with a technology or technological knowhow. Waze will enable Google to add a critical element to its Maps technology – real-time, crowdsourced updates. A weakness of all the major players in the Maps market has been the need to spend millions of dollars to periodically update the maps for accuracy in a rapidly changing world (cue the Apple Maps disaster). Waze will augment Google’s efforts by providing a cheaper option for map updates as well potential future monetization through location based advertising.

An acqui-hire: While the technology artefact represented by Waze is impressive indeed, Google will also benefit from the knowledge residing within the employees of Waze. Google has committed to maintaining the Waze R&D team in an ‘as is’, independent state, thus ensuring continuity of tacit forms of individual and group level knowledge. This will maximize the potential innovation outcomes from the Waze R&D team, and Google will be able to benefit from potential knowledge spillovers to its own R&D centres (some of which are located relatively nearby). [It is reported that Waze employees have been offered nice retention bonuses to stay for 4-5 year post-acquisition, thus maximizing the time for spillovers, knowledge transfer, and innovation.]

Overall, the Waze acquisition provides Google with several benefits which will enable it to possibly dominate the ‘Lo’ portion of the next big battlefield – The SoMoLo Convergence.

Good or Bad? 1 Billion+ LinkedIn Endorsements

Why LinkedIn Endorsements are a good idea, gone bad. 
  

A few months ago, LinkedIn celebrated 1 billion endorsements by releasing an infographic (see below). Considering the passage of time and the increasing velocity of endorsement giving, this number may be over 3 billion by now.

On the face of it, LinkedIn Endorsements seemed to be a good idea. Users can endorse specific skills of others, thereby helping potential employers to more easily shortlist candidates (the ‘placement’ market is after all, the main revenue stream for LinkedIn). Users will also benefit from ‘social recognition‘ of their skills and capabilities.

However, all is not well in wonderland. The manner in which the Endorsement system has been implemented is resulting in several, hopefully unforeseen, problems. Three main issues are:

1. Personal Brand Dilution:

A user does not necessarily have control over what skills are being endorsed by others. Thus a skill which one does not wish to emphasize might get ‘suggested’ by LinkedIn for endorsement by others, while the skills a user has selected as part of his/her ‘online brand’ are not always visible. While a one can opt not to display a particular endorsement, the overall result is either a wasted endorsement or dilution of the personal brand.

2. Endorsement Value Dilution:

As per the current implementation, anyone can endorse any skill for any connections on LinkedIn. As a result, one may get endorsed for a particular skill by someone who is not is a position to make a genuine evaluation of the skill. For example, a Scientist’s mathematical skills can be endorsed by his/her basketball teammate – not exactly someone who maybe in a position to make such a judgement.  Alternatively, one might get endorsed for a skill that one does not possess [In jest, I've received an endorsement for Quidditch! Unfortunately, I cannot tell a Quaffle from a Bludger]. When combined with the fact that there is no way to verify endorsements, this results in the value of a LinkedIn endorsement being zilch.

3. Unusable LinkedIn Stream:

There was a time when one could view the LinkedIn activity stream and garner the major happenings in one’s professional network. Who changed jobs, who got promoted, who started something new. Now, the stream is largely unreadable, with the majority of updates simply stating that X got endorsed by Y for a skill Z.  Which has made the LinkedIn Activity Stream unusable.

1 Billion Endorsements Given on LinkedIn

ICIS 2012 Update

One of my research papers was recently nominated as a candidate for the Best Paper award at the 2012 International Conference on Information Systems (ICIS), the flagship conference and most prestigious gathering of information systems researchers in the world. Titled “Juggling Paradoxical Strategies: The Emergent Role of IT Capabilities”, the paper has been co-authored with Benn Konsynski, the George S. Craft Distinguished University Professor of Information Systems & Operations Management at Emory University. In this study, we assert that in the 21st century, different IT capabilities act in differing ways to individually and jointly enable or impede firms to simultaneously pursue paradoxical strategies as an emergent means of attaining competitive advantage.

Paper presentation at ICIS 2012

Paper presentation at ICIS 2012

Such an ability to follow two conflicting strategies at the same time is termed organizational ambidexterity. Firms which concurrently engage in the paradoxical strategies of exploration (or radical innovation) and exploitation (or incremental innovation) are able to address the needs of new and existing customers and thereby attain higher competitive performance. Our research finds that Transform IT capability, which leads to redefining and recreating business practices, strongly supports this instance of ambidexterity. On the other hand, IT Informate Capability, which results in greater information access across the organization, and IT Automate Capability, which facilitates automation of existing business processes, both hamper ambidexterity by ossifying business processes and reducing flexibility. Transform IT capability reduces these harmful effects. Our findings also suggest that a balance of IT Automate, Informate and Transform capabilities enables organizational ambidexterity, hitherto a challenging competitive possibility.

Data for the study was gathered from 352 manufacturing firms of all sizes in high growth sectors in India – a setting that provides an exemplar for the world’s enterprises undergoing rapid changes in the 21st century. These findings not only showcase the emergent role of IT in facing the complexities inherent in juggling paradoxical strategies, but also throw light upon previously unexplained variance in IT payoffs in the emerging economy and small and medium enterprise contexts.

A link to the paper in the conference proceedings is here.

Technology Acquisitions Continue to Grow in Size

A report by PricewaterhouseCoopers regarding acquisitions by technology firms in Q2 of 2012 reaffirms a trend seen last year – technology firms are making lesser acquisitions, of greater size. Thus Technology Acquisitions are continuing to grow in size (by value), but reduce in numbers.

 

The number of technology deals in the second quarter decreased 35 percent, while total spending increased 19 percent compared to the same period last year, the report said.

via a Bloomberg note on the Q2 report, which is found here.

 

Another Bloomberg article on the 2011 report can be found here.

Technology companies spent $125 billion in deals in 2011, up 17 percent from the $107 billion spent in 2010. There were 308 deals in 2011, a drop of 21 percent from the prior year.

Mobile App Strategy

The rapid proliferation of smartphones demands a rethink on the IT strategy front. This article suggests that CIOs should designate a ‘CMO’, who is responsible for taking advantage of the powers of customer engagement and empowerment that are provided by mobile apps.

 

The first step in CIO’s mobile strategy is to create the office of the chief mobility officer and a supporting mobile architecture team.

 

Apple iPhone 3GS, Motorola Milestone and LG GW60

Apple iPhone 3GS, Motorola Milestone and LG GW60 (Photo credit: Wikipedia)

Mobile apps give rise to several challenges, including multi-channel conflicts, a deluge of data and activity, and transaction-based business process atomization. This requires changes to the business (transaction-based interactions thinking) and technology (scalable architectures) fronts of the firm’s strategy.

Read more at Page 1 Five tips on developing a mobile app strategy – CIO UK Magazine.

Brief history of Crowdfunding

This infographic by GPlus presents a brief history of crowdfunding. Crowdfunding, as the name suggests, is the idea of using capital (funding) raised from the public (crowd) to support private firms. The SEC has recently introduced a Crowdfunding bill, which will make crowdfunding easier and more regularized for entrepreneurs.

 

INFOGRAPHIC: Drawing a Crowd: The Crowdfunding Phenomenon Heats Up

Image via GPlus

 

See the original image here and read more at Crowdfunding: Where it has been and where the new bill is taking it (infographic) | VentureBeat.

SAP looking at technology acquisitions

SAP is on the hunt for major technology acquisitions. With nearly $6 billion in cash, and visible gaps in its cloud offerings, SAP has both the resources and motives for such a move. Compared to its biggest competitor, SAP has so far preferred in-house innovation and is lagging in the acquisitions space and with only 2 major acquisitions in the past few years.

Oracle, SAP’s US rival, which has made acquisition a central strategy, buying about 78 companies over the last six years.

Sap

Image via Wikipedia

A link to an interview with the co-CEO of SAP here.

Read more at ‘Sup with SAP? — Cloud Computing News and SAP resumes search for big acquisitions – FT.com.

The Case of Orabrush: Building a multi-million dollar company using Youtube

Google’s blog tells the story of how an entrepreneur used Youtube based video ads to market millions of Orabrush – a tongue cleaner. After the failure of a $40,000 traditional ad campaign, the firm spent $500 on making a Youtube video (see the video here or below). After 2 years of increasing success (reflected in sales of over a million Orabrush), they approached Walmart. Again, when a $20,000 TV pitch failed to catch the attention of Walmart execs, the firm spent $28 on targeted FaceBook ads. Today Walmart and CVS carry the product at over 10,500 locations, making Orabrush the “first product to go from no sales online or offline, to nationwide retail distribution just using YouTube. “

Image via Google

Their first ad is below:

Read more at Official Google Blog: The Orabrush story: How a Utah man used YouTube to build a multi-million dollar business.

Giving an eBook free for a limited time: A new business model?

Scott Berkun, who worked with Microsoft on Internet Explorer till 2003, now works for Automattic on WordPress.com, and is the author of three previous books, Confessions of a Public Speaker, Making Things Happen and The Myths of Innovation, is giving away his latest book, Mindfire, for free. Only for 48 hours.

This is an interesting mix of the Freemium model and sampling strategy. Most of the content in the book is curated from the author’s blog and hence is already accessible for free, albeit in piecemeal form. The hard copy of the book sells for $8.69 on Amazon and the eBook would also have a price after the free giveaway is over. By giving away the book for free, the author would benefit from word-of-mouth publicity and resultant sales. This would also increase the number and quality of reviews available for the book on Amazon, thereby positively impacting future sales of this and other books. Finally, people who like the free sample may be driven to purchase a copy of the author’s previous works.

Read more and get the book at Mindfire: Download free for 48 hours « Scott Berkun.

India’s economic landscape

A representation of the Lion Capital of Ashoka...

Image via Wikipedia

The Economist‘s special report on India Inc. states that unlike in western economies, successful Indian firms are predominantly government owned or family owned businesses. The conglomerate is the business model of choice and this empire building is reflective of the 1900′s economic landscape of the US. An Infosys is an exception, rather than the norm.

All this might seem a recipe for disaster. In Korea and Japan closely held and widely spread firms became slothful. So far India Inc has been different: its big business houses compete and innovate fiercely. Their returns on capital are neither pathetic nor outrageous and most are prepared to invest billions of dollars in the risky capital projects that India needs so badly.

In the past decade Indian business has not been on a journey towards someone else’s economic model, whether Chinese, European or American. It has not been growing out of an immature phase, or shaking off a simpler way of doing things. Instead it seems to have established its own equilibrium—what might be called “capindialism”—in which profits are controlled not by institutional shareholders but mainly by the state, or by entrepreneurs and their descendants. Outside the state firms, the fiddly conglomerate is the favoured form of organisation.

The special report blames India’s soft state for being the reason firms choose to grow into conglomerate structures. It claims that ‘horizontal and vertical diversification’ of professionally managed firms is proof of this thesis.

Yet the best explanation is India’s soft state. Courts can take years to make their minds up, so contracts are hard to enforce. Infrastructure is often poor, supply chains tricky, red tape a hazard, and markets for people, materials and finished goods unreliable. Tarun Khanna and Krishna Palepu of Harvard Business School coined this idea in a 1997 paper. In these circumstances it makes sense to do things yourself.

Indian Buffet

Image by samk via Flickr

This cause and effect reasoning seems to be rather simplistic for the complicated Indian Thali . It ignores the unique role of the joint family in Indian society. It also ignores cultural and legal norms that encourage dynastic progression of company ownership and wealth. This ownership structure also promotes a more long-term view by Indian business houses. Unlike institutionalized firms, where bosses have to meet quarter to quarter performance measures, family owned businesses are more focused on creating wealth in the long-term, for the next generation. Thus they invest in frugal products (which, according to the report, do not generate high profits), which is a means to hook the millions of potential middle-class customers of tomorrow.

Overall, though the analysis comes across at times as bit contrived (it works towards the underlying assumption that one size fits all – the institutionalized business models that are successful in the west are the best) and at other times a bit naïve (for example, the report mixes up vertical integration, related diversification and unrelated diversification), the report is well written and worth a read. It raises several key questions and invigorates critical thinking on the state of India’s economic landscape.

If India is to finish the long journey to superpower status that has been plotted for it by many forecasters, it will have to get its act together on things like infrastructure, efficient land allocation, education, bond markets, reliable supply chains and the enforcement of contracts. Yet if it manages to make progress in these areas, the rationale for sprawling big business groups—sometimes almost like mini-states in their own right, as substitutes for the real thing—will gradually disappear. A big danger, then, to Indian business’s current way of doing things is long-term economic success. It would make today’s approach to organising firms redundant.

Read more at Business in India: Building India Inc | The EconomistAdventures in capitalism | The EconomistFamily firms: The Bollygarchs’ magic mix | The Economist, and The Indian miracle and the future: Rolls-Royces and pot-holes | The Economist.