We have used this space to discuss the Kodak failure to innovate with digital, while instead holding fast to their traditional film business. A recent New York Times blog asked how a small start-up called Instagram could create a new application for photography, while Kodak, Nikon, Olympus, Canon and many others did not. And that leads to a discussion of disruptive technologies and how companies are profoundly challenged to go in different directions.
The blog post quoted Kodak board member, Michael Hawley, who pointed to a cultural problem within big companies:
“It’s a little like asking why Hasbro didn’t do Farmville, or why McDonald’s didn’t start Whole Foods.”
Gary T. DiCamillo, the former CEO of Polaroid (which went out of business), put it this way:
“We knew we needed to change the fan belt, but we couldn’t stop the engine. And the reason we couldn’t stop the engine was that instant film was the core of the financial model of this company. It drove all the economics.”
Brand after brand is caught off-guard by Internet disruption and the power of what Brian Solis calls Generation-C – or the connected consumer. The dividing lines are not demographic or economic. Gen-C is about people living through social networks powered by mobile devices.
So I wonder about the radio business. The industry as a whole – or one of its biggest companies – could have invented pay radio or what became satellite radio. But that would have been disruptive to the core business.
Same thing with Pandora. Any radio company could have developed the technology to create custom radio stations that would algorithmically select successive songs, but none did.
Perhaps part of the challenge, like in Kodak’s case, is cultural. Still, how many broadcasters have a true R&D engine that is charged with inventing two ways to create and disseminate audio content? Instead, it is easier for smaller, agile entrepreneurs to come along and innovate instead.
You have to give Clear Channel credit for iHeartRadio, an invention that is very un-radio like in its uniqueness and its potential to disrupt broadcast radio and the ratings it needs to exist. The bet is that by building a major digital infrastructure of audio and other content, iHeartRadio can generate the revenue that is diminishing from Clear Channel’s traditional broadcast assets.
In our insanely fast-changing techno-media culture, of course, all bets are off. None of us can fix the jet plane while it’s flying at 35,000 feet. But you can invest in your bread and butter, because no matter how the platforms change, evolve, or become extinct, the content that drives them will always be in demand. Perhaps R&D in radio is more about finding and recruiting talent than it is exploring new technologies.
The system that made it possible for a couple of green DJs in Birmingham, Alabama, to become fixtures for 25 years in Los Angeles is rusty and ineffective. No longer can radio companies reliably look to smaller markets for “the next Mark & Brian.” It doesn’t have to be that way if radio companies were investing in their farm teams – their future.
But as Facebook just acknowledged – and the Times blog points out – if you can’t beat ‘em, buy ‘em.
Some may look at $1 billion for Instagram as a bad move, but given that Google, Apple, or Twitter didn’t invent it, taking it off the market and integrating it into the Facebook infrastructure makes sense. You know what happens when you monkey with the fan blade while a 900 million person engine is running.
Solving problems via acquisition has to be an option for legacy companies and industries where the culture is not conducive to innovating new products that might be considered disruptive to the heritage product.
What would Pandora have cost five years ago?
What kind of financial damage will it incur five years from now?