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Let’s get this straight: Kodak, which has been in the image business for 100 years, used to be the biggest employer in the city of Rochester, N.Y., and has been a household name for generations, is bankrupt. On the other hand, Instagram, which has been in the image business for 555 days, has no revenue, and employs a mere 13 people, is now worth $1 billion.
Who knew?
Let’s chat for a few minutes about three things: 1) Facebook, which bought Instagram last Monday for all that cash; 2) TagTile, Facebook’s latest acquisition (on Friday, purchase price unknown, but it probably wasn’t $1 billion); and 3) innovation.
So What Did Facebook Buy?
For backgrounders, let’s define Instagram and TagTile.
Facebook, despite its nearly 3,000 employees, apparently didn’t have time or bandwidth to create this way-cool app itself, so it simply made a deal that we heard took a mere 48 hours to complete.
TagTile, which joined the Facebook team on April 13, is both a cloud application and piece of hardware called the TagTile Cube for businesses. Customers buying an item at a TagTile-affiliated store or restaurant tap their iOS or Android phones on the Cube as they are leaving. Then, should they choose to do so, they can share their enjoyment of the business to their friends with the tap of a button. It therefore follows, naturally, that if the customer is not satisfied, that not-so-good comments also may be networked out to the world.
So this is what Facebook is doing in the days leading up to what likely will become the largest initial public offering of stock in business history–an IPO worth some $5 billion. The brash social networking company has now resorted to buying good ideas.
Nobody is saying this is bad. In fact, this is the way most of the big players in IT now are moving. Technology advancement moves so fast, is so pervasive and so fickle, that companies that do not look to the outside for good ideas undoubtedly will be bypassed by competitors at some point.
Big-Time Companies Already on to This
Big-Time Companies Already on to This
Dell, which last week bought three companies before Michael Dell had lunch, realizes this. So does Google, Hewlett-Packard and Cisco Systems. Not to mention IBM, Oracle, EMC, Microsoft and any other big-time IT company you can name.
In fact, the executive chairman of HP said the other day that the company intends to trim the $3 billion budget of venerable and respected HP Labs and start looking more closely at startups and individual innovators for new product ideas. He didn’t say this next part specifically, but he implied that by acquiring new companies, products now can be brought to market faster and less expensively.
This whole line of thinking may have been a slap in the face to the managing director of HP Labs, Senior Vice President Prith Banerjee, whose abrupt resignation earlier this month appears to have given witness to this amended strategy.
Back to Facebook. Up to now, the company has done most of its own development, but now its appears to have shifted into innovation overdrive, knowing that Google dearly wants a piece of the social networking action and will stop at nothing to get Google+ more subscribers and media attention. Facebook wants no part of Google moving in on its territory, just as Google wants no part of Facebook moving deeper into search.
Facebook founder and CEO Mark Zuckerberg, a Big Picture kind of guy, has done what he has always done: He’s looked ahead and sees the reality of the future. He knows that even with hundreds of very smart software developers on his staff, ideas simply don’t come from folks who sit down at a table and say, “Well, okay, now it’s time to come up with something good, or Mark’s gonna get upset with us.”
Innovation Comes When It Comes
Innovation comes when people dream, interact, talk, test, experiment, fail, succeed, interact again, test again and so on. And this doesn’t generally happen on deadline, although deadlines can be great motivators. Innovators don’t have to be sitting next to each other, although physical closeness helps a lot. These ideas can emanate from an open-source SIG, an industry task group, a group of like-minded friends, or even one guy lost in thought over in the corner.
One never knows from where those new ideas will come. That is why when Zuckerberg and Co. saw Instagram and TagTile, they saw good ideas, and they moved.
Of course, having a $5 billion line of credit helps such moves to be made a lot quicker.
Chris Preimesberger is Editor of eWEEK Features and Analysis. Twitter: @editingwhiz