livecast lecture final
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Wharton's first interactive videolecture, and the slides... About @EnableTech (OPIM 662: Enabling Technologies) is the first integrated social media classroom among top b-schools. Check out our platforms: · Blog: http://opim.wharton.upenn.edu/enabletech/ · Twitter: https://twitter.com/EnableTech · Facebook: http://www.facebook.com/pages/Philadelphia-PA/EnableTech/238219489104 · YouTube Channel: http://www.youtube.com/enabletechTRANSCRIPT
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Kartik Hosanagar
Innovation in Tech Firms:
Google, Apple & Pixar
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Wharton’s First Free/Open Livecast
• History
• Acknowledgements
– Yujin Chung
– Dale McCook
– Corey Pierson
– Allan Yang
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Instructor Bio
• Professor at The Wharton School at Penn
– Research focus on Internet Commerce
– Teach undergraduate, MBA and PhD courses
on technology strategy, entrepreneurship and
data-driven decision-making
– Cofounder of Yodle Inc, a venture-backed firm
with 250+ employees
– Consulting/training work with firms from a
variety of sectors: e.g. Yahoo, Amex, etc
– Actively work with several Internet startups
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Learning Objectives
• Examine some of the most innovative firms of
the past decade
• Develop a common understanding of the factors
that led to their innovativeness and success
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Being Innovative/Visionary is Hard
• “There is no reason anyone would want a
computer at home”
– Founder and CEO of Digital Equipment Corporation
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Outline
– Discussion
• Apple
– Discussion
• Pixar
• Summary & Discussion
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• Founded by CS PhD students
• Incorporated in Sep 1998 at a friend‟s garage
• Introduced to Bessemer Venture Partners: “How
can I get out of this house without going
anywhere near your garage?”
• IPO in Aug 2004
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Revenue: 23.65B
EBITDA : 9.84B
Mkt. Cap: 171.18B
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: More than Just Search
Developed in-house Acquired
What has helped drive this growth?
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Key Factors
Strategy
Managing
People
Decision
Process
Product
Development
Innovation
Culture
Consumer
Psychology
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Strategy: Business Model
Google generates most of its revenues from ads
Sponsored
ads
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Business model (contd)
Google runs auctions to sell ad space
Select
Keyword
Submit Ads and
bids on Google
Attract
Customers 21 3
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Empower Your Employees
The “20% time” policy
• Employees spend 20% of time on projects they
choose
• Not a new concept
– 3M‟s 15% employee time rule
– Every division should generate 25% revenues from
new products developed in past 5 years.
• Follows traditional entrepreneurship: no budget
and need to convince others
• Strong signal: Google trusts employees and
expects innovation
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Empower Your Employees
• 50% of features released in second
half of 2005 came from “20% time”
efforts
Google News (news aggregator)
Started by AI expert, news junkie googler
Orkut (~Facebook) and Lively (~Second Life)
Started by the same employee (named Orkut)
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Iterative Product Development
“Get Early Feedback from the Market”
“…a few of our favorite ideas that aren't quite ready for prime time”
Let the market decide:
What products should we offer? How much to invest in a product?
What features take top priority?
Users are forgiving and Google can gather relevant data
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Consumer Psychology
“The Halo of Invitations”
• Some products are released “by invitation
only”
– It helps balance the server load in the first stages
– Problems are detected prior to release to general
public
– It creates a „halo‟ of exclusivity and privilege
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Consumer Psychology
• Pricing
– Acquired Where2 Technologies and gave
Google Maps away from free
• Bottin Cartographes lawsuit for unfair competition
– Google Docs and Spreadsheet priced at zero
• Microsoft charges $149.95-$679.95 for MS Office
– Should Google charge a small price to
monetize these other products?
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A Pricing Experiment
Hershey’s Ferrero Nothing
A (1,26)
B (0,25)
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A Pricing Experiment
Source:
Shampaner & Ariely
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Accounting for Transaction Cost
Implications: Loss leader like Maps/ Docs might draw enough people to Google. Traffic can then be monetized through Google search
Source:
Shampaner & Ariely
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Decision Process
“Data are apolitical”
• „Open books‟ culture as a managing style
– Decisions are based on actual data,
eliminates politicking and lobbying
– Empower through shared and common
information
– Allows flat organization and horizontal teams
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Outline
• Apple
• Pixar
• Discussion
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Apple Inc
• Founded in 1976 by Steve Jobs & S. Wozniak
– Jobs resigned in 1985 due to differences with CEO
– Brought back in as CEO in1997
• Product launches: iMac (1998), iPod (2001),
iTunes store (2003), iPhone (2007), MacBook
Air (2009)
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• $10K invested in 1997 would now be worth $450K
Steve Jobs’ Shareholder Returns
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Apple: Collaboration
“Real artists ship”
No Concept Products
– GM, Microsoft, others often make
concept products
– Last concept model: Knowledge
Navigator (1987)
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Managing an Ecosystem
• iMac, iPod, iPhone part of same ecosystem
– Success of 1 product aids success of others
• MacBook Air leverages interface design and the
miniaturization of the iPod, iMac and iPhone.
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Apple: Collaboration and Control
Control believed to be centralized: Steve Jobs
– iMac: “And they [engineers] said, 'Well, why?' And I said,
'Because I'm the CEO, and I think it can be done.'”
– Ultimate source of Apple‟s vision, drives innovation
• Risks associated with strategy
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Outline
• Apple
• Pixar
• Discussion
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• Movie industry background
– Predicting what will be a hit is really hard!• “Raiders of Lost Ark” rejected by ~all studios (not Paramount)
• Universal rejected “Star Wars”
– “Nobody knows anything …Not one person in the
entire motion picture field knows for a certainty
what‟s going to work. Every time out it‟s a guess” –
William Goldman (Adventures in Screen Trade)
– Studios deal with uncertainty through a portfolio• Assumption: several movies will fail
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Box Office Success
Release Date Movie NameWorldwide
GrossBudget
11/22/1995 Toy Story $361,996,233 $30,000,000
11/20/1998 A Bug's Life $363,398,565 $45,000,000
11/19/1999 Toy Story 2 $485,752,179 $90,000,000
11/2/2001 Monsters, Inc. $528,970,172 $115,000,000
5/30/2003 Finding Nemo $866,592,978 $94,000,000
11/5/2004 The Incredibles $635,564,642 $92,000,000
6/9/2006 Cars $461,982,881 $70,000,000
6/29/2007 Ratatouille $624,445,654 $150,000,000
6/27/2008 WALL-E $532,936,655 $180,000,000
5/29/2009 Up $472,690,456 $175,000,000
Totals $5,334,330,415 $1,041,000,000
Averages $533,433,042 $104,100,000
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Pixar’s Success
• All projects have become blockbusters
– Never bought scripts
• Success more impressive than Google or
Apple
• Two main ingredients for Pixar‟s success:
– Processes
– People and Culture
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Processes
Brain trust
– Consultative body with senior directors, if
needed
Dailies
– Show work to whole crew & gather comments
– Tool for project communication
Postmortems
– Reviewing what went right/wrong at the end
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People and Culture
• Free communication
– Person from any department can approach
anyone without going through “proper
channels”
• Safe to provide new ideas
– People encouraged to share work and
feedback
– Ideas grow
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Outline
• Apple
• Pixar
• Discussion
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Key Takeaways
• An organization is defined by its
employees, customers, products, partners
and processes.
– Employees: How do we empower them?
– Customers: Get early feedback from them
and foster communication among customers
– Products: Explore synergies and develop
ecosystems
– Partners: Align their incentives with yours
– Processes: that make problem-solving easy
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