What Can Innovators Learn from Disruptive Streaming Video Providers?

The Internet has disrupted many industries over the past decade. The traditional television industry is now the latest victim of this disruption. Thanks to the wide availability of low-cost, high-bandwidth Internet access, on demand streaming video services have grown rapidly over the past few years. Such “real time entertainment,” as it is called, has taken a 62% market share in North America during the first half of 2013 according to a survey by Sandvine. Netflix has almost single handedly created a big disruption in this industry. It has a staggering 89% market share in video steaming services in the U.S., followed by HULU and Amazon Prime.

There are four main reasons that on demand services are growing and threatening to wipe out traditional TV.

Adaption to technology
The streaming services have very quickly adapted to new technologies. They started with online video streaming on computer desktops, but understood the rising demand of tablets and smartphones and started offering applications for Android and iOS. These new apps give users access to their favorite shows on the go from their phones and tablets. They now have the choice to watch on whatever device they want.

netflix and hulu plus streamers

Strategic partnerships
Netflix and Hulu have partnerships with leading movie and television producers, giving them access to many movies and TV shows, both new and old. The variety of entertainment available to viewers has attracted a huge number of customers (Netflix is said to have more than 40 million streaming subscribers globally). Netflix has also partnered with digital media streaming hardware and console companies to support their services, making it even easier for customers to access the entertainment they want, when they want it.

Cost structure
Murdoch-quoteBecause of the large user base and also low overhead – no physical stores and, in the case of Hulu and Amazon, no physical inventory – on demand streaming video services can afford to offer customers a good deal. They are typically freemium and subscription based. HULU offers some of its content for free with advertisements. If the viewer wants to watch ad-free programming, he has to subscribe for a monthly fee. The monthly subscription fee is very reasonable, especially compared to the cost of traditional cable television, or even the cost of traditional movie rentals.

Exclusive content
It’s easy and low cost for customers of on demand streaming video platforms to switch from one provider to another. Thus, there is a need for original content to keep customers interested. Netflix started producing its own TV shows – like the Emmy award winning “House of Cards” – which gives users privileged or exclusive access to shows that cannot be viewed on any other platform. Other services, like Amazon and Hulu, are following the same concept of producing exclusive shows, and have been in successful in getting viewers’ attention.

What can other businesses learn from on demand streaming video providers?

If you look back at the reasons above that on demand streaming video services have been so successful, you can derive several lessons that can help any organization be more innovative, even disruptive.

  1. Adapt to technology quickly, especially technology that your customers are using and that makes it easier for them to consume your product/service.
  2. Form relevant partnerships that help you deliver more to your customers – more variety, more cost savings, more quickly, whatever you can do better than the competition.
  3. If you can offer a comparable product/service for less than the competition by targeting a new market (young Internet-savvy movie fans, in this case) you will disrupt your industry.
  4. Invest in exclusive products/services/features to attract new customers and distinguish you from the new competitors who always follow in the footsteps of a true disruptor.

AmazonFireTVThe future of on demand streaming video services

The UAE has its own prominent streaming video service, Icflix, which was started a couple of years ago. The biggest differentiator is that it provides regional content to suit local audiences. As with other streaming services, membership is offered on a subscription model and rates are quite modest.

With the UAE having 77% internet penetration, I predict there will be plenty of regional players to tap in to this market. The future for these steaming services is bright and competition will be intense. It remains to be seen how the global service providers will expand to other markets and compete with local players.

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New $100M Venture Fund Announced by Leading VC Firm Targeting Middle East, Asia and Silicon Valley

A new venture fund, the Fenox Global Fund IV, seeks to invest USD $100 million in seed, Series A and pre-IPO funding throughout the United States, Asia and the Middle East. The fund has been established by Fenox Venture Capital, a global investment firm headquartered in Silicon Valley, in partnership with Innovation 360, a leading innovation consultancy based in Dubai, UAE.

Fenox’s current investment portfolio includes, among many others, Dream Link Entertainment (DLE), the largest animation company of its kind in Japan that recently executed an IPO on the Tokyo Stock Exchange, and Lark, a wearable technology company whose products are now sold at Apple stores around the world. Fenox’s portfolio companies have been included in joint venture rounds with some of the top VCs in the world.

Now open to investors in the Middle East, the Fenox Global Fund IV will seek to invest in information technology startups – including Internet, computer hardware and software, and communications – as well as startups in the area of healthcare technology and clean tech.

The fund strategy is to invest in a mix of startups in need of seed and Series A funding in the Middle East, pre-IPO companies from Asia, and seed and Series A startups in the United States – particularly Silicon Valley.

“We are breaking new ground in the Middle East with the Fenox Global Fund IV,” said Brent Traidman, General Partner at Fenox. “I know of no other time that a Silicon Valley VC has used capital from Middle East investors to promote entrepreneurship in the local region.”

At the same time, Kamal Hassan, Fenox General Partner and president of Innovation 360, cautioned that the number of businesses seeking VC funding in the Middle East is small compared to regions where the startup culture is more mature. “Fenox sees the huge opportunity for growth in the MENA region, and so we are offering funding and expertise to a few best-in-class regional startups who we believe will provide significant long-term gain,” he said. “However, by also investing in more mature companies from Silicon Valley and Asia, the fund will diversify the investors’ portfolio and create a greater return for investors.”

Fenox has a track record of investing in global businesses from all around the world, having managed funds that focus on entrepreneurial development in South Korea, Singapore, Japan, Indonesia and China. Innovation 360 has been a visible and vocal supporter of the entrepreneurial ecosystem in the UAE. In addition to establishing i360accelerator for early stage startups, founder Kamal Hassan is a Managing Director for the TURN8 seed accelerator established by DP World, and has himself invested in 19 startups from the Middle East and elsewhere.

Ten percent of the fund (USD $10 million) has already been committed. Fenox Venture Capital is currently qualifying additional investors for the fund. If interested, contact KHassan@fenoxvc.com in Dubai, or BTraidman@fenoxvc.com in San Francisco.

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How Design Thinking Enables Creative Problem Solving

By Guest Blogger Christine Nasserghodsi

Design Thinking at The CribbPeople often think they fall into one of two categories — creative or not.  Although there is a general belief that creativity is a trait that some are simply born with, strategies to enhance creativity can, in fact, be taught. Design thinking is one such strategy, and has the added benefit of helping people develop creativity in a way that increases the impact and reach of ideas. Design thinking is a user-centered approach for problem finding and problem solving that is marked by building empathy, ideating solutions, and rapidly developing and testing prototypes.

So, how does design thinking spark creativity?

Imagine being told to sketch out an idea for a new wallet. You would probably think about your existing wallet, what works well, what doesn’t, and make a few changes. There’s a pretty good chance that those changes would be things you’ve already thought about. On the other hand, imagine being asked to design a wallet for another person…worse yet, someone who says he likes his wallet the way it is! After interviewing this person, perhaps even watching him for a day, you’ve learned that he works a full day and is developing a start-up. He gets frustrated when he’s late but often is. You’ve seen him fumble through different currencies and misplace his cellphone several times. You’ve also noticed that he keeps pictures of his children between business cards and lights up when talking about them. How might your design be different for him? The odds are you would come up with something that hadn’t occurred to you previously.

design-thinking-empathyDesign thinking begins with empathy – developing a deep understanding of a user.

After defining the user’s point of view or need, design thinkers work with a team to explore ways to help the user. Through the use of various constraints, design thinkers ideate broadly and group their ideas in different ways. They select an idea to test and develop a low-resolution prototype to capture their idea. After giving their user a chance to test their idea and capturing verbal and non-verbal feedback, design thinkers make changes to their prototype and continue with testing. Throughout the process, the user remains the focus.

[Read more...]

3 Reasons Why Companies Fail at Intrapreneurship – and How to Succeed

Intrapreneurship, or creating a startup culture within an existing large business, is a fairly well known element in corporate jargon these days. With a new wave of urgency sweeping the corporate landscape and the threat of extinction, it is not surprising that large companies have started looking to intrapreneurship to help them fast track new offerings and explore innovation opportunities. This article is not an effort to describe the merits of intrapreneurship, but instead is aimed at highlighting a few reasons why companies are unsuccessful at inculcating intrapreneurship or startup culture into their normal activities.

What is IntrapreneurshipWe all like to emulate the Apples, Googles and Starbucks of this world, and in desperate attempts to start something new, many companies rush forward in what they claim to be well-thought-out-strategies for successful intrapreneurship. These attempts are often related to mission statements, vision statements, goal setting and trainings.

In this article, I will highlight three major reasons why many attempts by large companies to engender intrapreneurship have ended in failure.

Art versus Science

Developing a sub-culture within a larger organization is difficult, and rushing ahead optimistically without a solid plan will not work. However, the process of engendering intrapreneurship is usually not subjected to the same amount of thoroughness that other processes like financial planning and budgeting are. Until companies begin to see the cultivation of an intrapreneurship culture as a science, they will most likely leave the results of their efforts to serendipity.

The Solution: Intrapreneurship should be managed with a paradigm of causes and effects, inputs and outputs, and planning and scheduling. In other words, building this kind of culture should have its accountability points, dedicated resources, and gates of evaluation. At LinkedIn, for example, employees can propose a new idea once every quarter. They form a team to work on the idea and pitch it to an executive team. They are then given three months to work on the idea and improve its viability. These kinds of processes – coupled with the appropriate enablers, such as an online idea submission portal – provides a method for intrapreneurship and makes it repeatable.

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Innovation Management: A Paradigm for Change or Simply a Buzzword?

innovation-quote-jobsEver since the world has become aware of the importance of innovation, almost every company has created a strategic plan toward becoming more innovative or toward jumpstarting its innovation journey. While the amount of buzz around this topic is commendable, it is not difficult to see that innovation is more of a lip service and buzzword for a TV commercial, than it is a crucial strategic goal of many organizations. In other words, the low level of adoption of innovation as a strategic goal and as part of a management program depicts a lack of clear understanding of what innovation is and the consequences of not putting resources toward it.

Has this always been the case? If we take a historical look at the adoption of management methodologies, we can get an inkling of what is currently happening with the adoption of innovation management.

In the middle of the last century, most management methodologies, processes and tools were focused on enhancing productivity (with Ford Motors taking the lead in the 1920s). However, by the 1980s, it was apparent that Quality Management was the next big thing. This later took the form of TQM (Total Quality Management) and Six Sigma, and no doubt companies invested massively in efforts driving quality management in the early 1990s.

Studying the evolution and adoption of these management methodologies, one can safely assume that a good definition of adoption is when corporations actually put their money where their mouth is. In other words, when they invest in the execution of whatever strategy they have developed—whether it is increased productivity or quality.

A good way to see this adoption lifecycle will be to actually subject it to the theory made popular by Everett Rogers in his book “Diffusion of Innovations”. While some may argue that management concepts can hardly be subjected to the diffusion model due to the wide application of this model to products or general ideas within a social system, I think it may be useful in understanding the response of typical companies today to important concepts in management—most especially, innovation management.

Diffusion-innovation

The Diffusion of Innovation theory explains that there are five categories of adopters of an idea or a product: innovators, early adopters, early majority, late majority, and laggards. We can apply this to the concept and practice of innovation management as a management methodology and principle. [Read more...]

The Importance of Feeling Threatened

There are few CEOs who don’t feel threatened by their company’s main competitors. Often significant and costly measures are taken to stay ahead of, or apace with, the competition. Yet how many CEOs have a system in place to warn them of other threats that can be just as deadly to the survival of the company?

We have seen big corporations lose the battle for market share to seemingly smaller and “less privileged” entrants. We have also observed how these small entrants were seemingly negligible and posed no obvious threats to the incumbent initially.

Exploiting-Chaos-Jeremy-GutscheIn his book, “Exploiting Chaos: 150 Ways to Spark Innovation during Times of Change,” author Jeremy Gutsche shares examples of companies that, due to complacency and lack of foresight, lost their positions as market leaders. A notable one was Smith Corona, the typewriter maker whose $500 million 1989 revenues and market dominance gave them a misleading confidence in their ability to remain profitable in the coming years.  Cutting short projects and a potentially viable partnership that may have led to their entry into the computing business, the CEO G. Lee Thomson stated in 1992 that, “There is still a strong market for our products in the United States and the world.” Of course, there is no need telling what became the fate of this company.

Today, one would honestly wonder why such a hugely successful company with access to a vast array of resources, as well as the power to reinvent themselves if they wanted to, should have fallen prey of the danger of disruption. Well, the answer is not farfetched if one considers the characteristics of companies that lose when it comes to innovation. Executives and managers typically act in accordance with the rational principles needed to survive. These rational principles are by themselves the danger to tomorrow’s success.

According to Clay Christensen’s work on disruptive innovation, incumbents are more likely to flee the segments that are least attractive to them at the time, such as an area where profit margins are low. However, new entrants will most likely enter into segments where the incumbents earn comparatively lower profit margins. Christensen cited the example of how minimills gradually disrupted the integrated steel companies as the latter fled from the lower-margin markets.

While this only makes sense, it is also the main reason why new entrants and new technologies are most likely to succeed in disrupting the incumbent.  In some cases, the incumbent underestimates the potential of a small entrant stealing their market share and eventually forcing them to lose profits and possibly become extinct. In others, the incumbent fails to recognize or act on potential gamechangers in its industry, leaving the new entrant free to capitalize on future trends. [Read more...]