IBM-Apple Deal: Mobile Enterprise Applications

On July 15 IBM and Apple announced an exclusive partnership.  There are several components to this partnership that have been addressed elsewhere (here and here) but of most interest was the commitment to develop 100 industry-specific mobile analytic applications for the enterprise.  As I had written, the broad adoption of smartphones and tablets by employees, customers and partners, combined with a BYOD strategy, is driving corporations to rethink their enterprise application strategies.  They are starting to mobilize existing applications and embrace a mobile-first approach for the new applications they are licensing or developing internally.  Analytics-based insight-generation applications represent a major category of these new applications. Recognizing this trend, I and many other venture investors, have been aggressively funding startups that develop mobile enterprise applications.

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Acquiring Innovation

In 2001 Apple introduced iTunes based on the IP of a company it had acquired in 2000. By 2003, after the introduction of the iPod and of the iTunes Store, iTunes had become the de facto disruptive innovator of digital music. More recently Apple itself started being disrupted by Pandora and Spotify.  Streaming music companies have been growing and taking market share away from iTunes because of their business model and technological innovations. For example, the data they collect about subscriber music libraries and listening habits can provide unique customer insights that can lead to better monetization of the service, as well as improved personalization of the service’s user experience. Apple’s internal efforts to develop a streaming music offering have been unsuccessful.  In May, Apple paid $3B to acquire Beats, for its streaming music service this time in order to defend its turf and not be disrupted. Apple’s 2000 acquisition shows that disruptive innovation can be acquired in addition to being created.  Even companies with strong innovation DNA, such as Apple, Google, Facebook, and 3M, frequently acquire innovation for a variety of reasons, as we will see later on.  To access disruptive innovation corporations may acquire early stage startups as Apple did in 1999, or later stage private companies, as Google did more recently with the acquisition of Nest. In this post I try to make three points:

  1. Innovation can be acquired, as much as it can be created within a corporation.
  2. Lack of growth in large corporations, combined with the accelerating innovation pace, are causing corporations to increase their innovation-driven acquisitions, particularly of earlier stage companies.
  3. Corporations must first identify the goal driving each innovation-driven acquisition and utilize five important dimensions with their associated actions during the acquisition and subsequent integration process.

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