2014-01-22

Co.Labs

If You Can't Beat Them, Buy Them

I can guess where tomorrow's Nest is hiding and buy them for a lot less than $3.2 billion.



When clients and CTOs ask me what "the next mobile" is, my answer could be a wall device, some sort of gestural tech, or one of the thousands of wearables that we saw at CES this year. It wouldn’t matter. What they’re really asking me is what they should know to prepare themselves for what’s next. My answer is Kickstarter.

Kickstarter is the greatest idea incubator of the 21st century, possibly ever, but it doesn’t teach people how to ship a product. A study by the Wharton School of Business last year said that only 25% of Kickstarter projects deliver their goods on time, and even then, it’s usually in small quantities. The founder of one fully funded project bragged to me over lunch that he was only a year late. If I was over a year late to anything, I’d be fired.

Stories like that are common, and probably the reason why Felix Salmon over at Reuters once called Kickstarter a "Skymall for vaporware." Which is awesome. My advice? Get a subscription to the Skymall that is Kickstarter, and put someone on it full time. Large companies can take that vaporware and make it a reality. Companies should be looking at Kickstarter and Indiegogo as a menu of what’s available and a heat map of where user traction is. Then, buy next-gen tech companies while they’re still inexpensive, put a team of experts on the problem, and push the product out through all of your established distribution channels.

If You Can’t Beat 'Em, Buy 'Em

Google just positioned themselves front and center of this trend by purchasing Nest for the not-so-inexpensive price tag of $3.2 billion. What they got for the price however, is proven design expertise in the connected hardware space and an established development team led by two hardware veterans. While it is rare, products backed by teams with the whole package aren’t completely unheard of, and if you can afford it, make great buys. Estimote, which makes low-energy remote plastic beacons that give smartphone users an "enhanced shopping experience," works beautifully. So does Fitbit, the wearable activity monitor. But waiting until these products prove themselves in the market is a luxury only deep-pocket players can afford.

Finding The Right Match

For those looking at acquiring products that still deal in backers, not buyers, there are a few things you can learn from the Google/Nest matchup.

  1. Follow the momentum. Break down what people are funding, how quickly it’s getting funded, and what makes each project the best in its category.
  2. Find teams with technical experience in their field, hopefully years of it, otherwise it's more of a creative endeavor than a potential product.
  3. Acquire more than just the product. Look for teams where partnership means acquiring their niche expertise, and industry-specific credibility, as well as the hardware.
  4. Finally, find the projects with a missing piece that aligns to one of your core competencies. Is it a hardware product without a beautiful software interface? A niche product that could realign its positioning to find a broader market? Or does the project need what every crowdfunded project needs: efficient development, processes, consumer-grade polish, market launch strategies, and distribution channels?

Ask More Of Your Startups

This year’s CES saw companies like Univision and Unilever hiring tech startups to guide them around the show. According to Alex Gold, cofounder of Buzzstarter, "brands are essentially using startups as ‘external innovation teams’ since they’re already in the trenches on a day-to-day basis." Why not take it a step further and actually outsource the emerging tech R&D to the guys on the ground floor, rather than just asking them for a tour of it? If you want to keep to your core missions, and keep clear of distractions, let your partners help you understand what’s worth your resources, and how your brand fits into the ever-shifting, and sometimes shifty, world of new tech.

The best of both worlds

What I still find most intriguing is GE and Quirky—a cross between buying a team wholesale and looking to startup partners to help you pick and choose. In November, GE invested $30 million in the New York company. Started as an idea clearinghouse for home inventors, Quirky solicits ideas for new tech. It then picks the best ones, makes them, and distributes them to stores. With its massive corporate infrastructure and often inhibitive contracts and processes, GE just isn’t able to behave as innovatively as Quirky does. But it has distribution networks that a new company couldn’t hope to reach in 100 years.

GE and Quirky shared patents. They collaborated on a milk jug that can tell you when its contents are going sour, an egg container that sends you a text when its contents are about to expire, and a power strip that automatically connects to the Internet. Now they’ve cut a deal to co-develop six products a year for the next five years. That’s the way modern business should work.

So what’s the "next mobile?" Hopefully, you are. Being mobile isn't easy for huge companies that run about as flexibly as government, and there’s no magic formula out there to teach corporations how to outmaneuver startups. But there are thousands of paying customers out there without a product to pay for. And Kickstarter has identified them for you. Go get them.

Ben Lamm is CEO and co-founder of Chaotic Moon, a creative technology studio. His signature blend of integrated product strategy, brand development and interaction design has led hoards of world-renowned clients to multi-million dollar successes.

[Image: Flickr user 401(K) 2012]






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