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Livecast Lecture Final
 

Livecast Lecture Final

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Wharton's first interactive videolecture, and the slides... ...

Wharton's first interactive videolecture, and the slides...

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    Livecast Lecture Final Livecast Lecture Final Presentation Transcript

    • Innovation in Tech Firms: Google, Apple & Pixar Kartik Hosanagar
    • Wharton’s First Free/Open Livecast • History • Acknowledgements – Yujin Chung – Dale McCook – Corey Pierson – Allan Yang
    • 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
    • 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
    • Being Innovative/Visionary is Hard • “There is no reason anyone would want a computer at home” – Founder and CEO of Digital Equipment Corporation
    • Outline • Google – Discussion • Apple – Discussion • Pixar • Summary & Discussion
    • Google • 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
    • Revenue: 23.65B EBITDA : 9.84B Mkt. Cap: 171.18B
    • : More than Just Search Developed in-house Acquired What has helped drive this growth?
    • Key Factors Strategy Managing Innovation People Culture Decision Product Process Development Consumer Psychology
    • Strategy: Business Model Google generates most of its revenues from ads Sponsored ads
    • Business model (contd) Google runs auctions to sell ad space 1 Select 2 Submit Ads and 3 Attract Keyword bids on Google Customers
    • 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
    • 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)
    • 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
    • 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
    • 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?
    • A Pricing Experiment Hershey’s Ferrero Nothing A (1,26) B (0,25)
    • A Pricing Experiment Source: Shampaner & Ariely
    • Accounting for Transaction Cost Source: Shampaner & Ariely Implications: Loss leader like Maps/ Docs might draw enough people to Google. Traffic can then be monetized through Google search
    • 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
    • Outline • Google • Apple • Pixar • Discussion
    • 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)
    • Steve Jobs’ Shareholder Returns • $10K invested in 1997 would now be worth $450K
    • Apple: Collaboration “Real artists ship” No Concept Products – GM, Microsoft, others often make concept products – Last concept model: Knowledge Navigator (1987)
    • 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.
    • 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
    • Outline • Google • Apple • Pixar • Discussion
    • • 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
    • Box Office Success Worldwide Release Date Movie Name Budget Gross 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
    • 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
    • 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
    • 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
    • Outline • Google • Apple • Pixar • Discussion
    • 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