Google is said to be giving up on its moonshot projects – the latest example of the limits of corporate innovation. That’s a shame.
While Google has produced some notable ventures, like Waymo, the company is now said to be coming back to earth and spinning out many of its venture projects.
Google’s moonshots are not leaving earth.
It’s ironic that Google, itself a “moonshot” search engine that was developed by two guys in a lab who tried to sell it for just $1 million and failed, led to the creation of one of the most successful companies in history. Today, despite spending billions on moonshot projects, Google has not been as productive. About 90% of Google’s revenues are not from the moonshot factory but from:
· Google Search – the original bootstrapped product from Page and Brin.
· YouTube – that Google purchased when its own offering was not as good.
· Google Network – where Google places ads on other platforms.
· Google Cloud – where Google imitated Amazon Web Services.
Do corporations need to get better at unicorn development?
So, why is it that corporations:
· Rarely develop unicorns. From Walmart to Aleph, new unicorns were mainly started by entrepreneurs – not corporations.
· Struggle when acquiring potential unicorns. According to a Harvard Business Review article, about 70% – 90% of corporate acquisitions are said to fail.
5 reasons for earth-stuck moonshots.
Here are 5 reasons why corporate attempts to develop or acquire unicorns (other than product or market extensions) often fail to take off.
#1. Difficult to recognize potential before Aha!
Many unicorn technologies, including the flat-screen TV (RCA), laser printer (Xerox PARC), PC mouse (Xerox PARC), and the Ethernet (Xerox PARC) did not benefit the corporations that developed them, because the corporations failed to recognize the true value of the game-changing technologies. Instead, these innovations were exploited by others who saw potential.
#2. Long-term unicorn development is easier if you don’t need results.
From Xerox (Xerox PARC) to Google, corporations seem to love to create labs to invest “excess” cash into moonshots. If top executives support a “long-term” vision and do not demand immediate results, researchers are freed from the burden of quarterly and annual goals – and results.
#3. Corporations need to master revolutionary innovation.
Corporations generally excel at evolutionary innovations and often falter when it comes to revolutionary innovations – disruptive changes that allow new business models that are the key to unicorn-entrepreneur strategies. This accounts for the demise of once-dominant companies like Control Data, DEC, Sears, Wards, and Borders; and for the success of billion-dollar entrepreneurs from Sam Walton (Walmart) to Brian Chesky (Airbnb).
#4. Unicorns need strategic innovation more than product-innovation.
Innovation today seems focused on product. But most unicorns are built on bold strategies on emerging trends that redefine the rules of the game. Examples include Walmart (rural stores), Microsoft (OS), Dell (custom PCs), Bezos (AWS), Kalanick (taxis without cabs), and Airbnb (hoteliers without a hotel). Corporations need to learn strategic innovation from the 99% of billion-dollar entrepreneurs who succeeded based on unicorn strategies.
#5. Learn ‘VC-Love’ – what have you done for me lately?
VC can be brutal. Ventures that do not show results are not coddled. Corporations do not seem to apply the same vigorous rules to their moonshot labs.
The Solution
Combine street-smart and finance smart. Google is reportedly teaching its internal “entrepreneurs” how to pitch to get external VCs and leave the mother ship. They would do better by learning the right skills, strategies and structure used by billion-dollar entrepreneurs.
MY TAKE: Corporations need to go beyond guessing about potential and make unicorn-development more about proving potential. They can learn from the 94% of billion-dollar entrepreneurs who bootstrapped to takeoff by integrating:
· Street-smart skills to grow more with less – like Fawn Weaver; and
· Finance-smart skills to finance growth without VC like Richard Burke (UnitedHealthcare) who did it with a $40,000 loan (Bootstrap to Billions by Dileep Rao).
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