A New Model for Innovation: Buy, Buy, Buy!

Facebook's recent acquisition of Instagram (for $1 billion) has captured many people's attention. The ability to create vintage-looking photos and share them with the world has definitely changed the photography landscape. But is creating and sharing vintage-looking photos all that novel? Apparently so, considering that huge companies such as Google, Apple, Facebook, Nikon, and Canon have not been able to successfully develop an application that can convert today's snapshots into timeless photos despite their robust R&D capabilities. 

Personally, it's hard to imagine a large company not being able to do what it wants, when it wants. But I guess that's why there's a market for start-ups. Start-up companies have the flexibility to do daring and disruptive things; they can look at a market, identify the pain points, and create a solution. If that venture doesn't work, they pivot and go at it in a different direction. Not much has been gained, but not much has been lost. For larger companies, it is harder to pivot when all their revenues or successes are tied up into their cash cows. According to Nick Bilton, "the challenge of creating something small and disruptive inside a large company is one that many face today." [1] But let's give large companies some credit. They are not just relying on their cash cows; they are constantly looking for stars. But how do you balance between cash cows and stars? How do you innovate at the expense of your revenue driver? (Just ask NetFlix, who lost $12 billion in market value after transitioning from DVDs to digital downloads.) 

The answer: Maybe you don't have to. Who needs to innovate when you can just buy innovation? That's what Facebook did. 

1. Bilton, Nick. Innovation Isn't Easy, Especially for an Industry Giant. NY Times. 16 Apr 2012.