Comments on: Incumbents

By: Raising Venture Capital and Angel Investment Funding Can Only Be Done by You

Raising Venture Capital and Angel Investment Funding Can Only Be Done by You — Tue, 23 Feb 2010 17:55:17 +0000

[...] are enough high quality resources out there on raising venture capital and angel investment. And there are some fairly [...]

By: 1 week ago

1 week ago — Wed, 03 Feb 2010 03:13:21 +0000

As a geek with no social skill, I have trouble understanding the community building process. I guess it's the same for many googlers hehe.
Could you give some insights about it.

By: Incumbents | Igniting Startups - nPost

Incumbents | Igniting Startups - nPost — Mon, 01 Feb 2010 16:11:23 +0000

[...] From cdixon.org [...]

By: Dave Blanchard

Dave Blanchard — Wed, 27 Jan 2010 21:44:29 +0000

They actually killed that program because the subjective standards for the awards were causing tension between projects. That's habitats question is a tough nut to crack..

By: chris dixon

chris dixon — Wed, 27 Jan 2010 07:57:19 +0000

I think its possible to fight the incumbent as Jamdat did – just very hard. Interesting postscript is Jamdat would probably be worth very little today – games on non-smart phones have cratered. Seems like Jamdat timed things perfectly.

By: Mike Su

Mike Su — Wed, 27 Jan 2010 07:55:04 +0000

To your last point about sustaining technologies and the threat from the incumbent to build their own – I recall listening to Mitch Laksy talk about EA approaching Jamdat early on and gave them a lowball offer to acquire them. Jamdat respectfully declined, and EA basically said, “well, prepare to be crushed suckers!!!” and proceeded to throw tons of money into building a mobile games division. Since then Jamdat went public, and eventually kicked EA's ass, and EA ended up buying them for nearly $700mm, a huge premium from their original offer.

Of course one analogy doesn't disprove your point, but it is a good example of a company that was able to take on the incumbent head on and the incumbent paid the price.

By: Keith B. Nowak

Keith B. Nowak — Wed, 27 Jan 2010 07:52:19 +0000

I just watched the sly stallone video you posted on Twitter and it reminded me of this discussion, especially the bit about his hunger being his only advantage. Talk about an unnatural act of willpower!

By: chris dixon

chris dixon — Wed, 27 Jan 2010 06:46:55 +0000

I think its probably mostly incentives. My experiences in big companies is no one cares and they all leave at 5pm etc. Also as you say complacency. It really takes an unnatural act of willpower to do something new and that just doesn't tend to come from the cozy confines of incumbents.

By: Keith B. Nowak

Keith B. Nowak — Wed, 27 Jan 2010 06:35:28 +0000

Why do you think big companies cannot build new products? Do you think it is a matter of focus (they have enough balls in the air already) or is it a result of the type of leadership at a big company vs. a startup? Or perhaps, its due to a sense of complacency since they believe that if they miss an opportunity they can just acquire the best startup in that space.

By: David Semeria

David Semeria — Wed, 27 Jan 2010 01:13:59 +0000

Nice reply.

Emphasizes the notion that it's all about the “all-in” hand. You can get lucky (by definition rare) and get there soon after the game starts, or, more likely, patiently accumulate your chips and wait for the big moment.

By: chris dixon

chris dixon — Wed, 27 Jan 2010 00:32:43 +0000

I think it completely depends on why they are lower in price. If its just because they are willing to settle for lower margins or have some undefendable operational improvements, I'd worry. If there is something fundamental to what they do that gives them price advantage, that's different.

By: Greg4

Greg4 — Wed, 27 Jan 2010 00:29:47 +0000

So in your capacity as an investor, how much dis/comfort would you hypothetically feel if a startup you were looking at were mostly disruptive by virtue of price? I'm trying to gauge how hard I need to think about this point for my competitive analysis.

Once they killed a bunch of 20% and acquired projects as the recession hit, I got the same impression. Seems inevitable they would need to get more corporate.

By: chris dixon

chris dixon — Wed, 27 Jan 2010 00:27:24 +0000

Interesting, thanks. I think there are more dimensions though. Like is it something the incumbent is good at, and how far out on their road map are you willing to target.

By: chris dixon

chris dixon — Wed, 27 Jan 2010 00:20:47 +0000

Price is definitely one big way to be disruptive. Think microcomputer vs minicomputer makers. Incumbents are structured through and through to protect existing cash flows.

Google: interesting. In theory the 20% experimentation time thing would help, but I hear that's mostly bogus PR stuff and to get any resources you need approval.

By: Greg4

Greg4 — Wed, 27 Jan 2010 00:16:21 +0000

Great points. As far as being disruptive, how much do you see price point playing a role in addition to the “toy” issue? If the incumbent is making $1,000 per user and the entrant wants to make $50 per user, it seems like that's usually a pretty good psychological barrier to competition. Companies hate to cannibalize their own revenue, even if someone else is going to do it eventually. For example, Google Apps versus Microsoft Office is shaping up to be a classic example. How much do you see pure economics mitigating risk when you're the entrant?

Regarding Google, they're also starting to put the market size blinkers on. A guy I know there was saying they're not interested in anything that can't be a $100 MM business in ~2 years. Not sure whether that's representative, but it's hard to attack new markets if you start by defining most of them as too small.

By: Mark Essel

Mark Essel — Wed, 27 Jan 2010 00:04:00 +0000

My strategy is to build a cash positive business model. I'll go out of my way to approach potential partners whenever possible.

If other businesses really love what we have (or perceive that their competition may make an offer), they'll open up discussions.

If not, we keep on building a successful business.

I'm not 100% certain whether our business (VictusMedia) is sustaining or disruptive though. There aspects of both. We sustain social companies and semantic processing architectures, but we will hopefully disrupt other forms of advertisement.

By: Mark Essel

Mark Essel — Wed, 27 Jan 2010 00:01:56 +0000

Interesting take Andres, could use some simple clarification (are big /small raise equivalent to value?)

By: Mark Essel

Mark Essel — Tue, 26 Jan 2010 23:59:28 +0000

"Which means it should be a diving force in textual organization."
I count on some very groovy semantic APIs to help make sense out of context. Zemanta and Alchemy's Orchestr8 are flexible and improving interfaces. I hear Open Calais is good but haven't explored it yet.

Totally agree that Amazon should not be selling baby books to you (if it's not in your info stream, check out VictusMedia.com for some samples of personalized ads matched to your social stream).

By: Mark Essel

Mark Essel — Tue, 26 Jan 2010 23:54:43 +0000

The sale was solid. Everyone walked away with something, great move not holding on in a tight situation. Appreciate your candid sharing.

Over lunch I briefly explained to co-workers (day job) about how incredible social media, blogging, and twitter can be for getting valuable, timely, and relevant information. I don't think I succeeded in convincing them, but I'll keep trying.

Most of their instincts were that folks just lie online. I countered that trust and reputation are the most valuable asset of any business.

One friend at work follows folks on twitter and is just starting to really enjoy it.

By: Ryan Graves

Ryan Graves — Tue, 26 Jan 2010 23:33:34 +0000

if you're a product or trade sale type company, when do you expose your product to the potential acquirer. If I'm Urchin Analytics, when do I enter communications with Google?

& how, if you have time to answer both.

Cheers,
@ryangraves

By: Andres Moran

Andres Moran — Tue, 26 Jan 2010 22:36:50 +0000

I love how you laid this out. It's essentially a decision matrix. In an effort to represent these thoughts graphically, I created the following: www.drop.io/incumbents

Please let me know if you agree with the labeling.

Also, I borrowed the layout from a post Mark Davis wrote a couple months back.

By: Tweets that mention Incumbents cdixon.org – chris dixon's blog -- Topsy.com

Tweets that mention Incumbents cdixon.org – chris dixon's blog -- Topsy.com — Tue, 26 Jan 2010 22:19:01 +0000

[...] This post was mentioned on Twitter by Andrew Chen, Hiten Shah, Jesse Farmer, chris dixon, John Sjölander and others. John Sjölander said: RT @cdixon: Some thoughts on incumbents http://bit.ly/6nzLjC [...]

By: AndreaF

AndreaF — Tue, 26 Jan 2010 21:45:50 +0000

My 'hunch' is that you are going where search and e-commerce will meet. I think you are 3 years ahead; i.e. in 3 years time, other companies will be ready to launch a competing product with what Hunch will be in 3 years. Very ambitious project you have there and potentially awesome. I see some interim opportunities as well to monetize your content and functionality. Wish you and Caterina the best success.

By: chris dixon

chris dixon — Tue, 26 Jan 2010 20:45:37 +0000

Certainly thought about it. With Hunch we made the deliberate decision to try to do something 5 years ahead of the curve instead of 2 years out like SiteAdvisor.

By: chris dixon

chris dixon — Tue, 26 Jan 2010 20:44:57 +0000

I would almost never approach incumbents. Wait for them to come to you, and even then proceed cautiously.

By: ronald

ronald — Tue, 26 Jan 2010 20:44:29 +0000

Isn't Google like the early Microsoft really, really good at Data analysis.
Means, everything which has enough background Data or can be advanced evolutionary they can do (straight line).
But create new abstractions from organizing songs into playlists to a different UI for a phone. That's not their thing. I mean come on, last time I checked, WAVE had context as an enum. Even my 9 year old son has a clear understanding that meaning changes with context. Which means it should be a diving force in textual organization.
Amazon is still suggestion baby books to me, give me a break.
Both companies might be mighty from a business point of view, but from a tech/research view point?
On the other hand, Microsoft has deep roots in research. It's very easy to talk to their highest Management. But still they don't seem to make any of it.
In other words incumbents are like old brains there is some plasticity there but it's really hard to introduce new thinking (abstractions) . Question is, what happens if they get injured, in a brain plasticity increases (for a while).

By: chris dixon

chris dixon — Tue, 26 Jan 2010 20:44:25 +0000

It's a negotiating tactic, which I guess is always about price.

SiteAdvisor: given where I was in my career (i.e. broke) and the fact that we did well for our investors which made me “backable” to start more companies I was happy to sell.

By: chris dixon

chris dixon — Tue, 26 Jan 2010 20:42:59 +0000

Yeah i think Google is trying to do that with their “Founder Awards” or whatever they call them. It's hard to compete with owning a big equity chunk of your own company.

By: joshuakarp

joshuakarp — Tue, 26 Jan 2010 19:55:35 +0000

Just out of curiosity, what companies would you guess might have Hunch functionality on their roadmap? Did you think about this before you started it, and do you consider it a positive or negative?

By: Ken O'Berry

Ken O'Berry — Tue, 26 Jan 2010 19:44:31 +0000

I hate asking questions that demand an 'it depends' response… but any words of wisdom of when to approach an incumbent with what appears to be a strategic solution? As in, at what percentage of fidelity to our vision should we be? How early is too early…

By: Mark Essel

Mark Essel — Tue, 26 Jan 2010 19:42:15 +0000

I see the trend of startup DNA connected to business survival as the decider in higher flux markets (now).

But the only way to get that genetic code is to get founders that have successfully created a business from nothing to work in a more restrictive environment. Bigger businesses will have to make habitats that founders want to work in.

By: Mark Essel

Mark Essel — Tue, 26 Jan 2010 19:38:44 +0000

Hah, great visual David.

By: Mark Essel

Mark Essel — Tue, 26 Jan 2010 19:37:54 +0000

When they say they'll build it themselves, is that a price dropping threat? If you were able to pivot siteadvisor would you have?

By: reecepacheco

reecepacheco — Tue, 26 Jan 2010 19:22:39 +0000

Off the radar and disruptive is where it's at. I like it.

By: chris dixon

chris dixon — Tue, 26 Jan 2010 18:50:58 +0000

yeah, bezos is a superhero.

By: andrewparker

andrewparker — Tue, 26 Jan 2010 18:37:32 +0000

Great way to think about it. Agree. I'd throw Amazon in with Apple.

By: chris dixon

chris dixon — Tue, 26 Jan 2010 18:33:59 +0000

Totally agree. I sometimes say there are two kinds of big companies, those that can't build new products and know it, and those than can't build new products and don't know it yet. I think the exceptions are companies with superhero leaders (Apple) or else enough startup DNA still in the company because its young or because of acquisitions (Google).

By: andrewparker

andrewparker — Tue, 26 Jan 2010 18:31:46 +0000

I am frequently surprised by how *few* things incumbents are good at. I have seen many incumbents try to knock-off the feature set of the startups in the USV portfolio, and in pretty much all cases, the nimbleness of a startup with appropriate laser focus can persevere the largest (often unfocused) incumbents. I chalk the incumbents failures up to #2 above: the incumbents generally aren't good at building products that aren't in their (surprisingly narrow) core focus.

Some examples: eBay's WorldofGood.com and handcrafted mini-sites VS Etsy. FB's redesign that looked very similar to Twitter, after the reported $500M offer from FB to buy Twitter didn't happen. The job search redesigns of Monster and CareerBuilder in response to Indeed.

By: Jesper Bergmann

Jesper Bergmann — Tue, 26 Jan 2010 18:30:50 +0000

Nice thoughts on incumbents.

Another point that should be assuring to anyone challenging incumbents is that incumbents often mistakenly think that starting resource postions are a sure-fire indicator of leadership.
Hamel and Prahalad wrote an excellent book (competing for the future) where they showed several examples of this not being true.

By: chris dixon

chris dixon — Tue, 26 Jan 2010 18:16:30 +0000

heh, true.

By: David Semeria

David Semeria — Tue, 26 Jan 2010 18:13:41 +0000

“We'll build it ourselves” – the incumbent's equivalent of the horse's head…