The cool Flip video recorder that easily records videos for quick uploads to YouTube and other social networking sites has just been jettisoned from Cisco’s product portfolio. Cisco paid $590 million to acquire the company in 2009. What Cisco saw back in 2009 was a device that could load up the network with more data meaning more business for Cisco servers. Sounded like a great strategy at the time – too bad it didn’t work.
In their excitement to record their latest cool moves someone forgot to mention to Cisco execs that the Flip video recorder was a consumer product – a market with which Cisco was unfamiliar. In consumer marketing distribution channels are everything – without them Cisco could never build the mindshare needed to make Flip a success.
Frequently, companies hungry for growth look to join forces with other companies having complementary strengths but as Cisco has shown us the synergies they seek can sometimes be elusive. Deceived by their ability to succeed in familiar markets many companies become overly optimistic about their ability to succeed on an unfamiliar playing field.
In 2009 Cisco was watching Apple, YouTube and Facebook shine in the spotlight and wanted some of the action. Unfortunately, Flip was an impulse buy which even a company as big and strong as Cisco couldn’t make good.
Before rushing into an acquisition, stop and ask yourself and your team a few questions:
- Is there a good reason we haven’t done this before? Cisco had never played in the consumer market place for a very good reason – they’re a technology company not a consumer goods company and tech people don’t understand consumer goods (and vice versa)
- Is this a realistic strategy for the long term? With cameras and video players by then integrated into cell phones, a separate video recorder was already becoming redundant technology.
- What would an independent panel say? Even when synergies do exist, excitement over them has led many good companies off the rails. Objective market research at the time would have lead Cisco to pass on Flip but in their exuberance, objective market research turned into an exercise to justify supporting a foregone conclusions.
Remember this – market variables that allow an entity to rise to a level of dominance in one context tend to trap it later, preventing it from competing successfully in another.1 Successfully executing a strategy in more than one context is extremely rare.
Adapted from a statement by Jame Hackett HBR 2007 Preparing the perfect launch PP46