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Bala Iyer

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Why new ideas don’t get the recognized?

Posted by Bala Iyer on Sat, Jan 17, 2009 @ 07:24 AM

I was reading an article in the WSJ about how Microsoft had internal initiatives on ad supported search in the late 90s. Leadership within Microsoft chose not to support this initiative and has been playing catch-up ever since. Meanwhile, Google figured out a way to deliver on that idea. We have heard a similar story about IBM and PCs in the early 80s. Why is it that successful companies with smart business managers ignore such breakthrough ideas?

Despite repeated brush-ins with the ad subsidized search idea, Microsoft decided not to pursue it. In the late 90s they had an initiative called Keywords but it was killed because it threatened an existing revenue stream from banner ads. A similar fate awaited the idea of purchasing Goto.com (Overture) when it was available to Microsoft. Leadership felt that it would be cheaper to build the technology internally. While it is clear that Microsoft has lost the race for search related ads, they did not lose it for lack of ideas or capabilities – they simply failed to see it as a major opportunity in a timely manner!

While breakthrough ideas suffer this fate, incremental innovation has been mastered by many companies. A good example is Google. With their well established process for hearing and approving ideas and their 70/20/10 principle, they have mastered the concept of appropriating value from incremental innovation. A good place to look for ideas on harnessing breakthrough innovation would be the venture capital industry and its associated ecosystem.



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New revenue model for Google

Posted by Bala Iyer on Wed, Jan 14, 2009 @ 09:12 AM

In the most recent quarterly results, Google generated 99% of its revenue from ads. Today Google has announcedplans to create an additional revenue source using Web-based Google Apps. Since Google doesn't have a sales force that can sell to enterprises, they have decided to use the reseller route. Microsoft has over 900,000 resellers and has a substantial lead here. Google plans to initially experiment with 50 resellers before opening it up to others. Given its heavy investment into infrastructure and reusable components, this is a good way to monetize it by marketing its cloud using resellers.


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The Satyam fiasco

Posted by Bala Iyer on Wed, Jan 07, 2009 @ 06:04 AM

Over the last several weeks Satyam computer share holders have been subjected to one bad news after another. First it was the failed attempt to diversify into real estate and infrastructure. Then it was the resignation of board members. Now it is the resignation of the CEO and a open letterto stakeholders admitting wrongdoings. Apparently, the company has been misstating its revenues and operating margins for several quarters. While the CEO has taken the whole blame for this and absolved all other parties, I wonder if this scale of wrongdoing can be perpetuated by just one person.

The finacial crisis in North America provide the backdrop to these events. There is intense rivalry between the IT vendors in India and sustaining growth and profit margins have proven to be a challenge to them  in these times. There is a fear of being acquired if the stock prices fall as a reaction to lower revenue and margins. Employee retention is also a big competitive necessity. The admission of wrongdoings would definitely impact customer retention and employee morale. This could the beginning of the end for Satyam. The SWITCH vendors will be reduced to WITCH (just doesn't have the same ring to it). I hope the rest of them are learning from this.



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