By Sree Sreenivasan
DNAinfo Contributing Editor
Here’s a business fable.
Once upon a time, a small startup creates a simple product that costs about $150 in a market that sells more sophisticated, more expensive versions that cost more like $500 or $800. The professionals in the business scoff at the new product, turning up their collective noses at the newcomer, saying they’d never use it. But everyday consumers love it, and, without any advertising, help it grab at least 20 percent of the market, selling 2 millions units.
Within two years, a giant player in another business comes by and buys the startup for $590 million. Observers are skeptical about what the giant can do with its new toy. But the giant promises to nurture its little division and help it grow and do amazing things.
Within two years, the giant kills the product.
But this is no fairy tale. This is exactly the story of the Flip video camera, which Cisco, the computer networking giant, bought two years ago and killed last week.
I was with a tech-savvy friend and I casually said, "They killed the Flip cam." He nearly fell out of his seat and said, twice, "They killed the Flip cam?!" I said, "They killed it because they didn’t know what to do with it."
At the time of the surprise announcement, more than 5 million Flips had been sold and it was the No. 1 point-and-shoot camcorder. A week earlier, a planned roll-out of a WiFi Flip called FlipLive (where you could shoot video and stream it directly onto the web or YouTube) was suddenly postponed.
Here are three things I learned from the Flip story (I was the first journalist to do a TV segment on the Flip, so I know it well):
1. You never know where innovative products will come from. What made the Flip so interesting when it came out in 2007 was its simplicity. There were better, more complicated camcorders, but its magic was that it solved a big problem for consumers. Millions of us had desk drawers and closets filled with videotapes and digital cards that we’d shot, but didn’t have the time to do anything with. Editing the videos meant lots of work: finding the right cables and the right software and the know-how.
Along came Flip with its built-in USB connector and self-installing PC/Mac software — and suddenly, you were able to shoot videos and upload them with minimal effort. In my own case, the first six months I had a Flip, my twins' grandparents in India saw more video of the kids than they did in the first four years since their birth.
When I'd talk up the Flip to video professionals, they'd scoff. They'd complain about the resolution or the fact that it couldn't accept an external mic or that the Flip only held an hour of video (later models would have more). What they didn't realize is that for consumers, getting the video onto the web and shared was more important than getting perfect footage. And that a series of short clips is exactly what works in web video. Besides, Flip would regularly put out upgraded versions, included several that shot in HD reasonably well.
Dozens of my friends and acquaintances got Flips to shoot video of their families or to just carry them around town. And, in an example of the value of starting early, my students were able to sneak a Flip into a Columbia University talk by Iranian president Mahmoud Ahmedinajad, getting the only video and soundbites from the floor of the event.
Envious of the Flip's success, companies such as Sony and Kodak started making "Flip-killers." None had the ease-of-use and success of the Flip.
2. Startup founders can never predict what happens to their babies. Who is to argue with a $590 million pay day? It’s easy to say now that the Flip’s founders should have turned down the Cisco offer and held out for someone more likely to be longer-term supporters of Flip. After all, Cisco CEO John Chambers personally championed the purchase, pointing out that he had bought seven Flips for his family. But even then there were signs that Cisco, with no real consumer DNA (except for the boring but ubiquitous Linksys routers), wasn’t the natural home for Flip. This story is a good reminder that successful startups should be prepared to lose control (and more) if they go for a pay day. Sam Grobart has an excellent piece in the New York Times about the Wreckage at the Intersection of Corporate and Consumer Markets. An excerpt:
As Cisco hoped in its acquisition of Flip, each of Palm's parents hoped that the smaller company’s innovations would bring fame and fortune to the entire organization. The parent company would no longer just be a business — it would be a brand. Its executives would be minor (or even major) celebrities. Perhaps the stock price would get a healthy bump.
"It's a little tough when all the money and energy is over in the consumer space," said an industry analyst, Mark Anderson. "If you're on the enterprise side of things, you want some of that."
3. Smartphones scare some companies, but shouldn't. Much of the analysis around the Flip’s demise has centered around the fact that smartphones like the iPhone and Android are good at doing so many things including video that there was no need for a single-purpose digital product. I humbly disagree.
I believe there are millions of people who like the ability to have a standalone product when they work as well as the Flip. For example, they can be easily given to a young child so you don’t have to hand over your iPhone every time. Another use case: Given the battery problems that many smartphones have, a Flip-like device is good to have with you. And not everyone can afford a smartphone, anyway.
It’s mostly tech snobs who are quick to pronounce the single-use product dead. Yes, my phone has an alarm, but I like the reassurance of my clock-radio unit.
I think a device like Flip would have survived for years even if it had been nurtured properly.
What I don't understand is why Cisco didn't sell the company. Also, if they are in such dire straits, why only cut less than one percent of the workforce of 72,000 (a total of 550 layoffs were announced as part of the changes around last week)? Can that really make a difference? There’s more to this story than we know — but then that always seems to be the case in business these days.
Here’s a list of of PCMag.com’s 10 Top-notch Flip alternatives.
What did you think of the Flip? Post your comments below using your Facebook account or on Twitter @sree.
Every week, DNAinfo contributing editor Sree Sreenivasan, a Columbia journalism professor, shares his observations about the changing media landscape.
