Dealing with the Make or Buy innovation dilemma using Strategic Project Portfolio Management (SPPM)

My PhD thesis is not completed, even though I widely analyzed strategic innovation management for almost 4 years.   I am studying the dilemma Make or Buy innovation to create value, through Strategic Project Portfolio Management (SPPM).  It appears that few industries have what I call “highly dynamic” SPPM.  For instance, big pharmaceuticals such as Pfizer, have thousands of innovation projects and use a formal SPPM  to create more corporate value.  While the tendency in the past decade in this industry was investing massive internal R&D, a new trend has emerged with a more optimal mix between making innovation and buying innovation.  Big pharmas are acquiring more biotechnology firms and sub-contracting innovation, for a more “open innovation” system.

Another firm, which is probably using a systematic approach in SPPM, and moving toward a more highly dynamic approach, is Google.  Recently, David Lawee, the vice president of corporate development of Google said that the acquisition of the wireless-software start-up Android was Google’s “best deal ever”.  Furthermore, in buying innovation, integration is the key.  According to the VP, when Google buys a company, it’s up to the entrepreneurs behind that company to make it a success.  Android was acquired for around $50M in 2005, representing around 40% of total 2005 acquisitions.  The founder of Android stayed with Google and was the champion of the development of Android’s platform as an open-source operating system. It is now the fastest growing platform for high-end smartphones, a tough opponent for Apple, RIM and Nokia.

In infocom industries a key metric exist: Is the technology being used? A lot of it depends on the perseverance of the team coming in.  Google does not charge for the operating system itself, but the company profits from mobile ads displayed on Android phones. In 2010, mobile ads represent around $1 billion in revenues for Google.  These revenues come mainly from one of its latest acquisition: AdMob.  While mobile ad networks are very sexy and growing very fast, Google had to pay $750M for AdMob a mobile-advertising startup in 2010.  Timing and integration is almost everything in acquisitions and the payoff on this investment will be more long term.  Google is the leader in the number of acquisitions for 2009-2010 in infocom industries and made over $8 billion in acquisitions since its creation in 1998.

Louis Rhéaume

Infocom Intelligence

louis@infocomintelligence.com

MySpace et les médias sociaux. Peut-on avoir une deuxième chance de faire bonne impression?

Les médias sociaux ont la cote.  Facebook vaut plusieurs milliards de dollars.  La firme de capital de risque Kleiners Perkins vient de lancer un fonds de capital de risque pour l'industrie des médias sociaux, avec l'appui financier de Facebook, Zynga et Amazon, entre autre.  Le secteur a le vent dans les voiles, mais est-ce que tous les joueurs profitent de la croissance du secteur?  


MySpace a été l'un des premiers leaders en médias sociaux. Quelques années avant Facebook, Myspace était le principal joueur dans ce secteur.  Moi-même, je me suis inscrit en 2007, pour y retourner seulement 3-4 fois, en 3 ans. MySpace a été largement supplanté par Facebook dans la quête de masse critique comme joueur de réseautage social.  Facebook a 500 millions d'usagers et espère avoir 1 milliard prochainement.  MySpace doit donc changer son modèle d'affaire pour renouer avec la rentabilité.  D'ici quelques semaines MySpace va changer complètement le design de son site web.  Au lieu d'être le lieu de rencontre entre amis, Myspace veut être le lieu de rencontre du divertissement social. Cela veut dire que certains usagers vont obtenir le titre d'experts (en anglais "curator") de sous-cultures, principalement de la génération Y (les jeunes nés après 1975).  Ainsi, les usagers pourront mieux suivre les bonnes émissions de télé, les bons jeux vidéos, et leurs artistes musicaux et acteurs préférés. MySpace mise donc sur les experts pour augmenter l'engagement des usagers envers leur site web.


Le focus sur la génération Y semble une décision stratégique louable, mais va-t-elle être profitable à long terme?  MySpace mise sur une de ces forces, mais est-ce que les jeunes vont réellement lui donner une deuxième chance? Après avoir perdu le momemtum aux mains de Facebook, est-ce que MySpace va être capable de se forger une identite et une niche stratégique soutenable? C'est à suivre...


Louis Rhéaume
Infocom Intelligence
louis@infocomintelligence.com

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Are we entering in a second Internet stock market bubble?

Everybody knows the Internet bubble of 1998-2000.  Valuations of most firms with a link with Internet got very high valuations and after lost a lot of value in 2000-2002.  At that time a firm with the name .com was found sexy by acquirers and represented a great potential takeover target with the exchange of shares (which were only going up) instead  of cash.  After the crash, firms surrounding the Internet, which had a poor business model, lost most of the time 90-95% of their values, or went bankrupt.  E-commerce mutual funds which had 200% return in one year and a half, like Altamira E-commerce fund lost 90% of their value in 2001-2002.


Time has changed and the web 2.0 has seen the emergence of new sexy players such as Youtube, sold to Google and Facebook, just to name a few. I just read that Facebook's value has triple in 2010 only.  Social networks is the new sexy sector and now you can find a 4 years old firm like Zynga, which is a social video game firm, with a value higher than Electronic Arts, which is 28 years old firm in video game.  Zynga is now valued on the secondary market at $5.27 billion on SharesPost, where Zynga employees can sell shares that they own in the private company. EA is worth $5.24 billion in public trading on the Nasdaq stock market. The SharesPost listings are thinly traded compared to EA’s stock, but it is perhaps the only real measure of the value of Zynga’s stock at any given moment. Several hope that Zynga will go public, but it hasn’t any plan yet. 


I simply don't understand why people will pay real dollars to use virtual currency in virtual games. Zynga is expected to grab roughly a third of the $1.6 billion market for virtual goods in the U.S. in 2010,  thanks to virtual goods sales.  Zynga got the momentum when in the middle of 2009 they launched FarmVille, which is still the No. 1 game on Facebook with 57.4 million monthly active users. With such popular games, Zynga can cross-promote its titles and advertise them as well, allowing it to turn lots of its games into huge hits. In addition to FarmVille and Texas Hold Em Poker, FrontierVille, Mafia Wars, Cafe World, Treasure Isle and PetVille all have more than 10 million users. Overall, Zynga has 214.5 million users. CrowdStar has 54.2 million monthly active users, and EA is No. 3 at 44.7 million users. EA bought Playfish for $400 million in the fall of 2009, but is still behind Zynga in that area.  However, EA’s online game revenue is at $750 million in the current fiscal year, or around 20 percent of overall revenue, is significantly bigger than Zynga’s online game revenue, which the only source of revenu of Zynga.  The largest independent maker of video games is Activision Blizzard, which has titles such as World of Warcraft. 


It appears that the market values Zynga as equal to EA in market share, so it is deeply discounting the rest of EA’s nearly $3 billion or so in traditional video game console and PC game revenues. It seems that Zynga is truly overvalued and in some sectors of the Internet, like the Web 2.0 we are in the presence of a second Internet bubble.


Another example of this is Apple, which has 83% of the market capitalization of Exxon Mobil.  Apple has a P/E ratio of 20.8 and Exxon a low 12.8.  It is true that Apple is one of the best innovator in the world and has created a dependency for its customers toward its proprietary platforms, such as iTunes and Apple Apps store.  Apple is more a telecom firms and a content firms than it was before, as an hadware firm.  The potential of its mobile advertising network is huge.  The question is can Apple create on the long term 83% of the profits of a firm, such as Exxon Mobil?  I explained in previous comments that the dependency of Internet mobile can create huge values.  However, I have a certain doubt that it would represent a long-term oligopoly, such as gas with Exxon Mobil.  We are much more dependent right now (and in the medium term) toward gas than toward Internet Mobile access and its ecosystem (apps, music, etc.). In a bubble it won't mean that P/E ratios will diminish in the short term, but in the medium and long term, there will be important depreciation of overvalued Internet stocks.


Louis Rhéaume
Infocom Intelligence
louis@infocomintelligence.com

The day that mobile data will surpass mobile voice is coming

We saw in an earlier post that mobile data revenue will take over fixed voice revenue around 2011.


ttp://infocomanalysis.blogspot.com/search/label/fix%20telephony


It appears that mobile voice has already been surpassed by mobile data traffic on some networks, and it is definitely accelerating.  The main reason is that Mobile data usage continues to grow exponentially as 3G technology expands globally. ABI Research predicts that from 2009 to 2015 data usage in Western Europe and North America is expected to increase at a compound annual growth rate (CAGR) of 42% and 55% respectively.


While mobile data revenues are expected to grow at a CAGR of about 18% in North America, this is in sharp contrast to the increase in usage.  In 2010, the average North American user is expected to consume 159 megabytes of data – up from 100 megabytes in 2009.


The growth in data traffic is cannibalizing (at the cost of) voice revenues.  Thus, minutes of use are on the decline in developed markets in North America and Western Europe.


Louis Rhéaume


Infocom Intelligence


louis@infocomintelligence.com

10 great Blackberry applications

Here are some great Blackberry applications:

Opera Mini
The default Blackberry mobile browser is bad. Thus, Opera Mini offers a better navigation experience.
The first page is similar to a Google Chrome page with mini windows of few popular websites.

Google Maps
You can use this application to know the right direction, see your location and watch traffic. You can also use this app to get maps in satellite view.

Blue Mobile
Blue Mobile app offers to track customizable portfolios, watch lists, and every major market. It is an interesting financial application.

Slacker Radio
This app offers an extensive assortment of genres including Blues, Classical, Hip Hop, Jazz and Comedy — each with numerous individual channels. Slacker also allows users to customize stations, store favorites and recently played selections, and – of course – search for specific tunes and artists. For listeners more interested in popular songs and themes, Slacker Spotlight and Top Stations both keep up with current trends.

Poynt
Poynt offers GPS location-based services. Local weather, and different sub-categories such as: People, Businesses, Gas Prices (vicinity and price), Restaurants (with an impressive list of cuisines and themes) and Movies (by location or specific film). They also can guide users to local eateries, theaters and hotspots, with an indication on a mobile map. Poynt offers easy information sharing, including the maps and directions, through both e-mail and popular social networking services.

Mobipocket Reader
You can read eBook titles and as well as download books on your mobile phone. Mobipocket Reader supports .Mobi format. This application can help while researching on some depth of any topic.

Capture It
The application capture images of BlackBerry’s screen and then saves them as .jpg file format for your ease while transferring the image. .JPG format saves file in less Kilobytes.

ISkoot
You can use this application to send and receive voice calls to and from Skype users. The application offers instant messaging function to its users.

Beyond 411
You can use the application to look up business listings and know about the driving directions. Beyond 411 gives right direction about various locations. It is a mere traffic or route helper application.

Blackberry Appworld
You can browse many other Blackberry apps through this application. It is all about different applications of blackberry smart phones.

Louis Rhéaume
Infocom Intelligence
louis@infocomintelligence.com

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Some of my favorite and useful blogs that I read

I have some favorite blogs that I read often.  Here they are:

Finance:
-Seeking alpha  http://seekingalpha.com/
-Abnormal returns http://abnormalreturns.com/
-Zero hedge http://www.zerohedge.com/

Technology:
-Techcrunch http://techcrunch.com/
-Readwriteweb http://www.readwriteweb.com/

Finance & Technology, venture capital: 
-Venture beat http://venturebeat.com/
-Paul Kedrosky Infectious greed  http://paul.kedrosky.com/

General information:
-Huffington Post http://www.huffingtonpost.com/

Enjoy.

Louis Rhéaume
Infocom Intelligence
louis@infocomintelligence.com

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iPhone, iPod Touch and iPad apps are now more popular than the most popular TV shows

     

According to a survey by Flurry, the aggregated audience of users of Apple iOS operating system on a daily basis has reached over 19 million. They spend around 22 minutes a day on average on these applications. It is a survey of around 20% of the apps, so we can affirm than Apple's users have surpassed the audience of popular TV shows such as American Idol, which is a very interesting fact for advertisers.  Apple Applications Store has been opened only 2 years ago in July, 2008. While TV shows air around 22 episodes per year, Apple's apps are available 365 days per year. 


Louis Rhéaume
Infocom Intelligence
louis@infocomintelligence.com  

Who is still the leader in smartphones?

Blackberry is still the most popular operating system (OS) platform for smartphones around the world with a presence in around 70% of firms in North America and Europe in Q1 2010. However, among consumers and business smartphones users, RIM is also the leader but is challenged by the growth of Android of Google.  Even though Apple experienced fast growth with its iPhone, they lost a bit of market share between May and August this year.  Finally, Microsoft just announced the launch of Windows phone 7 which resemble Android http://news.yahoo.com/s/ap/20101011/ap_on_hi_te/us_tec_microsoft_phones

Louis Rhéaume
Infocom Intelligence
louis@infocomintelligence.com

Consumer internet business models

AOL just acquired the tech news blog Techcrunch for US $25M. There was a recent interesting article concerning Consumer internet business models on this blog:

13 Ways To Get To $10 Million In Revenues (Part I).

http://techcrunch.com/2010/10/10/teardown-13-ways-10-million-revenues/

The different business models can be read at:

http://tctechcrunch.files.wordpress.com/2010/10/chart-2-consumer-internet-startup-models-overview.jpg

Louis Rhéaume

Infocom Intelligence

louis@infocomintelligence.com

www.infocomintelligence.com