How to Buy Innovation: The Case of Condé Nast and Reddit
By Shlomo Maital
Obama: AMA
Last Thursday, President Barack Obama signed up for an AMA (Ask Me Anything) session on Reddit, a social networking “aggregating” site. (His favorite basketball player? Surprise – Michael Jordan.)
What is Reddit and what can we learn from it? Founders Steve Huffman and Alexis Ohanian, Univ. of Virginia graduates, founded it in 2005, then sold it to the magazine publisher Condé Nast in 2006 for $20 m. Reddit is very messy, “like peering into a bowl of spaghetti”, writes David Carr in his Global New York Times media column (Sept. 3). But it has defeated sites like Digg, has 40 m. subscribers, serves up over three billion page views monthly, and has only 20 employees.
Big organizations have immense trouble with innovation, almost by definition. Many of them try to buy innovation, by buying startups, like Reddit. As they swallow the startup into their bureaucratic jaws, their gastric juices dissolve all the creativity, the founders leave, the creative people leave, and nothing is left.
But not in this case. Condé Nast wisely decided, under its Chair Steve Newhouse, to spin off Reddit in 2011 as an operationally-independent subsidiary. This happened after it became clear Reddit was failing as an integral part of the Condé Nast bureaucracy, even though the two founders stayed on with the company for three years after they were acquired. As one expert noted, “Condé gave it enough rope and left the people there to their own devices. I don’t know whether it was a brilliant strategy or accidental neglect, but the founders did not leave, the community stayed intact and the site grew beyond anbody’s expectations.”
Reddit is, well, weird. Carr says it has the “retro graphic appeal of Craigslist”. And it has miniscule revenues. Condé Nast says that is OK, “there will be ample opportunities to monetize what they have built”. Perhaps, perhaps not. But the lesson is clear. If you are big fish, and you swallow a very small one, best to leave it largely alone. Recall that the IBM PC was born only because IBM made an independent unit out of it, way down in Boca Raton, Florida, and then ignored it, so it could not be infected by the stultifying IBM bureaucracy. You can buy innovation, without killing it, provided you treat it with benign neglect.
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September 3, 2012 at 1:58 pm
Eelker van Hagen
Benign neglect, what a beautiful contradiction. Because that is exactly what it is. How to foster something? By keeping your fingers off of it. It just gives me a little ring of the all famous experiment that ignited the complete HR industry. Workers in a factory seemed to perform better with better lightning conditions. Now every single one of the factory workers probably could have told you that. However the world just shifted a little toward more benign, the moment a scientific approach proved the factory workers to be right in the first place.
Now how about that? The real innovative power doesn’t come anymore from big conglomerates. Whilst the Science Lab from Phillips in the last century was a boiler room for innovation and scientific progress, the company by now knows, it can only foster start ups to successfully safeguard innovation in the future. What happened in the mean time? Is it possible to design a kind of replica of the lightning experiment to define the influence of benign neglect? Does it make sense to test whether the innovative spirit of men flourishes better in small companies that keep founders and key employees in direct contact over companies where the distance between key employees and the ones leading the company is light-years away? Probably. Does it make sense to have our HR people start their careers by following Psychology courses? Probably. Or do we listen to the “factory” workers at the base of these successful start ups to tell us what really works before we send in the scientists. Because basically all the companies that have been founded in the last 2 decades and have managed to reach the “top of the bill”, only have their small start up phase in common and the way they manage to keep this start up spirit an integral part of the company culture.
Benign neglect, what a wonderful phrase.