Was the pitch line of Twitter good enough for you to consider it 'useful' before it became what it is?
What the "startup" mentality has that the cash cow companies lack is the sink-or-swim pressures that create success or failure from new projects. Market pressures, in other words. Cash cow companies can afford to have many projects in limbo, sucking time and energies away from progressing towards projects that will ultimately succeed.
Because cash cow companies (by their very nature) haven't had to develop many successful projects, they tend not to be very good at it. Not only that, but cash cow company executives often become fearful of any line of development that may undermine the cash cow's market performance. When those two factors coexist, you're left with a company that's not only painted itself into a corner, but has also forgotten how to paint.
BTW, I think Twitter sounded like a simple idea on paper, but certainly not a stupid one. If a small group of people finds a passionate use case, there are likely others out there who will feel the same.
Cash cow disease costs _stockholders_ untold (sometimes actively buried in accounting maneuvers) dollars. Consider Xbox, which consumed billions (that's with a 'b') before eventually turning a profit of millions (that's with an 'm'). If Xbox had been spun into a separate company, then Microsoft _stockholders_ could have kept those billions (with a 'b') and let _someone else_ decide to invest billions in trying to jump into the game console business.
(emphasis mine).
1) Android is growing like wildfire-- contributes over a billion to revenue last year it was claimed.
2) Google App Engine serves over a billion page load a day.
3) Google Apps? I love it--
etc etc.
Spin-off is a technique, but I don't think it's the only way to go.
Who's going to seriously invest in an online word processor or spreadsheet with Google apps squatting on the territory? Just MS.
Google apps is still pretty basic and they're not operating under commercial conditions, which means potentially the customer is not getting what they actually want.
I think in some ways he's wrong, not operating under commercial pressures is not necessarily a bad thing, but Google and Microsoft have recently been extremely weak on following through on promising technology, abandoning projects instead of pivoting.
But in Google's case it can be especially toxic, it's then difficult for others to enter those markets as suddenly there's a free competitor. That's not healthy and on that I agree with the author.
But isn't this the grave we've dug for ourselves (as software developers)? We've pivoted the whole market so that software has no intrinsic value on its own?
Look at WordLens for example. Mindblowing technology. If you could only get it in a standalone piece of HW the markup would purely be a function of the HW cost. As it is, they started pricing at $5. And as ridiculously cheap that is I can see people saying, "Why isn't it 99 cents?"
At this point the horse is out of the barn. The value of your product is no longer the utility of the product, but rather how well advertisers can leverage your audience.
Although that makes me think, there's great advertising angles with WordLens since you know what words/signs people are looking at. I freaking went to sleep thinking about that product... sorry for the tanget. :-)
By keeping the cost lowish, they're discouraging immediate competition, but can still make a large profit if they market it right. And that video certainly looks like the right marketing to me!
For most people software has the value of a Happy Meal prize.
http://gigaom.com/mobile/augmented-reality-translations-word...
read the last line of the WordLens review... "A price cut would also help a lot." $5 is too much to pay for this app! A medium caramel frappucino from Starbucks is almost $5!
It just seems like over the past 20 years I've seen this evolution of programmers building intricate valuable product, to now it being generally viewed as disposable crap... even the best stuff. It only has value when coupled with HW or is a service.
There are 6 listed here: http://en.wikipedia.org/wiki/Office_suite
Google's word processor began life as a startup (Writely). It now has real-time collaborative editing from Google's Etherpad acquisition.
This was an acquisition.
2) Google App Engine serves over a billion page load a day.
Is it profitable? (I'm actually ignorant here.. not snarkiness).
3) Google Apps? I love it--
As do I, but not yet so much to pay for it.
Spin-off is a technique, but I don't think it's the only way to go.
Indeed, I'm not sure even the author is suggesting it's the only way.
The market incumbent strives upmarket and creates a performance oversupply (a surplus of features in excess of customer demand) which opens space below for a downmarket competitor to disrupt upmarket.
But the net result of cash cow disease is a waste of brainpower, and a decrease in useful innovation.
From what I can tell, there isn't as much of a contradiction as you imply, and the author is merely advocating a spin-off technique for investing in non-core innovation.