Microsoft’s Acquisition of Minecraft: A teaching moment about R&D investments. The recent news of Microsoft’s acquisition of Minecraft, is further evidence that in the technology world, the larger players are beginning to eye external entrepreneurs as essential to their growth, possibly more so than their own R&D. Google is a frequent purchaser of external companies. In 2014 alone they have purchased 29 different companies – as of September 19th. There are likely more to come. These acquisitions included songza (music streaming), Dropcam (home monitoring) and Titan Aerospace (maker of solar powered drones). These are unrelated companies – well, prior to purchase by Google – but had highly innovative histories or signs of future potential.
Historically, companies were rewarded by the market by investing in R&D, particularly in the pharmaceutical, automotive and electronics/technological arenas. If you think about innovation the car industry, consider that Volkswagen reportedly spent 2.5 billion euros in the third quarter of 2013 alone… But have we seen anything from them approaching the innovation of Tesla?
Small, newly formed companies, of course, need research and development to bring their products to market. Larger companies, such as Microsoft or Google, can choose to invest in research and development or may find better value for their money in selectively acquiring smaller, focused start-ups who have seen a need, filled it and already begun to prove the market-readiness of the product. Tony Hseih, CEO of Zappos, is quoted as having said “Chase the vision, not the money; the money will end up following you.” Hseih not only sold Zappos to Amazon for $1.2 billion, he had earlier sold LinkExchange – an internet advertising network – to Microsoft for $265 million.
Wonder if your company should look to change its R&D spending? Speak with Arcus to find out how best to use your innovation dollars.
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