Flip Video – A Lesson in Disruption

Last week I wrote about disruptive innovation, how it works and why it should matter to any business executive.  This week let’s look at a case study in disruption:  the Flip video camera.

Flip as the Disruptor
The Flip video camera went on sale in 2007, quickly became a hit and went on to dominate the camcorder market.  It was invented by a few entrepreneurs located above Gump’s department store in San Francisco.  They sold over 2 million Flips by 2009, when the company was bought by Cisco Systems for $590 million.  Pretty nice pay day for the founders of Flip, don’t you think?  Particularly interesting since Cisco announced this week that they were shutting down the Flip camera division.

Unfortunately for Cisco the Flip was disrupted first by the iPhone and then by other smartphones.  Even in the the double-speed lifecycle of electronic products, the saga of Flip’s demise is a fast one.  2007 – 2011 RIP Flip!

Lessons in Disruptive Innovation
One lesson that Cisco has learned the hard way is that their core strength is in networking hardware, not consumer products.  But the Flip was an attractive take-over candidate that looked like a “plug and play” deal in 2009 and would begin to migrate Cisco into consumer electronics.  Unfortunately for Cisco, they could never integrate Flip into their business, primarily because they didn’t appreciate the organizational changes it would require. 

Rapid innovation in smartphones may be one of the most disruptive trends that most of us have witnessed first hand.  The next big thing is eclipsed continually by newer, faster and cooler technologies.  The smartphone is one of the most desirable consumer electronics products available at the moment because it does many tasks in a small package, compared to single-purpose devices like the Flip, MP3 player, point and shoot camera, or even the alarm clock or wristwatch.

Look at a Palm PDA in the mid 1990’s, which allowed us to digitize address books and calendars.  Then came cell phones and iPods, but we were juggling three devices.  Then along came the iPhone, which did a great job of integrating all of them into one, including a videocamera.  Thus Disruptive Innovation 101.

Lesson for Entrepreneurs
Another lesson we can learn from the Flip story is for entrepreneurs about when to cash out.  The founders of Flip did pretty well for themselves when they sold to Cisco.  They were smart enough to know what they did best, which was to conceive the product and guide it though the start-up phase into a hot growth product.  Cashing out at the right time is one lesson entrepreneurs of all stripes can learn from the Flip saga.  Unfortunately for too many start-up entrepreneurs, they can’t sell their baby until it’s too late.

Here’s a New York Times story that goes into more depth: http://www.nytimes.com/2011/04/13/technology/13flip.html?_r=1&scp=1&sq=For%20Flip%20Video%20Camera,%20Four%20Years%20from%20Hot%20Start-Up%20to%20Obsolete&st=Search

Charlie Alter specializes in Business Growth, Innovation, and Coaching and can be reached at calter@me.com or http://bentbrookadvisors.com.  Follow Charlie on Twitter at: http://twitter.com/#!/cpalter