Professor of Strategy and Entrepreneurship; Academic Director, Institute of Entrepreneurship and Private Capital
YouTube provides the modern-day substitute for the philosophical question, "If a tree falls in a forest and no one is around to hear it, does it make a sound?" Now it’s, “If it’s not on YouTube, did it really happen?”
YouTube serves more than one billion users today – the same number of videos that people view on a mobile device every single day. Over a decade the channel has transformed the way video is shared online, and it has done so at speed.
In February 2005 the video-sharing company was founded by three former PayPal employees Chad Hurley, Steve Chen and Jawad Karim – part of the so-called ‘PayPal Mafia’ that also includes VC Peter Theil, LinkedIn founder Reid Hoffman, and Elon Musk. In November 2006 it was bought by Google for US$1.65 billion. It took the trio just 16 months to start streaming more that 30 million videos a day. This, says Julian Birkinshaw, Professor of Strategy and Entrepreneurship at London Business School and Academic Director of the Deloitte Institute of Innovation and Entrepreneurship, is what’s known as “harnessing the winds of change” – with an emphasis on the plural.
“Innovators have to have smart insights about how user needs. But they also have to get the timing right. The most successful are astute to how the world is changing, they spot the opportunity, and they ride the waves of change.”
In 2005 people were uploading the occasional photo, but sharing even short video clips online was prohibitively slow. YouTube brought video into the mainstream with what Stephen Johnson, the author of Where Good Ideas Come From, calls the “adjacent possible”, says Professor Birkinshaw. He argues that technology moves forward and makes innovation possible in areas adjacent to what’s already known and what already exists.
“So while Da Vinci had all these cool ideas about flying machines,” Professor Birkinshaw says, “they didn’t take off because he was ahead of his time.”
Johnson writes that “the adjacent possible is much more about limits than it is about openings”. In the YouTube story, this couldn’t be truer. If the founders had tried to launch their idea in 2002 they would have failed because three important waves of change were only just starting to take shape.
1. Download speeds had to be fast. Who wants to wait an hour to download a two-minute video clip about elephants and their trunks (YouTube’s first ever video)? It would have taken this long with a 14.4 bps modem in the age of the dial-up connection. The trio’s vision, “broadcast yourself”, would have required a serious dose of patience.
2. The software had to exist. By launching when they did, the founders were able to serve up videos using Adobe’s Flash. It helped them focus their efforts on the ease of sharing and discussing clips – rather than on spending a fortune developing a new platform. Timing here is everything: Flash didn’t support video until 2002. Before 1996, it didn’t even exist.
3. People had to be ready to share their lives. The year before YouTube was launched, Facebook, then called ‘thefacebook.com’, had proved an immediate hit. A flurry of social sharing sites from LinkedIn through Myspace to the UK’s Friends Reunited meant the world was ready to use the internet as a place not only to discover new information, but to share it.
YouTube was a good idea made possible by technology that was ready by only a whisker to help it launch. Any earlier and it would have been before its time – like Yahoo’s failed video provider broadcast.com, bought for US$5.7 billion in 1999. Any later and someone else would have done it first.
So what can we learn from innovators who harness the winds of change?
The venture didn’t set out to make YouTube stars like Stampy Cat. At first YouTube only shared videos for online auctions. It only became clear once the site was live that people wanted to post any videos – quirky, sharable, moving – for people to comment on.
Professor Birkinshaw says: “With any innovation there is an element of adaptation. Until a product, service or platform is launched we don’t know how people will use it. Innovators have to be prepared to pivot their ideas to suit their market.”
The YouTube founders were clear on their values from the beginning: uploading should be simple and advertising should be kept to a minimum. They even managed to preserve these principles when they entered the Google empire in 2006.
Professor Birkinshaw says: “Its core purpose helped enormously. A good innovation is one that solves one problem really well rather than being all things to all people. The internal dilemma is to have on the one hand a clear belief, and on the other a willingness to pivot if it’s not working. This made YouTube the perfect acquisition for Google.”
“At some point, innovators have to move from value creation to value capture,” he says. YouTube provides an endless supply of weird, wacky and inspiring content every day. The social value it creates is undeniable.
Professor Birkinshaw says: “Early on, YouTube was essentially storing the world’s videos. It has been a painful transition to make the move to an advertising business model because they didn’t originally want that. But they have done it in a way that means their videos remain free to share and free to watch.”
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