Data Sheet—The Famed ‘Pivot’ Strategy May Not Work for Big Companies

While I was out last week Fortune published my feature on Eric Ries, author of the wildly popular book for entrepreneurs , The Lean Startup. Ries is a whirling dervish of the startup and innovation world. He’s an author, speaker, coach, consultant, and even CEO of an ambitious if quixotic startup of his own, the Long-Term Stock Exchange, which aims to combat short-termism on Wall Street.

Ries is a prophet in Silicon Valley, and his first book is its Bible. The thrust of my feature is the 39-year-old’s pivot to helping big companies find their inner startup and the book he has published as their field manual, The Startup Way. Ries and his teachings have been valuable to numerous companies—P&G and ING have had promising successes—and his work is an inspiration to a veritable cottage industry of innovation consultants.

That said, it might not be clear for some time if concepts like “pivoting” and “minimum viable product” can ever move the needle for big companies. (Buzzwordery meets cliché in a Ries-inspired firm that’s actually called Moves The Needle, which boasts: “We are innovation architects.”) Ries’s primary example in his new book is GE, where he was deeply embedded and coached at the highest levels.

Ries says he is “cautiously optimistic” about GE. He might be the only one. When I read The Wall Street Journal’s impressive reporting on GE’s yes-man culture, I couldn’t help but wonder if the tens of thousands of workers trained in lean-startup methods and hundreds of projects that followed its techniques were part of the “success theater” the paper describes.

Incidentally, The Startup Way is making less of a dent in the world than its predecessor. According to Nielsen Bookscan, which measures only U.S. physical book sales, seven-year-old The Lean Startup sold three times as many books last week than The Startup Way, which came out in October. The Lean Startup is ranked No. 1,832 of all books on Amazon, a phenomenal ranking for such an old book; its heavily promoted successor is at No. 10,028.

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My vacation reading: Anyone who writes should read this lovely and erudite essay by Amy Chozick of The New York Times … The Economist competently sums up a thesis we at Fortune have been hammering for a year, that Chinese tech companies no longer are copycats—and that Silicon Valley has been arrogantly slow to figure this out … Onetime Time writer Joshua Cooper Ramo, supposedly an expert on Asian affairs, ought to pick up the haunting novel Pachinko, by Min Jin Lee. It’d be impossible to read it and not understand how Koreans feel about Japan … This stunning narrative in New York magazine about a young ex-Air Force linguist accused of disclosing top-secret information is all the more powerful for not having pointed out the central irony of the crime for which its subject will soon stand trial.

NEWSWORTHY

Finally. After a decade as a privately-financed startup, Dropbox on Friday confirmed its plans to go public. The full S-1 registration statement is here, but Fortune's Jonathan Vanian has also pulled out some of the most interesting tidbits if you need a TL;DR version. Even shorter version: Sales rose 31% to $1.1 billion last year while Dropbox's net loss shrank 47% to $305 million. Boston VC Jeff Bussgang blogged his analysis of why Dropbox is a winner (and why he uses it as a case study in a course he teaches at Harvard Business School).

Featuring. The Mobile World Congress kicks off in Barcelona this week and several phone makers sought to get out front by unveiling their newest flagship phones. The Samsung S9 and S9+ look a lot like last year's models but have better cameras and more capable wireless features (and they still have a headphone jack). Sony caught up to the competition by shrinking the bezels on its Xperia XZ2. And Nokia-brand licensee HMD Global had a bunch of new models, including a high-end Nokia 8 Sirocco and a hybrid feature phone/smartphone reviving the famed Nokia 8110, which was featured in the movie The Matrix.

Forever. Apple will be storing iCloud accounts for Chinese customers on servers based in that country starting next week. The move to store data locally will also include the encryption keys needed to read the customer information, which is stored in a coded format for security. “Once the keys are there, they can’t necessarily pull out and take those keys because the server could be seized by the Chinese government,” crypto expert and Johns Hopkins professor Matt Green tells the Wall Street Journal. Meanwhile, on Tuesday, the U.S. Supreme Court will hear arguments in a case over whether prosecutors can get access to data stored overseas with a search warrant.

Figure of speech. Google is dramatically increasing the number of languages its digital assistant can understand to 30 from eight currently. Coming up next for the assistant on both Android phones and iPhones are Danish, Dutch, Hindi, Indonesian, Norwegian, Swedish, and Thai, with more to follow later this year.

False flag. Russian military hackers penetrated hundreds of computers used as part of the 2018 Winter Olympic Games in South Korea, while trying to pin the blame on North Korea. The move to disrupt the games could have been payback for the International Olympic Committee's drug doping-related ban imposed on Russia.

Frisson. Investment giant BlackRock and private equity firm Pamplona Capital Management have jointly acquired PhishMe, a cybersecurity company based in Leesburg, Va., in a deal worth $400 million. The acquired firm, which started off helping to thwart phishing attacks but has since expanded into other areas, also changed its name to Cofense, a combination of “collaborative” or “collective” and “defense.”

FOOD FOR THOUGHT

Amazon, Berkshire, and J.P. Morgan said last month that they'd band together to try to provide health care coverage for their employees and crack the insurance industry's high prices and inefficient service. But they didn't give many specific details of what they planned. Tren Griffin, senior director of strategy at Microsoft and a former partner at Craig McCaw's Eagle River private equity outfit, has a few ideas about the direction the three companies, which he shorthands as "ABJ," may pursue:

Why are the businesses driving ABJ engaged in this effort together? Getting to critical mass in creating a platform is sometimes called overcoming the “chicken and egg problem.” The nature of this problem can be stated simply: How do you get one side to be interested in a platform until that other side exists, and vice versa. Part of the challenge is to get enough customers on both sides so there is critical mass. ABJ via its employee base has enough purchasing power to justify the creation of the platform and the participating by a critical mass of health care providers.

Amazon has the skills and systems to create a transparent marketplace, Berkshire has insurance expertise and J.P. Morgan Chase has payments and other expertise. They are also huge purchasers of health care services. The leaders of these businesses want to solve this important and very hard problem. All of that is helpful. But there are no easy answers.

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BEFORE YOU GO

Every culture has its own myths and fairy tales and usually even its own line up of mythical creatures. Artist Iman Joy El Shami-Mader decided last year to start drawing illustrations of every kind of mythical creature of which she could find a description. They're all on her Instagram account, one per day and counting. There's even a few from pop culture, like the porgs from Star Wars.