The “CNN-Casey Neistat” Model … How to Become a More Agile, Productive & Innovative Company
CNN gets it. Companies must constantly reinvent themselves to be best prepared for future opportunities and challenges.
How then is CNN doing this?
In November 2016, Time Warner’s CNN acquired social video sharing application company Beme for US$25 million. The startup company was founded by YouTuber Casey Neistat and his partner Matt Hackett. Beme’s technology will undoubtedly be useful to CNN. Yet, the acquisition’s main goal was to have the whole Beme team onboard. The video sharing app will be shut down in January 2017.
Casey Neistat, Matt Hackett and the other Beme employees have joined CNN to “create something new”. This should make CNN more attractive to the “digital” Millennial audience.
But, might it also help CNN transform itself into a 21st Century company? What about Casey Neistat and his team? What does this deal give them? And can we draw any lessons for the future?
To answer these questions, it might be helpful to step back and consider the broader challenges that a company like CNN is currently facing.
Opportunities and Challenges in the “New” Economy
We live in a new economy that is characterized by technological disruption, sharing and the proliferation of platforms. The economy generates a continuous flow of new opportunities that are transforming the way we live and work.
But there are also significant risks. Governments struggle to adapt to the realities of the new economy. Rapid technological change makes it difficult to agree on a regulatory framework. “Unfair competition” is often used as a pretext to freeze out innovation and protect incumbents that are hostile to change.
Clearly, encouraging the new economy will have a detrimental effect on established companies, like CNN. But should regulators care about these companies? A bureaucratic corporate culture usually means that such firms lack the agility to react creatively to changing realities.
The inevitable result? Stagnant performance means that incumbent players are at risk of becoming “corporate dinosaurs”. Lumbering giants that face extinction. There is little regulation can do to stop this from happening.
What does seem clear, however, is that a flat organization gives startup companies a significant competitive advantage in the new economy. The fast development of digital technologies has made it easier for them to enter markets that corporate giants previously dominated. Startup companies use new technologies to build user-friendly platforms at lightning speed. These platforms allow consumers to be more involved with the service that is offered to them. More accessible, trustworthy and personalized services are one clear advantage of the new economy. FinTech startups are a great example of this. It is no surprise that these startups are revolutionizing the banking industry.
And there are other advantages in the organization of startups. The Millennial generation has reached adulthood. Distinctive features of this generation are different expectations and demands of “work”. For Millennials, “work” needs to offer a fulfilling personal experience that also develops capacities. Work is central to the creation of a unique identity and personal “happiness”. In the absence of a meaningful experience, Millennials simply change jobs in pursuit of something that does please them. The mission-driven culture of a startup is more attractive than the profit-driven approach of most established firms.
Surviving Means Reinventing Yourself
In today’s business environment, every company has become a technology company. This means that every company needs to embrace the new economy. Companies that adopt and maintain an entrepreneurial spirit will be the “winners” of the future. To become more entrepreneurial, innovative and responsive, even established companies must reinvent themselves.
Companies around the world have been busy with putting in place strategies that will increase agility. Some companies have chosen to break up into two or more separate firms to better compete in the new economy. Other companies attempt to replicate innovation processes that have proven successful in startup firms. To attract and keep talented employees, companies also try to increase happiness at work. Computer games, fashionable work spaces, and Chief Happiness Officers are just a few examples. The plethora of employee satisfaction surveys should of course be added to this list.
Yet, any attempt to develop a more entrepreneurial environment often involves two risks.
First, most of the strategies aim to project an image of being agile or innovative, but often have a counterproductive effect. This is what Steve Blank termed “theater”. And, over time, these strategies are exposed for what they are: empty bluster.
Employees usually see through the theater. The risk of such an exposure is that it generates a second risk, which we refer to as “skepticism”. A great deal of skepticism often surrounds the possibility of transforming into a 21st Century company. At least, that is the impression after observing several such strategies and initiatives.
In most cases, this skepticism is well-founded. Previous disappointing initiatives usually trigger a destructive cycle of negativity that undermines genuine progress.
In other cases, the initiatives run counter to a company’s “profit-driven” focus. As we have seen, innovation flourishes in a flat and open organization. The principle of “freedom and responsibility” maximizes opportunities for creativity and innovation. Workplace happiness is a by-product of an open dialogue and a “best ideas wins culture”.
What is interesting is that an open and honest dialogue is often not what is valued in a “profit-driven” environment. Nobody wants to be the messenger with bad news. In a profit-driven environment, where promotions and bonuses are based on financial metrics and performance, the main focus is on “positive news”.
The problem with this attitude is that “implications” and “issues” are only detected when it is too late. Consider Nokia’s failure to effectively compete in the smart-phone market. Middle management were not encouraged to disclose the shortcomings of Nokia’s smart phone operating system. Volkswagen’s emissions issues and Samsung’s exploding batteries nightmare are other examples.
So, the question is: How can companies capture some of the important characteristics that are attributed to startups? And why is CNN’s partnership with the Beme team a possible answer?
The “Corporate — Startup” Partnership
In recent years, a great deal has been written on the benefits of partnerships between corporations and startups.
On paper, large multinational corporations and startups seem like a perfect match. Corporations can open doors for startups. They can provide them with the necessary capital. They often deliver tremendous resources in the form of knowledge sharing. But also they give access to distribution channels and seemingly endless rolodexes. The list goes on.
On the other hand, startups can help corporates stay lean. The most important benefit of the partnership is the access to innovation. Many large companies are engaging with startups as a form of open innovation or external research and development. This “outsourcing strategy” sometimes focuses on furthering existing lines of business. But more often the external R&D is focused on penetrating growth markets. Startups give a glimpse into the potential “next big things” that are, or may, become relevant soon.
In practice, however, the partnerships between corporations and startups often fail. Reasons for the lack of success are plentiful. They range from a lack of internal know-how to minimal interest in engaging as a legitimate partner. Yet, the most common source of failure is the mismatch between corporations and startups. Corporations and startups are inherently different creatures. Corporations have different expectations. They measure progress and success in different ways.
So, corporations often find it difficult to establish a clear connection between the “partnership” and “staying relevant, innovative and competitive in the new economy”.
It is no secret that corporate involvement is not always well regarded by entrepreneurs. The differences in expectations, aims and ways of operating often get in the way of a fruitful partnership.
Investors in startup companies have also expressed their dissatisfaction. They believe that corporations should not partner with startups. They should buy them. It is here that we can see a new “partnership model” emerging.
The CNN — Casey Neistat model
CNN, when they acquired control over Beme, did not seek to assimilate it into CNN’s existing organization and structure.
This approach is in marked contrast to the conventional mergers and acquisitions practice. The usual M&A strategy is to absorb (and integrate) a startup into the structures, practices and culture of the acquiring company. Yet, this can be difficult. Founders do usually not wish to work for a corporate. Acquiring the startup is likely to trigger the swift departure of the founders and other key employees.
How then did CNN ensure that the founders are retained?
CNN allowed Beme to preserve its own identity. Crucial in this task of preserving the distinct identity of a startup is acknowledging the importance of retaining the founders and their teams. The founders provide the “know-how”, inspiration and vision. Preserving a startup’s identity goes a long way in keeping the founders and key-employees in place.
Thus Beme is not absorbed into CNN’s corporate structure. Yet, it has become part of CNN’s “ecosystem”. This “ecosystem” allows Beme to enjoy the benefits of being associated with CNN (i.e., growing faster and exploiting synergies with other departments or businesses within the “ecosystem”).
Casey Neistat has made it very clear that Beme’s growth potential and strategic possibilities are much greater in the CNN ecosystem than if Beme was to remain independent. In a Medium piece, Matt Hackett explained that by joining forces with CNN, they are able to give their mission more than just one, startup-budgeted shot at success.
Clearly, the “CNN-Casey Neistat” model can be very attractive to founders interested in ensuring “their” company has the impact it deserves. What makes this model a real partnership is that the startup’s success will also (potentially) have a transformative influence on the much bigger, well-established firm. And it is this possibility of a two-way process of mutual learning and success that makes the “partnership” attractive to both CNN and its parent company Time Warner.
It is hardly surprising that CNN is not alone. Startups acquired by the “most innovative corporations” are also allowed to retain their identity, grow and then transform the internal culture of the acquiring firm. Amazon, Facebook, Tencent, Under Armour are among the other companies that have successfully followed this model.
But for this model to work, it is crucial that the top management of the acquiring firm — CNN in this case — buy in to this model and don’t interfere. In this respect, trust becomes absolutely crucial. It makes no sense to acquire a unique talent like Casey Neistat and then smother him. Many larger firms may pay lip-service to the idea of an open and inclusive partnership, but the reality may become a more familiar tale of interference and control.
Recognizing that the success of the startup is in the mutual interest of both parties and then giving the startup the support of the “ecosystem”, but also the space — the freedom and responsibility — to flourish is the key. One can only hope that CNN really gets this. Casey Neistat seems to believe they do, even if many of his “fans” seem to need convincing.
Startup companies are increasingly challenging major established corporations in the new economy. To deal with the challenges, corporations put in place strategies that should help them reinvent themselves. Recapturing the “startup feel” is viewed as crucial. However, many of these strategies are mere theater and merely feed the inherent skepticism that surrounds much of what established firms are doing.
Corporations have also become more active as investors in and partners of startup companies. While in theory these partnerships offer great opportunities for mutual learning, they are not always successful due to a misalignment of interests.
It appears that acquiring startup companies can add value to a corporation. A condition is that the startup company should keep its own identity inside the acquiring firm. Also, it is crucial to retain the founders and other key employees of the acquired startup. Only then the corporation can be viewed as an open, inclusive and fluid ecosystem in which the interests of the corporation and the startup company are properly aligned. A mutual interest is then created around the mission of making the “startup successful”.
And it doesn’t stop there. Because the “CNN-Casey Neistat” model needs the buy-in from the management teams of both the startup company and the corporation, it has the potential to become a serious alternative to venture capital and corporate venture capital.