It is not unusual to note management issues when large enterprises and smaller firms partner or when larger firms acquire smaller firms.
Nor is it unusual to understand strategic issues and conflicts whenever a joint venture aims to create a big replacement business important to an enterprise, as any enterprise logically tries to maximize the value of its present business, even if it understands that business is shrinking and will be replaced in time.
Comcast’s new Stream service, for example, is available only to Comcast high speed access subscribers, although it importantly does not require buying Comcast linear video service.
The service features access to about a dozen major networks (four TV broadcasters, PBS, CW, and Spanish-language channels, HBO and a cloud DVR feature, that can be viewed on Web browsers, tablets and mobiles.
You see the hybrid approach: buyers must previously have chosen to buy, and keep buying, the Comcast high speed access product. The service offers a limited menu and works only on non-TV devices. But there is no requirement to buy the Comcast linear video service.
Those features make Stream a complement, not a substitute product. Critics might argue the limited channel line-up prevents Stream from becoming, in any substantial way, a substitute for the core linear video product.
That is the point.
The same dynamic might be at work with a CEO resignation at Otter Media, the streaming media joint venture between AT&T and the Chernin Group.
In principle, both firms might hope for serious market success that might be defined as creating a credible competitor to Netflix.
On the other hand, too much success might jeopardize the cash flow AT&T hopes to wring from its acquisition of DirecTV, a business that everyone agrees is imperiled by the rise of streaming alternatives.
Ultimately, one might argue, efforts to foster growth of a substitute new product, by a leader in that market, are difficult--and often impossible--to finesse.
The problem includes, but is not limited to the inherent tension between the legacy and replacement revenue units. Too much success by the innovation unit, too fast, directly reduces legacy business unit revenue.
So interests are in direct conflict. That rarely is a recipe for rapid progress. Indeed, one might argue precisely the opposite will happen: the innovator unit will be constrained to protect the legacy unit.
The problem is more than “bureaucracy.”
Any large enterprise, in any industry, will operate more “bureaucratically,” which is to say, with many more rules and structured processes.
Many would say such firms must do so, to maintain the organizational equivalent of rule of law.
As frustrating as working in a rules-driven organization might be, the alternative likely is worse: the danger of whimsical, conflicting, unsteady decision making.
Stresses arguably are even greater when a joint venture tries to navigate a complex and dangerous juncture between fundamental business models and technology platforms, and when one of the parties aims to be a disruptor, while the other is a leader in the legacy business.
That, in a nutshell, might well be the problem faced by Otter Media. Verizon Wireless might be taking the opposite approach, essentially harvesting its legacy business faster by building and promoting replacement services at a faster rate.
You might explain that attitude by structural realities. AT&T will be the biggest provider of linear video in the U.S. market if its acquisition of DirecTV is approved. Verizon is among the smaller providers. In other words, AT&T has far more revenue to lose.
As much as managers might want to be leaders in an emerging big new business, they also want to harvest and protect their existing business.
That forces innovation efforts to avoid actions that are viewed as negatively and directly reducing the magnitude of revenue streams from the legacy business.
It is a serious and perpetual problem, and more relevant for Comcast and AT&T, which are leaders in linear video, compared to Verizon, which has concluded it is not worth the effort to grab a bigger position in linear video.
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