Fire Sale – What Happened To Cisco’s Flip Camera?

by drjim on May 9, 2011

The Flip Video Camera Seemed To Have Everything Going For It…

The Flip Video Camera Seemed To Have Everything Going For It…

Dang it! This was supposed to be a story about a product success, not a product failure. Pure Digital created the low-end highly portable video camera market a few years back and then got bought out for a half a billion U.S. dollars by the networking giant Cisco. Cisco is stuffed with smart, bright product managers and they should have been able to boost this successful product into outer space. But they didn’t and now the Flip video camera is going away, what happened?

Why I Loved The Flip Video Camera

So I’m willing to ‘fess up – I own a Flip video camera. In fact, I so fell in love with this product that I bought one early on when it was still owned by Pure Digital. However, after a while of traveling around in my pocket all the time, the screen failed. I ended up getting a Kodak Zi8 to replace it in part because the Zi8 had a feature that the Flip never did – it had a jack that allowed it to be used with an external microphone.

I kept my eye on the Flip over time because I was still seduced by its small size. I never again bought one simply because it never really seemed to change – the Flip that is being offered today sure looks the same as the Flip that I bought several years ago. Sure, they’ve come out with an HD version and some pretty “skins” that allow you to personalize it, but that seems to be about it.

What Went Wrong Between Cisco And The Flip

Cisco is a smart company. They employ smart product managers. Something went wrong here. Brian Chen and Chunka Mui have both taken a close look at what happened here, and it’s not pretty.

It appears as though the reason that the Flip product line didn’t do well under management by Cisco is due to two preventable sets of conditions: the Flip was a bad purchase decision for Cisco and then Cisco did a poor job of managing the product once they had it. The product line might have been able to survive one of these mistakes, but it couldn’t overcome both of them.

The Wrong Decision

Cisco should not have purchased the Flip product line. Sure, at the time it seemed like a good idea. Cisco’s John Chambers announced that Cisco was buying Pure Digital so that they could promote products that would create content that would drive the need for bigger networks – Cisco’s core business.

However, what was missed in all of the glowing press releases was that Cisco bought Pure Digital not because they were in a fantastic “adjacent market”, but rather because Cisco’s core business was slowing. Because of this mistake, Cisco found itself in a market that it really didn’t know anything about – consumer electronics. The forces that drive this market are unlike those that drive Cisco’s main enterprise networking market.

Additionally, Cisco thought that their brand name that conveys quality and innovation in the enterprise market would help to sell more Flip video cameras. It didn’t. I, for one, don’t associate Cisco with home products and would rather buy something from Sony or Apple before I’d buy something from Cisco. Finally, any thoughts that Cisco had about using the Flip product line to cross sell its other products was a pipe dream. People who are buying a US$100 video camera are not going to be the same people who buy a US$25,000 high-end router.

Bad Product Decisions

Did I mention that the Flip product line seemed to be stuck in a time-warp? In the fast moving field of consumer electronics, this is the worst thing that can happen. The Flip pretty much got mowed over by the arrival of smartphones: both Apple and Android products keep getting better and better every couple of months at doing what the Flip does.

The Cisco product managers could have saved the Flip. Just like the folks over at MySpace, they could have specialized to save the ship from going down. One way to do this would have been to work very hard to incorporate social networking features into the Flip. Just imagine if you could shoot a video of your dog barking a Christmas song and then hit a button and have it automatically uploaded to both YouTube and your Facebook account. But that never happened.

Finally, the product never moved on. There was never a compelling high-end Flip product that I saw in magazines that caused me to pause, and look longingly at (e.g. the iPad 2) thinking about what I could do with it. The Cisco product managers would have had to be careful here, but things like a good zoom lens, Wi-Fi connectivity, and maybe even an apps store just for the Flip would have done the trick. We’ll never know…

What All Of This Means For You

When a company wants to grow its bottom line, purchasing another company to get a successful product sure seems like a simple way to make this happen. However, the ultra-successful Cisco has just proved that this can actually be a risky way to do things.

Their purchase of the Flip video camera product line was flawed in several ways. Although the product was hot when they bought it, the future was already getting cloudy as smartphones kept getting smarter and cheaper. The lack of any compelling high-end features or social networking tie ins reduced consumer interest in carrying this extra electronic gadget. Finally, Cisco just didn’t know that much about the consumer market that they were getting into.

In the end it all comes down to doing the basic product manager homework that we’ve all been taught to do. You need to take a look at the market and understand what need they are looking to fill. Then you need to take a look at your product and make some hard decisions as to how you are going to be able to fill that need better than anyone else. It cost Cisco over US$500M to learn this lesson, let’s hope that the rest of us can learn from their mistake…

– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Product Management Skills™

Question For You: If you were running Cisco, would you have shut down the Flip product or would you have tried something else to make it successful?

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{ 5 comments… read them below or add one }

Chuck Gehman May 14, 2011 at 11:56 am

I think the thing you have right is that Cisco shouldn’t have bought the company, but that’s easy to say in hindsight.

Cisco was already in consumer electronics, they sold their low-end networking gear, as well as music players and other goodies at outlets like Best Buy. So Flip was an adjacent market.

You allude to this, but clearly the market was done at the time Cisco bought this company. Flip was a low-end product, not at all suitable from a brand or product perspective to go up-market, to benefit from the fancy features you mention.

Specialization? The product was already over-specialized, which you point out when discussing the fact that smartphones emerged with the same features.

I heard John Thompson, chairman of Symantec put it most distinctly when describing one of the few acquisitions his company made that went wrong– “it was like driving up the 101 freeway and throwing a bag with $100 million dollars out the window”.

Except in this case, it was John Chambers and it was $500 million.

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Dr. Jim Anderson May 20, 2011 at 11:00 am

Chuck: you make good points. So here’s another thought that I haven’t heard anyone talk about: Cisco is just shutting Flip down probably because they can’t sell it. Should they have detected that they had problems and decided to part ways with Flip when they could have still sold it?

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Chuck Gehman May 20, 2011 at 11:40 am

Thank you Jim, great point. AND, I think it is incredible that there isn’t some intellectual property in there that someone would have wanted to buy, right?

But big corporations sometimes make “accounting decisions” where it’s better to just sweep it under the rug when things go wrong.

And the new rumor is that Cisco is going to let Webex go, which is even more fascinating. When you are “reorganizing”, you can make big painful cuts, put the bad stuff behind you, and move on.

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Anticramer July 11, 2011 at 7:29 pm

Hello Dr. Anderson,
I just wanted to wait one quarter to really understand better this move Cisco made about shutting down the FLIP camera business and I think it was not a bad decision, but it was the easy decision to make. CISCO’s main problem as a corporation does not lie on its people but on its lack of understanding on consumer needs. Being CISCO a pioneer in the network business and getting used to lead markets, they got lost in trying to grow too much that they fell in what Peter Lynch calls “DIWORSIFICATION” and this FLIP camera business is just one of the many examples CISCO has done. CISCO’s business is networks, not consumer products. I still can’t understand how a FLIP camera can be incorporated on a business platform and be used for video conferences. The design is just so impractical. I would have attempted to sell this business before shutting down.

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Dr. Jim Anderson July 15, 2011 at 1:50 pm

Anticramer: I think that you are correct. To the best of my knowledge, Cisco did try to shop Flip around, but nobody was willing to pay them enough to make it worth selling it. John Chamer’s stated reason for buying Flip had been to generate more bandwidth to fill more pipes and thereby make people go out and buy more Cisco networking gear. I think that you are correct that this idea just really didn’t match how consumers think and so it never happened!

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