Recently, there have been many local reports chronicling the missteps of Shanda over the course of past few years, especially in the company’s moves to diversify its offerings. Shanda stepped up big efforts to make various initiatives like Tangguo SNS, Ku6 video site, Pingju, Youni and MKNote, to name a few. And all these services more or less suffered from frustrating setbacks. For instance, Tangguo has long gone offline and its URL was directed to Tuita, a Tumblr-like service from Shanda. Ku6 now is trailing behind Youku, Tudou and other video sites. Pingju which is a B2C site from Shanda got shut down within three months after live online. Both Youni (Kik-like) and MKNote (Evernote-like) were once first-movers in their areas, but now seemed to lose their momentum in catching up with their counterparts like WeChat and Youdao Note.
These investments or in-house efforts didn’t really pay off.
It’s known to all that Shanda made its first fortune by operating games, and was long been regarded as a gaming company though it made numerous and respectable efforts to branch out into other areas. One industry observer once commented on Tencent and Shanda surpassing Shanda in gaming sector saying the diversification also dilute the company’s focus and even ambition in games.
Fairly speaking, Shanda’s gaming business – though being replaced by Tencent as No.1 in the sector – still prints money for the company. One Shanda staff claims the company enjoys the highest ARPU in the industry – even higher than Tencent’s. It’s online literature business has also been deemed as a upcoming disruptor in e-reading area. But once the company attempts to move out of its comfortable zone, it’s seriously challenged by totally different market environment and fiercer/more adaptive competitors.
That partly explains why other than the rather profitable gaming business, Shanda’s new ventures haven’t been able to turn in any profit yet.
While Shanda’s symptoms are unique, the cause behind it is very pedestrian. Like many falling giants, Shanda suffers from the innovator’s dilemma. Clayton M. Christensen, the professor at Harvard Business School who literally wrote the book on the subject, believes that a company’s capabilities are divided into three categories: resources, processes, and priorities. While big firms like Shanda may be resource rich, they do not have the right priorities and processes when it comes to innovation.
According to the report, while Shanda was willing to endure losses for the sake of a bigger payday, its patience for any innovative effort is limited. A product had to either sink or swim after a certain period. This model is almost destined for failure, for unless you devote the necessary energy to promote a new idea, it probably wouldn’t succeed. In addition, Shanda remained a one man band, all decisions go to the top, and the world turns based on the whim of Chen Tianqiao, the founder and CEO. Because of these problems, despite the resources dedicated to the effort, Shanda did not build an environment that fosters risk taking, which is essential for innovation. Some internal staff revealed that some times Chen’s nodding or shaking head solely decides on the fate of a product, and he’s a man of volatile minds.
What Shanda should’ve done and can start doing right is adjust and adopt the right way for innovation. In many ways, Creativity is almost the antithesis to efficiency. This is the root for the innovator’s dilemma. Even companies like 3M that has thrived on creative couldn’t resolve this problem without tension. It seems that for Shanda it’s in an urgent need for speed to transform now.