Small startups are generally better at innovating than large legacy companies. On the surface, it seems like big companies have all the advantages: capital, brand recognition, many employees, marketing, sales and distribution. Yet, most of these companies (Apple excluded) tend to stagnate when it comes to innovation. The explanation involves risk aversion, low tolerance for failure, inability to pivot, lack of entrepreneurial culture and poor creative vision.

For these reasons, it’s hard for large companies to innovate organically. The startup world may slow down in 2012 as some air comes out of the current bubble. This dynamic will open the door for recruitment of startup teams by big companies. Embedding startup founders as innovators inside big companies will become a major trend starting in 2012.

If you are a successful entrepreneur, you should consider this option in addition to the traditional path of seed funding.

I’ve been thinking about the next big things in technology and have narrowed my list to three hot areas I think will emerge as we enter 2012.

Online and Offline
The Internet, social networks and online marketing are entering a mature phase. Yet, there is still great competition among startups to find creative ways to enter the online market.  I see a huge gap, and a related opportunity for startups to connect online and offline activities. This is the proverbial pendulum swinging back toward equilibrium from a pure online model. Traditional large businesses and brands are looking for this bridge between online and offline. Pure Internet social platforms like Twitter and Facebook need offline balance. So, look for startups to emerge that connect the online world to our offline world.

New Media Advertising
With the exception of Google and online clicks, advertising has not really evolved over the past 30 years. Look for the TV to connect with our small screens in a much more focused way when it comes to advertising. High production quality episodic video will emerge as a quick way to garner millions of views on YouTube. Companies like CP+B, AKQA and the Fearless Group will likely lead the way.

Ultra Modern Banking
Banking is another industry that hasn’t evolved much during the last 30 years. People are tired of excessive fees and other aspects of banking. Look for electronic micro banking to emerge, with platforms built primarily on mobile devices. The startups that crack this code will have huge potential to quickly capture millions of customers and their deposits.

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There are presently about 250 million iOS devices and about 200 million Android devices in the world. Mobile devices are the present and the future. Apple and Google have decided advantages over others, because they have created operating systems. These two companies will continue to succeed, while everyone else plays catch-up.

Facebook, Twitter and others have two choices: be acquired or go public. The window for IPOs is about to close. Groupon’s IPO is a shadow of its former self and not likely to have great results. The fates of Facebook and Twitter are tied to Apple and Google. In my opinion, these companies cannot go public in the near term. Facebook can wait it out for a few years, but Twitter cannot.

Apple has not succeeded with its social network attempts. That, coupled with Tim Cook’s leadership and a lot of cash, will lead Apple to make runs at acquiring Twitter, then Facebook. Expect an acquisition of Twitter by Apple in 2012-13. Expect Apple and Google to compete to acquire Facebook.

It’s Apple and Google vs. everyone else.

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• Android 4.0 Vs. iOS 5 Faceoff (informationweek.com)
• WSJ: Twitter CEO Costolo on Apple, Privacy, Free Speech and Google; Far From IPO (anisekirkpatrick.wordpress.com)
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Steve Jobs eschewed focus groups, consultants and market studies. He was extremely successful in showing consumers what they wanted.  Netflix tried the same approach, yet its subscribers departed in droves and its stock has lost 2/3 of its value in the last six months.

Why did this approach work for Apple but not Netflix? Both companies benefited from millions of passionate customers and smart founders/CEOs. The difference is found in the way Steve Jobs and Apple promoted the release of new products. No other company on the planet generates more pre-launch excitement, curiosity and publicity than Apple when it comes to new product releases.  And, no other CEO delivered products on launch day the magical way Steve Jobs did.

Had Netflix taken the Apple approach and generated excitement for its streaming product, it might not be in today’s predicament. What should Netflix do? Reed Hastings’ accomplishments cannot be questioned, but to save his company, he needs to step away and focus on his passion – education. Netflix needs a new CEO with energy, passion and excitement. A CEO who can implement the Apple approach and quickly turn things around.

There are many great candidates out there, but one person is just perfect for this job. That person is Loic LeMeur. Loic has limitless energy; he’s ambitious, great on stage and at ease in front of the camera. He’s tech savvy and now is a great time to transition away from Seesmic (acquisition by Salesforce.com is likely anyway). Plus, Netflix needs to expand internationally and Loic, as a Frenchman who relocated to San Francisco, is the perfect international leader. So, don’t be surprised this December at LeWeb, if Loic LeMeur is celebrating his new role as CEO of Netflix.

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• Netflix Backtracks − Abruptly Cancels Plan To Spin Off DVD Business (NFLX) (businessinsider.com)
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• Netflix backpedals: Qwikster is no more, DVDs staying at Netflix.com (digitaltrends.com)

The convergence of television, social and Internet will result in 3x growth this decade in the $400 billion global advertising industry. Online and mobile social platforms have matured during the last few years to cumulatively capture billions of users. In 2012, it is likely that Apple will reinvent Apple TV as a revolutionary television that will capture the market, as did the iPad. This product will serve as the bridge and the stimulus for modern new media and advertising. The mad geniuses (men and women) of modern agencies and consultancies will be people in their teens and twenties, geeks, hackers and artists who have grown up with social media. The new media agencies to watch are CP+B, AKQA and Razorfish.

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Email, can’t live with it and can’t live without it. I’m testing a simple solution to solve the problem of email overload. No, it’s not a fancy app, it’s a simple numerical reply coupled to a definitional footer.

There are three replies:

Reply #1 – I’ll get back to you soon.

Reply #2 – Sorry, I’m unable to help.

Reply #3  – Thanks.

I’ll report the results in about 30 days.

In physics, a pivot is defined as the swing point of a rotational system. In the startup world a pivot is an adjustment in business strategy, plan or focus. Generally, a startup pivot is a survival move made necessary when the original plan fails to work. More and more, pivots are occurring during iteration soon after launch or even during development prior to launch.

Founders of startups should not be afraid to pivot. Doing so is less a sign of weakness and more an indication of shrewd awareness of the right formula to assure success. Several startups achieved amazing success soon after pivoting, including Twitter, Groupon, Turntable.fm and Fab.com.

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