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Reading the case study ROCKET INTERNET - WILL THE COPYCAT BE IMITATED? by: Patrick regnr

answer the ff questions:

1. Based on the data from the case (and any other sources available), use the frameworks from the chapter and analyse the resources and capabilities of Rocket Internet:

a. What are its resources and capabilities?

b. What are its threshold, distinctive and dynamic resources and capabilities?

2. Based on your initial analysis and answers to question 1, carry out a VRIO analysis for Rocket Internet. What do you conclude? To what extent does Rocket Internet have resources and capabilities with sustained competitive advantage?

3. What is the importance of the Samwer brothers? What would happen if they left or sold the company?

CASE EXAMPLE Rocket Internet - will the copycat be imitated? Patrick Regnr Introduction Rocket Internet is a very successful Berlin-based start-up incubator and venture capital firm. It starts, develops and funds e-commerce and other online consumer businesses. With over 700 employees and an additional 30,000 across its network of portfolio companies, the firm has helped cre- ate and launch over 100 start-ups and is currently active in more than 70 companies across more than 100 countries. The company was founded by the Samwer brothers, Alexander, Oliver and Marc. After going to Silicon Valley in the late 1990s they became inspired by the Californian entrepreneurial culture and especially eBay. The broth- ers contacted eBay offerring to create a German version of the online auction house, but they received no reply from eBay. Instead they launched their own eBay clone, Alando. A month later they were acquired by eBay for $50m (30m, 37.5m). This was to be their first great online success, but far from the last. Next the brothers created Jamba, a mobile phone content platform. It was sold to VeriSign, a network infrastructure company, for $273m in 2004. Since then they have become experts in spotting promising business models, especially in the USA, and imitating and scaling them internationally quicker than the originals. This model is the basis of Rocket Internet, which was founded in 2007 and stock listed in Germany in 2014 valued at $8.2bn. Several of their ven- tures have been acquired by the company with the original idea (see Table 1). Two of their most high-profile ventures after Alando were CityDeal, which was sold off to American Groupon, and eDarling sold to American eHarmony. The company has frequently been criticised for simply being a copycat machine without any original ideas, and some have even claimed it is a scam that rips off the originals. However, the question remains: if Rocket Inter- net has been so incredibly successful and what it does is simply copying, why has no one successfully imitated Rocket Internet yet? The brothers, through Oliver Samwer, defend their model in Wired:1 "But look at the reality. How many car manufacturers are out there? How many washing machine manufacturers are there? How many Best Buys? Did someone write that Dixons copied Best Buy, or did anyone ever write that Best Buy copied Dixons, or that [German electronics retailer] Media Markt copied Dixons? No, they talk about Media Markt. They talk about Dixons. They talk about Best Buy. What is the difference? Isn't it all the same thing?' Finance and expert teams Rocket Internet has strong financial backup from its main investor globally, Kinnevik, a Swedish investment company with a 14 per cent stake. Other investors invest The Samwer brothers Source: Dieter Mayr Photography. Company Founded Business Buyer Founded Price, $m Transaction date 50 Alando cember.net 1999 2005 eBay Xing 1995 2003 1999 2008 6.4 30% stake* eDarling GratisPay 2009 2009 Online marketplace Online business network Online dating Virtual currency for online games Discount deals for consumers Online astrology eHarmony Sponsor Pay 1998 2009 2010 2010 na CityDeal 2009 Groupon 2008 1267 2010 viversum 2003 Questico 2000 na 2010 *With option to buy more Including a stake in Groupon Source: Attack of the clones, The Economist, 6th August 2011, The Economist Newspaper Limited, London, 2011. 128 ROCKET INTERNET - WILL THE COPYCAT BE IMITATED? directly in the start-ups and in the later growth stages, "We are looking for those who from an analytical point among them the American investment bank J.P. Morgan. of view understand the beauty of the business model, To work with the investors and structure the financial solu- understand the rationale and understand what a huge tions, Rocket Internet has a large team of finance experts opportunity is. Sometimes we say we are looking at the Berlin headquarters. for analytical entrepreneurs rather than accidental Besides financial skills Rocket Internet also develops billionaires. the concepts of new ventures, provides the technology The company emphasises not only strong expertise, platforms and combines various skills necessary for set- but 'a close cultural connection to Rocket Internet'. ting up new ventures. It has about 250 specialists working Rocket Internet has an intense entrepreneurial working at the Berlin head office. These specialists are part of culture that is highly performance driven including high diverse expert teams. Engineering, including IT software, programming and web design skills, is essential for prod- pressure, long working hours, often from 09.00 to 23.00, and little job security. While this is attractive to some, the uct development and there are around 200 engineers with culture has also been criticised for being too tough and access to state-of-the-art technologies. The expert team in marketing includes experts in aggressive. Rocket Internet's Managing Director Alexander Kudlich comments on the culture:3 customer management, customer relationship marketing and online marketing. Other teams include Operations, 'I would describe our culture as very focused, we have Business Intelligence and HR. Apart from this, there is a Global Venture Development programme including a young teams - the average age is below 30. There is no global mobile task force of entrepreneurial talents that place where you get more freedom and where you can can bring further know-how to all international markets. take as much responsibility as you want. The only thing This task force includes venture developers with func- we want back is accountability.' tional skills in product development, supply management, operations and online marketing. They rotate every 4-6 Identification of business models and execution months to a new venture in another part of the world. While some of Rocket Internet's skills are common among Human resource management and culture other European incubators, the company is more of an international venture builder compared to most. Expertise The HR team recruit regular staff support for Rocket Inter- is shared throughout the portfolio of ventures globally and net and specialists for the expert teams and Global Venture its best practice can be applied across diverse business Development programme and, not least, the founders of the models (ranging from online fashion to payments to deals ventures. Based on their entrepreneurial spirit they empha- to social networking). Compared to many other incubators, sise personal drive rather than good school grades. Head of the function of the headquarters is central. While entre- HR, Vera Termuhlen, explains to VentureVillage.com:2 preneurs are hired to oversee individual ventures, overall strategy for Rocket Internet is largely shaped at the head 'All in all, it doesn't matter if an applicant is from an office. The managing directors at head office lead the elite university. For the area of global venture devel- opment, we look for applicants that are hands-on, scanning for and identification of novel and proven online and mobile transaction-based business models that are first-class, have analytical skills, describe them- selves as entrepreneurs, have a passion for the online internationally scalable. Former Managing Director Florian Heinemann explains in Wired: 'We take a pretty system- start-up scene along and a willingness to work inter- atic look at business models that are already out there nationally, often in exotic locations like the Philip- and we basically try to define whether a model suits our pines or Nigeria. competence and is large enough that it's worth it for us The co-founders and managing directors of the indi- to go in there.' vidual ventures establish all operations, build the team Another significant aspect of Rocket Internet's central- around a venture, and develop the business; acting as ised model is the speed at which it can launch novel busi- entrepreneurs and holding personal stakes in the ven- ness models internationally. This is different compared to ture's equity. Recruiting them is central and Rocket Inter- many US and European counterparts. Rocket Internet has net normally recruits extraordinary, ambitious MBA-level an international infrastructure and distribution network graduates with high analytic skills from within the local with the capacity to build ventures on an international regions where the venture is set up. As Alexander Kudlich, scale in just a few months. As Managing Director Kudlich Managing Director of Rocket Internet, says: explains in Wall Street Journal:3 129