You, too, should probably be thinking about tying your products to the mobile Internet, even if you think $100 million is a bit rich to throw at this opportunity.

Chris Murphy, Editor, InformationWeek

March 2, 2011

4 Min Read

The car company that long derided cupholders as extraneous to the driver experience now is investing $100 million in mobile applications, some that won't have any real tie to the vehicle.

There are two ways to look at BMW's decision to create a $100 million venture capital fund for mobile apps. One is that this is the new business reality, that every company must be looking for new ways to connect with customers over the mobile Internet. The other is to be wary of the exuberance, as everything about this deal, right down to the $100 million price tag, smacks of a similar deal struck in the dot-com bubble era.

CIOs had better pay heed to both realities.

What BMW is doing is quite bold. Its $100 million venture capital fund will invest in mobile application services that don't necessarily connect to its cars -- except for BMW describing them as "premium" services, like its high-performance vehicles.

For its first deal, BMW has invested in MyCityWay , which provides people with information on public transportation, parking availability, and traffic, as well as location-based entertainment options, in more than 40 U.S. cities. BMW is tying this mobile effort to BMWi, the unit and brand that's building its electric and hybrid vehicles.

Here's what's so remarkable about this venture fund. This is BMW, maker of "the ultimate driving machines," the company famous for skimping on cupholders because customers are supposed to be immersed in the driving experience at 120 mph on the autobahn, not sipping a gargantuan half-caf vanilla latte. Now, I'm not saying that BMW wants drivers using these apps while they drive, everyone knows that's nonsense. But BMW has always been about the car. Now it's also trying to be about the apps.

BMW's venture initiative reflects the reality that more and more of our products and services will include IT as part of the experience -- whether it's a hotel stay, a car trip, or a doctor's visit. Our recent Global CIO survey finds that 34% of IT leaders say that creating an IT-driven product or service is one of the top ways they'll innovate in the coming year. (We'll have more on this research, in an InformationWeekarticle and InformationWeek Analytics report, on March 14.)

I believe in this trend. Every IT leader should have at least some people spending time thinking about new ways to engage customers or suppliers or employees via the mobile Internet.

But I must say that BMW's $100 million venture fund reminds me of a $100 million investment Textron made, in January 2000, in Safeguard Scientifics, an Internet holding company seen at the time as a way for the manufacturer to get hip to the Web and e-commerce. A year later, Textron took a $117 million charge to write down that investment.

In a May 2000 article I wrote looking at Textron's and similar Internet-driven deals, called Revenge of the Giants, I conveyed the prevailing wisdom that companies had to move quickly or get quashed by new Internet rivals. Wal-Mart partnered with venture firm Accel Partners to speed up development of, for example. "This isn't about the capital," Accel managing partner Jim Breyer told me at the time. "If we're not turbo-charging these efforts, the chance of success is very small."

Did the worst fears of that time come true -- did WalMart get "Amazoned" into relative obscurity? No, but there's no denying that e-commerce has changed Wal-Mart's business. Just as there's no denying that mobile commerce will change it again -- something I experienced first-hand recently, as I shopped for TVs in Wal-Mart while checking Cosco's prices and products on an iPhone.

So feel free to be skeptical about a carmaker throwing $100 million in venture capital at mobile apps. But don't dismiss the mobile Internet as irrelevant to your business.

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About the Author(s)

Chris Murphy

Editor, InformationWeek

Chris Murphy is editor of InformationWeek and co-chair of the InformationWeek Conference. He has been covering technology leadership and CIO strategy issues for InformationWeek since 1999. Before that, he was editor of the Budapest Business Journal, a business newspaper in Hungary; and a daily newspaper reporter in Michigan, where he covered everything from crime to the car industry. Murphy studied economics and journalism at Michigan State University, has an M.B.A. from the University of Virginia, and has passed the Chartered Financial Analyst (CFA) exams.

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