Orange County Register

(Correction: Yes, we know there are 365 days in a year, but it’s Xbox 360.)

Analysis by Register innovation columnist Colin Stewart

HOW TO FOSTER INNOVATION, OR NOT

Michael Morhaime, chief executive of Blizzard Entertainment of Irvine, gets praise but little new clout in the Blizzard-Vivendi-Activision merger announced Sunday.

That’s a shortcoming of the deal, especially in comparison to last year’s similar Disney-Pixar merger.

Morhaime has presided over the growing dominance of “World of Warcraft” in the online gaming market, with more than 9 million subscribers worldwide. But Activision seems to be ignoring much that he has to offer. After the merger, he will remain apart from the new company’s other gaming groups, staying on as chief executive of Blizzard. He won’t take a seat on the new company’s board of directors.

That structure undervalues the power of cross-pollination as a tool for fostering innovation.

Putting together experts from different specialties can produce startling breakthroughs, which is why “cross-functional teams” are routine at innovative companies.

That was also much of the value of the $7.4 billion Disney-Pixar merger of 2006.That merger came after Pixar Animation Studios won 19 Academy Awards and took in more than $3 billion at the box office.

With the merger, the Walt Disney Co. brought in John Lasseter, the creative force behind “Toy Story” and other Pixar movies, as chief creative officer for Disney’s animation work and as principal creative adviser for Walt Disney Imagineering.

The deal also put innovator extraordinaire Steve Jobs of Apple Inc. on Disney’s board.

The $9.85 billion Blizzard-Vivendi-Activision merger looks much less ambitious.

So far, the deal, announced Sunday, appears unlikely to achieve dramatic results from cross-pollination between Blizzard’s experts in online gaming and Activision’s developers of “Guitar Hero” and the “Tony Hawk” skateboarding games for consoles such as Xbox 360 and PlayStation 3.

Activision seems to be planning to glean benefits from associating with Blizzard without major changes in organization or product lines.

For example, Blizzard’s success in Asia can teach Activision how to expand its sales there, said Robert Kotick, chief executive officer of Activision and future CEO of Activision Blizzard, during this morning’s conference call about the merger.

Similarly, said Morhaime, don’t hold your breath for “World of Warcraft” to appear as a console game.

Vivendi and Activision executives spoke about “uniting the greatest group of development talent under one umbrella,” but what does that mean? They didn’t mention any ways for those talents to work together.

Earlier blog posts and articles:

• Blizzard won’t team up with Activision in ‘Warcraft’ console games (Update1)
• O.C. key to megagame merger

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