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Didi 10 Uber 0: Why?

By Shlomo Maital

Didi

Uber, the global ride-share company, has sold its China business to Didi, its Chinese counterpart. This, after Apple announced a major investment in Didi.

   Uber’s failure in China (it never had more than a 10% market share, compared with Didi’s 80 %) reminds me of eBay and its massive defeat by Alibaba, despite a huge $150 m. investment of eBay in its China operation.    Alibaba, by the way, along with Tencent, is a major owner of Didi.  

   We can learn a lot from the Uber-Didi battle. The head of Uber China, and of Didi, are cousins. Their uncle was a founder of Lenovo. Didi has been adding 400,000 drivers a day! It has been innovative, offering innovations like bus service and car pooling. Business in China is based on relationships, and the two cousins’ close relationship smoothed the deal.

     I am writing this blog in Pittsburgh, where I’m visiting my sister. Decades ago, I visited her and went to see the steel mills, in Braddock and along the rivers. They’re all gone. And the jobs have migrated (though not the same steelworker people) to health care. U. of Pittsburgh Medical Center, Montefiore Hospital and others now are the major employers, in Pittsburgh, and the city has undergone an amazing revival. This is not, however, true of other rust-belt cities like Gary Indiana and Cleveland, Ohio.

     China has a new program, or policy, Innovation Plus. The idea: Migrate steel jobs toward services, like Didi. America never did have any such plan. The free market is supposed to do the job. But it did it very very poorly or not at all. China’s government is actively encouraging Internet service businesses, like Alibaba’s Taobao villages which do e-commerce.

     I have written a case study of Alibaba, including how it triumphed over eBay, available to anyone who sends me an email: smaital@tx.technion.ac.il

 

Too Big to Succeed? Carve it up.

By Shlomo  Maital

how-to-carve-a-turkey

  Over the years, in working with big companies, I’ve learned how difficult (impossible?) it is for huge organizations to sustain creativity and innovation. In a recent magazine column, I wrote about Intel, and how a young rather junior Israeli engineer kept Intel from abandoning its CISC technology, leading to the highly successful Pentium.  This occurred only because Andy Grove, then CEO, was willing to listen to those below him.  Many CEO’s of huge MNC’s simply are not able or willing.  Creative people get lost in the swamp of organizational bureaucracies.

   A new fashion is developing to grapple with this problem.  Split huge companies, elephants, into smaller pieces, rabbits.  Like on Thanksgiving (always the 4th Thursday in November – Nov. 27, this year, in America),  big companies are being carved up like turkeys, in the hope the pieces will be tastier than the whole bird.

    eBay is divesting PayPal.   Now, HP is splitting into two. HP stock soared on the news. Shareholders are delighted.  It’s an act of creation – making something out of nothng.

    I am very doubtful.   Many industries have seen a wave of ‘consolidation’ – mergers.  A merger is when two sick companies merge, to create one really BIG sick or sicker company.  This is what happened in the airline industry.

   Now this is being reversed.  Reverse mergers.  Very very profitable for Wall St. investment banks that shepherd the process, for a huge fee.   HP is a company that lost its way, under very poor management, until Meg Whitman.   But it will not solve its problems by splitting them into small pieces.  You cannot make a company healthy by combining it with another;  nor can you make a company healthy by carving it up like a turkey.   The pieces are still turkey.

   Long ago, management educators taught that ‘structure is not strategy’.  The way you structure the pieces of a company is NOT a strategy.  Companies that seek innovation by restructuring rarely succeed.   Because the DNA, the company culture, remains. 

  Let’s wish HP success.  But I’m very skeptical.

Blog entries written by Prof. Shlomo Maital

Shlomo Maital

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