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Patents are Like Love: The More You Give, the More You Get

By Shlomo Maital

 Elon Musk

Elon Musk

   Some innovations change the way people think about doing business.  Elon Musk, a great innovator (co-founder of Paypal, founder of Tessla,  Space-X….etc.) has just announced that he is “opening the books” for all the patents related to Tessla and his electric car technology.  Meaning?   Anyone who wishes can use the technology he and his company created, free of charge.

   What in the world? What happened to the assumption that if you create IP, intellectual property, then you have the right, nay the duty, to make huge profits from it? 

    And is this philanthropy?  Or shrewd business strategy?

    It is the latter.   Musk wants to build Tessla.  To do so, he wants the established big car companies, the ones who proved unable to develop truly great electric cars,  to adopt his technology.

   If they do, then Tessla becomes the first, the authentic, the real thing.   And the way to make that happen is to offer the technology free of charge, and – reap the benefits indirectly.   And I am convinced, the indirect benefits to Musk and Tessla will be enormous, far bigger than any royalties.

     We learn from Elon Musk that innovation is breaking the rules intelligently. Find a rule, e.g. patent everything that breathes,  and see if you can break it, for your own advantage and the advantage of the world. 

    Are patents indeed like love – the more you give it away, the more you have?   

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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