The End Of Microsoft Money: Big Company Doesn't Always Win

from the welcome-to-competition dept

There's a disturbing trend in various discussions we have here (especially on patent discussions) where people seem to insist that big companies automatically win in competitive environments. Yet, especially in the tech space, we've seen that it's often quite difficult for big companies to do that. Smaller companies are often more innovative and effective at taking on big companies. The idea that some big company can just copy someone else's product and automatically take over the market is clearly wrong. Does it happen sometimes? Sure. But as has been noted by many folks, if your product is truly innovative, you'll often have to beg people for attention, rather than worrying about anyone copying it.

A great example of this is the failure of Microsoft Money. The company has now announced that it's going to discontinue the product despite years of effort and millions of dollars spent to try to defeat Intuit's Quicken product. In fact, the saga of the battle between Intuit and Microsoft highlights (yet again) that it wasn't so much the invention part that allowed Intuit to win the battle, but the innovative way in which Intuit kept and grew marketshare. In an interview with News.com, the guy who ran Microsoft Money for a few years, noted that Intuit beat Money because they did a better job with the marketing.

Meanwhile, of course, it's worth noting that Intuit itself is now facing upstart challenges from web-focused startups like Mint and Wesabe, and some believe the company is discovering in its own way how smaller, more nimble startups can succeed against larger entrenched interests. Innovation is an interesting beast. The idea that big companies can always defeat smaller ones has been disproved many times -- but here's yet another example.

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Are Companies Too Eager To Do Big Mergers?

from the big-egos-big-mergers dept

With Microsoft and Yahoo! back at the negotiating table, Megan McArdle suggests that corporate CEOs are too trigger-happy when it comes to big mergers. She says there are a few situations where mergers really make sense, including when there are significant economies of scale or cost savings. A big part of the original rationale for the Microsoft-Yahoo! merger was that it would give them the scale to compete effectively with Google in the search advertising market. But against these speculative advantages, it has to be remembered that Microsoft would have have had to pay a hefty premium on a firm's market value, cover the costs of the merger process, worry about corporate culture clashes, and absorb the reduced productivity as employees of both companies were focusing on the details of integration rather than developing new products. The deal would have had to produce some amazing benefits to offset those costs.

Indeed, this kind of basic math suggests that big mergers should be pretty rare. But in practice, they seem to get proposed pretty often. In a lot of cases merger proposals seem to be driven by empire building and excessive optimism on the part of the acquiring CEO. CEOs tend to have high opinions of themselves and their managerial skills, and they like the idea of running a larger, more prominent company. And with deals of this size, it's almost always possible to tell a plausible story of how things will turn out well. The AOL Time Warner merger is the classic example of this, it was heralded as a strategic master-stroke, but it created a lot of problems and the promised synergies never materialized. Megan suggests that Microsoft's new strategy of pursuing a strategic partnership rather than an outright acquisition makes more sense. They can probably get most of what they could have gotten from a merger without all the baggage that comes with a full-blown acquisition.

Timothy Lee is an expert at the Insight Community. To get insight and analysis from Timothy Lee and other experts on challenges your company faces, click here.

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The Big Company Doesn't Always Win

from the a-reminder dept

In our debates over the patent system, one message is repeated over and over again by those defending the patent system: that it's needed to prevent big companies from coming in and stomping out smaller companies. Unfortunately, the evidence just doesn't support this. Yes, it does happen sometimes, but there are so many examples of smaller companies outrunning bigger companies that the idea that a big company can easily beat a smaller company is just rubbish. In fact, the NY Times now is running an article noting how no large tech company has ever really been able to thrive through multiple generations of technologies. A smaller, more nimble "game changer" comes along and out-innovates the larger company -- in many cases because that larger company isn't just slow to react, but also because they have legacy lines of business that prevent them from fully embracing the cannibalizing nature of disruptive businesses. Once again, this highlights the the importance of the process of innovation, rather than just the idea. The big company with lots of money may get "the idea," but if it can't full embrace it, it won't do a very good job implementing it. So, while big companies do have some advantages, it's a clear myth that any big company can step in, take a smaller company's idea, and succeed with it. Microsoft outran IBM. Google outran Microsoft. Netflix outran Blockbuster. YouTube outran Google (and then got bought by it). The list goes on. Being smaller doesn't mean you can't win against a larger player if you do a better job providing what customers really want.

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Big Tech Companies Team Up To Share Info And Fight Patent Hoarders

from the information-asymmetry dept

While the Patent Troll Tracker remains darkened, the world at large is definitely missing out on some of the more useful information he provided on his blog, shedding all sorts of light on some of the sneakier practices of various patent hoarding companies, who were often shell companies to hide the real identity of who was behind the lawsuits. Without much information to fight back against these shell companies demanding millions and millions of dollars, various large tech companies seem to have seen an opportunity to team up to fight back. Joe Mullin points out a new organization called PatentFreedom that is basically an association of large tech companies to share information privately on some of the patent hoarding firms that pop up and sue all too often. Mullin has some fascinating background on the organization, which is actually spinning out of another firm that (of all things) was co-founded by Nathan Myhrvold (the guy some folks now accuse of creating a huge patent trolling organization on his own). That existing firm helps companies both big and small in their patent litigation strategies -- but this spinout organization will focus on larger companies facing shell companies that don't produce any products.

While I think it's a good thing that the companies who are often on the receiving end of questionable patent lawsuits are trying to combat the information asymmetry concerning these lawsuits, it's a bit worrisome that this perpetuates the stereotype that this is really a battle between "big companies" and "small inventors." That's a false dichotomy that opponents to patent reform like to set up, because no politician wants to be seen as going against the "small inventor." The truth is that there are all sorts of problems with the patent system, and big companies are some of the worst abusers of the system. Focusing merely on the non-practicing entities, rather than the overall problems with the patent system, may be a necessity these days, but it's merely dealing with a symptom, rather than treating the actual problem.

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