Tag Archives: Technology

The Hedgehog who got fucked or the power of probability.

I have been long intrigued by the ‘Hedgehog Concept’. Basically it is your USP which lies at the intersection of three conditions:1.What you can be the best in the world at.
2.What drives your economic engine.
3.What you are deeply passionate about.

And Jim Collins(perhaps he mooted this idea), classifies companies into two categories—Foxes and Hedgehogs. Hedgehogs are the companies who apply the above principle and foxes are companies who pursue multiple endeavors and seem diffused in their strategy.

Ever heard of Intersil? It is the name of a hedgehog which got fucked by a fox. Wi-Fi Technology was developed in the mid 90s and by the end of the decade Intersil was leading producer of Wi-Fi. At that time it was the best in the world, Wi-Fi was driving its economic engine and I am sure the Intersil guys must be very passionate about it. So, it was truly a hedgehog.Then came a fox named Intel. It started selling its own Centrino brand of Wi-Fi chips at dirt cheap prices. It wasn’t better than Intersil by a long shot, but it sure was damn cheap. In fact, Intel was selling the chips at a loss. It destroyed Intersil;Intersil, to put it mildly, got fucked.

Intel derives most of its profit from laptop chipsets rather than pc chips. So, it made sense for Intel to commoditize Wi-Fi which in turn will make laptops more popular. And hence, Intel was not running at a loss by this strategy at all, if you look at the big picture. And this tactic had the added advantage of eliminating the hedgehogs,like Intersil.

Mostly, people don’t want to believe depressing news even if the facts say so. So, after giving a bad news I practise giving goodies and solutions, and that makes the party-spoiler more palatable. So, here I present solution in mathematics to come out of this quandary. Imagine you are a hedgehog with one core competency. And let us assume the probability that a bigger rival having the same business is 0.4(and hence 0.4 chances of you being killed, to simplify things). Now imagine you have 3 core competencies tied in an intimate manner which make you distinctive, instead of one which you were doing best. So, what are the chances of your rival beating you up in that game? The probability is 0.4×0.4×0.4=0.064. So, now your chances of being killed dropped from 40 in 100 to 6.4 in 100.That is a dramatic risk reduction. So, the best strategy is to tie together a few core competencies in a unique manner, which holistically work together,even if those core competencies are not the best.

Reference:
[1] G.Carr,Nicholas, “Does IT Matter?Information Technology and the Corrosion of Competitive Advantage.”
[2]Isaiah Berlin, “The Hedgehog and the Fox .”
[3] http://tinyurl.com/27dqjo

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Ideas are not land grab or why patents suck.

A chain of thoughts ensued when I read the following article about Microsoft patenting the machine classification technique(ref : http://www.seobythesea.com/?p=942).I am sure that if Microsoft(MS) was there in stone age, it would have patented wheels and you would have to pay MS some big ass royalty each time you drive to work. And if MS was there in prehistoric times where we were still walking on fours, it would have patented the method of walking on two legs, and each time you walk down the grocery store you would be paying even more to MS. Practically your whole life would be centered around paying Microsoft.
The fact of the matter is that patents on Intellectual Property(IP) has to do with protectionism. People who advocate IP either haven’t seriously thought about the impact of IPP(Intellectual Property Patenting) on the general health of humanity or that they don’t really believe in free market. They just believe in securing their own interests. IPP basically boils down to monopoly over pricing for big corporations. I say big corporations– or else try getting a patent if you are a lone guy working in your garage lab. In fact , time and time again it has been the case that if you are a brilliant inventor in a garage lab, you are inducted in some big corporation, and you would get 1$ for making them billions. It is only recently that garage inventors have also become entrepreneurs.The fact that we are knowledge species has to do with sharing of information, not patenting it. A truly creative thing beneficial to the whole humanity can come out only with free flowing of ideas. In fact, IPP is not something new to the history of human civilization. It has existed in one form or the other since ancient times. For example, in most ancient civilizations only people of high rank were allowed to read and write. If you are poor and do not belong to the upper gentry then you would be punished if you try to acquire knowledge and try to do something with it. Monopoly of knowledge is an old game. Progress in technology and general economy exploded in few hundred years only when society became more egalitarian in knowledge transfer. IPP flies in the face of egalitarian knowledge transfer as well as true principles of free market economy. Microsoft and its ilk are trying to reverse the clock of time and push us back to the era of darkness of knowledge.

Microsoft forgot that the knowledge capital it has, is not just because of Bill Gates, but because of the collective knowledge base of the humanity as a whole. It is trying to kick the very ladder it climbed on to this position, so that others can’t reach there. And it forgot what Newton said—” I seem brilliant because I stand on the shoulder of the giants”.

If someone else can come up independently with what you have made then it is not worth patenting. And if they can’t then you don’t need to patent it.

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