If you don’t cannibalize yourself, somebody else will — Steve Jobs
The Coke legend.
Imagine Coca Cola releasing its formula for Coke? For all practical purposes, this is very much unlikely. Indeed, practical wisdom suggests that such time would never come. It appears that such a decision is not only stupid but highly suicidal. Coke is the flagship product in the very huge portfolio of the Coca Cola Company; one time biggest brand in the world. It is perhaps its most successful product that has spanned a century. It goes without saying that Coke has become such a universal symbol for happiness. Legend has it that the formula for Coke is locked up in a tightly secured destination. While this confers some form of mystery on the Coke brand, there are more reasons to believe that without its unique formula, Coke wouldn’t be all that it is. There are those who will swear by Coke. The reason for such loyalty sure goes beyond the taste but without its unique taste, Coke is just another soda. This analogy is based on the timeless principles of choice and competition. The availability of two or more alternatives creates choice which in turn creates competition. Competition ultimately creates winners and losers. The products that win are those that create more value (perceived or real). Others that aren’t so fortunate become commodities. This is perhaps why product differentiation is such an holy grail. So again, will Coca Cola ever share its Coke formula?
Tesla hands over the keys to its electric car technology.
When Elon Musk (Chairman of Tesla Motors) announced the decision of the company to release the company’s patent portfolio to ‘Good Faith’ use, it sounded very improbable. Tesla Motors is in a nascent industry (electric powered automobile) where its patent should ordinarily represent its most latent defense against competition. Indeed, its portfolio of patent makes any likely new entrant re-think and -re-evaluate its interest. In a broader automobile industry dominated by traditional car manufacturers like Ford, GM, Fiat, hybrid savvy Toyota, BMW, Mercedes and others, one is tempted to pronounce the announcement as a very lousy one; a pure show of madness. Common sense suggests that Telsa’s decision is suicidal in the same way one would refer to a decision by Coca Cola to share its Coke formula with Pepsi and others. So why would Elon Musk and by implication Tesla decide to choose this path? This singular question is why this piece was written. I will come back to it in a moment.
Is Nokia X a gamble?
Microsoft Corporation acquired Nokia. This acquisition not only gives Microsoft access to the manufacturing capability of the Finnish company but accords it such unbridled access to Nokia’s patent portfolio and very robust supply chain infrastructure just to mention a few. From the outside, this acquisition puts Microsoft in a very strong position to finally take on the mobile device market ruled by Android (an open source platform) and Apple’s IOS. A possible route for Microsoft could be to decide to create a next generation operating system (Its combined team of engineers and designers confers on it such a huge scale and capacity to do this). This is largely possible if the integration model was a transformative one. It (Microsoft) could also decide to allow Nokia run solo. Doing this would mean that Nokia gets to continue innovating on its own terms. While this could be cannibalistic, its doesn’t hurt much. Nokia is a Microsoft company. There may be more possible course(s) of action the winning aspiration for Microsoft and what it hopes to achieve. The least likely course however was the decision of the company to release a phone on a competing platform. Microsoft released Nokia X (an android powered smart phone). Like Telsa, Why did it choose this path? Why should any company choose this path?
The sharing economy and the lessons thereof.<
The sharing economy (sometimes also referred to as the peer-to-peer economy, mesh, collaborative economy, collaborative consumption) is a socio-economic system built around the sharing of human and physical assets. It includes the shared creation, production, distribution, trade and consumption of goods and services by different people and organizations. These systems take a variety of forms, often leveraging information technology to empower individuals, corporations, non-profits and government with information that enables distribution, sharing and reuse of excess capacity in goods and services. A common premise is that when information about goods is shared, the value of those goods may increase, for the business, for individuals, and for the community. This is the gist of this concept. Examples of successful business models leveraging this model include Zipcar ( a car sharing service), Airbnb (a space sharing service) e.t.c. The obvious question here is that what has this got to do with anything? I’ll return to this once I provide insights into the previously raised questions.
So, why would Tesla handover its patent portfolio? How on earth does this make sense?
According to Clem Chambers, a Forbes contributor, the decision is a very intelligent one. It is so because of a very fundamental reason. Ford, GM, Fiat, hybrid savvy Toyota, BMW, Mercedes and others are not Tesla’s competitors. The internal combustion engine which is the industry standard is. Tesla’s current sales profile is a miserly splash in the ocean of the internal combustion guys. Treating its patent portfolio as open source is an intelligent way to leap frog the technology of the electric car. Truly, this decision throws up the question of how Tesla will succeed if the big guys decide to go full throttle on electric car technology by investing billions of dollars into it. How will Tesla cope with the scale of operations and capabilities the big guys possess? Perhaps there are other things to consider here. One wouldn’t be surprised if there is an underlying business model in this horizon. It is also not farfetched that Musk is trying to get Tesla bought over by one of the big guys who might consider acquiring the company. In any case, I guess when Musk gets to that bridge, he would cross it. Other reasons for the decision apparently are purely altruistic. For a guy who radically believes in carbon crisis, such a decision could be a no-brainer.
In the case of Nokia X, the story is quite different. Android is a direct competition with Windows and IOS. So why would Microsoft go this route? It is difficult to say for sure how that has strengthened Microsoft’s position against others like Samsung , Google, ASUS who all run on Android and the more proprietary group of Apple and HTC. If the objective of strategy is winning. I did a random opinion poll to measure customer’s satisfaction with respect to the device and it seems that much is left to be desired. This is not a product review and such, I won’t delve into the subject. According to CNET, the review of Nokia X reads: Bogged down by sluggish performance and a lackluster UI, the Nokia X only disappoints. The game is not over so while Nokia seem to have had a relatively less impressive outing, this is hardly the end of the matter.
So what is it to learn about the sharing economy within the context of this piece?
That would be that in the pursuit of a successful and scalable business model, there are different routes to carefully consider. Each path creates a different outcome. It is true that the world is changing (sharing economy is a testament) and traditional methods are under siege. However, in this age of disruption, somethings never quite change. As novelty does not guarantee success, wisdom is yet profitable to direct. Strategy as is cooking is about making choices about what to cook, what to add and other considerations. Will Coca Cola ever share its secret formula for Coke? Never say never.
Image Credit: Google