The Art Of Stealing & Absorptive Capacity - Aditya Yadav


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The Art Of Stealing & Absorptive Capacity - Aditya Yadav

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The Art Of Stealing & Absorptive Capacity - Aditya Yadav

  1. 1. “Running an Agile Fortune 500 Company” Aditya Yadav, *
  2. 2. * *A Typical Global Company *Fortune 500/1000 *200 Divisions *40 Countries *25000 Employees
  3. 3. @ Acme Inc. *
  4. 4. * *Original Question “After Steve Jobs Biography everyone is talking about how cool it is to steal. It doesn’t sound right. Is there a management framework we can look at to understand what everyone is gungho about?” *The Correct Question - “Yes! There is a Management Framework which is very relevant to Stealing (!!!) though I would like to point out when people refer to Steve Jobs and Stealing they don’t mean it in the sense of Crime or Robbing anyone… allow me to explain with a framework.”
  5. 5. And The Philosophy Behind The Answer *
  6. 6. * *In Management there is a Theory called Absorption Capacity... basically anyone cannot steal any idea and exploit it successfully... *The most effective stealing happens when you have the absorptive capacity to absorb and exploit something... *And the best way to have absorptive capacity is to do something similar yourself and then jump on some invention/new-knowledge that extends your work and capitalize on it... *That my dear friends is THE ONLY WAY how the real stealing is done!!! ;-)
  7. 7. *
  8. 8. * * The concept of absorptive capacity was first defined as a firm's "ability to recognize the value of new information, assimilate it, and apply it to commercial ends" by Cohen and Levinthal. * For them, absorptive capacity depends greatly on * Prior related knowledge and * Diversity of background * Therefore, they’ve put the investments a firm makes in its R&D central to their model of development of absorptive capacity. The absorptive capacity is seen as cumulative, meaning that it is easier for a firm to invest on a constant basis in its absorptive capacity than investing punctually. Efforts put to develop absorptive capacity in one period will make it easier to accumulate it in the next one. * “The cumulativeness of absorptive capacity and its effect on expectation formation suggest an extreme case of path dependence in which once a firm ceases investing in its absorptive capacity in a quickly moving field, it may never assimilate and exploit new information in that field, regardless of the value of that information.” * Absorptive capacity is also said to be a reason for companies to invest in R&D instead of simply purchasing the results post factum (e.g. patents). Internal R&D teams increase the absorptive capacity of a company. A firm’s investment in R&D then impacts directly its absorptive capacity. The more a firm invests in research and development activities, the more it will be able to fully appreciate the value of new external information. * Aditya – Diversity Amplifies Re-Combinatorial Innovations!!! And also increases the Probability of absorbing a diverse set of Inventions & New Found Knowledge… Again it seems Generalists dominate Absorptive Capacity Creation Ref: Wikipedia
  9. 9. * * Absorptive Capacity * R&D * Diversity * Knowledge management * Organizational structures * Human resources * External Ecosystem Interactions * Social Capital * Supplier & Client Integration * Market Research * Inter-organizational fit * Learning, Un-Learning & Re-Learning * Asset & Resource Management * Complimentary Assets * Money (Cash Surplus) * Risk Management & Taking Ability * Innovation Culture * Rewards & Incentives
  10. 10. * *As applied to human social systems, the adaptive capacity is determined by * The ability of institutions and networks to learn, and store knowledge and experience. * Creative flexibility in decision making and problem solving * The existence of power structures that are responsive and consider the needs of all stakeholders. *Aditya – We defined Leadership as (i) Change (ii) Growth & (iii) Innovation. So basically Adaptive Capacity in our definition is proportional to Leadership!!!
  11. 11. * * For Infinite Series: a + ar + ar^2 + ar^3… * Where 0 <= r < 1 * Total = a / (1-r) * If Initial Value Outbreak (measured in US$’s) = $x e.g. $400million * Absorptive Capacity of the ecosystem = k e.g. 0.3 * Leadership/Adaptive Capacity of the ecosystem = l = 0.8 * Then r = k * l * And Total Ecosystem Value Dispersion/Benefit from the Value Outbreak = x / (1-k*l) e.g. $400m / (1-0.3*0.8) = $526m * Other Examples: * If Facebook is valued at $184Bn (k=0.3 l=0.8)then TEVD = $242Bn * If Apple is valued at $538Bn and (k=0.8 l=0.9) then TEVD = $1.921Tn
  12. 12. * * For a Value Outbreak if * Your firms Absorptive Capacity (Capability to Steal) is k=0.6 * And your firms Adaptive/Leadership Capacity l=0.4 * And your market share is m=0.4 * And your value fitment is v=0.2 * Capability to Exploit = l * m * v * Then your probable Value Exploitation = Capability to Steal * Capability to Exploit… from the Apple Phenomenon = $1921Bn * 0.6 * 0.4 * 0.4 * 0.2 = $36Billion * Have Fun!!!
  13. 13. * * If you run your business by the way of Acquisitions mostly then you lose on Absorptive Capacity * If you ‘Acquire’ Patents then you lose on Absorptive Capacity… it is what it is … only a Legal Defence!!!! * If you Lack Diversity or Generalists you lose on Absorptive Capacity * If you don’t invest in R&D you lose on Absorptive Capacity * If you don’t have an Internal Innovation Ecosystem you lose on Absorptive Capacity * Everytime you Outsource or Sub-Contract something r’ber you are Losing Absorptive capacity of that work/process/function/division * The Value from M&A comes through Absorptive Capacity Integration/Amalgamation * The Reason Startups are Extremely Secretive about their Business Idea’s is because the Capability to Steal & Exploit of other Startups is extremely high and the number of other Startups is huge * … * If nothing convinces you R’ber This… - It is The Best Way To Steal and according to me The Only Way To Steal… * Steve Jobs famously said in 1996: "Picasso had a saying – ‘good artists copy; great artists steal’-- and we have always been shameless about stealing great ideas."
  14. 14. * Aditya!!!