Imagine that this conversation took place in HP between the Chief Legal Officer (CLO) and the Chief Executive Officer (CEO).
CEO: We need to get a PC product fast. But designing such things are expensive!
CLO: How about we clone one of Apple‘s designs and ship it instead?
CEO: Are you crazy? They’ll sue us into oblivion!
CLO: Don’t worry, I’ll manage that risk. Even if they win, it’ll be a lot cheaper than designing and marketing an unproven product design ourselves. Even better, the legal battle will secure our position as the #1 non-Apple computer manufacturer in consumer’s minds, taking over Dell in the meantime.
CEO: Are you sure?
CLO: Very. Just look at Samsung’s case. It took only a billion dollars to solidify them as the #2 smartphone manufacturer, surpassing Nokia and RIM. They haven’t even paid that money yet and prolonging the battle via appeals.
CEO: You have a point there. Free advertisement through high-profile legal battles? Meanwhile we’ll still sell the stuff that’s being disputed?
CLO: Exactly. Furthermore the courts’ decision will only affect US market and won’t impact international sales. It certainly won’t affect our sales in China or even Asia in general.
CEO: And beat Apple in those markets on price?
CLO: Double whammy! Those regions are more price-sensitive and we can easily beat Apple with a similar model and much lower price.
CEO: Good job!
CLO: Thanks, Ma’am!
This could be the backstory behind the HP Spectre One. It’s a classic case of one high-ranking manager trying to get more funding for his department by getting it diverted from another (possibly rival) department. Meanwhile the CEO has no vision for the company other than increasing profit and improving her bonuses in the short run. In the hypothetical conversation above, the head of Legal tried to get more funding for his department and his strategy was to divert it from the Engineering and Marketing departments. Apparently the CEO of the company is a clueless bean-counter and evaluates decisions purely from the standpoint of short-term profit alone. So she diverted funding that was originally for researching original designs and marketing those designs to hiring more lawyers in preparation of a legal battle. By copying other company’s proven designs, she saves on R&D costs and improved the short-term sales figures. Within the first couple of years, she’ll have pocketed her bonuses already and likely is preparing for her own retirement. When the legal battle finally completes, chances are it’s going to be the next CEO to handle the damages and she’d have taken all her winnings and successfully “transitioned” her out of the company.
This could also be Samsung’s strategy since their Series 9 WQHD look strikingly similar to the Macbook Air. They just won’t want to risk designing an innovative product which carries their own personality and would rather risk litigation which on the flip-side could be good advertising.
Pretty good strategy, I must say. These reminds me of a story that my MBA’s Financial Management professor, Imam Istiyanto (deceased?), told us in class. It sounded more or less like this:
Once upon a time there was a wheat-processing machine and a foreman who operates the machine. The guy was ambitious and aggressive – he ran it at 100% capacity with almost no downtime for maintenance nor repairs. As a result, the yields of his machine were far above his peers and then he got promoted for it. The next foreman who handled the machine ran it at normal capacity but obtained production results much below his peers because the machine was such in a bad shape due to the abuses done by that previous foreman – and now manager of another department. Because the company uses stack ranking, the unfortunate foreman was then dismissed due to a below-average performance – which was not really his fault.
In summary, it’s a classical story of people who optimizes for short-term benefits and externalizes the costs in such a way that it goes undetected until the person have successfully transitioned out of the position. Examples of these are prevalent around us, from the overly-aggressive financial advisors, all the way through the fact that we’re still dependent on un-renewable energy even after hundreds of years since the industrial revolution. It’s not pretty and definitely not sustainable – but it’s human nature.
With all these legal battles, lawsuits, and various disputes, who definitely benefits? The lawyers. Both sides’ legal teams get paid no matter who won the trial. Also the courts and the entire legal ecosystem are trickled with the money spent in these fights. The ultimate loser is innovation since funding for developing new and exciting products are taken away to pay for these fights.
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