Upstarts vs. BigCos and corporate transparency

Gordon Mohr
Wed, 9 Jan 2002 12:55:07 -0800

Dave Long writes:
> > I disagree with your conclusion, though.  DISCREDIT/COPY/BUY (or, in
> > transparentland, just COPY) is a valid "investment" (i.e., strategy) for
> > dominant player P --- and even for P's shareholders, since this strategy is
> > maximally preserving of market share --> revenue streams to which share
> > value is presumably tied in the face of challenge from disruptive
> > technologies.
> In a world where shareholders were
> limited to owning but one stock at
> a time, I would be able to agree,
> however:
> A valid strategy for P is usually a 
> a valid strategy for P shareholders,
> but strategies which are optimal for
> P alone can be quite sub-optimal for
> P shareholders.
> In a transparent world, the optimal
> strategy for the shareholders (who
> can own P, Q, and R) may be that P
> sticks to its knitting, which would
> encourage innovation at Q & R.

This last point is gigantic.

Sure, considered in isolation, transparency 
could make it easier for a BigCo to understand 
and then COPY what an Upstart is doing. 

However, transparency could be expected to 
check BigCo opportunism in a number of ways.
The interaction with stockholders (and their
portfolio preferences) that Dave points out
is one way.

Another: No more "FUD". 

A BigCo can't bluff that it will enter a 
market with a well-developed offering if
it really hasn't done the work, or is 
still wracked by internal division.

BigCo's true internal capabilities and plans 
will be just as transparent as the Upstart's

Similarly, BigCo's mere consideration that
COPYing Upstart might be worthwhile will be
public knowledge; this allows Upstart to 
adjust and would prompt BigCo investors and 
competitors to take more interest in Upstart.

And when things are going wrong with BigCo --
projects are failing, customers are unhappy,
and so forth -- transparency means Upstarts
know exactly where to concentrate their 

Finally, with observers flooded with public
info about established firms, being so small
that few people pay attention might provide
an advantage much like secrecy. 

Transparency could easily wind up making size 
a net disadvantage when all effects are 

- Gordon