The Art Of Stealing & Absorptive Capacity - Aditya Yadav

1. “Running an Agile Fortune 500 Company”
Aditya Yadav, aditya.yadav@gmail.com
http://www.adityayadav.com
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2. *
*A Typical Global Company
*Fortune 500/1000
*200 Divisions
*40 Countries
*25000 Employees

3. @ Acme Inc.
*

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. And The Philosophy Behind The Answer
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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. *

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. *
* 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. *
*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. *
* 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. *
* 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. *
* 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. *
Aditya!!!