You can’t protect a good idea

Image by Sean MacEntee via Flickr

If I hear one more entrepreneur say “I’ll tell you about my idea, but I need you to sign a Non-Disclosure Agreement first,” I think I’m going to hurl myself out of a window! I can’t think of a bigger red flag to a new business than an entrepreneur unable to share his idea. If someone can sink your new company just because they’ve heard about your idea, it’s probably a pretty lame idea.

If you have a great idea and stash it under your pillow – the entrepreneur fairy doesn’t come along at night to exchange it for a great company. While great companies can benefit from good ideas, they require superior execution.

Execution is the best protection

There’s a simple and effective way to protect your idea from the world — focus on actually executing on the business plan. It’s rare that a company loses to its competitors because they “stole the idea” and somehow instantly created a huge company with it.

Take a company like Amazon.com for example. Do you really think the founder Jeff Bezos was worried that someone else might think about selling books online? He knew competition for his idea was inevitable and that Amazon (like most other companies) would have to be successful at execution, not protecting their idea.

If you think great ideas somehow protect you from failure, allow me to direct your attention to the dotcom graveyard, namely Netscape, Webvan and Napster. These were all fantastic ideas that failed on poor execution, not because they were able to keep the secret long enough.

If your idea is good, it will be stolen

A few years back Bill Gross, the founder of IdeaLab had a brilliant idea. He developed the concept of pay-per-click advertising that launched his company, Overture. Pay-per-click was a brilliant idea and like any other brilliant idea, it was stolen, in this case by Google.

Google took this idea, applied it to its wildly popular search engine, and grew faster than any other company in history. Talk about “taking the ball and running with it.”

Gross did everything you would ever want to do to protect the idea, including filing a patent. Even after Google stole his idea, lost a patent dispute, and paid off Overture (to the tune of $400 million) they were still way ahead of the game. Overture didn’t lose because they didn’t “protect the idea,” they lost because they didn’t execute as well as Google did. Now Overture is but a footnote in the very business they invented, although they did sell the company for over $1 billion, so not a bad footnote.

Keep the Secret Sauce a Secret

Some people legitimately have a secret sauce. They’ve discovered the molecules that will lead to a new drug or devised a statistical algorithm that provides more relevant results when searching the Internet.

If that’s the case, then revealing the mechanics of the product may require a non-disclosure agreement or some similar protection. But those circumstances are few and far between and in most cases I would recommend simply explaining what the product does, not how it does it.

In introductory discussions, saying, “this product speeds the recovery time for patients with xyz disease,” suffices to generate interest. Only if investors need to know more and are willing to spend more time on the idea does an NDA become relevant.

Switch to Stealth Mode

In some cases you may want to keep your intentions on the down low to allow yourself a first-mover advantage. That might make for a nice lead when entering the market, but that lead doesn’t necessarily translate into a sustainable position after you’re there.

The idea still has to be strong enough to compete effectively when the market gains more competitors which you should hope there will be. Let’s face it – if there’s no competition in your future, then perhaps the market you’re serving wasn’t that great to begin with.

Let your execution speak for itself

A good entrepreneur believes not only in themselves, but also in their ability to execute better than anyone else to turn the smart idea into a great company. Telling others that you cannot share your idea for fear of someone else stealing the idea and building a better company only suggests that you don’t have the confidence to execute.

Instead, you should welcome competitors. You should welcome anyone else that is willing to take you on because you feel confident in your abilities to beat the pants off of them if they try.

I don’t fear the entrepreneur that keeps their idea from me, I fear the entrepreneur that tells the world what she’s going to do and actually makes it happen. That’s the entrepreneur we should all want to be.

 

Nail Art Advertising

TrendCentral: KIA Motors recently tapped into the nail art trend to promote their “smALL” sized KIA Picanto, proving that one really can pack big things into compact spaces. The auto maker created a stop-motion ad campaign that caught the attention of some hip folks. Being the first-ever nail art stop motion is pretty impressive, but what’s even more noteworthy is that it took only 25 days to create this masterpiece. Each nail took two hours to paint, using 1,200 bottles of nail polish for a total of 900 fingernails. Working out the math, that equals one outstanding piece of advertising that has really nailed its target market.

The Taco That Changed the World (or At Least, American Farming)

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If you lump all fast-food restaurants into the same profit-driven-pushers-of-unhealthy-food category, you may want to delineate a new group: Sustainable Farming Advocates.

Chipotle, the fast-casual Mexican-inspired chain with 1,100 locations across the U.S. that has been serving up healthy food made with organic and local produce since 2008, has just announced the creation of a nonprofit foundation targeted at increasing the amount of sustainable farming practiced by American farmers. They’re the only U.S. fast food chain committed to organic and local produce (10 million pounds coming from a 350 mile radius of each location just this year), and they buy more naturally raised meat than any other restaurant—proving not only that it can be done, but that it can also be affordable and excel in flavor. Chipotle’s success may be one of the examples that led McDonald’s to agree to begin purchasing cage-free eggs, and moved one of its former executives to develop a healthy fast food chain set to launch in the near future.

The Chipotle Cultivate Foundation will use its funding to support family farms and ranchers developing sustainable practices and youth-targeted education programsfocused on food and healthy eating. In a statement from Steve Ells, founder, chairman and co-CEO of Chipotle, he says that, “By creating the Chipotle Cultivate Foundation, we are extending our reach beyond our restaurants and will be supporting organizations and people that are working to improve individual family farms, animals and the environment, and youth and education programs.”

Don’t think they’re serious? Chipotle also released a video this week featuring country music star and president of Farm Aid, Willie Nelson, singing Coldplay’s “The Scientist” over an animated video of a farmer who turns his small family farm into an industrial operation that includes drugging livestock and creating pollution before a change of heart reverts him “back to the start”—the song’s refrain, where he embraces sustainability and better food.

HP kills TouchPad, looks to exit PC business

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NEW YORK (CNNMoney) — Hewlett-Packard is taking a hatchet to its business and doing some radical restructuring.

The company said Thursday that it is looking to spin off its industry-leading but struggling personal computer business. HP also killed off the TouchPad tablet it launched last month, as well as its webOS smartphone line.

The move essentially leaves for dead the webOS software HP got byacquiring Palm last year, though the company said it will continue trying to “optimize the value” of its purchase. Though the move was unexpected, it’s not all that surprising: Despite a huge marketing campaign, TouchPad sales struggled so much that HP almost immediately cut the tablet’s price by $100. HP said none of its webOS products reached the company’s internal sales targets.

HP also said it has agreed to buy British software developer Autonomy for roughly $10.2 billion in cash. At $42.11 per share, the purchase price represents a 58% premium over the company’s average share price over the past month. Autonomy specializes in database search and other enterprise software technologies.

“We believe this bold action will squarely position HP in software and information to create the next-generation information platform,” Apotheker said on a conference call with analysts. “This is about a transformation to position HP for a new future and driving shareholder value.”

Curiously, and perhaps paradoxically, Apotheker said HP will run Autonomy as a separate company, but HP will “look for synergies.”

HP’s (HPQ, Fortune 500) stock fell an additional 6% in afterhours trading, after tumbling 6% during regular hours.

The share price swung wildly after reports of the PC spin-off plan first broke late Thursday morning. Shares had fallen by as much as 8% in early trading, then rebounded and shot up as high as 8% above Wednesday’s closing price before falling back into negative territory.

The various moves are part of the company’s stated goal of transitioning into faster-growing, more profitable businesses like software, servers and corporate technology services. But ditching its consumer businesses will come at a steep price: HP’s Personal Systems unit accounts for about 1/3 of the company’s annual revenue.

As a result of the transition and “challenges that we face across our businesses,” HP reduced its full-year revenue forecast by 9%. It also lowered its profit forecast by 16%, though that dreadful number includes charges related to killing off its webOS products. Without those charges, HP still lowered its previous estimate by 4%.

HP Chief Financial Officer Cathie Lesjak told analysts on the call that the outlook was “definitely the toughest one for me as CFO.”

The end of an era

The bold move to reshape HP — the world’s largest tech company by annual revenue — would be in line with the strategic vision CEO Leo Apotheker unveiled in March.

In May, Apotheker told analysts that the company needed to put greater investment into its “value-added services” or it will “be left with a business that is running out of steam.”

Consumer PC sales have slumped industry-wide for the past several quarters, as tablets like Apple’s (AAPL, Fortune 500) iPad have slowed netbook and mini-notebook sales. The trend has hit HP particularly hard: sales to consumers fell 17% between May and July.

“The tablet effect is real,” Apotheker said on the call with analysts on Thursday. “Consumers are changing how they use PCs.”

But a move to sell off its PC unit would be a 180-degree turn for HP, which 10 years ago bought Compaq in an acrimonious deal that eventually helped cost then-CEO Carly Fiorina her job. That acquisition made HP the largest PC manufacturer in the world.

Despite its recent struggles, HP still sells more PCs than any other vendor, shipping 14.9 million PCs last quarter — enough to give it control of 17.5% of the market, according to Gartner. Dell (DELL, Fortune 500) and Lenovo are in a near-tie for second place, each with more than a 12% share of the market and shipments in excess of 10 million units last quarter.

The company said its board of directors has authorized executives to explore “strategic alternatives” for its Personal Systems unit, including a full or partial spin-off or sale. HP said it plans on making a final decision on the division within the next 12 to 18 months In addition to PCs, that unit also makes some other consumer devices like mobile phones.

Apotheker has said that by placing greater emphasis on the company’s fast-growing software and server businesses, HP can leverage those units to improve its slow-growing services division. But HP executives aren’t kidding when they preach “patience” in the transition: HP’s software business made up just 2% of the company’s sales this past quarter.

A deep dive into enterprise software would also take Apotheker back to his roots. He was previously the head of German software giant SAP (SAP).

By the numbers

For the previous fiscal quarter, which ended July 31, the Palo Alto, Calif., company reported net income of $1.9 billion, or 93 cents per share up 9% from a year earlier.

Results included one-time charges totaling 17 cents per share. Without the charges, HP said it earned $1.10 per share. Analysts polled by Thomson Reuters, who typically exclude one-time items from their estimates, had forecast earnings of $1.09 per share.

Sales rose less than 2% to $31.2 billion, in line with analysts’ forecasts.  

Windows Laptop Makers Can’t Catch Up to the MacBook Air

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The PC world is buzzing lately about how laptop manufacturers are struggling to compete with Apple’s MacBook Air, which has exploded in popularity since the introduction of the third-gen model in 2010. This year’s fourth-gen update is proving to be the must-have laptop of the year. For every laptop manufacturer not named “Apple”, the race is on to make new super-thin and super-light laptops. Intel calls them Ultrabooks, and the name is catching on, despite being sort of silly.

Here’s a question for you: why didn’t HP, Dell, Acer, Samsung, or some other huge PC manufacturer build the Air before Apple? The answer is: they did. Sony’s X505 was a razor-thin laptop weighing less than 2 pounds, and it came out in 2003! More recently, Dell introduced theAdamo in 2009, and later that year the even thinner Adamo XPS. These laptops didn’t sell. Sony’s cost over three grand. Dell’s were also too expensive, and the battery life was pitiful. Instead of fixing those problems, Dell killed the Adamo line. Sony and Dell built nearly-great products with critical flaws and instead of challenging their engineers and designers to find ways to address those flaws, they concluded that nobody really wanted these systems. Apple didn’t give up, though. Drive too thick and too slow? Apple commissioned a special case-less SSD that could fit in its slim design. It worked to make the motherboard smaller, the components cheaper, and crammed as much lithium polymer battery as it could fit in the case. By 2010, the Air had evolved from an overpriced, underpowered status toy to the must-have computer of our day.

My point here is not simply that PC manufacturers are quitters. It’s that they have the entirely wrong mindset to build must-have products. Several times a year, I have meetings with major PC manufacturers about their upcoming product lines, and the tenor is always the same: “Our customers told us this is what they want, and our market research says this is what people are buying, so we made this great product to address that market!” There’s nothing inherently wrong with that, but you’ll never set any trends that way. If you want to make the product that everyone else compares their product to, you have to go outside the envelope. You have to take a risk to build something nobody has told you they want, because they don’t know they want it yet, and then you have to invest in it and stick with it until you get it right. The real irony here is that their marketing departments are constantly striving to find differentiators: ways to set their products apart from the pack. If every company is building products to address the same set of market research data, you’re not going to get differentiated products.

Building a better Air – or even just a cheaper one – is proving to be difficult. Those unibody aluminum chassis on MacBooks make them really rigid despite the thin design, and Apple hasbooked solid all the lathes capable of carving a laptop body out of a single block of metal. Challengers like the Samsung Series 9 have metal bodies, but without the satisfying stiff feel and seamless edges of one carved from a single chuck of alloy. Of course, the Series 9 is also quite expensive. When one of the main reasons people don’t buy a Mac these days is because they can’t buy one for less than $1,000, pricing your Mac alternative well above that price doesn’t do you any favors.

There are other pretenders to the ultrabook throne coming this fall. There’s the Asus UX51, and the Acer Aspire 3951. Rumor has it HP will unveil an ultrabook soon. What do all these systems have in common? They’re too late. Yes, the ultra-thin form factor made popular by the Air is rising in popularity, and if priced right some of these systems will sell pretty well. Sales numbers notwithstanding, they’ll suffer the ignominious fate of being labeled also-rans. They’ll be “MacBook Air-like.” The problem with PC manufacturers is not that they can’t build a computer as good as the hottest Apple thing, it’s that they’re constantly trying to. Apple is in the driver’s seat.

If you aim at a fast-moving target, you’re sure to hit behind it. While HP, Acer, Asus, and others are worrying about how to make a MacBook Air killer, Apple is busy redefining the rest of its laptop line. Intel is kicking in $300M to drive the ultrabook category with new inventions and new, cheaper SSDs will help drive costs down. By the time all the PC manufacturers figure out how to make a cheaper laptop that is as thin, light, and long-lived as a MacBook Air, everyone will be drooling over the new MacBook Apple will have just introduced. I suppose we can’t expect a lot of creativity and focus from companies that think a random string of letters and numbers make for appropriate product names.

Here’s a bit of free advice for the PC manufacturers: lose the optical drive. No, not just in your upcoming ultrabooks, in everything. I’ve asked four PC makers this year why they’re still putting DVD drives in their 13-to-15 inch laptops while struggling to make them thinner and lighter. They all said the same thing: “our customers say they aren’t ready for that yet.” Well of coursethey’re not! If you wait until the world tells you an optical drive isn’t worth the tradeoff in thickness, weight, and space for a bigger battery, you’ll be marketing laptops just like everyone else’s. I’d make a million dollar bet Apple’s next generation of MacBook Pro won’t have optical drives in its 13 and 15 inch models, and they’ll be so slim and sleek and light everyone will want one. Then Dell, HP, Acer, Asus, Samsung, Sony, and the others will follow suit six months later, looking like they can’t come up with an idea until after Apple does.

Here’s another free idea: make netbooks half as thick as they are today. Intel has advanced the Atom platform over the years, AMD has that tiny Fusion E-series chip, there’s no optical drive, and the rest of the internals are minimal at best. Yet netbooks still basically look like they did four years ago when the genre was new. There’s no good reason a system that small, that cheap, with that little horsepower, should be more than two-thirds of an inch thick.

Consider the story of Hewlett-Packard’s invention of the first pocket calculator, the HP 35, back in 1972. HP’s market research said they shouldn’t make and release it – it was going to cost at least $350. At twenty times the cost of a slide rule, nobody was going to buy it! Bill Hewlett said, “I don’t care, I want one of these things” and pushed the project through. It was so revolutionary, so visionary and transformative, that even at a cost of $350+ (that’s 1972 dollars!) the orders were over 10,000 a month. HP didn’t project sales of 10,000 a year. I don’t know if HP or other laptop manufacturers still feel as though they operate with this sort of audacious drive to build gotta-have-it products, and “damn the torpedoes,” but it’s certainly not evident in the products we see on the market today.