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Last evening I decided to watch a couple episodes of National Geographic’s new mini-series, American Genius that I had recorded. It should be available in the UK. I highly recommend the one-hour docudramas that show how genius thrives or fails in the face of other genius. An upcoming episode features the classis story of the commercial genius of Thomas Edison versus the inventive genius of Nicola Tesla. I would probably not have given it too much thought had I not watched two episodes, one after the other. The first was about Orville and Wilbur Wright and their perpetual conflict with aviation pioneer Glenn Curtiss. The second was about the on-again, off-again relationship between Steve Jobs of Apple Computers and Bill Gates of Microsoft. The similarities of situations and the contrasts in their resolutions were astounding in comparison. Aside from personalities, there was a least one lesson learned about power of mergers and acquisitions, and knowing when they are most beneficial.
The Aviators
Bicycle manufacturers and repairmen, Orville and Wilbur Wright, are generally acknowledge as having been the first to accomplish the feat of sustained, controlled flight. Another bicycle maker and inventor, Glenn Curtiss, had been successfully designing and building engines for his motored cycles. But he was also intrigued by the potential for flight, despite most people thinking it impossible. After all, it had never been done before in the history of mankind. Curtiss was keenly aware of the Wright brothers’ accomplishments, but his vision was much bigger.
Curtiss approached the Wrights with the proposal that they cooperate, using his engines and their aircraft designs. The Wrights were introverts and were not keen on sharing their inventions with others, so they spurned Mr. Curtiss’ offer in favor of seeking to protect their intellectual property through the patent process. They were granted a very broad patent, which virtually assured them a royalty on the manufacture of any aircraft made in the United States. When Mr. Curtiss attempted a new aircraft design, the brothers sued him. When he created another new design, they sued him again. It was Henry Ford, himself, who pointed Curtiss in the right direction. Ford knew what to do, because he had been through more than a few of these suits himself.
Ford advised Curtiss to keep making a protracted series of small changes. Each time he did, he not only learned something new about aircraft, he also get sued. But, it takes a lot of money to keep filing and sustaining litigation. Eventually, the Wrights found themselves with already obsolete technology and without much money. After Wilbur’s death, Curtiss once again extended the offer of a cooperative venture. Once again, Orville refused. World War I brought about the intervention of the U.S. government, because the litigation was crippling badly needed U.S. aviation production. Long story short, by the end of WWI, Glenn Curtiss had become the largest airplane manufacturer in the world and was worth $32 million, but Orville Wright’s glory had faded as quickly as it had come.
One can only imagine what could have been accomplished if those early companies had merged. In 1929 they did, too late for the founders to enjoy the fruits of their labor. Today Curtiss-Wright (NYSE:CW) is a global, diversified industrial company with annual revenue of $2.2 billion, a market cap of 3.48 billion and claims to hold the #1 or #2 preferred supplier position to it end users.
The Computer Geeks
Most people are more familiar with the more recent stories of Bill Gates and Steve Jobs and their respective companies, Microsoft (NASDAQ:MSFT) and Apple (NASDAQ:APPL), so there is not the need to go into as much detail. It’s a story of two guys with similar, but separate visions that sometimes ran parallel and sometimes crossed as personal computing came of age. Had these two gentlemen not cooperated at some point, we might still be using typewriters and carbon paper. In the 1990s each company had their own failures and successes. By 1985, Steve Jobs was booted out of the company he had founded. It had been faltering, but it continued to do so, until, on the verge of bankruptcy, the company invited him back.
At the same time, sometime competitor, sometime friend, Bill Gates, was dealing with his own troubles at Microsoft. It seemed like anyone and everyone who wanted a piece of the personal computing pie was filing suit against Microsoft in an effort to destroy its monopolistic grip on the industry. Facing certain bankruptcy, Jobs need cash and he needed it quickly. He did, what to the ordinary person, was unthinkable. He called Bill Gates. That conversation resulted in, to the amazement (and displeasure) of nearly everyone, Microsoft investing $150 million in Apple. It was the light at the end of the tunnel for both companies. Apple had the needed cash and Microsoft could prove that it was not being monopolistic. The success of both companies has been overwhelming.
Two pioneers in aviation let greater fortune elude them because they saw no value in merging. Two pioneers in computing achieved greater success by cooperating. Steve Jobs passed away from pancreatic cancer in 2011. Bill Gates is still an adviser to Apple.
“While another suitor or White Knight may have emerged instead, the Microsoft deal provided a number of things: a cash cushion, the neutralization of Apple’s chief tormentor, continued independence and — perhaps most important — a way for Jobs to make his Phoenix-like return and assemble the small inner circle that still runs everything at One Infinite Loop. And, without the alignment of these particular stars, it is anyone’s guess if the iRevolution — iMac, iTunes, iPod, iPhone — would have ever happened.” – Wired.
Image courtesy of stockimages at FreeDigitalPhotos.net
