Platt Perspective on Business and Technology

Reexamining business school fundamentals – business law in a rapidly changing collaborative and competitive context

Posted in book recommendations, macroeconomics, reexamining the fundamentals by Timothy Platt on August 1, 2010

Two quotations come to mind for me as I start this posting: “the law is an ass”(Charles Dickens, as spoken by Mr. Bumble in Oliver Twist) and “the first thing we do, let’s kill all the lawyers” (William Shakespeare, Henry VI Part 2, Act 4. Scene II as spoken by Dick.) The law is, by its very nature reactive so in any rapidly changing context, it is always well behind the curve – except when new law is written proactively in an attempt to get ahead of that curve, or current law is interpreted proactively by (activist) judges. And then law always seems to be proactively marching off in the wrong direction. Consider the Digital Millennium Copyright Act and some of its unanticipated consequences in that context. That said, while reactive law may have its problems, it is far better than proactive law and either would be better than no law at all, where all efforts to create order and consistency on a societal basis were ad hoc and where there were no standards or benchmarks for determining the boundaries of acceptable behavior.

Two areas of law that for rate of societal change, are perhaps among the furthest back behind the curve in this are the law of contracts and agreements, and intellectual property law with copyrights and patents – together forming much of business law. And legal standards and rules of law functionally define these business practices. And the reactive quality of law and the difficulty in keeping law addressing current needs and opportunities and current issues requiring adjudication, become very important.

I find myself thinking of two core issues as I consider this. One of them is the need to be able to monetize information – a topic I have touched upon repeatedly throughout this blog and most recently in this series (e.g. see Macroeconomics and Business, postings 20-32.) The other issue, very closely connected to that, is in the collision between current case law and current business context where proprietary information and information processing (as for example when algorithmically set up and organized as software) and pressures to maintain a proprietary approach come into direct competition with open source and public domain.

My goal in this posting is to posit a conjecture, which I identify as such as I have not (yet) done anything like a necessary case study-based analysis that would validate or refute it.

Platt’s Innovation Driver Conjecture:

In a closed innovation society where businesses in effect exist as islands of expertise and performance in the market spaces they carve out to compete in, proprietary protection of intellectual property equates directly with strength in securing and maintaining market position. This becomes essential for offering a unique value proposition needed for long term success.
In an open innovation society where businesses are surrounded by valid and important sources of business intelligence and other information of monetizable value, and where organizations need to connect strongly into supply chains and value chains to succeed and thrive, free exchange of business intelligence and particularly of enabling information becomes crucial to success. Here, the value chain system that can more effectively exchange business intelligence among its members, crucial to the flow of mutually created value in them, is going to out-compete its less nimble and more barrier ridden competitors. And overt barriers to information flow where crucial information is simply denied to necessary business partner organizations can in effect kill the entire value chain and stop all participants in their tracks.

I will add two more points here to further clarify the issues involved. The first is that value chains can form, mature, evolve and then fade in significance to their partner members and disappear, and they do and will. I cite as a reference in this context:

• Fung, V.K., Fung, W.K. and Wind, Y. (2008) Competing in a Flat World: building enterprises for a borderless world. Wharton School Publishing.

as presenting a compelling case for the modern, flexible supply chain. Value chain partners, as a defining feature of these systems, will come and go. And businesses not so connected today, may be tomorrow and even where they are competitors now, and by virtue of their currently participating in competing value chains if nothing else. So a business ecosystem comprised of individual companies and organizations, and collections of them organized into value and supply chains cannot simply be viewed as proprietary-only enterprises with all of the walls that that implies permanently in place – just moved out a bit to selectively include some immutable set of specific vetted partner businesses that must always be kept at arm’s length and on all matters.

Business law, and in both its contracts and agreements, and in intellectual property law is going to have to catch up to a new context and a new set of needs, where certain information is shared, but other information is held confidential – and personal and personally identifiable information for specific customers and potential customers definitely falls into that category. And new approaches for storing and sharing this information will be needed. And even now this information flows through emerging value chains, and as an example consider any online business that uses a third party service provider such as PayPal to manage its online payment systems.

The second point I would add is that businesses and groups of businesses can push to include business intelligence and knowledge developed from it into the public domain as a blocking action, to keep competitors and potential competitors from carving out proprietary domains that can be used as competitive barriers. What realistically can even in principle, be declared as proprietary and locked in through patent or other legal means is rapidly changing at the very least, and for a lot of reasons that are not just limited to the current and emerging state of the art technologically.

The law is an ass. I have to add, of course that the ass is a valued and capable draft animal even if it can be stubborn and even if it can demand that it go in the wrong direction at times, or not at all. Think of this posting as an acknowledgment with a specific contextual focus on the ongoing need for that next ass 2.0, with a matching nod to the fact that this will always be needed.

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