WASHINGTON, September 23, 2014 – The tech world and indeed the world as a whole has been stunned by the recent IPO of the Chinese tech giant Alibaba. This massive new offering gave the Chinese online behemoth a market capitalization of around $230 billion, making the company the shining star of the moment in the tech world.
However, the situation on the ground is far from bright in the tech sector as a whole. Microsoft, for example, once a technology growth mega-star, recently announced plans to cut 18,000 jobs or 14% of its workforce.
Yahoo! reports stagnant revenue and has been in trouble for years. Sony continues to be plagued by its business model recently giving a profit warning for the coming end of quarter result.
Elsewhere, one-time telecommunications giant Blackberry can no longer compete with the likes of Apple and Samsung, though its CEO John Chen believes the company will soon reach “cash flow break even.”
The tech sector will likely continue to grow in leaps and bounds in terms of innovation, however, as Kumud Srinivasan, president of Intel India recently told India’s Financial Express, stating “over the next decade, I see innovation and use of technologies playing a key role in accelerating business transformation.”
To stay involved in the technology evolution, underperforming companies like Yahoo!, Blackberry, and Sony need to pay more attention to their product lines and the people who create those products. The people who make up the tech sector make the products that make the company innovative and productive.
What will a company like Blackberry or Yahoo! lose at this point by considering extra incentives for their product developers? Perhaps it is time to move away from the old Edison model that has dominated the world over; namely, that once somebody becomes a company employee, patents developed by that employee are 100% owned by the company.
Why not share the commercial benefits of the patents?
Let’s say that Joe Smith is hired as a software programmer by Yahoo!. He creates a wonderful new app that’s likely to generate profits and that the company loves. The app is patented as a property of the company. So far, so good. After all, Joe was hired and paid for that purpose.
But what if competitors like Google or Alibaba like the product and decide to license it and pay a licensing fee to Yahoo! How, exactly, would the company be hurt if Joe were awarded 10% of the license fee from outside vendors? Such a continuous and significant pay boost would almost certainly encourage him to be more creative, knowing that if his idea were good enough not only for his own company but for competitors as well, both he and his company would benefit handsomely.
Perhaps it’s time to seriously consider an idea like this, namely to incentivize the lowly techie who develops the next big thing. Common sense would seem to tell us that if we continue to withhold meaningful incentives, why should talented techs really bother stepping it up for no apparent reward?
In any case, in an economy where pay scales have essentially flatlined for at least two decades, taking in the effects of inflation, it is time to rebalance the system and create meaningful pay increases for those unsung employee heroes who actually create the products that make a tech firm large and profitable. These include the techies, the computer scientists, the programmers and the project managers.
Many will argue that these employees are already well compensated. But perhaps more incentives for them and perhaps a few less stock options for corporate officers will incentivize a company’s employees to bring their original ideas to the corporate table. Such ideas might even include technologies that tech employees develop or toy with at home, treating them as hobbies or interesting sidelines.
Silicon Valley has been built on stories of techies and tinkerers who started working with their ideas out in the garage. Start-up tech companies, perhaps most notably Apple, begin as hobbies that turn into products their creators soon discover that people will actually buy. Creating a situation where tech employees feel comfortable bringing their garage technologies in-house to be considered by their company could bring a fledgling start up in-house. Should the idea prove marketable and likely profitable on a larger scale, companies could cut a deal with such an employee, handsomely awarding the employee while gaining the product or technology at a cost far less than paying billions of dollars to acquire it later on.
It’s easy to see that such creative incentivization is not only limited to the tech world. Such incentives could also work with consumer products and even with the auto industry. If Jennifer creates a good idea that Ford patents, and if General Motors or Toyota later want to employ that technology, part of the fee that goes to Ford should go to Jennifer. It’s high time to provide fairer, more meaningful compensation to technology creators.
Incentive compensation should not be limited to corporate officers and board members, but should be allocated to key product developers as well. Spreading the wealth could eventually prove to be a key factor, potentially vaulting also-rans like Blackberry and Yahoo! back into the tech fray by incentivizing the minds that will create “the next big thing.”
Looking ahead, there is still a great deal to be done in the area of security technologies. For example, we now need stand-alone storage facilities for crypto currencies and other digital commodities, so that people do not lose them when their computer is stolen or when their hard drive is suddenly fried.
Likewise, we need programs to keep international government snoops from getting into our computers, defending all of us not only from the NSA, but also Russia, China, and countless other countries that can’t seem to get enough of our private information without our foreknowledge.
Will companies answer the call and develop such technologies? If they rise to the challenge, that development may very well start with Joe or Jennifer. For that reason, we need to give Joe and Jennifer tangible reason to begin that process. It is high time to structure the massive rewards from a launch like Alibaba not only to a company’s founders but also to the people that made an Alibaba happen and continue to grow far into the future.