Rick Wallace: Managing Competition from Startups

We had our own crisis around that a few years ago in terms of the fear that we were going to get taken out by a lower tech solution that we would ignore. Right. The basic classic problem, what we do is we spin out kind of what I mentioned. We have these small units where they're wholly focused on winning in those markets. The tyranny of the large. I mean, the thing you worry about is companies get too big and nobody feels the heat. Nobody owns winning a market. So we intentionally split our organization so that you have smaller units that are focused very heavily on innovating. And sometimes our view is if we're going to cannibalize something, we should be cannibalizing it. In other words, if there's a new technology approach. So we also do KT Ventures, where we fund with venture funds. We'll fund innovative startups that might look like they'll bring something to us in the future. And we'll do acquisitions along the line. So we'll do a combination of organic with small focus groups. We'll do M and A, and we'll do investment and venture. But it is an ongoing concern. How are you going to get taken out? Barriers to entry. What analysts will tell me is they'll say, why can't people compete with you? Because a lot of people have come and gone. And the answer is barriers to entry are very high in our business. So on the one hand, the growth rate is probably somewhat capped, but the barrier is it's very expensive to bring capital equipment to the market. It's probably 50, 60 million dollars to bring a product to market. And then you got to have worldwide support systems. And there aren't that many customers. So customers tend to favor buying from the larger players.