Ex-Platinum CEO: Investors Look for Smaller Units

CHICAGO (04/19/2000) - Corporations age just like people do, becoming more conservative and averse to risk with the passage of time, but spinning businesses off has a rejuvenating effect and can help revive an innovative spirit, said Andrew "Flip" Filipowski, chief executive officer of Divine InterVentures, in a Comdex keynote address here today.

As the darling companies of the pre-Internet economy aged, they became more bureaucratic and consequently it grew harder for them to innovate, Filipowski said. Citing Sears, Roebuck & Co., he said the company was a model retailer in the 1970s, but today the company is no longer listed on the Dow Industrials Index and has little more than a "grand and glorious" past.

"What happened, truthfully, is they just matured," Filipowski said. Missed opportunities, bad ideas and poor execution might have figured in the decline of Sears, but eventually every company gets to the point where the they need to "spin out paradigms," he added.

Several other large corporations -- Filipowski named General Motors Corp. (GM) and General Electric Co. (GE) as two examples -- are under increasing pressure to spin off individual units, Hughes in the case of GM and the television network NBC in the case of GE, because investors today are saying loudly and clearly they want to put their money strictly into the individual units, he said.

"It's critical to spin the business out... so it can be reckless at the beginning," Filipowski said. "It needs to be a little bit reckless to innovate beyond the boundaries to get the job done."

Filipowski, former chief executive officer of Platinum Technologies Inc., a maker of data mining, data warehousing and knowledge management software, founded Divine InterVentures last year after Computer Associates International Inc. (CA) bought Platinum. The new company invests in Internet businesses.

As an investor, Filipowski said he watches out for small signs of atrophy, such as companies whose message is they "listen to their customers." Any engineer knows that customers always demand 15 percent improvement in products for 15 percent less money, he quipped.

"That's not innovation," he said. "If you listen to that, you will continue to concentrate on perhaps dead products, you will not get the benefit of innovation."

Throughout his speech, Filipowski referred to "inflection points" in the evolution of technologies that create great opportunities for wealth, saying they are occurring more frequently than ever before. He said none of the top 10 software companies in 1985 still hold their positions, and the lineup probably will change over the next decade and a half.

"I would predict, just for the hell of having something to say about it, that if we come back in 15 years, that the wealth created by the subsequent inflection points to the PC revolution will create 10 to 50 aggregations of wealth," he said. "It's not unfeasible to predict that Mr. (Bill) Gates will only be in the top 50 wealthiest people on the planet." Gates is currently ranked as the world's wealthiest individual.

Such a state of affairs could happen even without the Microsoft Corp. chairman losing any money, Filipowski said. All that's necessary is ongoing and frequent wealth-creating "inflection points."

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