Archive for disruptive innovation
A book on World War II teaches a lesson for today on innovation. In Churchill and Orwell: The Fight for Freedom by Pulitzer-prize winning author Thomas E. Ricks (New York: Penguin, 2017), we learn about some of the reasons England struggled to defend itself effectively in dealing with Germany. A key problem discussed by Ricks was England’s poor state of preparation with inadequate machinery, feeble industrialization, weak supply chains, etc., that made it hard to fight a serious war and led to embarrassing disasters like the rapid loss of Singapore, their supposed fortress in southeast Asia. Close to home in Europe, Britain had a hard time just moving troops around — they often had to walk — and the Brits were amazed at how quickly their American cousins could mobilize when they came to the rescue. Why was England so poorly prepared?
England, as you will recall, was the birthplace of the Industrial Revolution, yet by the time of the War, they were awkwardly behind in many of the basic technologies they would need. How could this happen? Ricks comments are insightful:
Managed by family members more interested in reaping dividends than investing in new machinery and other gear, “British firms were unable to adopt modern, best-practice technology,” concluded business historian Alfred D. Chandler Jr. As a consequence, Britain’s brilliant university research generally did not make the transition into factories. Britain had led the first Industrial Revolution of coal and steam power, but generally sat out the “Second Industrial Revolution” of the late nineteenth and early twentieth centuries, built around oil, chemicals, metals, electricity, electronics, and light machinery, such as automobiles. By the end of the 1940s, it would have neither an empire nor an economy capable of competing with those of other major powers. As Correlli Barnett put it, the reality was that by the time World War II ended, the British “had already written the broad scenario for Britain’s postwar descent to the place of fifth in the free world as an industrial power, with manufacturing output only two fifths of West Germany’s.” Interestingly, Barnett was the keeper of the Churchill Archives at Cambridge University from 1977 to 1995. [Ricks, pp. 203-204]
Something similar happened in China, which once led the world in innovation and GDP, but from the Qing Dynasty until the late 20th Century, in part due to apathetic leaders unwilling to invest in or even open the doors to innovation and technology, China missed out on much of the Industrial Revolution. Only through massive reform and exerted effort in recent decades has China begun its return to a position of global leadership in innovation, IP creation, and economic growth.
In the paper industry, which I’ve been close to for many years, it’s clear that the American paper industry has largely fallen into the same trap that nearly cost Britain its freedom and did cost many lives unnecessarily. The American paper industry has largely failed to invest in new technology and relies heavily on antiquated paper machines and pulp mills that are decades behind what we have in Asia (China and Japan in particular). Their slower, less efficient machines and less efficient plantations put them at a distinct cost disadvantage. Instead of taking steps to compete better, the US industry too often tries to rely on protective legislation to raise tariffs on imported paper and make everyone in the nation pay much more for their paper than they should. The real problem is not Chinese competition, but American businessmen falling into the same pattern that nearly cost Britain the war: focusing on immediate profit and dividends while neglecting the future.
Each industry, whatever it is, needs to build for the future with investment in innovation and a willingness to boldly cope with the threats and opportunities of disruptive innovation. If your industry is dominated with leaders who feel like they can just milk their business as a cache cow with no need to invest in the future, that industry will fail.
Many leading IP professionals working with the US patent system are growing increasingly concerned about the weakening of the IP system there. Some are so concerned that they are wondering what steps can be taken to save it. Save it from what, you might ask? Save it from erosion of the basic property rights that the Constitution sought to protect. Solve it from the capricious destruction of the incentives that inventors need to create and share their work. Save it from judges and politicians who see patents and property rights as problems.
One man who wants to save our IP system is Rep. Dana Rohrabacher (R) from California’s 48th District and a member of the House Science and Technology Committee. He recently authored a piece for the Washington Times called “Patent ‘reform’ is killing the right to invent: How a congressional misstep could imperil creativity” (March 1, 2015). I agree with much of what he says.
He warns that Congress’s zeal to stop “patent trolls” will actually result in them simply doing the bidding of powerful companies who are annoyed by little guys able to defend themselves with patents. In effect, Congress is being manipulated into apparently “reforming” the US patent system but in reality they will be weakening it for small inventors and making it more friendly to the big empires that see patents as unpleasant sources of cost and annoyance. Here is some of what Rohrabacher has to say:
With the best intentions, and naively going along with the corporate world’s hugely financed publicity machine, Congress is about to stomp on America’s most creative citizens, its inventors.
The target is not the much-hyped “patent trolls.” They are a minuscule matter. What’s at stake is average Americans’ constitutional right to own what they’ve created. We’re really up against corporate lawyers acting like ogres, devouring the little guy’s innovative accomplishments.
Many of my colleagues, without understanding the legislation’s impact, will soon vote on “HR 9,” a misnamed “patent reform,” also dubbed “pro-innovation,” that is anything but. In reality, it deforms our patent system beyond recognition.
This legislation — pushed by my Republican colleague, House Judiciary Committee Chairman Bob Goodlatte, and deep-pocketed multinational corporations — appears on its way, again through the House, to the Senate, thence to an eager President Obama for signing.
When that happens, America’s exceptional system of invention will be shoveled into the depths of mediocrity, there to seep into the murk in which less scrupulous global competitors spend their resources.
In the last session, a bipartisan band of my Republican friends (some of whom made their pre-political marks as patent-holding inventors); members of the Black Caucus; and a heroic Ohio congresswoman, Democrat Marcy Kaptur, failed to dissuade our House colleagues that the bill was not the litigation-curbing effort as advertised.
The bill went to the Senate where, fortunately, it stalled. It’s back, this time resurfacing in the House with just one hearing. A whole class of small inventors, among the many who will be injured, is being kissed off as scarcely deserving a voice. All in a day’s work for the corporate influencers who shaped HR 9 from start to finish.
Just because a measure holds itself up as “tort reform” should not mean it escapes the scrutiny of free-market Republicans. It should instead call for a skeptical second look, and then more throughout its progress. Guaranteed: Such close-eyed analyses of this bill will encourage deep suspicion.
Fair-minded members will find themselves aghast at how this leaves defenseless our individual inventors, small and midsized companies, researchers, even universities who depend financially on their patent portfolios. It is a coup in the making by the biggest and best protected operators….
Legislative reform efforts invariably build on a narrative of great injustice. This one moves wildly beyond the need to fix real abuses, wherein at considerable cost companies must defend their legitimately acquired patents against unscrupulous claimants.
But the term “patent troll,” directed against such bad actors, has been transmogrified by corporate marketers to include legitimate small inventors — many of them minorities, which is why my Black Caucus friends sized up the issue astutely — who are outgunned and outspent when they try to protect their intellectual property.
Almost all infringement cases are brought by people who own a patent legitimately. If not, such cases should be decided in court. There is nothing wrong with bringing such matters to court — a cornerstone, not of crony capitalism, but of the free market itself.
Our economy and culture depend on the disruptive nature of innovation. Our Constitution deliberately made all people equal, giving no advantage to those of social status, wealth or position. The founders, even before they added the Bill of Rights, secured the right to hold patents in the Article I of the Constitution itself, the only right mentioned prior to the amendments.
We all know our country’s history of innovation. Large companies reject new ideas. It is the innovator who challenges the status quo, not the corporation.
Under the proposed bill, the pretrial discovery process — just one part of many dubious sections — tilts heavily against the small inventor, who of course must share his or her secrets with an opposing corporation’s well-armed legal team. In another era, I might have considered this an innocent, unintended consequence of ill-considered drafting. Not now.
I implore my colleagues in both the House and Senate to stop this monster aborning.
A small start-up company fighting one of the great giants of all time: it’s a classic story of David vs. Goliath, or in this case, David vs. Googleliath (a.k.a. VSL vs. Google).
Many small companies have claimed that Google misappropriated trade secrets or other IP, but rarely has Google graciously (and accidentally) cooperated in providing smoking-gun evidence the way they apparently did for Vedanti Systems, Ltd. (VSL). In this case, they allegedly left sticky notes on VSL’s trade secret materials showing their questionable intentions to take Vedanti’s technology. If VSL prevails against this giant, it may be more a case of Googleliath falling on its own sword than David being great with a sling.
VSL and their partners are now suing Googleliath for infringement of patents and theft of trade secrets in two courts. The suits are against Google (here also known as “Googleliath”) and their subsidiairies, YouTube and On2 Technologies. London-based Vedanti Systems Limited and their U.S.-based parent, VSL Communications, Inc., have turned to Max Sound for help in enforcing IP rights. The patent suit was filed in U.S. District Court for the District of Delaware, while the trade secret suit was filed in Superior Court of California, County of Santa Clara.
The complaints claim that Google executives met with Vedanti Systems in 2010 to discuss the possibility of acquiring Vedanti’s patented digital video streaming techniques and other trade secrets. Vedanti’s compression technology for streaming audio and video files is far superior to what Google had, Google’s own standards for streaming video t the time led to “jittery, low-quality video and sound for large-sized video files,” according to the patent complaint.
As part of the talks with VSL, Google had access to trade secrets such as VSL’s proprietary codec for encoding and decoding a digital data stream. That codex has proprietary techniques for “key frame positioning, slicing and analyzing pixel selection of video content to significantly reduce the volume of digital video files, while minimizing any resulting loss of video quality.”
Shortly after the negotiations began, Google allegedly began implementing VSL technology into its WebM/VP8 video codec, applying what they had learned from VSL but not letting VSL know. The WebM/VP8 video codec is extremely important for Google. It is used in many of their services and websites including YouTube.com, Google TV, the Android operating system, and Chrome web browser. They had inferior technology, but by allegedly stealing Vedanti’s, they were able to quickly advance their business at virtually no cost.
There’s just two pesky little problems for Google:
1. Vedanti has patents for its technology and is not afraid to sue. Now you might see why Google seems to really hate software patents (rather, other people’s software patents). They have been a leading force in some of the patent reform measures and related steps that have made protecting IP rights harder than ever for little guys like Vedanti. This giant, with its easy access to the White House and many other influencers, has also been an important voice against software patents, and may have helped influence popular opinion and the courts into recent devastating attacks on software patents. But Vedanti’s patents are still alive for now, so Google has cause for concern.
2. Google seems to have assisted VSL’s case by returning VSL’s trade secret materials with tell-tale sticky notes all over them showing their intent. Huh? This is really an amazing part of this story.
When the VSL Google talks ended, VSL demanded the return of its files. The returned documents were covered with incriminating Post-it notes that had apparently been left behind by Google employees. Attorney Adam Levitt claims that the notes said, among other things, that Google might possibly be infringing VSL’s then-pending patent and that Google should “keep an eye” on VSL’s technology and sweep it into a Google patent. In addition, notes warned Google engineers not to be caught “digging deep” and to “close eyes to existing IP.”
The complaint alleges that Google began to amend its preexisting patent applications and file new applications using VSL’s technology. Then in early 2012, VSL noticed that there were significant improvements to the video quality of Google’s Android operating system as well as other Google software. In June, the staff at VSL analyzed Google’s publicly available code only to discover that the code contained VSL trade secrets. Levitt asserts that the “Defendants’ theft of VSL’s trade secrets pervades virtually every website and product offered by defendants.”
“The use of new technology by established companies should be based on original creation and innovation,” said Adam Levitt, head of Grant & Eisenhofer’s Consumer Protection practice, who is representing the plaintiffs. “Vedanti Systems created groundbreaking digital video technology — technology that has forever changed the way that video content is streamed and displayed over the Internet.”
The lawsuits allege that Google willfully infringed Vedanti Systems’ patent and did so deliberately and knowingly, while recognizing the serious shortcomings of their own video streaming capabilities prior to the infusion of stolen IP.
Whether the suit will succeed or not remains to be seen, but I find Google’s lapse in leaving sticky notes on the borrowed materials to be rather hilarious, if it is true. One thing is for sure: If Vedanti’s allegations are factual, their chances of seeing some degree of justice are vastly greater by virtue of having a patent than if they did not. Software patents are essential for protecting innovations in the hugely important arena of information technology. This is the Knowledge Economy, folks, not the Iron Age. Economic growth and progress is more likely to come from advanced software and IT innovations than from hammering out better cogs and gears, and we need an IP system that understands this. Most judges and politicians ranting against software patents or patents in general do not understand this. Recent ruling that make many software innovations not even eligible for patents show that we have judges and influencers very ignorant of the physical nature of information and computer systems. Innovations like those of Vedenati are not tantamount to mere abstraction and mental exercises. They should have just as much right to be considered for a patent (provided they are novel, nonobvious, and useful) as any tool wielded by or widget hammered out by an innovative blacksmith.
Software patents matter, and they are vitally important for the best innovators of our day if they are to stand against the anti-patent giants that want anything but a level playing field. VSL vs. Google, or David vs. Googleliath, is a compelling reminder of that.
VSL’s patents in Europe are already causing pain for Google. Here is an excerpt from “Court Seizes Google’s Infringing Android Devices in Germany at IFA,” Stockhouse.com, Sept. 11, 2014:
SANTA MONICA, CA–(Marketwired – September 11, 2014) – VSL Communications, creators of Optimized Data Transmission technology and Max Sound Corporation (OTCQB: MAXD) (MAXD) creators of MAX-D HD Audio solutions, have been granted multiple preliminary injunctions from the District Court Berlin against OEM’s (Original Equipment Manufacturers) to stop the sale of certain Google Android devices in the Federal Republic of Germany at the Premier show IFA in Berlin (Internationale Funkausstellung, http://www.ifa-berlin.de/en), the world’s leading fair for Consumer Electronics and Home Appliances).
Max Sound, under agreement with VSL Communications, is enforcing intellectual property rights on VSL’s behalf and has obtained preliminary injunctions against Shenzhen KTC Technology Co. Ltd and Pact Informatique S.A., France. German Customs authorities further inspected several other exhibitors of smartphones and tablet PC’s with Android operating system. Shenzhen KTC Technology Co. Ltd. is one of the largest Chinese electronics groups operating worldwide, and Pact Informatique is a French electronics company operating in many European countries under the brand Storex. Max Sound’s actions were based on infringement of VSL’s European Patent EP 2 026 277 concerning an Optimized Data Transmission System Method. The Infringement was found on the basis that Google’s Android OS implements the H.264-Standard for video encoding, which is protected by VSL’s patent. A bailiff seized all smartphones and tablets of KTC and Pact at the trade fair IFA in Berlin on September 10, 2014. The injunctions have no automatic time limit, and opponents can file an opposition.
So what will Google do? For starters, I’m predicting we’ll see VSL and their allies soon being called some kind of “troll.” I also think we can rely on Google’s friends at the USPTO and beyond to find all sorts of reasons why Vedanti’s patents aren’t even drawn to patent eligible subject matter, regardless of how novel they may be. But the trade secret case is where I think tiny Vedanti might have a fighting chance, thanks to Googleliath’s cooperation with the sticky notes. Who said IP law wasn’t entertaining? Weird Al could have a lot of fun with this story. Suggestions for what tune to use in his spoof?
Note: The US cases referred to are captioned as: Vedanti Systems Ltd. and Max Sound Corp. v. Google, Inc., YouTube, LLC, and On2 Technologies, Inc., No. 1:14-cv-01029 (D. Del., filed Aug. 9, 2014) and Max Sound Corp., VSL Communications Ltd., et al. v. Google, Inc., et al., No. 114-cv-269231 (Cal. Sup Ct.).
- Max Sound Corp. Files Two Lawsuits Against Google, Accusing Search Giant of Misappropriating Proprietary Digital Video Streaming Technology (PRNewswire.com)
- Story at Yahoo! News
- Android Devices Seized in Europe (Stockhouse.com)
- Originally posted at JeffLindsay.com
At the Marcus Evans Innovate 2014 Conference in Shanghai today, I met Rosalie Wu, the head of marketing in China for the rapidly growing startup, Uber. Rosalie was Uber’s first hire in China and exemplifies the energetic, entrepreneurial spirit that is driving Uber to global success. She spoke about the development of Uber’s innovative business model and the many innovations they continue to add in their unique approach to “glocalization,” wherein a company going global adapts its products and business model to the unique constraints and opportunities of each local market. I see Uber at the poster child for sound and innovative glocalization.
Uber began when one of its founders and first CEO, Travis Kalanick, attended Le Web in Paris in 2008 and struggled to get a cab in snowy weather. He realized there had to be a better way to use the free market to solve the basic problem of getting a ride. His passion for solving this problem resulted in forming a San Francisco start-up that began in 2010 with a mobile app for ride sharing in San Francisco. Today they offer a refined and clever business model with services in over 200 cities. Beijing was #200, and Uber is marching rapidly across China and other parts of the world. Rosalie’s enthusiasm for Uber is contagious and really stirred the audience here at the Hongqiao Marriott Hotel.
Uber’s business model innovation includes systems for registering, insuring, and rating drivers. It offers flexible pricing that helps tap the power of the free market much better than conventional taxi pricing and taxi systems can. With Uber you can select quality drivers and have simple, positive experiences getting to where you need to go when you want to be there. The business model is being extended with many other innovations such as delivery of products and even services (in China, they have even offered the service of having a traditional Chinese lion dance sent to be performed in your office). The innovate their offerings to meet local needs and adapt to local regulations and customs, while finding clever ways to continually make people’s lives better. This will inspire the competition to do more and bring ongoing innovation that will benefit us all. Amazing what a bad snowy night can do when an innovator is around.
Less than a year ago, Uber was valued at over US$3.5 billion. A few months ago in 2014, Uber was valued at around $17 billion. This is the power of doing something that brings people together in new ways.
Uber has faced and overcome a host of innovation barriers. Funding challenges, regulatory burdens, and stiff competition. But they have forged ahead with a relentless focus on making life better for its customers with green, energy saving, disruptive innovation . May the path before them remain wide open. Kudos, Uber!
A painful message from the CEO of Nokia, shared below, reminds us that the pain of disruptive innovation often catches major incumbents unaware. As they listen to their existing customers and improve existing products and services, often incrementally, they may not sense the tsunami of change that is coming from afar. The innovations that will disrupt them often seem not good enough to threaten their core business. By ignoring the threats and opportunities around them, they continue to focus on core competencies and core markets and feel little pain until the new competition, ignore too long, has developed the skills and competencies to strike at the core itself. When the pain is felt, it is often too late. When the heat of a raging fire is finally felt and awakens you from your dreams, it is often too late. You may escape if you are lucky, but the building is likely to be lost. How will Nokia cope? Read the speech below, then we’ll discuss their newly announced plans.
Nokia’s CEO, Stephen Elop, gave this speech to employees last week and the transcript has been posted on several sites such as Casey’s Daily Dispatch, the Wall Street Journal’s TechEurope Blog, Ongo.com, MSDN.com. It is brutal and painful. A few years ago tech stock experts recommended Nokia as one of the leaders in the business and best investment opportunities. But by focusing on their existing markets and competencies, they missed the changes that would envelope the market and misallocated their innovation resources. They are now on a “burning platform.”
There is a pertinent story about a man who was working on an oil platform in the North Sea. He woke up one night from a loud explosion, which suddenly set his entire oil platform on fire. In mere moments, he was surrounded by flames. Through the smoke and heat, he barely made his way out of the chaos to the platform’s edge. When he looked down over the edge, all he could see were the dark, cold, foreboding Atlantic waters.
As the fire approached him, the man had mere seconds to react. He could stand on the platform and inevitably be consumed by the burning flames. Or he could plunge 30 meters into the freezing waters. The man was standing upon a “burning platform,” and he needed to make a choice.
He decided to jump. It was unexpected. In ordinary circumstances, the man would never consider plunging into icy waters. But these were not ordinary times – his platform was on fire. The man survived the fall and the waters. After he was rescued, he noted that a “burning platform” caused a radical change in his behaviour.
We too, are standing on a “burning platform,” and we must decide how we are going to change our behaviour.
Over the past few months, I’ve shared with you what I’ve heard from our shareholders, operators, developers, suppliers and from you. Today, I’m going to share what I’ve learned and what I have come to believe.
I have learned that we are standing on a burning platform.
And we have more than one explosion – we have multiple points of scorching heat that are fuelling a blazing fire around us.
For example, there is intense heat coming from our competitors, more rapidly than we ever expected. Apple disrupted the market by redefining the smartphone and attracting developers to a closed but very powerful ecosystem.
In 2008, Apple’s market share in the $300+ price range was 25 percent; by 2010 it escalated to 61 percent. They are enjoying a tremendous growth trajectory with a 78 percent earnings growth year over year in Q4 2010. Apple demonstrated that if designed well, consumers would buy a high-priced phone with a great experience and developers would build applications. They changed the game, and today, Apple owns the high-end range.
And then there is Android. In about two years, Android created a platform that attracts application developers, service providers and hardware manufacturers. Android came in at the high end, they are now winning the midrange, and quickly they are going downstream to phones under €100. Google has become a gravitational force, drawing much of the industry’s innovation to its core.
Let’s not forget about the low-end price range. In 2008, MediaTek supplied complete reference designs for phone chipsets, which enabled manufacturers in the Shenzhen region of China to produce phones at an unbelievable pace. By some accounts, this ecosystem now produces more than one-third of the phones sold globally – taking share from us in emerging markets.
While competitors poured flames on our market share, what happened at Nokia? We fell behind, we missed big trends, and we lost time. At that time, we thought we were making the right decisions; but, with the benefit of hindsight, we now find ourselves years behind.
The first iPhone shipped in 2007, and we still don’t have a product that is close to their experience. Android came on the scene just over 2 years ago, and this week they took our leadership position in smartphone volumes. Unbelievable.
We have some brilliant sources of innovation inside Nokia, but we are not bringing it to market fast enough. We thought MeeGo would be a platform for winning high-end smartphones. However, at this rate, by the end of 2011, we might have only one MeeGo product in the market.
At the midrange, we have Symbian. It has proven to be non-competitive in leading markets like North America. Additionally, Symbian is proving to be an increasingly difficult environment in which to develop to meet the continuously expanding consumer requirements, leading to slowness in product development and also creating a disadvantage when we seek to take advantage of new hardware platforms. As a result, if we continue like before, we will get further and further behind, while our competitors advance further and further ahead.
At the lower-end price range, Chinese OEMs are cranking out a device much faster than, as one Nokia employee said only partially in jest, “the time that it takes us to polish a PowerPoint presentation.” They are fast, they are cheap, and they are challenging us.
And the truly perplexing aspect is that we’re not even fighting with the right weapons. We are still too often trying to approach each price range on a device-to-device basis.
The battle of devices has now become a war of ecosystems, where ecosystems include not only the hardware and software of the device, but developers, applications, ecommerce, advertising, search, social applications, location-based services, unified communications and many other things. Our competitors aren’t taking our market share with devices; they are taking our market share with an entire ecosystem. This means we’re going to have to decide how we either build, catalyse or join an ecosystem.
This is one of the decisions we need to make. In the meantime, we’ve lost market share, we’ve lost mind share and we’ve lost time.
On Tuesday, Standard & Poor’s informed that they will put our A long term and A-1 short term ratings on negative credit watch. This is a similar rating action to the one that Moody’s took last week. Basically it means that during the next few weeks they will make an analysis of Nokia, and decide on a possible credit rating downgrade. Why are these credit agencies contemplating these changes? Because they are concerned about our competitiveness.
Consumer preference for Nokia declined worldwide. In the UK, our brand preference has slipped to 20 percent, which is 8 percent lower than last year. That means only 1 out of 5 people in the UK prefer Nokia to other brands. It’s also down in the other markets, which are traditionally our strongholds: Russia, Germany, Indonesia, UAE, and on and on and on.
How did we get to this point? Why did we fall behind when the world around us evolved?
This is what I have been trying to understand. I believe at least some of it has been due to our attitude inside Nokia. We poured gasoline on our own burning platform. I believe we have lacked accountability and leadership to align and direct the company through these disruptive times. We had a series of misses. We haven’t been delivering innovation fast enough. We’re not collaborating internally.
Nokia, our platform is burning.
We are working on a path forward — a path to rebuild our market leadership. When we share the new strategy on February 11, it will be a huge effort to transform our company. But I believe that together, we can face the challenges ahead of us. Together, we can choose to define our future.
The burning platform, upon which the man found himself, caused the man to shift his behaviour and take a bold and brave step into an uncertain future. He was able to tell his story. Now we have a great opportunity to do the same.
Alex Daley’s commentary at Casey’s Daily Dispatch on this memo is among the best. A few excerpt from Alex follow:
But one of the mobile world’s most celebrated early stars is fading, and fast – Nokia. The Finnish mega-company traces its roots all the way back to the rubber industry in 1865. But it evolved over nearly a century and a half into the largest mobile phone supplier in the world. At its peak, the company accounted for the majority of all phones in the world. However, lately things have begun to unwind. Market share for the company has slipped from 39% in 2008 to 35% in 2009, and again to 30% in 2010.
Not only is their global market share decreasing, they’re being assaulted from every side and find themselves with shrinking influence, shrinking margins and shrinking options. Apple, RIM, and the contingent of Android phone manufacturers around the world have gulped up the overwhelming majority of the high-end smartphone market, where profit margins are high. On the other end of the spectrum, Chinese technology outfits have begun to lock up the massive lower end of the market, turning out designs and equipment at a breakneck pace.
Desperate to find relevance in a market moving on without the company, last year they appointed former Microsoft executive Stephen Elop to the position of CEO. He has been pretty quiet since he joined the company, taking his time to learn the business and get to the root of the issues that cause the market to value this technology giant at less than the $43 billion in revenue it generated last year. Quiet until now….
And [Elop’s] use of the term “platform,” while symbolic, seems like a calculated choice for a company that staked its future on a failing developer platform known as Symbian, and a long delayed smartphone platform called MeeGo yet to even launch nearly four years after the iPhone was originally released….
The question of the hour is not just whether or not that will happen, but whose platform it will be. Apple doesn’t license. HP has locked up WebOS with its Palm buy. That really only leaves Google, whom Elop cites as a competitor, and Microsoft, his Alma Mater, which goes completely unmentioned in the damning note….
Elop’s failure to mention Microsoft was certainly deliberate, for a few days later he announced a major partnership with Microsoft aimed at saving the company. See “Microsoft, Nokia Agreement Signals New Smartphone Game,” a Feb. 14, 2011 story from EWeek.com.
Microsoft and Nokia announced a wide-ranging partnership Feb. 11, which will include running Windows Phone 7 on Nokia smartphones, in a combined bid to blunt the competitive momentum of Google Android and the Apple iPhone.
“We have a formidable plan to ensure our collective leadership in the smartphone market and in the ecosystem that surrounds it,” Nokia CEO Stephen Elop told a London press conference. “Our long-term strategic alliance will build a global ecosystem that creates opportunities beyond anything that currently exists.”
Now comes the hard part: actually building that ecosystem.
A formidable plan? I’m sorry, but part of me cringes when anyone declares that the plan they created is “formidable.” Too close to “fool-proof.” And we went from desperation on the brink of ruin on a burning platform one day to a formidable plan the next? Eweek mentions some reasons to restrain enthusiasm:
“Microsoft wins big in this arrangement, having gained a partner for an OS that is struggling in the market and losing share even among its current device suppliers (e.g., HTC),” Jack Gold, principal analyst of J. Gold Associates, wrote in a Feb. 14 research note. “Nokia brings huge scale and can dramatically increase WP7 market share beyond its traditional reliance on vendors with much lower market share. And this precludes Microsoft from having to enter the device market directly (as it did with its Kin disaster).”
However, some analysts see the deal as a decidedly negative one for Nokia, particularly in the longer term.
“We think Nokia has created a new set of issues—a lack of ecosystem control, margin decline and a raft of new royalty payouts—in return for a ‘unique relationship,'” Lee Simpson and Andrej Krneta, analysts with Jeffries & Co., wrote in a Feb. 14 research note. “With WP7 as Nokia’s new primary smartphone OS, why would any operator take an end-of-life product (Symbian)? This can only cap the top line for Nokia going through 2011 and much of 2012.”
The analysts believe that Nokia’s first Windows Phone 7 devices will be “hollowed out ‘N8s’ or the like,” referring to one of the manufacturer’s higher-end smartphones. “Despite longer-term assertions of speedy time to market designs, the overhauling of road maps (and cancellations near-term) will likely dent near-term progress and leaving Nokia dangerously exposed to further market-share erosion.”
I wish Nokia success, but feel that it will take more than Microsoft to bring them success. Innovation fatigue needs to be addressed at multiple levels in the company and the culture radically strengthened to reach their destination. Otherwise, further fatigue may stand in the way.
Doug Gross at CNN has a list of the top 10 tech product failures in recent years (hat tip to Greg Aharonian’s Patnews newsletter). The list includes:
- Apple Newton
- Google Wave
- Microsoft KIN
- Atari Jaguar
- Virtual Reality
Some great ideas and even some cool technology went into most of these products, but they failed for various reasons. Wrong business model, easy or vastly superior alternatives, low-cost “good enough” alternatives, benefits too narrow, company out of touch with the market, poor execution, premature launch, failure to learn and iterate to respond to the market, etc. Their failures important for other innovators to consider, for there are many things that can stand between you and innovation success. Success is more likely to favor the the flexible few who learn from the initial failure and have funds left to iterate to give the market what is really wanted.
I was surprised to see Virtual Reality on the failed tech list, but it certainly hasn’t lived up to all the hype. Here is CNN’s take:
Remember when we were on the verge of living high-tech virtual lives?
When optic sensors, VR helmets and power gloves were supposed to have us living in “The Matrix?” Or at least on the Holodeck?
Turns out, the promises were a little ahead of their time.
“The technology of the 1980s was not mature enough,” says Stephen Ellis, who continues hacking away at virtual reality at NASA’s Ames Research Center.
The main effect of commercial VR-tech that’s rolled out since then has largely been making the user want to throw up.
Virtual reality may have a pathway similar to RFID (radiofrequency identification technology). Years of hype hindered by high costs and inadequate execution, but successful niches will be found where its impact can become enormous as the technology becomes useful and affordable for those applications, while not being nearly as ubiquitous as pundits once projected. There is something there, making it far too early to write off virtual reality or several other of CNN’s top 10 failures as genuine failures. For those who can learn from the marketplace and adjust business models and technology to exploit genuine unmet needs, there are exciting opportunities that we may see shortly.
I am delighted to see Wired Magazine feature a story about the new book on the largely untold story of one of the original inventors of the computer. Nearly everyone has heard the standard story of the invention of the ENIAC computer at Penn State by a team led by John Mauchly and J. Presper Eckert Jr. However, as is so often the case in the world of innovation, those who get public credit for an invention may not be the original inventors. In many cases, one can make a case that key elements of a successful invention were borrowed or even stolen from a neglected inventor who deserves at least some of the credit.
In “Pulitzer Prize-Winning Novelist Tells the Tale of the World’s First Computer” by Gary Wolf, we learn that John Vincent Atanasoff with his partner Clifford Berry were already working in the 1930s on assembling a computer in the basement of the physics building at Iowa State University. Their invention was finished in 1942, four years before ENIAC was finished. About the size of a large desk, the Atanasoff-Berry computer (ABC) could do laborious calculations rapidly. It was relatively unknown, but was known and admired by other inventors working on related problems, including some of the team that would develop ENIAC.
Now a novelist will help set the record straight. Jane Smiley, a winner of the Pulitzer Prize for fiction, has written The Man Who Invented the Computer to tell Atanasoff’s story. He had a successful career, but his magnum opus, the computer, was “forgotten until the late 1960s, when a legal battle broke out over the patents that the ENIAC project leaders had filed on basic computing concepts. In the course of the bruising litigation between the Sperry Rand Corporation, which had purchased the ENIAC patents, and Honeywell, which wanted to break them, it was proven that the ENIAC team stole key ideas from Atanasoff. The patents were declared invalid by a federal judge. But Atanasoff’s achievement never became widely known or celebrated.”
Smiley learned about his life at Iowa State, where Smiley studied and taught.
[At Iowa State,] she met someone who plays a minor, ignominious role in her tale: a professor who told her that, as a graduate student, he had been the one to dismantle and throw away the prototype of some strange calculating device that had been left behind in the basement of the physics building. The first digital computer was lost. “He ultimately went on to become the head of the computer science department,” Smiley says, “and he told me that destroying that computer was one of the great regrets of his life.” It is out of such personal twists and ironies—a novelist’s materials—that Smiley builds her tale, capturing both Atanasoff’s genius and, at the same time, the forces of chance that influence invention.
It is of such twists and ironies that the journeys of many other great inventors are formed, some of whom we discuss in Conquering Innovation Fatigue. The problems that deprive inventors and innovators of the due credit and reward for their work are often part of the innovation fatigue factors that can wear innovators down and decrease incentives for innovation for many. There are things inventors can do to improve the odds of success, and of receiving credit for their work. May great inventors never be forgotten!
The world of automobiles today is radically different than it was a twenty years ago, based on several metrics. In the area of fuel efficiency, it was once an automotive maxim that if you wanted good fuel efficiency, manual transmission was clearly the best way to go. Automatic transmission was more convenient but far more wasteful of energy. Today a radically different result has been achieved, and curious observers can wonder what happened to suddenly make automatic transmissions more efficient. The answer, in a simplistic sense, boils down to the combined effect of multiple “incremental” innovations in automatic transmission design that together have propelled automobiles radically forward. In “Why do automatic transmissions now get better fuel efficiency than manuals?,” Green AutoBlog explores the changes that have turned things around so dramatically, but gradually.
In the last 25 years, there have been three major advances to automatic transmissions that have made the biggest difference in fuel economy gains: more gear ratios, lock-up torque converters and electronic controls. Lock-up converters incorporate a mechanical clutch that can hard-couple the pump and turbine when the vehicle is cruising with no transmission shifting. The clutch allows the torque converter to achieve near-100 percent efficiency. In recent years, engineers have also been able to utilize electronic controls to increase the proportion of time that the torque converter is locked, further increasing efficiency.
Those electronics have played a much bigger role than just controlling the torque converter clutch. Since the mid-1990s, engineers have integrated the management of the engine and transmission making the entire system work together. In combination with electronic throttle, spark and fuel control, engineers have been able to optimize how the engine behaves during shifts as well as during acceleration.
Since fuel efficiency is measured on standard driving cycles on a dynamometer, the engineers are able to calibrate how the throttle responds regardless of what the driver actually requests with the accelerator pedal. This way, actual vehicle response can be closer to the demands of the cycle so the transmission typically shifts at lower engine speeds. The increasing number of ratios – automatics have gone from three speeds in the early-1980s to six, seven and eight speeds today – has also allowed engineers to calibrate shift patterns that keep the engine closer to its most efficient speed regardless of vehicle speed.
Despite the mechanical efficiency advantages of manual transmissions, the transmission is controlled by the vagaries of the driver trying to follow the test protocol. The result is that in most cases, the automatic transmission can now match or beat the manual. Going forward, automatics are likely to improve even more as torque converter automatics are gradually supplanted by dual-clutch transmissions (DCT).
Sometimes innovators strike out for radical change all at once. One can imagine brainstorming teams in the 80s talking about doing away with transmissions altogether, or making them purely electronics, or coming up with entirely different systems that could improve performance. The wild ideas may elevate hopes before they are incinerated on the pyres of reality, while realistic engineers stayed focused on improving each element of the automatic transmission. The latter gave us important but arguably incremental gains, but cumulatively, they have delivered radical innovation that turns popular wisdom upside down, giving us automatic transmissions that are not only more convenient but now also more fuel efficient than manual transmissions.
There are lessons in their story for many other fields.
In May 2010 I was invited to speak at a conference of WTA (the Wisconsin Telecommunications Association) about innovation lessons for the telecommunications industry from our recently published book, Conquering Innovation Fatigue (John Wiley & Sons, 2009). Here is a condensed version of the presentation. I’ll do another Pixetell soon with some additional content.
Can’t help mentioning this: I had a technical problem with the above Pixetell and sent an email to their tech support team. I had a response within minutes. In fact, I had a phone call – the kind that takes real people using real time – and the quickly helped me troubleshoot the problem and get this post working. Wow! Miracles still happen–or at least great customer service. Love Pixetell. Great way to turn PowerPoints or whatever you have on a computer plus your voice into a recorded presentation that you can share with a URL, embed into a blog, or save as a movie. Pixetell is a product of Ontier, Inc.
The latest Journal of Product Innovation Management (JPIM), an excellent journal from PDMA for those interested in innovation and new product development, has an article that describes an approach to disruptive innovation that we developed at Kimberly-Clark Corporation when I was there as Corporate Patent Strategist. “Disruptive Innovation and the Need for Disruptive Intellectual Asset Strategy” by Jeff Lindsay and Mike Hopkins (JPIM, Vol. 27, No. 2, March 2010, pp. 283-290), addresses one of the large gaps in the literature around disruptive innovation, namely, what role intellectual assets should play. Search through the popular books and articles by leading authorities in disruptive innovation and you will find scant reference, if any, to intellectual assets, yet they may be key to overcoming the dilemma faced by corporations. A small, aggressive team in a corporation can employ a variety of low-cost intellectual asset (IA) tools to mitigate potential competitive threats from disruptive innovation, while also subtly laying a foundation for future offensive disruptive innovation from the company. By the time the corporation as a whole recognizes the value of an emerging disruptive innovation, it need bot be too late, as is often case, for the initially defensive actions that were taken at an early stage can now provide a serendipitous foundation for taking the offense. It’s not easy, but the odds of success or survival can be significantly increased.
Here is our abstract:
Disruption has become a popular business term, yet it is often used so loosely as to convey almost nothing of substance. Here a largely neglected factor is addressed: the role of intellectual assets in securing opportunities for or averting threats from disruptive innovations. While the literature explains why the decision-making systems in large established companies cause difficulty in responding effectively to disruptive innovation the generation of intellectual assets (e.g., patents, publications, trademarks) typically is not subject to the same cultural and structural barriers. Though it may be difficult to convince a business to invest millions in pursuit of a speculative disruptive innovation, it is much easier for a small team to gain support in pursuing low-cost intellectual assets in the name of mitigating potential threats. A two-pronged approach is proposed that builds on the authors’ experience at Kimberly-Clark Corporation in dealing with disruptive threats and opportunities. The approach calls for generation of intellectual assets, often using small proactive teams, to (1) protect an existing business by reducing competitive risks from disruptive innovation, including the risk of new products with disruptive potential and the risk of associated competitive patents that might limit one’s response; and (2) prepare for future new and disruptive business opportunities that could be protected or strengthened by the intellectual assets generated. Kimberly-Clark’s growing experience with this approach suggests that it may be a valuable component of one’s strategy for innovation and protection of the business.