Kodak film square

What Apple needs to learn from Kodak’s missteps

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Kodak’s value proposition

Kodak was founded by George Eastman and Henry Strong in 1888. During the 20th century, Kodak transformed the photography industry to become a creative outlet available to the masses. By reducing the film processing cost, it enabled every person the opportunity to own a camera and capture memories on film. By the 1970s Kodak owned over 85 percent of the market. But by the early 2000s, Kodak’s net income had declined and the company is still struggling even today to stay ahead of the game.

Kodak identified their value proposition as “capturing memories” or, “Kodak Moments,” and that the real value is in sharing those captured memories.

While Kodak’s innovative minds knew that digital would be the future, even creating a digital camera in 1975, they couldn’t break away from their foundational belief that traditional film would be everlasting. Despite owning many patents in the digital tech space, Kodak didn’t anticipate the rapid growth and enthusiasm from consumers for the digital camera. In addition to smaller profit margins compared to their traditional film revenue, Kodak failed to stay relevant in the market.

What is interesting is that Kodak’s decline happened long after the Ethernet revolution, and the dot.com boom. The writing was on the wall and yet Kodak still did not see it.

Photo by Olia Nayda on Unsplash

Apple’s value proposition

While Apple doesn’t have the same longevity as Kodak, they still established itself as a household name and worldwide brand. Founded in 1976 by Steve Jobs, Steve Wozniak, and Ronald Wayne, it would be the Steves that would develop the Apple personal computers and grow the company. Wayne left the company after only 12 days, while the Steves would leave to pursue other ventures as the competition in the personal computer market grew by 1985.

By the end of September 1997, Apple’s sales had declined to $1.6 billion and the company was desperate for a revival. Steve Jobs was asked to return to Apple that July after CEO Gil Amelio was ousted. He spoke at Apple’s Worldwide Developers Conference (WWDC) where he declared Apple’s value proposition is in addressing the following questions:

  • “What incredible benefits can we give to the customer?”
  • “Where can we take the customer?” which translated into “Is there a magical user interface that will enable a broad base market?”

Later that year when the iPhone was introduced, Jobs called it, “Magic!” The iPhone changed how the world uses a smartphone and moved the customer base (SAM) from a few million users to billions. It was this value proposition that helped Apple become the dominant market leader in the smartphone business.

Kodak and Apple’s common threads

Both Apple and Kodak created unique value propositions that changed their respective worlds. Kodak figured out how to reduce the price of the film which allowed cameras to be used by anyone for any occasion. Apple figured out a magical user interface that enables people of all ages and skill level to use a smartphone and be enchanted by its features.

But, Kodak failed to change their value proposition along with the market and to their detriment. So, how can Apple avoid this same issue? The answer is hidden within Steve Jobs words from the 1997 WWDC.

“What incredible benefits can we give to the customer? Where can we take the customer?”

This a very broad statement and can not be taken as the value proposition, but an intention, or company vision. When it comes to the value proposition, Apple needs to do better than that.

Kodak was a giant in technology and in research — they once owned over 75,000 patents! Currently, Apple is a giant in technology and in research— owning over 75,000 patents, as well.

Remember, Kodak was one of the first companies to develop a digital camera. There is a reason to believe that amongst the patents that Apple owns today there are some that will be part of the “next big thing.” Yet, will Apple be able to recognize these patents and technology, as well as continue its market leadership?

Understanding that value proposition shifts over time and capturing the shifts correctly, are the key to any company’s future. Apple not only needs to clearly identify the correct value proposition, but it will also need to reposition itself as a leader in the market and the technology. An example: after the world learned that smartphones are useful and great, the next value proposition is about communication and the magical interfaces that no longer depends on touchscreens…if this is true, the days of the smartphone as we know it are numbered.

How long do you think Apple has before they will need to come up with new and exciting technology in order to maintain their market position?

Tech devices

Why Apple v. Qualcomm was just a game of “chicken”

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Apple and Qualcomm just played the most watched game of chicken probably ever.

Just as we all got settled in to watch Apple and Qualcomm convene in court this week, it just ended.

The decision: Both parties agreed to end all ongoing litigation, including Apple’s contract manufacturers. Apple will also cough up a settlement to Qualcomm and according to mutual press releases, “The companies also have reached a six-year license agreement, effective as of April 1, 2019, including a two-year option to extend, and a multiyear chipset supply agreement.”

So much was leading up to this war, and yet there was no epic battle fought. What happened!?

Let’s begin with what started this war:

GSM, EDGE, UMTS, 4G, 3GPP…does any of it ring a bell? These are all standards and air interface telecom-based technologies. The companies who created those standards have been receiving up to a total of 15% of every mobile which includes the set of patents that are essential for the standard to work (SEPs). Those companies include Nokia, Motorola, Ericsson and more. Qualcomm, on the other hand, manufactures IP in the form of chips that include its technology and patents which are part of the 3GPP licensing program.

Now Apple does not provide any SEPs. For every mobile sold by Apple, the company must pay for the standard SEPs, which opens the door for double dipping by Qualcomm. On the other end, Apple is not a radio or a telecom company. Qualcomm believes that without its technology, Apple would have never gotten to its current leading position in the industry and thus feels betrayed after years of close partnership with Apple.

Apple can and should be able to choose who they choose to partner with when developing products. Qualcomm should be able to sell chips and ask for licensing fees since the two seem to be independent. And Qualcomm can also complain about a loss of business based on its contracts. Now, if Apple did not buy chipsets from Qualcomm then they would still need to pay royalties for its 3GPP patents that they use, therefore Qualcomm is within its right to ask for royalties.

Apple had nothing to lose while Qualcomm had everything to lose. Taking this to the courts, was a giant game of chicken — and both sides bailed.

I believe that the purpose for Apple going to court, wasn’t because the company was hoping to win financially but instead they were hoping to leave with some extra IP in its pockets. Apple believed it deserved a better deal from Qualcomm, but that doesn’t mean they were right. If the court had ruled in favor of Apple, Qualcomm would have had difficulty staying in the game. Why? Last year Qualcomm’s revenue slipped, which weakened the company. If Qualcomm had lost, it’s market value would have dropped so much, it would have never been able to recover.

Despite coming to a mutual decision, Apple weakened themselves by opening another front in the courts instead of focusing on what its next magical product should be in order to maintain its market leadership, while Qualcomm has had its name tarnished.

Less than 24 hours after the decision to drop the case, Intel announced that they will stop developing mobile chips due to the declaration by Apple and Qualcomm.

Now the big question is: how will licensing activities for 5G be informed? Stay tuned, this story is only just beginning.

Steve Jobs

Think BIG like Steve Jobs

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“You can’t start with the technology and try to figure out where you’re going to try to sell it.” — Steve Jobs, Apple’s Worldwide Developers Conference, 1997.

Over 20 years ago, Steve Jobs stepped on stage at Apple’s Worldwide Developer Conference after Gil Amelio was ousted as CEO of the company by the board of directors. Jobs was taking on the crucial task of rebuilding the company’s product line as well as the public’s faith in the company.

But, not everyone in attendance was thrilled with Job’s return to Apple. In fact, one particular audience member shared his skepticism and disappointment with him. I highly recommend you watch the entire clip for yourself. I was completely captivated by Jobs’s response to the man’s questions and feel that his answer is one that can help business leaders grow today.

Audience member: “It’s sad and clear that on several counts you’ve discussed, you don’t know what you’re talking about. I would like, for example, for you to express in clear terms how, say, Java and any of its incarnations addresses the ideas embodied in OpenDoc. And when you’re finished with that, perhaps you can tell us what you personally have been doing for the last seven years.”

Jobs: “You know, you can please some of the people some of the time, but one of the hardest things, when you’re trying to effect change, is that people like this gentleman are right in some areas.

The hardest thing is: how does that fit into a cohesive, larger vision, that’s going to allow you to sell 8 billion dollars, 10 billion dollars of product a year? And, one of the things I’ve always found is that you’ve got to start with the customer experience and work backward for the technology. You can’t start with the technology and try to figure out where you’re going to try to sell it. And I made this mistake probably more than anybody else in this room. And I got the scar tissue to prove it. And I know that it’s the case.

And as we have tried to come up with a strategy and a vision for Apple, it started with ‘What incredible benefits can we give to the customer? Where can we take the customer?’ Not starting with ‘Let’s sit down with the engineers and figure out what awesome technology we have and then how are we going to market that?’ And I think that’s the right path to take.

Apple embodies this philosophy throughout the customer lifecycle, including being exposed to the product, buying the product, implementing the product, upgrading the product, and getting help with the product. It is Apple’s competitive advantage.”

Can you pick out what Jobs identifies as Apple’s value proposition?

“What incredible benefits can we [Apple] give to the customer? Where can we take the customer?”

That is Apple’s value proposition. These questions are what helped Apple develop and create the magical user interface of the iPhone. This device would go on to change how the world uses a smartphone. It would also grow a customer base (SAM) from a few million users to BILLIONS of users.

The success of Apple revolves around their philosophy and strategy: Start with the value proposition and then develop the technology to deliver, NOT the other way around.

As a company, the most important IP asset that you own is your value proposition. Why not develop a strategy to protect this IP as opposed to trying to just protect your technology?

Before Apple debuted the first iPhone in 2007, the company went ahead and protected their value proposition — iPhone user experience using less than 10 US patents:

These patents have also been instrumental in the infringement litigation between Apple and Samsung.

Apple generates over 4,000 patents per year but they only needed these 7 to protect their company’s value proposition and therefore become the masters of their market. By protecting their use case, they were solidifying the Apple brand into the minds of technology and electronic consumers around the world.

Now, do you know how many patents you need to have in your portfolio to protect your value proposition?

Digital caterpillar to butterfly

Businessᴵᴾ Score: A new way to assess business potential using IP

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The quality of a technology company’s intellectual property (IP) is an important consideration in funding, investment and acquisition decisions. However, existing valuation methods fail to deliver true insight into the value of a company’s IP. This is largely due to the fact most IP is created and valued around protecting specific technologies rather than capturing the overall value proposition of the business. Existing methods for IP valuation simply miss the point: they fail to focus on the extent to which a company’s IP enables them to leverage the opportunity within their overall business space, or value proposition (VP).

While it is hard to believe that companies would invest in creating patents that do not protect them, it happens all the time. The fact is most patents are relatively worthless. Why? Because they do very little to protect a company from the competition because they are very easy to circumvent. Where the game changes are when companies invest in IP as a strategic asset. That’s when their own position takes hold and their multiplier should improve significantly! But, there is currently no known method to assess the quality of IP relative to the VP in a common rubric.

I am proposing a new scale to measure IP — Business to the power of IP, also known as Bᴵᴾ. Given a well-defined value proposition, the Bᴵᴾ scores an IP portfolio’s ability to protect the VP by answering the question: “What percent of the solution space that is given a value proposition is actually protected by this portfolio?” The score is between 0 to 100, where 0 is no protection and 100 is ideal protection.

The Bᴵᴾ is a rating scale that can be used to evaluate and influence the multiplier of a company at any stage. It will also inform the risk level associated with an investment in a technology-based company. Bᴵᴾ makes it is easier to compare and contrast multiple companies in the same space. It also informs early-stage investment decisions by answering the question: “Can this VP be protected and to what level?” This can offer powerful insights into the overall strategic direction of the company.

While this scale is still new and in development, I am very excited to see the impacts it will have on businesses and strategies. Since this scale is still in alpha, there will be more to share as we move through testing over the next few months. If you are curious about learning more about Bᴵᴾ, don’t be shy! I would love to connect and share more about it with you!

Castle surrounded by moat

How to use patents as a barrier to entry

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“In business, I look for economic castles protected by unbreachable ‘moats.’” — Warren Buffet

The United States Patent and Trademark Office was established to protect inventors and give them the freedom to operate without influence from larger corporations. This freedom to operate enables businesses to operate in a truly competitive environment, but it does very little to actually protect them from competitors. A typical patent is a way to guarantee that no one will be able to copy the specific technology claimed in it for a limited time, but that’s about all it guarantees. There is no legal business monopoly. So, how can we protect the business value?

Any problem that is worth solving, and any business opportunity worth pursuing, has plenty of viable competing solutions. Protecting just one solution is virtually worthless.

The trick is to figure out which patent portfolio is going to become a barrier-to-entry to all possible solutions in the space. The first step to accomplish this is to focus and clarify the value proposition. Let’s use an example to help visualize this: Dyson created a technology that solved many mechanical challenges in vacuum cleaners. Those mechanical issues had a direct impact on the value that consumers associated with vacuum cleaners, which was to maintain high suction over years of service. By solving the problem, Dyson delivered a clear value proposition. Dyson created a patent portfolio protecting the key elements of their solution and then promoted their vacuum as a patented technology. Another well-known example is Apple’s iPhone. The iPhone was not the first to market, but it was the first to provide a user interface that anyone can use with ease. Apple patented this interface before the phone was marketed, therefore protecting its value proposition.

In principle, value proposition is directly correlated to market share. In turn, protecting the value proposition is a way of protecting the market share.

Now, let’s return to patents: The atypical patent is tantamount to having a lock on the front door of your castle when there are still access points through side doors or backdoors. The right patent, or in many cases patent portfolios, can serve more as a moat, making it very difficult for an intruder to get outside of your castle, let alone enter it. It forces them to overcome hurdles to even enter your space. While having that moat doesn’t necessarily stop competitors from trying to enter your space, it gives you the benefit of time and distance to see them coming and to do something to protect yourself.

Dyson and Apple thought differently in how they approach patents. They started with the value proposition and then asked themselves, “How can I protect it?”. Apple generated a small patent portfolio (less than 10 patents) to protect the user interface. Dyson identified the key elements of their cyclon technology and protected it. Both companies demonstrate a healthy bottom line as result.

Any tech company can churn out endless IP to protect their inventions. But when a company focuses on protecting the value proposition of their business, it truly changes the game. So, here the questions that need to answer:

  1. What is your value proposition?
  2. Can this value proposition be protected with patents?
  3. What is the IP portfolio strategy that will protect your value proposition?
  4. How does your existing patent portfolio protect this value proposition?

It might be a good time to evaluate just how well protected your business is, and whether you need to change your game when it comes to your intellectual property.