iPod business model

iPod business model - note that iTunes was released after the iPod was released. iPod's development was supervised by Apple, aspects of the UI were supervised by Steve Jobs personally. The hardware and user interface were built using pre-existing platforms by non-apple partners. 

Steve was reportedly disgusted with the existing music players and their extremely unfriendly user interfaces.

In visible pain, hidden opportunities: the many roads to disruptive innovation

In a recent article, Luke Williams, a fellow at Frog Design, argues that you can't find opportunities to innovate simply by watching for glaring problems and fixing them. Rather, you have discern more subtle problems that hide in plain sight. 

'Instead of large pain points, you should spend your time looking for--and addressing--something much more subtle: small “tension points,” the things that aren’t big enough to be considered problems. The challenge, however, is that tension points are usually hard to spot, because the symptoms are easy to overlook. They’re not screaming for attention the way “real” problems are. They’re typically little inconveniences that people have grown complacent about.' - L. Williams. 

A simple but classic example of this is the disruptive innovation that Dutch Boy created in the area of paints - not with a new paint formulation but with a new paint can design.

This helped them leap-frog their competition due to their seeming ability to look at their customer's latent need for a container that homeowners (not house painters) could use.

i-MOS case study

i-MOS Semiconductors: Review of business plan

Summary: I will not to fund them at this stage.

I-MOS semiconductors is proposing a solution to the important problem of thermal power dissipation in CMOS circuits. This problem is expected to get worse with increasing power density.  On the face of it, their solution, which is based on patenting certain implementations of impact ionization for CMOS circuits seems very promising.

However, it is clear based on some background research, that they cannot get coverage around the principle of impact ionization itself. Impact ionization is the process in a material by which one energetic charge carrier can lose energy by the creation of other charge carriers. For example, in semiconductors, an electron (or hole) with enough kinetic energy can knock a bound electron out of its bound state (in the valence band) and promote it to a state in the conduction band, creating an electron-hole pair.

If this occurs in a region of high electrical field then it can result in avalanche breakdown. This process is exploited in avalanche diodes, by which a small optical signal is amplified before entering an external electronic circuit. In an avalanche photodiode the original charge carrier is created by the absorption of a photon.

The application of this to the design of CMOS devices appears to be the novel aspect of their IP.

A closer analysis of the business plans's technology, risks & mitigation sections along with the projections regarding financials leaves me somewhat concerned.

The part about the management team's inexperience would be a easy concern to raise - but given the potential of mitigating this by leveraging Stanford University's links to the Silicon Valley, it may be less of a real challenge.

My real concerns rest more with the area that they speak about IP but do not clarify how broad the IP is. If the IP covers specific implementation of i-MOS it may be less valuable than if it covers all possible approaches to implementing i-MOS.

Their own business plans speak to how they will have to use series A for technology development and IP generation. Does this imply insufficient IP coverage?

One of their key technical risk is that the technology itself depends on strained silicon. The IP for strained silicon is held by IBM. If strained silicon technology development or rollout is slow, this will their business plan. They have no control over this. 

They also have a market risk since the number of potential customers is fairly small and these customers will hold pricing power during negotiations. This will result in the company being a "price taker" putting at risk its financials. If foundries fail to adopt their process, their backup plan going from IP licensing model to product oriented SRAM or DRAM company will require 100 orders of magnitude higher levels of investment in a very cyclical and capital intensive industry. This is not really a credible mitigation strategy.

Their financial risk is high since relatively few successful semiconductor IP companies have been successful and high levels of investment are needed in this area. Their stated mitigation for producing relatively simple product based on the fundamental technology doesn't seem to be well thought out.

My assessment is that they are in a very early part of the technology development curve and need to incubate their ideas a bit more before seeking venture funding.

I would choose not to fund them at this stage.

TRIZ – Discover the theory of inventive problem solving

TRIZ was developed by Soviet inventor and science fiction author  Genrich Altshuller. Altshuller was a patent disclosure analysis for the Soviet navy and refined his methods in one of Stalin’s Gulags.

Altshuller’s contribution was that he systematically reviewed over 40,000 patent abstracts and derived techniques that could help resolve the technical contradictions (e.g. safety vs weight ) inherent to the problem.

This resulted in the most commonly used set of 40 principles that could help inventors looking for solutions to their specific problem. However, Altshuller derived a contradiction resolving tool called ARIZ. ARIZ is an algorithmic approach to finding inventive solutions by identifying and resolving contradictions. This includes the "system of inventive standards solutions" which Altshuller used to replace the 40 principles and contradiction matrix, it consists of SuField modeling and the 76 inventive standards.

TRIZ has been used at my organization with mixed results. Though TRIZ can help democratize the invention process without solely relying on the limited number of “creative” individuals, in reality, the true benefit of TRIZ/ARIZ can be maximized by helping improve the quantity & quality of solutions developed by creative individuals.

Other variants of TRIZ can help identify technology development trajectories (useful for competitive analysis & roadmap creation) and deficiencies & failure modes related to existing products.

To summarize, TRIZ is not just a tool, it is a mindset. If properly adopted, can unleash the latent creativity that is typically present in all organizations. 

Working with Steve Jobs

Business week has an article featuring many well known individuals who have worked with Steve Jobs. To summarize, the article portrays Steve Jobs as a man who was demanding, focused on quality and did not hesitate to berate his employees or suppliers while also being a loyal friend and a sometimes fair business partner. 

However, inadvertently it also reveals how Steve Jobs would work with companies but only on his terms, would undercut them if it was in the interests of Apple and steal their know-how if he needed to.

In particular (former Motorola CEO) Ed Zander's bittersweet recollections of his encounters with Steve Jobs clearly indicate that Steve Jobs chose to work with Motorola only to gain enough information about the cell phone industry. What is not clear in this article is why Zander who was unceremoniously booted out from Motorola let himself be manipulated like this.

 Zander claims, in an attempt to paint a softer profile of Jobs,  that Jobs always regarded him as his friend and offered his personal support and advise on numerous occasions. Based on his revelations in this article,  Zander should be sued for breach of fiduciary duties for the manner in which he handled the relationship with Apple and Jobs. But this would take up it's own blog and detract from my final point below. 

After reading the article, I was left with the feeling that the title was wrong. Nobody, including his suppliers or partners, worked WITH Jobs - they always worked FOR him. Of all the people featured in this article only Ed Zander, comes close to realizing this. Jobs must surely be laughing AT these people and definitely not WITH them.

Convicting Creativity: what the frog croaked

Frog is a global innovation firm that is currently part of the Aricent group. In fact, Hartmut Esslinger, founder of Frog Design did some of the early work for Steve Jobs and Apple and is credited with helping Steve Jobs come to the conclusion that Apple should come up with its own designs rather than copy anyone else.

In a recent article in Businessweek, Doreen Lorenzo, president, frog makes several points with respect to creativity, employee value, innovation and conviction.

She argues that businesses have accepted the notion that "creativity" is a desired trait in employees. Creativity does result in the production of a lot of ideas. However, that alone is not sufficient for innovation within organizations.

What truly makes creative individuals effective is the degree of conviction behind the specific ideas that they may have. This conviction helps them stay strong in the face of inevitable criticism and look at positive approaches to building the support needed to convince the organization at large.

What she calls conviction, Daniel H. Pink would call "Drive: The surprising truth about what motivates us". 

Overall she makes a convincing case for convicting creativity on grounds of ineffectual impact while institutionalizing conviction as a key desirable trait in employees. 

Kicking off with Kickstarter.com

Finding funding to help develop new innovative solutions is the most common challenge for entrepreneurs. The traditional funding sources such as angel investors or early stage venture capital firms can demand significant equity stake in return for small investments. Alternatively, they may choose to pass up on specific opportunities that do not meet their criteria either in terms of potential markets or rates of return.

This sometimes left innovators with little option other than to bootstrap their projects by pooling together small loans from friends, family and more often than not high interest credit card debt.

Kickstarter is an innovative platform that breeds other innovations.

It provides a platform for entrepreneurs to pitch their idea to the public at large. Those in the crowd who like the idea can then support it through small donations. The entrepreneur may in turn promise such supporters anything from a note of thanks to the final version of the product at a reduced price (often free).

The product campaigns typically last for defined periods of time and have defined fund raising goals. If the fundraising goal is not met, then none of the supporters get charged and are free to support other ideas with the same dollars. This helps ensure that you do not back ventures that don't have enough support (i.e. prevents your money from being wasted).

I would not be surprised if one day, an inspired entrepreneur chose to use Kickstarter to raise sufficient funds to out-innovate Kickstarter -leading to Kickstarter's eventual demise.

Such a failure would be the ultimate & final proof of Kickstarter's success.

My friends, go forth, explore, be inspired and eventually raise your funding at Kickstarter.com 

Tucker - death of the man and his dream

This is a highly entertaining movie based on the life of Preston Tucker and his efforts to produce and market the 1948 Tucker Sedan.

The story describes how Preston Tucker managed to develop the prototype of a car designed to compete with the big-three automotive companies. Filled with boundless optimism and drive, he persevered even though the political machinery was manipulated to put him out of business.

Eventually, though he won the court cases against him, he failed to realize his vision of a new kind of car company dedicated to safety and design driven innovation.

Though this tale is an inspiring one, it should also been seen as one offering ample examples of how not to underestimate the power of incumbent entities - especially if you openly declare that you are trying to supplant them.

In this sense, Tucker appears to come across more of a salesman rather than an innovator and would have benefited from "Darwin and the Demon". He was engaged in developing innovative approaches to marketing during the early phases of the product life-cycle - he could have benefited from waiting for the right product phase.

To summarize, he successfully sold the public on his vision, made promises he did not keep, prematurely alarmed his powerful competitors who, helped by his fatal hubris, figuratively &  literally buried the man and his dream.

Darwin and the Demon – Innovating within established enterprises by Geoffrey Moore

From Wikipedia:

A Darwinian Demon[1] is a hypothetical organism that can maximize all aspects of fitness simultaneously and would exist if the evolution of species was entirely unconstrained. Such organisms would reproduce directly after being born, produce infinitely many offspring, and live indefinitely. Even though no such organisms exist, biologists use Darwinian Demons in thought experiments to understand different life history strategies among different organisms.

Geoffrey Moore’s article discusses the taxonomy of innovation. The kinds of the innovations discussed include Disruptive, Application, Product, Process, Experiential, Marketing, Business Model and Structural innovations. It also offers guidance on which form of innovation would be most appropriate at different points along the “Market Development Life Cycle”.

The market evolves through many stages ranging from early markets, the chasm (which hopefully everyone crosses), the bowling alley, the tornado, early main street, mature main street, declining main street, fault line (need to navigate) to finally the end of life phase.

Disruptive, application and product innovation are very relevant in the pre-main street phase. Process, experiential, marketing & business model innovations tend to become important in the main street phase. Structural innovation is relevant in the late main street and end of life phases of the product.

Though these guidelines are useful, the key point made in the paper is that all these kinds of innovation will encounter practices that “belong to” existing power structures and unless these existing practices are dismantled, new innovation will not find the room to grow. Here is where the article becomes a bit vague as to how one would effectively do this.

It offers the prescription of going through several stages to eventually outsource support for legacy processes. However, in my experience, the devil here lies in the organizational dynamics and legacy process details. Sometimes these roots are very hard to pull out and create a lot of organizational dysfunction which then impacts productivity adversely. Accelerating the process by fiat often leaves the affected individuals feeling powerless and can reduce productivity in unanticipated ways. HBR articles will not help you here. Only a deep understanding of the organization, credibility with the people directly affected by this transition and their active engagement will result in reducing levels of organizational trauma that innovations typically cause.

In that sense, innovations are like surgical operations that are essential but need to be carried out carefully. Else, in the extreme case, the patient/organization will die either during the procedure or shortly thereafter due to post-op complications.

The Shark Tank (ABC)

“Shark Tank” is a series on ABC and is based on the Sony TV/BBC TV Dragons Den. It features a panel of five wealthy entrepreneurs who are called “sharks”.

Panel members include (from ABC web site)

• Robert Herjavec, former owner of an IT security firm.
• Barbara Corcoran, former owner of the real estate company, The Corcoran Group.
• Kevin O'Leary, co-host of CBC's The Lang and O'Leary Exchange, and former president of The Learning Company.^[8]
• Daymond John, founder of the clothing company FUBU.
• Kevin Harrington, pioneer in the infomercial industry.
• Mark Cuban, owner of the Dallas Mavericks, Landmark Theatres, and chairman of the HDTV cable network HDNet.
• Jeff Foxworthy, Grammy Award winner, author and TV host.

The series serves as a good reminder that American ingenuity is not dead but very much alive even in the midst of a recession.

In one episode, a firefighter/inventor (HyConn™ inventor Jeff Stroope ) demonstrated a quick connect/release fire-hydrant hose clamp (HyConn™). The panel member response was lukewarm compared to the inventor’s enthusiasm for the product. They questioned whether he had a patent on the invention and he confirmed that he did have a patent covering the device.

In a remarkable example of positive thinking (not found very often on the show), one of the panelist, Robert Herjavec, wondered if the same invention could be used for garden hoses. With a dramatic, Jeff Stroope pulled out a prototype of a quick connect garden hose coupler from his pockets. He confirmed that he had IP coverage around this miniature version of his fire-hydrant connector.

Mark Cuban, one of the panel members, entered into a bidding war which then led to his final offer. Mark offered Stroope $1.25 million to buy the company, with a three-year employment deal worth $100K each year and a 7.5% royalty on the profits thereafter. Despite the other offer on the table, Stroope eventually accepted Cuban’s deal and Cuban in return got a significant piece of what should be a very popular product.

Frank Hoy's article on growth opportunities in small and medium size enterprises

This article by Frank Hoy proved to be very useful during our discussions on our business plan. By correctly relabeling the business plan itself as a product, I was able to apply the guidance in this article to help improve the quality of the plan.

Though the guidance offered here may seem self-evident, during the actual idea generation, assessment and planning discussions, I found myself ignoring many of the steps and jumping around a bit.

However, by recalling the systematic approach to opportunity identification, assessment, exploitation and execution described in this article, I was able to get back on track quickly.

Robert Ronstadt’s “corridor principle” was particularly useful as it painfully highlighted the fact that unless we got out of our own room of ideas, we would never be able to open doors leading to other opportunities.

I hope the lessons remembered from the rest of the article will serve us well as we implement our business plan. 

CGT article on product innovation challenges in the consumer goods area

The recent study on product innovation in the consumer goods area (CGT & Sopheon) indicates that only half of the products launched in the last five years achieved profit goals.

The study blamed lack of product differentiation and poor market analysis as the key causes. The study findings are derived from a global survey examining innovation practices, performance and execution impediments among companies across the consumer goods sector (including food & beverage, apparel & footwear, nonfood consumer packaged goods, consumer durable goods and consumer electronics).

The survey pointed out that only 20% of new ideas generated were considered innovative – the rest were extensions to existing products. It proposes introducing innovation governance best practices to kick-start new growth and resuscitates innovation efforts into organizations.

Though all of this seems plausible, the study recommendations focus more on process driven solutions as opposed to people driven solutions. There are plenty of alternative conjectures that may support the results of the survey.

Perhaps the reason why market research is poor is because for these new products, it may be very difficult to get good conclusive market data. In retrospect it may be obvious but not during the early stages of the development.

Perhaps the reason why these new products get low priority could be the incentive structure within the organization – it may encourage people to meet their near term objectives at the expense of long term “vision”.

Perhaps the reason why execution suffers is because it IS always the most difficult stage of product development – having the idea is easy.

Perhaps the executives have no ability to make decisions when faced with lack of information and hence stick to the tried and true.

By jumping the gun and recommending an “innovation process” solution, the study essentially underwhelms.

Ironically, this study is a perfect metaphor for describing the problems in the area of innovation in consumer goods. I would borrow from a comment in this same article and say that this study is like a linear extension of existing ideas and a repackaged version of similar studies.

In this sense, the study may have succeeded spectacularly in highlighting the problem of innovation overall, but in a manner that the author(s) may not have intended. 

Yahoo Case Study

The Yahoo!(tm) case study presents and interesting look back. The most striking aspect of the case study is that the business plan got the major trends right. These included
1) Growth of the number of people with access to the Internet
2) The Expected use by companies, home businesses and consumers
3) Ability to use platforms such as Yahoo!(tm) to serve advertisements

What they got wrong were the numbers associated with
1) Rate of growth of the Internet
2) Variety of uses for this new communication medium
3) The peer to peer communication enabled by this new medium (a vital miss)

This also brings up a question as to how much effort one should put into developing rigorous growth and financial projections in creating business plans in new areas. 

Yahoo!(tm) was attractive because of the following:
1) it solved a key problem in a new communication medium - how do you help people find information
- this was the same problem that Google(tm) later on solved in a much better automated manner.
2) Managed to 'brand' itself early in the process
3) Business model that generated revenue by focusing on ads and sponsorship

Even though their background was in technology, their core business was NOT centered on technology. Though they did mention that they would need servers, databases etc, their business plan notes that they effectively would outsource some of this work to a Canadian entity. This was probably their biggest mistake in retrospect.

On a final note, a quick internet search on Google(tm) (I don't use yahoo to search) indicates that they went public a year later with just 46 employees. This was a pretty rapid 1 year exit for the venture capital firms. Compare that with the recent nearly 10 year wait for Linkedin(tm) to go public. This is a trend that is expected to be the new norm.