Kirk Klasson

The Ghost in the Machine…..

The Economy of Innovation and Mutually Assured Destruction

Over the past few months, a number of the posts here have dealt with the notion of the economy of innovation (See Requiem for a Business Model, Parts I & II… January and February) Both of these posts explored the idea that rivals could not afford to pursue closed architectures when addressing emerging markets whose cost thresholds were significantly different than those served by incumbent technologies and vendors. The infrastructure required to support going it alone, including not just the resources to invent and sustain the innovation, but to establish and maintain proprietary business ecosystems, would eventually diminish the prospects for the competitor who undertook such an adventure. Tucked between the lines was a prediction that certain incumbents would be disadvantaged by this phenomenon, in particular the newly minted Microsoft/Nokia partnership. However, there is another player who perennially chooses to go it alone with essentially closed architectures.

Well the results are in.

Recently, the Queen of the Net, the Oracle of Indiana, Mary Meeker, esteemed partner at Kleiner, Perkins, Caufield and Byers, released her latest assessment of all things tech and Internet related. If you happened to miss it, you can catch it here.

This year’s report, as in all years this report has been published, included a couple of real gems. One we’ll take up here and others in subsequent posts. Tucked within this year’s tome was the revelation that despite all the hype, the emerging share leader in smart phone devices as measured in units shipped was not Apple but Android. Have a look.

Even after spotting the iPhone a considerable head start, Android is becoming the dominant platform for smart phone devices and for a number of obvious reasons, the economy of innovation being one of them.

Keith Bergelt the head of the Open Innovation Network summed up the notion of economy of innovation with respect to creating and sustaining proprietary invention in a recent interview posted on Silicon Alley Insider.

The problem is, over time, you have only the productivity and the collective intelligence of a group of however many people that work in your company, versus those things of an entire population of people around the world. Linux is not about technology, it’s about a modality for invention. It’s very difficult to sustain a competitive advantage when you are only able to tap into those people you can hire.

Read more:

But herein lies a very serious rub. You can appropriate the inventions of the people whose time you rent but you cannot appropriate the inventions of those you don’t employ. And if you’ve been watching the evolution of the smart phone market a lot of appropriated inventions are now contesting for market dominance. An IP storm is ragging in the smart phone and tablet device industry.

But to whose advantage and to what purpose?

Just this week Apple was granted a patent for a sliding off/on switch to hand held devices, basically a button with instructions to “slide to unlock”. This is not a “hard technology” advancement as much as it is a design affordance. (See: The more I buy gadgets, the better I like furniture… October) However, it is a design affordance that Android devices use but do not own as intellectual property.

So here’s the dilemma: does Apple press this IP advantage against rivals and, if so, what real gains will be realized? Steve Jobs’ parting advise was to go “thermonuclear” when it came to Android. Really? Mount a costly IP war of attrition against rivals on the basis of a patent for a design affordance? The losers here are numerous. The consumer looses as well as all the contestants. And in the bargain Apple may find that it has fewer weapons than its competitors. For while its affordances are clever and popular, hard IP in connectivity, display and processing trump it easily. And Samsung, the market leader in Android based smart phones, has over 100k patents, some that even Apple’s iPhone depend on.

Rivals can easily invent new affordances. How about an on-off switch that slides vertically? Or toggles like a light switch? It would be difficult for Apple to lay an ownership claim to the design affordance of a light switch.

To fight ones rivals to a stand still over IP in hand-to-hand, country-by- country combat seems like a fools occupation. But it seems to be one that both Apple and Samsung intend to pursue vigorously. Affordances can be redesigned and if the customer adopts and comes to prefer a new affordance, well, it is a customer you probably have lost for a couple generations of product. It seems that in many countries Apple’s IP case is centered on the proprietary nature of its design, not necessarily the underlying technology of its devices which are sourced from several different players in the industry.

So, does design constitute defensible intellectual property?

Maybe. But recently, in a case in Spain, a firm called Nuevas Technologies prevailed against Apple who had sued to prevent the sale of its NT-K tablet that is powered by Android. I guess in some venues the fact that two products look the same and act the same does not necessarily constitute the infringement of IP.

No matter how this turns out, Apple can always take comfort from the fact that imitation is the sincerest form of flattery; Apple’s shareholders, on the other hand, may not be nearly as sanguine about the compliment.

2 Comments to "The Ghost in the Machine….."

  1. You ought to take part in a contest for one of the best blogs on the internet.

    I am going to recommend this blog!

  2. I simply watend to write down a quick word in order to appreciate you for all of the unique steps you are sharing on this website. My incredibly long internet research has now been rewarded with wonderful content to go over with my friends and classmates. I would assert that most of us site visitors are definitely blessed to dwell in a good community with many special people with very helpful advice. I feel very much blessed to have come across your webpages and look forward to so many more entertaining moments reading here. Thank you once again for everything.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Insights on Technology and Strategy