By Greg Mills
Recent interviews with Google executives have pandered to the notion that Apple is doing something inherently evil asserting patent rights. Nothing could be further from the truth. Without the ability to gain an advantage over competitors in making a profit from new ideas, innovation will not be sustainable.
Rather than being a “patent bully,” Apple has led the flock in the electronics segment for so long, somehow the followers have come to think stealing Apple’s best ideas are in the public interest. That is nuts. It is in the interest of the companies that waste billions of dollars on R&D or have management that can’t see the future when they hold it in their hands.
Samsung struck a similar note when they said that Apple wanted to limit innovation. The opposite is actually true. Innovation costs money — lots of money — and there are ideas that copycats like Samsung don’t have the right to steal.
Research and development is an interesting thing from a corporate management angle. Spend too little and your competition will beat you to the next big thing and freeze you out. Spend too much foolishly and you will see your market share and market cap decline. The one thing Apple has is focus. Once they decide to do something, stand back.
The advantage of being able to choose the product ideas that have the most merit early saves billions of dollars in wasted R&D funds. Steve Jobs said that choosing what not to do was more important that choosing what to do. Ideas are cheap; brilliant ideas are more costly, but focusing on only a few good ideas is what makes Apple thrive.
Companies that are known for innovation have policies that encourage thinking outside the box. I have been to 3M Labs a number of times to discuss some of my ideas. They have a policy of allowing R&D employees time each week to play with interesting ideas that might lead to new products. Post It Notes are one such idea that took off and make 3M a lot of money. Monetizing good ideas is something 3M excels at. There is a quotation from the founder of 3M above the door leading to the labs that reads “buy it by the inch and sell it by the mile.”
Simply having good ideas isn’t enough; you also have to choose the ideas that fit the company and have the potential to make money. Back when copy machines were the big thing, Xerox had money and loads of great ideas that never found a pathway to development within the company. Steve Jobs had what the leaders of Xerox didn’t have: vision. The rest is history.
I read an article on “fixing Microsoft.” Frankly, any plan to fix Microsoft that doesn’t start with firing Balmer is doomed to failure. Missing the boat on the next big thing is now culturally engrained at Microsoft. The “it wasn’t invented here so it must not be a good idea” syndrome has put Microsoft several years behind in all the categories they should have been leading in. PC operating systems, mobile OS, touch screen tablets, smartphones and cloud computing technology are all being done better and sooner by Apple.
The punishment for not innovating in the electronics sector is brutal. Microsoft, once the most valuable company in the world, is now worth less that Apple’s iPhone business alone. Microsoft has lost half its market cap since Gates retired. Microsoft is now in the position where others must fail to allow them to succeed. If Android fails, Windows Mobile might be the only viable alternative. Bill Gates once stated that “the company that fails to obsolete its own product is doomed to see its competition do it.” The slide in market share for the PC, and the rise of Apple’s OS and iOS, is a case in point.
Samsung and Google have made their bed and now they must sleep in it. While Apple still buys tons of parts from Samsung, the patent infringement situation may well be behind a shift to alternative suppliers. Apple’s anger regarding Android has soured the situation between Google and Apple for the long term. Maps is only the beginning of that story. Even Google knows Siri is a shot across the bow of the search business that makes the money Google spends on everything else.
Apple’s advantage is that they can hook Siri up to use any search engine they want and users will go along. Just as Apple has gone their own way with Maps, the search engine business is potentially a giant money maker.
Having gotten into advertising, we will see Apple leverage that into its products and services. Microsoft has spent a bundle on Bing and still spends money trying to get it working from the standpoint of making money. Yahoo is also floundering. Hopefully, their new CEO can turn Yahoo around.
Sprint is another company that has floundered by making bad decisions. Selling the iPhone has been both a boon and blunder for them. While they are capturing new customers with an aggressive unlimited data plan, the ClearWire, Nextel and 4G cellular network mistakes have made Sprint stock virtual junk.
I have speculated that if Apple spent only the profit on the iPhone sold to Sprint to simply buy the company, the stock would double over night in value. If Apple owned a major cellular network, they could push the iCloud connection for everything they sell.
Some consolidation is likely with Apple growing and key competitors and potential takeover targets out there. So far, most of Apple’s acquisitions have been small potatoes. That may change.
That is Greg’s Bite.