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In an intriguing article in the Journal of Asset Management published in the March-April 2012 edition, Mark Summerfield overviews the battle between Apple and its many competitors. According to Summerfield, when the late Steve Jobs heard about Google’s decision to launch the Android operating system for mobile smart phones and tablets in 2010 he threatened to declare a “thermonuclear war”.
The primary strategy that Apple has followed throughout its history has been that of a closed operating system. When you choose to go Apple you enter an Apple controlled world and accept that everything is supplied by Apple.
During the 1980s the approach taken by Apple in computing was to keep their operating systems closed and only available on their machines. By contrast Microsoft embraced the IBM clones and built their business on software that could run across a wide range of hardware platforms.
For Apple users the benefits are a seamless and less “glitch” prone environment in which the Macbook, iPod, iPhone and iPad all work in harmony. The downside is that they can only use Apple software or Apple approved products.
Microsoft grew successful on the rise of the IBM PC clones in the 1980s and has held a dominant position in software with its Windows operating systems. Despite some initial hostility Apple and Microsoft reached an agreement in 1997 to allow Microsoft’s Office suite to run on Apple along with the Internet Explorer.
As the process of convergence brought mobile telephony and computing together into products such as the iPhone (launched 2007) and iPad (launched 2010) Apple innovated and secured dominant market position. Yet as with any open market there is competition and the launch of the Linux-based Android operating system in 2008 offered an opportunity for competitors to get into the market.
Korea’s Samsung launched its Galaxy S smartphone with Android operating system in 2010 and the Galaxy SII the following year. During the same period it also launched the Galaxy Tab, as a competitor to the Apple iPad. By 2012 it had sold over 30 million Galaxy phones globally and was reporting sales of over 2 million Galaxy Tabs.
Faced with this competition Apple sought to take legal action against Samsung claiming infringement of its intellectual property (IP) rights. It took similar action against other competitors including Motorola and HTC. Despite some initial success in Europe and Australia, the Apple claims for IP rights infringements were overturned.
Samsung is now free to sell its products and has modified the Galaxy Tab sufficiently to satisfy the courts that they are not identical to the Apple devices. Yet where is the future of mobile computer telephony heading?
A key point made by Summerfield in his article is the power various companies hold in relation to their ownership of patents. A study of patents relevant to the mobile communications and computing industry suggests that Samsung is a major player in the sector. As shown in the following graph Samsung holds around 31,524 patent families compared to only 1,941 held by Apple or 8,887 held by Microsoft.
What is meant by “patent families” is the ownership of patents across a range of hardware and software application, with these typically registered in the three main patents offices in the United States, Japan and the European Union. These patent portfolios create a concentration of patents within specific areas of technology known as “patent thickets”. The diagram below illustrates cluster map of the various patent portfolios relating to mobile communications and computing in which companies such as Apple, Microsoft, Motorola and Samsung compete.
At the bottom left hand side of this “patent thicket” are patents relating to mobile and wireless networks access and transmissions. At the top right hand side are software applications relating to the internet. Lower right are cellular mobile network management and operations, while the top left hand side has handset designs, antennas and touch screen displays. In essence the cluster map shows the range of hardware and software patents that can be found in almost all the smartphones and tablets we use today.
As illustrated in the diagram below are the range of patents owned by Samsung (shown in Red) and Microsoft (shown in Yellow). It can be seen that Samsung controls the largest range of patents and its technology is found inside many products, ironically a good proportion of Apple’s iPhone and iPad devices. Microsoft also has a strong presence, with strength in software.
For fiercely competitive Apple the amount of patents they own in the mobile communications and computing field is significantly less than their two major competitors. As shown in the following diagram, the main concentration of Apple’s patents is in the areas of audio process management and output (Hello Siri) and image processing and display (touch screen technology).
Yet the relatively small number of patents that Apple actually owns requires them to rely upon patents from the likes of Samsung and Microsoft for which they pay royalties. As noted by Summerfield, Samsung has been actively involved in the development of industry standards for mobile communications systems. Its work over many years since the emergence of the first GSM systems has made a significant contribution to the development of the currently mobile telephony and computing market.
Although Samsung has sought to negotiate with Apple in good faith over the use of its patents, Apple has tended to ignore these approaches and make use of technology using third party technologies by the likes of Qualcomm and Infineon that adhere to the standards set by Samsung and others who support industry standards.
The patent wars that have been fought out between Apple and Samsung within the tablet market have tended to overlook the emerging threat from Google. Since its founding in 1998 Google has grown steadily to become one of the largest technology companies in the world. In 2011 Google acquired Motorola’s mobile communications business for $12.5 billion. This purchase gave Google ownership over a substantial patent portfolio. It is a wildcard for the internet giant.
As shown in the figure below, the Motorola/Google patent portfolio is quite substantial and strengthens its position in the ongoing patent wars. By controlling this substantial portfolio Google is able to better protect its Android market in mobile telecommunications and computing. With some 9,582 patent families across a wide spectrum of the patent landscape Google is well placed to match the technology position of Samsung and Microsoft, not to mention Apple.
Of interest will be the future use to which Google may put its patent portfolio acquired at such high cost from Motorola. Technological convergence has thrown open the doors to significant shifts in the market landscape. I recall running a series of strategic management training workshops for Nokia Corporation in 2006. During a discussion of future competitive threats one particularly prescient manager made the comment that; “one day someone will put an aerial in an iPod and it will be game over”! Indeed the following year saw Apple enter the mobile telephony market with the iPhone.
Samsung was not viewed as a significant competitor to Apple in the mobile telecommunications market until its launch of the Galaxy range of products. The launch of the Galaxy Nexus Android smartphone in 2011 as a joint venture between Google and Samsung appears to signal a move by Google into the world of mobile telephony products.
Seeking to predict the future in the rapidly moving world of mobile communications and computing is fraught with risk. However, if the foundation of market competition is the control over patent portfolios we can expect Google to play a key role into the future.
Australia's two-speed economy has now been replaced with that of a three-speed one.
COSBOA and The Tax Institute will hold a round table in May to find a better definition of small business for tax and legal purposes. Yet why does it matter?
Entrepreneur Week panelists reflect on what it means to be an entrepreneur.
http://www.ted.com Sir Ken Robinson makes an entertaining and profoundly moving case for creating an education system that nurtures (rather than undermines) creativity.
This animate was adapted from a talk given at the RSA by Sir Ken Robinson, world-renowned education and creativity expert and recipient of the RSA's Benjamin Franklin award.
One of our most innovative, popular thinkers takes on-in exhilarating style-one of our key questions: Where do good ideas come from? With Where Good Ideas Come From, Steven Johnson pairs the insight of his bestselling Everything Bad Is Good for You and the dazzling erudition of The Ghost Map and The Invention of Air to address an urgent and universal question: What sparks the flash of brilliance? How does groundbreaking innovation happen? Answering in his infectious, culturally omnivorous style, using his fluency in fields from neurobiology to popular culture, Johnson provides the complete, exciting, and encouraging story of how we generate the ideas that push our careers, our lives, our society, and our culture forward. Beginning with Charles Darwin's first encounter with the teeming ecosystem of the coral reef and drawing connections to the intellectual hyperproductivity of modern megacities and to the instant success of YouTube, Johnson shows us that the question we need to ask is, What kind of environment fosters the development of good ideas? His answers are never less than revelatory, convincing, and inspiring as Johnson identifies the seven key principles to the genesis of such ideas, and traces them across time and disciplines. Most exhilarating is Johnson's conclusion that with today's tools and environment, radical innovation is extraordinarily accessible to those who know how to cultivate it. Where Good Ideas Come From is essential reading for anyone who wants to know how to come up with tomorrow's great ideas.
Scott Cook is co-founder of Intuit, the company behind QuickBooks, Quicken, and TurboTax. He now serves as the chairman of Intuit's Executive Committee, and is a mentor to entrepreneurs at the company. In this video, we sit down to discuss the making of great corporate leaders. Cook says that for any company to continue to flourish and thrive, it can't rely on its first product, its first customers, its first employees. Continual entrepreneurship is necessary to reengineer success. "Entrepreneurship isn't easy," says Cook. "But the internet, mobile phones, and app stores now enable far more entrepreneurship at a far more rapid scale, so more ideas can be tried, winnowed, iterated, and win. It's a thrilling time."
Cook is also focused on entrepreneurship in the developing world. Intuit has become active in India, creating an entrepreneurial center to hire, train, and develop Intuit employees there, with the hope they will become the entrepreneurs who invent new businesses for the developing world. That's why Cook carries around a bare-bones mobile phone, in addition to his smartphone: it's the phone most of the world uses. Right now it's just a phone, and you can't get information on it—but Cook's working on changing that. "It will either be a big hit or a total bust. This could change life for 4 billion people."
A political shell game for small business?
The CEMI Executive Summary Series provides short reviews of academic research papers and other publications in order to provide an overview of the key findings and the implications of this research for managers. 