Wednesday, July 27, 2011

Ripping off. Take 2.

Dan commented on my post "Ripping-off for fun and profit":

The original Mac was partly a rip off from Xerox Park and the iPod was definitely not the first digital music player. Then again, Apple made significant improvements to the product rather than just straight copying.

I think it's important to address Dan's point in a separate post because his is a very common attitude, stemming from the difficulty to see the difference between invention and innovation. And it's not only about making improvements.

The slide below is from my lectures at "Principles of Invention and Innovation". It shows a chart with dimensions Nobody - Everybody (horizontal) and Idea - "It works" (horizontal). Invention is marked by the blue dot in the left bottom corner. It occurs when one person or a small group of people comes up with an idea. Opposite to Invention, in the upper right corner, is Innovation, marked by the red dot. The path between Invention and Innovation involves turning ideas into working products/ services and having a lot of people use them in real life.

This simple chart allows us to map companies' entry points into a particular market. For example, when Google ripped off Facebook's design and entered social networking with Goolge+, it was way to the right. That is, not only the idea was not new, but it was already implemented by Facebook on a massive scale – hundreds of millions of users. The same can be said about Microsoft when it entered advanced GUI PC market with Windows 95, or its Office and XBox products. All markets with working products built according to the same Invention had already existed and had millions of users. The goal for the company was to take these users away from existing competing implementations, either by offering a price/feature advantage and/or simply applying the marketing muscle.

In contrast, Apple's entry into the GUI PC space happened much earlier. At the time Wozniak and Jobs debuted their machine, the market for such PCs simply did not exist. Xerox machine was basically a lab demo, with no market traction whatsoever. Apple's goal was to create a market, with software, additional hardware, distribution channels, and etc. The same was largely true for Apple's iPod I and iPod Touch introductions. Google had a similar entry into the text ads/search market. The risks in those two types of entry, one to the left and another to the right on the chart, are totally different.

Even Facebook, with all the hoopla about Mr. Z stealing somebody else's idea, entered the market closer to Apple's or Google circa 2000 path. If they, Facebook, were smart enough and filed for patents at the right time, Google would be in the same legal trouble their Android customers are right now with regard to Apple's patent suits. Different market entry strategy entail totally different business risks, that is why it's important to understand at least the basic difference between Invention and Innovation.

tags: invention, innovation, market, patent, synthesis, s-curve, system, business, competition, apple, google, microsoft


Dan said...

Yes, you're right of course. I should have remembered this chart from class... There is a big leap from the Xerox Park idea to millions of Mac users. I did remember your lesson from class when I watched the "Social Network" movie and I have a lot of admiration for what Mark Z has been able to accomplish.

On the other hand, I recently read a book (forgot the name) that talked about innovation through imitation and how certain companies, like Microsoft, have been able to exploit this strategy very effectively. I suppose there is also innovation through acquisition which Cisco exploited in the 90's.

Will your book be available again soon on Amazon?

Eugene Shteyn said...

There's nothing wrong about innovation by imitation or acquisition. This is how most innovation is done in the world anyway.
The main difference is business risk structure and patent strategies. "Inventors" would like to have strong patent protection; "Innovators" would love to have no patents at all.

The book is going to be out in electronic form later this year. I'm working on it right now.