How Not To Innovate: Trying To Create An Exact Replica Of Another Service

from the gotta-go-beyond-that dept

We've talked in the past about the importance of copying what other companies do as a business strategy (and just how common it is throughout history, despite the pejorative terms associated with it). But one of the key factors in making "copying" a successful strategy is in knowing how to improve upon what you copy. It's why Apple has been so successful over the years. Yes, it builds on the ideas of others, but does so in a way that improves them and makes them more usable.

Yet, we always hear of people fearing companies copying one another (sometimes mistakenly calling them "thieves" or decrying their unoriginality). And yet, it seems pointless to worry about such things. Even as people always seem to be afraid of big companies with big budgets copying others, history has shown time and time again that this almost never works. That's because merely copying what someone is doing not only takes you "where the puck has been" rather than "where the puck is going," but also has you focused solely on the outward, superficial aspects of what makes another product or service successful. What's missing is an awful lot of details in the background -- the knowledge of why certain things work and don't work, as well as how users and customers actually interact with the product. Such copying almost inevitably fails.

With that said, it seems like Samsung's plan to make its own Facebook, using the rather telling code name "Samsung Facebook" seems destined to fail for exactly that reason. The very fact that they're internally calling it "Samsung Facebook" shows that they're already aiming at a target in the past, rather than the future. It's the exact wrong approach and almost guarantees that whatever comes out of it will be seen as pointless by the time it launches. Learning from what others do is a useful strategy. Copying what others do can be a very important business strategy -- but it has to be done with the goal of exceeding where those others are heading, not in replicating what they've already done. That's a recipe for expensive failures.

Filed Under: copying, innovation
Companies: facebook, samsung

Dear Judge Koh: Competition Is No Reason To Ban A Phone

from the that's-ridiculous dept

We already had mentioned that Apple had succeeded in getting a rare pre-trial injunction against Samsung's tablets, but now it's also succeeded in blocking the Galaxy Nexus phone as well, though the judge's reasoning is a bit bizarre:

"Apple has made a clear showing that, in the absence of a preliminary injunction, it is likely to lose substantial market share in the smartphone market and to lose substantial downstream sales of future smartphone purchases and tag-along products," Judge Koh said in Friday's ruling.

First of all, this seems to be yet another admission by Apple that it just can't compete in the marketplace against Samsung. Such a ruling seems to scream out to potential buyers: hey, check out the devices that even Apple admits you'd want over its own. But, more importantly, "losing substantial market share" is what competition is all about. If someone comes out with a better product, then the other company should lose substantial market share. That doesn't deserve an injunction. That harms the market, who clearly -- even by Apple's own admission, apparently -- wants the other product more.

The fact that two phones will compete is no reason to ban a phone. Let them compete. Let the market decide.

Even more bizarre is why an injunction should be issued at all. Following the MercExchange decision, courts are only supposed to issue injunctions in exceptional cases. If it's an issue that can be dealt with by requiring a royalty, then there's no reason to issue an injunction.

Samsung, of course, is appealing this and asking that the injunction be put on hold until that appeal is heard. In the meantime, some are pointing out that, for all of Apple's insistence that Samsung copied the designs of its phone and tablet from Apple, you could easily make the argument that Apple got some inspiration from Samsung as well: And really, that's the point. Innovation and advancement involve all sorts of copying, but also improvements. It goes back and forth. Attacking one party for copying another misses the point, limits competition and harms consumers. It's too bad the US patent system and the courts now want to aid that process.

Filed Under: android, competition, injunction, iphone, lucy koh, patents
Companies: apple, samsung

New Study Shows Patent Laws Spur Patents; Report's Authors Pretend This Means Innovation

from the they're-not-the-same dept

Slashdot points us to an article about a new research report, commissioned by a biotech trade group that argues the evidence shows that patents spur innovation, rather than hinder it. However, as some quickly noticed, the report has severe methodological flaws, starting with the fact that it seems to use patent activity as a proxy for innovation. So, it argues that stronger patent law creates more patents (or more funding of patents or more sales/licensing of patents) -- and then claims that clearly there's more innovation. But we already knew that patent laws spur patents. The question -- not answered in the report -- is about the actual impact on innovation.

Just as an example, the report provides some case studies from different countries. In one of them, it talks about how Taiwan basically took the US' Bayh-Dole Act, which encourages the locking up of university research... and shows there was much more patenting afterwards. The report discusses how "impressive" this is:

A 2010 study of the effects of this legislation on university patenting activity provides a concrete and detailed example of the positive effect the introduction of technology transfer mechanisms can have. The study examines patents granted to 174 Taiwanese universities during the period of 2004 to 2009 and compares this to the period preceding it. Strikingly, the study finds a sharp and sustained increase in university’s patenting activity: patenting increased from 446 patents in 2004 to 1,581 by 2009. This is an impressive increase of 354%. As importantly, apart from a slight drop in 2007, this growth has been progressive and sustained year after year.

Yup. So patent laws that expand the coverage of what's patentable and provide incentives for more patents... increase the number patents. What does that say about innovation? Abso-freaking-lutely nothing. And, in fact, if you look at the actual research on the impact of Bayh-Dole in the US, while it similarly increased patent activity, it didn't increase research, and actually held it back. This is because university research is meant to be shared and meant to be discussed and to have others work on it. That's how great research is done: with lots of sharing of information and ideas to spark new thinking. But the Bayh-Dole Act basically told researchers to shut up, keep things secret, and patent the results. Because of that there are a lot more patents, but a lot fewer real breakthroughs, because you no longer have the same information sharing, discussion and openness that created true innovation in the past.

Filed Under: bayh-dole act, licensing, patents, taiwan

Every Successful New Technology Has Created Panic From Those It Disrupts

from the well-said dept

Jeffrey Tucker has an all around fantastic essay on capitalists who fear change -- discussing how companies and industries in an otherwise capitalist/free market society freak out when they face competition from disruptive innovation. They go to amazing lengths to claim that it's not real competition or innovation they face, but something that must be illegal, immoral, unethical or the death of all things good and holy. The technopanics set in with alarming frequency, and in the end, they are always wrong. The end result ends up being bigger and better than ever before, even if some of those legacy players don't make it through. Tucker tells the story wonderfully:

Through our long history of improvement, every upgrade and every shift from old to new inspired panic. The biggest panic typically comes from the producers themselves who resent the way the market process destabilizes their business model.

It was said that the radio would end live performance. No one would learn music anymore. Everything would be performed one time, and recorded for all time, and that would be the end.

Of course that didn’t happen. Then there was another panic when records came out, on the belief that this would destroy radio. Then tapes were next and everyone predicted doom for recorded music since music could be so easily duplicated (“Home Taping is Killing Music”). It was the same with digital music: surely this would be the death of all music!

And think back to the mass ownership of books in the 19th century. Many people predicted that these would destroy new authors because people would just buy books by old authors that were cheap and affordable. New authors would starve and no one would write anymore.

There is a pattern here. Every new technology that becomes profitable causes people to scream about the plight of existing producers. Then it turns out over time that the sector itself thrives as never before but in ways that no one really expected.

Tucker includes other examples, but then explains the reality of innovation and profits. Profits are a temporary thing: because copycats do come along. But that's a good thing, because it forces greater innovation, as others seek to collect profits. You profit by being unique and different, and you encourage that to continue by letting others copy. That leads to more incentives to keep innovating and keeping make the world a better place. But, of course, that's hard, and companies want to keep their profits. So they move away from free market capitalism, towards crony capitalism:

This is why business is always running to government for protection. Kill this crazy new technology! Stop these imports! Raise the costs on the competition! Give us a patent so that we can clobber the other guys! Impose antitrust law! Protect me with a copyright! Regulate the newcomers out of existence! Give us a bailout!

And, of course, the public often accepts the moral panic story. Hell, I'd bet that even the companies making those claims -- completely out of self-interest -- believe the horrible things they're predicting from these new technologies. Jack Valenti was being sincere when he thought the VCR would destroy Hollywood. He was wrong. They're always wrong.

Here is a striking fact about the human mind: we have great difficulty imagining solutions that have yet to present themselves. It doesn’t matter how often the market resolves seemingly intractable problems, we still can’t become accustomed to this reality. Our minds think in terms of existing conditions, and then we predict all kinds of doom. We too often fail to consistently expect the unexpected.

This poses a serious problem for the market economy, which is all about the ability of the system to inspire discovery of new ideas and new solutions to prevailing the problems. The problems posed by change are obvious enough; but the solutions are “crowd sourced” and emerge from places, people, and institutions that cannot be seen in advance.

Capitalism is not for wimps who don’t want to improve. If you want guaranteed profits for the few rather than prosperity and abundance for the many, socialism and fascism really are better systems.

The full piece is absolutely worth reading.

Filed Under: capitalism, competition, disruption, monopolies, technology

EFF Launches 'Defend Innovation' Site In An Attempt To Fix Software Patents

from the will-it-work? dept

The folks over at EFF have launched a new site called DefendInnovation.org that seeks to get people to speak up about fixing the patent system, specifically around software patents. It puts forth a series of key suggestions:

1. A patent covering software should be shorter: no more than five years from the application date.
2. If the patent is invalid or there's no infringement, the trolls should have to pay the legal fees.
3. Patent applicants should be required to provide an example of running software code for each claim in the patent.
4. Infringers should avoid liability if they independently arrive at the patented invention.
5. Patents and licenses should be public right away. Patent owners should be required to keep their public records up-to-date.
6. The law should limit damages so that a patent owner can't collect millions if the patent represented only a tiny fraction of a defendant's product.
7. Congress should commission a study and hold hearings to examine whether software patents actually benefit our economy at all.

To me, number four is the key one and would fix a large number of issues with the patent system. I've been arguing for an independent invention defense for years. In fact, I'd take it slightly further. Since patents are only supposed to be granted on ideas that are non-obvious to those who are skilled in the art, the fact that there is independent invention suggests evidence that it is obvious to those skilled in the art, because multiple "skilled in the art" practitioners are arriving at the same obvious conclusion. Thus, such patents should be invalid, beyond just allowing the independent inventor a defense.

Some don't think the EFF is going far enough. Tim Lee put together a petition, asking the EFF to go even further and oppose software patents altogether. You could argue that point number seven gets towards that. In fact, you could argue that point number seven should be the whole ballgame here. The fact that we don't have any evidence that software patents benefit the economy should make the whole system a mockery. Either way, the EFF's response to the whole "abolish software patents" issue, is that there needs to be a first step:

Regardless of whether you think software patents should be abolished altogether or just reformed, the first step is recognizing that a one-size-fits-all patents system doesn’t make sense and that we need to treat software patents differently from other types of patents. Without that, no effort – whether reform or abolition – can be successful.

To be honest, as bad as software patents can be, I still do worry about hardware patents as well. So I don't think we should lose sight of the independent invention defense (or independent invention as evidence of obviousness) as a useful tool to fix many of the larger problems with the system. There are some other potential fixes out there as well, including something akin to an anti-SLAPP law for patents -- where it's clear that the lawsuit is an abuse of the patent system, just to try to get a company actually producing a product to pay. A big part of the problem today is how expensive a patent lawsuit is, and how difficult it is to get one dismissed without first having to spend upwards of a million dollars (no joke). That leads many companies to settle. This is, obviously, what point number 2 in the Defend Innovation campaign is about, but getting faster, anti-SLAPP-like dismissals would be a big help as well, as no company wants a big expensive lawsuit hanging over them.

Either way, it's good to see renewed emphasis on the problems of the patent system, especially after Congress and President Obama pretended that they'd "fixed" everything last summer with the patent reform bill that did very little (and probably made some things worse).

Filed Under: defend innovation, eff, software patents

The Chilling Effects On Innovation Caused By Bad Copyright Law

from the it's-feeling-frosty-in-here dept

We've talked a few times about how attacks on new innovations in the name of protecting copyright can create massive chilling effects. For example, the increasingly questionable arguments against Megaupload have created a real chill for online cloud storage providers. That was likely manifest last week in the news that Dropbox was killing off its "public folders" feature in deference to its link feature, basically making the product less useful.

Matt Schruers, from CCIA has an interesting blog post up which ties actions like those done by Dropbox here with a new study showing how the chilling effects of bad copyright law can impact innovation. The full study (pdf) is actually something of a follow up to an earlier study we wrote about, which showed how good judicial rulings on copyright which allowed for greater innovation (such as the Cablevision ruling, which allowed cloud-based DVRs to exist) contributed directly to greater funding of innovation.

This new study, also by Harvard professor Josh Lerner, highlights the unfortunate opposite impact: the chilling effects on investment in innovation that comes as a result of anti-innovation judicial rulings. In this case, Lerner looked at specific rulings in the EU:

We analyze the effects of a court ruling in France and several court rulings in Germany on VC investment in cloud computing firms in these countries. These court rulings were seen as negatively affecting the development of cloud computing, and our findings confirm this view by showing that these rulings regarding the scope of copyrights had significant, negative impacts on investment. Specifically, we find that VC investment in cloud computing firms declined in Germany and France, relative to the rest of the EU, after the French and German rulings. Our results suggest that these rulings led to an average reduction in VC investment in French and German cloud computing firms of $4.6 and $2.8 million per quarter, respectively. This implies a total decrease in French and German VC investment of $87 million over an approximately three year period. When paired with the findings of the enhanced effects of VC investment relative to corporate investment, this may be the equivalent of $269.7 million in traditional R&D investment.

Combine these two studies and you can see how these chilling effects can be quite massive in terms of investment in innovation. Of course, investment alone is not the sole determinant of the pace or success of innovation, but it is a key factor. And scaring investors away from innovations can have a major impact on the public and the economy.

Filed Under: chilling effects, european union, investment
Companies: cablevision, dropbox

Disruptive Innovation Is Not An Orderly Process

from the it's-dirty dept

Brian Kahin, over at Project DisCo has a good post that goes over the basics of disruptive innovation, covering the innovator's dilemma -- and why it's rarely big companies who are able to truly innovate. But the bigger issue is how much people judge innovation by the incremental look at how things have been done before, not how the new thing totally shakes up and disrupts the market.

Disruption makes big demands now – in terms of learning and immediate costs – while offering only speculative benefits in the long term. Large companies with successful business models and dominant positions are especially wary of cannibalizing existing revenue streams – the cash cows that insulate them from the extremes of market competition. At a behavioral level, this inertia is compounded by the “endowment effect,” the demonstrated human tendency to overvalue what you already own.

All too often we hear companies, industry reps or politicians insist that it's crazy to think that Legacy Industry X must change and adapt to new market conditions until someone shows them how to make as much money as they were making in the past. There's just one problem: if you wait until that answer is clear, you're too late. The disruption has already won. Disruptive innovation is disruptive because it takes the legacy industries by surprise. It's disruptive because it happens in a way where the path isn't clear to the legacy players.

And it happens both more slowly and more quickly than most observers acknowledge.

It happens "more slowly," because there are always ways to paint that initial innovation as being "worse" than what exists today, and thus something not worth paying attention to. This is a key point in Clayton Christensen's Innovator's Dilemma. The disruptive innovation is dismissed because based on the old objective measures, it almost always appears demonstrably "worse" than existing offerings. And it does take some time to "catch up." So when these things first appear, they're dismissed as being too little/slow/ineffective/etc. for the market at hand.

But what people miss is how the rate of change happens much more quickly -- and the advancement comes at a surprising pace and/or in surprising ways. Usually the rate of advance is on metrics that the legacy industry never thought were that important, and thus they totally miss it when customers start shifting in droves, because it just doesn't make sense.

Unfortunately, however, one of the true killers of disruptive innovation is the political process. If it were just true that legacy companies totally missed the boat and disruptive innovators did their disruption and killed off those dinosaurs, that would be one thing. But that ignores the political process:

Large companies have the resources and accumulated expertise to influence policymakers and regulators against disruption of their business models. They have many arguments in their arsenal: preserving jobs, justifying past investments, incentivizing investments that they might make in the future, subsidies to politically important constituencies, supply chains dependent on the status quo, etc. By contrast, disruptive innovation doesn’t have much of a presence in Washington. Existing innovators are too busy. Future innovators don’t exist yet.

Yet even if policymakers are sensitized to the fact that disruptive innovation has few friends and many opponents, that information is difficult to operationalize. Future innovation is hard to predict, and advocates within government probably won’t be around long enough to take credit for it. Instead, innovation policy is framed in terms of past success. Thus, a linear or “pipeline” model of innovation in particular still dominates despite much criticism, academic and otherwise. The linear model explains innovation in an intuitively simple way and serves well-established interests along the way. Research goes in the front end, investments in commercialization are secured by patent, and new products emerge from the pipe. It suggests a simple policy agenda: ”More of the same.”

But that's not the way disruption actually works. Nor has it ever worked that way. But nearly all of the policy that comes out of the government acts as if this is the case.

Disruptive innovation is not an orderly process. It sneaks up on companies, and if they wait too long, it will bite them. But, at the same time, bad policies can lead to massive unintended consequences that don't necessarily stop the innovation from happening, but pervert it so that it is less useful or efficient or (most likely) that it simply happens somewhere else, leaving our own economy behind.

Filed Under: disruption, innovator's dilemma, project disco

Why Is The US So Hostile To Foreign Entrepreneurs Who Want To Build Businesses Here?

from the let-them-in dept

We've talked about just how ridiculous US policies towards highly skilled immigrants and entrepreneurs are for years. We're driving away the very people who can help create new companies and new jobs within our economy, and handing them, gift-wrapped, to other countries. And those other countries are increasingly aware of the massive opportunity the US is vehemently ignoring, and those other countries are becoming increasingly welcome to foreign high-skilled workers and entrepreneurs. The Economist has a good article highlighting just how backwards US policies on entrepreneur immigration are, especially compared to countries like the UK, Australia, Canada and New Zealand, who are very welcoming towards foreign nationals who want to start companies in their countries. And then there are upstarts like Chile, who go so far as to simply hand large sums of cash to startups that want to set up shop there.

But the US keeps pushing such people away.

The article includes an example -- one of hundreds we've seen -- of entrepreneurs trying to setup a new company and create jobs in the US... only to be forced to do the same thing in another country (in this case, Canada). We're actively pushing away the job creators at a time when our economy needs jobs.

And, of course, while sometimes these individuals go to these other welcoming countries, some also just head back home. As the article notes, China has actually become pretty aggressive in offering some highly skilled workers who come back from trying to work in the US "not only free homes but also cash to buy furniture."

Honestly, it's pretty clear from the Economist piece that whoever wrote it is incredulous that the US would have such policies in place when they clearly harm its own interests. And, of course, the truly amazing thing is that over the years, the various efforts to fix these problems and welcome in skilled immigrants who create jobs always seem to get shot down. As we recently mentioned, the Startup Act 2.0 has been introduced, and even though it offers some pretty simple ways to let in a few more job creators, it's not clear that there's enough momentum to push it through (though, you can help change that by telling your elected officials to pass the bill). There are many different forms of protectionism -- and almost none of them are helpful. But it's perhaps worst of all when you're protecting yourself from job creators.

Filed Under: canada, china, immigration, skilled immigrants, startup act

Does 'The Future' Need Lobbyists Too?

from the do-we-want-that? dept

Back in April, I wrote about the Hack Society meeting at Union Square Ventures, where Rep. Jim Cooper provided a great quote:

"The past, in general, is over-represented in Washington. The future has no lobbyists."

That is, indeed, a problem to some extent. Of course, that then leads to a debate about what to do about that if you believe in the importance of disruptive innovation, and fear incumbents holding it back. The answer is not necessarily to "hire lobbyists" and play the same game -- because that's simply not a winnable war. The real answer is change the way things are done. There are a growing number of groups trying to do that, and while some may accuse them of just being "more lobbyists" at first, that severely underestimates what they're actually setting out to accomplish. GigaOm has a nice summary piece on a few of the groups who are seeking to have "the future" better represented in policy discussions.

It kicks off with a brand new think tank, put together by CCIA, called the Disruptive Competition Project -- or Project DisCo for short. Its focus is to highlight the importance of disruptive competition. This is a big deal, since legacy players almost always seek to position disruptive competition as doing something "illegal," when the truth is merely that they're disrupting the business models of those legacy players. This is a brand new effort, but with some great minds involved, so I'm excited to see where it goes.

Then they discuss Engine, a group that (full disclosure) I helped put together initially, and remain on their steering committee/advisory board. Engine is really about a two way conduit for education and information exchange between policy makers and the startup ecosystem. Too often we've heard that entrepreneurs just ignore policy makers (and equally from policy makers that they never hear from startups). This is often because the entrepreneurs are so focused on getting stuff done and just want government to get out of the way. But ignoring the government is no answer -- it's how we get bad policies that favor incumbent players and stifle innovation. Engine is seeking to change that not by lobbying in the traditional sense, but by opening up channels of communication, and presenting a real data-driven approach to things. Oh, and if you're a startup entrepreneur, you should become a member -- it's free and it'll help make sure your voice is heard in policy debates.

Next up, we've got the Internet Defense League, in which (again, full disclosure) Techdirt is a member. This was put together by the folks at Fight For the Future -- who were instrumental in the anti-SOPA/PIPA fight, recognizing that it would be good to have a bunch of websites ready to respond to existential threats against the internet. With SOPA/PIPA the threat was so large and so clear that they were able to get a bunch of websites to sign on for things like the "Call Congress" day in November and the big anti-SOPA blackout in January. The goal of the IDL is to leverage that effort into having sites prepared to respond when other big threats come along, rather than having to cobble together a new coalition of sites every time.

The final piece listed is TestPAC, Please Ignore, the PAC that was built out of the Reddit community, though isn't associated with Reddit the company. While this is an interesting attempt to play the "traditional" game with an internet twist, I'm not convinced that playing the game this way is ultimately going to succeed. In the end, we know that the incumbents are almost always going to play the PAC game better than the upstarts. I'm glad that these guys are trying, but I'm much more interested in the efforts that are seeking to really change the game, not just be a new player in the old game.

Either way, it's good to see that more people are thinking about this, and it's not over yet. I'm aware of at least three other efforts to really try to change the game in politics and policy to make sure that "the future is represented." Any one -- or even all -- of these may fail completely. But I'm encouraged to see multiple groups trying to get involved, and recognizing that ignoring policy is no longer an option.

Filed Under: ccia, disruption, engine, hack society, internet defense league, jim cooper, lobbying, pac