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  • 1. “Customer  Service  is  the  Most  Valuable  Source   for  Innova7on  –  a  Success  Story  of  Silicon  Valley”   A  presenta*on  at     2012  Hong  Kong  Interna7onal  CRE  &  Innova7on  Expo        Prepared  by:    Al  Kwok            Principal  IP  Advisor,  STARS  Founda*on  (www.STARSF.org)            Founder,  China  Interna*onal  Intellectual  Property  Services  Ltd.              Governor  &  Co-­‐founder,  Savantas  Policy  Ins*tute              Former  VP  &  CIPO,  NetLogic  Microsystems  (“NETL”)   1/F., CMA Building, 64-66 Connaught Road Central, Hong Kong Tel: +(852) 2810 1777 Email: info@starsf.org
  • 2. Outline   “Customer  Rela7onship  Excellence  =>   Innova7on  Leadership”   Customer  Rela7onship  Excellence  <=>  Product/Service  Focus     Innova7on  Leadership  <=>  Value  Crea7ons  for  Customers   ⇒ End-­‐to-­‐end  Product/Service  Lifecycle  Analyses   ⇒ Complete  Value-­‐Chain  Analyses  (focusing  on   Mission-­‐and-­‐*me  Cri*cal  Links  in  the  Chain)   ⇒ (Produc*on)  Supply-­‐Chain  Management  (SCM)  +   Applica*on-­‐Service  Demand-­‐Chain  Management   ⇒ CRE    Design-­‐win  Professional  Services     Innova*on  Leadership     ⇒ New  Applica7on/Service  PlaMorms  +  (China)   Market  Sustainability  &  Scalability   1/F., CMA Building, 64-66 Connaught Road Central, Hong Kong Tel: +(852) 2810 1777 Email: info@starsf.org
  • 3. The  Value  Hierarchy  (Business  Models)   Presented  at  Intellectual  Property  Symposium  2002  in  Guangzhou  on  December  10,  2002       Brand Innovation Intellectual Property (IP) Values/Profit Margins 50% Applications (Mkt. & Standards) System Integration (Archit., …) Outsourcing 40% Trend Engineering (Design, ODM,..) 30% Manufacturing (Process, OEM) Consumer recognition Core competency 1/F., CMA Building, 64-66 Connaught Road Central, Hong Kong Tel: +(852) 2810 1777 Email: info@starsf.org
  • 4.  The  Value  Chain  (=>  DemandSupply  in  Alignment)  Great  end-­‐to-­‐end  push-­‐pull  effect  for  market  scaling  thru  lifecycles   For  Consumer  Electronics  Market  (Ecosystem)   Consumer  Markets  (End  Users)   Service Providers Various  Applica7ons/Services   System  Manuf.   Differen7ated  Applica7on  Designs   System  Integrators    System  Applica7on  PlaMorm(s)   Generic  Reference  Design  (w/ other chips)   IC  S/W  PlaMorm  (API,  drivers,  etc.)   IC  Design  houses   IC  H/W  PlaMorm   1/F., CMA Building, 64-66 Connaught Road Central, Hong Kong Tel: +(852) 2810 1777 Email: info@starsf.org
  • 5. Raising  Values  of  a  Product  (IP  is  the  Core)   •  价格  =  给客户的价值  =>   Price  =  Values  to  Customers    价格  =  成本+服务+IP授权+品牌   (价格 = 给客户的价值) •  Pre-­‐sale  services  mean  design-­‐win   efforts  providing  solu*ons  to  address   customers’  problems   Brand  Recogni*on   •  This  is  the  best  sources  of  innova7on   (品牌认知) and  ideas  for  the  next-­‐genera*on   Increasing Values (提高增值) products  (Product  &  Tech  Roadmaps)   •  Post-­‐sale  services  mean  reducing   Embedded  IP  Licensing   customers’  costs  of  ownership,   (隐含IP授权) extending  the  useful  life*me  of  the   product,  genera*ng  recurring  sales  &   product  improvement  ideas   Pre-­‐  &  Post-­‐Sale  Services   •  Embedded  IP  licensing  means  the   (售前及售后的服务) customers  can  use  the  product  IP  for   their  own  product  upli[ing  &   differen*a*ons  -­‐  e.g.,  “Intel  Inside”   Manufacturing  Cost   •  Brand  recogni7on  means  the   (生产成本) customers  recognize  the  product  and   its  maker  for  superb  quality,   performance,  reliability  &  services   1/F., CMA Building, 64-66 Connaught Road Central, Hong Kong Tel: +(852) 2810 1777 Email: info@starsf.org
  • 6. IT  Business  Food-­‐chain     Hierarchy of IT Business (from “service to consumers” as the top of the food-chain with highest Gross Margin then down):   Service requirements drive H/W platform improvements       Service (to consumers) <=> Domestic market (localization) (China market is huge enough) Application (for service) <=> Domestic market (localization) (China centric standards & IPs) Network platform <=> Domestic stds. for local services/appl. International stds. (for global interface) System Integration <=> Domestic market (localization) vs. Int’l. mkt. (for applications) (China centric standards & IPs vs. Int’l. ones) S/W & F/W platform <=> Int’l and domestic stds. (global & local) H/W platform <=> International stds. (global IC supplies) Existing OEM/ODM business model breaks the IT Business Food Chain without positive feedback from Service to drive next product dev. cycle 1/F., CMA Building, 64-66 Connaught Road Central, Hong Kong Tel: +(852) 2810 1777 Email: info@starsf.org
  • 7. High-­‐end  vs.  Low-­‐end  Example    China  e-­‐book  as  a  low-­‐end  example     “Shanzhai”  business  model  (山寨型商业模式)     Copy  others’  design  concepts     Add  more  common  (proven)  applica*ons     Aim  for  low-­‐cost  and  low-­‐price  (~US$250)     Lidle  post-­‐sale  on-­‐going  services     Lidle  connec*on  to  on-­‐going  e-­‐commerce  service     Lidle  customer  feedback,  no  learning  and  no  product  innova*on    Apple’s  iPad  as  a  high-­‐end  example     Designed  as  an  e-­‐commerce  CRM  tool  (*ed  to  iTunes  e-­‐commerce   plaeorm)  -­‐  one-­‐stop  e-­‐commerce  business  ecosystem     More  recurring  business  from  post-­‐sale  of  iPad  (hardware)     Aim  for  high-­‐value  and  affordable  price  (~US$600)     Complete  the  “H/W  plaMorm  to  Service”  end-­‐to-­‐end  cycle  for   next-­‐genera7on  product  innova7on   1/F., CMA Building, 64-66 Connaught Road Central, Hong Kong Tel: +(852) 2810 1777 Email: info@starsf.org
  • 8. Market  Posi7oning  -­‐  Product  Focus   ecosystem:    Industrial  market  by   Under-­‐developed   Too  Far-­‐out:   nature  with  higher  (50-­‐>70%)   Building  infrastructure  &   Not  ready,   hype,  bubble   Ecosystem   profit  margins     Future  Growth:   Future  Growth:   Long-­‐term   Longest-­‐term   Future  Growth:   Well-­‐developed   Short-­‐term   Cut-­‐throat   Well-­‐developed  infrastructure:   Compe77on   consumer  market  by  nature  with   (me  too!)   lower  (30-­‐>50%)  profit  margins     Mature  (must  have)   Futuris*c  (nice  to  have)   Applica7on   1/F., CMA Building, 64-66 Connaught Road Central, Hong Kong Tel: +(852) 2810 1777 Email: info@starsf.org
  • 9. Types  &  Ranking  of  Innova7on   In  the  order  of  las*ng  value  impact  to  society  (from  most  to  least):     New  business  model  (global  produc*vity  jump)  -­‐  great  las*ng  value  impact     E.g.:  e-­‐Commerce  (internet),  pure-­‐play  foundry  business  model,  carbon  trading…     New  business  process  (global  produc*vity  jump)  -­‐  great  las*ng  value  impact     E.g.:  Window/Office  (new  work  environment),  outsourcing,  TQM,  ERP…     New  applica*on/market  (for  exist.  prod.  or  tech.)  -­‐  great  value  impact       E.g.:  GPS,  RFID,  radar  guiding…  -­‐  from  military  to  commercial  applica*ons     New  technology  (for  exis*ng  product)  -­‐  great  value  impact  some*mes     E.g.:  High-­‐speed  CMOS  (over  NMOS)  for  power  reduc*on  and  device  scaling     New  product/service  (for  exis*ng  market)  -­‐  medium  value  impact     E.g.:  On-­‐line  shopping/trading,  SMS  (China),  digital  broadcast…     New  combina*on  of  package  of  technologies,  products  and  services     E.g.:    Apple’s  iPhone  and  iPod,  Blackberry,  solar,  clean  tech…     New  design  (implementa*on  or  appearance)  -­‐  limited  value  impact     New  system  architectures:    e.g.,  the  Sandisk  “338”  patent  for  flash-­‐memory  card     New  subsystem/circuitry   1/F., CMA Building, 64-66 Connaught Road Central, Hong Kong Tel: +(852) 2810 1777 Email: info@starsf.org
  • 10. Success  Example:    GPS-­‐based  Services  (MyCard  Ltd.)   GPS/GPRS Logistics Service Platform - System Architecture Control Call Data Center / Center Center Access Platform GPRS Real-time Coordination, Data analyses / Bus. Location Security Checks Intel., Map Database & Tracking & Alerts User Web Portal Logistics Co. Customer- User Access Control & specified Call Portal Management Forwarding Services Logistics & Passenger Agents Map Database Mgmt. Security Senders & Monitoring & Receivers Alerts GUI & Templates Customs Emergency Data Storage & Insurance Alerts Archives Co./ Bank - Asset Mgt. Functions of Control/Call/Data Centers & Service Platform August 1, 2008 1/F., CMA Building, 64-66 Connaught Road Central, Hong Kong MyCard Confidential 9 Tel: +(852) 2810 1777 Email: info@starsf.org
  • 11. Maximizing  IP  Value  Crea7on  –  Part  1      Innova*on  <=  Differen*a*ng  values  to  customers     Highest  values  =  Mission-­‐and-­‐*me  cri*cal  (“Must-­‐have”)  ones     Customers  must  use  and  buy  the  product  when  available     Lidle  values  <=  “me-­‐too”  innova*on  w/o  differen*a*on    Intellectual  property  (IP)     Protected,  reproducible  and  scalable  innova*on     Patent  is  the  best  form  of  protected  IP       Exclusive  rights  for  20  years  to  use  for  commercial  purposes    Values  of  the  patent  is  based  on  its  “CLAIMS”     The  1st  CLAIM  is  most  important  in  a  patent     Scope  –  the  broader  and  the  more  independent,  the  beder     The  fewer  enabling  elements  and  less  restric*ons,  the  beder     Coverage  –  covering  all  means  of  customer  value  crea*ons     Mapping  value  crea7ons  vs.  enabling  elements     Values  to  customers:    performance  (func*onality  &  speed),  price  (yield   improvement  &  cost  reduc*ons),  quality  (robustness,  consistency,   tolerance  &  reliability)  &  delivery  (shortened  cycle-­‐*me  and  lead-­‐*me).   1/F., CMA Building, 64-66 Connaught Road Central, Hong Kong Tel: +(852) 2810 1777 Email: info@starsf.org
  • 12. Maximizing  IP  Value  Crea7on  –  Part  2     Customer  value  driven  corporate  culture:         Innova*on  is  pursued  solely  to  create  DIFFERENTIATING  VALUES   to  the  customers  (sharpshoo7ng  &  no  shotgun  approach)     Contribu*ng  directly  to  their  bodom-­‐line  in  term  of  cri7cal  func7onality,   cost,  performance,  low-­‐power,  quality  and  delivery     CRE  =>  Strategic  partnership  and  close  working  rela*onship  with   the  lead  customer  is  a  must       All  valuable  innova*on  ideas  come  from  lead  (strategic)  customers     Cisco  for  NetLogic  Microsystems  (recently  ranked  as  the  best  supplier  by   Cisco)     Aligning  all  the  company’s  ac*vi*es  to  be  proac*vely  responsive   to  the  customers’  current  and  future  needs     Including  applica*on/technology  and  service/product  roadmaps  as  well  as   employee  evalua*on/promo*on     Con*nuous  innova*ons  by  solving  proac*vely  the  customers  next  biggest   problems  (the  next  product  development  cycle)     1/F., CMA Building, 64-66 Connaught Road Central, Hong Kong Tel: +(852) 2810 1777 Email: info@starsf.org
  • 13. Methodology  for  “CRE  +  Con7nuing  Innova7on”     Lead  Customers’  Requirements  =>  2nd  G  =>  3rd  G  =>…   Close collaboration between the customer and the vendor Differen*a*ng  Value  Crea*ons  =>  2nd  G  =>  3rd  G  =>…   Business  Model  =>  2nd  G  =>  3rd  G  =>…   Service/Product  Roadmap  =>  2nd  G  =>  3rd  G  =>…   Applica*on/Technology  Roadmap  =>  2nd  G  =>  3rd  G  =>…   IP  Poreolio  Development  =>  2nd  G  =>  3rd  G  =>…   The  next  innova*on  ideas  come  from  customers  &  “Stress  Tests”  iden*fying     (1)  The  weak-­‐links  in  product  design  &  performance  and  scalability   (2)  System  (architecture)  integrity  and  scalability  (elas*city)  issues   (3)  The  bodlenecks  for  scalability  (technology  and  manufacturability  roadmap)   1/F., CMA Building, 64-66 Connaught Road Central, Hong Kong Tel: +(852) 2810 1777 Email: info@starsf.org
  • 14. AK  comment:    Based  on  a  poreolio  of  ONLY  ~100  patents   (All  mul*-­‐billion  $  companies)  AK  comment:    Considering  the  facts  that  NM  is  much  less  than  1/10  of  the  size  (in  revenue)  of  the  other  9  top-­‐ranking  companies  and  much  younger  (~10  years  old),  it  is  a  crowning  achievement!    Likewise,  “ipIQ”  rated  NM’s  poreolio  the  best  for  a  medium  size  (~$100M)  high-­‐tech  company  worldwide  in  its  “Patent  Scorecard  2006”  report  with  the  2nd  highest  CII  (current  impact  index).  Mkt    Cap:    US$250M  @  2004  IPO  =>  US$3.7B  @  2011    M&A  (14.8X  in  7  years  =  >46%  CAGR)     1/F., CMA Building, 64-66 Connaught Road Central, Hong Kong CIIPS Presentation 14July 20, 2010 Tel: +(852) 2810 1777 Email: info@starsf.org
  • 15. Conclusion     Knowledge  Economy  must  be  Prof.  Service/Applica7on  driven     Core  competency  in  professional  services  is  the  key  to  global  compe77veness     IBM’s  transforma*on  is  a  good  example  (from  H/W  to  Professional  Services)     Must  focus  on  “True  Demand”  –  Mission/Time  Cri7cal  ones     Supply-­‐side  economics  (Reaganomics)  is  a  dead-­‐end  –  unsustainable     Real  economic  growth  must  come  from  “True  Demand”  –  not  unsustainable   Cheap-­‐Credit  Inflated  False  Demand  causing  con*nual  global  economic  crises     OEM/ODM,  SCM…  are  for  the  “Push  Effect”.    From  the  Demand  Side,  Services   and  Applica*ons  based  on  standardized  services  provide  the  “Pull  Effect”  –  the   horse  (engine  providing  the  Pull  Effect)  should  be  in  front  of  the  cart  (economy)!     CRE  “Professional  Services”  is  the  Intrinsic  Source  of  Innova7on  &  IP     Valuable  IP  development  is  from  Pre-­‐  and  Post-­‐Sale  Professional  Services     Core  competency  development  requires  “Technical,  Business  and  IP/Legal     Domain  Exper*se”  –  HK’s  educa*on  &  prof.  development  systems  have  to  adapt     Hong  Kong  &  the  whole  world  need  China  for  market  scalability     GD-­‐HK-­‐Macau  CEPA  PlaMorm  must  be  further  strengthened  with  CEPA  Special-­‐ Policy  Pilot  (Landing)  Site  (for  product/service  localiza*on)  –  STARSF’s  goal!   1/F., CMA Building, 64-66 Connaught Road Central, Hong Kong Tel: +(852) 2810 1777 Email: info@starsf.org
  • 16. Thank  You!  多谢光临指导!   al.kwok@starsf.org   1/F., CMA Building, 64-66 Connaught Road Central, Hong Kong Tel: +(852) 2810 1777 Email: info@starsf.org