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  Presenta)on	
  at	
  the	
  7th	
  Workshop	
  of	
  the	
  “IIPCC	
  HK	
  Chapter	
  IP	
  Workshop	
  Series:	
  	
  	
  	
  	
  
IP’s	
  Role	
  in	
  Entrepreneurship	
  &	
  Innova)on”	
  (in	
  CityU	
  of	
  HK	
  on	
  Mar.	
  19,	
  2015)	
  
	
  
Prepared	
  by:	
  	
  Al	
  Kwok	
  (郭灿辉)	
  
	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  Governor	
  &	
  Co-­‐founder,	
  IIPCC	
  Hong	
  Kong	
  Chapter	
  
	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  Governor	
  &	
  Co-­‐founder,	
  HKIURCA	
  (⾹香港產學研合作促進會)	
  
	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  Member,	
  HKSAR	
  “IP	
  Trading”	
  Working	
  Group	
  
	
   	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  Governor	
  &	
  Co-­‐founder,	
  Savantas	
  Policy	
  Ins)tute	
  
	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  President,	
  CASPA	
  (华美半导体协会)	
  PRD	
  Chapter	
  
	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  Former	
  VP	
  &	
  CIPO,	
  NetLogic	
  Microsystems	
  (“NETL”)	
  
OEM to ISF (Integrated Service
Franchiser) Transformation: Turning a
Product Co. into a Service Franchise
Mar. 19, 2015 OEM to ISF Transformation 1
Evolution of Intangible Assets – U.S. Companies
Knowledge-based Economic Trend (2008)
2Mar. 19, 2015 OEM to ISF Transformation
The Value Hierarchy (Business Models)
Values/ProfitMargins
Applications (Mkt. & Standards)
System Integration (Archit., …)
Engineering (Design, ODM,..)
Manufacturing (Process, OEM)
Intellectual Property (IP)
Outsourcing
Trend
Consumer recognition Core competency
Brand Innovation
50%
40%
30%
Presented	
  at	
  Intellectual	
  Property	
  Symposium	
  2002	
  in	
  Guangzhou	
  on	
  December	
  10,	
  2002	
  
OEM to ISF Transformation 3Mar. 19, 2015
Pillars for Knowledge Economy (2012)
IC IT IP
Hardware Network Know-how/Content
Functionality Physical devices Connectivity Experience sharing
Scalability Moore’s Law Metcalfe’s Law TBD!?
Scaling Factor 2X/18 mon. Value ~ n2 Value ~ XR (X, R >1)
Disruptive Driver CMOS (IDT) IPv4/6, Internet,
QoS (NMI)
Apple iTunes ->
“Unified IP Pooling”
Driving
Product/Service
Memories & CPU
=> SOC
QoS, Mobile
Multimedia
Standardization
for scaling
Start Time ~1985 ~2000 ~2015?
Mkt. Size (20 yr) ~$300B Trillions Zillions?
Mar. 19, 2015 OEM to ISF Transformation 4
•  Evolution of Knowledge-based Economy (KBE): IC -> IT -> IP
•  Value of IP is based on its “Reusability” and “Ability to Share”:
•  The more it is reused, the higher its value is
•  No physical limitation: IP can be used by many users at the same time
•  The impact of “free-market IP sharing” on Knowledge Economy is immeasurable
Mar. 19, 2015 OEM to ISF Transformation 5
IT Business Areas & Opportunities (2008)
High-valued services
with good business
potentials
Network environment
given (by providers)
or to be set up
Data mining from
public domain to add
values
Factors given or to be
used “as is” – not to
reinvent
H/W
components
S/W & F/W
Network
Platform
System
(H/W)
Platform
Network Services/environments:
Internet, cellular, WiMAX
System
Integration
Protocols & Interfaces
(Open stds. for reuse?)
Content
Layer
Service
Platform
CRM, ERP,
POS, etc.
Applications
(ASP)
Consumer
Services
Public
Domain
Company
Proprietary
Bus. Domain
Knowledge
Instructions & Interfaces
New ICs and Devices
every 18 months or less
Moore’s Law and Metcalfe’s Law (acting on H/W and Network
Platforms respectively) are fuelling on-going IT System/Business
Process Re-engineering for global improvements (changes) like
magma shaping Earth crust’s movements
Mar. 19, 2015 6
IT Services Mean Everything! (2008)
n  All services in any industry are relied on IT infrastructure and know-
how for their effective deliveries
n  IT is the critical enabler for global competitiveness
n  Companies lack of IT proficiency will be history!
n  IT services encompass everything: banking, finance, logistics,
tourism, manufacturing and so on
n  Integrating IT capabilities into the business process is a matter of
survival of the fittest!
n  All business processes are continually reengineered for better IT
capabilities in “a globally networked world” valuing “differentiating
customer services to anybody, anywhere and anytime”.
n  Inevitable future trends:
n  IT service management is the hottest topic for this century!
n  IT services will generate >50% of all high-paid jobs worldwide!
n  “IT proficiency + business domain knowledge” is a must!
n  Productivity improvements greatly outweigh the cost!
n  IT service capabilities determine global economic power!
OEM to ISF Transformation
 Value	
  Chain	
  (=>	
  DemandóSupply	
  in	
  Alignment)	
  
IC H/W Platform
IC S/W Platform (API, drivers, etc.)
System Application Platform(s)
Generic Reference Design (w/ other chips)
Differentiated Application Designs
Various Applications/Services
Consumer Markets (End Users)
IC Design houses
System Integrators
Service Providers
For Consumer Electronics/IT Market (Ecosystem)
System Manuf.
Great	
  end-­‐to-­‐end	
  push-­‐pull	
  effect	
  for	
  market	
  scaling	
  thru	
  lifecycles	
  
OEM to ISF Transformation 7Mar. 19, 2015
(2012)
Mature (must have)
Under-developed
Ecosystem
Well-developed
Cut-throat
Competition
(me too!)
Application
Futuristic (nice to have)
Too Far-out:
Not ready,
hype, bubble
Future Growth:
Longest-term
Future Growth:
Long-term
Future Growth:
Short-term
Well-developed infrastructure:
consumer market by nature with
lower (30->50%) profit margins
Buildinginfrastructure&
ecosystem:Industrial
marketbynaturewithhigher
(50->70%)profitmargins
Market Positioning – Product/Service Focus
OEM to ISF Transformation 8Mar. 19, 2015
(2008)
IT Market Characteristics
ServicerequirementsdriveH/Wplatformimprovements
Existing OEM/ODM business model breaks the IT Business Food Chain
without positive feedback from Service to drive next product dev. cycle
Integration vs. Standardization vs. Scalability
n  Hierarchy of IT Business (from “service to consumers” as the top
of the food-chain with highest Gross Margin then down):
Much Higher Value Creation from Demand-side
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)
OEM to ISF Transformation 9Mar. 19, 2015
(2008)
Raising Values of a Product (IP is the Core)
§  Price = Value to Customers =>
Price = Mftg. Costs + Services +
Embedded IP License + Brand
§  Pre-sale services mean design-
win efforts providing solutions to
address customers’ problems
§  This is the best sources of
innovation and ideas for the next-
generation products
§  Post-sale services mean reducing
customers’ costs of ownership,
extending the useful lifetime of the
product, generating recurring sales
§  Embedded IP licensing means
the customers can use the product
IP for their own product uplifting &
differentiations - e.g., “Intel Inside”
§  Brand recognition means the
customers recognize the product
and its maker for superb quality,
performance, reliability & services
OEM to ISF Transformation 10Mar. 19, 2015
Mkt. Cap. / Intangible Asset (2013):
1) Apple: ~US$393B / >99%
2) Foxconn: ~US$3.5B / <20%
Manufacturing Cost
(⽣生产成本)
Pre- & Post-Sale Services
(售前及售后的服务)
Brand Recognition
(品牌认可)
Embedded IP Licensing
(隐含IP授权)
IncreasingValues(提⾼高增值)
Price = Values to Customers
(价格 = 给客户的价值)
>70%PM
~10%PM
>60%PM
>40%PM Demand Side
Demand Side
Demand Side
Supply Side
(2012)
Profitability vs. IP Creation (Competitiveness)
OEM to ISF Transformation 11Mar. 19, 2015
Manufacturing Cost
(⽣生产成本)
Pre- & Post-Sale Services
(售前及售后的服务)
Brand Recognition
(品牌认可)
Embedded IP Licensing
(隐含IP授权)
IncreasingValues(提⾼高增值) Price = Values to Customers
(价格 = 给客户的价值)
>70%PM
~10%PM
>60%PM
>40%PM Demand Side
Demand Side
Demand Side
Supply Side
OPEN	
OPEN	
PRIVATE	
Trademarks
Patents, Utility Models,
Designs, Copyrights…
Trade Secrets
(Know-how)
PRIVATE	
Only <20% Know-how for Patents, the rest kept as Trade Secret
(2012)
IT Market Characteristics
Trade Secrets (Know-how):
Manufacturability (yield) &
Testability (observability)
Types & Ranking of Innovation (2008)
In the order of lasting value impact to society (from most to least):
n  New business model (global productivity jump) - great lasting value impact
n  E.g.: e-Commerce (internet), pure-play foundry business model, carbon trading…
n  New business process (global productivity jump) - great lasting value impact
n  E.g.: Window/Office (new work environment), outsourcing, TQM, ERP…
n  New application/market (for exist. prod. or tech.) - great value impact
n  E.g.: GPS, RFID, radar guiding… - from military to commercial applications
n  New technology (for existing product) - great value impact sometimes
n  E.g.: High-speed CMOS (over NMOS) for power reduction and device scaling
n  New product/service (for existing market) - medium value impact
n  E.g.: On-line shopping/trading, SMS (China), digital broadcast…
n  New combination of package of technologies, products and services
n  E.g.: Apple’s iPhone and iPod, Blackberry, solar, clean tech…
n  New design (implementation or appearance) - limited value impact
n  New system architectures: e.g., the Sandisk “338” patent for flash-memory card
n  New subsystem/circuitry
OEM to ISF Transformation 12Mar. 19, 2015
Mar. 19, 2015 OEM to ISF Transformation 13
Case Study: MxXxxx Ltd (2007)
(Hong Kong - Shenzhen)
Business/Market Strategies (2007)
n  Business focuses/existing revenue sources
n  AMR system (#1 priority) - Towngas as the lead customer
n  GPS/GPRS logistics service platform (#2 priority) - Nippon Express (for
cargo) & Eternal East (for passenger) as the lead user/customer
n  Wireless data acquisition system (#3 priority) - existing business
n  Business model
n  Fully-integrated solutions to build long-term service platforms
n  Scalable service platforms for recurring revenue streams from top-tier
customers.
n  Add high-value service items to grow revenue/account.
n  Customer channel development - mostly by referrals (endorsements)
n  Top-tier users/customers introduce their partners as new customers
n  Follow and support top-tier customers’ expansions for growth
n  Market expansion -- as led by top-tier customers
n  Hong Kong (as the market test site) -> PRD -> Mainland -> Global
n  Setting up service/data centers in Beijing, Shanghai, Chengdu and Xian
Mar. 19, 2015 OEM to ISF Transformation 14
OEM to ISF Transformation 15Mar. 19, 2015
AMR System - Architecture (for Towngas)
Gas meter -
Low Speed
DTS
GPRS
Modem
Control Centre
A/D
Converter
Commercial &
Industrial
(C&I) Users
Domestic
Household
Gas meter -
High Speed
MS/RMS CMS
GBS
Mid-way
collector
1X
20 X
240 X
2Y
Y
Y240 X
: Items currently supplied by MxXxxx
DTS : Item to be supplied by MxXxxx : Items to be integrated
Billing
Customer
service
Resource
Planning
Marketing IVRS
Towngas existing internal system
GPR
S
IVRS = Interactive Voice Response system
CBS
CBS
RF
(2007)
OEM to ISF Transformation 16Mar. 19, 2015
AMR System – Milestones (2007)
GBS
Jan
2005
CBS
CMS
Control
Center
Sep.
2008
Jan
2006
RMS
Dec.
2008
Nov.
2008 Adoption
Into 90+ JVs
in China
Sept.
2005
Dec.
2006
MxXxxx Product/Technology Roadmap
DTS *
Jan.
2009
R/T Data
Analyses
Billing Customer services, IVRS,
Gas supply planning
Values to Towngas
* = under development Full system integration
capability for any AMR
system in all flow-based
applications incl. gas
AMR System - Realized Benefits to Towngas
Direct Cost Reduction Benefits
n  Monthly data transmission charge (GPRS vs. phone line)
n  HK$20 vs. HK$148
n  Installation cost reduction (w/o digging, drilling & cabling)
n  HK$200 vs. over HK$5,000
n  Monthly staff cost reduction for collecting meter reading manually
n  HK$2.4M (over 200 persons @ $12K/month each)
CRM, Productivity & Efficiency Benefits
n  Enable real-time gas usage monitoring, down to 1 minute interval,
for CRM, ERP and gas supply/distribution/delivery planning
n  Enable proactive CRM to retain high-value customers
n  Enable accurate billing based on real data instead of estimates
n  Connectivity in all situations regardless physical accessibility
Mar. 19, 2015 OEM to ISF Transformation 17
(2007)
Service = Highest-level Value/IP Integration
MyCard Confidential 9August 1, 2008
GPS/GPRS Logistics Service Platform - System Architecture
GPRS
Logistics & PassengerLogistics & Passenger
Logistics Co.
Forwarding
Agents
Security
Monitoring &
Alerts
Customer-
specified Call
Services
Functions of Control/Call/Data Centers & Service Platform
Customs
Insurance
Co./ Bank -
Asset Mgt.
Real-time
Location
Tracking
Coordination,
Security Checks
& Alerts
Data analyses / Bus.
Intel., Map Database &
User Web Portal
CallCall
CenterCenter
ControlControl
CenterCenter
Data Center /Data Center /
Access PlatformAccess Platform
Data Storage &
Archives
Map Database Mgmt.
User Access Control &
Portal Management
GUI & Templates
Emergency
Alerts
Senders &
Receivers
Transformation from Product to Service:
OEM -> ODM(S/S) -> IDM(D/S) -> ISP(D/S)
OEM to ISF Transformation 18Mar. 19, 2015
Supply-side
OEM = Original Equipment Manufacturers
ODM = Original Design Manufacturers
---- A Big Gap In-between ----
Demand-side
IDM = Integrated Design Manufacturers
ISP = Integrated Service Providers
(2007)
OEM to ISF Transformation 19Mar. 19, 2015
GPS/GPRS Log. Service Plat. – Network
Customers monitor vehicle activities on MxXxxx web-portal
Hutchison
PCCW
(Sunday)
China
Telecom
MxXxxx
Sinotrans
China
Mobile
Internet 4M+
lease line
10M lease line
MxXxxx capabilities:
• Web ASP services
• Map database
• Data center
In Hong Kong In Mainland
Wireless network
Wireless network
Wired & wireless
network
Wired network
Wired network
(2007)
OEM to ISF Transformation 20Mar. 19, 2015
GPS/GPRS Log. Service Plat. - Milestones
Launch in HK
- Single-SIM
2nd-gen. Device
w/ Additional
Interfaces
Dual-SIM
Device
Cross-border
Logistics Co.
Cross-border
Passenger
Vehicles
Partnership with TC - the largest smartcard
payment service provider for bus in China
90 cities in China with
98,000 bus
Overseas
markets
Aug.
2004
Mar.
2006
Dec.
2007
Aug.
2008
Oct.
2008
Jan.
2010
Total Solution to
Customers - Fully
integrated System
MxXxxx Service/Technology Roadmap
Market Development
Local
Logistics Co.
Full system
integration capability
to send other device
data thru GPRS
Eternal East as the
lead customer
(2007)
GPS/GPRS LSP - Realized Benefits to Users
Direct Cost Reduction Benefits
n  Saving on fuel consumption: $4,000 estimated vs. $220 for a monthly
service fee to MxXxxx
¨  As reported on a newspaper, a saving of HK$120,000 in fuel expense for 30
trucks on monthly basis, with the assistance of MxXxxx’s fuel consumption
report
n  Saving on toll expenses: $3,360 estimated vs. $220 for a monthly service
fee to MxXxxx
¨  Testimony by CEO of Eternal East: a potential saving of HK$3,360 in toll
expenses for each coach on monthly basis, with the help of MxXxxx’s specified
location report
CRM, Productivity & Efficiency Benefits
n  Has become a mandatory requirement (de-facto standard) for cross-
border cargo logistics by the largest forward agents in HK - MxXxxx is the
sole source!
n  Intelligent fleet management through “Fixed Route Control” or “Fixed Area
Control” with SMS/e-mail alerts on rule violations for proper supervision
n  Effective security measure against robbery/theft with the on-line SOS button
n  Ability to real-time coordinate vehicles for optimized job assignments
Mar. 19, 2015 OEM to ISF Transformation 21
(2007)
Differentiating Advantages & Strategies
n  “Full System Integration” solutions
n  End-to-end proprietary solution from “H/W+F/W+Interface S/W”
device platform to “Application S/W + User Interface (GUI &
templates)” IT service platform
n  Embedded through customization into customers’ operation
systems as an integral part of its daily operation - hard to replace
n  Becoming de-facto standards with on-going customer driven
improvement cycles once every 3 months
n  Comprehensive core competency for location-based total-
solution service capability (“Entry Barrier”)
n  “Full System Integration” know-how endorsed by lead customers
n  Proprietary map database system customizable to cust. needs
and capable of fast search (benchmarked as the best by PCCW)
n  Proprietary wireless transmission evaluation platform to ensure
proper optimization for high-reliability data transmission
n  Data center and call center capabilities to support customers’
needs for “Total Solutions”
Mar. 19, 2015 OEM to ISF Transformation 22
(2007)
Diff. Advantages & Strategies – Cont. (2007)
n  Close collaborations with lead customers/users
n  For wireless real-time flow-based intelligent-control total-solution
n  Towngas - AMR “total system” solution development
n  For location-based real-time intelligent logistics managmt. system
n  Nippon Express and SinoTrans - cargo logistics GPS/GPRS tracking
n  Eternal East - passenger logistics GPS/GPRS tracking
n  Tianjin IC Card Public Network System - integrating GPS/GPRS
tracking with smartcard (RFID) applications
n  Business connections and leverage:
n  Being the Shenzhen base of National Engineering R&D Center
for Mobile Communications - a market-leader making platform!
n  pre-approved authority to pilot-test in new frequency spectrum -- 1st
mover advantage with >1 year’s lead
n  Attractive platform to team up with the best device (H/W) providers
n  Strategic partnership with leading network service providers in
China: China Mobile, China Telecom and Sinotrans in Mainland;
Hutchison and PCCW in HK
Mar. 19, 2015 OEM to ISF Transformation 23
Business/Technology Developmt. Roadmap
n  Comprehensive Business Intelligence (BI) enabling
capabilities as core strategy
n  1st stage (present status): GPS/GPRS
n  For “real-time” (updating) location-based service platform for time/
mission critical applications
n  Generation of appropriate management reports
n  2nd stage: GPS/GPRS + RFID
n  RFID: add real-time item tracking capabilities
n  For Location-based item-tracking service platform for Item-based
logistics management and BI services
n  3rd stage: GPS/GPRS + RFID + environmental sensor
technologies
n  Sensors: add real-time environmental (temp., humidity, pressure,
etc.) monitoring capabilities
n  For high-end high-profit comprehensive critical-item tracking and
logistics management services
Mar. 19, 2015 OEM to ISF Transformation 24
(2007)
Mar. 19, 2015 OEM to ISF Transformation 25
Looking Ahead: What Drives
Knowledge Economy?
Various “IT-related” Business Models (2014)
OEM	
  (Product)	
  	
   ODM	
  (Product)	
  	
   OBM	
  (Product)	
  	
   	
  	
   IDM	
  (Product)	
  	
   ISP	
  (Service)	
  
PRD	
  Factories	
   Foxconn	
   TCL/Xiaomi?	
   	
  	
   “iPhone	
  alone”	
   ”MyCxxx”	
  
	
  	
   	
  	
   	
  	
   	
  	
   	
  	
   	
  	
   	
  	
  
Supply-­‐side:	
  SCM+	
   Must	
   Must	
   Must	
   	
  	
   Yes	
   Yes	
  
Manufacturing	
   Yes	
   Yes	
   Yes	
   	
  	
   Outsourced?	
   Outsourced?	
  
Engineering	
   No	
   Yes	
   Yes	
   	
  	
   Outsourced?	
   Outsourced?	
  
Product	
   Client’s	
  product	
   Client’s	
  product	
   	
  Integrat.	
  of	
  IC	
   	
  	
   Yes	
  (Propriet.	
  Core)	
   Yes	
  
Brand	
   No	
   No	
   Yes	
   	
  	
   Yes	
   Yes	
  
	
  	
  
Demand-­‐side:	
  DCM+	
   No	
   No	
   Some	
   	
  	
   Must	
   Must	
  
R&D	
  (Roadmap)	
   No	
   No	
   Surficial	
   	
  	
   ~30%	
  of	
  Rev.	
   ~30%	
  of	
  Rev.	
  
System	
  Integra)on	
   No	
   Some	
   Some	
   	
  	
   Yes	
   Yes	
  
Integrated	
  Services	
   No	
   No	
   No	
   	
  	
   No?	
   Yes	
  
	
  	
  
IP	
  Ownership:	
   Don’t	
  care?	
   Don’t	
  care?	
   Brand	
  focused	
   	
  	
   Comp.	
  IP	
  Strategy	
   Comp.	
  IP	
  Strategy	
  
Trade	
  Secrets	
   In-­‐house	
  only	
   In-­‐house	
  only	
   Some	
   	
  	
   Yes	
   Yes	
  
Embedded	
  Licensing	
   No	
   (NRE	
  fee)	
   Don’t	
  care?	
   	
  	
   Yes	
   Yes	
  
Trademark	
   No	
  Branding	
   No	
  Branding	
   Self	
  Branding	
   	
  	
   Yes	
   Yes	
  
	
  	
  
Pre-­‐	
  &	
  Post	
  Sale	
  Services	
  (should	
  be	
  >50%	
  of	
  all	
  ac)vi)es	
  for	
  innova)on):	
   	
  	
  
Design	
  Win	
   No	
   No	
   Some/Must	
   	
  	
   Must	
   Must	
  
Field	
  Monitor	
  &	
  Upgrade	
   No	
   No	
   Some/Must	
   	
  	
   Must	
   Must	
  
New	
  Product	
  Defini)on	
   No	
   No	
   Some/Must	
   	
  	
   Must	
   Must	
  
Business	
  Intelligence	
   No	
   No	
   In-­‐house?	
   	
  	
   In-­‐house?	
   Must	
  as	
  Service	
  
Mar. 19, 2015 OEM to ISF Transformation 26
Apple’s Ecosystem – “IP” Business Model
Self	
   Partners	
   Comments	
  
Product/Service	
  Categories:	
  
Hardware	
   √	
   Proprietary/Std.:	
  iPhones,	
  iPads,	
  Mac…	
  
S/W	
   √	
   Proprietary:	
  Apple	
  OS	
  
Cellular	
  Network	
   √	
   Verizon,	
  ATT,	
  T-­‐mobile…	
  
Internet	
  Infrastructure	
   √	
   	
  	
   	
  	
   iCloud	
  (cloud	
  compu)ng	
  &	
  storage)	
  
Apps/Content	
  Planorm	
   √	
   	
  	
   	
  	
   iTunes/Apps	
  Store	
  (IP	
  eCommerce!)	
  
	
  -­‐	
  Applica)ons	
   √	
   Apple	
  apps	
  developers….	
  
	
  -­‐	
  Contents	
   √	
   Musics,	
  movies,	
  TV	
  shows,	
  eLearning	
  
Users’	
  Content	
  Sharing	
   √	
   With	
  iCloud	
  +	
  iTunes	
  (from	
  B2C	
  to	
  C2C)	
  
"IP"	
  Business	
  Ecosystem	
   √	
   	
  	
   	
  	
   	
  Only	
  one	
  of	
  its	
  kind	
  (Global	
  Leadership)	
  
Mar. 19, 2015 OEM to ISF Transformation 27
Apple is 1st company building the “IP” Knowledge-based Business Ecosystem
successfully with its proprietary hardware:
n  The Game-changer in “Cellular Phone” business with “Ecosystem” approach.
n  Successfully leverages the Moore’s Law and Metcalfe’s Law scalabilities.
n  The Most Valuable Company – only one for “End-to-end One-stop Users’ Secured (with
Security & Privacy) Content Sharing”
Why Apple is the Most Valuable Company?
n  It understands “IT” Business Model better
than all the competitors (Anybody):
n  “IP” is its “Centerpiece” (Proprietary)
n  Proprietary (vs. Open Standard) => “Diff. QoS”
n  Total Ecosystem Building is its “Core Effort”
n  Minimizing End Consumer (Direct Service) Liability
Exposure
n  Enabling Service Ecosystem Building at arm’s length
(being the 3rd party)
n  “QoS” is its “Branding” (Customer Loyalty)
n  Comprehensive Differentiating “QoS” Business
Ecosystem (the Only Game in Town so far!?)
Mar. 19, 2015 OEM to ISF Transformation 28
Methodology	
  for	
  “CRE	
  +	
  Con)nuing	
  Innova)on”	
  	
  
Lead Customers’ Requirements => 2nd G => 3rd G =>…
Differentiating Value Creations => 2nd G => 3rd G =>…
Business Model => 2nd G => 3rd G =>…
Service/Product Roadmap => 2nd G => 3rd G =>…
Application/Technology Roadmap => 2nd G => 3rd G =>…
IP Portfolio Development => 2nd G => 3rd G =>…
The next innovation ideas come from customers (CRE) & “Stress Tests” identifying
(1)  The weak-links in product design & performance and scalability
(2)  System (architecture) integrity and scalability (elasticity) issues
(3)  The bottlenecks for scalability (technology and manufacturability roadmap)
Close collaboration between the customer (CRE) and the vendor
Mission-&-Time Critical Requirements along Demand-chain
OEM to ISF Transformation 29Mar. 19, 2015
(2012)
Strategies in the “Cloud” & IP Protection
Barriers in Cloud Computing era against copycats
n  Business Model – Service-franchising is the best
n  Contractual framework in favor of the franchiser.
n  Business/operation process – proper SCM
n  Close-loop fully-traceable certified process is the best
n  Network system integration
n  Real-time monitor and surveillance is the best
n  System integration - PaaS
n  Proprietary firmware as trade secrets
n  Software - SaaS
n  No source code disclosure is the best
n  Hardware - ASIC
n  Anti reverse-engineering practice is the best
OEM to ISF Transformation 30Mar. 19, 2015
(2012)
Most Suitable “IP” Business Model for HK
n  Franchising encompasses all the IP commercialization
elements and more:
n  Proprietary information: Trade Secrets (Know-how’s)
n  Exclusive Rights: Patents, Copyrights, Trademarks, Branding, etc.
n  Standardization: Training & Certification, Audit & Q.A.
n  Ecosystem-building: Supply-chain Management & Control
n  Contract dictated by Franchiser: Legal Terms & Conditions
n  Franchising is HK’s best IP commercialization method:
n  Rising China Middle-Class demand high-quality Modern Services
n  Mainland China lack sophistications in Modern Services
n  Hong Kong with its unique legal system in China should be the
franchisers’ paradise
n  Hong Kong as the Modern-Service Franchisers’ hub for China
n  Career job opportunities for Hong Kong’s next generations!
Mar. 19, 2015 OEM to ISF Transformation 31
IP Strategies of HK R&D Efforts
n  HK Gov’t funded R&D Centers
n  High tech: ASTRI (IT, IC…), NAMI (Nanotech)
n  Infrastructure: LSCM (logistics & related technologies)
n  People livelihood: HKRITA (textile related technologies)
n  “ISF” IP strategy is suitable for LSCM & HKRITA
n  Hard Standardization: 1-stop turn-key operation & equipment
n  Soft Standardization: Training & Certification, Audit & Q.A.
n  Ecosystem-building: Supply-chain Management & Control
n  Contract dictated by Franchiser: Legal Terms & Conditions
n  “IMEC”-like business model for high-tech
n  All R&D Centers must work with their counterparts in
Mainland on Roadmaps
n  Service/Product roadmaps; Application/Technology roadmaps
n  Collaborative R&D for China or International Standardization
Mar. 19, 2015 OEM to ISF Transformation 32
Thank You!
(al@iipcc.org)
Please visit www.iipcc.org
Mar. 19, 2015 OEM to ISF Transformation 33

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OEM to ISF Transformation (Final)

  • 1.                      Presenta)on  at  the  7th  Workshop  of  the  “IIPCC  HK  Chapter  IP  Workshop  Series:           IP’s  Role  in  Entrepreneurship  &  Innova)on”  (in  CityU  of  HK  on  Mar.  19,  2015)     Prepared  by:    Al  Kwok  (郭灿辉)                      Governor  &  Co-­‐founder,  IIPCC  Hong  Kong  Chapter                      Governor  &  Co-­‐founder,  HKIURCA  (⾹香港產學研合作促進會)                      Member,  HKSAR  “IP  Trading”  Working  Group                        Governor  &  Co-­‐founder,  Savantas  Policy  Ins)tute                      President,  CASPA  (华美半导体协会)  PRD  Chapter                      Former  VP  &  CIPO,  NetLogic  Microsystems  (“NETL”)   OEM to ISF (Integrated Service Franchiser) Transformation: Turning a Product Co. into a Service Franchise Mar. 19, 2015 OEM to ISF Transformation 1
  • 2. Evolution of Intangible Assets – U.S. Companies Knowledge-based Economic Trend (2008) 2Mar. 19, 2015 OEM to ISF Transformation
  • 3. The Value Hierarchy (Business Models) Values/ProfitMargins Applications (Mkt. & Standards) System Integration (Archit., …) Engineering (Design, ODM,..) Manufacturing (Process, OEM) Intellectual Property (IP) Outsourcing Trend Consumer recognition Core competency Brand Innovation 50% 40% 30% Presented  at  Intellectual  Property  Symposium  2002  in  Guangzhou  on  December  10,  2002   OEM to ISF Transformation 3Mar. 19, 2015
  • 4. Pillars for Knowledge Economy (2012) IC IT IP Hardware Network Know-how/Content Functionality Physical devices Connectivity Experience sharing Scalability Moore’s Law Metcalfe’s Law TBD!? Scaling Factor 2X/18 mon. Value ~ n2 Value ~ XR (X, R >1) Disruptive Driver CMOS (IDT) IPv4/6, Internet, QoS (NMI) Apple iTunes -> “Unified IP Pooling” Driving Product/Service Memories & CPU => SOC QoS, Mobile Multimedia Standardization for scaling Start Time ~1985 ~2000 ~2015? Mkt. Size (20 yr) ~$300B Trillions Zillions? Mar. 19, 2015 OEM to ISF Transformation 4 •  Evolution of Knowledge-based Economy (KBE): IC -> IT -> IP •  Value of IP is based on its “Reusability” and “Ability to Share”: •  The more it is reused, the higher its value is •  No physical limitation: IP can be used by many users at the same time •  The impact of “free-market IP sharing” on Knowledge Economy is immeasurable
  • 5. Mar. 19, 2015 OEM to ISF Transformation 5 IT Business Areas & Opportunities (2008) High-valued services with good business potentials Network environment given (by providers) or to be set up Data mining from public domain to add values Factors given or to be used “as is” – not to reinvent H/W components S/W & F/W Network Platform System (H/W) Platform Network Services/environments: Internet, cellular, WiMAX System Integration Protocols & Interfaces (Open stds. for reuse?) Content Layer Service Platform CRM, ERP, POS, etc. Applications (ASP) Consumer Services Public Domain Company Proprietary Bus. Domain Knowledge Instructions & Interfaces New ICs and Devices every 18 months or less Moore’s Law and Metcalfe’s Law (acting on H/W and Network Platforms respectively) are fuelling on-going IT System/Business Process Re-engineering for global improvements (changes) like magma shaping Earth crust’s movements
  • 6. Mar. 19, 2015 6 IT Services Mean Everything! (2008) n  All services in any industry are relied on IT infrastructure and know- how for their effective deliveries n  IT is the critical enabler for global competitiveness n  Companies lack of IT proficiency will be history! n  IT services encompass everything: banking, finance, logistics, tourism, manufacturing and so on n  Integrating IT capabilities into the business process is a matter of survival of the fittest! n  All business processes are continually reengineered for better IT capabilities in “a globally networked world” valuing “differentiating customer services to anybody, anywhere and anytime”. n  Inevitable future trends: n  IT service management is the hottest topic for this century! n  IT services will generate >50% of all high-paid jobs worldwide! n  “IT proficiency + business domain knowledge” is a must! n  Productivity improvements greatly outweigh the cost! n  IT service capabilities determine global economic power! OEM to ISF Transformation
  • 7.  Value  Chain  (=>  DemandóSupply  in  Alignment)   IC H/W Platform IC S/W Platform (API, drivers, etc.) System Application Platform(s) Generic Reference Design (w/ other chips) Differentiated Application Designs Various Applications/Services Consumer Markets (End Users) IC Design houses System Integrators Service Providers For Consumer Electronics/IT Market (Ecosystem) System Manuf. Great  end-­‐to-­‐end  push-­‐pull  effect  for  market  scaling  thru  lifecycles   OEM to ISF Transformation 7Mar. 19, 2015 (2012)
  • 8. Mature (must have) Under-developed Ecosystem Well-developed Cut-throat Competition (me too!) Application Futuristic (nice to have) Too Far-out: Not ready, hype, bubble Future Growth: Longest-term Future Growth: Long-term Future Growth: Short-term Well-developed infrastructure: consumer market by nature with lower (30->50%) profit margins Buildinginfrastructure& ecosystem:Industrial marketbynaturewithhigher (50->70%)profitmargins Market Positioning – Product/Service Focus OEM to ISF Transformation 8Mar. 19, 2015 (2008) IT Market Characteristics
  • 9. ServicerequirementsdriveH/Wplatformimprovements Existing OEM/ODM business model breaks the IT Business Food Chain without positive feedback from Service to drive next product dev. cycle Integration vs. Standardization vs. Scalability n  Hierarchy of IT Business (from “service to consumers” as the top of the food-chain with highest Gross Margin then down): Much Higher Value Creation from Demand-side 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) OEM to ISF Transformation 9Mar. 19, 2015 (2008)
  • 10. Raising Values of a Product (IP is the Core) §  Price = Value to Customers => Price = Mftg. Costs + Services + Embedded IP License + Brand §  Pre-sale services mean design- win efforts providing solutions to address customers’ problems §  This is the best sources of innovation and ideas for the next- generation products §  Post-sale services mean reducing customers’ costs of ownership, extending the useful lifetime of the product, generating recurring sales §  Embedded IP licensing means the customers can use the product IP for their own product uplifting & differentiations - e.g., “Intel Inside” §  Brand recognition means the customers recognize the product and its maker for superb quality, performance, reliability & services OEM to ISF Transformation 10Mar. 19, 2015 Mkt. Cap. / Intangible Asset (2013): 1) Apple: ~US$393B / >99% 2) Foxconn: ~US$3.5B / <20% Manufacturing Cost (⽣生产成本) Pre- & Post-Sale Services (售前及售后的服务) Brand Recognition (品牌认可) Embedded IP Licensing (隐含IP授权) IncreasingValues(提⾼高增值) Price = Values to Customers (价格 = 给客户的价值) >70%PM ~10%PM >60%PM >40%PM Demand Side Demand Side Demand Side Supply Side (2012)
  • 11. Profitability vs. IP Creation (Competitiveness) OEM to ISF Transformation 11Mar. 19, 2015 Manufacturing Cost (⽣生产成本) Pre- & Post-Sale Services (售前及售后的服务) Brand Recognition (品牌认可) Embedded IP Licensing (隐含IP授权) IncreasingValues(提⾼高增值) Price = Values to Customers (价格 = 给客户的价值) >70%PM ~10%PM >60%PM >40%PM Demand Side Demand Side Demand Side Supply Side OPEN OPEN PRIVATE Trademarks Patents, Utility Models, Designs, Copyrights… Trade Secrets (Know-how) PRIVATE Only <20% Know-how for Patents, the rest kept as Trade Secret (2012) IT Market Characteristics Trade Secrets (Know-how): Manufacturability (yield) & Testability (observability)
  • 12. Types & Ranking of Innovation (2008) In the order of lasting value impact to society (from most to least): n  New business model (global productivity jump) - great lasting value impact n  E.g.: e-Commerce (internet), pure-play foundry business model, carbon trading… n  New business process (global productivity jump) - great lasting value impact n  E.g.: Window/Office (new work environment), outsourcing, TQM, ERP… n  New application/market (for exist. prod. or tech.) - great value impact n  E.g.: GPS, RFID, radar guiding… - from military to commercial applications n  New technology (for existing product) - great value impact sometimes n  E.g.: High-speed CMOS (over NMOS) for power reduction and device scaling n  New product/service (for existing market) - medium value impact n  E.g.: On-line shopping/trading, SMS (China), digital broadcast… n  New combination of package of technologies, products and services n  E.g.: Apple’s iPhone and iPod, Blackberry, solar, clean tech… n  New design (implementation or appearance) - limited value impact n  New system architectures: e.g., the Sandisk “338” patent for flash-memory card n  New subsystem/circuitry OEM to ISF Transformation 12Mar. 19, 2015
  • 13. Mar. 19, 2015 OEM to ISF Transformation 13 Case Study: MxXxxx Ltd (2007) (Hong Kong - Shenzhen)
  • 14. Business/Market Strategies (2007) n  Business focuses/existing revenue sources n  AMR system (#1 priority) - Towngas as the lead customer n  GPS/GPRS logistics service platform (#2 priority) - Nippon Express (for cargo) & Eternal East (for passenger) as the lead user/customer n  Wireless data acquisition system (#3 priority) - existing business n  Business model n  Fully-integrated solutions to build long-term service platforms n  Scalable service platforms for recurring revenue streams from top-tier customers. n  Add high-value service items to grow revenue/account. n  Customer channel development - mostly by referrals (endorsements) n  Top-tier users/customers introduce their partners as new customers n  Follow and support top-tier customers’ expansions for growth n  Market expansion -- as led by top-tier customers n  Hong Kong (as the market test site) -> PRD -> Mainland -> Global n  Setting up service/data centers in Beijing, Shanghai, Chengdu and Xian Mar. 19, 2015 OEM to ISF Transformation 14
  • 15. OEM to ISF Transformation 15Mar. 19, 2015 AMR System - Architecture (for Towngas) Gas meter - Low Speed DTS GPRS Modem Control Centre A/D Converter Commercial & Industrial (C&I) Users Domestic Household Gas meter - High Speed MS/RMS CMS GBS Mid-way collector 1X 20 X 240 X 2Y Y Y240 X : Items currently supplied by MxXxxx DTS : Item to be supplied by MxXxxx : Items to be integrated Billing Customer service Resource Planning Marketing IVRS Towngas existing internal system GPR S IVRS = Interactive Voice Response system CBS CBS RF (2007)
  • 16. OEM to ISF Transformation 16Mar. 19, 2015 AMR System – Milestones (2007) GBS Jan 2005 CBS CMS Control Center Sep. 2008 Jan 2006 RMS Dec. 2008 Nov. 2008 Adoption Into 90+ JVs in China Sept. 2005 Dec. 2006 MxXxxx Product/Technology Roadmap DTS * Jan. 2009 R/T Data Analyses Billing Customer services, IVRS, Gas supply planning Values to Towngas * = under development Full system integration capability for any AMR system in all flow-based applications incl. gas
  • 17. AMR System - Realized Benefits to Towngas Direct Cost Reduction Benefits n  Monthly data transmission charge (GPRS vs. phone line) n  HK$20 vs. HK$148 n  Installation cost reduction (w/o digging, drilling & cabling) n  HK$200 vs. over HK$5,000 n  Monthly staff cost reduction for collecting meter reading manually n  HK$2.4M (over 200 persons @ $12K/month each) CRM, Productivity & Efficiency Benefits n  Enable real-time gas usage monitoring, down to 1 minute interval, for CRM, ERP and gas supply/distribution/delivery planning n  Enable proactive CRM to retain high-value customers n  Enable accurate billing based on real data instead of estimates n  Connectivity in all situations regardless physical accessibility Mar. 19, 2015 OEM to ISF Transformation 17 (2007)
  • 18. Service = Highest-level Value/IP Integration MyCard Confidential 9August 1, 2008 GPS/GPRS Logistics Service Platform - System Architecture GPRS Logistics & PassengerLogistics & Passenger Logistics Co. Forwarding Agents Security Monitoring & Alerts Customer- specified Call Services Functions of Control/Call/Data Centers & Service Platform Customs Insurance Co./ Bank - Asset Mgt. Real-time Location Tracking Coordination, Security Checks & Alerts Data analyses / Bus. Intel., Map Database & User Web Portal CallCall CenterCenter ControlControl CenterCenter Data Center /Data Center / Access PlatformAccess Platform Data Storage & Archives Map Database Mgmt. User Access Control & Portal Management GUI & Templates Emergency Alerts Senders & Receivers Transformation from Product to Service: OEM -> ODM(S/S) -> IDM(D/S) -> ISP(D/S) OEM to ISF Transformation 18Mar. 19, 2015 Supply-side OEM = Original Equipment Manufacturers ODM = Original Design Manufacturers ---- A Big Gap In-between ---- Demand-side IDM = Integrated Design Manufacturers ISP = Integrated Service Providers (2007)
  • 19. OEM to ISF Transformation 19Mar. 19, 2015 GPS/GPRS Log. Service Plat. – Network Customers monitor vehicle activities on MxXxxx web-portal Hutchison PCCW (Sunday) China Telecom MxXxxx Sinotrans China Mobile Internet 4M+ lease line 10M lease line MxXxxx capabilities: • Web ASP services • Map database • Data center In Hong Kong In Mainland Wireless network Wireless network Wired & wireless network Wired network Wired network (2007)
  • 20. OEM to ISF Transformation 20Mar. 19, 2015 GPS/GPRS Log. Service Plat. - Milestones Launch in HK - Single-SIM 2nd-gen. Device w/ Additional Interfaces Dual-SIM Device Cross-border Logistics Co. Cross-border Passenger Vehicles Partnership with TC - the largest smartcard payment service provider for bus in China 90 cities in China with 98,000 bus Overseas markets Aug. 2004 Mar. 2006 Dec. 2007 Aug. 2008 Oct. 2008 Jan. 2010 Total Solution to Customers - Fully integrated System MxXxxx Service/Technology Roadmap Market Development Local Logistics Co. Full system integration capability to send other device data thru GPRS Eternal East as the lead customer (2007)
  • 21. GPS/GPRS LSP - Realized Benefits to Users Direct Cost Reduction Benefits n  Saving on fuel consumption: $4,000 estimated vs. $220 for a monthly service fee to MxXxxx ¨  As reported on a newspaper, a saving of HK$120,000 in fuel expense for 30 trucks on monthly basis, with the assistance of MxXxxx’s fuel consumption report n  Saving on toll expenses: $3,360 estimated vs. $220 for a monthly service fee to MxXxxx ¨  Testimony by CEO of Eternal East: a potential saving of HK$3,360 in toll expenses for each coach on monthly basis, with the help of MxXxxx’s specified location report CRM, Productivity & Efficiency Benefits n  Has become a mandatory requirement (de-facto standard) for cross- border cargo logistics by the largest forward agents in HK - MxXxxx is the sole source! n  Intelligent fleet management through “Fixed Route Control” or “Fixed Area Control” with SMS/e-mail alerts on rule violations for proper supervision n  Effective security measure against robbery/theft with the on-line SOS button n  Ability to real-time coordinate vehicles for optimized job assignments Mar. 19, 2015 OEM to ISF Transformation 21 (2007)
  • 22. Differentiating Advantages & Strategies n  “Full System Integration” solutions n  End-to-end proprietary solution from “H/W+F/W+Interface S/W” device platform to “Application S/W + User Interface (GUI & templates)” IT service platform n  Embedded through customization into customers’ operation systems as an integral part of its daily operation - hard to replace n  Becoming de-facto standards with on-going customer driven improvement cycles once every 3 months n  Comprehensive core competency for location-based total- solution service capability (“Entry Barrier”) n  “Full System Integration” know-how endorsed by lead customers n  Proprietary map database system customizable to cust. needs and capable of fast search (benchmarked as the best by PCCW) n  Proprietary wireless transmission evaluation platform to ensure proper optimization for high-reliability data transmission n  Data center and call center capabilities to support customers’ needs for “Total Solutions” Mar. 19, 2015 OEM to ISF Transformation 22 (2007)
  • 23. Diff. Advantages & Strategies – Cont. (2007) n  Close collaborations with lead customers/users n  For wireless real-time flow-based intelligent-control total-solution n  Towngas - AMR “total system” solution development n  For location-based real-time intelligent logistics managmt. system n  Nippon Express and SinoTrans - cargo logistics GPS/GPRS tracking n  Eternal East - passenger logistics GPS/GPRS tracking n  Tianjin IC Card Public Network System - integrating GPS/GPRS tracking with smartcard (RFID) applications n  Business connections and leverage: n  Being the Shenzhen base of National Engineering R&D Center for Mobile Communications - a market-leader making platform! n  pre-approved authority to pilot-test in new frequency spectrum -- 1st mover advantage with >1 year’s lead n  Attractive platform to team up with the best device (H/W) providers n  Strategic partnership with leading network service providers in China: China Mobile, China Telecom and Sinotrans in Mainland; Hutchison and PCCW in HK Mar. 19, 2015 OEM to ISF Transformation 23
  • 24. Business/Technology Developmt. Roadmap n  Comprehensive Business Intelligence (BI) enabling capabilities as core strategy n  1st stage (present status): GPS/GPRS n  For “real-time” (updating) location-based service platform for time/ mission critical applications n  Generation of appropriate management reports n  2nd stage: GPS/GPRS + RFID n  RFID: add real-time item tracking capabilities n  For Location-based item-tracking service platform for Item-based logistics management and BI services n  3rd stage: GPS/GPRS + RFID + environmental sensor technologies n  Sensors: add real-time environmental (temp., humidity, pressure, etc.) monitoring capabilities n  For high-end high-profit comprehensive critical-item tracking and logistics management services Mar. 19, 2015 OEM to ISF Transformation 24 (2007)
  • 25. Mar. 19, 2015 OEM to ISF Transformation 25 Looking Ahead: What Drives Knowledge Economy?
  • 26. Various “IT-related” Business Models (2014) OEM  (Product)     ODM  (Product)     OBM  (Product)         IDM  (Product)     ISP  (Service)   PRD  Factories   Foxconn   TCL/Xiaomi?       “iPhone  alone”   ”MyCxxx”                               Supply-­‐side:  SCM+   Must   Must   Must       Yes   Yes   Manufacturing   Yes   Yes   Yes       Outsourced?   Outsourced?   Engineering   No   Yes   Yes       Outsourced?   Outsourced?   Product   Client’s  product   Client’s  product    Integrat.  of  IC       Yes  (Propriet.  Core)   Yes   Brand   No   No   Yes       Yes   Yes       Demand-­‐side:  DCM+   No   No   Some       Must   Must   R&D  (Roadmap)   No   No   Surficial       ~30%  of  Rev.   ~30%  of  Rev.   System  Integra)on   No   Some   Some       Yes   Yes   Integrated  Services   No   No   No       No?   Yes       IP  Ownership:   Don’t  care?   Don’t  care?   Brand  focused       Comp.  IP  Strategy   Comp.  IP  Strategy   Trade  Secrets   In-­‐house  only   In-­‐house  only   Some       Yes   Yes   Embedded  Licensing   No   (NRE  fee)   Don’t  care?       Yes   Yes   Trademark   No  Branding   No  Branding   Self  Branding       Yes   Yes       Pre-­‐  &  Post  Sale  Services  (should  be  >50%  of  all  ac)vi)es  for  innova)on):       Design  Win   No   No   Some/Must       Must   Must   Field  Monitor  &  Upgrade   No   No   Some/Must       Must   Must   New  Product  Defini)on   No   No   Some/Must       Must   Must   Business  Intelligence   No   No   In-­‐house?       In-­‐house?   Must  as  Service   Mar. 19, 2015 OEM to ISF Transformation 26
  • 27. Apple’s Ecosystem – “IP” Business Model Self   Partners   Comments   Product/Service  Categories:   Hardware   √   Proprietary/Std.:  iPhones,  iPads,  Mac…   S/W   √   Proprietary:  Apple  OS   Cellular  Network   √   Verizon,  ATT,  T-­‐mobile…   Internet  Infrastructure   √           iCloud  (cloud  compu)ng  &  storage)   Apps/Content  Planorm   √           iTunes/Apps  Store  (IP  eCommerce!)    -­‐  Applica)ons   √   Apple  apps  developers….    -­‐  Contents   √   Musics,  movies,  TV  shows,  eLearning   Users’  Content  Sharing   √   With  iCloud  +  iTunes  (from  B2C  to  C2C)   "IP"  Business  Ecosystem   √            Only  one  of  its  kind  (Global  Leadership)   Mar. 19, 2015 OEM to ISF Transformation 27 Apple is 1st company building the “IP” Knowledge-based Business Ecosystem successfully with its proprietary hardware: n  The Game-changer in “Cellular Phone” business with “Ecosystem” approach. n  Successfully leverages the Moore’s Law and Metcalfe’s Law scalabilities. n  The Most Valuable Company – only one for “End-to-end One-stop Users’ Secured (with Security & Privacy) Content Sharing”
  • 28. Why Apple is the Most Valuable Company? n  It understands “IT” Business Model better than all the competitors (Anybody): n  “IP” is its “Centerpiece” (Proprietary) n  Proprietary (vs. Open Standard) => “Diff. QoS” n  Total Ecosystem Building is its “Core Effort” n  Minimizing End Consumer (Direct Service) Liability Exposure n  Enabling Service Ecosystem Building at arm’s length (being the 3rd party) n  “QoS” is its “Branding” (Customer Loyalty) n  Comprehensive Differentiating “QoS” Business Ecosystem (the Only Game in Town so far!?) Mar. 19, 2015 OEM to ISF Transformation 28
  • 29. Methodology  for  “CRE  +  Con)nuing  Innova)on”     Lead Customers’ Requirements => 2nd G => 3rd G =>… Differentiating Value Creations => 2nd G => 3rd G =>… Business Model => 2nd G => 3rd G =>… Service/Product Roadmap => 2nd G => 3rd G =>… Application/Technology Roadmap => 2nd G => 3rd G =>… IP Portfolio Development => 2nd G => 3rd G =>… The next innovation ideas come from customers (CRE) & “Stress Tests” identifying (1)  The weak-links in product design & performance and scalability (2)  System (architecture) integrity and scalability (elasticity) issues (3)  The bottlenecks for scalability (technology and manufacturability roadmap) Close collaboration between the customer (CRE) and the vendor Mission-&-Time Critical Requirements along Demand-chain OEM to ISF Transformation 29Mar. 19, 2015 (2012)
  • 30. Strategies in the “Cloud” & IP Protection Barriers in Cloud Computing era against copycats n  Business Model – Service-franchising is the best n  Contractual framework in favor of the franchiser. n  Business/operation process – proper SCM n  Close-loop fully-traceable certified process is the best n  Network system integration n  Real-time monitor and surveillance is the best n  System integration - PaaS n  Proprietary firmware as trade secrets n  Software - SaaS n  No source code disclosure is the best n  Hardware - ASIC n  Anti reverse-engineering practice is the best OEM to ISF Transformation 30Mar. 19, 2015 (2012)
  • 31. Most Suitable “IP” Business Model for HK n  Franchising encompasses all the IP commercialization elements and more: n  Proprietary information: Trade Secrets (Know-how’s) n  Exclusive Rights: Patents, Copyrights, Trademarks, Branding, etc. n  Standardization: Training & Certification, Audit & Q.A. n  Ecosystem-building: Supply-chain Management & Control n  Contract dictated by Franchiser: Legal Terms & Conditions n  Franchising is HK’s best IP commercialization method: n  Rising China Middle-Class demand high-quality Modern Services n  Mainland China lack sophistications in Modern Services n  Hong Kong with its unique legal system in China should be the franchisers’ paradise n  Hong Kong as the Modern-Service Franchisers’ hub for China n  Career job opportunities for Hong Kong’s next generations! Mar. 19, 2015 OEM to ISF Transformation 31
  • 32. IP Strategies of HK R&D Efforts n  HK Gov’t funded R&D Centers n  High tech: ASTRI (IT, IC…), NAMI (Nanotech) n  Infrastructure: LSCM (logistics & related technologies) n  People livelihood: HKRITA (textile related technologies) n  “ISF” IP strategy is suitable for LSCM & HKRITA n  Hard Standardization: 1-stop turn-key operation & equipment n  Soft Standardization: Training & Certification, Audit & Q.A. n  Ecosystem-building: Supply-chain Management & Control n  Contract dictated by Franchiser: Legal Terms & Conditions n  “IMEC”-like business model for high-tech n  All R&D Centers must work with their counterparts in Mainland on Roadmaps n  Service/Product roadmaps; Application/Technology roadmaps n  Collaborative R&D for China or International Standardization Mar. 19, 2015 OEM to ISF Transformation 32
  • 33. Thank You! (al@iipcc.org) Please visit www.iipcc.org Mar. 19, 2015 OEM to ISF Transformation 33