I was kindly invited by Dan Murray of Deloitte in Dublin to give the keynote at their FAST 50 dinner yesterday evening. Dan asked me to say something about intellectual property and its importance to the companies present. My speech follows, and afterwards I took a few minutes of Q&A.
The very first indigenous Irish technology company which became globally well known in the technology industry, was Glockenspiel, 25-30 years ago. The visionary founder and CEO was John Carolan, now very sadly passed at a young age in December 2001. He assembled a world class team in Dublin, which developed and promoted the world’s first commercial C++ compiler and associated class libraries. Glockenspiel thus brought object oriented programming into the mainstream and in particular to the C and UNIX community, at a time when object orientation was seen as a highly niche and specialist methodology limited to the wizards of Smalltalk-80 and Objective-C.
Back in the 1980s, there was no Enterprise Ireland: just the IDA, and frankly incredulous at the idea of a Irish high technology software sector. Back in the 1980s, TCP/IP and internet were both in their infancy. There was no world wide web, cloud computing or hardly any mobile phones. To sell their products worldwide, Glockenspiel therefore took the classical route of signing up resellers and distributors in various locations and territories. Glockenspiel appointed a sole distributor in the United States, Imagesoft. But Glockenspiel ultimately went out of business. Accordingly to an unverified story that I heard, after a time a commercial dispute developed between Glockenspiel and Imagesoft, which ultimately forced a cash crisis in Glockenspiel. Glockenspiel was sold to Computer Associates in 1992.
Just a few years later, we in IONA followed Glockenspiel, also with object oriented technology. But things were very different. The internet had arrived, and we were able to promote and distribute our products worldwide over the internet. We consequently grew rapidly grew with global sales, and indeed we were a FAST 50 winner. Yes, we did appoint some distributors as well, but usually these were primarily to provide a local point of contact and a human face on our technology in locations far away from Dublin. However we were never dependent on cash flow from our distributors, as Glockenspiel apparently became. One wonders what John Carolan would have been able to do had he had the internet.
IONA had the internet, but we didn’t have the cloud. In the earlier years of IONA, I had to give a personal guarantee using the security of my semi-d house in Shankill to raise a financing loan to pay for our first three UNIX workstations for our team. Today of course we would have paid for compute time as went, using the cloud. Like Glockenspiel, we also did not have Enterprise Ireland. However in our early years, there was at least a part of the IDA assigned to the Irish high technology sector, for all Irish software, hardware, semiconductor and telecoms technology companies: it consisted of just one IDA person.
Today, all has changed. The indigenous sector is buoyant, and well represented by the companies honored here this evening. Enterprise Ireland eventually was formed, and is now strong. Today we have the internet, the web and the cloud at our disposal. Most of all we have mobile phone and tablets, which enable all of us in the industry to deliver extremely sophisticated products and services literally directly into the hands of consumers of all ages and worldwide. There is no longer the same big “digital divide” within society, no longer the PC in the bedroom for the geeky members of the family. In fact, you guys have it so easy!
It is now so easy to develop and deliver new products and services worldwide to the global masses. If you have a great idea, you frankly do not need a lot of capital and investment to bring it to a worldwide audience. You can rent machines in the cloud, rather than give a personal guarantee on financing. You can distribute worldwide without requiring distributors. You can reach almost every consumer via their mobile phone and tablet. All you need is that great idea, and then you can take on the planet.
Which in fact is the problem. No, the problem is not conceiving of that great idea, the problem is that you can take on the planet. If you can quickly develop and distribute to the planet, well so can others. If you have a great idea, and other people see that yes that is actually a fantastic idea, what is there – if anything at all – to stop them from copying you and sweeping away the global market immediately right from under your feet ? Right now, is somebody in the Bay Area, or Cambridge, or Rio de Janiero, or Stockholm, or CapeTown, or Mumbai, or Guanzhou – you get the picture – about to take you on and capture your global market before you ?
What’s to the stop them ? The internet, web, cloud, mobile and tablets are global technology resources for every smart person, imaginative innovator and hungry entrepreneur on the planet. Good ideas can be very quickly copied and exploited.
So: what’s your strategy ?
Patents ? Yep, well, patents are in principle good and no doubt you are watching with fascination the increased use of patents for competitive strategy by many multinationals in the last 18 months or so. A strong patent portfolio may indeed today make you highly attractive for your exit. But a strong patent portfolio also requires moderately deep pockets for patent and legal fees, as well as time to develop. And defending patent claims against you, not least overseas, requires even deeper pockets. Personally, I am all for patents, but I am unconvinced I would use them as my sole strategy to outmaneuver a hot new competitor in the Bay Area, or Cambridge, or Rio de Janiero, or Stockholm, or CapeTown, or Mumbai, or Guanzhou.
I believe your fundamental strategy ought to be: very strong intellectual property (which of course may lead to patents, but that is putting the cart before the horse). You need to have a secret sauce which makes it very very much harder for anyone else to duplicate you: a very high barrier to entry. Your intellectual property and secret sauce may not just be technology of course; it can also be domain know-how, and/or consumer insight, and/or clever internal process. Of course at the same time as a very high barrier to entry, you also need to a vey low barrier to adoption, to make it easy and natural for your market to adopt your new product or service.
One approach to deep intellectual property is deep know-how that genuinely is difficult for other people to fathom out how exactly it works and how do you get it to work pragmatically. We did that in IONA, where we used industry standards as our strategy. Perhaps that sounds counter-intuitive as a competitive strategy? Sure, a standard reduces the barrier to adoption by the market, but what’s to stop competitors implementing the same standard too, where is the intellectual property ? The answers are of course that nothing stops competitors – including well-funded multinationals – from implementing the standard too. But in IONA we were able to erect a high barrier to entry because we engineered better than anyone else, with our knowledge and experience built up over a decade of applied research, adding one or two great ex-Glockenspiel engineers who had world leading competence, and also the valuable feedback from our early customers.
I’m getting involved with another European company right now, which is using a similar strategy with standards, this time in the security space, but unfortunately I can’t mention their name just yet. Another similar example though is Sophia in Belfast, who have developed extremely sophisticated algorithms, and has published these in academic journals. The algorithms are about matching content, sorting out what is related to what. Based on the mathematical entropy contained in information and intrinsic in bit patterns (recall your Thermodynamics lectures ? Shannon’s Information Theory and Hamming distances ?), Sophia can match for example what patent is related to what other prior patents; what legal case has precedence; what social network posting is related to others; and what advertisement might be a great one to put in front of a specific consumer. Despite publishing their algorithms, Sophia have been able to erect high barriers to entry in the way in which they make their algorithms pragmatic in different use cases.
Another approach to building deep intellectual property and high barriers to entry is deep domain knowledge. Swrve, an Irish company whose founders I know well, is getting noticed for its deep experience in gaming technology, now applied to automated A/B testing of mobile games for phones and tablets. Metaio, a Munich based company and whom I know through my involvement with Atlantic Bridge, is making waves worldwide for its 3D realtime augmented reality recognition and presentation software. Cloudsmith, a virtual company with staff across Europe, Canada and the US, has a team with deep experience of the automated analysis of software language structures.
Yet another approach to building a high barrier to entry in a very competitive world is to take a completely different approach to a problem. While Sophia has done this, another example is Gridstore, an Irish founded company now based in Mountain View. The Gridstore team have a very innovative storage technology, and yet the founding members have no deep background or domain knowledge in the storage sector. Instead they brought radical thinking: why are large scale storage systems based on centralized cluster architectures, rather than fully distributed direct peer-to-peer, and using commodity hardware ? By challenging established thinking and the incumbent players’ architectures, Gridstore is carving out a very nice market for itself.
So: my message to you tonight is to think vey deeply about your key strategic advantages. If your idea is not so so good and you don’t want to take over the world, then you should be extremely worried: somebody else somewhere on the planet with a better idea than yours and with global aspirations is about to walk all over you. However if your idea is so so good, and is clearly going to take over the world, how quickly could somebody else do essentially the same thing and steal the march on you ? Be paranoid about this, because somebody somewhere on the planet might be about to do so right now, and with the web and the cloud maybe they will take over the market faster than you. Therefore how are you building a fortification of barriers to entry against emerging competitors, especially those you do not yet even know exist ? And still at the same time make it easy and natural for the global market to adopt your offerings ?