Monthly Archives: June 2013

Will the Patent Pirates finally be Plundered?

The patent pirates have been plundering for way too long. And we should all be fed up. Since SI alerted you to the problem way back in 2006, in a post on how The Software Patent Pirates will Plunder Away, inspired by a post by Dave Stephens on the now defunct Procurement Central, which evolved into Stephen’s Business and Technology Nexus (which, unfortunately has not been updated since October 1, 2011, as Mr. Stephens is one of the original Procurement Gurus), not much has changed. Even though Mr. Obama declared war on the patent trolls on September 16, 2011 when he signed the Leahy-Smith America Invents Act into law, the pirates are still trolling the high seas of business in search of easy prey to pillage and loot.

To date, as covered in 2011 in SI’s post on how Patent Pirates are Still Plundering, patent trolls have cost investors over half a trillion dollars over the last 22 years (as reported in CNN Money). Half a Trillion Dollars. Think about that. This puts the Somali Pirates, who have figured out how to steal approximately 10 Billion a year from the shipping industry (according to the LA Times), to shame! (The patent trolls are pillaging almost 3 times as much as the Somali pirates from the safety of their penthouse suites!)

The trolls have to be stopped. They now account for approximately half of the roughly 4,000 patent cases a year in America. That’s 2,000 patent cases that are, for the most part, frivolous and unfairly extortive (as small companies cannot afford a lengthy legal battle and are forced to settle to survive). Fortunately, the Obama administration realizes that and has announced new actions and proposals for patent reform. These proposals, designed to reduce anonymity in patent litigation, improve review at the USPTO, give more protection to downstream users, and improve standards at the International Trade Commission, are definitely a step in the right direction. (SI agrees with the TLF that more is needed, but we’ll get to that later.)

Specifically, the administration is recommending the following legislation:

  • Require patentees and applicants to disclose the “Real Party-in-Interest”
  • Permit judges more discretion in awarding fees to prevailing parties in patent cases, providing district courts with more discretion to award attorney’s fees as a sanction for abusive court filings.
  • Expand the PTO’s transitional program for covered business method patents to include a broader category of computer-enabled patents and permit a wider range of challengers to petition for review of issued patents before the Patent Trial and Appeals Board (PTAB).
  • Protect off-the-shelf use by consumers and businesses by providing them with better legal protection against liability for a product being used off-the-shelf and solely for its intended use.
  • Change the ITC standard for obtaining an injunction to better align it with the traditional four-factor test in eBay Inc. v. MercExchange, to enhance consistency in the standards applied at the ITC and district courts.
  • Use demand letter transparency to help curb abusive suits, incentivizing public filing of demand letters in a way that makes them accessible and searchable to the public.
  • Ensure the ITC has adequate flexibility in hiring qualified Administrative Law Judges.

In other words, the proposals are to:

  • Make it public as to who is filing a patent suit,
  • why the suit is being filed,
  • and allow judges to penalize abusive, frivolous, filers with big legal bills.

This is a good start, but it’s not enough. First of all, as per SI’s post on why we need a “loser pays” bill for patent lawsuits, the filer of the frivolous patent should be required to pay a penalty that is at least double the cost of the suit, including the defence’s legal fees, damages, and court costs. (If the penalty won’t hurt, they won’t stop.) Secondly, despite the objection of cash-flush giants like Apple and Microsoft, we have to follow the lead of the EU and New Zealand and abolish software patents. The vast majority are complete and utter bullshit. The one’s that aren’t contain specialized business methods that could be patented separately (just like you can patent unique physical inventions and processes for extracting medicinal compounds from natural plants). (And SI is happy to see that the Technology Liberation Front agrees with this proposal.) Software is just code that encodes algorithms in a machine language that is compiled into a binary instruction set that runs the program. This is essentially a complex mathematical formula, and mathematics, like laws of nature, is NOT supposed to be patentable. And since many of the trolls have armed their arsenal with software patents, this would be the best way to strike back.

For more information on the challenges of taming the trolls, you can start by reviewing the recent report on Patent Assertion and U.S. Innovation from the National Economic Council and the Council of Economic Advisors.

Today We Can Carry 40,000 Songs in Our Pocket

But 125 years ago you couldn’t hear a song unless you went to see a band. This is the 125th anniversary of George Edward Gouraud‘s recording of Handel‘s Israel in Egypt, which for many years was thought to be the oldest known recording of music. It is most likely the oldest recording of classical music.

The oldest known voice and music recording was 135 years and 7 days ago on June 22, 1878, made on a Thomas Edison phonograph in St. Louis, and consisting of a 23-second cornet solo of an unidentified song and a man’s voice reciting “Mary Had a Little Lamb” and “Old Mother Hubbard”. Described in this CBS News article, you can hear the unrestored recording, courtesy of The Creators Project.

And it was only 34 years ago on July 1, 1979 that Sony introduced the Sony Walkman TPS-L2, a 14 ounce, blue-and-silver, portable cassette player with chunky buttons, headphones and a leather case. In other words, we’ve only had recorded music for 125 years and recorded music on the go for a little over a quarter of that time, where you were limited to a cassette tape that couldn’t hold more than 20 songs. And now you can carry around a smaller iPod Classic that can hold 2000 times that. The pace of innovation over the last 75 years is absolutely astounding.

An Interesting Take on the Top Ten Trends Influencing Procurement

At the World Procurement Congress in London in May, Tom Linton, CPO Flextronics, gave a talk on his top ten trends influencing Procurement, which are summarized in this online Slideshare presentation.

Tom Linton’s Top Ten Trends Influencing Procurement

While SI may not necessarily agree with the order of the trends, SI has to admit that the top nine were great insights, and are certainly influencing Procurement to various degrees. As a result, SI will list and discuss these trends for you.

9. Business Process Convergence
It’s more than just document convergence and the virtual vertical integration of multi-tier supply chain management capabilities, but NPD, Manufacturing, Sourcing, Procurement, and Payment are all merging as one continuous function through common application back-bones and plug-in best of breed applications.

8. Global Labour Costs Equalize
Mexico matches China in Direct Labour Costs, and costs in other markets continue to rise. And when you consider the cost of logistics, remote staff management, etc., the savings from labour arbitrage become less and less by the day.

7. Raw Material Scarcity
The demand for oil, metals, timber, food, etc. is increasing around the globe. Demand is meeting or exceeding supply in many commodity categories.

6. Skill Specialization
With the increasing need for sourcing / supply network optimization, analysis, risk management, and emerging market management capabilities, a new class of specialized skills are required by strategic supply managers.

5. Control Tower Models replace Traditional Procurement Functions
Technology enabled centres of excellence are becoming the dominant Procurement model in leading Procurement organizations.

4. The Growth of Regional Local Sourcing
It’s taken a while, but home-sourcing is finally starting to happen. “Made in the USA”, the EU focus on Eastern Europe (and Poland, Romania, and the Ukraine in particular), and the shift to India and Indonesia from China.

3. Unpredictability Becomes More Predictable
With the chance of a major supply chain disruption for your organization exceeding 98% over the next 24 months, risk, resiliency, and preparedness is the new modus operandi for supply chains that can always predict that sooner, not later, something is going to go wrong. Leading organizations are adopting multi-tier visibility applications and optimizing costs and risk across the supply chain.

2. Corporate, Social, and Environmental
It only takes one scandal to send your stock in a downward spiral. As a result, CSR is taking a front page, especially since laws designed to protect workers and the environment are catching up in emerging economies.

1. Non Zero
Supply Management organizations are moving away from commodity sourcing events to strategic category management, using risk management to lower insurance rates and drive (hedging) investments, applying new multi-tier visibility and collaboration tools to drive trust, transparency, and reliability throughout the supply chain, and looking for ways to generate non-zero sum value for all parties.

The only trend SI did not like was number ten, Cloud Computing. It may be low-cost, but its reliability is in question. For example, 38% of Amazon Web Services instances have poor security! (Source) You have no clue where your data is, if it’s backed up, or who has access to it. And, most importantly, The Cloud is Not a Crystal Ball Either. And just like a real cloud, it can evaporate after a good rain!

Do We Need Flexons to Adapt to Transient Advantages? Part II

In Part I, we noted that today’s business leaders are operating in an era when forces such as technological change and the historic rebalancing of global economic activity from developed to emerging markets have made the problems increasingly complex, the tempo faster, the markets more volatile, and the stakes higher. As a result, there is an ever-greater premium on developing innovative, unique solutions than ever before as organizations have to swiftly move from one temporary advantage to another to remain relevant in many constantly-changing industries. This is requiring these organizations to essentially innovate on demand.

However, innovation on demand is hard. Really hard. There is no one approach guaranteed to work for any particular problem, and given the wide range of problems facing today’s organization, there might not be any approach with a chance of success that exceeds the your chance of winning the lottery. We have the situation where some problems are so challenging that your odds of success are only favourable if you simultaneously attack the problem from multiple angles with multiple approaches. This is where flexons come in. Flexons, which are essentially problem solving languages derived from the social and natural sciences to accomodate the world of business problems, used in concert, provide a way for you to tackle a wide range of very difficult problems that will arise in the course of normal operations. They might not solve every problem, but, properly applied, have a good chance of solving a decent number of problems and are a good addition to your toolkit.

Flexons come in five flavours:

  • Networks
    The network flexon helps decompose a situation into a series of linked problems of prediction (how will ties evolve?) and optimization (how can we maximize the relational advantage of a given agent?) by presenting relationships among entities. A properly constructed influence network can be used to determine who can best influence the adoption of a certain viewpoint, product, or solution; a properly constructed transportation network can help you optimize deliveries and shipments through various intermodal channels; and a properly constructed organizational map can help you determine which organizations your organization could partner with to quickly create a new servitized product offering.
  • Evolutionary
    Based on the concept of an evolutionary algorithm, which uses randomness (to generate diversity) and parallelization (to generate multiple possible solutions) to quickly identify unworkable and/or sub-optimal solutions in a directed search process to get to a workable and/or near-optimal solution, the evolutionary flexon embraces a model where a series of low-cost, small-scale experiments involving product variants pitched to a few well-chosen market segments are preferred to a large all-in strategy. With every turn of the evolutionary-selection crank, where losers are discarded and winners are evolved into a pool of potentially better solutions, the company’s predictions will improve and the distance to the marketable solution will decrease.
  • Decision-Agent
    Based on the definition of social behaviour as the outcome of interactions among individuals, each of whom tries to select the best possible means of achieving his or her ends, the decision-agent flexon represents teams, firms, and industries as a series of competitive and cooperative interactions among agents. The basic process is to determine the right level of analysis (such as the firm), ascribe to each agent at this level the beliefs and motives that represent their actions, consider how their payoffs change as a result of the actions of others, determine the combinations of strategies they might collectively use, and seek an equilibrium where no agent can unilaterally deviate from the strategy without becoming worse off.
  • System-Dynamics
    Making the relations between variables of a system, along with the causes and effects of decisions, more explicit allows you to understand their likely impact over time and using a system dynamics lens that shows the world in terms of flows and accumulations of money, matter, energy, or information serves to shed light on a complex system by helping you develop a map of the causal relationships among key variables. This helps you identify the impacts of different decisions and is a great tool for identifying potential risks, and mitigations, in a system.
  • Information-Processing
    This flexon focuses attention on what information is used, the cost of computation, and how efficiently the computational device solves certain kinds of problems with the goal of determining how to transform information in an intelligent way into an insight that a decision can be made on.

The approaches contained in these flexons can prove quite insightful in a wide range of industries. In their article on five routes to more innovative problem solving, the authors provide examples in biofuel manufacturing and telecommunications where the biofuel manufacturer wants to improve researcher productivity and the telco wants to predict future usage and customer desires. SI highly recommends reviewing the case studies if you believe that flexons would be a good tool in your innovation toolkit, which SI believes they will be for most organizations.

Do We Need Flexons to Adapt to Transient Advantages? Part I

Last week, in our series on The End of Competitive Advantage (Part I, Part II, and Part III), we explained that the notion of sustainable competitive advantage is now a pipe dream in many industries and many markets and the only way some companies can hope to survive the new chaos is to swiftly move from arena to arena where they can temporarily acquire a transient advantage and profit.

Last Thursday, in our post on Maintaining Competitiveness – Adaptable Supply Chain Structure, we noted that a company would only be able to deftly move from temporary advantage to temporary advantage if it had a supply chain that could keep up. This supply chain — which needs to focus on risk, use a variable cost structure, support flexible capacity, and use shared services — will have to be innovative at its core, and may require the organization, and Supply Management, to innovate radically new solutions to existing challenges.

As noted in this recent McKinsey Quarterly article on five routes to more innovative problem solving, today’s business leaders are operating in an era when forces such as technological change and the historic rebalancing of global economic activity from developed to emerging markets have made the problems increasingly complex, the tempo faster, the markets more volatile, and the stakes higher. We now have a situation where the number of variables at play can be enormous, and free-flowing information encourages competition, placing an ever-greater premium on developing innovative, unique solutions. But how can an organization do this? There’s no one blueprint for innovation that will work for every company, and no one approach that will always work.

Some problems are so challenging, that your odds of success are only favourable if you simultaneously attack the problem from multiple angles with multiple approaches. One way to do this might be to use McKinsey’s flexon approach, where flexon is short for FLEXible Objects for generating Novel Solutions. While traditional problem-solving frameworks address particular problems under particular conditions, they have limited applicability. In comparison, flexons offer languages for shaping problems, and these languages can be adapted to a much broader array of challenges.

The creators of flexons have developed five flexons, or problem solving languages, derived from the social and natural sciences, to accomodate the world of business problems. Just like the Gang of Four’s* five creational design patterns (which provide ways to instantiate single objects or groups of related objects) may not be sufficient for every object oriented system you can imagine, the authors don’t claim that their five flexons will be exhaustive, just that they are sufficient, in concert, to tackle a wide range of very difficult problems that will be sufficiently inclusive for most individuals. Furthermore, as with (object oriented) design patterns, it will often be the case that serious mental work will be required to tailor the flexons to a given situation, and each will retain blind spots arising from its assumptions, but multiple flexons can be applied to the same problem to generate richer insights and more innovative solutions.

Flexons are not the ultimate problem solving methodology, but they are a good methodology to have in your toolkit, because the more methodologies you have, the better your chances at solving a particular problem and innovating on demand. In Part II, we will describe the five flexon patterns.

* If you don’t know who the Gang of Four are or what Design Patterns are, it’s not critical to understand this post but it is worth researching, especially if you want a better understanding of how good software (which you will rely on) can be constructed.