Tuesday, August 28, 2007

Monetizing innovation

Sometimes an engineer or scientist will make a technical breakthrough but have a hard time figuring out how to monetize it. If markets exist for innovations — as with open innovation — then such breakthroughs can readily be commercialized, whether or not the innovator has the relevant complementary assets (as defined by David Teece in 1986) to bring them to market.

Last week, George Hotz announced that after working all summer, he had unlocked the iPhone so it can be used on other networks. While he graciously credited his collaborators, Hotz won 15 minutes of fame that has included national TV and his own Wikipedia biography. (He had also previously won some recognition as a finalist in the 2005 International Science and Engineering Fair). He used the new media — a blogspot blog and YouTube — to get the word out. But it seemed like a curiosity — and an advertisement for future employment — rather than something that could be directly monetized.

Over the weekend, he announced that he had traded his unlocked iPhone for a Nissan 350Z, a story picked up by the news media today after he finally arrived for his first week of college. He got the car from a cell phone refurbishing company that wants him to teach unlocking secrets to its other technicians — whether or not they will be able to unlock and sell iPhones.

So this is a clever way to commercialize something that may or may not be legal to commercialize. Even if the invention cannot be commercialized, the ability to invent can.

As various commentators have noted, Hotz has great career possibilities, although I’d add two caveats. One is that many early stars flame out, so hopefully he won’t let the acclaim go to his head. The other thing is that his choice of car is exactly the model that a reckless 19-year-old last month wrapped around a tree here in San José, killing himself, his teen passenger, and two pedestrians. Let’s pray that Mr. Hotz has more responsible parents than the late (not so great) Z-head of Almaden.

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Anthony said...

Mr. Hotz is ready for bigger and better things now, I would guess. It seems that money sought him out after his cell phone industry earthquake-inducing revelation. Let's hope he can parlay his success into future dollars. I cross-linked to your post, along with some comments at http://blog.innovators-network.org which is a non-profit dedicated to bringing technology to small businesses, intellectual property experts, entrepreneurs, and venture capitalists. Please visit us and help grow our community!

Best wishes for every future success.

Anthony Kuhn
Innovators Network

Seth said...

When the “Geohot” video aired, it was predicted that a software solution – (for the cell phone majority without proficient soldering skills) was imminent. [iphonesimfree.com] claims to have broken (i.e., monetized) the iPhone's Sim lock via a soon to be available commercial release: “a simple software install”- aka a “jailbreak” procedure - allowing users (without opening the case) to replace the Sim card & operate the device on GSM networks other than AT&T's, as well as install and execute applications on the iPhone.

Although Engadget [www.engadget.com/2007/08/24/iphone-unlocked-atandt-loses-iphone-exclusivity-august-24-2007] claims the iphonesimfree software is not affected by the latest updates from Apple and allows access to nearly every iPhone service, Apple previously has used software updates (automatically installed when device is docked) to disable unlocking software.

In 2006 the Digital Millennium Copyright Act (DMCA) [http://www.copyright.gov/1201/docs
/1201_recommendation.pdf] included an exemption for unlocking cell phones tied to wireless networks, reasoning that software locks which restrict the phone owner’s choice of phone service providers supported a business model, rather than copyright protection. Personal use was exempted – commercial distribution of hacker’s tools and/or software was not. Expect Apple to vigorously protect its intellectual property (and royalty) rights.