• Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist by Brad Feld and Jason Mendelson, this book describes the role of VCs,  how an entrepreneur should deal with them (the General Partners) and what it means to raise VCs money.
• The Business of Venture Capital: Insights from Leading Practitioners on the Art of Raising a Fund, Deal Structuring, Value Creation, and Exit Strategies by Mahendra Ramsinghani, this book describes the world of VCs  from the perspective of the Limited Partners (LP) and the General Partners (GP).

this two books complement each other and give a great perspective on how the VC system works.

According to Horace Dediu, at Asymco Apple and Samsung captured about 90% of all available profits in the mobile phone industry. Then comes RIM third at 3.7%, HTC fourth at 3.0% and Nokia last at 1.8% of a $15 billion total for the quarter. See the post First: Apple’s rank in mobile phone profitability and revenues.

Furthermore, Q4 Y/Y growth of phone vendors:

• Apple 128%,
• Samsung 18%,
• ZTE 17%,
• HTC 10%,
• RIM -1%,
• Motorola -7%,
• Nokia -8%,
• Sony-Ericsson -20%,
• LG -26%.

And the ratio R&D/sales shows that Apple spending at least 2 times less than its direct competitors, at 2.8%. See the post at Asymco, You cannot buy innovation:

Smartphones are experiencing  double digit growth, but a few are reaping all the profits with the rest lagging behind and even posting losses.

• Nokia operating loss was EUR 1.1 billion in Q4 2011
• RIM has appointed a new CEO after disappointing revenues and declining market share
• Motorola announced Q4 2011 earnings with $3.4 billion revenue, $80 million net loss
• Sony Ericsson reported fourth-quarter Net Loss as Sales Decline, $266 million and its second quarterly loss in a year
• HTC Profit Drops for First Time in Two Years on Mounting Phone Competition, and posted its first quarterly profit decline in two years as competing models from Apple Inc. (AAPL) and Samsung Electronics Co. damped demand for its handsets.

In terms of handset shipments, Nokia is still leading, according to Strategy Analyst, Nokia still top vendor as global handset shipments reached 1.6 billion in 2011:

In terms of smartphones platform market share, Canalysis reports some numbers, from the article Canalys: Apple led the way as smartphones overtook PCs:

For the year 2011, according to Canalys, the total smartphone shipments reached 488.0 million units, up 63% on the 299.7 million shipped in 2010. Apart from the numbers, it would be interesting to understand why so few winners and so many losers. Samsung smartphones use Android, Bada and Windows Phone, mainly Android though. And Apple uses its own iOS platform. Both the modular platform (Android) and the  vertical approach (Apple iOS) seem to be doing very well. And proprietary (relatively old) platforms  Symbian and BBOS (RIM) are suffering from the innovation of the newer platforms. But even vendors using Android are struggling to remain competitive and to differentiate even though the platform is experiencing an incredible growth. Then there is the Windows Phone OS, fighting for relevancy, now stuck at 1.4% market share in 2011. However, Nokia is now introducing several new handsets with this OS and the Nokia Lumia 900 has just won the best phone at CES , 2012 will be an important year for Microsoft and for Nokia. And while profitability has been greater in the smartphones segment, according to Tero Kuittinen Feature Phones Now More Profitable Than Mid-tier Smartphones. Android is growing but in Q4 has  lost market shares, mainly in North America, Tero Kuittinen Nielsen Numbers Bad Indeed for Android, RIM and if carriers sells more heavily subsidized iPhones they are in trouble too, as AT&T’s profitability deteriorated as more than 80% of its smartphone activations were now taken over by the heavily subsidized iPhone, see Tero Kuittinen Android Share Dive Aftershocks.

We have seen a lot of data but a lot of questions remain:

• What should smartphones vendors do to remain relevant? Create their own platform? Use a modular or a proprietary vertical oriented approach?
• Even though this is a battle of ecosystems, not all the players in the ecosystem are successful, actually only a few of them are able to compete

Some very good articles on the topic:

• HBR Restoring American Competitiveness, Gary P. Pisano and Willy C. Shih, the pdf file is here
• The NYT Does America Need Manufacturing?
• Forbes Why Amazon Can’t Make A Kindle In the USA
• The Boston Consulting Group Made in America, Again Why Manufacturing Will Return to the U.S
• Video of Clayton Christensen  Reinventing IT and the related article on Forbes How Pursuit of Profits Kills Innovation and the U.S. Economy
• The NYT How the U.S. Lost Out on iPhone Work

This is the Carlson’s law, as described by Thomas L. Friedman and Michael Mandelbaum, in the book That used to be us.

The Carlson’s law: Innovation that happens from the top down tends to be orderly but dumb. Innovation that happens from the bottom tends to be chaotic but smart.

An excerpt from the book:

People think innovation is the idea you have in the shower,” said Ernie Moniz, the physicist who heads MIT’s Energy Initiative. “More often itcomes from seeing the problem. It comes out of working with the materials.” To be sure, there is some pure innovation—coming up with a productor service no one had thought of before. But a lot more innovation comes from working on the line, seeing a problem, and devising a solution that itself becomes a new product. That is why if we don’t retain at least part of the manufacturing process in America, particularly the high-endmanufacturing, we will lose touch with an important source of innovation: the experience of working directly with a product and figuring out how toimprove it—or how to replace it with something even better.“

A lot of innovation now happens on the shop floor,” said Hewlett-Packard’s CEO, Léo Apotheker. Indeed, if you open a factory, and are doingthings right, “it will be more productive a year later because the workers themselves on the factory floor are critical thinkers and can improveprocesses along the way,” said Byron Auguste, the McKinsey director. In any factory or call center, he noted, “there is often dramatic variation inproductivity in different parts of the system. If you have continuous learners on the shop floor or in the call center, there is a constant opportunity tolearn and spread the word, and then everyone improves. If you are doing that in every node of your production, design, and aftersales service, you will have a system that delivers three percent productivity growth every year and is not dependent on new inventions coming out of Carnegie Mellon University or Silicon Valley”

Here some good advice:

• Forming a new software startup, how do I allocate ownership fairly? by Joel Spolsky
• The Equity Equation by Paul Graham
• How to start a startup by Paul Graham

And the capitalization table from Fred Wilson is an essential tool to show how much everyone owns of the company:

• MBA Mondays: Cap Tables

here a short edited excerpt from the book to the question, at what, exactly, are reward effective?

..reinforcements do not generally alter the attitudes and emotional commitments that underlie our behaviors. They do not make deep, lasting changes because they are aimed at affecting only what we do. If you think that actions reflect and emerge from who a person is (what she thinks and feels, expect and wills), then interventions that just control actions wouldn’t be expected to help a child grow into a generous person or even help an adult decide to lose weight.

What rewards and punishments do is to induce compliance, and this they do very well indeed. If your objective is to get people to obey an order, to show up on time and do what they’re told, then bribing or threatening them may be sensibel strategies. But if your objective is to get long-term quality in the workplace, to help students become careful thinkers and self-directed learners, or to support children in developing good values, then rewards, like punishments, are absolutely useless. In fact, as we are beginning to see, they are worse than useless – they are actually counterproductive.

From a paper written by Nathan Savage Libraries, eBooks & Copyright Law we read:

Kindle: License Agreement and Terms of Use Digital Content is licensed, not sold, to you by the Content Provider. This statement effectively strips away all of the rights libraries and others would be granted as the owners of information resources, and so they will not be able to “sell, rent, lease, distribute, broadcast, sublicense, or otherwise assign any rights to the digital content or any portion of it to any third party”

In addition to not owning Amazon’s “digital content,” those who license the content from Amazon will be limited to viewing it “solely on the [Kindle] device or as authorized by Amazon as part of the service,” which is to say that content from Amazon will only be viewable on a Kindle, or in one of the Amazon-created applications made for computers, cell phones, etc.

Barnes & Noble, Sony and Google have similar restrictions explained in the article. Digital rights management software does a good job in protecting the rights of the publishers, unfortunately user rights have somehow a lower priority.

a previous talk of Jesse Schell at the Dice conference in 2010:

Here what the NYT writes in the article “Disruptions: The 3-D Printing Free-for-All“:

It won’t be long before people have a 3-D printer sitting at home alongside its old inkjet counterpart. These 3-D printers, some already costing less than a computer did in 1999, can print objects by spraying layers of plastic, metal or ceramics into shapes. People can download plans for an object, hit print, and a few minutes later have it in their hands. Call it the Industrial Revolution 2.0.

And as highlighted in the article, 3D printers do not only will change the nature of manufacturing, but they will further challenge our concept of ownership and copyright. However, we have had the same changes with tape and DVD recorders. The technology is disrupting the status quo, and opportunities and challenges will arise, as usual.

I have just bought one Thing-o-Matic and it is an incredible machine. It is not for the general public, at least, assembling one of them requires soldering skills, taking care of a lot of nuts and bolts and a lot of patience. At the end, I have learned a lot, and it was worth it.

My machine is below:

The machine is just a small part of the overall system. It is the platform, once again, that makes this paradigm attractive and powerful. Just go to Thingiverse and you will have 3D designs to download and print, made by people around the world.

AutoDesk, is making its powerful CAD software Autodesk 123D free to download and, at the same time it offers the tools and the services to print your creations. It is a complete different business model from the past and new opportunities emerge. AutoDesk believes that is better to experiment than to be left behind.

Take Ponoko, your personal factory, a successful company able to deliver what hobbyists, students and artists design, by using 3D printers and laser cutting techonologies. The designs of those creations can also be sold and it is a space where creators can meet with the demand.

In the area of electronics and DIY, companies like Sparkfun show the incredible demand for electronic components, sensors, microprocessors from hobbyists. The tutorials on the Sparkfun website allow almost anybody with some passion to make and create useful and sometimes not so useful stuffs, but it is fun. A link from Sparkfun brings you to BatchPCB, a website where you can order the PCB (printed circuits board) that you have designed or you can buy PCB made by others. Once again, the barriers to access to this world are lowered and people can create, share and sell stuffs.

Arduino is another fantastic example of DIY platform. Arduino is an open-source electronics prototyping platform based on flexible, easy-to-use hardware and software. It’s intended for artists, designers, hobbyists, and anyone interested in creating interactive objects or environments. I have a few Arduino boards now and it is extremely easy to start and write simple programs that gradually become complex. Sensors, leds, wireless components can be combined to create unlimited applications and experiences. The platform allows the creations of additional add-ons, called shields that augments and facilitates the overall project. Android now supports Arduino for the creation of accessories, increasing the importance of this platform and its user base. And by the way, the Think-o-Matic 3D printer has at its core Arduino boards, the Arduino Diecimila is used for the extruder controller and the Arduino Mega 2560 is used for the main board.

DIY Drones is another growing community around UAV. An Unmanned Aerial Vehicle (UAV) is an aircraft that has the capability of autonomous flight, without a pilot in control. Chris Anderson has started this community and the community has created a lot of software, hardware and drones that can fly. What they have achieved is not an easy task, for example: the DIY Drones community has created the world’s first “universal autopilot”, ArduPilot Mega. It combines sophisticated IMU-based (IMU Inertial Measurement Unit) autopilot electronics with free Arduino-based autopilot software that can turn any RC vehicle into a fully-autonomous UAV. To get started read DIY Drones A newbie’s guide to UAVs.

Overall, we are  clearly seeing  the importance of the DYI revolution. A disruption that promises to lower the barriers to creation and enhance creativity. The mass-market is still the dominating paradigm, but at the same time there is an emergent trend towards making things they way we like and want and share those creations with many other people around the world. And exciting future is ahead.

• Apple has just launched the iPod nano that can be used as smart watch
• Mototola MotoACTV is a smart watch based on Android focused on fitness
• Metawatch is a company that provides  Android on a HW platform for smart watches
• I’m watch provides an android smart watch, focused on fashion and design
• Wimm offers Android on a HW platform, the app store is included

Certainly there are many other companies working on the same area, not included in the list above. Most of these smart watches are based on Android and some of them offer also an app store. The iPod nano does not run iOS and does not allow applications development, at the moment but I expect this will change. When are we going to see Windows Mobile smart watches?

The ecosystem battle goes beyond smartphones and we will see more and more appliances becoming smart and interconnected.

The device price is below cost (see Amazon tablet costs $209.63 to make, IHS estimates) because the remaining revenues and profits should come from the tightly integrated Amazon services. Amazon is a content company, with the ability to serve videos, music, apps, books, magazines over the air thanks to their powerful cloud.
The Kindle Fire presentation by Bezos is below, starting at the 31-minute mark:

The other tablets are on sale for much higher prices. The iPad WiFi, the Motorola Xoom WiFi, the Samsung Galaxy Tab 10.1 WiFi, the HTC Flyer Tablet 7′ WiFi, Sony – Tablet S, they all sell starting at $499. Asus – Slider Tablet with 16GB Memory $479. Toshiba – Thrive Tablet with 8GB Hard Drive $379. The BlackBerry – PlayBook Tablet 7′ is at $299. Prices found at BestBuy website on Sept 30 2011.

With the Amazon tablet Fire we see, once again, how digital convergence is transforming the mobile business. A content company can disrupt incumbents with a different business model. By selling the integrated service they can offer the devices to a price that traditional hardware vendors cannot compete with. Competition is in this space is brutal, HP has recently discontinued the TouchPad tablet, and now rumors on BlackBerry that may have halted production of its PlayBook tablet computer and canceled additional tablet projects.

And the prices of Kindle have been constantly dropping, as you can see from the Business Insider chart of the day When Will Kindles Be Free?
Another good article on Amazon margins and Amazon business model: Amazon’s $199 Fire sparks supply, margin questions

Some good blog posts on this topic:

• Om Malik   at GigaOm Tablets wars: Apple is from Venus, Amazon is from Mars
• Michael Mace at  MobileOpportunity Amazon vs. Apple? No, it’s Amazon and Apple vs. Everyone Else
• John Gruber at DaringFireball Amazon’s New Kindles

Apple is another example of how digital converge is disrupting the mobile world. Apple is a hardware company, (came from the PC business) that sells the experience by complementing the device with content. In the case of Apple, the money are made on the hardware, the iTune store breaks even but provides a great complement to the device. A complement that makes the overall experience sticky and more compelling.

Another company that could compete using the asymmetrical business model is Google. And probably this is what will happen once the deal with Motorola Mobility goes through. In this case, search and advertisements, content such as books, video and music and other cloud services such as docs and content storage and sync are already part of the Google portfolio. The integrated experience could make possible to offer mobile devices for a very low price or even for free.

The question arise for the incumbents that base their business on the pure device offering. Can they survive? They certainly need to reinvent themselves and establish partnerships with content providers and or find a different path to differentiate and innovate.