The Biggest Innovation of 2009 - Accepting Nominations for Best Innovations of 2009

Creativity And Innovation Driving Business Blog is taking nominations for the Biggest Innovation of 2009 now!! We will be accepting all nominations until December 15, 2009.

The Top Ten Innovations of 2009, including the Best Innovation of 2009, will be announced on January 15, 2010 in an Annual Report of the Best Innovations of 2009 at this Blog. Further, the Best Innovation of 2009 will get year-round exposure on this award-winning Blog on Creativity & Innovation in Business.

We invite you to nominate your Top Innovation of 2009 by filling out the form below... You can nominate your own innovation that you launched (owner), or an innovation that you are using or experiencing (end user)!

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Starbucks gets it right this time, partners with AT&T to provide Free Wi-Fi

AT&T Inc. (NYSE: T) and Starbucks (Nasdaq: SBUX) announced plans to deliver AT&T Wi-Fi(SM) service at more than 7,000 company-operated Starbucks locations across the United States. Starbucks and AT&T will offer a mix of free and paid Wi-Fi offerings at Starbucks stores to meet the needs of both frequent and occasional Starbucks Wi-Fi customers.

AT&T benefits because "the initiative further expands the AT&T Wi-Fi network to more than 17,000 U.S. hot spots and more than 70,000 globally" thereby entrenching AT&T as the leader in hot spots and making it the ever ubiquitous brand for Internet and mobility.

AT&T is one of the Top 20 Innovators of The Innovation Index. Starbucks was a Top 20 Innovator in 2007.

Starbucks benefits because millions of customers will now flock Starbucks for coffee and free Internet. Importantly, for the first time, a Starbucks Card holder gets an added benefit of two hours of free Wi-Fi service per day! According to the press release: "Beginning this spring, Starbucks Card holders can enjoy up to two hours of free Wi-Fi service per day at Starbucks locations offering Wi-Fi access, while more than 12 million qualifying AT&T broadband and AT&T U-verse(SM) Internet customers will have unlimited free access to the Wi-Fi service. In addition, more than 5 million of AT&T's remote access services business customers will be able to access Wi-Fi service at Starbucks locations."

Fringe revenue benefits: "In addition to the free Wi-Fi access for qualifying AT&T customers and any Starbucks Card holder, customers will be able to purchase tiered access to the AT&T Wi-Fi network at Starbucks at attractive price points. For a two-hour period, customers will pay just $3.99 per session. Monthly membership will also be available for $19.99 per month, and will include access to any of AT&T's 70,000 hot spots in 89 countries around the world."

Bottomline:

Rick Welday, AT&T chief marketing officer, Consumer emphasized: "Our work with Starbucks is collaborative innovation at its finest." Quite Possibly. What is Starbucks recipe for turnaround? Introduce $1 coffee, provide free coffee to loyal Starbucks customers who have a Starbucks card (coffee loyalty program), and offer free services such as the free Wi-fi to loyal customers. The new program will be a hit! As for AT&T, this is a huge marketing win, since it creates presence of AT&T in even more places and hot spots around the country and the world, provides AT&T customers nationwide Wi-Fi access and entrenches them further (not to mention increases customer loyalty), and has the potential upside of incremental revenue in the tens of millions.

Invest in the Innovation Index Fund

We launched the new Innovation Index Fund in December, 2007 that invests in the Innovation Index and returned 66% in 2007, and 174% in the previous five years. If you want to learn more about the Innovation Index Fund, fill out your contact information at the bottom of this form: http://www.innovationindexgroup.com/invest.html

The Innovation Index Reports:

Invest in The Innovation Index - Invest in the brand new Innovation Index Fund
Introducing The Innovation Index Fund - Invest into The Innovation Index
Top 50 Innovative Companies in the world - 2007 Report on Top 50 Companies
Annual Report - Chapter One - Total Innovation Activity - 2006 Annual Report One
Annual Report - Chapter Two - The Top Innovator - 2006 Annual Report Two
Annual Report - Chapter Three - The Innovation Insights - 2006 Annual Report Insights
Innovation and Stock Performance Correlation - The Innovation Index and Stock Performance
The Innovation Index gallops to 56% - Quarterly Report - Q3, 2007

About The Innovation Index

The Innovation Index introduced in December 2006 is a weighted stock price index of the top 20 Innovators in North America.

The Innovation Index returned 66% in 2007, and returned 174% over the previous five years (2002-2006). This assumes equal investment in each stock of The Innovation Index as of December 31, 2001. An average of $100 invested in The Innovation Index on December 31, 2001 returned $454 as of December 31, 2007. By comparison, $100 invested in S & P 500 returned 28% or $129, $100 invested in NASDAQ returned 34% or $136, and $100 invested in the Dow Jones Index returned 30% or $131 through December 31, 2007. The Innovation Index beats the S & P 500, NASDAQ and Dow Jones Index by more than seven times over the past six years.

Alphabetical list of the Top 20 Innovators of The Innovation Index for 2008 and their stock ticker symbols:

3M Company - (NYSE: MMM)
Amazon.com, Inc. - (NASDAQ: AMZN)
America Movil - (NYSE: AMX)
Apple Inc. - (NASDAQ: AAPL)
AT&T Inc. - (NYSE: T)
Best Buy Co., Inc. - (NYSE: BBY)
Cisco Systems, Inc. - (NASDAQ: CSCO)
Costco Wholesale Corporation - (NASDAQ: COST)
eBay Inc. - (NASDAQ: EBAY)
General Electric Co. - (NYSE: GE)
Google Inc. - (NASDAQ: GOOG)
Hewlett-Packard Co. - (NYSE: HPQ)
Intel Corporation - (NYSE: INTC)
International Business Machines Corp. - (NYSE: IBM)
Merck & Co., Inc. - (NYSE: MRK)
McDonald's Corporation (NYSE: MCD)
Microsoft Corporation - (NASDAQ: MSFT)
NIKE, Inc. - (NYSE: NKE)
Research In Motion Limited - (NASDAQ: RIMM)
The Proctor & Gamble Company - (NYSE: PG)

The Innovation Index will analyze the positions and standings of the Top 20 Innovators at the end of each year. For 2008, there will be no further changes in The Innovation Index.

Disclaimer: The Innovation Index Group, Inc. invests in the stocks comprising The Innovation Index.

iPod - Apple's Best Innovation

Apple Inc. (NASDAQ: AAPL) is the World's Number One Innovative Company, three years in a row according to BusinessWeek's 2007 list of the world's 50 most innovative companies. BusinessWeek proclaims "their creativity goes beyond products to rewiring themselves." BusinessWeek ranks the innovative companies based on the responses received from over 1,000 global executives of the largest global corporations; survey questions include innovation metrics on process, product and business model innovations.

Apple is one of the Top 20 Innovators of The Innovation Index.

According to BusinessWeek, innovation today is “much more than new products.” Innovation is also “reinventing business processes and building entirely new markets that meet untapped customer needs.” The ubiquity of the Internet and globalization of the business expand generation of new ideas. Innovation is then “selecting and executing the right ideas and bringing them to market in record time.”

iPod driving Apple to Number One Innovative Company

iPod, powered by Apple, introduced in 2001 and masterminded by Steve Jobs, combines outstanding design, easy-to-use interface, superb performance, and an experience like no other. Apple assumed the world’s number one innovative company position and held it again in 2006 in large part due to the exponential growth of iPod – aptly called the iPod phenomenon. Just ask the tens of millions of fans walking, driving, jogging, exercising, chatting, playing, humming, relaxing, singing, rocking, screaming, and above all enjoying their daily iPod experience. Imagine if they were to miss their iPod for a day, or even for a few hours. iPod is oxygen – pure and simple – the source of life for these millions of fans. Not to mention iPod has become associated with personal status and symbol that speaks of cool, hip, polished, and different. What began as a new product quickly became a revolution. iPod is by far the best commercial innovation the world has seen in the last few years, and perhaps is the best innovation from Apple dating back through its storied history of innovation firsts. Apple one-upped the iPod design innovation by creating new innovations in business model with the launch of iTunes online service enabled by strategic partnerships with the Music, TV and Movie industry.

Selected references:
Leading eBook on Creativity and Innovation in Business
Creativity and Innovation Best Practices
Creativity and Innovation Case Studies
The Innovation Index
Top 50 innovative companies in the world

Buy the latest iPod for lowest prices at Amazon.com

A Glorious History of Innovations

Apple has created great innovations beginning with the first Apple computer in 1976, Graphical User Interface (GUI) along with the popular Macintosh introduced in 1984, the reliable PowerBook introduced in 1991, the PDA named Newton that created a new industry of handhelds in 1993, the new millennium revolution beginning with the iMac in 1998, the new iBook hot on the heels of the iMac in 1999, the iPod that put an oomph in the MP3 players and essentially changed music as we know it in 2001, iTunes software and Music store service that changed the Music industry business model and made it easy for fans to listen and buy music piecemealed in 2003, iPod mini, iPod (U2 Special Edition) and iPod photo in 2004, iPod shuffle, iPod nano, iPod with Video and Mac Mini in 2005, the new iMac with Intel core Duo processors and the new MacBook with Intel processors in 2006.

Five years of iPod Innovations

2006 marks five years of iPod innovations. Apple's Hardware engineering chief Jon Rubinstein assembled a team of engineers to design and build the first iPod in less than a year, and it was unveiled by CEO Steve Jobs on October 23, 2001 as a Mac-compatible product with a 5GB hard drive that put "1,000 songs in your pocket." Since then, Apple has introduced fourteen different models of iPods in various colors, displaying photos, downloading and playing videos, branded and signed by U2, with numerous forms and shapes, different capacities for holding songs, pictures and videos, with connectors, next generation models with better wheels, and more. For instance, the new iPod video introduced in 2005 was the first iPod that could download and playback full-motion video with a larger color screen and better display resolution – an innovative package under $300 for the base model. Or the innovation in the wheel that is akin to the driving wheel on a car – from an original mechanical scroll wheel to the current touch-sensitive click wheel. According to PC Magazine, “In the years since (2001), the iPod's market share has grown tremendously, iPods have shrunk in size, Apple's iTunes Music Store has taken the lion's share of legal digital music downloads, and the iPod accessory market has exploded and taken on a life of its own. All this has made the iPod as synonymous with "MP3 player" as Kleenex is with facial tissues.”

The love for iPod

Why do people love iPod perhaps more than their spouse, boyfriend, girlfriend or children? It has to do with the simple yet elegant design that makes it extremely easy-to-use (Toyota’s Innovation Factory), exceptional sound, video and imagery, and the amazing experience. The flexibility provided by the iTunes software and service that allows you to try and download any music and video with the click of a button from any computer or the Internet to your iPod. And all the available accessories from wireless headsets, remote controls, beautiful skins, acoustic speakers, to connectors that can literally take your iPod music and videos anywhere – inside the room, in the car, in the office, on the plane, even while taking shower. iPod fans can’t live without their iPods literally. And the search is still on for a music fan that has switched from an iPod to another MP3 player. And there is that small sharing thing: hard-core iPod fans don’t like to share their iPods with others. BYOiPod. Bring your own iPod.

iPod’s Topline

In the quarter ending September 2006, Apple sold 8.7 million new iPods, generating $1.5 Billion in sales, a third of Apple’s total quarterly sales. By the end of 2006, there will be over 67 million iPods in the world; Apple is poised to eclipse the 100 million iPods mark in 2007. iPod has revived Apple from the depths in 2001 when annual sales had plummeted to $5.36 Billion and Apple was losing money. Apple’s shares were under $10. Compare this to 2005, when Apple had sales of $13.9 Billion, and profits of over $1 Billion. Apple’s shares have climbed sixteen folds. The Apple machine is kicking into high gear, in large part due to iPod Innovation Revolution. iPod’s halo effect is even evident in the latest quarter when Apple sold more Macs than it has ever sold before: 1.61 million.

In 2007, Apple sold 52.7 million iPods, an increase of over 15% from the 45 million iPods sold in 2006. In the latest quarter ending December 2007, Apple sold 22.1 million iPods representing five percent unit growth and 17 percent revenue growth over the year-ago quarter. Can Apple grow iPods sales to over 20% in 2008? What strategy would Apple employ to lure more iPods buyers in 2008?

The next generation iPods

What innovations can be expected from iPod? Can Apple create jazzier, easier, feature-rich iPods?

How about iPods that beam songs and videos to each other, to a computer or even to a TV? Or iPods that deliver Presentations and Live Videos in team meetings. iPods with GPS Navigation system. iPods that combine as cell phones. iPods that can receive satellite radios. What innovations will Apple bring out next? Steve Jobs indicated in the latest quarterly earnings press release that 2007 will be an exciting year full of great new products. The world will be watching.

2008 Fast Forward

Apple Inc. added new models of iPod(R) touch after the success of iPod touch launched in 2007. The new models have "double the memory, doubling the amount of music, photos and videos that customers can carry with them wherever they go."

iPod touch now comes in a 32GB model for $499 or less, joining the 16GB model for $399 or less, and the 8GB model for $299 or less.

iPod touch features Apple's revolutionary Multi-Touch(TM) user interface and pioneering software that allows users to find and enjoy all their music, videos, photos and more with just a touch of their finger. iPod touch models include the ability to automatically find your location using the new Maps application*; create Web Clips for your favorite websites; customize your home screen and watch movies from the new iTunes(R) Movie Rentals. iPod touch features the world's most advanced mobile web browser in the world with Safari(TM) and great mobile applications including Mail, Maps, Stocks, Weather and Notes.

Apple had an outstanding 2007 - the stock price and market cap more than doubled and finished upwards of 130% owing to such game changing innovations including the new iPhone, the new iPod Touch, and the all new Mac OS – Leopard, and on the strengths of the growing iPod and Mac business.

Retail research firm NPD Group says Apple's iPods still maintain a lock on the top spot in U.S. sales of digital music and media players, with as much as 75% of the market.

Nike + iPod

One innovation that Apple created with another Top 20 Innovator of The Innovation Index, NIKE, Inc. (NYSE: NKE) is Nike Plus. Apple calls it the "ultimate synthesis of sport and music: a pair of Nike+ shoes, an iPod nano, and the Nike + iPod Sport Kit."

Nike+ shoes feature a built-in pocket under the insole specially engineered for the Nike + iPod sensor. iPod nano syncs a runner's complete workout data with both iTunes and nikeplus.com. The Nike + iPod Sport Kit allows an athlete's Nike+ shoe to talk to the iPod nano. The sensor uses a sensitive accelerometer to measure the activity, then wirelessly transfers this data to the receiver on your iPod nano.

Nike + iPod receiver fits securely into the Dock connector on the bottom of the iPod nano. Wirelessly connected to the sensor in your Nike+ shoe, it receives up-to-the-second information as you run.

As one runs, iPod nano tells you your time, distance, pace, and calories burned via voice feedback that adjusts music volume as it plays. In addition to progress reports, voice feedback congratulates you when you’ve reached a personal best — your fastest pace, longest distance and time, or most calories burned. Besides the voice feedback, iPod nano plays the workout songs you choose, or have the iPod nano choose it for you based on your workout. You can also choose to play PowerSong.

Nike+ has created a growing new business for Nike, and Nike even touts this in their earnings reports and press. Is Apple planning to make more deals with more athletic companies besides Nike for the iPod? We will find out in 2008.

How can Apple turnaround the iPod sales growth?

(click to maximize)

Apple iPod growth is slowing in recent years.

Learn how can Apple turnaround the iPod sales growth?

Apple iPod - Apple's Best Innovation.

Buy the latest iPod for lowest prices at Amazon.com

Creativity And Innovation in Business Definitive Guide is a 212-page collection of my handpicked 56 Creativity and Innovation best practices, case studies, articles, interviews, and insights on the current state of innovation in business. The eBook provides real-world examples on how the Top Innovators including Apple, Google, GE, Proctor and Gamble, Yahoo, Toyota, Netflix, BMW, Deloitte, Timex, Frito Lays, Johnson & Johnson and more innovate and grow their business successfully time and again, especially during trying times. Use this eBook as a guide to find and create game-changing innovations, unblock creativity, and make innovation successful at your business. This eBook is used by over 300 leading organizations and universities including Pepsi, EDS, HP, Nokia and more.

Download the Creativity And Innovation in Business eBook Now



Selected references:
Leading eBook on Creativity and Innovation in Business
Creativity and Innovation Best Practices
Creativity and Innovation Case Studies
The Innovation Index
Top 50 innovative companies in the world

References:
BusinessWeek
PC Magazine
Apple-history.com
Apple.com
Wikipedia

Introducing The Innovation Index Fund - Learn about The Innovation Index
Top 50 Innovative Companies in the world - 2007 Report on Top 50 Companies
Annual Report - Chapter One - Total Innovation Activity - 2006 Annual Report One
Annual Report - Chapter Two - The Top Innovator - 2006 Annual Report Two
Annual Report - Chapter Three - The Innovation Insights - 2006 Annual Report Insights
Innovation and Stock Performance Correlation - The Innovation Index and Stock Performance
The Innovation Index gallops to 56% - Quarterly Report - Q3, 2007

About The Innovation Index

The Innovation Index introduced in December 2006 is a weighted stock price index of the top 20 Innovators in North America.

The Innovation Index returned 66% in 2007, and returned 174% over the previous five years (2002-2006). This assumes equal investment in each stock of The Innovation Index as of December 31, 2001. An average of $100 invested in The Innovation Index on December 31, 2001 returned $454 as of December 31, 2007. By comparison, $100 invested in S & P 500 returned 28% or $129, $100 invested in NASDAQ returned 34% or $136, and $100 invested in the Dow Jones Index returned 30% or $131 through December 31, 2007. The Innovation Index beats the S & P 500, NASDAQ and Dow Jones Index by more than seven times over the past six years.

Alphabetical list of the Top 20 Innovators of The Innovation Index for 2008 and their stock ticker symbols:

3M Company - (NYSE: MMM)
Amazon.com, Inc. - (NASDAQ: AMZN)
America Movil - (NYSE: AMX)
Apple Inc. - (NASDAQ: AAPL)
AT&T Inc. - (NYSE: T)
Best Buy Co., Inc. - (NYSE: BBY)
Cisco Systems, Inc. - (NASDAQ: CSCO)
Costco Wholesale Corporation - (NASDAQ: COST)
eBay Inc. - (NASDAQ: EBAY)
General Electric Co. - (NYSE: GE)
Google Inc. - (NASDAQ: GOOG)
Hewlett-Packard Co. - (NYSE: HPQ)
Intel Corporation - (NYSE: INTC)
International Business Machines Corp. - (NYSE: IBM)
Merck & Co., Inc. - (NYSE: MRK)
McDonald's Corporation (NYSE: MCD)
Microsoft Corporation - (NASDAQ: MSFT)
NIKE, Inc. - (NYSE: NKE)
Research In Motion Limited - (NASDAQ: RIMM)
The Proctor & Gamble Company - (NYSE: PG)

The Innovation Index will analyze the positions and standings of the Top 20 Innovators at the end of each year. For 2008, there will be no further changes in The Innovation Index.

Disclaimer: The Innovation Index Group, Inc. invests in the stocks comprising The Innovation Index.

Apple iPod innovation article originally published October 23, 2006. Updated February 09, 2008, May 08, 2009

Top Ten Innovations from the Top 20 Innovators

The Innovation Index tracks and reports on the Top 20 Innovators in North America. Here are the Top Ten announced innovations for the week ending March 28, 2007.

Innovator: Yahoo Inc. (NASDAQ: YHOO)

Innovation:
Strategic partnership with McClatchy providing access to global news and views; Strategic partnership with Virgin Mobile to provide Yahoo's mobile services available to Virgin Mobile's more than 4.6 million customers; Yahoo! Mobile Publisher Services, a suite of services designed to enable publishers to increase the discovery, distribution and monetization of their content on mobile phones.

Summary:
Yahoo! and McClatchy: Yahoo Inc. (NASDAQ: YHOO) signed a deal to feature foreign news from McClatchy Co. (NYSE: MNI) towards a project to be called "Trusted Voices”. This will put traditional news and feature stories as well as exclusive blog reports from McClatchy foreign correspondents based in places like the Middle East, China and Latin America on Yahoo's news portal, the most visited news site on the Internet.

Yahoo expects McClatchy's content to help satisfy that reader appetite, particularly by providing perspective on the news beyond breaking-news coverage from wire services, now the backbone of its "World News" section. World News is consistently among the site's three most-visited categories, he said.

McClatchy, which owns 31 daily newspapers, including The Miami Herald, The Sacramento Bee and The Fort Worth Star-Telegram, should benefit from a significantly wider online audience. -- Dow Jones Newswires

Yahoo! and Virgin Mobile: Yahoo! Mail and Yahoo! Messenger will be available through Virgin Mobile's Email & IM offerings in early April 2007. These applications will be available for download on several of Virgin Mobile's handsets including the Switch_Back and Cyclops and will be preloaded on selected future phones. Yahoo! Mobile Web will also be prominently featured in Virgin Mobile USA's Surf the Web service beginning in April 2007. Finally, additional mobile services from Yahoo! will be available on Virgin Mobile handsets in the coming months, including Yahoo’s range of SMS services such as search and messaging.

Yahoo Mobile Publisher Services: Yahoo! Mobile Ad Network, Mobile Content Engine, Mobile Media Directory and Mobile Site Submit.

1. Yahoo! Mobile Ad Network
   
   The Yahoo! Mobile Ad Network will allow mobile publishers to have syndicated advertising served on their mobile content and services. Publishers will be able to select the ad formats they want to have run, such as display, sponsored links, video or in-game placements.
2. Yahoo! Mobile Content Engine
   
   The Yahoo! Mobile Content Engine will enable publishers to bring their content to Yahoo’s mobile audience. It will also help enable publishers who do not have a mobile site or only have a limited mobile offering to distribute their content to consumers on their mobile phones.
3. Yahoo! Mobile Media Directory
   
   The Yahoo! Mobile Media Directory will allow publishers to make their mobile media content accessible directly through Yahoo! oneSearch. Publishers could submit a catalog of their content such as ring tones, games, video and applications.
4. Yahoo! Mobile Site Submit
   
   The Yahoo! Mobile Site Submit will allow publishers to provide information about their mobile site, such as a description and relevant tags, to ensure that their sites are accurately indexed and available to consumers through Yahoo! oneSearch.

Insight:
Yahoo's World news content expansion beyond breaking news, providing global news to global audiences; Yahoo's mobile expansion in the youth and young adults markets where Virgin Mobile primarily caters to; Yahoo's expansion in mobile market by enabling publishers to grow their own mobile businesses through Yahoo Mobile Publisher Services.

Opinion:
McClatchy partnership: Yahoo News is the most visited news site on the Web with 36.2 million visitors in February 2007, up 37% year over year, according to research firm comScore Networks Inc. McClatchy's also has 6.6 million online news visitors, almost triple a year ago, before McClatchy purchased and began operating most of Knight Ridder's newspapers.

This partnership will further entrench global readers to World News on Yahoo News. It will also bring a cross-section of new newsreaders to Yahoo. It will not only further Yahoo News' leadership position, but also generate incremental revenue from global advertisers as well. McClatchy also wins through royalties that Yahoo will likely pay for "clicked readership" which in turn will fund McClatchy's foreign news division.

Virgin Mobile partnership: Yahoo! is consolidating and solidifying it's mobile leadership and strategy; Yahoo possibly won this partnership wherein both Google and Microsoft competed. Did Yahoo! pay Virgin Mobile to get included on the Virgin Mobile handsets, or did Yahoo! and Virgin Mobile create a win-win partnership wherein both companies are working towards shared revenues and shared risks? Yahoo gets a potential market of 4.6 million users, which is small compared to AT&T or Verizon's market of cell phone subscribers. Yahoo will need to create larger deals with the market leading wireless carriers in order to gain a solid footing in the mobile market of e-mail, messaging, search and more.

Yahoo! Mobile Publisher Services: The Yahoo! Mobile Publisher Services went live across 19 countries, including Argentina, Brazil, Canada, France, Germany, Indonesia, India, Ireland, Italy, Malaysia, Mexico, Philippines, Singapore, Spain, Taiwan, Thailand, UK, US and Vietnam. Yahoo! seems to have scored a home run with the Yahoo Mobile Publisher Services. Will Mobile content providers embrace Yahoo! Mobile, and begin converting their content on Yahoo Mobile? Yahoo! is providing everything a mobile content owner can ask for: a ready ad network to monetize the content (first ads go live in Q2, 2007), a content engine to convert their content to mobile, and mobile directory and site submit. Yahoo! has partnered with MobiTV, the global leader in mobile and broadband television and music services, Opera, the leading provider of Web browsers for mobile devices, and go2, the leading location-enabled mobile content network in the U.S. By bringing together the global audiences of Yahoo’s popular mobile services with those of participating publishers, Yahoo! will create a combined pool of valuable inventory. Yahoo! wants to sell this valuable inventory to leading advertisers through its proven ad-serving technology...Yahoo is playing the right cards; now its a matter of time before the mobile content, search and ad business takes off.


Innovator: IBM Labs

Innovation:
An outsourced "Innovation Factory" that accelerates the innovation process from ideas to commercialization, and cuts process time from years to days.

Summary:
IBM (NYSE: IBM) opened its "Innovation Factory," a Web 2.0 solution that manufactures ideas and new products and services for business growth.

Innovation Factory uses a blend of Web 2.0 social networking technologies including blogs, wikis, social tagging, surveys and polls, to help companies rapidly conceive and test new products and services, accelerating a launch process that often takes years down to mere days.

IBM Innovation Factory for Telecom is designed to capture the innovation process from ideas to commercialization, speeding up co-creation (link) among employees, partners, software developers and subscribers through online communities.

Innovation Factory for Telecom can play a central role in the launch of new service trials, provide online documentation and support for the trials, and capture feedback about the trials from the innovation community. This process brings service providers closer to their subscribers by more accurately creating products that meet subscriber needs and spotting market trends through early and direct subscriber interaction. -- IBM press release

Insight:
A new product (service) "Innovation Factory" and a new process for Innovation that could find adopters in industries being commoditized

Opinion:
IBM announced that Sprint Nextel is among the first Telecom clients piloting the "Innovation Factory." Although the concept of "Innovation Factory" and Web 2.0 technologies sound great on paper, and IBM has found an early adopter, it remains to be seen whether a larger segment of the Telecom industry will begin calling IBM for this. IBM needs to perhaps take a page from its own book, and showcase how the "Innovation Factory" is helping IBM and its key partner using co-creation and Web 2.0 technologies.


Innovator: Microsoft

Innovation: Product and Business Model Innovation - Xbox 360 Elite, a premier new model of the video game and entertainment system; Xbox Live: TV series and movies from A&E Network, ADV Films, National Geographic and TotalVid.com will add to the more than 1,500 hours of downloadable entertainment content in the U.S.

Summary:
Xbox 360 Elite:
Distinguished by its black finish and signature metallic detailing, Xbox 360 Elite will come packed with components and accessories for the ultimate high-definition entertainment experience:

-- Xbox 360 Elite console. The console is equipped with a premium black finish and three powerful core processors capable of producing the best in HD entertainment (up to 1080p), 16:9 cinematic aspect ratio, anti-aliasing for smooth textures, full surround sound, HDMI output and DVD playback with upscaling capabilities right out of the box.
-- Xbox 360 120GB hard drive.
-- Xbox 360 Wireless Controller (black). This features the Xbox(R) Guide Button for quick, in-game access to friends and music, range of up to 30 feet and a battery life of 30 hours on two AA batteries.
-- Xbox 360 headset (black).
-- Xbox 360 HDMI cable. New to Xbox 360, HDMI allows consumers to get HD video (up to 1080p) and multi-channel surround sound, all from one cable.
-- Xbox LIVE Silver Membership.
-- One-month subscription to Xbox LIVE Gold.

Xbox Live:
Paramount Pictures, for the first time on Xbox LIVE, will offer its feature films for download in high definition. Available titles will include "Braveheart," "Team America: World Police," "World Trade Center" and "South Park: Bigger, Longer & Uncut." Also, for the first time, Warner Bros. Home Entertainment will be releasing its direct-to-video movies exclusively in high definition on Xbox LIVE simultaneous with their availability on DVD, starting with "Sublime" and later "Babylon 5: The Lost Tales." Also:

-- A&E Network. "Dog the Bounty Hunter," "King of Cars," "Gene Simmons
Family Jewels," "Driving Force" and "Criss Angel Mindfreak"
-- ADV Films. Top offerings from the No. 1 producer-distributor of
Japanese animation ("anime") outside Japan
-- National Geographic. The television series "Is It Real?" and "Taboo" as
well as programs such as "21 Days to Baghdad" and "Air Force One"
-- TotalVid.com. A broad action-sports offering including extreme skiing
and snowboarding, skateboarding, motocross, surfing and mountain biking

Insight:
Creating Product Innovation for the high-end market, and competing against the latest Sony PlayStation with Xbox 360 Elite; Expansion of premium content on Xbox Live furthering Xbox's strength in the living room.

Opinion:
At an estimated retail price of $479.99 (U.S.), Xbox 360 Elite is well equipped to compete against the high-end Sony PlayStation at a time when Sony is trying to establish ground with its latest product. Xbox 360 Elite will find a market of gaming buyers who want the best there is within the Xbox line; also ten to twenty percent of existing Xbox owners will upgrade to the Elite version. This is solid strategy by Microsoft Xbox team to go after the high-end market.

Xbox LIVE community has grown to more than 6 million people comprised primarily of gamers; with more content and movie downloads, more gamers will use Xbox 360 for their movie and TV entertainment programs. Another fact is that downloads on Xbox LIVE have grown in double-digits, month-over-month, with a 400 percent increase since the service began offering TV shows and movies late last year (as per Microsoft). Free content is adding to the growing viewership on Xbox LIVE. For instance, Comedy Central recently offered the first-ever high definition episode of the No. 1 show on its network, "South Park." "Good Times With Weapons," available for a limited time on Xbox LIVE, has been downloaded more than 380,000 times to date. Warner Bros. Home Entertainment offered promotional clips from the blockbuster hit movie "300" that have been downloaded more than 477,000 times. Can Xbox Live compete well against iTunes, or Amazon's Unbox and CustomFlix? Netflix has also begun offering movie downloads. And even Wal-Mart. AppleTV just got launched last week. The biggest thing going for Microsoft is the growing number of Xbox 360 gamers; the key to success for Microsoft though would be to convert these gamers to TV, Movie and music show viewers, and find a cross-section of the consumer segment who will buy Xbox 360 for entertainment, and not just gaming.


Innovator: P&G (Proctor & Gamble) (NYSE: PG)

Innovation:
Product Innovation through Strategic Partnership: Duracell(R), a P&G company (NYSE: PG) to Offer New Portable and Backup Power Products for Consumers On-The-Go created by Xantrex Solutions

Summary:
Duracell will introduce a new line of Duracell-branded portable power products including inverters, power packs and battery chargers to meet the needs of a rapidly developing mobile culture that relies on power anytime, anywhere. The new line, which will be introduced through a business alliance with Xantrex Technology Inc. (TSX: XTX.TO) beginning in June 2007, will provide retailers and consumers with high quality portable power products from one of the world's most recognized and trusted brands.

An innovator in portable and backup power products, Xantrex solutions allow customers to operate and charge mobile electronic devices such as laptop computers, PDAs, cell phones and more, so they can stay productive when on the go. The new line of Duracell-branded products will be available in June 2007 in North America and in 2008 in Europe at mass retail, consumer electronics, automotive and specialty retail chains.

Insight:
Launching new product innovation delivered by an outsourced supplier, and leveraging strong brand and distribution presence.

Opinion:
According to the Consumer Electronics Association, approximately 54.1 million people own a portable digital media device, making the demand for portable power stronger than ever. In addition, electrical outages due to extreme weather conditions and grid instability have increased consumer awareness of the value of backup power products, while reinforcing the need for a brand that consumers can trust to keep them connected during emergencies.

Duracell is matching an unmet need of its customers globally: backup portable power. Duracell is a brand that most customers trust because of its high quality; Duracell also has a massive, worldwide distribution network. This partnership is a win-win-win: Xantrex Technology will now be providing its innovative products to Duracell, albeit under strict quality requirements; Duracell will be able to launch the new portable power product line with Duracell brand in a matter of months (as opposed to years if Duracell had to create this product from scratch); Duracell customers will finally get portable power backups from a brand they trust and buy. If the new portable power products are successful, Duracell will likely buy Xantrex within a couple of years. P&G is not shy about meeting the growing customer needs through outsourced innovations.


Innovator: Research In Motion (RIM) (NASDAQ: RIMM)

Innovation:
Product innovation: New BlackBerry API's to support growth in mobile applications

Summary:
Research In Motion (RIM) is adding additional Application Programming Interfaces (APIs) to the BlackBerry(R) Java Development Environment (BlackBerry JDE) to enable the next wave in mobile application development.

The new APIs available for BlackBerry smartphones are:

- Mobile Multi-Media API for Java (JSR 135) allowing developers to embed custom audio and video content into applications; invoke the BlackBerry Media Player to play video or audio content; record audio or voice and save recorded files to the handset or send it over the Internet
- Camera APIs that allow developers to invoke the camera application and access pictures taken with the camera; support for registering listeners with the Camera application that enable an application to be notified when a new picture is taken
- Support for MP3, WAV, WMA, AAC and AMR audio formats with support for routing audio playback to the external speaker, connected headset and Bluetooth(R) headset
- XML and Web Services support to help simplify communications with existing Internet applications
- BlackBerry Messenger APIs allowing access to presence and contact information and the ability to send peer-to-peer messages
- File System Access APIs (JSR 75) to provide access to documents and other files stored locally on the smartphone or on the microSD expansion memory; support for registering listeners with the file system that enable an application to be notified when a new files are added or removed
- GPS APIs (JSR 179) that provide access to location information from local GPS chip or external GPS receiver connected over Bluetooth
- BlackBerry Maps API providing access to the map application to display an address or a route with BlackBerry Maps providing all of the geo-coding and mapping data for free
- Wallpaper and Ringtone Customization Java APIs to enable custom applications to add new wallpapers and ringtones to the smartphone
- Planned support for 3D Graphics API (JSR 184) and SVG API (JSR 226) to enable more powerful gaming and rich-media content
- Planned support for MMS Java APIs (JSR 205) to complement the existing SMS and Phone APIs which enable third party applications to listen for incoming phone calls and SMS messages, invoke the phone application to place a call, and compose SMS messages for peer-to-peer messaging

Insight:
Potential expansion of mobile applications on Blackberry in areas such as Social Networking, Multi-Media, eCommerce, News and Information Services, and Location-Based Services

Opinion:
Over 500 software organizations have joined the BlackBerry(R) ISV Alliance program offering hundreds of business solutions and thousands of lifestyle applications. Blackberry has 8 million subscriber accounts, 100,000 BlackBerry Enterprise Server installations, and broad availability on over 225 networks in over 100 countries around the world. More than 125,000 registered developers have downloaded the BlackBerry JDE, which exposes thousands of Java APIs that developers can utilize to create powerful and innovative applications on the BlackBerry platform.

Can Blackberry give Apple's announced iPhone a run for the money in the consumer segment? Would the Blackberry ISVs and registered developers create new applications that make the Blackberry a "cool" mobile phone for the high-end or suave consumer? RIM is now providing the necessary APIs and support. Whether the ISVs and developers can go about creating cool apps for the Blackberry remains to be seen. One thing is certain: RIM is going to make a play versus Apple's (NASDAQ: AAPL) iPhone strategically to defend its own turf and customer base, as well potentially expand into the high-end consumer segment. Perhaps RIM may actually create a new wireless phone to compete head-on versus the iPhone and launch it this year.


Innovator: General Electric Company (NYSE: GE)

Innovation:
Product innovation, Green innovation, Strategic partnership: Development and commercialization of OLED (Organic Light Emitting Diode) devices for lighting applications in a partnership with Konica Minolta Holdings, Inc., Konica Minolta Technology Center, Inc. (collectively KM) to be launched within 3 years.

Summary:
OLEDs are thin, organic materials sandwiched between two electrodes, which illuminate when an electrical charge is applied. They represent the next evolution in lighting products. Their widespread design capabilities will provide an entirely different way for people to light their homes or businesses. Moreover, OLEDs have the potential to deliver dramatically improved levels of efficiency and environmental performance, while achieving at least the same quality of illumination found in traditional products in the marketplace today.

KM has successfully developed a white OLED with a world record power efficiency of 64 lumens per watt at 1,000 candela per square meter--a brightness which is appropriate for lighting applications. Prior to this development, KM developed its own highly efficient and long-life blue phosphorescent materials. Applying these material technologies, along with multi-layer design technology and innovative optical design technology, KM succeeded in developing an OLED having a practical light emission level of approximately 10,000 hours.

In addition to material technology and optical design technology, KM has been developing the ultra-high barrier film fabrication technology to enable high productivity. Superb coating technology nurtured through the development of photographic film and display materials also plays an important role in the development of highly productive OLEDs. Currently, research and development for its commercialization is under way.

GE, as part of its ecomagination initiative, has made substantial investments in OLED research that have resulted in world records for OLED lighting device size and efficiency. In 2004, GE researchers were able to demonstrate an OLED device that was fully functional as a 24 inch by 24-inch panel, which produced 1,200 lumens of light with an efficiency on par with today's incandescent bulb technology. This was the first demonstration that OLED technology could potentially be used for lighting applications. Since then, GE has more than doubled the level of OLED efficiency using device architectures that are scalable to a large area and can be produced cost-effectively.

In addition to increasing efficiency, GE has focused on developing all the requirements--ranging from plastic film substrates, ultra-high barrier coatings, and fabrication processes and equipment to enable the high speed, cost-effective "roll-to-roll" manufacturing--required to produce large-area OLED lighting.

In the coming months, KM and GE will further accelerate research and development of OLED lighting by sharing technologies and knowledge. KM's technology center will lead the research and development activities for KM. GE Global Research, GE's centralized research and development organization, and GE's Consumer and Industrial business division will lead research and development for GE.

Insight:
OLED lighting, coming to your homes within three years or less, through product innovations created by strategic partnership between GE and KM.

Opinion:
GE Consumer & Industrial Vice President Michael Petras said, "In a world demanding higher standards for energy efficiency and environmental performance, OLED lighting has the potential to become a major lighting source on both fronts. And because OLED lighting is soft and diffused, it will create some exciting application opportunities for designers and specifiers. The applications are numerous, ranging from ceiling lighting for office and residential applications to interior automotive and aircraft lighting to many specialty lighting applications such as task lighting, sign and various forms of interior retail lighting."

In ten years or less, OLED lighting will become commonplace, and GE will be lighting our homes with OLED innovation. GE is once again leading the world in creating innovative lighting solutions through global partnership with another innovator, Konica Minolta.


Innovator: Google Inc. (NASDAQ: GOOG)

Innovation: Product Integration through Strategic Partnership: LG Handsets to integrate Google Search, Google Maps for mobile, Blogger Mobile and Gmail for mobile

Summary:
LG Electronics, South Korea's global leader and technology innovator in consumer electronics, home appliances and mobile communications, and Google announced a global collaboration to pre-install Google's services on millions of LG mobile phones. Mobile users around the world will now be able to easily search for information, find locations, update blogs and manage email while on the move.

Select LG handsets, pre-installed with Google™ products and services will be shipped globally including North America, Europe and Asia starting in the second quarter of 2007. These handsets will create a more dynamic user experience, including one click access to Google search through an icon in the application menu. More features of LG-Google handsets include:

Google Maps™ for mobile, an application that enables users to view maps and satellite imagery, find local businesses, and get driving directions
Gmail™ for mobile, a Java-based application that brings more speed, convenience and functionality to the mobile Gmail experience
Blogger™ Mobile, an application to upload/download images and text to blog from mobile devices (www.blogger.com), keeps avid bloggers upwardly mobile.

Through this new partnership, LG and Google will jointly market LG-Google handsets, then further extending their collaboration to develop digitalized home in the future. LG plans to launch mobile handsets pre-installed with Google and products and service for the next few years with at least ten new handsets in 2007.

Insight:
Google has found a solid global partner in LG to befit its mobile strategy and expand its mobile market share. By embedding Google Search and key applications such as Maps, Gmail and Blogger into LG mobile phones, Google and LG are going to provide mobile phone users easier ways to access the applications they use most often and care about. Mobile phone users want simplicity and ease of use when it comes to searching, e-mailing, locating and blogging - Google applications provide one click access to these apps, and ease of use. This partnership and product integration is a win-win-win for LG, Google and mobile users.

The Innovation Index up 6% in 2007 - Weekly Report 02-21-07

The Innovation Index is now up 6% in 2007. S & P 500 was even for the week, and is up 3% in 2007. NASDAQ was up 1% for the week, and is now up 4% for the year, whereas the Dow Jones Index was even for the week, and is now up 3% in 2007. The Innovation Index continues to lead all the major indices.



Yahoo! Inc. (NASDAQ: YHOO) leads the Top 20 Innovators of The Innovation Index in stock performance with 24% gain for the year.

The Innovation Index closed at 73.15 on February 21, 2007, up 3.84 points from the closing price of 69.31 on December 29, 2006.

8 of the Top 20 Innovators showed positive gains, 7 of the Top 20 Innovators dipped in the red, and 5 Innovators were unchanged last week.

Weekly Advances

Apple Inc. (NASDAQ: AAPL) was up 5% in just one week owing to upgrades, upbeat forecasts by analysts for the current quarter, opening of a new store in Florida and agreement with Cisco Systems (NASDAQ: CSCO) about the iPhone trademark. Apple is now up 5% for the year. Wal-Mart Stores (NYSE: WMT) announced solid quarterly results with profits that exceeded the analysts' estimates, including the 2007 outlook. The news sent Wal-Mart's shares up 4% in just one week, and now Wal-Mart is up 8% for the year. Target (NYSE: TGT) also benefited from the announcement, and gained 2% in one week. Target is up an impressive 12% for the year. Yahoo! (NASDAQ: YHOO), Amazon.com (NASDAQ: AMZN) and Research In Motion (NASDAQ: RIMM) were each up 3% for the week. The street is expecting upside from Yahoo!'s Project Panama, and announced innovations such as Yahoo! Pipes only furthers the excitement (although Yahoo! search share slipped last month to Google). Research In Motion's latest Blackberry innovation is helping the recent surge in stock performance. RIMM is now up 11% for the year.

Weekly Declines

There were no significant declines last week. HP (NYSE: HPQ) had another solid quarter beating the analyst estimates for both topline revenue and profits; however, the 2007 outlook was deemed conservative by the analysts. HP PC business is doing well, and is gaining significant market share against Dell (NASDAQ: DELL). Yet, HP shares were down 4% in one week due to the projections, and are now even for the year. Dell is now planning to "experiment" with retail. Earlier, when Dell took over Dell's CEO role, I had dwelled on the same point on How Dell can turnaround Dell? Retailing is critical to Dell's future success, and Dell can perhaps emulate the recent success of Blockbuster that offers the best of both worlds in the movie rental business (related story: Blockbuster versus Netflix). Today's consumer wants all the choices, likes simple business model, and appreciates ease of shopping through multiple channels.

Yearly Leaders and Laggards

Yahoo! (NASDAQ: YHOO) is leading the top 20 innovators with 24% gain for the year. Target (NYSE: TGT) is up 12% for the year owing to the strong retail sector and Target innovations into music and electronics. eBay Inc. (NASDAQ: EBAY) is holding steady at 11% for the year. Starbucks Corporation (NASDAQ: SBUX) shed another 3% last week, and is now down 9% for the year, after posting a solid 18% gain in 2006. Can Starbucks repeat the 2006 performance with the introduction of new innovations in Coffee vending?

About The Innovation Index

The Innovation Index introduced in December, 2006 is a weighted stock price index of the top 20 Innovators in North America.

The Innovation Index has returned 119% over the last five years. This assumes an investment in each stock of The Innovation Index (buying each stock). An average of $100 invested in The Innovation Index on December 31, 2001 returned $219 as of December 29, 2006. By comparison, $100 invested in each of S & P 500, NASDAQ and Dow Jones Index returned $124. The Innovation Index beats the S & P 500, NASDAQ and Dow Jones Index by 77% over the last five years.

The Normalized Innovation Index is even more impressive, and has returned 174% over the last five years. This assumes equal investment in each stock of The Innovation Index.

The alphabetical list of the top 20 Innovators of The Innovation Index along with their stock ticker symbols are presented below:

3M Company - (NYSE: MMM)
Amazon.com, Inc. - (NASDAQ: AMZN)
America Movil - (NYSE: AMX)
Apple Inc. - (NASDAQ: AAPL)
Cisco Systems, Inc. - (NASDAQ: CSCO)
Dell Inc. - (NASDAQ: DELL)
eBay Inc. - (NASDAQ: EBAY)
General Electric Co. - (NYSE: GE)
Google Inc. - (NASDAQ: GOOG)
Hewlett-Packard Co. - (NYSE: HPQ)
Intel Corporation - (NYSE: INTC)
International Business Machines Corp. - (NYSE: IBM)
Microsoft Corporation - (NASDAQ: MSFT)
Research In Motion Limited - (NASDAQ: RIMM)
Southwest Airlines Co. - (NYSE: LUV)
Starbucks Corporation - (NASDAQ: SBUX)
Target Corp. - (NYSE: TGT)
The Proctor & Gamble Company - (NYSE: PG)
Wal-Mart Stores, Inc. - (NYSE: WMT)
Yahoo! Inc. - (NASDAQ: YHOO)

The Innovation Index will analyze the positions and standings of the top 20 Innovators at the end of each year. For 2007, there will be no further changes in The Innovation Index.

Disclaimer: I invest in the stocks comprising The Innovation Index.

Blockbuster versus Netflix - Winner takes all?

Netflix (NASDAQ: NFLX), the leader of online movie rental, had revenue of $997 million and 6.31 million subscribers in 2006 (year end). Netflix revenue increased 45% in 2006, adding $309 million to the 2005 total revenue of $688 million. Netflix ended 2005 with 4.18 million subscribers (year end). An average Netflix subscriber spends about $16 for monthly subscription. Netflix added 654,000 new subscribers during the December, 2006 quarter alone. Netflix business appears to be firing on all cylinders, and is poised to repeat the performance or even surpass it in 2007. It appeared for a couple of years that Netflix will take over the movie rental business altogether. Wal-Mart (NYSE: WMT) tried the online movie rental business, launched it in a huge way, and quietly closed it down, bowing the leadership position to Netflix.

The leader of movie rentals, Blockbuster Inc. (NYSE: BBI) was nowhere to be found. Until recently. Blockbuster was once thought finished. Netflix single-handedly created the online movie rental business, a new category killer that caused total disruption in the movie rental industry. Netflix business epitomizes disruptive innovation. Netflix, the disruptor, went up against the market leader, the sustainer, Blockbuster, and carved out a huge bite of the movie rental business. Blockbuster was caught napping. Blockbuster did not know how to respond to the Netflix business model of mail-order movie rental. Blockbuster tried many models of its own by luring customers to the thousands of Blockbuster stores. However, the customers enjoyed the flexibility of renting movies online at Netflix, where they could browse the catalogs in the comfort of their own homes, read reviews, choose the movies to rent, and submit the order online. The movies arrived within a few days, by which time the customer has already viewed the previously rented movies multiple times. Customers simply shipped the movies back in a pre-paid postage return envelope. No trip to Post Office necessary. All for a monthly subscription of about $20 (which is now $17.99).

Blockbuster, the established leader of movie rental business had it made with over 5,000 stores in the U.S and over $5 billion in revenue in 2001. The movie rental business was in a status quo, with hundreds of thousands of customers going to Blockbuster stores, choosing the movies (or video games) by browsing around the stores, and renting the movies one at a time. Blockbuster required a paid membership to rent movies, and the business model was pay-per-rental. Blockbuster grew by creating local stores, and the topline revenue growth was tied to the number of new store openings. The incremental business per store was flat or tapered (Blockbuster tried selling movies and games, previously rented movies, and other movie add-ons without a tangible upside). Customers essentially paid anywhere from $2 or higher to rent out the movies. Customers were used to this model, and rivals such as Hollywood Video and local movie rental stores offered similar business models. The business model of pay-per-rental had a huge drawback: Late fees. Most customers forget to deliver the movie back within one day or two days, and ended up paying extra day charges (some even argued these late fees from time to time). Late fees were a sizable percentage of Blockbuster business; hence, there were no real plans to change the business model. Other drawbacks included not finding the movie you want to rent (it's already checked out), and the high cost of rental of a new movie. The customers quietly rented from Blockbuster, frustrated by the late fees, but content to rent (there were no viable alternatives). No one could really match the presence, the size, the selection and quality of Blockbuster. And Blockbuster was getting bigger each year, to the tune of $6 billion plus in annual revenue in 2004.

Enter Netflix

Netflix attacked the pain point of Late fees head on. Netflix introduced "No Late fees". The customers loved this. No more frustration of paying a late fee if you forget to return the movie on time. You simply return the movie when you are ready to return in a postage pre-paid envelope. And the icing on the cake: unlimited Movie rentals. Albeit up to three movies at any given time. The only limit was really the time it took for movies to ship from Netflix warehouses and arrival at your home. If you are into watching lots of movies, you can essentially time your orders so that you can end up watching fifteen or more movies each month. All for a low monthly subscription fee. Netflix essentially emulated a monthly service fee business model similar to a telephone company. And Netflix made it simple to rent online. Of course, Netflix had no stores, i.e. physical stores. Netflix was completely an online movie rental business, similar to a mail order business. Netflix also reduced the pain points of knowing which movies to rent ahead of time, without making a trip to the store. For instance, if a movie was rented out, Netflix customer simply had to put that movie on the wait list. And as soon as it became available, it was automatically shipped out. Finally, the cost per movie rental became somewhat cost-effective - especially if you watch at least half a dozen or more movies each month. When Netflix entered the movie rental business, Blockbuster and others scoffed at the whole online business. However, Netflix became hugely popular, and movie rental buffs from college dorm students to teenagers, adults to families, became Netflix loyal customers. To the tune of 6.31 million subscribers as of December, 2006. Netflix created a $1 billion movie rental business from nothing. Netflix disrupted the likes of Blockbuster, whose businesses essentially stalled or were in a free fall, became unprofitable, and even closed.

The second coming of Blockbuster

Netflix served notice. And Blockbuster business came under attack. However, Blockbuster, like a tried and tested champion, held up. Blockbuster tried many business models, eliminated late fees, introduced two for one rental, provided incentives to renters, and even introduced unlimited on-premise rentals. However, the business was spiraling down, and customers kept leaving the stores. Blockbuster even had to close stores, and put plans on opening new stores on hold. However, it did not succumb. Eventually, Blockbuster got it right. Blockbuster realized that it was in a unique position to address the customers on its given strength: store locations. However, in order to captivate the online movie renters, Blockbuster also needed to create an online business. With a twist. Blockbuster provided movie renters the best of both worlds - rent online or rent at the store, rent online and return to the store, rent at the store and return online (possibly), rent online and return online. Whereas Netflix only provided customers one service model: rent online and return online, Blockbuster now had the flexibility and delivery model to offer customers tremendous flexibility and choice. All for a monthly subscription fee which is the same as Netflix's monthly subscription. In retrospect, this innovation from Blockbuster made perfect sense. And now it was simply a matter of time before customers returned. Blockbuster became aggressive in the marketing, including the recent promotion inviting Netflix customers to rent movies on President's Day (when post offices are closed), and over the weekends. Also, asking customers to bring in their Netflix return labels for free rentals (with a membership). Blockbuster is appealing to the emotions of customers with the message that you can rent a movie on the weekend, when there's no mail or "just when the mood strikes" - providing a "freedom of choice" and not having to wait for movies as they arrive in the mail.

Blockbuster's new Total Access provides customers unlimited movie rentals, online or in the store. Blockbuster ended 2006 with 2.2 million subscribers and revenues closing in on $7 billion (to be announced next week). Importantly, in the last quarter of 2006, Blockbuster added 700,000 subscribers, beating Netflix by about 55,000 subscribers. Blockbuster's Total Access Model has the momentum. With timely promotions such as President's Day promotion, and Valentine's Day (where Blockbuster offered a list of favorite movies for the special occasion), Blockbuster is capturing the mindshare from movie renters.

Netflix answers back

Netflix Chief Executive Reed Hastings, in a Marketwatch story, told analysts after the recently concluded earnings call "that the company expects to see a modest increase in subscriber cancellations in the first quarter of 2007 as rival Blockbuster Inc. aggressively markets its new Total Access program, which enables its online customers to either return DVDs through the mail or exchange them at stores for free in-store movie rentals."

Hastings believes though that "Blockbuster's impact on its subscriber base should decrease in the second quarter." He added that Netflix observed a similar pattern in 2005, when Blockbuster cut its monthly subscription price and heavily marketed that move. In that case, Blockbuster "had already captured in [the first quarter of 2005] the few consumers most likely to switch," Hastings said.

The very fact that Blockbuster added more subscribers than Netflix's in the latest quarter has to make Netflix rethink their strategy. Netflix recently introduced the long-awaited plan to offer movie and TV downloads over the Internet. "Our accomplishments during the year -- strong subscriber growth, continued improvement in the customer experience, and increased profitability -- together with the recent launch of the first generation of our online video option, leave us better positioned than ever to achieve our long-term objective of being the movie rental leader," Hastings said in a press release.

Winner Takes All?

Who will be crowned the winner of movie rentals? Would it be Blockbuster whose stock price has appreciated more than 80% in 2006, and importantly, has finally figured out the appropriate formula: Blockbuster Total Access. Or would it be Netflix, who has found time and again to improve upon its business model, and has shown ability to innovate with the recently announced online movie downloads? What about Apple (NASDAQ: AAPL) with the iTunes Movie download service available to the millions of iPod owners and iTunes subscribers alike. Apple recently added 150 movie titles from Lions Gates (movies including "Saw", "Basic Instinct", "Dirty Dancing - Havana Nights") to the iTunes store, and is poised to grow the online movie business. Wal-Mart has re-entered the online movie rental business as well offering its own version of online movie downloads in partnership with the major movie studios and powered by HP (NYSE: HP). Finally, Amazon.com (NASDAQ: AMZN) has also recently expanded the Unbox online movie download service. Amazon.com and TiVo Inc. (NASDAQ: TIVO) recently announced "Amazon Unbox on TiVo," a soon-to-be-launched service feature that will provide TiVo subscribers with the ability to rent and purchase movies and television shows from leading studios and networks. There is also the DVDPlay rental kiosk service available at the local grocery stores through a station similar to a vending machine and providing DVD rentals for less than $1.30. And then there are all the cable operators and satellite TV operators coming up with various options to rent movies as well. The entire movie rental industry has many players vying for the top spot. If the online movie download business takes off, it can cause yet another disruption in the movie rental industry - in the same vein as what Netflix did earlier. It's only a matter of time before Blockbuster will offer its own online movie download service as well. Why not? Offer the customers all the choices, simplify the business model, and make it extremely easy for customers to rent a movie through any of the available mediums: in the store, online through mail, online through immediate download or directly through cable or satellite. Perhaps Blockbuster is in the best position to address this changing market of movie renters and movie rentals worth $25 billion dollar annually and growing. Perhaps no one player is.

References:

Blockbuster Press Releases, Quarterly and Annual Earnings reports
Netflix Press Releases, Quarterly and Annual Earnings reports
Marketwatch
Top Ten Innovations for 02-14-07
The Innovation Index

Disclaimer: I invest in the stocks comprising The Innovation Index, beginning in 2007.

Top Ten Innovations for the week ending 02-14-07

Starting this week, I am going to release a weekly report on the Top Ten Innovations introduced by the Top 20 Innovators of The Innovation Index.

The Top Ten Innovations Report will be released weekly, and will include the following:

1. Top Ten Innovations introduced by the Top 20 Innovators during the previous week.
2. Insights gained from the game changing Top Ten Innovations.
3. My opinion of the business impact and lessons learned from the Top Ten Innovations

What are considered the Top Ten Innovations and included in the weekly report?

New revolutionary products, key acquisitions of innovative products and companies, strategic collaborations and partnerships that create or expand new markets and products, defining or brand new business models changing the business and revenue landscape, and business processes driving creativity and innovation.

Introducing the Top Ten Innovations for the week ending 02-14-07

Innovator: 3M (NYSE: MMM)
Innovation: Acquisition of innovative complementary technology
Summary:
3M announced it has acquired Acolyte Biomedica Ltd., a Salisbury, U.K.-based provider of an automated microbial detection platform that aids in the rapid detection, diagnosis, and treatment of infectious diseases.
Acolyte Biomedica helps hospitals control high-risk infections through improved screening and targeted treatment of methicillin-resistant Staphylococcus aureus (MRSA), a type of bacteria that is resistant to certain antibiotics and occurs most frequently in hospital patients who have weakened immune systems.
Insight:
Expanding 3M's core infection prevention business into adjacent markets.
Opinion:
3M is positioning to become the market leader in medical diagnostics area and infection prevention business. This acquisition of innovative technology will create incremental revenue stream and expand the platform to include diagnostic solutions that are more advanced such as molecular diagnostics that will help hospitals to improve the quality of patient care (besides simple, culture-based approaches).


Innovator: Apple Inc. (NASDAQ: AAPL)
Innovation: Strategic partnership and business model creating market expansion
Summary:
Apple Inc.'s iTunes store started selling films from independent movie studio Lions Gate Entertainment Corp. (LGF), including the horror film "Saw," the thriller "Basic Instinct" and "Dirty Dancing - Havana Nights” from $9.99.
Apple will add some 150 film titles to the online store, bringing the iTunes film inventory to more than 400 titles.
Insight:
Creating a viable online business model with movie studios that expands iTunes market.
Opinion:
Apple has once again proved that it can create key business deals with movie studios and offer online movies around the $9.99 price point for consumers. Apple will easily see a growth of 30% for the iTunes movie business with this strategic partnership. If the iTunes movie business takes off in the same realm as the iTunes music, watch out!


Innovator: Alliance of all major music publishers and 23 mobile operators
Innovation: MusicStation, a new cellular music service reaching out to 690 million phone subscribers worldwide.
Summary:
The Alliance would launch a cellular music service called MusicStation, introduced by British mobile music firm Omnifone, in the second quarter of 2007, offering unlimited track downloads at 2.99 euros per week -- 1.99 pounds in Britain -- including data traffic charges. MusicStation works on both second and third generation mobile networks. Consumers will be able to download one track in the background while listening to another. The service also tracks personal music tastes and interests, provides news and marketing offerings and has a community service to find users with similar musical tastes. Operators that will offer the service are based in Australia, Belgium, Czech Republic, France, Germany, Greece, Hong Kong, Hungary, Ireland, Italy, Netherlands, New Zealand, Philippines, Poland, Portugal, Romania, Singapore, South Africa, Spain, Sweden, Turkey and Britain.
Insight:
Game changing, global, collaborative innovation that brings parity and feasibility to mobile music.
Opinion:
If MusicStation takes off, it will be a win-win for music publishers and mobile operators. This innovation can significantly impact Apple’s soon to be launched iPhone and the direct service, and may impact iTunes music download business. Apple’s plan to provide a direct service to consumers through its iPhone (essentially bypassing the mobile operators) will be tested.


Innovator: Google Inc. (NASDAQ: GOOG)
Innovation: Enhanced AdWords, redefined business model
Summary:
Google will offer new flexibility to its advertisers by letting them select which third-party sites would display their ads on AdWords. Google said in March it would begin a "beta" test program giving that choice to advertisers. Google will charge for the ads on a cost-per-click, CPC, basis instead of the cost-per-thousand-impressions, or CPM, basis it presently uses.
Insight:
Targeting of marketing programs at Google content partners with one-stop business model
Opinion:
Google is finally providing a one-stop business model, CPC, for the AdWords program regardless of where and how many times the ads are marketed (on Google or at Google content partners). For advertisers, this means expanded reach of their marketing programs at the content sites relevant to their customer need. For Google content partners, this translates to a clear business model and relationship with Google, and upside through targeted marketing programs. For Google, this potentially leads to increased AdWords business as more advertisers resort to increased, albeit, targeted marketing programs at various Google content partner sites. A potential win-win-win.


Innovator: Challenger: HP (NYSE: HPQ) and Incumbent: Research In Motion (NASDAQ: RIMM)
Innovation: HP iPAQ 500, BlackBerry(R) 8800 smartphones
Summary:
HP introduced the latest HP iPAQ Smartphone that delivers a flexible wireless email experience for business customers through convenient voice control and hands-free operation.
The HP iPAQ 500 series Voice Messenger features voice over Internet protocol (VoIP) capabilities, "push" email and the latest Windows(R) Mobile 6 operating system. With up to six hours of continuous talk time on a fully charged battery, voice commands, hands-free operation, the HP iPAQ Voice Messenger also leads the competition in battery life.
Using a powerful "voice reply" feature, people can reply to email by dictating and sending a voice response, without the need for any typing. Users also can listen to email and text messages, navigate through phone and calendar tasks and speak to start applications.
Research In Motion introduced the BlackBerry 8800 - a feature-rich and finely tuned Smartphone that is both functionally and visually inspiring.
The BlackBerry 8800 is the thinnest BlackBerry handset yet and is designed to satisfy the most demanding mobile professionals. Equipped with a full, highly tactile QWERTY(i) keyboard and RIM's user-friendly trackball navigation system, it also includes built- in GPS (Global Positioning System), multimedia features and a microSD expandable memory slot.
The quad-band GSM/GPRS and EDGE-enabled BlackBerry 8800 offers best-in-class performance with smoothly integrated support for voice and data applications, including phone, email, text messaging, web browser, organizer, multimedia and more. Powering its robust performance is an ultra-thin, high-capacity battery that further extends the uncompromising battery life for which BlackBerry handsets are renowned.
Insight:
New smartphones for first time business professionals, and ones looking to upgrade, potentially expanding the smartphones worldwide market
Opinion:
Can HP create a dent in the Smartphone market that is led by established players including Research In Motion and PALM? HP does have a loyal albeit small following for the iPAQ, and this is the best iPAQ yet with innovative voice features. If the iPAQ 500 does not succeed, HP may have to rethink the Smartphone business altogether. On the other hand, the BlackBerry 8800 is a surefire success. It offers best in class features, performance and quality – the workhorse now even looks sleek. Research In Motion has plans to expand worldwide beyond the 200 operators through BlackBerry Connect, potentially adding a 100 more operators. The BlackBerry 8800 will be a catalyst for expansion.


Innovator: General Electric Co. (GE) (NYSE: GE)
Innovation: Joint Ventures and Strategic Investments in growing energy market, acquisition business model
Summary:
A unit of U.S.-based conglomerate General Electric Co. (GE) Wednesday agreed to buy up to a 22% stake in France-listed wind-farm developer Theolia SA (18481.FR) to boost its exposure to renewable energy in Europe. General Electric's unit, GE Energy Financial Services, will inject EUR20 million into Theolia to help fund the company's aggressive growth plans in Europe, Brazil and India.
123Systems, a promising young company with advanced technology for rechargeable batteries, recently received a timely recharge from a group of investors. GE, in addition to acting as lead investor in A123's latest fund-raising effort, a $40 million series D equity round which closed January 24, is also looking to see where A123Systems' proprietary energy-storage technology can accelerate work already underway at GE on clean energy products. GE's Global Research Center announced in late 2006 the first formal program, a $13MM joint initiative with A123Systems to develop a zero-emissions hybrid fuel cell bus.
Insight:
Continuous innovation at GE through joint ventures and strategic investments in emerging market companies.
Opinion:
GE has sound innovation business processes and is a perennial innovator of products that we admire and use on a daily basis; however, GE does not hold back when it comes to placing bets with key companies in the core growth markets such as renewable and alternative energy. GE has perfected the business model of identifying the companies with innovative technology in the core growth markets, injecting capital including money, products and resources into these companies, enabling these companies to create and further the game changing market innovations, and eventually acquiring these companies. GE is perhaps the master incubator of our times.


Innovator: Intel Corporation (NYSE: INTC)
Innovation: Teraflop processor delivering supercomputer performance
Summary:
Intel Corporation researchers have developed the world's first programmable processor that delivers supercomputer-like performance from a single, 80-core chip not much larger than the size of a finger nail while using less electricity than most of today's home appliances. This is the result of the company's innovative "Tera-scale computing" research aimed at delivering Teraflops -- or trillions of calculations per second --performance for future PCs and servers.
Tera-scale performance, and the ability to move terabytes of data, will play a pivotal role in future computers with ubiquitous access to the Internet by powering new applications for education and collaboration, as well as enabling the rise of high-definition entertainment on PCs, servers and handheld devices. For example, artificial intelligence, instant video communications, photo-realistic games, multimedia data mining and real-time speech recognition - once deemed as science fiction in "Star Trek" shows - could become everyday realities.
Insight:
“Tera-scale computing” for the masses
Opinion:
WOW!! Intel has no equal in the world of high performance microprocessors. I can’t wait for Intel to release the world’s first Teraflop microprocessor that delivers supercomputer-like performance on my PC, and host a live multimedia video conference with my friends and family all over the world, play virtual reality games, and convert my family room into a worldwide communication and entertainment hub. Let the countdown begin…


Innovator: Wal-Mart Stores, Inc. (NYSE: WMT)
Innovation: Checkup – The New Model for basic health care delivery in America
Summary:
CheckUps, the retail-based, non- emergency walk-in medical facility, will open 14 new clinics in leased space inside Wal-Mart Stores in Alabama, Louisiana and Mississippi as part of a Grand Opening series on February 14.
Check-Ups clinics diagnose and treat common ailments such as strep throat, ear and sinus infections, and provide routine pediatric care, blood screenings, and immunizations, along with services such as healthy living counseling. CheckUps nurse practitioners can write and email prescriptions to the patient's preferred pharmacy. Visits typically take under 15 minutes and no appointments are necessary. The clinics will provide a full cholesterol screening in just five minutes using the state-of-the-art Cholestech LDX System made available by Henry Schein, Inc. and Cholestech Corporation.
Insight:
Breaking the mold Innovation beyond retailing into preventative and basic health care.
Opinion:
Checkup and Wal-Mart has the potential to create disruptions in healthcare industry. On the one hand, Checkup provides a low cost option for every day health problems such as cold, cough, sore throat, ear infection, aches and pains, and more; Checkup also provides health screenings and counseling to live healthy and happy lives; finally, Checkup combines with Wal-Mart pharmacies so that a consumer can have a one-stop place for health checkup and medicine – all within thirty minutes or less. The biggest problem with healthcare has been getting a timely appointment with your primary doctor, going to the doctor, waiting for the doctor’s appointment, seeing the doctor, getting a diagnosis, getting a prescription, going to the pharmacy, waiting for the prescription, and finally getting a prescription – total time: 2 to 3 hours on an average. Checkup and Wal-Mart can potentially do all of the above in 1 hour or less for basic healthcare needs. This can be disruptive.

Innovator: Microsoft (NASDAQ: MSFT)
Innovation: Windows Mobile 6, Windows Live and PlayReady products and business model
Summary:
Microsoft launched three new Windows Live products alongside its updated Windows Mobile 6 operating platform, including a localized search engine product, a map application and improved instant messaging services.
Microsoft's Live search application includes localized services that will allow U.S. and U.K. residents to use an Internet browser on their mobile phones to search for restaurants, hotels and retail outlets in their area, and include satellite mapping applications. U.S. users will also be able to receive live traffic updates overlaid on a map on their mobile device. Advertising search facility would provide further advertising revenues for both Microsoft and mobile phone operators.
Microsoft also launched its PlayReady technology, a new multimedia content access technology optimized to meet the needs of mobile operators and handset manufacturers for digital entertainment and commerce. Microsoft PlayReady technology enables a broad spectrum of business models such as subscription, rental, pay-per-view, preview and super-distribution, which can be applied to many digital content types and a wide range of audio and video formats.
The DRM technology - which Telefonica SA (TEF), Verizon Wireless and AT&T Inc.'s (T) mobile unit, formerly known as Cingular Wireless, are all planning to use - protects music, video, games and ringtones from piracy.
Windows Mobile 6, takes its cues from Windows Vista, and introduces the ability to view e-mails in their original HTML Internet format with live Web links from advanced mobile phones, generally referred to as smartphones.
Insight:
Potentially game changing innovations in operating platform, search, DRM and business models.
Opinion:
Microsoft has served notice with the latest introductions of its key mobile applications and business models. Microsoft is challenging Symbian and Nokia, Google, Yahoo!, Apple, the Alliance (above), and everyone else is who is planning to provide operating platform, search, mapping and content technologies for the mobile business. Importantly, Microsoft is positioning well as a neutral operating platform player with applications and business models that taken together make business sense to mobile operators and content owners alike. Can Microsoft become the heavyweight in the mobile software industry? Only time will tell. However, Microsoft has so far dealt a good hand.


Innovator: Yahoo! (NASDAQ: YHOO)
Innovation: Integrated Marketing Innovation
Summary:
Yahoo! Inc. has signed up top corporate advertisers to use its advertising system to run brand ads on mobile phones in 18 countries, marking a major diversification beyond computers. The Internet media company has begun offering its brand advertising to reach mobile phone users across markets in Western Europe, South Asia and the Americas, capitalizing on its prowess in supplying Web advertising to computer users. Yahoo said it has signed up major advertisers including Hilton's Embassy Suites, Infiniti, Intel Corp., Nissan, Pepsi & Co, Procter & Gamble Asia-Pacific and Singapore Airlines as initial advertisers on Yahoo's mobile advertising system.
The company already offers online marketing services to a large majority of the top 100 U.S. advertisers. By expanding onto mobile phones, Yahoo aims to help corporate advertisers run coordinated campaigns that reach both computer and phone audiences, an official said.
Insight:
Leading integrated marketing innovations for online and mobile markets
Opinion:
Yahoo! is leading the battle of marketing services for advertisers who want to run integrated campaigns across online and mobile markets, through computers and wireless phones. Whereas Microsoft is positioning itself as an operating platform with applications for search and mapping and DRM, Yahoo! is leading the game by providing an integrated marketing platform for advertisers who want to run campaigns at either Yahoo!’s many online properties or mobile. Yahoo! Go for Mobile 2.0, Yahoo! Mail that now incorporates instant messaging, and Yahoo! Messenger for mobile further substantiate Yahoo!’s market leading position for mobile phone makers such as LG who is planning to incorporate these applications in the new mobile phones. If Yahoo! is able to pre-load Yahoo! apps on a majority of leading mobile phone makers, Yahoo! will be able to solidify its position in the mobile market. Yahoo!’s integrated marketing innovation will create a small revenue upside in 2007, with greater growth plausible in 2008 and beyond.

References:
The Innovation Index
The Innovation Index Annual Report – Chapter One
The Innovation Index Annual Report – Chapter Two
The Innovation Index Annual Report – Chapter Three
Reuters
Marketwatch
Press releases
Dow Jones Newswires
BusinessWire

About The Innovation Index

The Innovation Index introduced in December, 2006 is a weighted stock price index of the top 20 Innovators in North America.

The Innovation Index has returned 119% over the last five years. This assumes an investment in each stock of The Innovation Index (buying each stock). An average of $100 invested in The Innovation Index on December 31, 2001 returned $219 as of December 29, 2006. By comparison, $100 invested in each of S & P 500, NASDAQ and Dow Jones Index returned $124. The Innovation Index beats the S & P 500, NASDAQ and Dow Jones Index by 77% over the last five years.

The Normalized Innovation Index is even more impressive, and has returned 174% over the last five years. This assumes equal investment in each stock of The Innovation Index.

The alphabetical list of the top 20 Innovators of The Innovation Index along with their stock ticker symbols are presented below:

3M Company - (NYSE: MMM)
Amazon.com, Inc. - (NASDAQ: AMZN)
America Movile - (NYSE: AMX)
Apple Inc. - (NASDAQ: AAPL)
Cisco Systems, Inc. - (NASDAQ: CSCO)
Dell Inc. - (NASDAQ: DELL)
eBay Inc. - (NASDAQ: EBAY)
General Electric Co. - (NYSE: GE)
Google Inc. - (NASDAQ: GOOG)
Hewlett-Packard Co. - (NYSE: HPQ)
Intel Corporation - (NYSE: INTC)
International Business Machines Corp. - (NYSE: IBM)
Microsoft Corporation - (NASDAQ: MSFT)
Research In Motion Limited - (NASDAQ: RIMM)
Southwest Airlines Co. - (NYSE: LUV)
Starbucks Corporation - (NASDAQ: SBUX)
Target Corp. - (NYSE: TGT)
The Proctor & Gamble Company - (NYSE: PG)
Wal-Mart Stores, Inc. - (NYSE: WMT)
Yahoo! Inc. - (NASDAQ: YHOO)

The Innovation Index will analyze the positions and standings of the top 20 Innovators at the end of each year. For 2007, there will be no further changes in The Innovation Index.

Disclaimer: I invest in the stocks comprising The Innovation Index, beginning in 2007.