Three Breakthrough Ideas Shape the Future
The macroeconomist Paul Romer’s endogenous growth theory posits that knowledge is a factor in production because innovative ideas create wealth. How does this work specifically? QUALCOMM’s history of strategic and technological development demonstrates Romer’s thesis that ideas create wealth. Moreover, it illustrates the strategic power of leapfrogging architectural control.
Qualcomm embodies an entrepreneurial knowledge culture. Its patents line the halls of its headquarters. According to CEO Dr. Irwin M. Jacobs, the ideas that produced its patents were primarily generated within its first six months. Qualcomm is an exemplary intellectual property company that develops and licenses its innovative ideas about wireless communication for use in knowledge-based products whose superior performance creates competitive advantage. Given its knowledge-based competitive advantages in wireless communication, Jacobs and his team strategically designed their standards-based business model to explicitly enhance increasing returns to scale from the positive feedback of network effects generated by its advanced standardized solutions.
Qualcomm transforms breakthrough ideas into knowledge-based designs, that is, into Romer’s software as codified knowledge. Next, Qualcomm’s superior engineering, by making ceaseless small refinements, sustains the trajectories of improving performance, increasing its degrees of competitive advantage. Qualcomm’s recipe for its Code Divisional Multiple Access (CDMA) architecture combines its multiple software elements into Cell Station Modems (CSM), Mobile Station Modems (MSM), and operating system software for its Radio Frequency (RF) network designs of CDMA systems. The CSMs and MSMs are customized Application Specific Integrated Circuits (ASICs) that modulate-demodulate RF signals and serve as the conversing brains in base stations and mobiles.
The discipline of engineering transforms science into technology¾tools that leverage knowledge. Four key leveraging principles, two general and two specific to mobility, characterize the credo and competencies of Qualcomm’s exceptional engineers in making relentless small refinements. Because unremitting small refinements are necessary to continually enhance functionality to meet advanced performance needs, the first principle is: modularize and integrate the system. Because Qualcomm seeks to set standards, the second principle is: develop globally standardized solutions. In addition, two key engineering principles are necessary to enhance mobility itself. They are: conserve power and reduce size.
In addition to normal engineering’s persistent effort to make small refinements, a leapfrogging advance in RF system technology requires architectural innovation. Qualcomm’s remarkable success in transforming perplexing problems into growth opportunities required only three breakthrough ideas. A breakthrough idea transforms a previously puzzling conundrum into a solution by generating a fresh idea that clarifies what had here-to-fore been so riddling.
Breakthrough Idea # 1: Advanced power control of time-synchronized, orthogonal, and uniquely encoded direct sequence spread spectrum signals minimized interference and maximized spectral efficiency.
Breakthrough Idea # 2: By separating voice bits (where norms require disproportionate resources for disadvantaged users if they are to receive an expected quality of service with minimal latency), from data bits (where norms permit variable latencies, requirements, and resources) into their own decoupled 1.25 MHz carriers, the spectral efficiency of data throughputs was optimized, more than tripling the total throughput of voice. This decoupling of voice and data enabled high data rates and permits dynamic and flexible management of a limited spectrum based on an operator’s changing needs.
Breakthrough Idea #3: Qualcomm’s breakthrough radioOne direct conversion technology (which eliminated intermediate frequency conversion to reduce complexity, components, costs, board-size, and power consumption) permitted the tight integration in the chipset of the equivalent of multiple modems within the handset, which, in turn, enabled a global mobile solution for universal roaming¾harmonizing diverse bands of spectrum (multi-band), access modes (multi-mode), successive generations (multi-generation), continuous upgrades (multi-version), and operators’ networks (multi-network).
What Have Three Breakthroughs in Strategic Architecture Wrought?
All three of Qualcomm’s breakthrough ideas introduced revolutionary changes in mobile wireless architecture. Breakthrough idea #1 shaped the future of the industry by generating advanced throughputs of voice and data that required the use of its architectural standard to reach third generation goals. It did so by solving the problem of frequency reuse. This architectural advantage was sufficient to create a global movement to spread spectrum as the third generation global standard, validating Qualcomm’s intellectual property as possessing great intrinsic value.
Breakthrough idea #2 shaped the future of the industry by making high data rates feasible, the Wireless Internet reachable, and new data only business plans possible. It did so by separating the CDMA2000 architecture optimized for voice from a new, but compatible CDMA2000 architecture, that was optimized for data only, with both architectures using the same 1.25 MHz bandwidth, standard circuit boards, RF specifications, and RAN designs. This permitted both a controlled migration for CDMA operators from 2G to 3G and lengthened the migration path of TDMA and GSM rivals to include GPRS and, possibly, EDGE before UMTS.
Also, decoupling voice and data introduced a significant bonus of increased radio network flexibility by facilitating dynamic channel assignments: spectrally efficient data or voice capacity on demand as needed with requisite quality of service. This opened a magical door to always on, always with you mobile high data rates and wireless Internet, creating a vast new competitive space.
Compared to mixed voice-data networks using a spectrum span of 5 MHz, Qualcomm’s migration plan to enable high data rates has a marked architectural advantage because it flexibly and dynamically shifts 1.25 MHz segments of network spectrum from voice to data as demand for data grows exponentially. As streaming media become commonplace or when VOIP arrives in wireless networks, think of what Qualcomm’s architectural flexibility will mean to operators. This second architectural advantage will enable the first Internet experience for most of the world’s population. By facilitating the build out of a mobile wireless Internet, 1x EV-DO fundamentally changes how everyone worldwide will live, learn, work, and play.
Breakthrough idea #3 shapes the potential future of the industry by promising to end the standards war under the peaceful umbrella of universal harmonization. Harmonization required the introduction of a revolutionary simplification¾zero interference frequency¾of complex CDMA heterodyne RF architecture to generate lower costs and reduced form factors. Reducing the complexity of the mobile is disruptive in low-tier markets in South East Asia and Latin America because it permits a new price-performance point for a sub $70.00 handset. More significant, these architectural advantages, taken together with Qualcomm’s innovative mastery of multi-mode multi-band ASIC design, permit a viable technological integration of previously diverse and warring standards.
Fulfilling Brian Arthur’s principle “of networks there shall be few,” this third architectural advantage provides an integrative standardized platform for a global wireless telecommunication network of networks. A world phone opens the door to universal mobile communication, high-capacity high-speed data, and m-commerce worldwide.
Strategically Shaping the Future
Qualcomm remains further ahead than is widely recognized because its breakthrough innovations strategically shape its probable future. Using Hamel and Prahalad’s three-phase schema of how to compete for the future, Qualcomm won the first two phases of competing for the future. First, it won the competition for industry foresight through its intellectual leadership in selecting spread spectrum for commercialization. Second, it won the competition to shorten its migration path and to lengthen its competitors’ migration to 3G when the industry standardized on spread spectrum.
Because the architectural advantages of spread spectrum were so decisive, only it was judged to be the solution that could meet the ITU’s 3G specifications for voice and packet data speeds. Qualcomm’s foresight and technology leadership turned the tables on its rivals, whose second-generation leadership in a time-division-access mode was technically off tangent and left stranded.
This undermined the competitive significance of the GSM 2G installed base that now faces a long and expensive migration path to third generation spread spectrum networks. It is difficult to claim that you will be the “Universal Mobile Telephone System,” when Qualcomm was first to commercialize 3G, owns the only available high data rate solution, and delivers a multi-harmonized chipset for world phones in 2003 before UMTS rolls out.
Nevertheless, the 2G leaders’ management of expectations works until market perceptions decisively shift. That shift is coming because UMTS failures and Qualcomm’s successes must become suddenly and unavoidably clear. Such a shift in insight is like the perceptual shift in the gestalt of, say, a Necker cube: suddenly and dramatically, a new figure emerges as the old perceptual figure reverses with its ground. In time, investor’s expectations always center on an emergent leader’s intrinsic value. Independent thinkers gain insight sooner; others, only too late.
Nonetheless, this fundamental premise demands acceptance: claim what you will, the GSM/TDMA installed base will change its air interface to spread spectrum. What logically follows? First, Qualcomm shaped the standard for global 3G networks as forms of spread spectrum¾a sharp turn in its favor that shortened its migration path as it also lengthened the path of its rivals. Second, the ITU’s third generation performance requirements magnified its advantages as the intellectual leader of spread spectrum as it simultaneously handicapped its rivals. In this newly shaped future, only Qualcomm has the freedom to advance along its normal trajectories of progress in performance. All 2G rivals were forced to reorient and reinvent their R&D to try to catch up as they try to learn the new rules of this third generation spread spectrum game. Third, Qualcomm’s strategic architectural control as innovator and commercializer of spread spectrum architecture accelerated further when it rapidly evolved its platform through two more breakthroughs, optimized data only and the ZIF-based multi-mode phones.
It is becoming increasingly apparent for all who have eyes to see and ears to hear who is scrambling to adapt and who is shaping the future. Through superior foresight, breakthrough innovation, and precise engineering Qualcomm is advancing the spread spectrum RAN architecture that shapes and controls the competition for the industry’s future. |
