Tag: McKinsey

Mobile Phone

Mobile phones allow calls from anywhere that’s within range of a tower. They vastly increase productivity, convenience, lower the risk of a missed call, and they’re fun. Mobile phones work by beaming voice (and, later, data) to a tower, seamlessly switching from tower-to-tower as the person moves.

Cooper Creates the Mobile Phone

Battery-operated gadget maker Motorola invested $100 million between 1968 and 1983 to develop the mobile phone. Martin Cooper led the development effort. This culminated in the release of the $3,995 ($9,900 in 2019) Motorola DynaTAC 8000 in 1984. The world’s first mobile phone weighed 28 oz., offered about 20 minutes of talk time and took ten hours to charge. “The battery life wasn’t really a problem because you couldn’t hold that phone up for that long,” Cooper famously quipped.

The first public mobile call was from Cooper to Joel Engel, his competitor at AT&T who was also working on a mobile phone. In front of reporters, Cooper called Engel and said “Joel, this is Marty. I’m calling you from a cell phone, a real handheld portable cell phone.” Engel conceived of the idea for a cellular phone network, with switching from tower to tower, as a Bell Labs employee in 1970.

Mobile Mania

In 1980 consulting powerhouse McKinsey famously predicted there would be about 900,000 worldwide mobile subscribers by the year 2000. Instead, there were 109 million.

Due to mobile phones, Motorola revenue skyrocketed. A decade later, in 1994, their revenues of $22 billion put the firm 23rd on the Fortune 500 list.

Finnish company Nokia overtook Motorola in 1997 by retooling for digital, rather than analog, phone calls. Rather than focus on digital mobile phones, Motorola instead focused on Iridium satellite phone.

Motorola Stumbles

However, CEO Chris Galvin focused on a small digital phone, the Razr, but was fired in 2003 before it launched and replaced by Sun Microsystem COO Ed Zander. However, Galvin’s Razr was a mega-hit, boosting Motorola’s market cap to $42 billion in 2004.

Eventually, Zander struck a deal with Steve Jobs’ Apple to release an iTunes enabled phone, the Rokr, in 2005. Surprisingly, the iPod/iTunes phone flopped. However, as part of the development process, Motorola taught Apple about mobile phone technology and the mobile phone business. Simultaneously, Samsung adopted blue ocean strategy to manufacture good-enough phones at lower cost.

Subsequently, in 2007, Apple released the iPhone. Motorola had no smartphone, either in the development or the sales channel. In 2008, Carl Icahn purchased 6-percent of Motorola and demanded it be broken into parts and sold. Motorola continued working to compete, building an early Android phone. However, by 2012, Samsung had built a better Android phone, at lower cost.

On August 15, 2011, Motorola was sold to Google for $12.5 billion, a 63-percent premium over it’s then market capitalization. Twenty months later, Google sold what little remained of Motorola, besides the patents, to Lenovo for $2.9 billion.

Today, Motorola – innovator of the mobile phone – is essentially nothing more than a brand in the mobile phone world.

Barcodes & Universal Product Code (UPC)

Barcodes and UPC:

  • Vastly sped checkout times.
  • Reduced the number of staff and training required and the risk of the wrong price being rung.
  • Increased the ability to electronically manage inventory, lowering carrying cost and spoilage risk.
  • Enabled Just-In-Time ordering and itemized invoices.
  • Transformed market research, enabling “big data” studies about items purchased together and which items are purchased in various geographies, at various times, and (when coupled with loyalty cards) by which customers.

Early History

Bernard Silver quit his job after hearing the need, from a grocer, for a better way to manage innovatory and imagining the barcode. He worked with Woodland, who was employed by IBM. Eventually, the two ー inspired by Morse Code ー invented the barcode, a series of dashes and dots to electronically identify items. They patented the innovation Oct. 20, 1949.

Woodland, loyal to his employer, urged IBM to commercialize the technology but they passed. IBM sold the patent to Philco in 1952 for $15,000, which later sold it to RCA, that went on to commercialize barcodes. Silver died in 1963, at age 38.

Barcodes had no known commercial uptake until patents expired in 1969. Eventually, a group of supermarkets banded together to hire McKinsey. They jointly developed the Universal Product Code (UPC).

IBM tasked Woodland, who still worked there, to work with the group developing the UPC.

The UPC identifies every version of every product in barcode form, allowing computers to quickly lookup the product name and price in a computer, the now-familiar checkout process. Laser technology, the bright beam of light, makes modern barcode reading possible.

To encourage adoption of the UPC, IBM agreed to put their barcode patents in the public domain, which they did.

McKinsey’s Wilson implies that IBM and others went on to file new patents, involving the use of the UPC, violating the spirit if not the letter of their agreement.

Barcodes Evolve

There were several competing barcode types in the early days but the now-familiar horizontal bars won out. The original barcode looked more like a bullseye. In 1973, the grocery consortia adopted the modern barcode and UPC as a standard.

Barcodes Become Ubiquitous

Troy’s Marsh Supermarket, in Ohio, is the site of the first barcode being run-up on June 26, 1974.

McKinsey estimated that, for UPC to work, nearly every product would need a UPC barcode before supermarkets would adopt the technology. They found that, in hindsight, the technology lowered cost and increased convenience so much that stores would adopt the technology when about two-thirds of products had UPC codes.