Japan Patent Office “English-Language IP Training Program Development”
No.3-11
Case 7: Business Strategy and Licensing in the
IT Industry
-Smart Home Business by Google and Apple-
These case study materials have been created for the purpose of class discussion, and will not be used for judging its
suitability as a business. The copyright for these case study materials belongs to the Japan Patent Office. As such, the
adaptation, translation, reproduction or duplication of these materials for purposes other than human resources development,
etc. is prohibited without obtaining the permission of the Japan Patent Office beforehand. Inquiries should be addressed to the
Policy Planning and Research Division, Japan Patent Office (Tel: 03-3592-2911).
Objectives of this Course
• Through these materials, the the ideals for ecosystem formation
using open licenses and standardization will be studied through
approaches by Google and Apple toward the smart home business.
• Concretely, the aim is for the student to understand the following by
reading these materials.
 Relationship between a business strategy or business mode
and ecosystem formation based on open licenses and
standardization
 Points for when progressing with formation of a business
ecosystem
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1. Smart Home Business
Overview of Smart Home Business
Background behind expansion of smart home market
 IoT-related technological progress
 Popularization of smart phones
 Changes in regulatory environment regarding environmental
problems, etc.
Category
Applications
Energy control
HEM, air conditioning, lighting, control of various other
appliances
Home security
Gas leak alerts, prevention of intruders and burglaries,
child monitors, pet monitors, etc.
Home health
Nursing care, control of remote patients, etc.
Entertainment
Online video, games, etc.
Source: KDDI総研R&A 2015年4月号「IoTで注目を集める「スマートホーム」の展望」（海部美知＝エノテック・コンサルティング代表）
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Players in the Smart Home Business
 Wide variety of underlying technology behind smart homes

Devices, sensors

Network systems, etc.
 Broad service segments
Entry by diverse players
Movement of standardization,
platform development
Source: GSMA ”Vision of SmartHome”
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2. Google’s Approaches
Corporate Philosophy
Google’s mission is “to organize the world’s information and make it universally
accessible and useful.”
1. Focus on the user and all else will follow
2. It’s best to do one thing really, really well
3. Fast is better than slow
4. Democracy on the web works
5. You don’t need to be at your desk to need an answer
6. You can make money without doing evil
7. There’s always more information out there
8. The need for information crosses all borders
9. You can be serious without a suit
10. Great just isn’t good enough
Source: Google
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Trends in Business Results
Since the late-2000s, increase in income and profit has continued and
profitability of 25% has been maintained.
Revenues
Income from Operations
IO/Revenues
80,000
40.0%
70,000
35.0%
60,000
30.0%
50,000
25.0%
40,000
20.0%
30,000
15.0%
20,000
10.0%
10,000
5.0%
0
0.0%
2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: Google Annual Report
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Sales Composition
Sales composition in 2015 was made up of approx. 70% in advertising revenue by
sites directly operated by Google. When including advertising revenue via partners
through the AdSense program advertising revenue accounts for approx. 90%.
Other bets, 448
Google other
revenues, 7,151
Google
Network
Members'
websites,
15,033
Google
websites,
52,357
Source: Google Annual Report
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Trends Associated with the Smart Home Business
In 2014, Google acquired the thermostat venture NestLabs for $3.2 billion
[Characteristics of Nest]
In addition to being a thermostat, Nest is equipped with various sensors such as for
temperature, humidity, light perception, etc., analyzes information collected and
accumulated using a unique algorithm, determines the daily movement patterns and
preferences of users, and automatically creates a comfortable environment
出典：Nest
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Works with Nest
In June 2014, “Works with Nest” program for developers is announced
[Contents]
Nest’s API is published, and development by various device manufacturers to create
equipment that links to Nest is promoted. More than 50 small and large companies are
participating in this program.
Source: Nest
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Thread Group
In July 2014, the “Thread Group” standards organization for wireless
communication standards for IoT was established under the initiative of Nest
Labs
[Objective]
Development and promotion of “Thread” wireless communication protocol that fulfills
requirements such as communication to locations where it is difficult for radio waves to
reach, fastness, high security, and power saving
Source: Thread Group
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Thread Group
[Founding members]
Nest Labs, Yale Security (doorknobs, keys), Big Ass Fans (fans), Silicon Labs,
Freescale Semiconductor, ARM, Samsung Electronics
[State of activities]
 In July 2015, a new technological standard “Thread Version 1.0” was
announced. Member companies became able to access the technological
specifications in order to develop products that comply with Thread.
 As of April 2016, there were more than 220 participating member
companies. The major home control products manufacturer Somfy, major
home security products manufacturer Tyco, Qualcomm Technologies, and
major lighting products manufacturer OSRAM are active as central
members.
Source: Thread Group
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3. Apple’s Approaches
Corporate Strategy
Apple’s corporate strategy is built on the ideal stance of “establishing a
digital lifestyle for people that is of high quality and harmonized”
The Company is committed to bringing he best user experience to its customers through its innovative
hardware, software, peripherals, services, and Internet offerings. The Company’s business strategy
leverages its unique ability to design and develop its own operating systems, hardware, application
software, and services to provide its customers new products and solutions with superior ease-of-use,
seamless integration, and innovative industrial design. The Company believes continual investment in
research and development is critical to the development and enhancement of innovative products and
technologies. In conjunction with its strategy, the Company continues to build and host a robust
platform for the discovery and delivery of third-party digital content and applications through the iTunes
Store...Additionally, the Company’s strategy includes expanding its distribution network to effectively
reach more customers and provide them with a high-quality sales and post-sales support experience.
The Company is therefore uniquely positioned to offer superior and well-integrated digital lifestyle and
productivity solutions...
Source: Apple
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Trends in Business Results
Since the late-2000s, increase in revenue has continued and profitability of approx.
30% has been maintained.
Net sales
Operating Income
IO/Net sales
250,000
40.0%
35.0%
200,000
30.0%
25.0%
150,000
20.0%
100,000
15.0%
10.0%
50,000
5.0%
0
0.0%
2008
Source: Apple Annual Report
2009
2010
2011
2012
2013
2014
2015
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Sales Composition
With regard to the sales composition in 2015, approx. 66% of the total was related
to the iPhone sales. Approx. 87% is accounted for by sales of Apple’s major
products, combining the iPhone with the iPad and Mac.
Other Products,
10,067
Services, 19,909
Mac, 25,471
iPhone, 155,041
iPad, 23,227
Source: Apple Annual Report
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Trends Associated with the Smart Home Business
Announced HomeKit as an iOS function in 2014. In 2016, Apple
announced the Home app, which integrates a user interface.
[Characteristics of HomeKit]
Function that controls “accessories” such as lighting equipment, air
conditioners, door locks, etc. from an iPhone or iPad on which iOS operates.
Using the built-in audio assistance function “Siri”, it is possible to carry out
operations by speaking into an iPhone.
Source: Apple
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Development of HomeKit-compatible Accessories
[Development requirements]
To develop HomeKit-compatible accessories, it is necessary to become
a MFi licensee, follow guidelines specified by MFi, and mount functions
that follow HomeKit specifications.
Currently, more than 50 brands worldwide including Phillips (lighting
equipment), Elgato (sensors), Netatmo (facial-recognition home
cameras), etc. are making approaches toward providing products that
are compatible with the HomeKit framework.
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4. Discussion
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Discussion
Question 1
Google enters the smart home business through the acquisition of Nest and
promotes open activities such as Works With Nest and Thread. Let's think
about Google's business strategy assumed in this area from now on.
Question 2
In Smart Home business, Competitors such as Apple are entering one after
another. Let's think about how Google should collaborate or compete with them
to take initiative, and how to use intellectual property at that time.
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