Slow and steady. Until the market delivered its verdict on the bet. Flashback to the 1970’s when TI engineers came up with an ingenious tool to help children learn to spell: An electronic toy that spoke words out loud and asked the children to type the word out on a keypad—it became “Speak & Spell,” and it required them to invent what became DSP chips, which (simplistically) convert analog data like voices or music into digital bits. Here’s the timeline:
- 1979: TI invests $150,000 (< 0.01% of revenue) to investigate DSP;
- 1986: TI is collecting $6-million/year in DSP revenues;
- customers continue to find new uses for the chips, in modems, speech translation, and telecom;
- TI sets up a DSP business unit;
- 1993: Nokia awards TI a contract for DSP chips for its digital cellphones;
- 1997: More than 22-million cellphones contain TI DSP chips.
Then and only then did TI double down on DSP, selling its defense and commodity memory-chip businesses, shrinking the company to intensify its focus on DSP. By 2004, it had half the DSP market.
Now, the critical point is actually a bit more subtle than may appear. It’s not just that Motorola proceeded to ruin in the face of highly persuasive market evidence that Iridium had been overtaken by events, and it’s not just that TI waited for the market to deliver the (opposite) message that with DSP it had a winner on its hands. Would it were that simple.
As Collins puts it:
