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"To every madness there is a logic," proclaimed Alexander Tokman, CEO of the Redmond, Washington based high tech company Microvision.

It was September, 2009. Tokman had been under a lot of pressure from corporate share holders. After years of waiting, many investors who had signed up as VIPs with the company and were expecting to receive "member promotions" and "exclusive offers," learned that Tokman and Microvision had decided to launch the worlds first laser-based pico projector in Asia and Europe, rather than in the US. The Microvision website had committed: "[A]s a VIP Member youll be among the first in line to be offered a chance to buy the Microvision projector when it begins shipping,"1 But the promise had been broken.

It was an understatement to say that many VIP members felt rejected. There were outcries emailed to the company and posted to popular online investor forums. "VIP is a joke," one claimed. Another ridiculed "VIP" as "Virtually Impossible to Purchase." There was little information about the availability of the product. As time went on, the tension between investors and the company increased. A regular poster on Yahoo Message Board complained: "[T]wo months after this product was launched there are none to buy, anywhere, at any price." A Connecticut investor demanded: "I want to know within a dozen, how many units will be shipped in 2009, Tok-scum!" "It's my right to know as a Microvision shareholder, goddammit!" 2

The press release explained the product and the product launch:

Microvision, Inc. (Nasdaq:MVIS), a global leader in innovative ultra-miniature projection display and image capture products for mobility applications announced the commercial introduction of the worlds first laser-based pico projector, called SHOW WX™, based on its proprietary PicoP® display engine technology.

Microvision has signed several marketing and distribution agreements with international distributors in Asia and Europe to launch Microvision branded and private labeled versions of the laser pico projector. Microvision expects to begin product shipments in the next several weeks.

The Microvision pico projector uses the revolutionary laser-based PicoP display engine that delivers large, colorful, bright, and vivid images that are always in focus, regardless of projection distance. The accessory product is a simple plug-n-play pico projector for people on-the-go who want to spontaneously view and share mobile TV, movies, photos, presentations and more. Users can take the pocket-sized projector anywhere, plug it into 2

their portable media players, mobile phones, notebooks and other portable mobile media devices with TV-Out or VGA functionality and share a big screen experience with friends, family or business associates. Depending on the ambient light, the projected images range in size from 12" to 150".

It was unusual for a US company to launch its product in a foreign market, running the risk of alienating its loyal followers at home. There was "madness" for sure, but what was the logic? Investors and VIP members demanded an answer.

Microvision’s History

Microvision grew from research at the University of Washington in Seattle in the early 1990s where Dr. Thomas A. Furnace III and his colleagues at the Human Interface Lab developed the Virtual Retinal Display (VRD). The VRD was a head-mounted display that used low-energy laser beams to project images directly onto the human retina.

Pacific Northwest investors licensed the VRD technology from the University of Washington and founded Microvision in May 1993. The company went public on August 27, 1996. In the 12 years following its founding, Microvision had been a "scientific workshop" that focused on research and development for government and military contract work. Microvision had produced some notable innovations, but it operated in the red for years (Heim, 2006).

Microvision lost over $30 million in 2005 (Microvision, 2005) and was in dire need of a change The company brought in Alexander Tokman from GE as President and COO in July 2005. Six months later, the board of directors made Tokman the CEO. In 2006, Tokman initiated a drastic turn-around effort. He re-structured the company, including replacing the entire board. "He didnt come with a hatchet," said Matt Nichols, the communications director at Microvision, "The changes were necessary." 3

As a result of the restructuring the company improved its focus on quality customer service. Tokman decided to focus on a vital few high-volume consumer product opportunities. Tokmans goal was to transform Microvision from a "scientific workshop" into a consumer oriented business with a household name brand. Under Tokmans leadership, Microvision reduced its ongoing projects from thirty to five of the most promising.

Tokman brought a laser focus, literally, to Micovision. The first consumer product targeting the mass market was a tiny laser pico projector. The pico projector, also known as pocket projector or mobile projector was a projector embedded into or built as a handheld device. Microvision demonstrated a prototype of its pico projector based on its proprietary PicoP display engine technology at the 2007 Consumer Electronics Show. In 2008, Microvision partnered with Asia Optical to produce PicoP display engines and pico projectors. (See Exhibit A: Timeline and Milestones)

CEO Alexander Tokman 3

Alexander Tokman was born in the city of Kive, Ukraine. The family moved to the U.S. to escape political oppression from the government of the former Soviet Union in the early 1980s, while Tokman was still a teenager. He went to college at the University of Massachusetts, Dartmouth and earned his B.S. and M.S. degrees in electrical engineering.

Before joining Microvision, Tokman worked at General Electric for over 10 years. He served as General Manager of Global Molecular Imaging & Radiopharmacy—a self-contained, global multi-technology business unit. "At GE Tokman defined, developed, and successfully commercialized several new technology businesses including PET/CT, which added $500M+ of organic top line growth to the company within the first three years of its commercial introduction. He is a certified Six Sigma and Design for Six Sigma (DFSS) Black Belt and Master Black Belt and as one of GE's Six Sigma pioneers, he drove the quality culture change across GE Healthcare in the late 1990's." (Microvision, 2009)

Coming to Microvision was both an easy and a hard decision for Tokman. It was difficult, because he had an "exciting and fulfilling job" at GE Healthcare. However he was "fascinated with its unique and disruptive technology and the exciting products it could enable." "I wanted to be a part of this very dynamic company to pursue truly extraordinary market opportunities," he said (Averch, 2006).

Tokman was energetic, hard working, and fast moving. "I like to punch something ... or be punched," "to exceed the allowed „speed limit," he also maintained a long term perspective about the Microvision. He believed that "we are training for a triathlon, not a sprint." (Averch, 2006)

"I think he is the right leader for Microvison." Matt Nichols concluded after working with Tokman for four years.

The Fifth Screen

While Microvision adjusted its strategies and aligned its new focuses, the global markets of information technology and consumer electronics had experienced dramatic changes. There was a mega trend of convergence in how information was delivered and how it was consumed. The Internet and the Worldwide Web had become a ubiquitous infrastructure that enabled a single system to provide traditionally separated services in voice, data/computing, and video/TV communications. Traditionally separate devices, telephone, personal computer, and television were also becoming integrated. Pocket sized smart phones were powerful devices that allowed users to make phone calls, surf the Web, play music/movies/games and watch TV. These devices integrated access to information, communications, entertainment, sharing, and collaboration.

Such devices were becoming faster, more feature-rich, smaller, and more affordable. The possibilities for development seemed limitless. But there was one big "small" problem. The tiny 4.3" screen on typical smart phones compromised the functionality of those devices. Watching movies, playing games or sharing information/images on the tiny screen severely undermined the user experience. The small screen practically limited the viewing to one user at a time. 4

Microvision came to the rescue. One of the Microvisions five focused products was a tiny laser projector that could project vivid, always in-focus images from 6 inches up to 16 feet on any surface. This projector could easily connect to cell phones, notebook computers, PDAs, DVD players, or game consoles. It could also be embedded in those devices, just as cameras were embedded in cell phones.

There had already been four generations of screens for delivering rich multimedia content. Now there was a "fifth screen." The first was the big movie screen, then the second, the TV screen. The third was the personal computer screen. It was the most widely used screen to access information and entertainment. Then we had the fourth screen that was on smart phones or teleputer (a term coined by technology visionary George Gilder). The fourth screen offered mobility and ubiquity. However, its limited size made sharing with other people difficult. The fifth screen by projection promised to be the future. It was large, mobile, adjustable, and user-centered. The number of devices that might embed the projector was in the billions. Big content providers and advertisers would not overlook this enormous market. This was the mega trend that Microvision was focusing on—the fifth screen. 4

With the fifth screen, Microvision aimed at "amplifying life" by turning up the visual volume on images, videos, presentations, games, and more. The fifth screen was not limited just to multimedia projection. There were several research projects, such as Microsofts mobile surface (Hutchinson, 2010) and MITs Six Sense (Averch, 2009), aimed at making the fifth screen interactive. Simple examples of interactive projection included a projected touch screen on any surface and a projected fully functional keyboard on the desktop. With these inventions, presenters could project their slides on the wall and advance them by touching the projection or could type notes directly on a table top.

Figure 1. Projected keyboard. (Source: Think Geek, http://www.thinkgeek.com/)

"Microvision Inside" 5

Microvisions core competence was its laser projection technology. It had developed a strong patent portfolio. A 2009 Wall Street Journal survey ranked Microvisions patent strength at 43rd among electronic companies worldwide. The 2010 survey ranked Microvisions patent strength at 38th among all electronic companies, putting it above well known names such as Motorola and Apple.

"Microvision Inside" was what Tokman had in mind when he decided to join Microvision in 2005. "In a nutshell, we want to have the same profound impact on the high resolution display and imaging industry as Intel microprocessors had on the computing industry," Tokman said. That vision had led to a series of strategic changes in the company. As Tokman put it, "We are fundamentally reinventing Microvision" (Averch 2006).

"Intel inside" was perhaps one of the most successful marketing campaigns in the high tech industry. Alexander Tokman was a big fan of this kind of ingredient branding. "Our vision is very simple but very bold: We want to be part of every high-definition display and imaging product sold in the future" (Tokman, 2006). The big question for Microvision was: could it realize its vision of "Microvision Inside"?

The first consumer product Microvision planned to bring to market was a standalone pico projector that could be plugged in to mobile devices such as Apples iPhone or iPod. This was used to prove the concept of portable laser projection. The next step, once the laser display engine could be made in mass quantity, was to have the laser projector embedded in cell phones. That was the ultimate goal of the company.

Tokman was confident that leading cell phone manufacturers would embrace the "Microvision inside" idea as he claimed "Apple loves us" (Tokman, 2009). Microvision signed an agreement with Motorola to "develop pico projector display for mobile applications" in July 2007 (Microvision, 2007).

However, US OEMs (Original Equipment Manufacturers) would not consider embedding the laser projection module in cell phones unless the quantity was sufficient and price was not more than $30, Nichols explained. "Under current economic situation," Nichols continued, "some OEMs in Asia and Europe are more willing to work with us". "Perhaps due to cultural difference," he added. Tokman also had his eye on European and Asian markets as he believed the market for high-tech gadgets was hotter in Europe and Asia (Heim, 2006).

The Laser Focus

Microvision was not the only player in the pico projector market. Well established companies such as Texas Instruments and 3M were also developing pico projectors. There were two competing light sources for pico projectors, light emitting diode (LED) and laser. A light source based on LED was less energy efficient and required focusing. Laser light source was made up by three light components: green, blue, and red. The combination of the three primary colors could produce virtually all visible colors (Figure 2). 6

Figure 2. Three lasers (red, green, and blue) were used as light source in Microvisions pico projector. (Source: Microvision, Inc.)

Technologies for red lasers and blue lasers had matured during the previous decade. Red lasers and blue lasers could be produced in mass quantities, but not green lasers. Texas Instrument used lasers initially, but believed that green lasers would not become commercially available and cost effective in the near future. Because LED was based on less expensive and more mature technology, companies such as TI and 3M used LED and were able to bring pico projectors to market before Microvision could.

Microvision initially used LED for its projector light source. But the company switched to lasers for several reasons. Microvisions laser based projector was smaller in size, consumed less power, had better image quality, and the projected image was always in focus. Focus-free was an important feature for mobile projectors that projected to any surface rather than to a fixed screen.

Laser technology could generate bright full color images from a battery powered micro-sized device. Microvisions display engine was small enough to be embedded in various hand-held devices to create next generation products that enabled consumers to project full color, high resolution images from their mobile phones, laptop computers, personal media players, game consoles, and other portable devices.

Several companies were involved in green laser research and development. Corning was the front runner. Microvision successfully integrated green lasers from Corning, Novalux and OSRAM into its pico projectors. However, Novaluxs green laser did not fit well with Microvisions pico projector because of its relatively large size.

Corning made a breakthrough in developing green lasers in 2006. Corning decided to put green laser development on a fast track for commercial product. They projected commercial production of green laser in late 2007 or early 2008. Tokman communicated with Corning "on a weekly basis" in preparing the commercial launch of its first laser pico projector.

The Challenges

With Cornings projection of commercial availability of green lasers, Tokman painted a rosy picture at the end of 2008, foretelling a product launch in summer of 2009. However, Corning

ead the Microvision Case, and discuss the following two questions.

What are the possible reasons the company went ahead with the product launch when it knew the supply was extremely limited? 2. Why did the company go to Europe and Asia for their initial product launch?

Explanation / Answer

Tokman was confident that leading cell phone manufacturers would embrace the "Microvision inside" idea as he claimed "Apple loves us" (Tokman, 2009). Microvision signed an agreement with Motorola to "develop pico projector display for mobile applications" in July 2007 (Microvision, 2007).

However, US OEMs (Original Equipment Manufacturers) would not consider embedding the laser projection module in cell phones unless the quantity was sufficient and price was not more than $30, Nichols explained. "Under current economic situation," Nichols continued, "some OEMs in Asia and Europe are more willing to work with us". "Perhaps due to cultural difference," he added. Tokman also had his eye on European and Asian markets as he believed the market for high-tech gadgets was hotter in Europe and Asia (Heim, 2006).

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