Anoto's 4th quarter report and 2018 strategy reviewed.

Anoto’s fourth quarter report has finally come out and we have learned quite a few new things. My take away from it is that Joonhee Won has finally decided to adopt almost all of my suggestions! I have been arguing for several important changes for Anoto for about 10 years and now they finally are acting on them. I’m disappointed, naturally, that I haven’t been given credit for crafting the new strategy going forward. But for the record, let’s go over the suggestions that I have made over the years (you can find my articles here on my LinkedIn page).

1. Lower the cost of the pen! I can’t take credit for this one directly as virtually every customer of Anoto has screamed about this for well over 10 years. So here we are in 2018 and there is a new pen, the AP-701 that should come out at the $100-125 US range. Nice, but keep in mind that NeoPen has their M1 pen out now and it also is quite affordable. But seriously—it took 10 years to figure this out?!

2. Reduce the number of pens and paper platforms that exist. You had Livescribe and its pen/ paper, and going back there was the Logitech pen, and the DP-201 and on and on. They were not inter-operable, and often went obsolete in a couple of years. I’m glad to see that they are ending this practice. I suppose this is better late than never. Having just a few pens, and opening up the pattern range that they can be used on will be helpful.

3. Quit thinking of the business as “pushing pens”. Won appears to have finally understood that it’s not about pen sales; it’s about paper or pattern usage. Why? There are tens of thousands of pens that have been sold that are sitting idle in desk drawers. Think of how many former customers of Anoto have moved on (British Airways, Safelite Glass, etc.) You can’t really point to pen sales as proof of the genius of Anoto. Only when you can point to customers that have growing use of pattern can you do that! You don’t make money up front on the pens; you make it by selling each page at a few cents—then do that millions or billions of times!!

Thus you see this reflected in Won’s strategy in the forms product by having lower buy-in cost for pens, but charging for pattern (when before it was often given away for free).

Continuing Mistakes and Concerns

So far so good, but fundamentally they still keep making a whole range of additional mistakes. Let’s cover a few of them here.

1. The lack of transparent pricing. If you are going to reduce the chaos of having a different pricing model for each customer and standardize it, then why not PUBLISH it? There is nothing worse than being told you have to call Anoto or fill out some web form just to find out what it might cost to get involved with this platform. Put out a standard price for pen, pen license and cost per pattern (page). If it’s based on volume, just tell us that. Don’t act like all this stuff is super-secret. It makes people avoid you.

2. Either commit to the Livescribe Line or kill it. Everything about the Livescribe product is OLD and dusty. The pens are old, the website is old, and the support is terrible. If you want to bring in the new AP-701 pen to it, then FINE. Also, kill off the Echo pen. Finally, re-vamp the software so that it works and you have happy users, and get serious about high quality end-user tech support. Too many Livescribe customers have been burnt by you and many will never come back.

3. Quit trying to pick vertical market winners and losers. To this day a new vertical market application comes forward looking to use your platform and what do you do? You get all excited about it and put a lot of effort into it, but never enough. You will ALWAYS fail dramatically if you do this. Why? You aren’t in the vertical markets yourself! You got all excited about using digital pens in voting, only to find out that it meant you’d have to do some serious work and understand that market. But it’s not your core and you drifted away. You always do. Why not sell the platform to anyone, and let the market sort out winners and losers?

You are doing it again with the biometric pen. If you are developing that for one client, it’s a bad idea. If you think it’s a good idea on the whole, then go and do it. Every year it’s a new vertical market that you devote time and capital to: this year it’s MIT and an app for Alzheimer’s. It’s also true for the ADNA “freshness app” for Costco or Sam’s club (or someone like that).

All anyone has to do to understand this is to review your past quarterly reports. They are filled with failed vertical markets you were excited about (think Whiteboards and we-Inspire, etc.). You have to finally learn HOW to have an appropriate relationship with vertical market customers. You have to provide them with high quality support, but you will fail if you believe that Anoto itself is IN these various markets. You must have top employees that will learn about these markets and what it takes to make them successful.

4. If you don’t want to deal with the “little guy” tell us that. If you intend to sell only to large customers that will buy tens or hundreds of thousands of pens, JUST SAY SO. It’s clear from this report that this is the plan. Where does it leave the customer that wants to have 2 or 20 pens and process forms? Is there nothing that will be offered? If not, just tell us to look elsewhere. Make very clear what you are offering and how much the scale matters to you.

5. Clarify your relationship with Neolabs (NeoPen). There are dozens of questions surrounding your relationship with Neolabs and the NeoPen. For example, did Neolabs design or manufacture the AP-701 pen? It seems curiously similar to the M1 pen that they have. In your settlement with Neolabs do you have an agreement that Neolabs may NOT create forms software for their platform? We’d like to know that. Will you disclose any other pertinent facts that relate to Neolabs / Anoto?

Finally, I’m glad to see that Anoto reads my articles and is following my advice. I just wish you had done so earlier when the market might have still been in play for digital pens. It’s good to see that you are finally moving in the right direction. But two facts remain: 1) in general you missed the boat for widespread use of digital pens and 2) you still keep making some rather fundamental errors in attempting to manage what little business still remains for the platform. But best of luck—you’ll need it!