In 5 years, the tech world will look vastly different than it does today. 

And therein lies the problem many tech companies face as they invest in inovation. InvenSense (NYSE:INVN) is acutely aware of this issue as the company competes in one of the fastest pace industries in the tech sector -- sensors and chips.

Rule Breakers analyst Simon Erickson spoke with InvenSense CEO Behrooz Abdi at International CES 2015 to better understand how InvenSense has developed its lead in such a competitive market.

For a full video of the interview click here.

TRANSCRIPT

SIMON ERICKSON:

On that note, though, it seems like the tech curve continues to go higher. We saw 3-axis sensors. Six-axis sensors. Nine-axis sensors. And we know that you work very closely with customers to develop solutions that are sometimes several years out. How do you balance developing the next big thing with what's available for applications in the market today?

BEHROOZ ABDI:

That's really a great challenge and a great question. What we have to do [is] innovate ahead of our customers. When you look at the OEMs — whether it's a mobile phone or a wearable — their field of vision is about nine months to a year. They're on a cadence which is usually either Christmas or some holiday [where they have to] put out a product — whereas, a chip development is at least eighteen months if not two years. [This] means, by definition, there's a six-month to a year disconnect, so you have to be innovative. You have to really guess where the trend is going.

The best way to do that is really understand the megatrends in the market. When you understand the sensors like we do [and] when you understand the software — then we start thinking about what [problems] can [be solved] with this.

[This] is a conclusion that we reached, for example, with motion plus sound. We reached the conclusion that at some point, you really want to listen to the background and understand what decision you want to make with the motion [and] what the device [is] doing. Where is it? What's the context? So, we have to go and innovate on the sound. We have to acquire a microphone business or microphone technology.

So, we have to be really looking at the megatrend. We have to go to the customer, to the OEM and lead them. We can't just go in there, like the old days in the chip business, and say, "I've got a bunch of chips. Which one do you like and what do you want to do?" We have to wow them. That's the most exciting feeling — when we go to the OEMs and they [say], "You know what? I hadn't thought of that, but that's what I want to do. Get that to me as soon as you can."

the_motley_fool has no position in any stocks mentioned. Simon Erickson owns shares of Apple and InvenSense. Simon Erickson has the following options: short June 2015 $15 puts on InvenSense and short April 2015 $105 calls on Apple. The Motley Fool recommends Apple and InvenSense. The Motley Fool owns shares of Apple and InvenSense. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.