Zeitgeist

Zeit·geist = spirit, essence of a particular time

A collection of food-for-thought posts and articles on technology, business, leadership and management. 

The demise of the smartphone is inevitable, and necessary

ninos_ignorando_museo

 A shorter, edited & curated version of this article, published by CNBC.com on the 20th of May, 2015, is available here.

Big thanks to Eric Rosenbaum, CNBC strategic content editor, whose edits (and a notorious headline) made this article one of the top stories at CNBC.com and a social media hit the day of publishing (ranked among top 5 CNBC stories driving engagement)

The War is Over

Smartphones coupled with mobile services and apps (mobile ecosystems) have been the protagonists of the latest disruption tide for well over a decade. Horace Dediu is probably among the best analysts who have covered the phenomenon.

The Smartphone industry is a monumental business accounting for more than $380 Billions last year, on more than 1,2 Billion devices sold, according to IDC.

Furthermore, IDC is forecasting just under Half a Trillion dollars in revenues by 2018 ($451 Bn to be precise).

Despite these extraordinary numbersthis market has reached maturity and YoY growth is declining gradually, with manufacturers working with cut-throat margins and one single player monopolizing gainsseizing an estimated 93% of industry profits according to Cannacord.

No need to guess, just look around you, most likely you have one or more Apple devices on your desk or in your pockets.

Despite there are an estimated 8 Bn smartphones still to go into the market in the next 5 years, this industry is technically over.

...even in China.

AI-CH098_DIGIT_NS_20140305050304

Applying the diffusion of innovations theory (a.k.a the diffusion of technologies bell curve), when a technology goes over 50% penetration, the remaining audience is composed of a  late majority of followers and laggards.

In other words, with smartphone penetration well over 70% in more developed countries like US, the saturation point has been exceeded long time ago, and the 8 Bn shipments to happen in next 5 years are driven by emerging markets, less penetrated (hence rising star Xiaomi) and shorter product lifecycles with little incremental innovation (hence commoditization, profits diminishing for all manufacturers, hence Apple & others moving quickly into wearables).

Screen-Shot-2013-12-10-at-12-10-10.32.13-AM  

History repeating

The Smartphone war is over. I’ve been myself involved in the mobile industry for nearly two decades (with Nokia and BlackBerry). I started when there weren’t yet internet capable phones and GSM was just a promising standard in Europe.

This is what happened:

From a software perspective, Operating Systems turned competition into a mobile ecosystems war (a.k.a mobile apps & services war) which ended in a duopoly with Android capturing majority of volumes and iOS taking a lion share of the profits.

Before that, devices didn’t have enough computing power nor couldn’t deliver the user experience to drive adoption of content, apps and services (but, for the record, back to the future 15 years ago there was a world of app stores, mobile services and everything we have seen exploding in the smartphone era, and all of it was already working, it was simply not adopted or diffused widely)

Google’s android and Apple iOS disruptions were enabled by asymmetric business modelsApple profiting from HW margins (while investing heavily on an ever growing iOS ecosystem & apps), Google making money out of their services rendered through a myriad of devices running android (commoditizing the OS by giving Android AOSP for free).

Apple case is ironic, as hardware sales and iphone in particular is piggybacking on carriers and the telco services industry (an estimated 80% of iphone market relies on carrier subsidies). Telco (carriers) is a several trillions industry providing the underlying infrastructure and data connectivity over which both hardware (smartphones) and software (Apps & services) have grown explosively (a.k.a OTT services).

Services have been actually the disruptor element driving adoption, ultimately dragging sales of hardware with them (Apple is today’s example, BlackBerry was a pioneer with this asymmetric model).

In its early beginnings BlackBerry didn’t even have intentions to get into the hardware business, their offering was originally focused on the service side only. BlackBerry’s messaging proposition evolved into the incredibly popular mobile push email which Wall Street embraced. Utterly 'forcing' users to buy anti-fashion qwerty devices as a necessary 'accident' to have real time email. This was back in 2001-2005.

This asymmetric offering turned into a phenomenal hardware business for BlackBerry, fostered by carrier driven sales of push email services embedded in their data plans.

Same pattern follows Apple, building an incredible ecosystem of apps & services which in turn make users desire and buy the hardware devices, and it’s in hardware where the margins and profits lie.

Ok, we’re done with smartphones, what’s next?

 

In any industry, once maturity has been reached, it’s poised to disruption, typically even before arriving to the tipping point of the adoption bell curve. Clay Christensen innovation dilemma explains this.

In essence the reason why it is so difficult for existing firms to capitalize on disruptive innovations is that their processes and their business model that make them good at the existing business actually make them bad at competing for the disruption.

But, how is this disruption going to happen in the case of smartphones?

Think of smartphones as the entry point to the online world. Now, wouldn’t it be better, easier and more convenient to access your digital world without the constraints of a small screen?

Everything outside the realm of your smartphone’s touchscreen form the domain of disruption for this industry.

To put it bluntly, our heads can’t continue down staring to our screens. Something must be done to fix this, and, the basic technologies to do it are already there.

tumblr_mn49msj41n1r6rd7ko1_1280

The post-smartphone era is beautifully described by Horace Dediu in this post (a piece of poetry for analysts). 

The writing is in the wall

Early signs of what´s to come can be seen even embedded in our devices in certain ways already.

Siri, Cortana, Google Now are voice portals replacing screen access and typing. These are actually NLP (Natural Language Processing) and AI technologies combined in the cloud.

Smartphones have started talking and displaying information to TVs, projectors and now to smartwatches and wearables.

Furthermore, we have now smart-glasses and head mounted displays capable of displaying virtual images (AR/VR) blended with our natural view of the physical world (MS Hololens, Magic Leap, Oculus Rift). These devices can also understand gestures.

All indicates we will be using our voice instead of typing, and we will be interacting with images well outside the limitations of today’s smartphone screens.

Now, let’s recap what the smartphone wars taught us over the last decade, and, let’s couple it with the early signs of what’s to come:

  • Services are the enabler and differentiator driving hardware sales. (the interface and point of entry for the user is king, think search box or voice recognition)

  • The majority of profits come from Hardware sales (think iphone revenues, hence Apple smartwatch)

  • Smartphone industry is mature and poised to disruption (market is ready to accept new propositions)

  • The new disruption wave of services will be driven by virtual assistants operated by voice and gestures combined with virtual reality (digital images outside phone screens) running on new smart wearable/apparel hardware (again, think voice enabled interfaces, Siri, Cortana, Google Now as disruptors at interface level)

  

We can discern how new disruption devices will be. At the intersection of some sort of smart – eyeware with powerful Augmented Reality display and an advanced voice recognition capabilities, coupled with wireless earbuds, as well as with other wearable apparel equipped with sensors all over our body.

But more important than any of these pieces of hardware, (remember, services drive hardware adoption not the other way around), services in this new smart-wearable context will be delivered through the new access points, voice and gestures.

Access determines hardware but, the key element gluing all together and managing how humans interact with this new mobile computing platform is Artificial Intelligence.

Artificial Intelligence in the form of a guardian angel (yes, the movie Her is an excellent representation of this concept, otherwise refer to HAL the ill computer in 2001 Space Odissey).

If you google ‘virtual assistant’ you’ll get around 18M entries, and you’ll struggle browsing results endlessly to find even the first reference to a truly artificial virtual assistant. It means we are still far from a practical ‘HER’ like experience and for the time being, we are hiring human assistants by the hour to do the tasks, offshore.

Most likely, we will be flooded by wearables, smart glasses, apparel and all kind of fragmented technologies while the new AI powered, cloud based operating system, takes over control of human interaction with the world.

 stock-photo-the-guardian-angel-is-feeling-underappreciated-and-says-to-her-charge-let-me-guess-you-were-100107416

Whoever gets that AI guardian angel operating system to work seamlessly with humans, will disrupt the disruptors and will take control over the wearable hardware, which ultimately will need to bend to its (proprietary) specifications or be left out of the service proposition.

Jay Samit, author of Disrupt Yourself, said

“Disruption causes vast sums of money to flow from existing businesses and business models to new entrants”.

Let’s do a quick & dirty math, in the scenario we have pictured here, considering the smartphone industry represents an average of $350 Mn per year in revenues, there is potential to disrupt $1,750 Bn over the course of the next 5 years.

Big time for venture capitalists.

Fascinating times ahead, welcome to a brave new world of double back-flip disruption.

Dedicated to Graciela, my better half & lifelong soulmate, without whom I would be lost.

photofuna_HiUQCZMUoASw8KLfJY6oXA_r_edit

US Hispanics ahead of the curve in tech adoption

A bigger, better consumer market than millennials Ed Fernandez, start-up investor and advisor, former BlackBerry executive, and a member of the CNBC-YPO Chief Executive Network. (3 Hours Ago via CNBC.com)

With a 163 percent increase in population between 2010 and 2050, the U.S. Hispanic community will account for one-third of the country, according to U.S. Census data. The U.S. Hispanic population had purchasing power of $1 trillion in 2010 and is approaching $1.5 trillion this year — a 50 percent increase in just five years, according to a report from the Selig Center for Economic Growth.

Read More

The Startup Pitch Process: Lessons learnt (the hard way)

Got featured at YPO Young President's Organization Ignite Magazine this month, blogging the article, for the record and future reference: about-ypo-members

The Startup Pitch Process: Lessons Learned (the Hard Way)

By Eduardo Fernandez (YPO Global One)

These are fascinating times in the tech world. Mergers and acquisitions are accelerating at increasing speeds fostered by all kinds of startup-based innovations.

As part of a management course, the Engineering Leadership Program at the IE Business School in Spain, I have learned (the hard way) how the startup pitch process works these days, and what key messages to convey to investors to grab their attention, and their funding, for your project.

In essence:

1. Focus on the need (the problem) you are trying to solve. Clearly articulate your solution. Sometimes a crisp and thorough explanation of the problem to be solved is more important than the solution we are trying to sell.

2. Metrics: How big is this thing? Market size, audiences, where are they? How much interest do they have? Evidence (have you piloted it)? Reference points can be built quickly out of readily available online tools like kickstarterinstant.lySurveyMonkey or Google Trends and Adwords to show proof of market demand.

3. Demo your solution as much as you possibly can. If an image is worth a thousand words, a real-life demo is worth 10 thousand at least.

4. CompetitionWho are they? What is it that you have and they don’t? What is the plan to outsmart them? Typically, for new tech products or services, it is very much about adoption speed, critical mass, user engagement versus distribution, and branding or financial muscle, but you may have a different approach. Just make it clear and sound.

5. FinancialsThey are not relevant, actually. Conceptually, investors do not consider revenue a responsibility of entrepreneurs; the market decides. Your job is to orchestrate the team and build the product or service for that market so that they (investors) can bet on it. It is very important, however, to clearly state how much funding you are asking for, and what are you going to do with it.

6. The team. Team is crucial in a startup. Investors invest in people not in projects. Always secure a capable team with the required experience and competencies.

7. The motivation. Finally, the most important thing of all: put all your passion into it.

Emotions are the engine of everything we do. If you are wholeheartedly committed to your project, investors will notice by the way you show your emotions. This gives them confidence you are going to stay through the different stages, even if your project runs out of money.

How did it work for me and my team? We had to present our startup project to a jury of seasoned experts at the end of the Engineering Leadership Program, after receiving feedback throughout modules with the University of California, Berkeley, and Hong Kong University of Science and Technology.

Out of more than a dozen presentations, our home automation project was selected as the winner of the 2013 Engineering Leadership Program.

View Fernandez’s SmartHome Startup Pitch

Read more on his blog Zeitgeist–Ed Fernandez

Eduardo Fernandez (YPO Global One) is vice president of northern Latin America BlackBerry and associate professor at Menendez Pelayo University. He is also a technology start up investor and entrepreneur. He was the 2011-2012 chapter communications officer for the YPO Madrid Chapter. Eduardo can be reached via twitter at @efernandez.

2013 in review

The WordPress.com stats helper monkeys prepared a 2013 annual report for this blog.

Here's an excerpt:

A New York City subway train holds 1,200 people. This blog was viewed about 4,400 times in 2013. If it were a NYC subway train, it would take about 4 trips to carry that many people.

Click here to see the complete report.