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

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 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.

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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).

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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.

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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.

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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.

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Smartphone adoption, not even half way

Diffusion of technologies follow a bell curve, going from early adopters, on to majority, late majority and laggards,  to reach 100% penetration.  This phenomenon was studied and explained by Everett Rogers back in 1983.

An S shaped curve (logistic function) follows suit. The bell curve is actually product of the derivative of the logistic function.

WebCongress Miami 2013 Why does Superman wear his underwear outside

Stacking up the data of smartphone sales from last years, it´s amazing how accurately its adoption follows the pattern. The coloured area on the right part of the chart, corresponding to actual US smartphone sales gives you an indication of the maturity of this market today, well above 50% penetration, versus worldwide penetration sitting north of 22% only.

A similar pattern can be observed looking at top 5 European countries.

This post from the analyst Horace Dediu is the original source for the all data and graphs.

Now you can estimate where the growth (in volume) will come from, geographically speaking, based on adoption and relative audience available.

And this, regardless of manufacturer shares, as the theory demonstrates the different players will adapt their strategies accordingly, within the limits of the S adoption curve.

This theory can be applied to literally any new technology breakthrough; products, services, social networks....

Now, the task is to analyze the underlying reasons behind the pattern. The Why.

There are some theories out there linking human learning processes with it but I suspect there is more behind, specifically about the perceived benefit of a technology within the community (or the bigger entire human colony if you will), and the role of the brand as a fostering mechanism for adoption.

Fascinating food for thought.

@efernandez

credits: Horace Dediu. Asymco

WebCongress US: Why Superman wears his underwear outside his pants? - Tech trends & patterns

Actually this is a presentation about technology trends, patterns and mobility but, given the audience at WebCongress held in Miami James L. Knight center I had to look for a catchy title. Head on to slide 32 for a wonderful graph on Smartphone adoption where you can see where the world is at today compared to US and EU 5 countries. Thanks to analyst Horace Dediu of Asymco.

[slideshare id=28014475&doc=webcongressmiami2013whydoessupermanwearhisunderwearoutside-online-131107133803-phpapp02]

The deck is 51 slides long but there are another 50 in the original draft, pretty much covering everything I could find from real experts around tech. More importantly, at the end of the presentation, slides 46 onwards, you'll find what this means to people, and their reason behind the rising new generation of entrepreneurs.

As a summary, this is the new context we face:

  • New paths in Maslow’s pyramid
  • ‘truth’ is a tweet, photo or video clicked & sent away
  • New definitions of ‘success’: money may not be in
  • Access to luxury more important than owning luxury – Rise of sharing economy
  • Self-realization and self-actualization online
  • (Win)^3: You help me, I help you, we help others
  • Klout score in your resume
  • Managing man-machine symbiosis, key competencies.
  • Global network, global thinking, global objectives. A collective intelligence arising (Singularity)

Consequence of historical events:

  • Reduced sense of security since 2001 terrorists attacks
  • Destabilized economy since Global Financial crisis 2008
  • High unemployment levels – ‘Evil’ corporations
  • Increasing perceived fiscal pressure – need to self sustain or get out the system
  • Pervasive & cheap computing everywhere
  • Tech-entrepreneur heroes – Dorsey, Zuckenberg, Larry, Sergey
  • All tools you need in the web: crowdfunding yourself (kickstarter)

Loss aversion decreased dramatically for new generations, a 'nothing to lose' context fosters entrepreneurship. We'll all meet there.

@efernandez

The Sales Cycle Inside Out #toomuchtimeonplanes

sales cycle

The full picture behind a handshake, the universal expression of a successful transaction, a sale, has many similarities with other processes in physics, like the behavior of sub-atomic particles in a fusion process where atoms combine at the expense of energy to achieve a 'desired' new stable form. In a short-sighted view, a sale, is just a transactional consequence of the collision between a problem and its potential solution. Beyond the solution, it's about 'the job to be done', as analyst Horace Dediu many times refers to.

Problems belong to buyers, who are perpetually in active seek of solutions, in a dance surrounded of sellers.

 sales

In between problems and solutions, where they meet, there is, in 'firewalling' words, a DMZ area, the conflict zone. In the corporate world, this DMZ area is delimited by finance, business operations, business affairs and legal on one side, Brand & corporate marketing, channel marketing, Product Marketing, Technical support and PR on the other.

Picture yourself driving the Challenger spacecraft re-entering atmosphere. You can feel the heat below your feet, that burning side of the spaceship will be what we call sales in any company. This fringe, always in friction, is where I work, at the beginning of the end of problems, where the job needs to be done.

Problems and solutions belong to 'The What' of the story. The bigger picture becomes visible if we ask about 'The Why'. Why does a problem exist?, answers are not always evident.

Majority of the times, particularly in the tech word, and as a consequence asymmetric competition, it becomes necessary to reverse engineer everything from the visible impact in the market.

Smartphone sales, as an example, may illustrate this. A smartphone is actually a piece of hardware whose purpose is to materialize an interconnected multimedia experience for human beings (although we see also cats, dogs and other animals staring at screens). The problem to solve here, is to deliver intelligibly a stream of content&services to an UI, the solution (or the tool if you will) is a smartphone.

In this case, the problem belongs to different stakeholders in the value chain. Content and service providers want to reach end users, that's their problem. They ultimately rely on carrier networks to convey their products. Carriers, owners of networks, also want to reach end users and their problem is to make sure end users have something in their hands with a screen as big as reasonable to deliver their megabytes of data. But… why?.

Problem owners or buyers, carriers, content developers, service providers, share the same motivation, they want to monetize their products or services, that's why. In other words, they want to deliver something on to a recipient (at a cost) to obtain a benefit (at a profit), the delta between cost and profit speaks to the importance of the problem and fuels the determination to resolve it.

In our example, the solution is simple, go and buy an smartphone. In our story, those with bigger profits at a stake will be keener to dance with smartphone vendors, rules are simple, everyone will fight to maximize profit or reduce cost in the value chain but always within the limits to secure the new, aspirational stage, is not jeopardized. i

It's a sum-zero game in which everybody wins one way or another. We, users, enjoy our connected life in our never-leave-more-than-a-meter away smartphones, while carriers, content and service providers make commercial profits. It's all about the transfer of value and the transactions in between.

But, this is not over, no single solution can ever, never, serve entirely to solve the problem it is intended for. There will be always gaps. Gaps need to be filled in by means of innovation in products and services, ultimately serving better end users, us, for a richer and happier experience.

Is there a limit to this?.  I guess the answer is yes, if we, at some point of time, connect ourselves to an on demand endorphins delivery system.

But, this is a standalone topic on its own…

@efernandez    from the series #toomuchtimeonplanes

 

Farewell & Flashback

Farewell: interjeccion utilizada para decir adios.

fare·well

/ˌfe(ə)rˈwel/

interj.
Used to express goodbye.
Noun.
1. An acknowledgment at parting; a goodbye.
2. The act of departing or taking leave.
Ya he dejado mi querida y nunca bien ponderada España, eso si, he cogido el camino largo, pasando por Hong Kong donde estuve la semana pasada.
Blade Runner era verdad...
No tiene mucho sentido despedirse, no tiene sentido si en el fondo no te vas, pero sirve de excusa magnifica para recordar los buenos momentos.

flash·back

/ˈflaSHˌbak/

Noun
  1. A scene in a movie, novel, etc., set in a time earlier than the main story.
  2. A sudden and disturbing vivid memory of an event in the past, typically as the result of psychological trauma or taking LSD
(sin lugar a dudas, la definicion numero 2 'disturbing vivid memory ... result of trauma or LSD' es la que mejor explica todo)
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