Day One in The Future of Electronics:
Disruptive Forces, Challenge and Opportunities
What do you think of what you see the word “platform”? Personally I think of a construction site, with people from various trades all working together to create a new building. The platform enables them to access places impossible to reach alone, and a shared platform makes the work efficient. A good thing.
In Electronics, “platform” has been used for decades to describe a product design or industry standard that could be built upon by many. Every few years, a technical breakthrough would create an advantage for a new platform, usually more powerful, more useful and more cost efficient. Platforms were most closely tied to hardware innovation, and innovators captured the lion’s share of the value.
Electronics products, however, have historically been delivered to end users by an ecosystem of retail, channel and service partners. When we think of the roles and relationships in this ecosystem, we see constant friction in a battle for market share and margins. Rarely do we see the collaboration making the acquisition and use of electronics products efficient (and enjoyable). Electronics has been a game of “winner takes all”, or at least most.
Control of the Customer
One of the key battles has been for “control” of the customer. As we think of the meteoric rise of the Sears catalog decades ago, the focus of Richard Sears was clearly on creating a simplified experience for his “users”. Leveraging trends like westward expansion and enablers like post offices, his company delivered information and products efficiently for over 100 years.
The 1943 Sears News Graphic wrote that the Sears catalog, “serves as a mirror of our times, recording for future historians today’s desires, habits, customs, and mode of living.” Richard Sears created a “platform.”
Sears sold cars, cures, shoes, house plans, and of course, the first mobile phones. Imagine if electronics companies could create products with that type of end user insight. (Imagine if Richard Sears had big data and the internet available!)
Today’s platforms threaten to change the electronics industry design forever. Margins on electronics hardware are falling; the days of 60% margin on hardware (without sales and marketing costs) are fading away. Content and collaboration delivered by new “service” providers have shifted the value proposition in the industry. No longer is faster, smaller or shinier the reason for consumer investment — they crave experiences that improve their quality of life. Experiences that only platforms can deliver.
Very few electronics companies have the scale to even attempt to be a platform creator/operator. Pressure on the traditional business model makes investment dollars scarce; the new world requires new skills to monetize the tsunami of data available; and competitors seem to be coming from every direction, taking market share and profit. Re-invention to first survive and then thrive in the platform world looks to be the only path to success. Balancing re-invention with traditional profit expectations will be a critical challenge.
Hamburgers and Buns/Pasta and Sauce/Bratwurst and Beer
An app doesn’t make an ecosystem. Nor does it make a platform. While many companies will talk about providing services, it’s important that the services be “adjacent” or go together logically with each other. Consider AirBnB. When you travel, you may want to do interesting things. And the hosts who rent out their homes can provide some of those. Providing hosts an opportunity to make more and users an opportunity to experience more, this is a perfect adjacency. According to AirBnB they’re providing 5000 Experiences across 60 destinations and bookings have grown 2500% in the past year. Some hosts are earning $200,000 USD.
There are many traditional electronics companies that see platforms as a passing fad, as something that will run its course. How can a platform even exist without traditional electronics devices? Handsets, televisions, refrigerators, printers, scanners, copiers, industrial equipment…the list of connected devices is endless. Aren’t they the source of all this data? Isn’t that the fuel that makes a platform possible? No, because the devices are not the experience, they’re simply the pipe.
Fact: Data is the new natural resource in this platform world. Sensors in every device are scooping up this digital data. Most data, however, is never harvested or even available to the device manufacturer, as their traditional business model is designed to make and ship devices, not harvest data. And it is clear that the platform companies, with their exceptional valuations, have no issue with taking over device companies, or co-opting electronics manufacturers into playing a subservient role in their ecosystem.
Let’s for a second consider a smarter ambulance. It’s not just the truck that’s instrumented. The bed can weigh and capture vital signs from the patient and equipment, sharing these details with hospital. Any data on conditions can be sent ahead. Paramedics can see appropriate care protocols and make better decisions with AI providing support. Arrival time can be estimated and provided. Rerouting can occur if needed. Communications on arrival bays and treatment areas can happen while en route. Appropriate physicians can be alerted and better planning for resources can be arranged. The entire ecosystem becomes more successful at its tasks. It’s not just ambulances but fire trucks, police vehicles, emergency response, airports and others that can use these services. However, there is no ecosystem today that provides it.
Consider how using drones might allow responding police officers to better understand a situation they’re approaching. Tech enables, data and insight enrich. Pairing data and device into services that deliver insight is the goal.
Electronics make the experience possible
Electronics companies understand, however, the core technology in their products that make the end user experiences possible. While a stove can be connected to a platform, a platform cannot deliver the actual cooking experience. The challenge, then, is to focus on providing a connected experience without giving away the data created to the platform company. To find a balance within an ecosystem.
The domain knowledge that electronics companies bring on their product categories will be enhanced by artificial intelligence. This knowledge has been built over decades of producing and servicing their products. Simple voice commands to control devices are only the beginning. There are so many more experiences that end users want from artificial intelligence. The data and the insight that lead to experiences is the bargain end users make to improve the usefulness of the device.
The clock is ticking on electronics companies. Each year platform companies invade more product categories, putting additional pressure on traditional business models. Electronics companies are designed to work in annual or multi-year cycles to create new offerings. Platform companies are designed to work in weeks, days, even hours to provide new capabilities to their users. Their ability to ingest and understand the implications of data is improving daily.
There is good news
80% of all the data in the world is behind the walls of the enterprise. It is unavailable to the platform companies. That data may be in an electronic form; it may need to be reformatted, refined and even re-purposed. Every electronics company has this opportunity to create a balance for themselves in the platform world — by focusing on creating data-enabled revenue streams, and providing AI-enabled end user experiences. Much of the data required to do both is already in their corporate control.
So where and how do electronics companies place their strategic bets? The options are becoming clearer; the platform companies are a reality and will likely play some role. To level the playing field, electronics executives must view data as a valued corporate asset, and create processes for creating, harvesting, refining and translating device data into experiences and income streams.
I will close with one final challenge for electronics executives. Go into your kitchen and look at your refrigerator. Do you know how old it is? The exact dimensions? When it is likely to fail? How you bought it in the first place? How many times it has been serviced, by whom and with which parts? How about how many times the door is open and closed daily?
The answers are all within your reach. Unless, of course, the platform companies get there first. With data you made possible!
So ask yourself, are you ready to embrace the future of electronics?
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