Why
It's Very Hard to Be in the Hardware Business
In
everything from cars to cell phones, the mechanical and physical is losing sway
to software and content. And nobody is going to pay up for incremental
improvements.
There's a battle raging in
Detroit between "smarts" and "steel." At least for the
moment. Every day the hardware guys are losing more and more of their share of
the actual value in each vehicle as the software and the sensors take over the
driver's experience. In terms of getting you where you're going, what's going
on inside the car takes on increasing importance and significance compared with
what's under the hood. If you wonder why there's so much conversation and noise
about the entertainment centers, video displays, cameras, as well as the
connectivity being built into the new cars and trucks, it's because pretty soon
we'll all just be sitting quietly and passively in a comfy seat while the car
takes us where we need to go. And your insurance company will be happy to
insure you and your car in the near future as long as they're sure that you're
not actually driving it. I'm not really certain at the moment whether I think
that smart cars or smart roads (like they're building in Atlanta) are the best
bet (see Why Smart Cars Are Stupid), but, take my
word for it, within three years, some of us won't have to drive ourselves
anywhere.
And don't think for a moment that it's only the car guys who are
under the gun. Everyone who makes stuff is gonna have to get more aggressively
into the content/software part of the game pretty soon or they'll be left
behind. If you want to see an early warning sign of the trend, consider that
Apple's just reported iPhone 7 sales declined and, while Tim Cook blames it on
the advent of the iPhone 8, that seems to me to be only a modest part of the
explanation. For a growing part of the population, who religiously buy the
latest and greatest, we may be reaching an incremental demand saturation point.
That's when good enough is actually good enough and we conclude that there are
plenty of other things to spend our discretionary dollars on. It's hard to
justify to your CFO that you should purchase an expensive new phone with at
best imperceptible functional improvements when the device you have is more
than sufficient to get any and every job done that matters. Call me when the
battery life actually lasts a full day and I'll be the first in line.
I'm getting the feeling that more and more of us are
increasingly focusing on the function rather than the form of so many things.
We want the hardware to do its job and get out of the way-- we're tired of
celebrating the box and now we're paying far more attention to the beef. Only
engineers and designers care about whether the edges of my new phone have
disappeared. The camera is definitely the new keyboard and
capture/communication device, but I'm into its speed, ease of use, and
functionality rather than its good looks since pretty much every phone that
matters today looks about as good as the next one coming down the line.
But it seems that a lot of folks apparently haven't gotten the
memo yet. It's depressing to watch these slow-mo crashes as they're happening or
to see someone who's about to run into a brick wall. My favorite new commercial
catastrophe is the upcoming Fitbit smart watch, which is intended to compete
with the Apple offerings in that space. Keep in mind that last quarter Apple
moved past Fitbit to become the market leader in wearables. Of course, that's
not much to brag about and I'm not sure anyone really noticed or cared,
especially since Apple doesn't break out stats on the watch. But regardless,
winning this category isn't much to write home about; it's a little bit like
being Dolly Parton's shoes.
I've already said my piece
already about Fitbit and the living dead syndrome (see Where Will Your Business Be
When the Music Stops), which is how I see its future. And I made my position clear
on the Apple watch a while back as well (see Five Reasons the Apple Watch
Failed) So right now I feel that FitBit's latest smart watch
initiative is anything but smart and it's even more reminiscent of the old
college adage that: "when 3 different people tell you you're drunk, it's
time to lie down and take a load off." These guys need a prompt and
radical pivot, but it seems to me that they're knee-deep in fast-setting
concrete and unable to get out of their own way.
The move away from building
physical goods for all these guys can't come soon enough. (See Six Reasons Not to Manufacture.) If you're
Apple with a cash hoard exceeding $250 billion, you've got to be looking at how
really well your services business (iTunes, Apple Music, App Store, etc.) is
doing, and saying, how do I accelerate this part of my business even more
rapidly? Just for comparative purposes, Apple's business is almost 3 times the
size of Netflix and twice the size of Amazon's AWS. This is the world
today--not how fast am I going, but how fast am I getting faster?
Even with Apple's stock setting new highs seemingly every day,
you've got to be looking over your shoulder and asking one crucial question:
why is Apple getting its ass kicked in streaming media? They're not even on the
leader board (along with Facebook which is also not a player yet) while
YouTube, Netflix, Amazon and Hulu keep growing their shares. Remember the iPod?
These are the guys who made mobile music/media a reality and today - at least
for the foreseeable future - they're nowhere.
But things may be starting to change. It looks like yet another
iteration of Apple Music (based obviously around branded and bite-sized video
offerings) is stirring and we may see the first offerings, already oft-delayed,
in the near future. Honestly, I hope so because otherwise the Beats acquisition
will continue to look almost as bad as Yahoo!'s purchase of Tumblr, which still
holds the decade's dumb buy title. Of course, no one will ever retire Time
Warner's lifetime stupidity title for the AOL acquisition.
The opinions expressed here by Inc.com columnists are
their own, not those of Inc.com.
PUBLISHED
ON: MAY 16, 2017
