Reality Check: The purpose-driven device

Editor’s Note: Welcome to our weekly Reality Check column. We’ve gathered a group of visionaries and veterans in the mobile industry to give their insights into the marketplace.
Whether you cringe at the thought of attending CES or look forward to it as much as the holiday break, you cannot leave the show without a feeling of tired awe. It is a logistical masterpiece. But more than that, it’s a testimony to the power of time. Three years ago, no one had heard of the iPhone. One year ago, Jeff Bezos introduced us to the new and improved Kindle 2 and later in 2009, the Kindle DX. “Droid Does” became a mantra just four months ago, and at the show, we were introduced to Wi-Fi SD chips from Eye-Fi and 3D TV, which must have FiOS and 50-megabit-per-second cable devotees drooling. Many more talented writers have tackled the products from CES and I will not attempt to duplicate their insights, but the breadth of products covered at CES is simply mind-boggling. “Pace of change” is an understatement.
One example is the breadth of e-readers that are emerging (given my previous role in launching the Kindle and starting the process of bringing the Skiff to Sprint, it’s understandable). Last January the primary choices were the Kindle 1, iRex, and Sony. This year, there were no fewer than eight new e-reader products launched. Some use Wi-Fi only, others use Wi-Fi and 3G (Skiff uses Sprint, iRex on Verizon, and nearly everyone else on AT&T). Some have two screens (one of them color) while others have one. Touch capabilities were standard on many of the newly launched devices. The depth of library selection is important (the COOL-ER boasts two million titles), and size, weight, and battery life continue to be critical to device success. I detail the choices on my new blog called the Sunday Brief if you want more information. But in one year, we have gone from side-loading appendages to stand-alone learning devices. Publishers, while bemoaning the loss of “first release” revenues, now have a distribution lifeline. That’s the power of time.
But wait – there’s more. A slate-colored cloud is emerging in the horizon. Will these new “mids” subsume the larger e-readers? This gives rise to a broader question: Can purpose-driven devices survive, and for how long? Does every device have to do everything? If there is a “win,” “place,” and “show” in the stand-alone e-reader world, how can we predict which models will win? From the answers to these questions come the answers to “which apps win?” and “where is value created in the apps space after we are gamed out?”
Here’s four examples of purpose-driven electronics that have survived:
1. Calculators. Sure, sometimes we use the one on our phone or computer, but if you need to determine the slope of that line, nothing beats an HP or Texas Instruments device. The BA II Plus is also available as a $15 app on the iTunes app store. HP has also added their 12C and 15C scientific calculators to the iTunes store at prices that are significantly less expensive than the stand-alone device. But the stand-alone versions of these devices still live, and the 12C will celebrate its 29th birthday this year: that’s a life cycle.
2. Snapshot and video cameras. With the Qualcomm Snapdragon processor in full stride, “premium” or “super” mobile phones will likely start with 1 GHz processors and go from there. But digital cameras continue to proliferate, led by Canon, and HD video cameras are the choice of families – even with iPod Nano video capabilities, and abundance of photo applications in both the Android and iTunes markets, and 3/5/?-megapixel cameras becoming mainstream on many mobile phones. The camcorder celebrates its 25th birthday this year: many iterations later, it’s still going.
3. Navigation devices. TomTom made the big move here a few months ago when they released their navigation device for the iPhone for $99 (it’s on sale now for $50). Google has the Latitude and Navigator services out in the marketplace, and there are dozens of high quality applications available (some included in your mobile plan) over mobile devices. Garmin still has a market capitalization of nearly $7 billion. Garmin has been in the market with portable GPS (StreetPilot) since 2005; TomTom since 2004.
4. Standalone personal video players (Sony PSP, Nintendo DS). You can even get the Sony model in a Hannah Montana bundle or with your favorite “Rock Band” titles. The iPod touch was supposed to kill the video game business when it was announced in 2007. There are tens of thousands of titles available today for mobile devices – but the beat goes on for PSP and DS titles. The Nintendo DS will turn six this year.
Not all purpose driven devices have lived – the pager died in about five years, consumer Wi-Fi without the router died shortly after launch, the home telephone as we know it will be obsolete in another five years, and all but the high-end home stereos are dying every day to iPods and Pandora. Palm announced last week their support of an application that renders last year’s MiFi device (but not the need for a separate data plan) obsolete. Why do some survive while others die? Here’s some ideas:
1. Heritage and habit. This likely determines the slope of decline as opposed to replacement. If I am used to using an HP-12C, I am going to continue to use it. Those buttons on the remote are habit forming – once you learn where the “Guide” or the “List” button is, why learn another format? Using this argument for e-readers, there are some who claim that the binding in a book is a natural feel, and that it sits well in your lap. That argument may work for the adoption process from physical to digital media, but it’s going to be hard to claim “habits” have been formed in less than a year with the Kindle when alternatives emerge (although the proprietary Kindle format might be a short-term inhibitor). Final note: Heritage creates communities whose bonds cannot be easily broken. More on that in a future article.
2. Form factor. The buttons on the PSP are there for a reason. Same for the size of the screen and the clarity of the Skiff. Same for the e-Ink technology for the Kindle and many of the devices described above. Many of us who have followed the progress of the Kindle scratched our heads when the iTouch/iPhone (and later the Kindle for PC) versions were released. But Amazon had a good idea that for small doses, the iPod/ iPhone would be best, and for more complex charts and graphs, the PC version is better. For good ol’ reading, however, the form of the Kindle 2 works for the majority of their targeted segments.
3. Data, processor, and lens requirements. In my discussions on this topic this week, I asked “what would it take to have the functionality of the Canon Powershot 12.1 megapixel camera on my Droid?” The analyst answered “Batteries, processing, and memory.” I then asked “what about an SLR?” They gave me a puzzled stare – “won’t happen.” Why? “Can’t change the lens.” We have come a long way in processing technology since the iPhone debuted in 2007, and as was noted in this column last month, the 1 GHz LG (and now Nexus One) processors are just the starting point. With recent advancements, the corollary is also true: When the mobile processing and data storage environments overtake the stand-alone devices, the rate of substitution will increase. This is why games are the main draw of the iTunes store, and why navigation companies like TomTom are releasing their software through the iTunes store.
4. The business model. Nothing motivates l
ike survival. Amazon saw the Kindle
as an opportunity to reinvent the distribution model – to offer the New York Times bestsellers for $10 instead of $25. They saw the handwriting on the wall and the economic benefit of acting early. But they did so to protect (and expand) their distribution-based business model. The Skiff is another prime example – reinvent news distribution. What if Tower Records has introduced the iPod prior to Apple? History is littered with carcasses that waited too long to make the risky decision. The business model is the strongest variable to determining whether the stand-alone device will survive. When company executives that drive strategic decisions do not understand the pace of technology or the underlying business model implications of their decisions, run for cover. As we examined last week (see blog site for more details), the content creation/programming/publishing industry is in the middle of many of these decisions as we speak.
These are four variables that will influence the slope of the line. There certainly may be more. However, even with HP-esque longevity, eventually all purpose-driven devices are subsumed by change. Something to think about as we embark on the “Year of the Tablet.”
Jim Patterson is CEO & co-founder of Mobile Symmetry, a start-up created for carriers to solve the problems of an increasingly mobile-only society. He was most recently President – Wholesale Services for Sprint and has a career that spans over eighteen years in telecom and technology. He welcomes your comments at jim@mobilesymmetry.com.