There are so many wonderful parallels between the PC market and the smartphone market. Well, everyone may not agree they are wonderful, but as one who studies the industry, I find them wonderful. The PC market approximately 30 years to peak, from early sales to mass market. The Smartphone was a slightly shorter cycle reaching the mass market in roughly 20 years. But, the smartphone market has without a doubt peaked.
Is Innovation Dead?
Whenever I bring up this point that the smartphone market has reached its peak, the follow-up question is, does that mean innovation is dead? Or to get to the root of the question, does that mean smartphones will become boring. Well, this depends on your definition of innovation. For years the smartphone segment has been more iterative than inventive, but that does not mean those iterations were not innovative. Apple’s iPhone X is full of things I think are innovative, but folks can argue those were more iterative innovations than true first time inventions. Possibly, but the industry at its peak also means we take innovation for granted.
That being said, further iterating and refining of the smartphone is what the future holds, and we simply won’t see leaps in technology, or at least incredibly obvious ones. There is a lot of interesting refinements coming in software, and services, things we can argue are innovative and continue to deepen and add usefulness to the customer experience, but most will consider these things iterations.
As the PC was reaching its peak, most new hardware and software announcements were considered to include things that were more useful than mind-blowing or amazingly innovative. That’s when you know the category has peaked. When what you see generates more of an emotion that so and so feature is useful vs. ones we used to have where we considered them amazing or exciting.
Delayed Refresh Cycles
While my articulation of iteration becoming more useful than exciting is not how end consumer would explain it, the evidence this has happened is when we see refresh cycles begin to lengthen and consumers become content with the current devices they have in their hand. This has been coming for a few years but has no been fully cemented in stone.
Truly innovative features were things that moved a market. My favorite way to articulate innovation in this context is that true innovation shakes off the crust of contentment. Specifically, a truly innovative feature has the effect of causing a consumer to be discontent with their current product and desire the new one enough to make the upgrade in a timely fashion.
There is a narrative that iPhone X, and speculatively poor sales, is evidence that the features weren’t innovative enough to drive a big upgrade cycle. Maybe that is true, and maybe it isn’t we will have to see. One could argue the price was part of the problem and had Apple had a lineup of iPhones that included some of the features of the X at lower prices a bigger upgrade cycle could have been possible. All, speculative of course, but my sense is very little will be able to excite the market enough to “shake off the crust of contentment.”
On this point, one of my favorite parts of Jeff Bezos annual letter to shareholders was this paragraph.
One thing I love about customers is that they are divinely discontent. Their expectations are never static – they go up. It’s human nature. We didn’t ascend from our hunter-gatherer days by being satisfied. People have a voracious appetite for a better way, and yesterday’s ‘wow’ quickly becomes today’s ‘ordinary.’ I see that cycle of improvement happening at a faster rate than ever before. It may be because customers have such easy access to more information than ever before – in only a few seconds and with a couple taps on their phones, customers can read reviews, compare prices from multiple retailers, see whether something’s in stock, find out how fast it will ship or be available for pick-up, and more. These examples are from retail, but I sense that the same customer empowerment phenomenon is happening broadly across everything we do at Amazon and most other industries as well. You cannot rest on your laurels in this world. Customers won’t have it.
Describing consumers of divinely discontent is perfect. This phrase creates some tension with the lengthening hardware cycles we see in PCs and smartphones where contentment with the current product is also true. Bezos concludes this paragraph stating that you can’t rest on your laurels because customers won’t have it. From a competitive standpoint, this point is worth chewing on. Consumers are largely content with their smartphones, but also divinely discontent by nature. Both PCs and smartphones are nearing the end of their race, the pace of innovation has slowed, and the current products are sufficient for most, if not all of consumers needs. In this part of the cycle, contentment can exist. But when the new race begins, for whatever comes after smartphones, consumers appetitive for innovation will be re-invigorated.
The reality, that consumers (and the media) are easily excited when it comes to technology is true. This is a big reason why we get a lot of hype in early tech category cycles takes place. We crave innovation and excitement with our technology, and this creates both a challenge and opportunity for companies looking to get consumers attention.
When the time is right for a new industry cycle happens in consumer categories, companies with a history of innovation and packaging those innovations in ways that make it easy and enjoyable for consumers are the ones best positioned.