Apple has not traditionally talked much hardware at WWDC. However, when you think about it, it makes perfect sense. Any and all hardware advancements are the foundations for developers to build upon. Developers will be the first to tell you they never want to see hardware innovation stop because hardware innovation is what gets them excited and empowers them to create the software of the future. Advancements in CPU, GPU, image sensors, etc., are all things that let developers do more than they could with previous hardware.
Understanding the relationship between hardware innovation and software/developer innovation is why it actually makes sense to show your developer community the powerful new and innovative hardware you have coming and the toolkits you are enabling them with to utilize that new hardware. That being said, there were a few important software updates, really core technology updates that really got the crowd excited. I’ll discuss those first then talk about the hardware which was the start of the show.
Software, and Core Technologies Laying New Foundation for Future Much of the commentary was the software updates, the front facing things, were really incremental improvements rather than big leaps forward for MacOS. iPadOS was a different story and we will get there shortly. But even by the name High Sierra, we can gather this update is really an improving on the last one vs. something entirely new or a big step forward. Next year will probably be the year for macOS to take a leap. But at the foundational level many new kits and developer tools were released that give us some hints of where Apple is going. Kits for machine learning, and augmented reality were two of the big core technologies coming to either macOS or iOS 11, or in some cases both.
Apple’s operating systems are acquiring the foundation in the core architectures to start to learn and adapt to their users. Even in many cases today, Apple’s machine learning is hidden in plain sight and my experience with predictive text, Siri suggested apps, Maps, etc., is not like yours because they have both learned our habits and traits and start to customize their user interface to our unique needs. This is only going to deepen going forward as Apple’s operating systems becoming learning and more dynamic operating systems providing unique experiences to their users. In many analysis in the past, I’ve used the word anticipation engine to articulate how a piece of software can become more user and more contextually user aware. At the core, Apple is turning macOS and iOS into an anticipation engine.
ARkit is really a big deal and it was obvious. Most folks have never really had a good AR demo so it was interesting to see all the reactions from folks experiencing incredible AR demos on iPad and iPhone in the hands on areas. Developers can download the kits and the examples and start learning how to use them. Apple’s statement, that day one, they will have the largest AR development platform in the world is something to seriously consider. While one could argue Facebook has more reach, we know Apple has more engaged users and developers and this single factor trumps reach and gives Apple the advantage. Just looking at the devices it supports, it is likely that by the end of the year over 80% of Apple’s iOS installed base is an augmented reality customer. That equates to a market opportunity of around 600m people by the end of the year. Developers will be quite pleased with that.
The App Store redesign is also worth mentioning. Apple stated 500 million people visit the app store every week. This design is being updated for better discoverability, but most interestingly, the addition of a Today tab could increase that weekly number to a daily number. If this happens, then the app opportunity for developers goes up exponentially. This one change could end up being one of the biggest changes to the App store for both consumers and developers.
The Hardware that Stood Out In what is turning out to be a bit more transparent Apple in terms of roadmap (a welcome pivot in the new world), they offered a sneak peek at a few products. First is the new iMac Pro, which is a workstation beast that can go up to 18-Intel Xeon cores and has AMD’s latest and greatest Vega discreet graphics architecture. The sleeper addition here, and for all Macs in general, is the new support for eGPU (external GPU) solutions. Through recent years, Thunderbolt has acquired the ability to reliably push massive bits of computations over Thunderbolt cables meaning we can stack modern GPUs together and make our notebooks, or all-in-one devices like an iMac, expandable with the most important chip in today’s world, the GPU.
Let’s also be clear, the iMac Pro is not the Mac Pro Apple said they are working on. We are not sure what the timeline for that is but we do know they are not the same. This did, however, help ease the concerns of the pro community that Apple was letting them down. I think they can rest assured Apple is still committed to the Mac as ever, and honestly, the eGPU support is a really big deal that I’ll dive into at some point.
Apple made some important new performance and screen size updates to iPad. Going from 9.7 to 10.5 inches on iPad Pro truly did yield more screen size value than I initially thought once I played with it. The 20% more screen actually feels more like 20% and the full-size keyboard support single handily moves it up as a productivity device. Between the screen, and the CPU/GPU performance updates the new iPads truly enter a class of productivity they were not before. But it really is the software that will finalize this claim.
From what I saw, the specific updates to iOS 11 for iPad look very promising. From the feature that lets you organize multiple workspaces, like spaces on macOS, to drag and drop for multi-task, to screen shot edit, to screen record, etc., are all things once reserved to “computers.” Now the list of things you can’t do on iPad that you can on a Mac or Windows PC has dwindled, to perhaps, just using a mouse.
The really impressive stuff to me was how the touch-based workflows for things have improved. If Apple would have shown us this OS when iPad first came out people would have laughed, maybe cried, and there is no way the product would have done as well as it did, or get the opportunity to grow up into the mature adult it is today. The file system demos were truly unique in that it was not just a file system duplicate of what you get on a PC. It was truly a rethink of the workflows around file management in the modern, mobile, touch-based world.
Lastly, HomePod. As I wrote in my case for a Siri speaker last week, the whole room audio use case is the strongest. Most consumers simply don’t have this and we know it is a highly desired experience they have tried to fill with low-cost Bluetooth speakers that sound ok but not great. Sonos is a great solution, and they have always been the company with a target on their back in my opinion. I have friends with a Sonos and it really is an amazing solution, but one that Apple can do better and it looks like that is exactly where they are going.
I had the opportunity to hear the sound quality of the HomePods and they were truly amazing. It’s worth mentioning, that over the years I have done projects with high-end speaker, audio codec, and audio technology companies and had my fair share of demos in a controlled room listening to a full surround theater set up costing north of $5,000 and in some cases $10,000 dollars. I’m not joking when I say the sound quality out of these was not that far off. The spatially-aware technology on how sound is intelligently distributed is the true enabler here. The device was able to know what parts of the track were center audio (lyrics), accompaniment, and ambient like background vocals or percussion, and smartly distribute that sound to the right speaker and off the right wall in order to fill the room with sound. This is going to be one of those things you need to hear for yourself, but I’m confident in my audio knowledge to stand by the claims I made.
Apple led the value proposition with Music which I think is very smart since playing music is the top and most frequently used use case of all smart speakers today. However, that does not mean HomePod is not going to be great at assistant features also. Much of the commentary was Apple did not lead with Siri because Siri is not great, but whether that point is really true or not (and I may have quantitative evidence to dispute this claim), the reality is leading with Music is what the market will be most attracted to today. Average consumers are not buying Google Home or Amazon Echo because of their assistants, contrary to what many believe, early adopters may but average consumers are not. Music is the lead the mass market will appreciate and the rest is just icing on the cake.
That being said, Apple confirmed to us there is a lot they did not share about HomePod. Today was truly a sneak peek and more information on all it can do will come later in the year.
Overall, this WWDC set a new tone, and hopefully a new pattern of a combination of talking new hardware and new software tools together at WWDC. Apple covered a lot of ground leaving the fall just for the next iPhone. These two events together may be looked back on defining moments for Apple in their transition to the next era of computing.
For some, Apple’s WWDC keynote event went liked they hoped, with the company introducing some exciting new products or technologies that hit all the sweet spots in today’s dramatically reshaped tech environment. Augmented reality (AR), artificial intelligence, smart speakers, digital assistants, convolutional neural networks, machine learning and computer vision were all mentioned in some way, shape or form during the address.
For others, the event went like they expected, with Apple delivering on virtually all the big rumors they were “supposed” to meet: updated Macs and iPads, a platform for building AR apps on iOS devices, and a Siri-driven smart speaker.
For me, the event was a satisfying affirmation that the company has not fallen behind its many competitors, and is working on products and platforms that take advantage of the most interesting and potentially exciting new technologies across hardware, software and services that we’ve seen for some time. In addition, they laid the groundwork for ongoing advancements in overall contextual intelligence, which will likely be a critical distinction across digital assistants for some time to come.
Part of the reason for my viewpoint is that there were several interesting, though perhaps a bit subtle, surprises sprinkled throughout the event. Some of the biggest were around Siri, which a few people pointed out didn’t really get much direct attention and focus in the presentation.
However, Apple described several enhancements to Siri that are intended to make it more aware of where you are, what you’re doing, and knowing what things you care about. Most importantly, a lot of this AI- or machine learning-based work is going to happen directly on iOS devices. Just last year, Apple caught grief for talking about differential privacy and the ability to do machine learning on an iPhone because the general thinking then was that you could only do that kind of work by collecting massive amounts of data and performing analysis in large data centers.
Now, a year later, the thinking around device-based AI has done a 180 and there’s increasing talk about being able to do both inferencing and learning—two key aspects of machine learning—on client devices. Apple didn’t mention differential privacy this year, but they did highlight that by doing a lot of this AI/machine learning work on the device, they can keep people’s information local and not have to send it up to large cloud-based datacenters. Not everyone will grasp this subtlety, but for those who do care a lot about privacy, it’s a big advantage for Apple.
On a completely different front, some of Apple’s hardware updates, particularly around the Mac, highlight how serious they’ve once again become about computing. Not only did they successfully catch up to many of their PC brethren, they were demoing new kinds of computing architectures—such as Thunderbolt attached external graphics for notebooks—that very few PC companies have explored. In addition, bringing 10-bit color displays to mainstream iMacs is a subtle, but critical distinction for driving higher-quality computing experiences.
On the less positive front, there are some key questions on the detailed aspects of the HomePod’s audio processing. To be fair, I did not get to hear an audio demo, but conceptually, the idea of doing fairly major processing on a mono speaker of audio that was already significantly processed to sound a certain way on stereo speakers during its creation strikes me as a bit challenging. Yes, some songs may sound pleasing, but for true audiophiles who actually want to hear what the artist and producer intended, Apple’s positioning of the HomePod as a super high-quality speaker is going to be a very tough sell.
Of course, the real question with HomePod will be how good of a Siri experience it can deliver. Though it’s several months from shipping, I was a bit surprised there weren’t more demos of interactions with Siri on the HomePod. If that doesn’t work well, the extra audio enhancements won’t be enough to keep the product competitive in what is bound to be a rapidly evolving smart speaker market.
The real challenge for Apple and other major tech companies moving forward is that many of the enhancements and capabilities they’re going to introduce over the next several years are likely to be a lot subtler refinements of existing products or services. In fact, I’ve seen and heard some say that’s what they felt about this year’s WWDC keynote. Things like making smart assistants smarter and digital speakers more accurate require a lot of difficult engineering work that few people can really appreciate. Similarly, while AI and machine learning sound like exotic, exciting technological breakthroughs, their real-world benefits should actually be subtle, but practical extensions to things like contextual intelligence, which is a difficult message to deliver.
If Apple can successfully do so, that will be yet another surprise outcome of this year’s WWDC.
This piece will publish early Monday morning ahead of the first day of Apple’s WWDC developer conference. Some of you will read it before the keynote, and some of you will be reading it after Apple has made its announcements. Last week, I shared what I’m hoping to see at WWDC today, but here I want to step back a bit and provide some context for what’s announced at WWDC, in two ways: firstly, by showing which topics have dominated the keynotes at the other major developer conferences this year, and secondly by outlining the topics Apple has spent time on during this event in the past.
For the fourth year in a row, I took the train from San Jose to the San Mateo, CA Event Center in mid May where the grandaddy of Maker Faires took place. Over 125,000 people trekked to the show to check out all types of products, maker ideas and related services and to attend various sessions to help kids and adults alike become makers.
The Maker Movement started out small some 12 years ago and had more of a tech focus driven by kids interest in things like robotics, electrical circuitry and making one’s own electronic gadgets such as a PC and creating things like motors to drive all types of devices such as small miniature cars, small trains, robots, etc.
But over time, and thanks to the Maker Magazine and Maker Faires around the world, the Maker movement has gained great steam and its emphasis on getting people to make things spans everything from bee keeping, quilting, and hydroponics to full blown make it yourself electronic kits and tools, 3 D printers, wood and metal etching and shaping tools to creating robots, drones, mechanical engines and much more.
Maker Faire’s have drawn major attention from many companies such as Intel Microsoft, Google, Avnet, Cognizant, Kickstarter, IBM, Oracle and dozens of others. They understand that many of their employees in the future may come from the ranks of kids coming to Maker Faire’s today who catch the bug and could eventually become tomorrow’s scientists, electrical engineers, coders and people who can make things and get things done.
After attending last year’s Maker Faire I wrote about why Maker Faire’s are so important for our kids and stated that “The Maker Faires’ true importance lies in its focus on getting kids interested in making things. Over the last few years, I have written multiple pieces on STEM focusing on how companies around the world are backing STEM-based programs. All of them see how important these disciplines will be in the future. Still more germane to them is the real concern that if we cannot get kids trained in the sciences, we will not have the engineers and scientists to run our companies in the future.” http://time.com/4344680/maker-faires/
Although the Maker Faire delights people of all ages who attend the event, the greatest enthusiasm and joy from encountering and inspiring all to create and make things of their own can really be seen on the faces of the kids at the show. As they go from booth to booth and area to area to see all of the exhibits, models and electronic tools and kits that can be used by them to make their own creative dreams come true, their smiling faces and excitement is contagious.
While the show attracts a lot of boys, I also saw many girls at this year’s show and can see a rise in their attendance year upon year as this show strives to be highly inclusive and attract people of all ages, genders, and ethnicities.
At this years show crowds went to see swimming drones, a bunny robot, a robotic giraffe, an all-electric Porsche 911 and the Microsoft coding booth was packed with kids checking out new ways to learn to code. This year’s show also had a VR slant as Microsoft’s booth had a demo of Hololens and HTC had a small tent where all could see how HTC’s VIVE VR goggles worked. Also, Google’s “soldering booth” where kids can learn to solder electronic connections is always a big hit at the Faire. One of the other hottest areas is where they had the Drone races.
What is really interesting about the Maker Faire is that technology is not presented as math and science per se but is shown in highly entertaining ways that channel the underlying role science and technology plays in the creation of all types of products, devices, and related services.
While the Maker Faire itself is fun and educational, its reason to exist is extremely important. For many of these kids, attending the Maker Faire introduces them to Science, Technology, Engineering and Math (STEM) and in many cases the Arts (STEAM.) These skills and disciplines are important to America’s growth as technology will have a dramatic impact on all types of industries and jobs in our future. Millions of the youth of today will need to have many of these STEM and STEM-related skills in order to get work and become the leaders in our corporations over time and will be next inventors and innovators of the future. For many of them, the Maker Movement and Maker Faire’s could be the catalyst that helps them garner the type of interest in these types of skills and steer them towards an educational path that prepares them for many of the jobs of the future.
The next Flagship Faire is in New York – World Maker Faire, September 23 & 24, 2017 at the New York Hall of Science. For a list of other Maker Faire’s around the US and the world, check it out here.
This week’s Tech.pinions podcast features Ben Bajarin, Jan Dawson and Bob O’Donnell discussing developments in augmented reality and virtual reality from the AWE Expo, analyzing the announcements from Andy Rubin’s Essential, and offering a preview of next week’s Apple Worldwide Developer Conference.
Due to my background in the semiconductor space, I engage in a lot of financial analyst conversations around semiconductor component companies. I used to write a specific note we called “the Circuit” exclusively for hedge funds that dove into the opportunities and challenges for some of the largest semiconductor companies in the world. I would write extensively about Qualcomm, Intel, Samsung semi, Marvell, Xilinx, NXP, Broadcom, ARM, etc., and it was interesting to track the influence of Apple on many of these companies through the years. Nearly every note I wrote for investors in these businesses had Apple mentioned somewhere, and Apple was a constant topic during calls I had with these investors as well.
Next week is Apple’s Worldwide Developers Conference and, along with the rest of the Tech.pinions crew, I’ll be watching the announcements closely. At this late stage, it makes little sense to try to predict what we’ll see next week – there are a number of credible reports out there about at least some aspects of what’s on tap and we’ll know the rest soon enough.
Instead, here are some of the things I’m looking for as both a user of Apple’s products and services and as an industry observer who wants to see the companies in this space keep pushing those products and services forward. I’ve done similar exercises twice in the past, in 2014 and 2016, in case you’d like to see how those turned out.
Allow iOS to Continue to Evolve to Meet Disparate Needs
I’ve called in the past for the creation of a “padOS” – a variant of iOS focused on either iPads in general or the iPad Pro specifically. The naming and separation is largely symbolic and whether or not Apple does it is less important than that it allows iOS to continue to evolve separately in its iPhone and iPad versions. Apple’s current big push around the iPad is positioning it as a fully-fledged computer that can be used for advanced productivity tasks. That means both its role and the way it functions has to evolve separately from those of the iPhone. The iPad needs to support more sophisticated multitasking, a different home screen layout, and more advanced apps than the iPhone. Apple needs to set apart the iPad version of iOS more clearly for developers so they catch Apple’s vision and believe they can create not just great experiences but great business models around apps on the iPad.
The challenge for Apple is it has to allow iOS on the iPad to evolve in such a way it doesn’t break the core value propositions of focus and simplicity which have always characterized the OS and the devices it runs on. It would be easy to say Apple should simply either port macOS to an iPad form factor or make a touchscreen Mac, but neither would be the right solution. Apple has to strike a careful balancing act between enhancing the power and functionality of the iPad without making it seem less like an iPad.
When it comes to the iPhone, I want to see what Apple can do in augmented reality, which has already been a theme in all three of the previous big developer conferences this year. With dual cameras in the iPhone 7 Plus and arguably the most used cameras in the world, Apple is in a unique position to do interesting things with AR in the native camera app. That’s still where many of us take our pictures, even if they’re subsequently exported to social media apps for sharing. So Apple has a lot of power to combine software and hardware optimization to provide interesting overlays on photos and videos and open those capabilities up to developers. I would guess this might start with lenses and filters but there’s so much more developers could invent and create, given the right tools.
Siri needs to Evolve Faster
Siri was a major focus last year but not necessarily in the ways I’d hoped or expected. Siri extensions were a great new feature and were complemented by extensions across Maps and iMessage. But Apple did relatively little to move Siri forward as a standalone voice assistant, touting relatively few advances in voice recognition, natural language processing, or its own ability to serve up more relevant responses to queries it properly recognizes and processes. I’d like to see Siri as a voice assistant become better at recognizing and understanding what I’m saying and more consistently serving up relevant responses. Apple has acquired a number of companies over recent years which should help with this and I’m hoping we’ll see some big advances this year, including more conversational and contextual understanding.
In the context of Siri, I’d love to see a home speaker from Apple that would compete with the Amazon Echo and Google Home. These devices, specifically the Home, have grown on me over the past few months as I’ve had one in my home but, as someone who’s fairly heavily invested in the Apple ecosystem, I’ve found them frustrating. I’ve had to use other music services, messaging platforms, reminder apps and so on with these devices and, while I’ve made that transition, in some cases I’ve simply found those devices less useful as a result. An Apple speaker that would combine Siri, Apple Music, AirPlay, Reminders, iMessage, and more would be a huge advance for me and, I would imagine, for tens of millions of others. I think others have been reluctant to trust Amazon or Google with their personal data or have suspected these devices were really Trojan Horses for selling more goods or ads and, therefore, resisted them.
But Siri in that device has to be really good because the bar Amazon and Google have set in the home speaker space is high, at least in terms of voice recognition. Siri has so far always been somewhat constrained by the devices which contained it, none of which were designed first and foremost for fantastic voice recognition. A home speaker would remove that excuse. Amazon and Google have shown us what can be done in a dedicated device with mic arrays designed for far-field voice recognition and Apple now has to show it can match them and, ideally, exceed them in other areas such as ecosystem integration and audio quality.
macOS needs to Continue to Integrate and Differentiate
One of the key themes of recent years when it comes to what is now macOS is integration with iOS, whether in the form of features like Continuity and Handoff which directly integrate with other devices, or whether it’s in the form of user interface conventions, apps, and so on which now exist across Apple’s portfolio. But as Apple pushes the iPad Pro towards becoming a more powerful computer, it can’t simply leave the Mac and macOS where it is – it needs to establish a distinct identity and purpose for them in contrast to the iPad Pro. That means continuing to push the boundaries of what the Mac can do that an iPad can’t and demonstrating what it can do uniquely well because of the OS, the power of the hardware, and so on.
Beyond that increased differentiation, there’s still a role for integration and borrowing concepts and user interfaces from iOS. Nowhere is that truer than in iTunes. That software began life as a way to organize and then later, sync music to iPods, but it has become so much more since. Every time I fire up iTunes on my Mac, I have to first navigate to the right broad section – Apps, Music, Movies, TV Shows, or Books – and then to either a store or library mode (or more in the case of Music). There’s simply too much going on in that app and it needs to be broken out into separate apps for Music, Video, and syncing, at the very least (possibly even with a separate store for all of the above) to focus those content apps. That would streamline consumption, make the apps less confusing and easier to use, and make people more willing to use services like Apple Music on their Macs.
tvOS needs a Clear Focus
Ever since Apple launched the fourth generation Apple TV, it’s had a dual role as both a video consumption device and a sort of low-powered gaming console. That’s caused some confusion among video-centric users who in some cases don’t see why they have to spend significantly more on an Apple TV relative to comparable Roku devices (not to mention much cheaper Chromecasts) but it has also left gamers a little frustrated that the Apple TV doesn’t do more. Apple needs to decide how serious it is about gaming and build the Apple TV hardware and tvOS to match. It either needs to shift more clearly towards the casual gaming that’s always been the hallmark of iOS, or power up both the hardware and software to enable something more like what people are used to from consoles.
But it also needs to continue to improve the TV viewing experience. I actually like the TV app Apple introduced last year quite a bit – it consolidates my viewing in a number of apps like Hulu, CBS, and Apple’s own TV and Movies apps and shows me the next episodes or available movies in each. But it’s still glitchy and incomplete – Netflix is the obvious standout on the app side but it also frequently misses episodes I’ve watched (or ones I haven’t) and serves up the wrong episode next in the queue. The concept is good but the execution needs polish. And I really need a way to separate the stuff my kids watch from the stuff I watch. Too often, the first part of my queue is made up of half-watched cartoons rather than what I want to watch next. Some combination of profiles and/or time of day smartness could solve that problem pretty easily.
watchOS needs to Figure Out the App Model
Last year’s WWDC and the fall hardware launch felt like a narrowing of focus for the Apple Watch around health and fitness. I think that was smart and reflected the fact apps on the Watch really haven’t taken off, despite several tweaks to the model. I would expect to see continued enhancements to the health and fitness features on the Watch, possibly including sleep tracking and, ideally, including the ability for third party Watch bands to incorporate more advanced sensors and feed data back to the Watch itself, though that may have to wait until the fall. Apple still needs to figure out what the role of apps is on the Watch and how to make them easier and more compelling to use.
There’s probably more I could add here but that seems to be plenty to go on with. I’m optimistic I’ll get at least some of what I’m looking for next week and I’m certain there will be things I haven’t thought of but which turn out to be great additions too. One thing is certain: with more ground than ever to cover, Apple’s going to have a tough time getting through everything in one two-hour keynote. I wouldn’t be surprised if we see some more announcements either before Monday or in later sessions.
I was recently looking at a recent Pew Research Center report abut tech adoption by seniors and it stated that 40% of American adults ages 65+ own a smartphone now. At the same time, more than 2/3rds of seniors now use the Internet which is a 55% increase from 20000. And as the chart below states, 51% now have some form of broadband in their homes.
Over the past few months, there has been a lot of talk about the future of transportation; from the car as a service to self-driving cars. We seem to be expecting many changes that will redefine how we get from point A to point B.
Ride-share companies Uber and Lyft have grown in popularity capturing consumer dollars and press attention, although not always for the right reasons. If making a brand a verb is a measure of success and awareness, then Uber made it as “Uber it” seats quite happily with “Google it”.
Having presenters on tech conference stages talk about how millennials will only want an Uber account, not a car or judging by how many people we know to use these services and are anxiously waiting for their driving days to be over, might not be the best way to access how realistic or inclusive this future is.
At Creative Strategies, we just conducted a study across 1,000 US consumers of their preferences when it comes to commuting as well as their expectations about the future of it. The key takeaway is brands and industry watchers might want to consider the reality of how America feels about this topic is not dissimilar to how America felt about the recent US presidential election. Urban vs. rural, millennials vs. baby-boomers, higher income vs. lower income, male vs. female. All play a role in separating reality from fantasy.
Ride Sharing Services are Growing Thanks to a Few
If you look at where most Uber and Lyft users (based on the app phone usage) are coming from, it is quite easy to spot an income gap in the userbase. 31% of Uber app usage and 24% of Lyft app usage over the last quarter of 2016 came from American consumers falling in the top 25% income bracket.
In our research, only 18% of the consumers interviewed said they use Uber. Another 4% stated they use Lyft. Interestingly, 7.5% stated they shifted from Uber to Lyft as Uber has been in the news for all the wrong reasons. As one would expect, usage grows among early tech adopters. 29% of them say they use Uber with 8% saying they use Lyft. What is also interesting, however, is this market segment seems to be even more sensitive to the news surrounding Uber. An extraordinary 25% said they switched from Uber to Lyft. Millennials who, as a group, are usually portrayed as having a high social responsibility, do not seem to be impacted by the negativity surrounding Uber as only 11% said they shifted away to use Lyft.
The majority of Americans still own a car (82% to be exact) and another 9% have access to one they share with a family member. Ownership declines slightly among millennials to 72%, while car sharing rises to 14%. When it comes to planning their commute, only 4% will consider whether to drive their car or use a ride-share service and another 2% would consider whether to use a car service or a ride-share service.
It seems safe to say the death of car ownership is highly exaggerated.
Design Trumps Safety and Environment
I have been arguing for quite some time that, while we wait for self-driving cars to get to market, there is a lot of value car manufacturers can deliver, especially around safety. Sadly, however, safety is not the primary factor that drives consumers’ purchase. Design beats safety 50% to 24%. Safety is even less of a priority among early tech adopters. 55% mention design as the key driver and only 10% mention safety.
Safety was, however, on the minds of those consumers planning to replace their car over the next 12 months. 49% indicated blind spot warning systems, 49% mentioned parking cameras and 36% said auto-braking for collision avoidance were all things they were looking at. Although those potential buyers might not see these individual features as adding to their safety, they certainly do. The fact consumers do not think of these features as safety ones is interesting, as it could pose a challenge on how to advertise them in a commercial, calling more for an individual show and tell than an overarching claim of safety.
Fully electric cars score high with early tech adopters. 52% see fully electric capability as a key feature of their next car. Only 17% of the supposed environmentally conscious millennials prioritize a fully electric car for their next purchase.
Early Tech Adopters, not Millennials, are Ready for Self-Driving Cars
Big brands like Apple, Google, Tesla and more might all be in the race to deliver self-driving cars but consumers are certainly not holding their breath.
Only 11% of the consumers we interviewed said they are looking forward to computers taking over the driving and 29% stated they would never be seen in a self-driving car. Interestingly, 21% trust the technology but believe regulations will take a long time to make self-driving cars a reality. Early tech adopters are more open to the idea, with 29% looking forward to having computers take over driving and another 26% looking forward to using the time to catch up on reading or other content.
Who consumers trust with bringing to market a reliable self-driving car is not a done deal, at least when it comes to the runner-up brands. Tesla is the winner across all segments but the number two and three spots change quite a bit, depending on the group you are looking at. Overall, 28% of consumers believe in Tesla while 24% believe it will be a traditional car manufacturer. Among early tech adopters, the support goes to more tech brands, with Apple at 30% and Google at 17% but Tesla still best encapsulating the blend between cars and tech with 34%. Millennials also see Tesla as the brand most likely to deliver a reliable self-driving car. 38% in the group mentioning the Tesla brand. The number two choice is Google at 23% followed by traditional car manufacturers at 15% and Apple at 13%. Women hold almost similar faith in traditional car manufacturers (28%) as they do Tesla (27%). With men, the split between the two is 22% to 28% for Tesla.
I am not surprised consumers don’t have it all figured out when it comes to the future of commuting. A world where we no longer own cars and rely on self-driving ones when we are a passenger is quite different from today. A challenge for all involved though, when it comes to brand trust and intent, is that consumers are certainly influenced by how vocal companies are about their plans.
Imagining the Future of Commuting is Harder than Imagining the Future of Computing
How consumers feel about cars and their commute today, coupled with the uncertainty about artificial intelligence taking over from humans, shows how imagining how different our commute will be in 10 years is more complicated than thinking we could take our phone or PC outside of our home or office. Harder not only because it questions our beliefs in technology but because it wants to change habits and practices that have been set for decades. Think about waiting to turn 16 or 18 to get your driving license and how life empowering it is getting your first car. How can getting your own Uber account make up for that? How can you trust a computer in a car not to crash as much as your PC or phone does and knowing your life and the life of others depends on it? Big questions I am not sure consumers have answers for yet.
Streaming has become the big thing in the music industry over the last few years. On the one hand, it’s the fastest growing form of consumption for music but, on the other, it’s a medium the music labels seem to feel pretty ambivalent about, given their frequent spats with YouTube in particular. The real picture, of course, is always a little more complex than it seems. Here are some data points on what’s happening with the three big music labels and how streaming ties in.
As exciting and fast moving as the topics of augmented reality (AR) and virtual reality (VR) may be, there’s a critical question that needs to be asked and thoroughly analyzed when it comes to these technologies.
Are they well-suited for regular use or just special occasions?
While simple on the surface, the answer to the question carries with it key implications not just about the potential size of the market opportunity, but the kinds of products that should be created, the manner with which they’re marketed and sold, and even when different types of products should come to market.
As an early enthusiast of both AR and VR—particularly after having tried several devices, such as Microsoft’s HoloLens and HTC’s Vive—it was (and still is) easy to get caught up in the excitement and potential of the technology. Indeed, the first time you get a demonstration of a good AR or VR headset (and not all of them give a great experience, by the way), you can’t help but think this is the future of computing.
The manner with which VR engulfs your visual senses or AR provides new ways of looking at the world around you are pretty compelling when you first try them. That’s why so many people and companies, from product makers to component suppliers to software makers to retailers are so eager to offer an AR or VR experience to as wide a range of consumers as possible. The thinking is (or has been) that once people try it, they’ll be hooked.
While that’s certainly a valid and worthwhile effort, as time has passed, it’s not entirely clear that merely exposing people to AR and VR is all that’s necessary to achieve the kind of market success that many presumed would occur. In fact, a number of recent consumer studies have highlighted what general market trend observations will also confirmâ€”AR and VR products are indeed growing, but at a slower pace than many (including me) expected.
So, the obvious question is why? Why aren’t more people getting into AR and VR and purchasing more of the products and software that provide the experience?
While there isn’t likely one answer to that question, one can’t help but think about the underlying assumptions that are buried in the title and first question of this column. Is it realistic to think that AR and VR are ready for general use, and if they’re not, is it fair to assume that people are willing to spend good money on something they may only use occasionally?
At its essence, that’s the fundamental question that needs to be answered if we are to understand how the AR and VR markets are likely to evolve.
To be fair, some of the technological limitations facing current products certainly have an impact on the market. Large, clunky, wired headsets are not exactly the stuff of mass market dreams, after all.
But even presuming the technology can be reduced to a manageable or even essentially “invisible” form into regular-sized glasses—and it will still be a long time to really get things that small—is the very fact that it’s in a form that has to be put on our face going to keep it from ever really succeeding?
As we’ve seen with smartwatches, just because technology can be reduced down to a reasonable size and into a well-known form, doesn’t mean people will necessarily adopt it. Even cool capabilities haven’t been able to convince people who’ve never adapted to or cared for wearing a regular watch to don a smartwatch. They just don’t want it.
In the case of glasses, it turns out that over 60% of people do wear some kind of eyeglasses (and another 11% or so wear contacts), but the results vary dramatically by age. For the highly targeted segment under age 40, eyewear usage is less than half of that, meaning nearly ¾ of consumers under age 40 don’t wear corrective eyewear. Trying to convince that group to put something on their face other than for occasional special purposes seems like a daunting task, regardless of how amazing the technology inside it may be.
Even if we get past the form factor issues, there are still potential issues with the supply of engaging content and experiences once the initial excitement over the technology wears off—which it does for most people. A great deal of effort from companies of all shapes and sizes is happening in VR and AR content, so I do expect things to improve, but right now there are a lot more one-time demos than applications with long-term lasting value.
Ironically, I think it could be some of the easiest and simplest types of applications that end up giving AR, in particular, more lasting power and market influence. Simple ways to augment our knowledge or understanding of real world objects or processes will likely seep slowly into general usage and eventually reach the point where we’ll have a hard time imagining life without them. We’re not there yet, though, so for now, I think AR and VR are best suited for special occasions—with appropriate adjustments in market expectations as a result.
This week’s Tech.pinions podcast features Carolina Milanesi, Jan Dawson and Bob O’Donnell discussing numerous events and companies related to China, including Microsoft’s Surface Pro launch in China, Le Eco’s US restructuring, earnings and smartphone shipments from Lenovo, and new PC announcements from Huawei.
Google’s I/O developer conference is interesting because the company covers a lot of ground and talks about a lot of things in the keynotes. As a result, not everything that merits mainstage discussion one year is still top-of-mind for executives a year later. Still, I was somewhat surprised to see how little stage time Tango—Google’s mobile augmented reality technology—got at this year’s event. This despite the fact augmented reality has been a key focus of other recent developer conferences, including Facebook’s F8 and Microsoft’s Build. I can’t help but wonder: Is Google struggling to find progress with Tango or is it just waiting for Apple and its developers to validate the mobile AR market?
Two to Tango Nearly a year ago, I wrote about Google’s decision to turn Project Tango into a full-fledged initiative at the company. Tango utilizes three cameras and various sensors to create a mobile augmented reality experience you view on the phone screen. By tracking the space around the phone and the device’s movement through that space, Tango lets developers drop objects into the real world. In January, I wrote about my experiences with the first Tango phone from Lenovo and noted that a second phone, from ASUS, was also on the way. More than five months later, Google executives said on stage at I/O that there are still only two announced Tango phones. Worse yet, much of the discussion around the technology was a rehash of previous Tango talking points and the one seemingly new demo failed to work on stage. In fact, aside from a video about using Tango in schools (Expedition AR), Tango’s biggest win at I/O seemed to be the fact Google is using a piece of the technology, dubbed WorldSense, to drive future Daydream virtual reality products.
My experience with Tango back in January showed the technology still had a long way to go, with the device heating up and apps crashing on a regular basis. But it also showed the potential of mobile AR. The fact is, developers can drive a pretty rudimentary mobile AR experience on most any modern smartphone, as the short-lived hype around Pokémon Go proved. But for a great experience, you need the right hardware and you need the right apps. That Google hasn’t seemed to make much progress in either, at least publicly, is surprising, as it would seem to be an area where the company has a substantial head start on Apple’s iOS and iPhone.
Waiting for Apple? One of the biggest predictions around Apple’s next iPhone is that it will offer some sort of mobile AR experience as a key feature. Apple hasn’t said it will but CEO Tim Cook’s frequent comments about AR, and the company’s string of AR-related acquisitions, certainly point in that direction. Which has me wondering if maybe Google has slowed down on Tango because it needs Apple (and its marketing muscle) to convince consumers they want mobile AR. Or perhaps, more importantly, mobile developers should embrace the technology and create new apps.
Apple will likely ship the next version of the iPhone in September or October of this year. But the company’s Worldwide Developers Conference is happening in just a few weeks. So the question becomes: Does Apple begin to talk about augmented reality experiences on the iPhone now or later? If now, does that mean the company will support AR on existing iPhones or will only the new iPhone support the technology? As I noted last September, the addition of a second camera to the iPhone 7 Plus makes it a reasonable candidate for some AR features.
Chances are, if Apple is planning a big augmented reality push for iPhone, it already has key developers working on apps under non-disclosure agreements. But to drive big momentum, the company will need to get a significant percentage of its existing developer base to support it, too. It will be interesting to see if and what Apple discloses during the big keynote on June 5th. If Apple does put its full weight behind such an initiative, it can move the market. Such a move might jumpstart adjacent interest in Tango.
As for Google in the near-term, Daydream VR is clearly a bigger priority, as the company is working with HTC and Lenovo to bring to market standalone headset products and executives noted that more phones would soon support the technology, including Samsung’s flagship Galaxy S8 and S8+. In fact, Google predicted that, by years’ end, there would be tens of millions of Daydream-capable phones in the market. That’s the kind of scale Google likes and the kind of scale Tango can’t hope to achieve. Yet.
The shift in how consumers consume entertainment content has been top of mind for us from a research perspective for some years. The fundamental questions and behavioral shifts we have been watching are how consumers are shifting time from live TV experiences to more on-demand ones and what technology/devices are they consuming the different types of content with.
The US smartphone market is maturing rapidly, with the vast majority of US phone users now using smart rather than feature phones. As a result, growth is slowing dramatically. That, in turn, means the vast majority of market share gains will now come from customers switching behavior between vendors and platforms rather than from new users and sales growth will come almost exclusively from switching and upgrades.
Smartphone Base and Sales Growth both Slowing
Growth in the US smartphone base and sales of smartphones are both slowing. The first chart below shows year on year growth in the smartphone base in the US across the five largest operators:
As you can see just over two years ago, we saw 28 million new smartphone users in the base year on year, but that number has now fallen to less than half at just 13 million in the past year. That slower growth itself would already be having an impact on smartphone sales by the carriers, but we’re also seeing a lengthening of the upgrade cycle as people hold onto their phones for longer, both because their phones are becoming better and more reliable and because new payment structures incentivize that behavior. As such, carrier smartphone sales have been falling for several quarters:
That decline really began to kick in after the iPhone 6 bump was over, in Q4 2015, which was the first decline ever in annualized smartphone sales in the US market. But it has continued since then. That’s the result both of the smaller number of new smartphone customers in the market, as seen in the first chart, and the slower upgrade cycles I mentioned.
Upgraders and Switchers Make Up over 90% of Smartphone Sales
What’s even more interesting is if you compare the numbers shown in the two charts to derive the percentage of smartphone sales that go to new buyers versus those upgrading an existing smartphone or switching to a different brand of smartphone. The latter category made up 70% of postpaid smartphone sales in Q3 2013 but over 90% for two of the last three quarters:
In other words, nine out of ten postpaid smartphone sales are now going to people who are replacing an existing smartphone, which means the emphasis for all smartphone vendors in the US should be on two things:
Convincing people who have one of your smartphones already to replace it with a newer version
Convincing people who own a competing smartphone to switch to one of yours.
It’s no coincidence, therefore, that Tim Cook has mentioned upgrade and switching behavior repeatedly on the last few Apple earnings calls – these two behaviors will make up the bulk of iPhone sales in many markets around the world.
The Value of Driving Faster Upgrades
It also helps to explain why we saw Apple this week launch a new section of its website specifically targeted at switchers from Android. This is where many of Apple’s customers will come from in the future, especially in the US but also in many other markets. It also means smartphone vendors in the US and other mature markets are going to have to make the upgrade argument more explicitly. Given the relatively high loyalty rates for some leading brands, switching is going to make up a minority of total sales and many sales will come from within the base.
In the past, the carriers’ pricing and upgrade policies around smartphones drove people towards a two-year cycle and though that was never the universal pattern, it held true for many people. But now, under the new installment and leasing plans, that default two-year upgrade has gone away and been replaced by an average closer to three years. As such, there’s an enormous amount of additional smartphone sales to be driven by making the case for people to go back to a two-year cycle and for a smaller number to adopt a one-year upgrade cycle.
The value here is obvious – on a base of 100 million phones sold over the last three years, a three-year upgrade cycle suggests 33 million phones sold a year, whereas shortening it by six months to 30 months drives 40 million sales a year. Shortening it by a full year to 24 months would drive 50 million a year. As such, there’s a massive incentive for vendors to drive upgrades and we’re going to see an increasing emphasis on that factor in the coming years across the board.
Arguably, some Android vendors are already trying to drive faster upgrade behavior with poor operating system upgrade support after the first eighteen months or so, while Apple has introduced the iPhone Upgrade Program to drive one-year cycles for at least a portion of its base. Leasing or “device-as-a-service” models like these are going to grow in popularity and they’re increasingly going to be driven by the smartphone makers themselves rather than just the carriers. That also fits with a broader push towards subscription models for nearly everything in our digital lives. We should expect those programs to increasingly layer on other elements including insurance plans for devices, content services, additional devices like wearables, and so on.
Although I am a big fan of VR and more specifically, its potential for both business and consumers, my belief is that VR as an immersive experience is in its very early stages. I don’t expect VR to be significant outside of key verticals and gaming for at least five to seven years. While I do see VR-based entertainment experiences happening sooner, since Sony and other Hollywood studios hope to create VR theaters and deliver VR movies by 2018, the costs of these headsets and their need for a powerful PC of some type to drive it will keep this out of the hands of mainstream consumers for the foreseeable future.
If you ask ten different organizations what digital transformation is, you will likely get ten different answers. As is often the case, the answer depends on where each organization is in the process of integrating technology into their workflow. Many believe digital transformation means to get rid of paper, which of course is an oversimplification and not entirely the point. Others believe it is about using technology to do the same things we have always done. In other words, much of the focus is on digital and not so much on transformation.
Mobile was a Test Run
Let’s be honest, enterprise did not see mobile coming. Sure, they saw mobile phones but the impact smartphones would have on their IT department and business was never clearly understood until it was upon them. Smartphones were the start of employees’ empowerment. Carrier subsidies took away the cost barrier for the latest technology, making it accessible to the masses and those masses wanted to use that technology at work, not just at home.
“Bring Your Own Device” (BYOD) could have never been a trend when technology was so expensive only a few could afford it. We went from wanting to take home the PC we used at work to bring to work the smartphone we used at home. Smartphones were apps’ Trojan horse. Once we had our phones with us in the office, we wanted to continue to use the same applications and services we used at home. So, to BYOD we added BYOA (“Bring Your Own App”) as it was about the overall experience new mobile platforms such as iOS and Android were delivering.
Most organizations went through three phases: denial, resistance, and acceptance. Denial lasted a few years as devices came through the back door, then came a few years of resistance trying to impose mobile device management tools to limit what users could do, all in the name of security. Finally, we got acceptance with iOS now present in most Fortune 500 organizations recording a satisfaction rate of 96%.
The Rise of Millennials in the Workforce
What played to enterprise’s favor, at least a little, was the fact not everyone in their organizations, especially their C-suites, was quick to adopt these new devices and apps. That digital divide is going away faster and faster as new graduates get hired and younger managers move up the corporate ladders.
According to the U.S Census Bureau, millennials surpassed Generation X as the largest part of the American workforce back in 2015. Projections put millennials as comprising more than one of three adults in America by 2020 and 75% of the workforce by 2025.
It goes without saying millennials are very tech savvy. But the differences with baby boomers do not end there. Research has shown boomers identify their strengths as hardworking, optimistic, and used to navigating in organizations with large corporate hierarchies, rather than flat management structures and teamwork-based job roles. Millennials are quite drastically different: well educated, self-confident, multi-taskers who prefer to work in teams rather than as an individual and have a good work/life balance.
A recent study by Merrill Edge showed millennials have very different priorities in life compared to boomers. With the focus on personal achievements, millennials want to work at their dream job (42% vs. 23%) and travel the world (37% vs. 21%).
What is a Millennial’s Dream Job?
At Creative Strategies, we asked over 1,400 18 to 24 years old in the US what would make them not choose a company to work for after they were offered a job. While 35% were just happy to get a job, 46% would see not being able to work flexible hours as a dealbreaker. 21% would walk away from a job that did not let them use a smartphone for work in conjunction with their laptop or desktop, while another 17% could not tolerate an IT department that restricts what can be done with a smartphone. Finally, 14% could not be in a job that did not offer collaboration practices that fit their desired workflow, such as using apps like Google Docs or Slack, as well as video conference support.
Workflow is different for millennials. Aside from prioritizing collaboration, 65% said their preferred method to communicate is messaging apps. When it comes to collaboration, Google reigns supreme with 81% of US millennials regularly using Google Docs, 62% Google search, 59% Google Mail. Outside of Google, Apple iMessage scored the highest, with 57% of millennials saying they regularly rely on it, followed by Microsoft Word with 51%.
When it comes to devices, given a choice of laptop brands by their employer, there are only two brands that seem to matter: 62% would pick an Apple Mac and 14% would choose a Microsoft Surface Pro. Mobility is also no longer a “nice to have”. 34% of millennials say it is extremely important that the software, services and business processes they use for work are available on mobile as well as on a laptop. Finally, when coming into a job, 46% would prefer to be able to choose what laptop is given to them.
Digital Transformation to Attract and Retain
Transforming your business by embracing technology and the innovation technology empowers when it comes to business models and workflows, is necessary to attract talented employees. If that was not enough of a driver for companies, they should think about where the big spenders will come from. If 75% of the workforce by 2025 will be made up of millennials, where do you think the largest source of revenue will come from for businesses around the US? Where will the buying power be if not with millennials? Businesses will need to embrace digital transformation to deliver what their future customers will want.
I’ve lived an interesting experiment the past two weeks. I signed up for DirecTV Now, Hulu, YouTubeTV, and SlingTV to see what they offered and how it was different from my Dish TV service. For many, cordcutting is possible but, for the masses, I would argue it is not. There are still holes as well as trade-offs many still don’t quite realize. In the end, there are only a few companies I think can win as the service providers of the future and I’ll explain why. Let’s start with how these compare to a traditional TV service from the likes of Comcast, Dish, or DirecTV.
The evolution of the modern automobile is arguably one of the most exciting and most important developments in the tech world today. In fact, it’s probably one of the most important business and societal stories we’ve seen in some time.
The leadership at no less venerable a player than Ford Motor Co. obviously felt the same way and just replaced their CEO, despite his long-term tenure with the company, and the record-setting profits he helped drive during his 3-year leadership there. The reason? Not enough progress on advancing the company’s cars forward in the technology domain, particularly with regard to electric vehicles, autonomous driving, and new types of transportation service-focused business models.
As has been noted by many, these three capabilities—electrification, autonomy, and cars as a service—are considered the key trends driving the auto market today and into the future, at least as far as Wall Street is concerned. In reality, the picture isn’t nearly that simple, but it is clear that tech industry-driven initiatives are driving the agenda for today’s carmakers. And it’s pushing many of them into uncomfortable positions.
It turns out, however, that in spite of the importance of this critical evolution of automobiles, this is one of those issues that’s a lot harder to overcome than it first appears.
Part of the problem is that as cars have advanced, and various technologies have been integrated into them, they’ve evolved into these enormously complex machines. Today’s automobiles have as many as 150 programmable computing elements (often called ECUs or Electronic Control Units), surprisingly large (and heavy) amounts of wiring, numerous different types of electronic signaling and interconnect buses, and up to 100 millions of lines of software, in addition to the thousands of mechanical parts required to run a car. Frankly, it’s somewhat of a miracle that modern cars run as well as they do, although reports of technical glitches and other problems in newer cars do seem to be on the rise.
In addition to the mechanical and computer architecture complexity of the cars themselves, the organizational and business model complexity of today’s car companies and the entire auto supply chain also contribute to the problem. Having evolved over the 100+ year history of the automotive industry, the system of multiple Tier 1 suppliers, such as Harman, Delphi, Bosch and others, buying components from Tier 2 and 3 suppliers down the chain and car brand OEMs (such as Ford) piecing together multiple sub-systems from different combinations of Tier 1s to build their cars is notoriously complex.
But toss in the fact that there are often groups within the car maker that are specifically responsible for a given ECU (such as, say, heating, a/c and other “comfort” controls) and whose jobs may be at risk if someone suggests that the company changes to a simpler architecture in which they combined the functionality of multiple ECUs into a smaller, more manageable number and, well, you get the picture.
If ever there was an industry ripe for disruption, and if ever there was an industry in need of a tech overhaul, the automotive industry is it. That’s why many traditional carmakers are concerned, and why many tech companies are salivating at a chance to get a piece of the multi-trillion (yes, with a “t”) dollar global automotive industry.
It’s also why companies like Tesla have made such a splash. Despite their very modest sales, they’re seen as a credible attempt to drive the kind of technological and organizational disruption that many people believe is necessary to transform the automotive industry. In truth, however, because of the inherent and ingrained nature of the auto supply chain, even Tesla has to follow many of the conventions of multiple Tier 1 suppliers, etc., that its rivals use. The problem is that deeply embedded.
But even as those issues get addressed, they are really just a prelude to yet more innovations and opportunities for disruption. Like many modern computing devices—and, to be clear, that’s what today’s cars have become—the technological and business model for autos is slowly but surely moving towards a software and services-focused approach. In other words, we’re moving towards the software-defined “digital car.”
In order for that to happen, several key challenges need to be addressed. Most importantly, major enhancements in automotive security—both through architectural changes and software-driven advances—have to occur. The potential for life-threatening problems if either standard or autonomous cars get hacked should make this point painfully obvious.
Connectivity options, speed and reliability also have to be improved and that’s where industry-wide efforts like 5G, and specific products from vendors like Qualcomm and Intel can make a difference.
Finally, car companies and critical suppliers need to figure out the kinds of services that consumers will be willing to pay for and deliver platforms and architectures that can enable them. Like many other types of hardware devices, profit margins on cars are not very large, and with the increasing amount of technology they’re going to require, they could even start to shrink. As a result, car companies need to think through different ways of generating income.
Thankfully, a number of both tech startups and established vendors, such as Harman, are working on creating cloud-based platform delivery systems for automotive services that are expected to start bringing these capabilities to life over the next several years.
As with any major transition, the move to a digital car model won’t be easy, fast, or bump-free, but it’s bound to be an interesting ride.
Rumors have been circulating Apple will join Amazon and Google and make their own version of a smart speaker to compete with the Echo and Home speakers. Observing the commentary surrounding this rumor has certainly revealed many opinions on the matter, both in favor and against it. I even sense a debate inside Apple on whether a smart speaker is a fad or if it has staying power. I lean in the direction of Apple entering this market and competing with Google and Amazon and would like to make the case this product should exist.
Whole Room Audio The sales of Bluetooth speakers over the past few years did not get much attention even though it was a growing trend. These small and affordable units hit a pain point for many consumers in that they did not have ample speakers in many places where they wanted to consume their music. Contrary to popular opinions, as these products were starting to gain popularity, most of them rarely left the house and were simply used in rooms where a sound system did not exist (which is most rooms in the average consumer home).
The home environment is very different than the public one. Those who express their pessimism over the smart speaker solutions often misunderstand the average consumer home dynamic. In common rooms like the living room, kitchen, patio, family room, etc., access to music is either very limited or non-existent. Bluetooth speakers filled this void and validated the desire of consumers to have access to music in more rooms of the house.
From the value proposition of whole room audio alone, this would be a smart play for Apple and adding the smarts of Siri opens up a rich ecosystem as well. Apple Music is an example of something that would benefit from this hardware significantly. As every available bit of data we have proves, hardware for Apple drives their services. Hardware built to uniquely take advantage of those services will drive it even further. It is not a stretch to say, if Apple sold a smart speaker, subscriptions to Apple Music would increase significantly due to Apple’s ability to tightly integrate hardware, software, and services.
Siri is always with You and Can always Hear You One of the arguments against a Siri speaker is you always have your iPhone with you, making the iPhone the proper place for you to always access Siri. The flaw in this argument is, while your iPhone may always be with you, or not far from you, can it always hear you? The answer is no. When my iPhone is in my pocket, accessing Siri doesn’t work. When my iPhone is in the living room and I’m in the kitchen cooking, Siri can’t hear me. The counter-argument posits that Apple Watch or AirPods fill this hole since Apple Watch is always on my wrist or AirPods are in my ear. The reality, however, is not every iPhone owner will own one of those products in the foreseeable future. even if this argument is correct, the question remains: where does my music play?
This is where the home dynamic challenges Apple’s traditional and very individualized view of technology. The home is a shared a common environment, so to say everyone should just listen to their iPhone with headphones or AirPods on while walking around the house is a distorted view of what goes on in the home.
Here again is why the music experience and value of whole room audio alone makes a strong case for a Siri speaker to exist. But the challenge of putting Siri into something that can always hear you remains. A smart speaker can be purpose built to be a better listening device than your smartphone, watch or even earphones can be. This is one reason why the Amazon Echo is perceived as having better natural language processing than Siri. In a quiet, close range environment, Siri understands me as well as the Echo. However, the Echo hears me better in the normal dynamics of the home, thanks to how the microphones are built and tuned.
The Battle for the Smarthome What smart speakers are showing us is the growing battle for the smart home platform. Voice control has hit its stride as the most convenient way to interact with your smarthome. I’d also add, voice is on the cusp of becoming the mechanism to eliminate the remote with our TV experience.
The battle for the smartphone will be one fought by the number of endpoints in your home which you can interact with in some way. Amazon wants to get an Echo in every room and so does Google. Using the assistant on your phone makes sense in many contexts, however. In the home, having other ways to interact with your smart assistant beyond just your smartphone, smartwatch, or earphones, only increases the potential chances to engage with a smart assistant service.
The goal of companies battling for smart assistant domination should not limit potential chances to engage but extend their assistants far and wide in order to make sure the consumer always has a convenient way to engage. If they don’t, they risk losing key experiences to their competition.
Three companies dominate Chinese internet life to the extent they have their own acronym – BAT – for Baidu, Alibaba, and Tencent. They’ve also often been compared to US-based equivalents – Google, Amazon/eBay and, to some extent, Facebook respectively. However, in the last couple of years, the massive growth that has characterized each of these companies in the past has been less consistent across the three and it’s worth checking in to see just what’s going on with each of them.
This week’s Tech.pinions podcast features Ben Bajarin, Carolina Milanesi and Bob O’Donnell discussing Google’s IO event, including details on Google Assistant, Google Home, Android, and AR and VR platforms, along with some brief comments on the recent IoT World conference.
Data consumption continues to skyrocket, growing at about 50% per year. Average usage in mobile now exceeds 4GB per month in the US, with video an ever increasing percentage of that. Fixed broadband isn’t standing still either, with the typical Netflixing household consuming north of 200GB per month.
You would think these would be boom times for the major suppliers of network equipment to the operators. This is a market where three players — Ericsson, Nokia, and Huawei — split about $125 billion in annual global mobile network capex. But in reality, Ericsson and Nokia have been struggling of late and the forecast isn’t all that favorable. Ericsson’s mobile network business declined 10%+ in 2016 and they forecast a decline of 2-6% for 2017, indicating in their annual report that the addressable market for networks is flat to down 2% in the 2016-2018 period. Nokia’s numbers are a bit better, in part because 2016 was the first year of full reporting post the Lucent acquisition, but they nevertheless project flat-ish sales for networks this year. Cisco has had a rough time of it as well, announcing a cut of 1,100 workers this week, on top of a 7% workforce reduction in 2016. By contrast, Huawei’s revenues from network operators grew 24% in 2016, although nearly 60% of that business comes from Asia-Pacific (40% China).
Given the continued robust growth in data consumption, why is the network business so crummy and will the picture get any brighter? It is difficult to find any one reason for the relatively flat market. Our analysis boils it down to six broad factors.
1. The global nature of the business. The major suppliers do business in 100+ countries and with hundreds of operators. There are some parts of the world where network spend has gone way off. In Europe, for example, much of the 4G LTE buildout is complete but follow-on work, related to increases in network capacity, has not been as robust as anticipated. Additionally, the macroeconomic environment in certain regions, such as the Middle East and Latin/South America, has been challenging. There has also been operator consolidation in large markets, such as India, which has affected the addressable market.
2. Their share in growth markets under-indexes. The major 4G LTE buildouts in markets where Ericsson and Nokia are strongest, such as North America and Western Europe, have peaked, and those markets are now driven more by harder to project capacity enhancements and small cell deployments. Huawei’s share is stronger in geographies where there is still a large 3G/4G buildout.
3. Network operator revenues have flattened. The U.S. market is symptomatic. Although there is continued growth in data consumption, prices have declined and mobile revenues are not growing. This is playing out similarly in numerous geographies, putting put pressure on capex spend, with operators pushing their vendors harder on price.
4. The Huawei factor. We don’t see this in the US market because Huawei has been largely kept out of the network equipment business here but Huawei has taken significant share from Ericsson and Nokia and has also been very aggressive on price. Huawei now leads the global market, with 30% share, compared to 28% for Ericsson and 24% for Nokia, according to Dell’Oro Group.
5. Not capturing fair share of the fixed broadband market. Although mobile capex is flat to down in some markets, fixed line (broadband) capex is seeing an uptick, driven by fiber deployments, DOCSIS 3.1 upgrades and, in some geographies, spending on G.fast and PON. Ericsson and Nokia’s share in fixed under-index that of mobile. Nokia’s recent acquisition of Gainspeed is a signal of its efforts to grow that market segment.
6. Cost structure has not kept up with network transformation. We are in the early innings of a major transformation in networks from a hardware to a software-driven model. This impacts the equipment suppliers in three ways: they need to lower their cost structure, evolve the skill set of their workforce, and recognize that the competitive playing field will expand.
Even though the picture is currently mixed, with Ericsson especially under some pressure, I am bullish on the long-term prospects. I’ve spent time with senior level executives at the major equipment suppliers in recent months and they all recognize the business will be fundamentally different in five years than it is today.
In some ways, we’re in a bit of a ‘pause period’ before the next big wave of opportunity. First is IoT and the ability to connect the billions of devices that are projected. This market is materializing but growing more slowly and more unevenly than thought. So it’s a long game. Second, the transformation from hardware to software. The suppliers will have to keep in lockstep with their customers, the operators, on this one, and capture their fair share of this market going forward, which will undoubtedly feature a larger and more competitive playing field. There is still lots of work to be done to determine how to price for a software/cloud/network slice world. Third, a lot of resources are starting to be devoted to 5G, but it will be a couple of years before 5G-related spending begins in earnest. Finally, with much of the growth in traffic coming from video, equipment suppliers will need new technologies and offers to capture their fair share of this opportunity.
This transformation will also involve a new suite of potential customers, partners, and competitors. The Ericssons and Nokias of the world will need to do more business with major ‘webscale’ companies, such as Google, Facebook, and Amazon. A more open, software-centric network environment means there will be more competitors and lower barriers to entry but also the opportunity to partner with best of breed firms. Ericsson and Cisco are still, for example, in the early innings of their partnership. Another example is managed services and the broader world of OSS/BSS, where the network equipment suppliers will have to take share from (or work with) firms such as Amdocs, IBM, Accenture, and Oracle.
The future of the network equipment market won’t be one where three firms carve up some 80%+ of the revenues. But there’s plenty of market opportunity, as long as they capture their fair share.
Google is holding its I/O developer conference this week and Wednesday morning saw the opening day keynote where it has traditionally announced all the big news for the event. What was notable about this year’s event, though, was what short shrift Android – arguably its major developer platform – received at the keynote and that feels indicative of a shift in Google’s strategy.
Android – The First to Two Billion
One of the first things Google CEO Sundar Pichai did when he got up on stage to welcome attendees was run through a list of numbers relating to the usage of the company’s major services. He reiterated Google has seven properties with over a billion monthly active users but also said several others are rapidly growing, including Google Drive with over 800 million and Got Photos with over 500 million. But the biggest number of all was the number of active Android devices, which passed two billion earlier this week. Now, that isn’t the same as saying it has two billion monthly active users, since some of those devices will belong to the same users as others (e.g. tablets and smartphones), while others may be powering corporate or unmanned devices. But Android is a massive platform for Google and arguably the property with the broadest reach.
Cross-platform Apps and Tools at the Forefront
Yet, Android was given only a secondary role in the keynote, a pattern that arguably began last year. Part of the reason is Google has been releasing new versions of Android earlier in the year than before, giving developers a preview weeks before I/O and then fleshing out details for both developers and users at the event, rather than revealing lots of brand new information. But another big reason is a concession to two realities that have become increasingly apparent over time. First, Google recognizes it’s lost control over the smartphone version of Android, as OEMs and carriers continue to overlay their own apps and services but also slow the spread of new versions. It takes almost two years for new versions of Android to reach half the base. Second, Google also recognizes its ad business can’t depend merely on Android users because a large portion of the total and a majority of the most attractive and valuable users are on other platforms, mostly iOS.
Together, those realities have driven Google to de-emphasize its own mobile operating system as a source of value and competitive differentiation and, instead, to focus on apps and services that exist independently of it. As such, the first hour of Google’s I/O keynote this year was entirely focused on things disconnected from Android, such as the company’s broad investment in AI and machine learning, but also specific applications like the Google Assistant and Google Photos. No transcript is available at the time I’m writing this, but I would wager one of the most frequently repeated phrases during that first hour was “available on Android and iOS” because that felt like the mantra of the morning: broadly available services, not the advantage of using Android. As Carolina pointed out in her piece yesterday, that’s not a stance unique to Google – it was a big theme for Microsoft last week too.
Short Shrift for Android
But for developers who came wanting to hear what’s new with Android, the platform the vast majority of them actually develop for, it must have made for an interesting first 75 minutes or so before Google finally got around to talking about its mobile OS and, even then, not until after talking about YouTube, which has almost zero developer relevance. When it did, Android still got very little attention, with under ten minutes spent on the core smartphone version. Android lead Dave Burke rattled through recent advances in the non-smartphone versions of Android first, including partner adoption of the Wear, Auto, TV, and Things variants, and one brief mention of Chromebooks and ChromeOS.
The user-facing features of Android O feel very much more like catch up than true competitive advantages. In most cases, they’re matching features already available elsewhere or offsetting some of the disadvantages Android has always labored under by being an “open” OS, including better memory management required by its multitasking approach or improved security required by its open approach to apps. From a developer perspective, there were some strong improvements, including better tools for figuring out how apps are performing and how to improve that, support for the Kotlin programming language, and neural network functionality.
A New Emerging Markets Push
Perhaps the most interesting part of the Android presentation was the segment focused on emerging markets, where Android is the dominant platform due to its affordability and in spite of its performance rather than because of it. The reality is Android at this point, stripped of much of its role as a competitive differentiator for Google, has fallen back into the role of expanding the addressable market for Google services. That means optimization for emerging markets.
Android One was a previous effort aimed at both serving those markets better and locking down Android more tightly but it arguably failed in both respects. It’s now having another go with what’s currently called Android Go. This approach seems far more likely to be successful, mostly because it’s truly optimized for these markets and will emphasize not only Google and its OEMs’ roles but those of developers too. That last group is critical for ensuring Android serves emerging market users well and Google is giving them both the incentives and the tools to do better. I love its Building for Billions tagline, which fits with the real purpose of building both devices and apps for the next several billion users, almost all of which will be in these markets.
Last year at Google I/O, the term AI was thrown around frequently. This year, Google didn’t use AI as much during their opening keynote but they did use the term machine learning much more. It was a subtle but important shift, which speaks to how Google is orienting themselves around their mission statement to “organize the world’s data”.