Updating My Smartphone Market Analysis: The Market Is At A Strategic Inflection Point

NOTE: My original post, originally published in January 2013, continues to be one of the most viewed on the site.  Android and Apple have enjoyed an estimated 98% market share between the two, and many of my earlier projections regarding this market appear to have been borne out. However, the smartphone market has now matured to the point that it is at a strategic inflection point which has major implications for the future of this market and the major competitors. 

The Rapid Maturation of the Smartphone Market Should Have Been Foreseen

The signs of a dangerous strategic inflection point in the global smartphone market have been evident for some time: the rapid rise of domestic Chinese competition combined with the predictable end of the Western consumer fascination with “the next smartphone.” Five years ago, Samsung Electronics, the South Korean technology giant sat atop the Chinese market, selling nearly one of every five devices there. Today, Samsung is an also-ran, controlling less than 1% of the world’s largest smartphone market. Samsung has trimmed local staff and last month closed one of its two Chinese smartphone factories.  Surely, Apple must have been aware of this and the growing number of much lower cost domestic Chinese competitors that were already hammering Samsung.  Apple’s release of a lower cost iPhone, the XR, in Asia in October 2018 appears to have been a case of too little too late. Sales of the device have been disappointing in both Japan and China, and Apple has been relegated to offering “trade-ins” to camouflage slashing the price of the XR.  Apple had ample warning over at least a five year period.

Meanwhile, I sensed a very different kind of maturation of the smartphone market in North America and Europe. In what I like to call the smartphone market “Star Wars” phenomenon, each new generation of smartphones was greeted with a hysteria that was only paralleled by the Star Wars craze. This simply could not continue indefinitely.  Beginning in 2017 it was apparent the smartphone market as a whole was already shrinking, and there was significant anecdotal information in the media that smartphone hysteria was waning, if not publicly available hard data. I began having discussions about this with Tim Bajarin, one of the top Apple analysts.  As Apple moved to launch the iPhone X and broke the $1000 price point barrier it encountered clear if perhaps not overwhelming evidence that the smartphone market was softening: more people chose not to upgrade their phones. I like to say that the last major feature consumers seemed to want/need was water resistance, as so many had already experienced the disastrous “toilet drop.”  I view the Bluetooth earbud phenomenon as a distraction and perhaps a hint of the coming change. Samsung flirted with water resistance as early as the Samsung Galaxy S5, perhaps because water resistance had become a standard feature in the Japanese market. By 2018, water resistance was standardized, and the market began experimenting with “the next big thing” for phones, folding screens. WTF? It was clear to me that the smartphone market had run out of gas, and was undergoing rapid maturation, as phones were no longer fascinating and novel, but just simply commodity devices.

To my mind, and IMHO, this has been a case study in a classic “strategic inflection point” that was missed by both Samsung and Apple. Samsung might be forgiven for being the first to cross into the inflection point, while the media was still promoting “the next smartphone” hysteria, and not yet recognizing the sense of the market. Apple has no such excuse. The rapid maturation of the smartphone market should have been foreseen by Apple. Apple’s most disturbing move was the decision to increase pricing rather than delivering greater value, at exactly the wrong time. The crucial rhetorical question is what are the larger implications for Apple’s future business?

READ MORE:  Apple Beware: Samsung’s Fall in China Was Swift 

READ MORE: Samsung Profit Outlook Surprisingly Weak

 

Vendor Data Overview

Smartphone vendors shipped a total of 355.6 million units worldwide during the third quarter of 2018 (Q3 2018), resulting in a 5.9% decline when compared to the 377.8 million units shipped in the third quarter of 2017. The drop marks the fourth consecutive quarter of year-over-year declines for the global smartphone market. 

Quarter	2017Q1	2017Q2	2017Q3	2017Q4	2018Q1	2018Q2	2018Q3
Samsung	23,2%	22,9%	22,1%	18,9%	23,5%	21,0%	20,3%
Huawei	10,0%	11,0%	10,4%	10,7%	11,8%	15,9%	14,6%
Apple	14,7%	11,8%	12,4%	19,6%	15,7%	12,1%	13,2%
Xiaomi	4,3%	6,2%	7,5%	7,1%	8,4%	9,5%	9,5%
OPPO	7,5%	8,0%	8,1%	6,9%	7,4%	8,6%	8,4%
Others	40,2%	40,1%	39,6%	36,8%	33,2%	32,9%	33,9%
TOTAL	100,0%	100,0%	100,0%	100,0%	100,0%	100,0%	100,0%

 

 

 

2009 to 2012

In one of the most interesting high tech scenarios in years, the “smart mobile” OS (operating system) market is shaping up to be a classic Battle of the Titans. Key strategic issues, theories, speculation, and money, lots of it, are making this a great real-time strategy and marketing case study for management students of all ages (smile).  So as Dell prepares to fade into the sunset, get yourself a drink of your choice, and some popcorn, sit back and watch it all unfold.

The best metaphor I can apply to this might be a “destruction derby” featuring at least two players,  or perhaps a bizarre multidimensional Super Bowl or Rugby World Cup match, with four teams on one playing field with four goal posts at each cardinal point of the compass..  At the moment all four teams are tackling, passing, and running at each other in a confused pile. There are scrums, rucks and mauls in multiple locations. Two competitors, Google and Apple appear to be winning. The other two, Microsoft and Research in Motion, are pretty banged up, but still playing.

The two currently dominant competitors, Google Android with its acquisition of Motorola Mobility, and Apple IOS are rapidly consolidating and expanding their global market positions, via partnerships, vertical integration, and application development ecosystems. Microsoft has publicly committed to spending massively to make Windows 8 the third OS option, but a recent IDC mobile OS market forecast projects Microsoft with only a miniscule share in 2015.  Something tells me that Steve Ballmer will go on a rampage if that happens, rather like the video of him screaming and dancing on stage in my post “Extrovert or Introvert, Authentic Presentations Take Practice,” November 30th. http://mayo615.com/2012/11/30/introvert-or-extrovert-authentic-presentations-take-practice/

The key question is whether Microsoft or RIM, will be able to establish a third mobile OS to a survivable market position.  It is not at all clear that either can do so at this point.  The market is also speculating that mobile hardware market leader Samsung, is possibly considering making its own play by creating its own mobile OS ecosystem.  While this may seem far fetched, this kind of vertical integration seems to be making a resurgence as a strategic move, after having been discredited.  Then there is the perennial Nokia, who has seemed to be on death’s door, but may be coming back. As a strategic partner for Microsoft, Nokia’s fate may have a huge bearing on Microsoft’s strategy to reinvent itself as the PC goes into atrial fibrillation. Will Amazon enter the fray with its own smart phone entrant, and if so, with whose OS?  Will Research in Motion and the Blackberry be able to achieve a survivable market share, or is RIM already a walking zombie?

Finally, in a kind of death dance patent dispute reminiscent of the film, Gladiator, Nokia and RIM are now locked in new lawsuits and counter-lawsuits, as if to say, “If neither of us are going to survive, we might as well kill each other for the entertainment value.”

Here’s a more concise overview of the race to be the third mobile platform:

• The argument in favor of a third platform is straightforward and compelling: A new, robust competitor will prevent the dominant platforms from growing complacent or stifling innovation. Apple and Google are pretty happy with the status quo. Consumers are probably not consciously pining for a third mobile platform. Developers would happily get behind a third platform if it widened their revenue streams.
• Microsoft has a head start: It launched Windows Phone in 2010, and tablet-friendly Windows 8 this year. It is experienced in building developer communities. However, Windows Phone has so far only managed a paltry 3 percent platform market share.
• Amazon has the most potential to upend the market: A smartphone would be a natural extension of Amazon’s distribution empire, and its Kindle Fire tablet play. Unfortunately, the most recent E-reader forecasts show them in sharp decline as growth in full-functional tablets squeeze them out.  Amazon has 106 million unique visitors accessing its sites, many of them with credit cards on file. 
• Samsung is a dark horse: Its dependency on Android may become a liability and push the South Korean manufacturer into the platform business. Samsung’s strength is its hardware sales prowess — Samsung shipped over 56 million smartphones in the third quarter of 2012. 

Read more: http://www.businessinsider.com/bii-report-the-race-to-be-the-third-mobile-platform-2013-1#ixzz2IepLaaka

For Management students, this real time case study offers the opportunity to apply and ponder:

1. The time tested 1976 Boston Consulting Group (Bruce Henderson) “rule of three and four.”  In a stable mature market there can be no more than three surviving competitors, the largest of which can have no more than four times the share of the smallest of the three.   Here, the question is whether a third competitor can successfully emerge at all?

2. Barriers to market entry. Former Intel Marketing VP, Bill Davidow‘s book, Marketing High Technology, An Insider’s View, still considered the standard on the topic, suggested his own metric for a barrier to a new market entrant, or even a competitor just struggling to survive the market shakeout. The market entry barrier rule of thumb in dollars is three-quarters the most recent annual revenue of the market leader. In this case, that is a very big B number…  Microsoft has the bucks, but is it just too late?

3. Vertical integration. Rumors of Samsung introducing its own mobile OS seem implausible, but hey Nvidia just announced its own gaming console to compete with Microsoft, Nintendo, and Sony.

4. Resources and capabilities. It is necessary to consider the respective resources and capabilities of each of the many direct players, and those playing in related markets that bear on the mobile OS market.

5. Related markets, new markets, peripherally involved competitors and products which all could play a role in the eventual outcome of this. The integrated Internet HDTV market is only one example. Featuring Apple, Microsoft, Google, and Samsung, and the HDTV manufacturers, it could influence things.  What if Amazon were to vertically integrate and introduce its own smart phone?

This is the hairball of this Century so far.  Are you all still with me, here?

Financial Times ranks UBC Sauder’s Master of Management program #1 in North America

 

Source: Financial Times ranks UBC Sauder’s Master of Management program #1 in North America | UBC Sauder School of Business, Vancouver, Canada

September 10, 2018

Tagged: 

All News, Master of Management, Press Release

The Financial Times, one of the world’s most influential business news outlets, has ranked UBC Sauder’s Master of Management (MM) the leading program of its kind in North America for 2018. Offered by the school’s Robert H. Lee Graduate School, the nine-month MM gives recent non-business graduates the skills they need to gain a competitive edge in the job market.

Published today, the annual “Global Masters in Management Ranking” placed the UBC Sauder’s MM program 1st in North America, up from 2nd in 2017, and 49th in the world, up from 58th in the world last year. Among the ranking’s highlights, the UBC Sauder program stood out for the career success of its students, with 95 percent of grads achieving full-time employment within three months of graduation.

Developed to address the evolving needs of today’s most innovative employers, the MM curriculum provides students with a vital grounding in a broad spectrum of business and management disciplines, from accounting to finance and marketing to strategic management. Students are coached to meet their career goals and connected with opportunities in organizations in Vancouver and around the globe.

UBC Sauder’s MM program is consistently ranked among the best in the world and has ranked as the number one program in North America five out of the past six years.

“Specsmanship”: Missing the Point of a “Complete Product”

The Definition of “Specsmanship”

Wikipedia defines Specsmanship as the inappropriate use of specifications or measurement results to establish the putative superiority of one entity over another, generally when no such superiority exists. It is commonly found in high fidelity audio equipment, automobiles and other apparatus where uneducated users identify some numerical value upon which to base their pride or derision, whether or not it is relevant to the actual use of the device. Smartphones and the early microprocessor market are also examples.

Two Specsmanship Case Studies

Most recently, we are seeing specsmanship in the smartphone market.  As the smartphone market has matured into 7th, 8th, 9th generations of smartphones, the differentiation among products has been reduced to smaller and smaller differences in the products : resolution of the camera, display size or alleged brightness, etc.. In earlier generations, Apple, and the Android phone manufacturers created a highly effective intangible market need to possess their latest generation phone in which features were less important. I called this market need the smartphone “Star Wars” phenomenon causing people to line up around the block as if to see the latest Star Wars film.  Most market analysts now agree that the smartphone market frenzy has run its course. Apple’s strategy to reinvigorate the market by creating a higher price point product has predictably fallen flat. Apple’s move surprised me because the marketers at Apple seemed to miss the consumer market sentiment. Water resistance in my view was the last major device feature with a market need to protect phones from the dreaded “toilet drop.” Samsung introduced water resistance in the 5th generation Galaxy, and permanently in the Galaxy 7. I have not been motivated to buy a new phone since the Galaxy 7.

In another, more dramatic and pivotal example, my first personal experience of the specsmanship phenomenon was at Intel, during the original first generation microprocessor war: the Intel 8086 versus the Motorola 68000. Without diving too deeply into the technical specifications, the Intel 8086 on its face was technically inferior to the Motorola 68000 at a critical time when microprocessors were very new, customers had doubts, and the market was just beginning to establish a foothold in electronics design. Facing this marketing challenge, Intel’s Vice President of Marketing at that time, Bill Davidow, made a momentous decision to “differentiate” Intel and the 8086 not its specifications, but on Intel’s long-term vision for its microprocessor family of products and to focus its marketing efforts on senior management executives of its customers, not the engineers.  Davidow famously delivered a presentation to the Intel sales force, “How To Sell A Dog.” The message was to ignore the spec and concentrate on the customers higher level needs, and the security of an investment in Intel with its long-term vision to provide them with greater value and competitive advantage.

Motorola fatefully decided to concentrate its marketing strategy entirely on the superior technical specifications of the 68000, poignantly winning a small skirmish but losing the war. Intel dominates the general purpose microprocessor market to this day. The Intel versus Motorola story is definitively detailed in Bill Davidow’s now famous book, Marketing High Technology: An Insider’s View. Davidow’s book also includes numerous gems of insight into marketing. Bill’s thoughts on the barriers to a new entrant into an existing market have stuck with me over the years.

If the smartphone market is ever to revive, it needs to learn from Davidow’s lesson, ignore the specs, and concentrate on creating a higher level marketing message that meets deep customer needs.

 

Bill Davidow, former Intel Marketing Vice President

 

 

HBS Professor Ted Levitt’s Total Product Concept And Its Influence On Davidow

Though I have met with Bill Davidow many times, spent time with him, and invited him to speak with executives of an emerging technology company, I have never directly asked him about the degree to which Harvard Professor Ted Levitt’s concept of a Total Product influenced him. It does seem highly likely that it is the case.  By way of example, marketers often refer to “product differentiation.” Specsmanship is the lowest possible form of product differentiation. Creating a higher level of product value is the true essence of product differentiation. This is also the essence of Levitt’s now legendary Total Product. What is different in the Intel case is my memory of how Levitt’s Total Product model, was adapted at Intel. I will explain.

Harvard Business School Professor Ted Levitt

 

READ MORE: Levitt HBR: Marketing Success Through Differentiation of Anything

Levitt’s classic Total Product model is graphically displayed here:

In my personal view and recollection which I show here, I believe Davidow focused on the “Augmented Product,” “Expected Product” and the “Potential Product,” and avoided the “Generic Product” to win the specsmanship war with Motorola. I also distinctly remember a slightly different Intel model which is shown below.

The Intel Variation On The Ted Levitt Total Product Model

It is my recollection that we at Intel, and most likely Bill Davidow in particular, adapted the Ted Levitt model to Intel’s particular new market realities, and focused on the outer circle, “Corporate Vision” and “Product Roadmap” to win the microprocessor war. The “Engineering Deliverable” is not a product. It is only a naked engineering project deliverable. Specsmanship does not make it a product. The “Corporate Vision” and “Product Roadmap” offer greater long-term value to customers, and ultimately create a powerful brand image.

Industry Analysis: The Bigger Picture

by David Mayes on Jul 19, 2013

Industry analysis is not a well-understood discipline. It sits between macroeconomic analysis and market analysis and uses tools from both. It is most commonly associated with the financial services industry which produces guides for their investors. But there are also large global consultancy firms that specialize in industry analysis.   It is an important tool for governments, regional development agencies. Companies use industry analysts to assist in their strategic planning. Those who can anticipate the changes in an industry are more likely to be successful.  This brief presentation provides an overview of what industry analysis is, examples of industry analysis in action, and why it is so important.

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Industry Analysis: the bigger picture.  Presentation Transcript

• 1. Industry Analysis: The Bigger Picture July 2013 ©David Mayes 1
• 2. Industry Analysis: The Bigger Picture David Mayes, Lecturer ©David Mayes 2
• 3. Introduction 1. Lecturer Introduction 2. What is Industry Analysis? 3. Why Industry Analysis? 4. Suggested Reading Industry Analysis: The Bigger Picture ©David Mayes 3
• 4. Lecturer Introduction ©David Mayes 4 Industry Analysis: The Bigger Picture
• 5. Industry Analysis Lecturer Introduction David Mayes: LinkedIn Profile: http://www.linkedin.com/in/mayo615 Google+ Profile: https://plus.google.com/u/0/118299264663896711410/about Email: david.mayes@ubc.ca mayo0615@gmail.com UBC Office: EME 4157 (250) 807-9331 Hours: Thurs. 12PM – 2PM or by appt. Cellular: (250) 864-9552 Twitter: @mayo615 Experience: Executive management, access to venture capital, international business development, sales & marketing, entrepreneurial mentorship, technology assessment, strategic planning, renewable energytechnology. Intel Corporation, 01 Computers Group (UK) Ltd., Mobile Data International, Silicon Graphics, Sun Microsystems, Ascend Communications, P-Cube, Global Internet Group LLP, New Zealand Trade & Enterprise. ©David Mayes 5
• 6. Introduction 1. Instructor Introduction 2. What is Industry Analysis? 3. Why Industry Analysis? 4. Suggested Reading ©David Mayes 6 Industry Analysis: The Bigger Picture
• 7. What is Industry Analysis? ©David Mayes 7 Industry Analysis: The Bigger Picture
• 8. Industry Analysis What is Industry Analysis? A Proposed Definition of Industry Analysis: Industry analysis looks at long-term trends and forces that affect an overall industry. It is a strategic analysis tool used by governments, economic development agencies, financial services & investment firms, management consultancy firms, and businesses. Current estimates and future industry projections may include consideration of a broad range of global and local factors: economic, supply and demand, individual competitors, other external future forecasts, and government policy affecting the industry. Industry analysis is commonly performed within the framework of macro- economic analysis as well as market analysis theories and tools. ©David Mayes 8
• 9. Industry Analysis What is Industry Analysis? Industry Analysis As A Discipline: • Best known in the financial services industry • Industry performance & forecast guides for investors • High profile industry analysis consultancy firms • IDC, Gartner, Forrester, dozens of others in vertical markets • Used as a strategic planning tool by companies • “How to” guides/textbooks very limited, but masses of primary statistics and reports • Seen as between macro-economics and market research ©David Mayes 9
• 10. Macro Economy: Global, Regional, National An Industry: Global, Regional, National A Market: Can Be Industry Sub- segment(s) Competitor(s) Us Industry Analysis What is Industry Analysis? Hierarchy of Economic Analysis OUR FOCUS ©David Mayes 10
• 11. Industry Analysis What is Industry Analysis? IDC Forecasts Worldwide Semiconductor Revenues Will Reach $305 Billion in 2012 IDC Forecasts Worldwide Semiconductor Revenues Will Reach $305 Billion in 2012 Business Wire FRAMINGHAM, Mass. — December 15, 2011 “Despite the continuing global macroeconomic problems, semiconductor inventory overbuild early this year, and current DRAM oversupply, semiconductor revenues will register positive year-over-year (YoY) growth of 3.4% and 3.1% with $296billion and $305 billion for 2011 and 2012, respectively, according to the year-end 2011 update of IDC’s Semiconductor Application Forecaster (SAF).”The 2011 year-end update reaffirms the views IDC expressed in its qualitative SAF update published in November 2011….” Yada yada yada… Full Report Price: $1,000, other reports up to $10,000 Industry Analysis Example ©David Mayes 11
• 12. Industry Analysis What is Industry Analysis? http://www.youtube.com/watch?v=31SpS3 6ynDs&hd=1 Semiconductor Industry Analysis: Intel Cuts 2012 Outlook on Hard Drive Shortage (Flood in Thailand) ©David Mayes 12
• 13. Industry Analysis What is Industry Analysis? http://www.youtube.com/watch?v=- I50V4PO1y4&feature=g- wl&context=G25b6f51AWAAAAAAAAAA Information Technology Industry Analysis: Samsung Economic Research Institute ©David Mayes 13
• 14. Industry Analysis What is Industry Analysis? http://www.economist.com/node/21541746 The Economist on Video Gaming: World of Warcraft vs. New Market Entrants ©David Mayes 14
• 15. Industry Analysis What is Industry Analysis? http://www.dailymotion.com/video/xblts0_in dustry-analyst-jesse-divnich-on- v_videogames Video Gaming Analyst Jesse Divnich on the Video Games Industry ©David Mayes 15
• 16. Industry Analysis What is Industry Analysis? Answer: Huge consumption of microprocessors for game consoles “Over the past two decades the video-games business has gone from a cottage industry selling to a few niche customers to a fully grown branch of the entertainment industry. According to PricewaterhouseCoopers (PwC): • Global video-game market worth around $56 billion last year. • More than twice the size of the recorded-music industry • Three-fifths the size of the film industry, Including DVD sales Video games will be the fastest-growing form of media over the next few years, with sales rising to $82 billion by 2015.” — The Economist. December 10th, 2011 How Does The Video Games Market Relate to the Semiconductor Industry? ©David Mayes 16
• 17. Industry Analysis What is Industry Analysis? Leading Industries in Canada (GDP): • Aerospace (5th largest in the World) • Agri-food (4th largest exporter) • Automotive (3rd largest exporter in World) Leading Industries in British Columbia (GDP): • Construction • Manufacturing (?) • Mining & Gas Extraction Leading Industries in the Thompson Okanagan (GDP): • Construction • Manufacturing • Services (retail, tourism, etc.) Key Industries in Canada ©David Mayes 17
• 18. Questions? What is Industry Analysis? ©David Mayes 18
• 19. Industry Analysis 1. Instructor Introduction 2. What is Industry Analysis? 3. Why Industry Analysis? 4. Suggested Reading ©David Mayes 19 Industry Analysis: The Bigger Picture
• 20. Industry Analysis Why Industry Analysis? ANSWER: Large scale economic shifts caused by demographic, geographic, political, technological and social changes can create new opportunities or can lead to the demise of a company. Competitors that can anticipate these large-scale economic shifts are more likely to survive. Why Industry Analysis? ©David Mayes 20
• 21. Industry Analysis Why Industry Analysis? • Government Policy • Taxation, incentives, international export market development • Focused Economic Development Programs • Which industries should be promoted? • Example: New Zealand Trade & Enterprise* • Institutional/Individual Investment Management • Tracking Industry Trends and Growth • Management Consultancy Firms • Strategic Business Decisions on Markets • Individual businesses Why Industry Analysis? ©David Mayes 21
• 22. Industry Analysis Why Industry Analysis? • Federal, Provincial Ministries & Economic Development Agencies • Canadian Ministries of Industry and International Trade • BC Ministry of Energy, Mines and Petroleum • Central Okanagan Regional Development • Financial Services and Investment Firms • BMO, CIBC, RBC, TD Canada Trust, credit unions • Stock brokerages • Financial news networks • Management Consultancy Firms • Accenture, BCG, HP, IBM, PWC, Forrester, Gartner, IDC • Businesses • Executive management, strategic planning units • Corporate positioning, SWOT, long range planning Who Conducts and Uses Industry Analysis? ©David Mayes 22
• 23. Industry Analysis Why Industry Analysis? Example: New Zealand Trade & Enterprise Marketing an Entire Nation as an Industry http://www.nzte.govt.nz/Pages/default.aspx http://www.youtube.com/watch?v=eh-0knDpn5g ©David Mayes 23
• 24. Industry Analysis Why Industry Analysis? Example: International Data Corporation (IDC) http://www.idc.com/prodserv/maps/consumer.jsp ©David Mayes 24
• 25. Industry Analysis Why Industry Analysis? Example: Central Okanagan Economic Development Commission http://investkelowna.com/ ©David Mayes 25
• 26. Questions? Why Industry Analysis? ©David Mayes 26
• 27. Industry Analysis 1. Instructor Introduction 2. What is Industry Analysis? 3. Why Industry Analysis? 4. Suggested Reading ©David Mayes 27 Industry Analysis: The Bigger Picture
• 28. Industry Analysis Suggested Reading: Suggested Reading: HBR’s 10 Must Reads on Strategy, Harvard Business Press, 2011 (HBR article anthology). Blue Ocean vs. Five Forces, Burke, A.E. (HBR journal article, online) http://toby.library.ubc.ca/subjects/subjpage2.cfm?id=660 How to Conduct An Industry Analysis, Small Business and Technology Development Center, http://www.sbtdc.org/pdf/industry_analysis.pdf ©David Mayes 28
• 29. ©David Mayes 29

The Internet of Things: The Promise Versus the Tower of Hacked Babbling Things

The term “Internet of Things”  (IoT) is being loosely tossed around in the media.  But what does it mean? It means simply that data communication, like Internet communication, but not necessarily Internet Protocol packets, is emerging for all manner of “things” in the home, in your car, everywhere: light switches, lighting devices, thermostats, door locks, window shades, kitchen appliances, washers & dryers, home audio and video equipment, even pet food dispensers. You get the idea. It has also been called home automation. All of this communication occurs autonomously, without human intervention. The communication can be between and among these devices, so called machine to machine or M2M communication.  The data communication can also terminate in a compute server where the information can be acted on automatically, or made available to the user to intervene remotely from their smart mobile phone or any other remote Internet connected device.

Another key concept is the promise of automated energy efficiency, with the introduction of “smart meters” with data communication capability, and also achieved in large commercial structures via the Leadership in Energy & Environmental Design program or LEED.  Some may recall that when Bill Gates built his multi-million dollar mansion on Lake Washington in Seattle, he had “remote control” of his home built into it.  Now, years later, Gates’ original home automation is obsolete.  The dream of home automation has been around for years, with numerous Silicon Valley conferences, and failed startups over the years, and needless to say, home automation went nowhere. But it is this concept of effortless home automation that has been the Holy Grail.

But this is also where the glowing promise of The Internet of Things (IoT) begins to morph into a giant “hairball.”  The term “hairball” was former Sun Microsystems CEO, Scott McNealy‘s favorite term to describe a complicated mess.  In hindsight, the early euphoric days of home automation were plagued by the lack of “convergence.”  I use this term to describe the inability of available technology to meet the market opportunity.  Without convergence there can be no market opportunity beyond early adopter techno geeks. Today, the convergence problem has finally been eliminated. Moore’s Law and advances in data communication have swept away the convergence problem. But for many years the home automation market was stalled.

Also, as more Internet-connected devices emerged it became apparent that these devices and apps were a hacker’s paradise.  The concept of IoT was being implemented in very naive and immature ways and lacking common industry standards on basic issues: the kinds of things that the IETF and IEEE are famous for.  These vulnerabilities are only now very slowly being resolved, but still in a fragmented ad hoc manner. The central problem has not been addressed due to classic proprietary “not invented here” mindsets.

The problem that is currently the center of this hairball, and from all indications is not likely to be resolved anytime soon.  It is the problem of multiple data communication protocols, many of them effectively proprietary, creating a huge incompatible Tower of Babbling Things.  There is no meaningful industry and market wide consensus on how The Internet of Things should communicate with the rest of the Internet.  Until this happens, there can be no fulfillment of the promise of The Internet of Things. I recently posted “Co-opetition: Open Standards Always Win,” which discusses the need for open standards in order for a market to scale up.

Read more: Co-opetition: Open Standards Always Win

A recent ZDNet post explains that home automation currently requires that devices need to be able to connect with “multiple local- and wide-area connectivity options (ZigBee, Wi-Fi, Bluetooth, GSM/GPRS, RFID/NFC, GPS, Ethernet). Along with the ability to connect many different kinds of sensors, this allows devices to be configured for a range of vertical markets.” Huh?  This is the problem in a nutshell. You do not need to be a data communication engineer to get the point.  And this is not even close to a full discussion of the problem.  There are also IoT vendors who believe that consumers should pay them for the ability to connect to their proprietary Cloud. So imagine paying a fee for every protocol or sensor we employ in our homes. That’s a non-starter.

The above laundry list of data communication protocols, does not include the Zigbee “smart meter” communications standards war.  The Zigbee protocol has been around for years, and claims to be an open industry standard, but many do not agree. Zigbee still does not really work, and a new competing smart meter protocol has just entered the picture.  The Bluetooth IEEE 802.15 standard now may be overtaken by a much more powerful 802.15 3a.  Some are asking if 4G LTE, NFC or WiFi may eliminate Bluetooth altogether.   A very cool new technology, energy harvesting, has begun to take off in the home automation market.  The energy harvesting sensors (no batteries) can capture just enough kinetic, peizo or thermoelectric energy to transmit short data communication “telegrams” to an energy harvesting router or server.  The EnOcean Alliance has been formed around a small German company spun off from Siemens, and has attracted many leading companies in building automation. But EnOcean itself has recently published an article in Electronic Design News, announcing that they have a created “middleware” (quote) “…to incorporate battery-less devices into networks based on several different communication standards such as Wi-Fi, GSM, Ethernet/IP, BACnet, LON, KNX or DALI.”  (unquote).  It is apparent that this space remains very confused, crowded and uncertain.  A new Cambridge UK startup, Neul is proposing yet another new IoT approach using the radio spectrum known as “white space,”  becoming available with the transition from analog to digital television.  With this much contention on protocols, there will be nothing but market paralysis.

Is everyone following all of these acronyms and data comm protocols?  There will be a short quiz at the end of this post. (smile)

The advent of IP version 6, strongly supported by Intel and Cisco Systems has created another area of confusion. The problem with IPv6 in the world of The IoT is “too much information” as we say.  Cisco and Intel want to see IPv6 as the one global protocol for every Internet connected device. This is utterly incompatible with energy harvesting, as the tiny amount of harvested energy cannot transmit the very long IPv6 packets. Hence, EnOcean’s middleware, without which their market is essentially constrained.

Then there is the ongoing new standards and upgrade activity in the International Standards Organization (ISO), The Institute of Electrical and Electronics Engineers (IEEE), Special Interest Groups (SIG’s”), none of which seem to be moving toward any ultimate solution to the Tower of Babbling Things problem in The Internet of Things.

The Brave New World of Internet privacy issues relating to this tidal wave of Big Data are not even considered here, and deserve a separate post on the subject.  A recent NBC Technology post has explored many of these issues, while some have suggested we simply need to get over it. We have no privacy.

Read more: Internet of Things pits George Jetson against George Orwell

Stakeholders in The Internet of Things seem not to have learned the repeated lesson of open standards and co-opetition, and are concentrating on proprietary advantage which ensures that this market will not effectively scale anytime in the foreseeable future. Intertwined with the Tower of Babbling Things are the problems of Internet privacy and consumer concerns about wireless communication health & safety issues.  Taken together, this market is not ready for prime time.

 

Management Communication: How Not To Embarrass Yourself

Some years ago, the British comedian and Monty Python member, John Cleese participated in a series of sales and management training videos. To this day, I still laugh remembering one of them, “How Not to Exhibit Yourself.” There are other videos in this series, all of which remain very relevant. “How Not to Exhibit Yourself” focuses on trade show behavior and particularly how to effectively connect with potential customers, but in my mind, the humorous lessons offered by Cleese could just as easily apply to networking with people in general. This further caused me to recall an equally relevant and recent Wall Street Journal essay, “Networking for Actual Human Beings.” My key point is that in whatever field you work, your ability and skill in relating to people and communicating effectively will be crucial to your success.

My UBC Management students and graduates know the importance I place on interpersonal and public speaking in management, and particularly also in engineering and entrepreneurial roles. I like to repeat Warren Buffett’s endorsement of public speaking as the most important skill he learned as a young man. No matter what you do, you will need to be able to clearly, comfortably and effectively communicate the ideas or projects you are promoting in order to succeed in life. Yet you may not know that speaking with others is the most difficult and intimidating thing for most people.

People I talk with often tell me how much they hate networking or simply meeting new people. The truth is, deep down, so do I and many other people. Recent research has shown that people feel that explicit business networking makes them feel as if they are insincere or manipulative. The result is that much networking is unsuccessful, and people will naturally gravitate to speaking with people they already know. I often convince myself that I have an excuse to not attend a networking event or to meet a new contact.

I have some recommendations on how I overcome these issues:

Persevere. Just Do It! This is the hardest part. I am at my core an introvert. Invariably I do not want to go, but force myself to go, even telling myself that I will find an excuse to leave early. Rationalize however you want, but do it. In my case, after the encounter, I surprise myself with the results. Suggestions to avoid networking events altogether and to focus on people you already know may make you feel more comfortable, but you will not grow in your self-confidence. You can still devote time to renewing your existing connections which will become even easier and productive.

Begin by going off topic. Be conversational not business focused. Think of some topic bound to be of conversational interest. Literally, avoid discussing business or the other person’s details. Before you enter the event, take some time to think of some conversation starters unrelated to all the obvious “groaners”: your job, goals, education or the other person’s details. This is also a crucial key to successful public speaking. What is your opener to grab the audience, one person or many? “Did you see that post today by Larry Page on Internet privacy?”

Let the conversation evolve organically. Don’t force it. Just enjoy the moment, and if the person opens up to you, you can seamlessly move into direct business. If not, you may still have made a new friend.

Whatever you do, be yourself. Be candid. You will feel better about yourself in the process. It may not always work, but if the person doesn’t appreciate your openness and honesty, you have just saved yourself a lot of valuable time.

Know that not every encounter will work. That’s normal, inevitable and perfectly OK. However, if you do suck it up and try novel new approaches to speaking with people and building their interest and trust, you will improve your success, and success breeds success.

I don’t agree with all the points in the following Wall Street Journal essay, but I accept that there are other points of view on the tough topic of fear of networking and public speaking, and some of the discussion below may be helpful to you.

Source: Networking for Actual Human Beings – WSJ

Silicon Valley Is Suffering From A Lack of Humanity

Deep Down We All Know Silicon Valley Needs The Humanitarian Vision of Steve Jobs

The genius of Steve Jobs lies in his hippie period and with his time at Reed College. With the deep ethical problems facing technology now, we need Jobs vision more than ever.

To his understanding of technology, Jobs brought an immersion in popular culture. In his 20s, he dated Joan Baez; Ella Fitzgerald sang at his 30th birthday party. His worldview was shaped by the ’60s counterculture in the San Francisco Bay Area, where he had grown up, the adopted son of a Silicon Valley machinist. When he graduated from high school in Cupertino in 1972, he said, “the very strong scent of the 1960s was still there. After dropping out of Reed College, a stronghold of liberal thought in Portland, Ore., in 1972, Mr. Jobs led a countercultural lifestyle himself. He told a reporter that taking LSD was one of the two or three most important things he had done in his life. He said there were things about him that people who had not tried psychedelics — even people who knew him well, including his wife — could never understand.

Decades later Jobs flew around the world in his own corporate jet, but he maintained emotional ties to the period in which he grew up. He often felt like an outsider in the corporate world, he said. When discussing Silicon Valley’s lasting contributions to humanity, he mentioned in the same breath the invention of the microchip and “The Whole Earth Catalog,” a 1960s counterculture publication. Jobs’ experience rings with my own experience in the Santa Clara Valley at that time. Jobs and I were both deeply affected by Stewart Brand, the visionary behind The Whole Earth Catalog.  Stanford professor Fred Turner has documented this period in his book “From the Counterculture to Cyberculture, Stewart Brand, the Whole Earth Network, and the Rise of Digital Utopianism. 

For me this journey also began with the extraordinary vision of Marshall McLuhan, the Canadian professor of communications, who literally predicted the emergence of the World Wide Web and “The Global Village,”  like some kind of modern day Nostradamus.

Stewart Brand is also featured in Tom Wolfe‘s book, “The Electric Kool-Aid Acid Test,” along with Ken Kesey’s Merry Pranksters and The Grateful Dead.  I had the great good fortune to formally meet Brand at a COMDEX Microsoft event in a hangar at McCarren Airport in Las Vegas and was immediately impressed by him, as was Jobs. Not surprisingly, Brand was an invited guest at the Microsoft event, having already seized on the importance of the personal computer and the prospect of a networked World. Recently, in another anecdote on that time, Tim Bajarin shared a wonderful story about Job’s counterculture friend and organic gardener who remains the manager of the landscape at the new Apple campus, retaining the feeling of the original Santa Clara Valley orchard economy, that some of us can still remember.

It is important to think back to that time in the Bay Area and the euphoria of the vision of “digital utopianism.”   It grounds me and helps me to understand where we have gone so terribly wrong.

Digital utopianism is now dead. I have written about its sad demise on this blog. The wonderful vision of digital utopianism and the Web has been perverted by numerous authoritarian governments, now including our own, resulting in a Balkanized Web and a dark Web pandering all kinds of evil. This is the problem we face and the urgent need for greater emphasis on ethics. What about human life, culture, and values?  So many areas of technology are on the verge of deep philosophical questions.  Uber has become the poster child for everything that is wrong with Silicon Valley. I ask myself, “What would Steve Jobs have said about Travis Kalanick and Uber?” I think we know the answer. Ironically, Silicon Valley has a center for research and study in ethics, the Markkula Center for Applied Ethics at Santa Clara University. Mike Markkula was an Intel marketing guy who quit Intel to join with two crazy long-haired guys in Cupertino.

I am a Liberal Arts & Humanities graduate myself, including graduate study at Oxford University. When I returned from England I asked the obvious question: Now how do I make a living?  As it happened, I very improbably landed my first real job at Intel Corporation. When I asked why I was hired, the answer was that I was judged to have the requisite talent and aptitude if not the technical knowledge.  I later developed a reputation for being very “technical” by the process of “osmosis,” by simply living in a highly rarified technical culture and receiving whiteboard tutorials from friendly engineers. I was thrown into a group of Ivy League MBA’s. We wistfully shared a desire to have the others’ educations, but simply working together made us all more effective. Amazingly my career grew almost exponentially and I attribute my success to that cross-fertilization.

While with Intel in Hillsboro Oregon, someone approached me to represent Intel at a talk with Reed students. I was cautioned that few if any Reed students would be interested in working for Intel, but they would be very intellectually engaging.  That proved to be a significant understatement.  In the end, I believe that perhaps two dozen “Reedies,” as they are known, joined Intel, one of whom went on to a stellar career as a Silicon Valley venture capitalist.  A significant part of my later career has been devoted to using my Humanities education background to assess and translate deep technology in human terms for the benefit of both management and potential customers.

Today, nothing of my story would ever happen, but the influence of the Humanities and Arts in business seems more sorely needed than ever.

Read more: Why We Need Liberal Arts in Technology’s Age of Distraction – Time Magazine – Tim Bajarin

Read more: Digital Utopianism of Marshall McLuhan and Stewart Brand is Cracking – mayo615,com

Read more: Liberal Arts In The Data Age – Harvard Business Review

The Importance of “Convergence” In Market and Industry Analysis

If You Get Technology “Convergence” Wrong, Nothing Else Matters

I came across this book during my most recent visit to the UBC Vancouver campus.  As good as I think this book is at focusing attention, in workbook style, on the importance of market and industry analysis in new venture due diligence, there is an issue that I think is not adequately addressed by any model or theory: not Porter, not STEEP or SWAT. Convergence is the issue.

We can imagine and even potentially envision a very cool business idea, but if the technology to achieve it is not ready, not sufficiently mature, the idea is Dead on Arrival (DOA).   I do not mean to pick on young entrepreneurs, but I reviewed a business concept last week that was a superb and compelling idea, but the technology necessary to achieve it simply was not there, either in terms of its capability or its price point. I am confident that it will be there in time, but it is not now.  As if to make my point, Apple announced that it was acquiring a company for $20 Million in the exact same technology area: indoor location tracking (no small feat).  At this point it is not clear that the acquired company has any extraordinary intellectual property or expertise, and the article primarily focused on the point that this “location identification” technology was “heating up.”  It looks like it may be a simple “aquihire.”   Global Positioning and geo tagging as in smart mobile phones, radio frequency identification technology (RFID), and inertial guidance are all currently used in various combinations by a host of competitors (too many) to achieve required levels of accuracy, immediacy and cost.  A local industrial RFID company has just closed its doors because it simply could not compete and make money.  The simple problem was that this company’s idea, as compelling as it was, could not achieve the necessary price point, or possibly would not even work.

So we have the problem of “convergence.”  Great idea but the technology simply is not ready….yet.

I have three personal case study examples of the problem of “convergence,” that every potential entrepreneur should study. I have to admit that I was a senior executive at all three of these Silicon Valley companies, one of which actually made it to the NASDAQ exchange.  All of them had the “convergence” problem.. Too early for the available technology.

1. Silicon Graphics.  Silicon Graphics was founded in the late 1980’s by a pre-eminent Stanford professor, Jim Clark, on the idea that 3D visualization of complex problems would become the next big wave in technology. As a minor side business, it also excelled at computer animation, a growing new market of interest to Steve Jobs and others. It is now obvious that Clark was onto something that has now finally become the Next Big Thing, but at that time, the available technology simply made it too difficult and too expensive. Silicon Graphics no longer exists. Silicon Graphics crown jewel was its enabling software code, the SGI Graphics Library. It does still exist in open form.

Read more:http://mayo615.com/2013/03/31/hans-rosling-makes-visual-sense-of-big-data-analytics/

2. iBEAM Broadcasting.  iBEAM was the precursor of YouTube, but too far ahead of its time.  the founder, Mike Bowles, a former MIT professor, envisioned streaming media across the Internet, but this was in 1999.  Intel, Fox Entertainment, Reuters, Bloomberg, Microsoft were all involved, some investing significant sums in the company. We tried mightily to make it happen for Mike, but there were technology convergence problems.  The Internet at that time simply did not have sufficient reliable broadband capability.  In 1999 the vast majority of Internet users still used a dial-up connection.  The company, with help from Microsoft and its other big pockets investors turned to satellite transmission, which is immensely expensive.  I did learn a lot about the satellite business. Great idea, way too early, and the company failed early.

3. P-Cube.  In 2001, I was approached by prominent friends at two downtown Palo Alto venture capital firms to consider joining an Israeli startup in which they had invested. The idea was wildly popular at the time….traffic policy management and so-called Internet traffic shaping.  I enthusiastically joined the new company and became its first U.S. based employee.  The compelling idea was simple, make money by charging for bandwidth. The background idea was to enable deep IP packet payload snooping to prioritize traffic, but also for its political potential. This is the technology that Dick Cheney employed after 9/11 to snoop all Internet traffic.  The only problem was that the technology was simply not yet ready.  The P-Cube Internet traffic switch was a 24 layer printed circuit board (hideously difficult to fabricate), with 5 IBM PowerPC chips, 1 Gig of onboard memory (at the time bleeding edge, but today laptops have more memory), a host of “application specific integrated circuits” (ASIC), and to top it off a proprietary software language to program the box.  In the end, P-Cube burned up $100 Million in venture capital, and I had great fun traveling the World selling it, but the box never worked, largely because the technology simply was not there..  P-Cube’s assets were bought by Cisco Systems and t0day such capability is built into the boxes of Cisco System, Juniper Networks and others.

The key takeaway lesson from this: do not underestimate the importance of technology convergence with a great idea.

Uber Is Still Trump

Permits? We don’t need no stinkin’ permits!

UPDATE:  This February 3, 2016 post on Uber deserves an update. This week Uber announced that it lost $800 Million in its 3rd quarter. That’s correct, $800 Million in only three months. The Uber announcement tries to spin the loss as good news for Uber as ” increased by only 25% over the third quarter last year.  An $800 Million quarterly loss is right up there in the same league with Trump lost money. I guess we need to remember Trump’s admonition that debt is good, and it’s ok to lose other people’s money.  Uber’s announcement goes on to project continuing losses projected to be greater than $3 Billion next year, as Uber continues its plans for an apparent IPO for brain dead investors.

Then we have Uber’s new dispute with the California Department of Motor Vehicles and Attorney General’s office. Uber has begun operating self-driving vehicles in San Francisco without obtaining the necessary permits. Uber is claiming that they are exempt and don’t need permits to operate driverless cars. They “don’t need no stinkin’ permits,” though video posted on SFGate shows an Uber driverless vehicle running a red light on 3rd Street, right in front of SFMOMA.  Why do I feel like Uber and Trump are the same thing?

The Problem With Uber Has Absolutely Nothing To Do With Ride Sharing

Donald Trump, Travis Kalanick, and Uber

So Trump is Uber and conversely, Uber is Trump. This comparison has been made by both supporters and opponents, so as they say, there must be some truth in it. Both Uber and Trump have based their strategies on disrupting the status quo and the establishment with politically incorrect behavior.  My argument here is simply that while the disruption fostered by both Trump and Uber may appear attractive at first glance, and desirable to many, in both cases, there are much deeper ethical issues that are only now coming to the forefront.

Uber’s origins date back to a cold winter night in Paris in 2008, when founders Travis Kalanick and Garrett Camp were stranded without a cab.  Having personally also been stranded in Paris without a taxi on a cold and rainy night, I can commiserate.  But the real strategy behind the founding of Uber was to disrupt what they perceived to be an overregulated industry ripe for the picking, managed by municipalities and regional agencies ill-equipped to handle the kind of corporate pressure brought to bear by Uber.  The Uber strategy involves massive PR, faux negotiations with slow-moving regulatory bureaucracies, followed by defiantly ignoring the law, which Uber euphemistically describes as “principled confrontation.”  It is nothing less than blitzkrieg. Similarly, Donald Trump has crafted his strategy to disrupt politics as usual, with political incorrectness, bluster, and bombast.  Both Travis Kalanick of Uber and Donald Trump share the same odd appeal for their disruption, but both also have armies of critics who perceive much deeper and disturbing issues.  It all has an air faintly of Fredrick Nietzche’s Man and Superman and Ayn Rand’s philosophy of total self-interest.

Ayn Rand

I also ask rhetorically why and how Uber has managed to attract such a massive unprecedented pile of investment capital.  Uber is the current global symbol of defiant confrontation with any and all regulation of industries. Some are arguing convincingly that the huge pile of cash may have to do with sheer plutocratic greed, driven by Wall Street lobbyists, keen to roll back all regulation of capitalism everywhere.  There is no shortage of circumstantial evidence that this may be correct, from the ongoing global banking scandals to corporate tax evasion.

Both Trump and Uber also now appear to be hitting serious bumps in their strategies.  Trump ignominiously lost the Iowa Caucus and is facing a serious threat from a Republican establishment determined to stop his candidacy one way or another. Uber is facing its own disruption, a federal lawsuit by the California Public Utilities Commission, challenging Uber’s definition of their drivers as “contractors.” The California PUC lawsuit has spawned numerous other similar actions against Uber and is being closely watched by legal experts around the World, particularly in the European Union countries and India. A decision against Uber could have major global consequences for Uber’s business model.  Meanwhile, organized protests against Uber’s practices, policies, and contractor pay have also evolved and escalated.  The early protests were particularly unsuccessful and counter-productive, and which served only to aggravate the public. However, more recent protest strategies have been much more effective.  For whatever reason, Uber elected to announce its intent to reduce contract driver pay recently, which has provided a strategic opportunity for organized protests in many cities.

The core issue for me is the glaring distortion of Jeremy Rifkin’s Third Industrial Revolution into an unabashed corporate takeover of the sharing economy.  The capital feeding frenzy around Uber is disturbing, and still a potential bubble if things don’t go as planned. It also betrays myopia for Big Ideas in favor of the quick buck.

ANALYSIS

Uber discussions need to go beyond the fact it offers a cheaper ride

‘This isn’t just an Uber problem. If they get away with it, every company will do this.’

By Paul Haavardsrud, CBC News Posted: Jan 24, 2016 5:00 AM ET Last Updated: Jan 24, 2016 9:30 AM ET

A man rides his bicycle between taxis parked on the street during a protest against Uber in Rio de Janeiro, Brazil on July 24, 2015. A number of protests have cropped up the world over as the ride-hailing app grows in popularity. (Ricardo Moraes/Reuters)

This is part three of a three-part series on Uber. Read parts one and two.

Outraged taxi drivers the world over telling anyone who will listen that Uber is the devil in corporate form makes it tough, even for those so inclined, to blithely accept at face value the company’s argument that it’s just a technology firm disrupting a sheltered industry.

• Part 1: A look at Uber’s playbook
• Part 2: How Uber is waging its PR war

It would be nice if that were the case. Easier.

But nothing is ever that easy, is it? And neither is Uber.

In fairness, you could say there’s much to like about a company that can deliver a prompt ride at the push of a button, often at a cheaper price than cabs. So far, so good.

But that’s only the beginning of the Uber discussion. A closer look at the company’s particular brand of disobedience could quickly become unsettling.

Uber may like to cast itself as a harmless scofflaw that’s willing to bend a few rules for the greater good, but legal experts say its practices are hardly benign.

Uber’s confrontational approach to changing regulation is taking direct aim at the taxi industry. (Alistair Steele/CBC)

Working for its own narrow self-interest, the company’s systemic disregard for regulations — a stratagem termed “corporate nullification” — can undermine the laws of the land that everyone else follows.

“This isn’t just an Uber problem. If they get away with it, every company will do this; every company will become a platform and just say ‘oh, the laws don’t apply to us.’ If we enter into that stage, then it’s game over for vast swathes of business regulation: environmental, insurance, civil rights, worker protection, consumer protection, that’s all gone,” said Frank Pasquale, a law professor at the University of Maryland.

“People don’t see the stakes of it, they think ‘oh well, you know, we have to disrupt taxi cabs and we have to get this stuff done,’ but it doesn’t have to be done on Uber’s terms. The stakes couldn’t be higher in terms of the ability of these platforms to just get out of regulation.”

Gig economy

In the here and now, of course, warnings about the consequences of corporations flouting the rule of law can feel abstract compared to the immediate gratification of getting a cheaper ride to the airport.

That may soon change. While researchers haven’t yet reached a consensus on the number of workers participating in the so-called gig economy, most agree that new forms of contract employment made possible by companies like Airbnb, TaskRabbit and Uber are on the rise.

In the U.S., a recent poll suggests more than one in five Americans have participated in this type of on-demand contract employment. Part of the conversation now taking place there, which is beginning to migrate to Canada, involves asking what responsibilities 21st-century companies will have to workers, as well as the rest of society.

• Taxis likely hurting themselves, helping Uber with protests
• Uber debate overlooks taxi industry’s ‘silent victims’
• Uber’s NYE price surge meant painful bills for revellers

As it stands, employers and employees both pay to fund programs such as health care, employment insurance, Old Age Security and other parts of the social safety net. The question of who will cover those costs if the nature of work changes to include fewer traditional full-time positions — not to mention the fate of worker protections such as overtime and minimum wage — is still in search of an answer.

Indeed, the recent popularization of the term “gig economy” reflects thisevolution of the work world to include more part-time and contract employment and fewer of the full-time jobs that have traditionally been the bedrock of the middle class.

As for the more well-known term, “sharing economy,” it’s losing ground amidst a growing recognition that sharing isn’t really part of the equation. A transaction in which a passenger pays a driver wouldn’t seem to be any different from what happens with a taxi. Yet taking a cab isn’t known as sharing a ride.

Play Media

 Angry taxi driver confronts Uber driver1:13

Wrapping itself in the language of the sharing economy, however, allows Uber to align itself with values like co-operation, sustainability and community. It’s a smart play, if disingenuous, particularly insofar as it helps to bathe a business model that’s so nakedly commercial in a kinder, gentler light. Uber, as is often pointed out, is libertarian to its core, whether it’s the company’s attempts to dismantle regulation or its belief in the righteousness of the unfettered free market.

What happens to cabbies?

None of this, of course, makes Uber an evil corporation. At the same time, the speed at which the company, among the fastest-growing startups in the history of Silicon Valley, is crashing through the world puts it at the centre of any number of questions.

On the front lines of those looking for answers is the taxi industry. The existing system may be flawed, overregulated, and too costly, but that doesn’t mean cabbies should just be written off as collateral damage — the result of rule changes inspired by the financial ambitions of a single company.

Many taxi drivers say they can’t compete with a company that isn’t governed by the same strict, and costly, regulations. (John Rieti/CBC)

By pushing cities into making immediate changes, though, Uber is manufacturing a binary choice. To limit the decision to Uber or the current flawed system, however, is a false construct. The taxi system doesn’t need to be overhauled tomorrow and changes could come in many different ways that allow for ride-hailing services while also protecting existing taxi drivers.

“The main problem is it’s not an empty space,” said Mariana Valverde, a professor at the University of Toronto and an urban law expert. “Uber is coming in and they’re combining the power of a big, U.S.-based corporation with lots of lobbyists and lots of money, on the one hand, with a total disregard for regulations and rules. Taxi drivers have played by the rules and they’ve often followed really strict, often quite picky and annoying rules, and they’re seeing their livelihoods vanish.”

Big issues

The back-and-forth between Uber and the taxi industry opens up any number of considerations, ranging from practical to theoretical to troubling.

If Uber’s continued success pushes existing taxi fleets out of business, it’s worth wondering what happens to fares. The company’s introduction of surge pricing, which allows the price of rides to float when demand outstrips supply, points in a direction that may have customers yearning for the regulated days of yore. A market monopoly may never come to pass, but Uber’s success to date, combined with the controversies that surge pricing have already inspired, doesn’t make it a comforting thought.

Uber’s introduction of surge pricing, which allows the price of rides to float when demand outstrips supply, may one day have customers yearning for the regulated days of yore if a market monopoly is ever reached. (The Canadian Press)

The us-versus-them dynamic that’s developed between Uber and cab companies is also too often accompanied by an ugly undercurrent of racism that targets the ethnic makeup of the taxi industry. To be clear, this isn’t Uber’s fault per se, but it is an element of the ongoing confrontation that needs to be better recognized, understood and defused.

The many issues surrounding Uber can also become an issue in itself. As tales of Uber’s unsavoury tactics continue to circulate, how does someone who just wants to take an Uber across town reconcile the tension between wanting to be a good citizen, yet also a savvy consumer at the same time.

One theory, put forward by Robert Reich, suggests that no one can be blamed for seeking out a cheaper ride, regardless of how conflicted they may feel about the company offering the service. Our consumer selves, he says, are wired to look for the best deal possible and, on some level, we’ve made peace with what that entails. At the same time, he continues, serious thought must also be given to the responsibilities of citizenship.

As Uber inspires changes to the existing system, the idea of what our citizen selves might contribute to the discussion is worth considering. Yes, change is going to happen and outdated regulations need to be updated. How those changes happen, though, also matters a great deal. And not just to cabbies.

Partnerships, Collaboration and Co-opetition: More Important Than Ever

A Strategy For Survival in Tough Times

In the simplest terms, the concept here is how a company can potentially increase both revenue and market share by executing a strategy to work with its direct or indirect competitor(s) to the benefit of both, a win-win.  The old Arab saying, “My enemy’s enemy is my friend” also applies. It can also be as simple as joining an ad hoc collaboration among a group of companies or a standards group to create market order and simplicity from an overcrowded and confused market.  Customers invariably respond to products that provide the greatest value and paths to long-term increased value and cost reduction. Collaboration or “Co-opetition” is one of the most effective means to achieve that goal, particularly in an economic environment where “flat is the new up.”

Multibus: An Early Example of Collaboration Building A New Market

Soon after joining Intel, I learned about Intel’s concept of “Open Systems” and its “Multibus” system architecture.  Motorola was Intel’s primary competitor in microprocessors and so-called “single board computers” at that time.  Intel’s now legendary Marketing VP, Bill Davidow had developed a strategy to recruit other companies to support Multibus as an open system standard.  Davidow’s idea was to make Multibus more attractive to system designers by having a stable of compatible products from other companies supporting Multibus. It worked. Since that time the concept has evolved significantly and has played a major role in the development of many new markets. This post discusses some of the evolutionary changes, offers two high-tech case studies and some key requirements for successful collaboration.  It is more important now than ever as a survival strategy in a particularly challenging global economy.

The IBM Personal Computer Sets The Standard For The Future

Perhaps the best known high-tech example of an open system is the IBM Personal Computer, involving IBM, Intel, Microsoft, and thousands of other supporting companies. The result has been the creation of a huge new market, with over 400,000 applications for the PC, significant price competition, and interchangeable components from multiple vendors.  By contrast, Apple opted for a closed, proprietary system, which persists to this day, and continues to be a source of discontent from Apple customers: higher prices, as well as accessories and interfaces only available from Apple, etc. In sheer market share, the PC dominated at 85% of the total market, while Apple was forced to concentrate on niche markets like education and graphic design. I am not going to discuss the PC as it has been analyzed extensively over the years, though it does provide an excellent case study on the dynamics and market power of open systems versus closed proprietary systems.

 Important Current Co-opetition Successes: DSL And Android

I will discuss two other cases, one less well known and the other better known and more recent.  In the first case, I was personally involved so my experience enables me to speak in-depth on the topic.  Shortly after leaving Ascend Communications, I was called by a friend at Compaq/HP in Houston and asked to fly down to Houston for a private discussion with the VP of the Presario Division and his team.  The VP wanted to incorporate a high-speed digital subscriber line (DSL) connection in the Presario out of the box.  The idea was that a consumer would connect the PC to a standard RJ11 telephone wall jack, and be instantly connected to the Internet.  However, I had to explain that the challenges to this were enormous. First and foremost the telephone companies themselves could not agree on the standard for how DSL worked. Equally problematic, the DSL market was fragmented with dozens of competitors offering different proprietary solutions.

We decided to proceed regardless, recognizing that if HP/Compaq were to succeed with their ingenious idea, it would require a fundamental change in the current DSL market and the telcos.  This could only be attempted if Compaq joined forces with Intel and Microsoft, and even then the outcome would be uncertain.  I contacted Ali Sarabi in Intel’s Architecture Labs, who admitted that Intel had been thinking of the same idea, and talking with Microsoft as well. So within two weeks all three companies met at Microsoft in Bellevue and the idea gained steam. Soon after we held three days of secret meetings in Atlanta with DSL companies, without explaining our purpose, and came away completely dejected. Bringing the competitors together was hopeless. They all pointed in a different direction. It then dawned on us that if we could get the telecom companies to agree on a single DSL standard, they could unite and as “the customers,” and therefore dictate to the DSL competitors what they would buy. Nothing works better than the opportunity to make money.

Another round of secret meetings in Seattle with the telecoms, and follow-up meetings around the country led to a breakthrough: the formation of a global consortium of over 100 telecom companies and DSL companies that culminated in the International Telecommunications Union in Geneva Switzerland creating a single global DSL standard, which eventually made the original Compaq Presario vision a reality.

Special Interest Group Legal Framework Paves The Way

One of the keys to this success was a simple legal framework for the companies to collaborate, known now as a “Special Interest Group,” avoiding any hint of unfair competition and ensuring that the technical aspects of the standard would be in the public domain. The SIG legal document has since been used in a number of other developments, notably Bluetooth and USB.  Other standards bodies, like the IEEE and IETF, are also structured similarly, enabling the creation of crucial collaborative projects like WiFi. These efforts are now a key aspect of many high-tech markets. Many companies devote entire teams to managing their participation in these standards bodies and ad hoc industry collaboration activities. Even on a small scale, some agreed framework, a Memorandum of Understanding or a simple one-pager may be required to achieve the necessary trust to move forward.

Android Repeats The IBM PC Phenomenon

The second case of successful global industry-wide collaboration is the Google Android smartphone operating system versus Apple IOS.  Once again, Android is an open architecture while Apple IOS is a closed proprietary system. Android has been adopted by a wide range of smartphone manufacturers, most notably Samsung, HTC, and Huawei. Despite the well-publicised popularity of Apple’s iPhone, the fact remains that Android, as an open architecture dominates the global smartphone market at 82% market share in 2015, as reported by International Data Corporation (IDC), and Apple again stuck in the 15% range.

Global Smartphone Market Share 2015 (IDC)

Two Failures To Collaborate: Videoconferencing And The Internet of Things

The video conferencing market has been around for nearly thirty years. Originally, there were big bulky proprietary systems. Cisco Systems later became a major player with its own impressive HD technology. In all, there were nearly a dozen major competitors addressing an “enterprise market” for business use only. The equipment was very expensive. Then along came Skype, WebEx, Apple Facetime and others. The problem is that, after thirty years, none of these competitors applications can talk with any other application. Clearly, this is a problem. So “middleware” startups have sprung up, offering a simple translation of otherwise incompatible video transmission protocols. Bluejeans technology is one excellent example. I have used it personally in my UBC classes to link a guest lecture on Skype to UBC’s corporate video conferencing system because there is no other way to do it. Is this the best solution or cost-effective. Absolutely not. Why, after thirty years, has the video conferencing industry failed to standardize?

In another case, the emerging new market buzzword is “The Internet of Things.” This means that everything in your home can and will be connected to the Internet. Sounds simple enough, right?  Not exactly.  Today the IoT market remains a complex, confusing Tower of Babble, with multiple competing communications protocols. Some products support WiFi, but there is no one single agreed way to communicate. A recent ZDNet post explains that home automation currently requires that devices need to be able to connect with “multiple local- and wide-area connectivity options (ZigBee, Wi-Fi, Bluetooth, GSM/GPRS, RFID/NFC, GPS, Ethernet). Along with the ability to connect many different kinds of sensors, this allows devices to be configured for a range of vertical markets.” Huh?  This is the problem in a nutshell. You do not need to be a data communication engineer to get the point.   I have written here on this blog about this embarrassing failure to collaborate.

Summary

While the open architecture of the PC happened more or less organically, as so many companies were keen to get in on the action, the DSL problem was a hairball of enormous global complexity that had to be solved.  I am honored to have been part of that effort. Google’s decision to launch Android as an open architecture was more like Multibus, and the conscious strategic decision of Eric Schmidt and Larry Page to enter the market as an open system from the outset. Other examples in other industries abound and are documented in the now legendary book, Co-opetition.

The result in all three successful cases has been a dramatic market success. The key takeaway point is that in all three cases the open architecture created opportunity and expanded the market.  Industry collaborations like this are as relevant for smaller markets with only two or three competitors as for large complex markets.  Collaboration can be the key to company survival or failure.