Looking for next big wave of products or services, for something as big as smartphones or, more recently, tablets, we see technology kept in check by culture.
To qualify as a Big Thing these days, a product — or a service, or maybe something hardly more effable than a meme (think “social networks”) — has to assume a value on the order of $100B worldwide. The value needn’t be concentrated in a single company; indeed, the more boats that are lifted by the rising tide, the better. The revenue from the Next Big Thing might be divvied up among today’s hardware and software giants or shared with companies that are currently lurking under the radar of industry statistics.
The $100B number is derived from a look at Apple. For Fiscal Year 2013 (started October 1st, 2012), the company will weigh about $200B in revenue. To “move the needle” for just this one company, a Big Thing will need to contribute about $20B to this total. For Apple execs and shareholders, anything less counts as a mere hobby (which leads to questions about the future of the Mac, but I digress).
Using this gauge, smartphones easily qualify as a Big Thing. As Charles Arthur reports in The Guardian: Mobile internet devices ‘will outnumber humans this year‘. Initially offered by Palm, Microsoft, RIM, and Nokia, and then given successive boosts by the iPhone (first with the device itself and then the App Store), it’s no exaggeration to say that the size of the smartphone tsunami surprised everyone. Even the Big Four incumbents were crushed by the wave: Palm is gone, RIM is in trouble, and Nokia has enslaved itself to Microsoft — which has yet to come up with a viable smartphone OS.
The latest Big Thing is, of course, the “media tablet” (as IDC and Gartner obsessively call the iPad and its competitors). Whatever you call it, regardless of who makes it or which OS it runs, the tablet is a Big Thing that just keeps getting bigger. In less than five years, tablets have attained 10% US market penetration, a milestone that smartphones took eight years to reach. (See also slide 9 in Mary Meeker’s now iconic Internets Trends presentation.)
In his February 7th Apple 2.0 post, Philip Elmer-DeWitt offers this Canalys chart, which shows that one in six “PCs” shipped in Q4 2012 was an iPad:
So what’s next? Is there a breakthrough technology quietly germinating somewhere? What are the obstacles to a self-amplifying chain of events?
I don’t think the barriers to the Next Big Thing are technical. The ingredients are there, we simply need a master chef to combine them.
This brings us to the broad — and fuzzy — class of what is sometimes called “smart appliances.”
The underlying idea is that the devices that surround us — alarm systems, heaters and air conditions, televisions, stereos, baby monitors, cars, home health-care devices — should be automated and connected. And we should be able to control them through a common, intuitive UI — in other words, they should speak our language, not the other way around.
This isn’t a new idea. For decades now, we’ve been told the Smart Home is upon us, a fully automated, connected, secured, and energy-saving dwelling. More than 20 years ago, Vint Cerf, an Internet progenitor and now Google’s Chief Internet Evangelist, posed with a t-shirt featuring the famous IP On Everything pun:
The Internet visionary was and is right: Every object of importance is destined to have an “IP stack“, the hardware, software, and communication link required to plug the device into the Internet. With every turn of Moore Law’s crank, the hardware becomes smaller, less expensive and power-hungry, and thus makes more room for better software, allowing Internet (and local) connectivity to potentially “infect” a growing number of devices. And as devices become smart, they will “teach” each other how to communicate.
Imagine: You take a new remote control out of the box, walk up to a TV and press the “?” key on the remote. A standardized “teach me” message is broadcast, and the TV responds, wirelessly, by sending back a longish XML file that identifies itself and tells the remote the commands it understands:
In a language that computers — and even humans — can process without too much effort, the TV has taught the remote: Here is where you’ll find me, and this is how you can talk to me. The little computer inside the remote munges the file and now the device knows how to control the TV…or the five components of the home theater, the heater/air conditioner, the alarm system, the car…
Now replace the remote in this scenario with your tablet, with its better UI, processing, and connectivity. Rather than controlling your devices by pushing plastic buttons, you use an app on your tablet — an app that the device delivered just before it sent the XML file. (You can use the default app sent by the device, or wander over to the App Store and pay $5 for a deluxe version with different skins. This is how cottage industries are born.)
So goes the lovely theory… but in reality we see so-called Smart TVs with Internet connections but mediocre UI; or less-smart TVs that are still bound to barely intelligent set-top boxes, with their Trabant-grade user experience. And we control them through multi-function “universal” remotes that cost as much as a smartphone, but that do less and do it less well.
What’s missing?
The technological building blocks exist in abundance. There is plenty of Open Source software available to help the remote (or your tablet) digest the This Is How To Talk To Me file from the TV.
Even in our deliberately simplified example, there seems to be no interest in coming up with a simple, open (yes, that word, again) standard to help appliances tell the rest of the world how to control them. It wouldn’t add much to the cost of the device and certainly wouldn’t require hiring rocket scientists. In other words, the obstacles are neither economical nor technical; they’re cultural, they’re keeping the Machine To Machine (M2M) revolution in check.
We’ve seen a similar sort of cultural resistance when we consider à la carte, app-based channels on the mythical “iTV”, whether from Apple, Google, or anyone else. Users would love to pick and chose individual shows and have them delivered through applications rather than through deaf-and-dumb multicast streams. App-ification of TV content would provide other “organic” features: the ability to rewind a live broadcast (without a DVR), easy search through program archives, access to user forums and behind-the-scenes commentary…
The technology and design already exist, as the wonderful 60 Minutes iPad app demonstrates:
Similar examples can be found on every internet-enabled TV platform from Google TV to Roku, the Xbox, and others.
Nice, easy, technically feasible yesterday…but it’s impossible today and will almost certainly continue to be impossible for the near future (I first typed nerd future, a neat typo).
Why?
Because carriers won’t allow it. They’re terrified of becoming dumb pipes (the link refers to mobile carriers but the idea also applies to cable and satellite providers). Carriers force us to buy bundles of channels that they package and sell in a tiered, take-it-or-leave it pricing scheme. True, there is VOD (Video On Demand) where we can buy and view individual movies or premium sporting events, but a pervasive newsstand model where we only pay for what we consume is still far away.
The content owners — movie studios and TV networks — don’t like the newsstand model either. They go by the old Hollywood saying: Content is King, but Distribution is King Kong. iTunes made an impression: Movie and TV studios don’t want to let Google, Apple, Netflix, or Amazon run the table the way Apple did with iTunes and AT&T. (That AT&T derived lasting benefits in higher ARPU and market share doesn’t seem to alleviate the content providers’ fears.)
How can this change and, as a result, unlock one or two Big Things? To retread a famous two-part Buddhist joke, change is a mysterious thing. Telling people what they ought to do doesn’t always work. Still, two thoughts come to mind.
First, the tablet. We, Tech People have always known the tablet was the right thing to do, and we tried for thirty years without much success. Three years ago, Chef Jobs grabbed the ingredients that had been available to all and, this time, the tablet genre “took”. Now, perhaps, the tablet will take its place as an ingredient in a yet grander scheme.
Second, go to an aquarium and watch a school of fish. They move in concert and suddenly turn for no apparent reason. Somewhere inside the school there must have been a “lead fish” that caused the change of direction. Perhaps the fish didn’t even realize he was The One destined to trigger the turn.
Who’s going to be our industry’s fish, big or small, that precipitates a cultural change unlocking the potential of existing technologies and gives rise to the next $100B opportunity?
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17 Comments
HBO or ESPN will be the lead fish. Where they go, others have to follow.
You really talked about two different things in this article: appliances and media devices. The difficulties you described seem to pertain mostly to the latter. Would it be possible for the “IP on appliances” move to precede the media side? Could this build some momentum and standards among manufacturers, and thus create a more formidable partner to the media giants?
Which media channel is the weak sister that may wish to partner with (or be acquired by) one of these IP giants to allow entree to the media distribution world?
I watch crows flying home to roost every evening from our deck. These flocks behave somewhat like your school of fish, but it’s easier to see which one turns first. The crow that changes direction and induces the entire flock to change course is often nowhere near the front, but may be near the aft end of the flock.
The ‘smart’ home is probably the next Big Thing in that there are many potential benefits and cost savings to be had. I’ve seen products from companies like Control 4 (control4.com) that offer a range of products – but they seem to focus more on the entertainment side of things.
They key problem is that someone (company/person/VC) needs to figure out now to cheaply and easily update a dwellings wiring (electricity mainly) to become ‘smart’ – maybe via plugs interposed at the wall sockets – this technology exists but its fiddly and expensive and lacks scale…
Its not so much about remaking the TV industry or cable industry – its the power distribution industry and that would seem to be a harder chore….
I purchased a basic scanner three years ago. There is no driver for my new mac mini so I have to keep the old one. When you see something that simple not working correctly you don’t want the complexification of network to go ahead.
On the other hand there is slow progress on the standardisation like H.265 and HTML5.
Another problem is on whom will have control. For example my strata has shut off my access to the enterphone because I refused to pay them a false invoice.
> Even in our deliberately simplified example,
> there seems to be no interest in coming up
> with a simple, open (yes, that word, again)
> standard
That is what “Bonjour” is — a simple open standard that enables IP devices to self-configure so that they work together automatically. It is very broadly used and supported. It is basically open standard AppleTalk.
In your TV remote example, both the TV and remote would be IP devices, find each other over the Wi-Fi network in your home, and self-configure with Bonjour. Le Voila! You press “mute” on the remote and the TV volume is muted. Also works if the TV remote is an iPhone app. And of course it works anywhere in the house because the TV and remote are talking over Wi-Fi, not infrared.
Technology is like a Tsunami. Leave the boat and lie around on the beach for too long and when the wave comes, it’s all over. Almost everybody left their backberries on the beach along with the trashy novels and other junk.
Jobs understood more than just a product, and nobody else comes near him. Design, strategy, technology, people, organisation, managemement, sales, content, networks, production, logistics, style, marketing and assholery. All rolled up together into a big nest by the dung beetle.
“All rolled up together into a big nest by the dung beetle.”
Job’s turned shit into Gold? Many of his fans might think that turning water into wine would be a more apt anology,
From appearances, and your example, the ubiquity of IP interfaces will be less important due to the product-specific semantics. Until companies aim for a common set of understandings of labels, it’ll be hard for some third-party app to set up user-friendly scenarios such as “play last night’s Downton Abbey episode from the 0:30 mark when I fell asleep” regardless of whether that episode came from my DVR, a DVD or whatever. Let alone allowing an app to connect the audio from my Samsung TV into my Panasonic audio system, played only through my living room speakers.
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I have a rudimentary home automation system, mostly around security and timed lights, plus a house-wide audio system. Those were plenty complex enough with each using components mostly from a single vendor. If we’re going to make a Next Big Thing out of such pedestrian functions, they’ll need to add much more utility than complexity, one aspect of which will be to speak a common language —richer than the XML, which carries no meaning without understanding field labels AND contents.
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But I’m dubious that the various companies will naturally fall into line. Just as you say the content distributors don’t want to be turned into dumb pipes, the electronic manufacturers won’t want to be mere interchangeable modules in somebody else’s Grand Scheme. That’s certainly been the history of computer standards over the past decades, with web-wide standards often emerging only after the technology has peaked in relevance. E.g., W3C is still struggling with video standards when the huge majority of internet video (including Flash vids) is h.264.
Smart appliances? Meh. Yes, television will eventually get dragged kicking and screaming into the 21st century. But I don’t think that will be the next big thing. Margins are razor thin already and the value added will be limited.
Next big thing? Why not personal banking and commerce? Now that smart phones are ubiquitous, we should be using them to buy and sell. And not just overpriced lattes. NFC looked like the up and coming standard but Apple has backed off. Security issues perhaps? Lack of control? Hard to know but look for interesting things coming down the pike.
ABofC? (Apple Bank of Commerce?)
Regarding DD’s comment, while we all have been salivating at the notion of credit cards on phones and Google Wallet, those movements have been put on the backburner of tech firms, as the payment processing industry is even more convoluted and inundated w/ firms trying to protect their fees. I sincerely believe there may have to be more government authority exerted to enforce a more open standards vision, which will prevent duopolies and the like from cornering the market w/ their own proprietary standards. Or paradoxically, they could allow these big firms to collude and define an open standard themselves, which would actually be a step in the right direction. (Yes, bad for external competition, but the hardware game is over. No more entrants in the PC/mobile game, please)
Perhaps two numbers could put the Apple commerce revolution in perspective. 430 million and 137 billion. The first is the number of active accounts on iTunes, the second is Apple’s cash position. Both are growing. That is more than enough to define the standards for commerce.
“Three years ago, Chef Jobs grabbed the ingredients that had been available to all and, this time, the tablet genre “took”. ”
I think multitouch was a key ingredient. From what I have read, multitouch had not been around very long before the iPhone was released. There was a TED talk on multitouch in December, about 1 year before the iPhone was announced in January.
It’s true that all of this happened much longer than three years ago, but I’m guessing the iPad was being designed around the same time as the iPhone.
“From appearances, and your example, the ubiquity of IP interfaces will be less important due to the product-specific semantics. ”
This problem has been solved in other spaces. Both USB and Bluetooth have done an adequate job of describing semantics in a way that works across manufacturers. It is true that the CE manufacturers have traditionally done a lousy job on this front, but the way this could play out is simply that they become irrelevant and it is the Belkins and the Logitechs, more willing to face modern reality, that take their place.
Perhaps the problem is that there has been (so far) no equivalent of an Intel or an Ericksson willing to define a first pass at the necessary standards and create an industry group. But it won’t remain that way forever. One could see, for example, Intel’s recent mutterings about a set-top box as a step in that direction.
It is true that some prior efforts along these lines (eg DLNA) seem to suck. But it’s not clear that their suck is due to deep technological reasons rather than just lousy UIs.
Jean-Louis, Could you please elaborate on what the $100 billion figure represents? Is this an annual revenue figure from all related industries to the next big thing? Is your Apple 20 billion figure Apple’s slice of the presumed global pie?
Do you see this as some sort of threshold for stream-entry, as the Buddhists call it, or are you merely creating a definition of the NBT?
@Boris: The $100B number is illustrative, as opposed to a precise forecast. Apple reaching or exceeding $200B in revenue this year, a real NBT would need to count for about 10%, so the $20B number. And if Apple got a 20% share of that new product/service, we’d be looking at about $100B worldwide. All hypothetical and very rough.
That said, there’ll be a lot of room for smaller new things bekow that $100B size
It’s hard to find well-informed people for this topic, however, you seem like you know what you’re talking about!
Thanks
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