My predictions for 2014

2013 was an interesting year in wireless. Former handset makers were either absorbed or continued their death spirals. Operators changed the way they do business (and hired CEOs with personality for the first time). And upstart MVNOs are making inroads, forcing change in the status quo of the industry. 2014 will continue this trend of change - here are three of my predictions for what 2014 will hold for the industry.

1) CES 2014 will be the year of bad wearables.

Remember CES a couple of years ago when it seemed as though anyone who could afford a 10 x 10 booth space and a few questionably attired “booth babes” was introducing some sort of underpowered tablet? Get ready for the next generation of that particular “land rush” as everyone and their brother will be promising the next big thing in wearables. While I would expect that most of these will take the form of a watch or bracelet, there will certainly be plenty of laughably bad Google Glass knockoffs and other so-called innovations that will involve wearing a consumer electronic device in a place where nobody would have expected that one would ever be worn.

And much like the deluge of wannabe tablet makers from a few years back, the vast majority of these companies and their associated products will never be seen again.

2) 2014 will be the year that carrier owned retail begins to disappear.

I am not sure whether it is Starbucks, nail salons, or company owned wireless retail stores that take up the most square footage in strip malls around the country. But I am quite sure that in 2014, those ubiquitous wireless stores will begin to decline in number.

I see this happening for a number of reasons. First and foremost, now that the wireless penetration rate has reached a point where virtually anyone who wants a cell phone has one, there are no more new customers to be had. Instead, carriers are simply churning customers back and forth to one another. This zero-sum game simply is not as lucrative as when the entire industry was adding subscribers at a breakneck rate (which, not coincidentally, is when many of these retail storefronts were built out).

Additionally, in an era when a cell phone is no longer a futuristic, high-tech luxury, and more a utility, there isn’t nearly the need for the high-touch hand-holding that is the hallmark of wireless retail. Indeed, the major operators are quickly moving to emulate MVNO’s with self-serve, BYOD models - AT&T being the latest with their $45/mo smartphone plan. But with these models come slimmer margins, and a need to eliminate costs to maintain profitability, And the money spent on maintaining a retail presence on practically every corner is an obvious place to recoup dollars lost on lower margin no-contract plans.

3) The mid-market smartphone will become an endangered species in 2014

The need for phone makers like LG and HTC to exist is correlated with the need for corporate owned wireless retail to fill their stores with product. The same holds true for virtually any smartphone from Samsung except for the Galaxy S. LG and HTC are no longer making money on their smartphones, and I would venture to guess that Samsung’s extensive lineup of smartphones outside of the Galaxy S are loss leaders that serve little business purpose other than to take up shelf space that might otherwise go to another brand (who would ironically also be likely to lose money in that same space).

I would put Motorola and Nokia into that category, but since their larger corporate overlords have a bigger rationale for those companies to exist, they won’t be going away anytime soon. (although it is more than likely that one, if not both, of those names will be lost to the sands of time).

In 2014, as corporate owned wireless retail begins to fade away, so does the need to fill store shelves with product. The Galaxy S and iPhone, the only profitable smartphones, will represent the ‘high end’ of the market, and will continue to be sold “on time” given their high retail cost. For others (who are either more cost conscious or less brand conscious), there will be a handful of smartphones priced at or below $199, and will usually be paired with a flat rate prepaid monthly plan. This “low end” product will most likely be made by a Chinese upstart like Huawei or ZTE, who don’t have the legacy cost structure of other handset manufacturers, and have shown that they can produce a reasonably good smartphone at that price point.

Like the decline of company owned wireless retail, the change won’t happen overnight. But at the end of 2014, if we compare the range of widely available phones to what is available today, the change will be obvious.

Exclusivity - The option to take when it’s the only one you have

First, it is important to state the obvious. Virtually no manufacturer of any consumer product - especially one needing every possible sale that they can get - would ever purposely limit their own distribution. Certainly there are examples of deliberate channel compression, but only in instances where a manufacturer is coming from a strong position, and is doing so for market positioning (i.e. going upscale in the marketplace).

So, why do we see Nokia today announcing a new flagship product that will only be available in the US through AT&T? As noted above, this type of decision isn’t made with the understanding that is is the best strategy, rather it is made when it is the only option at hand.

Today, we see the wireless market dominated by two phone models - the iPhone and the Samsung Galaxy S. Both of these products are sold in essentially the same configuration across all major wireless operators. Meanwhile, less popular models (meaning virtually every other phone) are usually only available through a single carrier - or only available in greatly customized form across two or more channels.

Why is this the case? Because for any retailer of any product, exclusive is ALWAYS better. With an exclusive product, you don’t have to deal with pesky issues like price comparisons. And the issue is even more pronounced for a wireless operator, who risks losing a customer for years if they aren’t offering the phone that consumers desire at the time that they want it. While wireless operators would undoubtedly prefer a cable company model - one cable box option, take it or leave it - the nature of the wireless phone makes that a non feasible strategy. (When was the last time you met a Scientific Atlanta fanboy?)

The Galaxy S and iPhone are devices that have enough consumer preference to mean that a significant number of consumers could defect if that particular model is unavailable. This puts the manufacturer in a relative position of strength to get widespread, undifferentiated distribution.

But since no other phone has this kind of cachet, an operator is making a bet that there might be just enough interest to gain a few additional subscribers at the cost of rival operators to make taking on another device a good risk. But only as an exclusive, where they are the only destination for that phone. If that device were available among multiple carriers, the moderate interest would dilute demand too much to make adding the SKU a good risk. And the potential for that phone not being available on their network to drive substantial numbers of subscribers away is virtually nil. In short, the carrier is in the relative position of strength, and can demand the more desired exclusivity.

Today, only a very few products besides the iPhone and Galaxy S enjoy cross carrier availability - the HTC One and Moto X being the prime examples. However, with neither of these devices tearing up the charts, it is more than likely that this is the last hurrah for these devices as cross carrier products. Expect to see following generations either released as exclusives, or at best, only available in heavily carrier customized form.

When you see a phone released as a carrier exclusive, don’t think that this is the case because the manufacturer believes that it is the best option, understand that it was likely the only option.


You can’t buy cool

The recent news that HTC and Beats are calling off their ‘arranged marriage’ is another important reminder for companies looking to boost their brand images. The lesson that needs to be learned is that no matter how much money you are willing to throw out there, you simply can’t buy ‘cool’.

In the tech space, Apple has become the definition of coolness, or at least the closest approximation that any company producing electronic goods has been able to create. But despite this aura having been created through a combination of well-designed products and an aloof attitude, competitors (and wannabes) continue to believe that an oversized marketing budget thrown at the celebrity/cause/unrelated brand du jour will magically transform the most dowdy company into a hip, desirable brand.

There is nothing new about this kind of misguided brand alchemy. Looking back to the 1970’s, examples of this can be found in the auto industry. In a fruitless attempt to fight back against upstart imports, such embarrassing brand mash-ups as Lincoln/Oleg Cassini and AMC/Levis came to market. Instead of spending money on R&D to create higher quality vehicles that matched the changing desires of the market, there was a belief that smearing a little bit (or a lot) of lipstick on the pig was the answer.

The 21st century reboot of this idea came in the form of paying celebrities to become ‘creative directors’ for brands that need a quick influx of hipness. The first example of this was the ill-fated naming of Lady Gaga as creative director for Polaroid at CES 2011. A couple of lightly rebranded products later, Polaroid shockingly still is not nipping at Apple’s heels in the battle of cool brands. BlackBerry’s naming of Alicia Keys as creative director didn’t keep that brand from sliding into the abyss either. And looking into my career experience, it doesn’t seem that the Nokia 3300 ‘Jay-Z Edition’ did a lot for a company looking to battle Apple in the war of portable music players.

The brands that have truly captured the hearts (and wallets) of consumers around the world are those that have carefully studied the market, designed aesthetically pleasing products that meet the needs of that market, and then plow the resulting profits into more market studies and even better products again and again. The faster that companies realize that hard work, and not the indiscriminate throwing of funds at poorly conceived marketing programs, is the best path to success, the faster that we may see products and brands that can actually compete against the status quo.

How shifting power transformed the mobile landscape

Recent news has created a lot of talk about the demise of the ‘old guard’ of handset manufacturers. With Nokia soon to be digested within the maw of the Microsoft colossus, an old standby like Motorola already having been similarly consumed by Google, and brands such as Ericsson and Palm simply disappearing into the sands of time, there has been a lot of Monday morning quarterbacking going on about how these ‘old’ companies were unable to properly foresee the future, and how being caught flat-footed by newer, fleeter competitors, ultimately spelled their doom.

While there is a lot of truth in this analysis, one aspect that has been little discussed is that of the shifting power from the operator to the manufacturer. This shift can be traced almost directly to the rise of the smartphone, and how that shift transformed the mobile phone from a low-involvement to a high-involvement product.

For years, the mobile handset was in many ways to the mobile operator what the cable box is to the cable TV provider. A customer came in the door to sign up for service, and walked out with the phone that the salesperson plopped in his or her hand. From time to time, an interesting new product would come into play (the Nokia 6160 comes to mind), and suddenly the mobile operator would see this shift within their inventory.

In traditional retail, that would prompt a shift in inventory, and a retailer would stock up on the newly hot product to satisfy customer demand. But to the wireless operator, the tendency was to quash this interest by emphasizing other brands so as to not allow one manufacturer to become dominant over others. If the Motorola RAZR was beginning to have a disproportionate share of market, that was a signal to range a new LG phone and put it on promotion. If the Nokia 6160 was getting too hot, a new Samsung might help to put things back into balance if promoted properly. Since the handset was a fairly low involvement purchase, most consumers were happy to take this other phone without much protest.

By artificially stimulating demand for these less desirable brands, major operators were able to guarantee that no one manufacturer could wield too much power over them, and that there would always be a number of backup suppliers in play to make sure that nobody got ‘too big for their britches’. Once any manufacturer started to creep over 30% of sales, it was time to rebalance the portfolio. Manufacturers who were making the coolest, newest phones were none too happy, but this strategy saved the bacon of more than one manufacturer who would be unlikely to have survived without this artificial sales floor. (Sanyo’s inexplicable long run at Sprint perhaps?)

But today, consumers are much more demanding in what they want. The high involvement of consumers in the purchase decision has shifted the balance of power from the operator to the manufacturer. And huge marketing investments by the two most powerful names in handset manufacturing (Apple and Samsung) are calculated so as to not allow the possibility that this duopoly in consumer mindshare be broken anytime soon.

Much has been written about how carriers want Windows Phone as a third ecosystem to lessen their dependency on iOS and Android. That is almost certainly true. And within the Android ecosystem, it is almost certain that operators want HTC and Motorola to survive as a hedge against Samsung. Again, this is also most likely true. But in a world where consumers have dictated to mobile operators that they can no longer ensure the survival of a stable of handset suppliers, what they want simply isn’t all that important any more.

Why is tech PR broken?

Recently, I have been seeing a growing flood of posts and tweets from members of the media (print, online and otherwise) bemoaning the current state of PR (specifically tech PR). While some level of friction between media and PR reps is nothing new (and probably healthy to some extent), it seems as though the methods that many tech PR practitioners are now implementing are changing the historical role of the PR department as a liaison between members of the media and the inner workings of a company into something far different – and far less effective.

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When I first entered the PR field, there were a few simple lessons that I learned from the very experienced team with whom I worked:

  • Listening is more important than speaking.

  • Before blindly engaging, take time to understand a journalist’s interests by actually reading their writing.

  • Always take time to respond to an inquiry – even if you can’t give an answer, acknowledge that the question was at least heard

But the most important lesson that I learned was that the relationship between a writer and a PR pro is a two-way street. A PR pro can’t expect that he or she can ignore their media until needing to pitch a story to them – and then expect an enthusiastic reception. A good relationship is built by a PR pro working hard to help a writer obtain the information and access that they need to do their job. Certainly, a PR practitioner’s first concern needs to be their company (or client), but doing everything possible in order to assist a writer in gathering timely and accurate information is a very, very close second.

A PR pro can’t expect that he or she can ignore their media until needing to pitch a story to them – and then expect an enthusiastic reception.

Now, this certainly isn’t rocket science (or brain surgery, or whatever difficult task you wish to insert here). In our personal lives, it is understood that only taking, and never giving, is the fastest way to destroy a relationship. “As ye sow, so shall ye reap” has been understood for so long that people were still saying “ye” when it was first written. So why has this simple lesson been forgotten (or ignored) by so many when it comes to the PR field?

Actually, I don’t believe that these lessons have been forgotten – they have just been buried under the detritus of today’s business environments. The self-contained corporate PR department is becoming a relic of an earlier time when healthy profit margins roamed the earth. Instead, a company may have an internal PR team (at best), or more likely, an agency that acts as a company’s in-house team. In both of these cases, they are more than likely reporting to the marketing department. And this is where the problems start.

While to the C-level executives looking to trim costs, burying the PR function within marketing seems like a great idea (“Hey, PR is just free advertising, right?”), the reality is that no two functions are as diametrically opposite than PR and marketing. This may seem like an overstatement until you look at the very core of these professions. Boiled down to basics, marketers create a message, and then pay someone to deliver this message. PR practitioners create a message, and then leverage relationships to try and sell this message to someone (who may or may not deliver the message, and furthermore, may or may not deliver the message in quite the way as it was hoped.)

However, since these corporate PR teams (or PR agencies) are now reporting to (or at least subservient to) the marketing department – they are being directed to act as though they were simply placing advertising. Marketers are used to paying a specific sum of money, and getting exactly what they create placed exactly where they want it at the exact time that they need it. And unfortunately, now the expectation is that the PR team can do the exact same thing (except for free). And in the frenzy to meet those expectations, today’s PR practitioner is forgoing those basic lessons of how to do their jobs the right way, and are blindly using non-targeted email lists to carpet-bomb media with whom they have no prior relationship in hopes of creating a hit that can be inserted into the weekly PowerPoint presentation in a desperate bid to validate the continued existence of a PR team.

This isn’t an indictment of the marketing profession. Many marketers are extremely talented, creating outstanding campaigns and helping to make their organizations successful. Unfortunately, this talent is not directly applicable to the PR field – and when the methods of marketing are applied to PR, the results are unfortunate for everyone – including the PR practitioner and the journalist.

While I don’t know what the ultimate solution to this problem might be, maybe it does help offer some insight into the next tweet that pops up asking “Why the hell did some flack pitch me a story about X?” It’s probably because today’s business reality is forcing some unfortunate PR practitioner to swallow their pride and press “Send” on that bulk e-mail that he or she knows goes against their very best instincts – just to hopefully stay employed for at least one more paycheck.

The Rule of Two

This week’s introduction of Blackberry 10, and the surrounding punditry around it (is it innovative enough to succeed? Are there enough apps? How’s the battery life? etc, etc.) led me to thinking about whether the question shouldn’t simply be “Does it matter?”. There is absolutely nothing new about the hypothesis that the smartphone market has bifurcated into two camps – iOS and Android. Given the cost to develop a new platform and the necessary ecosystem to support a platform, the supposition is reasonable. But, is it really simpler than all of that?

To date, most comparisons are made to desktop operating systems – Windows and MacOS. It’s a fair comparison, given that the rationale for success or failure of a desktop OS is not all that different from that of a smartphone OS. In a nutshell, both need critical mass to support the platform with software (which is the lifeblood of any computing platform, unless consumers are destined to learn advanced coding and create all of their own applications.) There have been spectacular failures by players looking to grab a share of this market (OS/2), and niche entrants with a small, but enthusiastic base (Linux). But for almost 30 years, the desktop OS market has been very much a duopoly.

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But is the theorem that ecosystem support, defined by the (understandable) unwillingness of application developers to invest resources in more than two incumbent platforms, the main driver of this two-player-only phenomenon? I would venture to say that not only is it not the only driver, it isn’t even the primary one. The simple reason in my estimation is that consumers simply don’t have the bandwidth to absorb more than two potential choices in most purchase decisions. Certainly, there are esoteric differences around the edges that may drive a specific brand or model choice – but as for the core proposition of a consumer choice – more than a binary decision is too much for the average person to undertake.

Look no further than a far less complex product to prove the point – cola. While little more than sugar (or corn syrup) and water – countless attempts to break the Coke/Pepsi duopoly have resulted in either utter failure, or relegation to being a niche player destined to always being looking way up at the big boys. Attempts to compete on price (RC Cola) have failed. Competing with a better tasting product (again, RC Cola) has failed. Such a simple product should be ripe for commoditization – with multiple brands competing on equal footing with a reasonably low barrier to entry. But after a century – it is still Coke versus Pepsi. Everyone else is the beverage equivalent of Linux. Certainly – early in the game, there was a lot of jockeying for position – hundreds of regional brands vying to win over the taste buds of a nation. But in the end, two remained – and anyone looking to compete has found the market to be less than a sweet and bubbly experience (sorry, couldn’t resist).

And this is despite the “ecosystem” of sugary sodas being far less constricting for beverages that it is for smartphones. Soft drinks are truly cross platform (my Pepsi glass will happily accept a pour of Coca-Cola), and the cost to switch is virtually nil (you may need to toss that “I’m a Pepper” T-Shirt, but that’s about it). Yet the market looks eerily similar to smartphones – two major players, and a bunch of wannabes fighting over the scraps.

People that know me know that I always like to compare the market for phones to the market for cars. In my mind, there are a number of learnings that can be made from this far more mature category. In 1964 (and a half to be accurate), Ford introduced the Mustang – the first pony car (and the car which spawned the name of the entire category). Despite being not much more than a tarted-up Falcon (Ford’s economy car of the era), the Mustang was perfectly positioned for the era of baby boomers, who were reaching driving age and endlessly looking for something new that reflected their unique lifestyle. For two and a half years, the Mustang had this market to itself – becoming a monster hit in the process. Not until 1967, when GM introduced the Camaro (and its platform twin, the Firebird), did the Mustang have real competition.

Quickly thereafter, lines were drawn, and the market was fairly well split between Ford and GM for the lucrative pony car market (with the competition driving rapid innovation and improvement in the category). Even with the enormous sums of money being made, it wasn’t until 1970 when Chrysler finally got in the game (with the Dodge Challenger and Plymouth Barracuda). These Pentastar twins brought new innovation (like the Hemi engine) and slick new styling to the category. But despite that – the three year gap between the Camaro/Firebird and the Challenger/Barracuda was all it took to create a two-horse-race in people’s minds. The Chrysler entries were never viable competitors, and only lasted a few model years (the recent redux of the models notwithstanding). It should also be noted that AMC got into the market with the innovatively different, and ultimately unsuccessful, AMX – which could easily be seen as the WebOS of the pony car market.

Android or iOS. Windows or Mac. Coke or Pepsi. Camaro or Mustang. No matter how much innovation or improvement that the third (or fourth or fifth) entrant brought to the market – there has never been room for #3 to become a truly viable competitor. At best, #3 has been able to gather enough people who just want to be different to stay in business – but never to truly challenge the status quo. Blackberry 10 is more than likely destined to be the next Dodge Challenger, King Cola (look it up) or OS/2 Warp. It’s not for lack of trying – or being more innovative than the other guys – it’s simply that infernal rule of two.

What do the iPhone and George Foreman have in common? (Hint: It’s not a grill)

With the upcoming release of the sixth iteration of the iPhone, there have been plenty of educated (likely correct) suppositions that unlike the devices that have come so far, that the new iPhone will lack any sort of numerical designator - and simply be named “the new iPhone”. This seems to align with the most recent iPad - just known as “the new iPad”. Most commentators think that this is a fine idea, and that since automakers have done well with this model for as long as anyone can remember, that it won’t be a problem.

However, I say “not so fast”. The automotive example is not really a valid comparison. I drive a Nissan Frontier (yes, I live large) - and Nissan has used the Frontier name for over a decade now, ever since it supplanted the previous “Hardbody” model name in 1998. (Yes, I said “Hardbody”). In those 10-plus years, the Frontier has gone through at least two generations - but I have no problem always identifying the right parts. Why? Because the model year is an integral part of any automotive designator. I drive a 2008 Frontier. Other people have 1965 Mustangs, or 1957 Bel Airs. But the model year is what identifies the generation.

But, in the world of mobile phones, nobody uses years. At least I have never heard anyone say that they carry a 2009 LG Envy or a 2011 Samsung Galaxy S. But as Apple switches to a “they are all simply iPhones” model, I believe that this ultimately does a disservice to the ecosystem that has made the iPhone so incredibly successful. Without a generational designator, it becomes less clear as to which speaker dock has the correct system connector, which bumper fits which device, or which applications require specific features only found in the most recent hardware.

And, if the current Apple strategy of creating a “good, better, best” portfolio by keeping prior devices in market, how do retailers differentiate the offerings? Today, I can walk into an AT&T store and choose from an iPhone 3GS, an iPhone 4 or an iPhone 4S. In 2015, does that portfolio become a choice between an iPhone, an iPhone or an iPhone?

Don’t get me wrong, I can fully appreciate that a continuation of the current strategy would eventually result in some very unwieldy names (iPhone 8, the Ocho, anyone?). But, simply stamping out multiple generations of phones which will undoubtedly have different capabilities and form factors and giving them all the same name is simply not the solution. If you disagree, just go ask George Foreman what things are like for him at dinnertime.

Tags: iPhone

So long, and thanks for all the fi(nni)sh…

Even when a 3 year detour is taken into account, 11 years is a long time to spend at any one company in these days of serial job-hopping. More than half of my working life has been spent at Nokia, and while there have been a fair share of rough spots along the way - I still consider my decision to join an unknown company from a little-known country back in 1998 to be the best choice that I ever made. Even my decision a year ago to leave a then-thriving HTC to return to my roots is something I do not regret. But today, as the grim restructuring reaper taps upon the door, my time at Nokia comes to an end.

Since finding out that I, along with other colleagues who I admired and relied upon every day, would be casualties of Nokia’s understandable need to “sharpen its focus” and cut costs, I have spent a lot of time reminiscing on the unbelievable ride that I have had the privilege to take. In that time, I saw phones shrink from loaf sized bricks that delivered less than an hour of talk time (yet were still wonders to behold) to Zoolander-miniscule handsets that could get lost in a pocket. And also to witness a progression of technology from when musical ring tones and alphanumeric displays elicited oohs and aahs to where a phone with infinitely more processing power and memory than my first Nokia-issued laptop can be labeled as “woefully underpowered”.

And I saw all of this from a single vantage point. That’s the equivalent of having a ringside seat at Ford from the concepting of the Model T to the advent of today’s hybrid electro-cars. Hell, that’s understating it - it’s more like being part of the progression from the Model T to the flying car.

It’s hard to overstate just how amazing the experiences that have been afforded to me truly were. Nokia allowed me to visit three continents, traveling north of the Arctic Circle and south of the equator. I jumped in a frozen lake and survived (twice), experienced every variation of the sauna, and rode snowmobiles under the Northern Lights. I met three presidents, actors, musicians and sports figures of varying levels of talent and fame, and even Bill Gates during the era when Nokia and Microsoft were still fierce rivals fighting over the direction of the mobile Internet. (How things change!)

But most important to me are the people with whom I have worked over the years. In the early days, Nokia was a small, motley crew of hard-working, hard-playing folks who lacked fancy degrees and impressive resumes - but who gave everything they had every day to take Nokia from an unknown entity to a world-leading force. These were the true pioneers of our industry, and I am honored that I was able to play a small role in their accomplishments. I have worked for people who shared with me the knowledge and tools that have allowed me to get to this point in my career, and have worked side-by-side with people who have become friends that mean more to me than they will ever know.

Even at this moment, pink slip still firmly in hand, Nokia is giving me an incredible opportunity to hit the reset button. For the next few months I am just going to step back and enjoy life a bit. I have a feeling that this break will turn out to be yet another amazing gift that Nokia has given to me. And that is why I don’t feel a drop of anger or bitterness. Instead, I am simply grateful for the experiences that I have had and the people I have met along the way.

The phone history display in the Nokia Sunnyvale office. Weird to think that I worked, in some capacity, on every one of these phones somewhere along the line.

The phone history display in the Nokia Sunnyvale office. Weird to think that I worked, in some capacity, on every one of these phones somewhere along the line.

Tags: History