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Tag: augmented reality

Nokia Conducting Search for a New CEO

Very provocative headline for an interesting WSJ piece:

“They are serious about making a change,” one person familiar with the matter said. Nokia board members are “supposed to make a decision by the end of the month,” that person said.

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They should be very serious about making a change – its been disappointment after disappointment at the former Finnish phone giant (and its stock price, see above). But, this gives me a great chance to play $100-armchair CEO. So, what would I do if I was in the big chair at Nokia? I’d be focusing on three things:

  • Change the OS approach: With Nokia’s next OS Symbian^3 delayed and widely perceived to be inadequate, you really need to question the ability of Nokia to keep up in the industry-shaking smartphone platform war. In particular, Nokia’s challenge is that its attempting to take a software platform built to enable carrier services and high reliability on lower-end phones that weren’t meant to run software and somehow force it into achieving the same high-end software functionality that Apple’s iOS and Google’s Android provide. While there’s nothing that says this is impossible, this is an order of magnitude more difficult than Apple/Google’s initial problem of just creating a software platform without the burden of any legacy constraints/approaches, and, in an industry as fast-moving and disruptive as the smartphone space, that’s two orders of magnitude too many, invites all sorts of risk with no clear reward, and discards Nokia’s traditional strengths in wireless communications R&D and solid hardware design. What does that mean? Three things:
    • Re-tool Symbian for the low-end to be more like Qualcomm’s BREW (or heck, maybe even adopt BREW?): an operating system focused on enabling carrier/simple software services on the many featurephones out there. That category is Nokia’s (and Symbian’s) traditional strength, and that’s where Symbian can still add a lot of value and find a lot of support.
    • image In the mid-market (high-end featurephone/low-end smartphones), I’d tell Nokia to bite the bullet and adopt Android. Not only is it free, but it immediately levels the software playing field between Nokia and the numerous  OEMs who are itching to adopt Android allowing Nokia’s traditional strength in hardware design to win over.
    • imageIn the high-end, Nokia should go all-in with Intel on their joint MeeGo platform. In that space, Nokia needs a killer platform to disrupt Google/Apple’s hold on the market, and MeeGo is probably the only operating system left which might contest Android and iOS and drive the convergence of mobile devices with traditional computers that this category is pushing towards.
    • Double-down on Qt to make it easier for developers to “develop for Nokia”. A few years ago, Nokia bought Trolltech which had created a programming framework called Qt (pronounced “cute”). Qt had gained significant traction with developres as it made it easier to make a graphical user interface which ran across multiple devices and operating systems. This is a key asset which Nokia has tried to use to make MeeGo and Symbian more attractive (and which is probably one of the main reasons both OS’s still have reasonable levels of developer interest; although, interestingly, there has been an effort to bring Qt over to Android), but it needs to be emphasized even more if Nokia wants to stay in the game.
  • Pick your battles wisely: It is entirely possible that Nokia has lost the high-end smartphone battle in the US and Europe (even despite the operating system approach laid out above). But, even if Nokia was forced to completely cede that market, its not the end of the war – its simply the loss of a few (albeit important) battlegrounds. Nokia is still well-positioned to win out in a number of other markets:
    • image The featurephone world: Many of us tech aficionados often forget that, despite all the buzz that the iPhone and the Droid devices generate, smartphones actually make up a very small unit base. Featurephones are still the vast majority of the volume (for cost reasons) and, as devices like the iPhone continue to capture mindshare, there will be significant value in helping featurephones imitate some of the functionality that smartphones have. While it is true that Moore’s Law makes it easier for high-end operating systems like iOS and Android to be run on tomorrow’s featurephones, the incentives of Apple and Google are to probably better aligned with taking their mobile operating systems up-market (towards higher-end devices and computers) rather than down-market (towards feature phones) to chase higher margins and to continue to build highly optimized performance machines. So, given Nokia/Symbian’s traditional strength in building good devices with good support for carrier services, its natural for Nokia to solidify its ownership of the feature phone market and to emulate some of the functionality of higher-end devices.
    • Emerging markets: This is related to the previous bullet point, but much of the developing world is now seeing vast value in simply adopting basic services and software on their (by Western standards) very low-end phones. As banking systems and computer availability are extremely limited in Africa and parts of Asia, this represents an enormous opportunity for someone like Nokia who has spent years making their phones capable of mobile payment, geolocation, and carrier-enabled services. Couple this with the fact that there is enormous growth waiting to happen in markets like India, China, and Africa (where cell phone penetration is nowhere near as high as in the US), and you have the makings of a potential end-game strategy which could offset short-term setbacks in the US/European smartphone market.
    • image Japan: While Europe and the US are eagerly adopting smartphones (as in phones with rich operating systems), Japan has been a laggard due to differences in the carrier/vendor/services environment. While its been difficult for foreign companies to break into Japan, the recent technology deal between Japanese semiconductor company Renesas and Nokia might provide an interesting “foot in the door” for Nokia to enter a large market where its weakness in software is not so much of a hindrance and its strengths in hardware/willingness to play nice with carriers are a big asset. This is in no way a slam-dunk, but its definitely worth considering.
  • Figure out the key ecosystem player(s) to partner with: The previous two bullet points were mainly tactical suggestions – what to do in the short-run and how to do it. This last bullet point is aimed at the strategic level – or, in other words, how does Nokia influence the creation of a market environment which leads to its long-term success. To do this, it needs to figure out who it wants to be and what it wants the mobile phone industry to look like when all is said and done. I don’t have a clear answer/vision here, but I’d say Nokia should think about partnering with:
    • Carriers: Although Apple/Android have had to play nice with the carriers to get their devices out, the carriers probably see the writing on the wall. If smartphone platforms continue to gain traction, there is significant risk that the carriers themselves will simply become the “dumb pipes” that the platforms run on (in the same way that  internet service providers like AOL rapidly became unimportant to the user experience and purchasing decision). Nokia has an opportunity to play against that and to help bring the carriers back to the table as a driving force by helping the carriers expose new revenue streams/services (which Nokia could take a cut of) and by building more carrier-friendly software/devices which help with coming bandwidth issues.
    • image Retailers/Mobile commerce intermediaries: One of the emerging application cases which is particularly interesting is the use of mobile phones for the buying and selling of goods. This is something which is extremely nascent but has a huge opportunity as mobile commerce can do something that traditional desktop-bound eCommerce can’t: it can bridge the gap between pixels on the screen and actual real-world shopping. It can be used as a mobile coupon/payment platform. It’s camera and GPS enables augmented reality functionality which can let shoppers look up information about a product without having to type in search-strings. It can be used to provide stores with more information about a shopper, letting them tailor new ad campaigns and marketing efforts. I haven’t run the math to build a forecast, but there’s good reason to believe that this could be the application for mobile phones. While Nokia may have to cede application/ad revenue to Google/Apple, it may be able to eke out a nice chunk of profit (maybe even bigger than the one Google/Apple can get) from focusing on this particular need case instead.

Obviously, none of these are guaranteed home-runs, but if I were a Nokia shareholder, I’d hope that the next Nokia CEO does something along the lines of this. And, yes, I’d be willing to accept $100 (and “some” stock) to be Nokia’s CEO and implement this :-).

(Image credit – Business Insider) (Image credit – Android logo) (Image credit – MeeGo logo) (Image credit – feature phone montage) (Image credit – Japanese phones) (Image credit – Mobile coupon)

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Why smartphones are a big deal (Part 2)

[This is a continuation of my post on Why Smartphones are a Big Deal (Part 1)]

Last time, I laid out four reasons why smartphones are a lot more than just phones for rich snobs:

  1. It’s the software, stupid
  2. Look ma, no <insert other device here>
  3. Putting the carriers in their place
  4. Contextuality

My last post focused on #1 and #2, mainly that (#1) software opens up a whole new world of money and possibility for smartphones that “regular” phones can’t replicate and (#2) that the combination of smartphones being able to do the things that many other devices can and phones being something that you carry around with you all day spells bad news for GPS makers, MP3 player companies, digital camera companies, and a lot of other device categories.

This time, I’ll focus on #3 and #4.

III. Putting the carriers in their place

Throughout most of the history of the phone industry, the carriers were the dominant power. Sure, enormous phone companies like Nokia, Samsung, and Motorola had some clout, but at the end of the day, especially in the US, everybody felt the crushing influence of the major wireless carriers.

In the US, the carriers regulated access to phones with subsidies. They controlled which functions were allowed. They controlled how many texts and phone calls you were able to make. When they did let you access the internet, they exerted strong influence on which websites you had access to and which ringtones/wallpapers/music you could download. In short, they managed the business to minimize costs and risks, and they did it because their government-granted monopolies (over the right to use wireless spectrum) and already-built networks made it impossible  for a new guy to enter the market.

imageBut this sorry state of affairs has already started to change with the advent of the smartphone. RIM’s Blackberry had started to affect the balance of power, but Apple’s iPhone really shook things up – precisely because users started demanding more than just a wireless service plan – they wanted a particular operating system with a particular internet experience and a particular set of applications – and, oh, it’s on AT&T? That’s not important, tell me more about the Apple part of it!

What’s more, the iPhone’s commercial success accelerated the change in consumer appetites. Smartphone users were now picking a wireless service provider not because of coverage or the cost of service or the special carrier-branded applications  – that was all now secondary to the availability of the phone they wanted and what sort of applications and internet experience they could get over that phone. And much to the carriers’ dismay, the wireless carrier was becoming less like the gatekeeper who got to charge crazy prices because he/she controlled the keys to the walled garden and more like the dumb pipe that people connected to the web on their iPhone with.

Now, it would be an exaggeration to say that the carriers will necessarily turn into the “dumb pipes” that today’s internet service providers are (remember when everyone in the US used AOL?) as these large carriers are still largely immune to competitors. But, there are signs that the carriers are adapting to their new role. The once ultra-closed Verizon now allows Palm WebOS and Google Android devices to roam free on its network as a consequence of AT&T and T-Mobile offering devices from Apple and Google’s partners, respectively, and has even agreed to allow VOIP applications like Skype access to its network, something which jeopardizes their former core voice revenue stream.

As for the carriers, as they begin to see their influence slip over basic phone experience considerations, they will likely shift their focus to finding ways to better monetize all the traffic that is pouring through their networks. Whether this means finding a way to get a cut of the ad/virtual good/eCommerce revenue that’s flowing through or shifting how they charge for network access away from unlimited/“all you can eat” plans is unclear, but it will be interesting to see how this ecosystem evolves.

IV. Contextuality

There is no better price than the amazingly low price of free. And, in my humble opinion, it is that amazingly low price of free which has enabled web services to have such a high rate of adoption. Ask yourself, would services like Facebook and Google have grown nearly as fast without being free to use?

How does one provide compelling value to users for free? Before the age of the internet, the answer to that age-old question was simple: you either got a nice government subsidy, or you just didn’t. Thankfully, the advent of the internet allowed for an entirely new business model: providing services for free and still making a decent profit by using ads. While over-hyping of this business model led to the dot com crash in 2001 as countless websites found it pretty difficult to monetize their sites purely with ads, services like Google survived because they found that they could actually increase the value of the advertising on their pages not only because they had a ton of traffic, but because they could use the content on the page to find ads which visitors had a significantly higher probability of caring about.

imageThe idea that context could be used to increase ad conversion rates (the percent of people who see an ad and actually end up buying) has spawned a whole new world of web startups and technologies which aim to find new ways to mine context to provide better ad targeting. Facebook is one such example of the use of social context (who your friends are, what your interests are, what your friends’ interests are) to serve more targeted ads.

So, where do smartphones fit in? There are two ways in which smartphones completely change the context-to-advertising dynamic:

  • Location-based services: Your phone is a device which not only has a processor which can run software, but is also likely to have GPS built-in, and is something which you carry on your person at all hours of the day. What this means is that the phone not only know what apps/websites you’re using, it also knows where you are and if you’re on a vehicle (based on how fast you are moving) when you’re using them. If that doesn’t let a merchant figure out a way to send you a very relevant ad, I don’t know what will. The Yowza iPhone application is an example of how this might shape out in the future, where you can search for mobile coupons for local stores all on your phone.
  • image Augmented reality: In the same way that the GPS lets mobile applications do location-based services, the camera, compass, and GPS in a mobile phone lets mobile applications do something called augmented reality. The concept behind augmented reality (AR) is that, in the real world, you and I are only limited by what our five senses can perceive. If I see an ad for a book, I can only perceive what is on the advertisement. I don’t necessarily know much about how much it costs on Amazon.com or what my friends on Facebook have said about it. Of course, with a mobile phone, I could look up those things on the internet, but AR takes this a step further. Instead of merely looking something up on the internet, AR will actually overlay content and information on top of what you are seeing on your phone screen. One example of this is the ShopSavvy application for Android which allows you to scan product barcodes to find product review information and even information on pricing from online and other local stores! Google has taken this a step further with Google Goggles which can recognize pictures of landmarks, books, and even bottles of wine! For an advertiser or a store, the ability to embed additional content through AR technology is the ultimate in providing context but only to those people who want it. Forget finding the right balance between putting too much or too little information on an ad, use AR so that only the people who are interested will get the extra information.

The result of all four of these factors? If you assume that a phone is only a calling device, you’re flat out wrong. And if you think a phone is just another device for accessing the internet and playing goofy little games, you’re also wrong. The smartphone will, in this blogger’s humble opinion, dramatically change the technology landscape, and the smart money is on the companies and startups and venture capitalists who recognize that and act on it.

(Image credit) (Image credit) (Image credit)

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