Around 170,000 people came to Las Vegas last week for the Consumer Electronics Show (CES). They visited an exhibition space equivalent to 35 football fields, showing the products of some 3,500 companies.
But as commentators noted, there was one key item missing: excitement.
“Companies have promoted largely unwelcome new versions of existing products,” wrote Molly Wood in the New York Times, “like 3-D television, or new devices with little consumer appeal, like clunky virtual-reality headsets… With many tech writers saying they planned to skip an event no longer seen as vital, it has been ages since anything momentous was unveiled at CES.”
Sponsors hoped that that this year’s CES would be energized by a wave of new companies exhibiting the next really, really, really big thing: the Internet of Things. But even that didn’t seem to do the trick.
According to C/Net, the hottest thing in the whole show was, get this, a paperweight. Admittedly it was no ordinary paperweight: it was a kind of 3D selfie, with your own image carved inside a transparent cube engineered by Intel’s Realsense technology. But let’s face it, it’s still just something to hold down the stuff that CES was supposed to make extinct: paper.
For the Washington Post, the most interesting thing was, brace yourself, a case for your cellphone. The Vysk is a privacy-focused smartphone case for people who want to keep their information to themselves. Really? A cell-phone case?
For others, the unquestionable star of the show, the very “talk of the town” (Las Vegas), was the selfie-stick. A humble camera pole “stole the literal show at Las Vegas’ annual tech spectacular. Some came with the sticks smuggled in their checked bags. Others bought theirs onsite. At CES, selfie sticks lined the exhibit hall; outside, Las Vegas sold them practically on every corner. Which means, if you weren't careful, you could have had your eye taken out by an iPhone.” The selfie stick which had been a sensation in Asia had now reached the USA, with people uncertain whether “they're either a fun, handy selfie tool or indicative of everything that's wrong with the modern, self-obsessed human.”
So that was it? Did 170,000 people travel across the country and from around the world to get a paperweight, a cellphone case and a camera pole?
The Internet of Things
Whatever happened to the Internet of Things? The really new thing that was supposed to revive the old excitement?
The Internet of Things is indeed a powerful notion. It refers to the idea of connecting everything to everything else by way of the Internet so that users don’t have to think any more. Things do the work for you. They drive your car. They manage the security, heating, cooling, laundry and cooking in your home. They turn the lights on and off as you enter or leave a room. They adjust the colors of the lighting to suit your mood. They anticipate the music you want to hear. They monitor your health and exercise. They will track your pet and monitor its health. They manage the traffic of cars and planes. And so on.
“The Internet of Things is touching almost every aspect of your life,” enthused John Curran, managing director of communications, media and technology at the consulting firm Accenture. “It’s bringing in a host of new companies and new partnerships.”
But the key to the Internet of Things is the interaction of software and hardware, not some electronic gadget of the kind that the made the Consumer Electronics Show famous. It’s an array of Apps on a platform that can link together a grab bag of pieces of hardware that are essentially in themselves mundane and boring. The excitement lies in the interconnections and the interaction, and what the interconnections and interaction can do for the user, not the devices per se.
The waning of electronic gadgets
The problem for the CES is that the Internet of Things isn’t a gadget that can be exhibited. The sad reality is that electronic gadgets have been dying at a startling pace.
The reason for this is predictable. It follows sequence of phases.
At the outset, there were a lot of physical things that performed single functions. Many of them were electronic gadgets. If we try hard, we can remember them:
“Address books, video cameras, pagers, wristwatches, maps, books, travel games, flashlights, home telephones, dictation recorders, cash registers, Walkmen, Day-Timers, alarm clocks, answering machines, yellow pages, wallets, keys, phrase books, transistor radios, personal digital assistants, dashboard navigation systems, remote controls, airline ticket counters, newspapers and magazines, directory assistance, travel and insurance agents, restaurant guides and pocket calculators.”
RIP. So 20th Century.
As Larry Downes and Paul Nunes explained in Big Bang Disruption, they were done away with by one item:
The smartphone.
What’s happened is that now we only need one electronic gadget to meet all the needs of those different physical things. The smartphone provides a hardware platform which in turn provides the basis for the software platform, which in turn enables ecosystems of employees and partners to interact and generate a vast array of solutions for diverse human needs.
We saw this sequence first with personal computers. The first personal computers were single-function pieces of hardware that did things like word processing. Remember Wang? Then the multi-purpose computer was developed by Apple and by IBM. IBM’s open software platform, DOS, enabled many different software programs. In due course, Microsoft came up with a better operating system, Windows, and a variety of software developers provided the application software to meet the diverse needs of users.
Now the same sequence is playing out on a much larger scale with the combination of the smartphone and the Cloud. As Haydn Shaughnessy points out in his wonderful, just-published book, Shift: A User's Guide to the New Economy (Tru Publishing, January 2015), the result is a “new scale economics—growth without a crippling increase in complexity management” or “growth without sclerosis.”
Thus Apple [AAPL] meets the diverse needs of hundreds of millions of individual iPhone users by launching its own ecosystem—a technology platform that enabled hundreds of thousands of developers to create Apps that could meet every conceivable human need and to offer them directly to customers. The result is an iPhone that is easily adapted to meet the needs, preferences and passing whims of every single user—a feat inconceivable with traditional management practices.
Now more and more companies are seizing the opportunity showcased by Apple with its large developer ecosystem. With some variation this model is now more generally deployed and with it a much more decentralized operating model for the modern creative enterprise. That decentralized model has many consequences but its most obvious one is it relies far more on creative individuals and small entities, as well as open source, factors that Shift points out create new sources of power in the economy as a whole.
A predictable sequence
It’s important to understand the sequence. First, single function devices morph into multi-function devices. Second, as Marc Andreessen pointed out, software eats hardware, and indeed the world. Third, platforms and ecosystems change the basic nature of management. Fourth, the center of gravity shifts downstream. As a result, the value and the excitement today lie in connecting all the elements together. It’s the system, not the individual pieces, that matter.
One way of picturing the sequence is as follows:
Shaughnessy’s Shift gives many examples of the dynamic.
“Autodesk, a leader in CAD/CAM software and building system modeling, has created a platform where companies in construction and civil engineering can draw on a growing number of apps created by an independent community. The aim is to help large construction companies simulate all aspects of a giant building project before breaking ground so they can anticipate problems and better coordinate suppliers.”
The shift isn’t just happening in firms that could be described as digital natives.
“Look around now and you’ll see even old established corporations, among them the very largest enterprises in old industry, like GE, setting out platform and ecosystem strategies that depend on engaging small business ingenuity. In GE’s case, it has put $1 billion into growing a diagnostics ecosystem capability in breast cancer. It needs small, specialist data analysts to get involved. It is trying to grow a platform and ecosystem in industrial data. Who will be the ecosystem partners there, the risk-takers that come to GE’s aid? It is a major backer of Quirky, a platform that lets anybody with a good product idea take it to prototype. GE has offered to take a selection of those products to market, and has put much of its patent chest into Quirky to help others invent new products, relying on unknown individuals to lift the fortunes of this global giant.”
Shaughnessy's Shift points out that all this means massive gains in productivity and the ability to handle complexity. Netflix, for instance, “can operate in forty-two countries and deliver to over 1,000 different types of device with less than 2,000 staff. In old industry each of those end device access points would have its own product manager, a country manager and its own development path, maybe even its own brand manager. No longer – the move to interoperability makes it unnecessary and renders many ideas about product management irrelevant.”
Because the software is in the Cloud, rather than located in programs housed in the personal computer, the system is infinitely more flexible.
And the scale is massive. “The six million new jobs that apps will create in Europe,” writes Shaughnessy in Shift, “will arise entirely from an unorganized group of self-determining small enterprises start-ups and creative individuals. But these groups are organized on platforms owned by companies like Apple, Google and Alibaba. The ecosystems around these companies are bigger than whole continents. Apple has over 800 million registered customer accounts – twice the size of the American population.”
From upstream products to downstream customer solutions
Like the CES, many firms have failed to grasp the shift. “To many managers, the product is the business,” writes Niraj Dawar in Tilt. “Firms continue to spend inordinate amounts of time, effort, and resources on their products. In fact, businesses are structured around their products. Companies have product divisions and product managers, and profitability is generally measured by product (not by customer). Planning meetings and budgets are product-based, incentives and bonuses are tied to product volume moved, and the managers’ hopes and aspirations are pinned on product innovation and the new-product pipeline. Building better products, conventional wisdom in these companies holds, is their pathway to a better, less price-competitive future. And why shouldn’t the product define the business? After all, the product is what the business makes. Money comes in when product leaves the door, and product units are easily measured: revenue, costs, and margins can be assigned to a product unit and are correlated with the number of units made and sold.”
But the answers to questions like ‘Why do customers buy from us?’” don’t reside in products. As Dawar points out, they “reside almost entirely in the interactions that take place in the marketplace. Trust, reliability of supply, service, knowledge, experience, and reputation cannot be made in a factory or packaged and sold off the shelf. These are downstream sources of value. They have their origins in specific activities, processes, and systems the firm employs to reduce the customers’ risk and their costs of doing business.”
An epitaph for the Consumer Electronics Show
The Consumer Electronics Show still reflects the 20th Century mindset of single-function gadgets, at a time when the real action is now about platforms and ecosystems that provide extraordinary customer solutions. The problem for CES is that you can’t put ecosystems and solutions on display in an exhibition hall, even one as large as 35 football fields.
So people will still come to the Consumer Electronics Show and take away their paperweights, their cellphone cases and their selfie-sticks—the hula hoops of the 21st Century. But coming to the CES will increasingly be a pretext to come to Las Vegas to enjoy the adult entertainment of Las Vegas the city, more than anything displayed at CES. The excitement in today’s innovation lies elsewhere, in software platforms and massive ecosystems. To appreciate these phenomena, there is no need, or even point, in coming to the CES in Las Vegas. They can only be grasped in the mind.
And read also:
Business' Worst Nightmare: Big Bang Disruption
Tilt: Shifting Your Strategy from Products to Customers
How Apple Achieves Massive Scale Without Sclerosis
Don't Diss The Paradigm Shift In Management: It's happening
The five surprises of radical management
________________________
Follow Steve Denning on Twitter @stevedenning
