Thursday, January 31, 2008

Dessert topping and floor wax

Six years ago, I gave two sections of MBA students at UCI the following take-home midterm:

Management of High Technology Companies
Digital Mobile Devices: Convergence and Dominant Design

Midterm Exam
due via e-mail 2:00 a.m. May 2, 2002

Individual businesspeople and consumers today typically own one or more digital mobile devices incorporating similar technologies. Various analysts have predicted three different scenarios:

  • convergence: two (or more) types of devices will be combined into one, such as the PDA phone;
  • complements: two (or more) types of devices will remain distinct products (PDA and cell phone), but will become more tightly integrated so that they work together as a system (e.g. PDA and cell phone connected via Bluetooth)
  • substitutes: converged (or non-converged) products will act as substitutes for existing mobile or non-mobile devices
Complements and substitutes also apply to certain categories of non-mobile digital devices, such as laptops and desktop personal computers.The overall goal of your paper will be to:
  • identify how technological progress will transform one or more existing categories of mobile devices;
  • predict the characteristics of the dominant design for this category; and
  • anticipate which firms have competitive advantage in the category

The top paper in one section was by John Sparks, who began his answer thus:
Looking to the future, it is perfectly feasible to think that several of the following pairs of devices will have merged into one:
  • Cell phone and PDA
  • PDA and ultraportable
  • Cell phone and MP3 player
  • PDA and MP3 player
  • Cell phone and Digital camera
  • Digital camera and Digital Camcorder
Each of these pairs offers functions and benefits that are complementary or technically similar.
This was the best paper in my Thursday night class, but the more important lesson was that the collective wisdom of my class was far more creative (and risk-taking) than anything I could have done on my own.

As I challenged my students, we know some combinations will not succeed — those that don’t fit together or require too many trade-offs. This upper limit is captured by the Silicon Valley phrase “dessert topping and floor wax” (which, thanks to Google, I just found out dates to a 30-year-old Saturday Night Live skit). John predicted that the laptop and cell phone would not converge — if we define a “laptop” as something having a full-sized keyboard, that prediction seems safe for another five years.

Other combinations today seem mundane, like the camera phone or the camera that takes videos. Still other combinations are being worked out: the iPhone is a great MP3 player combined with a unique take on a cell phone, while the MP3 player included in most cell phones seems about as exciting as the $30 MP3 player at the checkout rack of the office supply store.

One neither of us saw coming was the GPS navigator-cell phone, epitomized by this morning’s announcement of the Garmin nüvifone. A columnist at Phone magazine calls it the best iPhone rival yet. (It also raves about the HSDPA bandwidth, even though the 3G iPhone should ship before the “third quarter 2008” nüvifone).

Offhand, I’d say that it’s easier to add map services to a large-screen cell phone than to turn a navigator into a cell phone. The key to the mapping is not the device (which is a commodity) or the software (which Google, Yahoo and others have done well) but the databases that they all use. The data mainly comes from Navteq and TeleAtlas (Etak), but even these databases are getting commoditized.

No comments: