Category Archives: Big picture

Big picture, Google

On Google’s purpose

Horace Dediu at Asymco has been pondering recently the purpose behind Google – its motivating force. This is something I’ve been thinking about too in my research, and I thought I’d put a few thoughts down by way of a response, or a contribution to his thought process.

I think Google’s purpose is very closely aligned to the founders’ personal objectives to a degree that is relatively rare in public companies. More often than not, founders get pushed aside as the need for “adult supervision” outweighs the desire to indulge them, especially in the run-up to an IPO. But even when they stay, it’s often because they’ve mastered traditional business management techniques (often with lots of help) and therefore somewhat lost sight of their own purposes or at least subjugated them to the needs of a public company to satisfy shareholders. Steve Jobs arguably tried this for a long time and eventually found himself forced out, only returning to Apple when he had learned how to reconcile the two.

But at Google today, it’s really Larry and Sergey calling the shots, with Larry once again at the helm after that period of adult supervision under Schmidt. But even under Schmidt, Larry and Sergey called the shots to a great extent. I’ll draw on several excerpts from Steven Levy’s In the Plex book here, starting with one about the dynamic between Schmidt and the founders:

His anecdotes about disagreements with Sergey and Larry followed a consistent storyline: Schmidt expresses a tradition-bound preconception. The young men who, technically at least, report to him, reject the idea and demand that Google pursue an audacious, seemingly absurd alternative. The punch line? “And of course they were right,” Schmidt would say. (p.81, Kindle Edition) Continue reading →

Big picture, Whole company analysis

Articles of Faith in tech

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Each of the key companies in the consumer tech market has its fans and its detractors – those who believe the company is destined for future success, and those who believe it’s doomed to fail. Some of these beliefs are founded in facts and figures, while others stem from gut feel, emotional investment in a company, or something else entirely. But ultimately backing any one of these companies requires faith that certain things are true.

This has been borne out to me by recent coverage of Amazon, which has focused on its supposed ability to ‘flip a switch’ to shift from breakeven to profitability at some future point. Some of the smarter commentary makes clear that the picture is a little more complex, but it also illustrates just what you have to believe in order to have faith that Amazon will eventually be able to pull off that sort of a transition.

The stories yesterday about Snapchat turning down a $3 billion cash acquisition offer from Facebook also highlighted divergent opinions about whether Evan Spiegel was right. Though most observers seemed to think Spiegel was nuts to turn down an offer, whether you believe that depends on whether you believe in Spiegel’s vision for how high Snapchat’s valuation could go. He – and presumably his investors – have faith that a certain series of events will play out in a certain way, ensuring Snapchat’s eventual profitability and thus an even higher valuation. 

Each company in this market has a similar story that it tells investors, and your view on these companies and their futures ultimately depends on your ability to have faith in those stories. Some of these stories are told explicitly, whereas others are secret (either because the companies are private and have no obligation to share their strategies with the world, or because of some perceived secret sauce they would rather keep to themselves). But ultimately, each tech company has what you might call articles of faith you’re required to sign up to if you want to believe in its long-term success:

Article of faith – n. something that people who support a particular religion or idea believe completely, although it has not been proved

– Macmillan English Dictionary

Let’s look at those articles of faith for some of the most important companies in this space: Continue reading →

Big picture, Meta

Beyond Devices

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This post is intended to encapsulate the philosophy behind this site and its name. If you spend any amount of time working in or covering the consumer technology industry, you quickly find that it’s dominated by devices – principally, smartphones and tablets. At Ovum, our relatively small devices team dominated our press coverage, not because those analysts were better than the others, but simply because of the huge volume of stories written about the latest smartphone or tablet launch across the industry, business and popular press. It’s easy to see why this is so – devices are the most tangible aspect of the consumer technology market and also its status symbols.

And yet there are two key reasons why this fixation on devices is misguided. Firstly, devices serve no purpose of their own – they merely act as endpoints for the things consumers really care about: namely, content and communications. And secondly, the hardware itself is nothing without the software that runs on it – both the operating system and the individual apps. Apple isn’t successful merely because it makes great hardware – its success is predicated on its prior success as a purveyor of content (through the iTunes store) and on its tight integration of easy-to-use software with that hardware.

Samsung, by contrast, is successful largely as the default option for Android smartphones (and to a lesser extent tablets), with its marketing budget rather than particularly good software-hardware integration explaining its present dominance. And there is a reason why most other purveyors of smartphones and tablets aren’t making money: hardware by itself is not that compelling, and that results in commodity pricing and thin margins.

Five parts to the consumer digital lifestyle

There are essentially five pieces to the consumer digital lifestyle, and they’re shown in the diagram below. Two of these are paramount – communications and content. These are the two elements that create emotional experiences for consumers, and around which all their purchases in this space are driven, whether consciously or unconsciously. The other three elements are secondary, with two being conscious choices and the last – cloud services – being somewhat hidden from the user in many cases.

Beyond Devices 1Of course, without devices, consumers couldn’t engage in communications or consume (or create) content, and removing connectivity from the equation is equally fatal. But these are means to an end rather than ends in themselves – consumers spend hundreds of dollars on devices not because the devices have inherent value, but because they are endpoints for content and communications. Equally, connectivity is essential, but to many consumers a pretty fungible element of the equation, one that might easily be provided by a number of companies in a largely interchangeable way.

Why is all this important? Why does it matter which of these things are primary, and which secondary, in consumers’ minds? And why does the inter-relationship between these elements matter? Well, for two primary reasons:

  • The successful companies in this space are those that increasingly combine several of these elements, ideally in a tightly integrated fashion
  • Consumers are increasingly building meaningful and sticky relationships with the companies that provide the primary functionality, while their relationships with the companies providing the secondary functionality are loosening.

That’s good news for companies which are successfully combining these elements, among whom are Apple, Samsung, Google and others. But it’s bad news for those that aren’t, including many carriers but also players which own a number of the elements but haven’t yet combined them in compelling ways, notably Microsoft.

All of these ideas are worthy of further exploration, and that’s what this blog sets out to do. This is the framework through which I’ll be looking at this space and the set of players that competes in it, which is far more than just those companies that make devices, and where the keys to success are to be found in combining these elements of the consumer digital lifestyle in an integrated fashion.