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The Four Phases Of Innovation In Consumer Electronics

 Aiwa CEO Joe Born

By Aiwa CEO Joe Born

Over 20 years in consumer electronics, I have witnessed a great deal of disruption, turmoil, growth and collapse. Commodification of electronics hardware and manufacturing, the rise of smartphones, the fall of physical media – have all been exhilarating or harrowing, depending on which side of the equation you sit on. Through all this, the meaning of my mandate as an inventor and entrepreneur has only become more clear. Inventors like myself are simply in search of an idea that improves the consumer’s experience – this is also how we compete in a crowded market. The means for accomplishing this in CE (Consumer Electronics) have moved through four distinct (but overlapping) phases. Restricting the discussion to consumer electronics, I believe we are now entering a fourth phase of innovation, where value is added not through innovations in hardware or even software, but through interconnectivity and APIs.

Analog – The First Phase of Consumer Electronics

Consumer electronics started out prior to the advent of the transistor, when everything was analog. From the phonograph to the radio, audio traveled along a series of analog devices, and from the 1890s through the 1980s, most innovation in CE relied on improvements in hardware. In my field (audio) this might have taken the form of a circuit that generated fewer harmonics, higher output, improvements to drivers, more power handling, and so forth – real work was being done on analog parts, which directly translated into new value to the consumer.

Digital – The Second Phase of Consumer Electronics

As more and more of the CE experience has moved digital, innovation in hardware has progressed beyond the point of relevancy for most consumer products. Much of the audio stream became a commoditized, perfect digital signal. Certainly loudspeakers and a handful of other components remain important analog devices. But generally, when novel consumer-facing improvements are developed (for example, a battery with improved energy density) they tend to be quickly commoditized. Due to the concentrated nature of physical manufacturing – a better smartphone battery will appear in an iPhone, but also LG, Blackberry, Sony, and so forth. A handful of factories quickly spread hardware innovations across an entire industry, mooting competition on the basis of hardware at the retail level.

As such, improving the performance of hardware in mainstream CE categories today, for the majority of consumer brands without outsize resources, is no longer a matter of basic research or original engineering. The hardware is mature enough and readily available enough that it’s mostly a question of cost and sourcing.  

Software/Experiences – The Third Phase of Consumer Electronics

As hardware became increasingly commoditized, software became the most important way to differentiate a product and deliver value to the consumer. For example, why did the iPod, Sonos or Nest  outsell its competition so handily? Is it because of the hardware? Their sound quality and wireless performance is good, but not world-beating, and certainly not unbeatable at their respective prices. There’s no magic widget in a Sonos system that makes their hardware fundamentally better. It’s because of the software. They won on the basis of ease of use, integration with services and content and an overall better user experience.

As always in electronics, content is king: VHS vs. Betamax, Nintendo vs. Sega and even cassette vs. CD can be characterized this way. One way Sonos has won in this phase is integration with 3rd party services. Where a Sony wireless speaker connects to 3 music services, Sonos connects to 31. In that aspect, a Sonos system is unmistakably more valuable to the consumer than their direct competitors. Sonos got that lead largely because they were the first to market and made those up front investments early on.

While the battle for content still lingers, we can see, watching the iTunes vs. Spotify and Netflix vs. Amazon battles, the content battle has largely moved from pure content to interactive apps.

It goes without saying that the software experience will remain important, but my view is that experience will morph substantially as we enter the fourth phase of consumer electronics. Where Sonos integrated a bunch of services into their proprietary app, the next wave of electronics will provide a more open framework that allows third parties to integrate themselves.

Interfaces – The Fourth Phase of Consumer Electronics

Moving forward, new, competitive, protectable value in CE will largely found in interconnectivity and APIs. Whereas smartphone platforms went the way of the PC, and competed on the basis of apps, with Android and ios mirroring the PC vs. Mac wars of thirty years prior, many CE devices have small (or no) displays and scant computing resources. Pushing developers to create full-fledged native apps for each device makes a lot less sense.

Instead, I believe that today innovators in CE need to take a hard look at how their device ought to connect to other devices and services. How to make that connection seamless and useful for the consumer is the new frontier of innovation for consumer electronics. As IoT takes off, it’s likely a given to readers of this blog that this approach will go from a source of competitive advantage to an existential necessity – regardless of whether your company makes watches, phones, dishwashers or speakers. Instead of every brand vying to be the platform or “master of masters,” we need to recognize that not every speaker needs to provide a robust software experience by itself – it needs to be seamlessly useful in context.  As the context of consumer electronics involves more devices and more cloud services, the APIs will become the locus of competition.

A very simple example is the Fitbit. By exposing their API and encouraging 3rd party development, they have created a nascent ecosystem of apps that interface with the Fitbit device (and data.) These are not native apps that reside on the device, they simply interface with the data generated by the Fitbit device. The model of interfacing with a device in real time or the data generated by that device is likely to be the way that 3rd parties incorporate embedded devices into their apps.

With our new Exos-9 speaker, we expose the onboard equalizer controls, and the controls for synchronization between different speakers in the house. As we add other DSP functions, we’ll expose the interfaces to those, too. Going forward, we can imagine mics and proximity sensors that can provide feedback on user engagement. A couple of speakers with relatively inexpensive sensors placed in front of a dance floor could easily provide feedback on which songs are getting people on the dance floor and which aren’t. Such real-time feedback would be invaluable to any recommendation engine providing the soundtrack to your party.

Whether you share our specific implementation choices, there’s little question that open systems tend to win in the long run. But the fourth phase of innovation will be defined by more than just openness.  After all, many Bluetooth and wifi speakers are, by their very nature, already open in that sense. To win as a hardware manufacturer in the fourth phase we will have to anticipate the compelling use cases and provide the right input and output devices (and the right interfaces to those devices) so that clever app developers can effectively participate in providing the seamless, compelling experiences that will define this phase.