PS: I could not resist the title Androids, Warp speeds and Klingons in one sentence!
In this post, I am trying to discuss the changing positions in the mobile ecosystem especially due to the impact of Android but also on emerging markets. The question is: How can handset vendors differentiate? I don’t think we have all the answers but some trends are becoming clearer as I discuss below
Gartner’s third quarter smartphone data is out and Android is now the second best selling smartphone OS worldwide at 25.5 percent behind Symbian, which still holds the top spot with 36.6 percent of sales share.
This is great news for Android but I think the figures do not explain the underlying trends and the disruption we are seeing in the mobile ecosystem.
Firstly, lets consider that there do not appear to be any specific best selling Android devices globally. So, growth is across the board. In this post, I analyse two trends, first the implications for Android success but also the growth in dumb phones (voice and SMS) and what it means for industry competitive positions
The question, in Star Trek parlance is: Is it possible to just ‘Klingon’ to the Android bandwagon? And what are the underlying trends in the handset ecosystem?
What happens when the handset industry becomes like the PC industry?
Back in 2008, I said about Long tail devices way before Android became popular (which I then called the ASUS effect) and that if the handset industry mirrored the PC industry, we would have a larger white label component. Also, Android is like ‘water’ another post some time ago – Sun Tzu, Android and water: Android is winning because it can evolve in many directions
Why did so many in telecoms missed this and some still continue to deny it? The answer is people often see telecoms and mobile in isolation and not as a part of a system. That can be a disaster as leading handset vendors have found out and many others will soon too .. Mobile was somehow ‘special’. It was supposed to always have a premium(people will always pay for content, people will pay a premium for devices etc etc) have all been proved wrong
The question is: What happens next?
Android is a fundamentally different type of competitor
Android is a fundamentally different type of competitor (like Water as I said before), and even today, the success factors for Android remain ‘under water’ and nebulous – to adopt a starry analogy. For example, we dont see top 5 best selling Android devices.
One thing we CAN say: The rate of change with Android is the real killer
Customers buy features. Customers want new features fast. Pre Android, the device cycle was 18 months. Gone are those days. We are now in 4.5 month cycles (post an Android release)
The average cycle time for handsets first sold in 2008 based on Qualcomm’s QSD8250 chipset and Android’s Donut 1.6 release was a brief 8 months. By late 2009, the average cycle time for handsets based on Qualcomm’s MSM7227 chipset and Android’s Eclair 2.1 release had nearly halved, down to 4.5 months. This is “warp speed” for complex smartphones.”
This actually decrements the BRANDS of the android makers since people are buying specific features which they are getting fast. They don’t care from whom they get them. The warp speed for smartphones is the real differntiator for Android. And Nokia/Symbian or even WinMo will need different strategies for it since in my view, it is not possible to copy Android strategy by these players.
The WARP speed of Android means customers seem to be buying ‘faster features’ if I may coin that phrase ..
The diversity and rich feature set of Android can be seen from the following four links
There is of course a wider battle going on between integrated (ex RIM) vs modularized(ex WinMO and Android) but the RATE of change from Android cannot be ignored even if you adopt the integrated strategy(ex RIM). Integration(vs modularization) is a great strategy provided you can execute it. Today Apple(and possibly RIM) can execute on it. In future, I suspect INQ may if the rumours of the facebook phone are true, Facebook And INQ: Married, In A Relationship, Or It’s Complicated? but it is unclear how many will be able to do this successfully
So, the Kligon question. If we accept the dominance of the Android strategy, how do you differentiate?
Amongst the analysis of Android gainers, HTC stands out
The giant winner among handset makers? HTC, which grew the numbers sold by 144%. If there’s anyone benefiting from Android’s growth, it’s probably HTC – and the carriers selling them – more even than Google. Those 20.5m Android handsets are worth at least £100 each to someone: that’s an extra £2bn in the smartphone market that wasn’t there a year ago.
How do we explain HTC success on Android?
Is it just because they were working with Google earliest? Which they were. But that does not explain everything. ex what specific features of HTC devices are users adopting?
Is it device integration? If so, again, we dont know specific features
Is it just HTC sense?
Firstly, HTC are innovating.
They had experience from re-skinning Windows Mobile, which they used with Android
Handset design and industrial design are great
Unlike motoblur, HTC sense has got much better reception even if there are instances of people posting videos to switch off HTC sense
All this alone does not explain the underlying trend trend of Android.
The answer appears to be HTC is executing well but at the same time also keeping the volume of devices launched high (which ties to the rate of change of Android and to the introduction of new features which benefits customers)
We can see this from an analysis of Android devices launched in 2010
Sony ericsson 3
Garmin- Asus Garmin- Asus 2
And one each for Kyocera,Lenovo, Inbrics, T-mobile, Geeksphone, Archos
Also, HTC, through HTC sense , is now launching new services like backups, security features, remotely lock, and wipe of all sensitive info. Apps ofcourse are rendered through the Android marketplace
The OTHER category of devices
There is a separate unrelated trend – that of OTHER category of devices in emerging markets. I think emerging markets is by no means a secure place for any handset vendor ..
The company is called ‘OTHER’ by analysts, but its worth 77m devices. Note this is not ‘Smart phones’ this is DUMB phones(voice + SMS). Qs is – Why OTHER? why not Huawei? i.e. low cost Chinese manuacturer
Some thoughts on this:
Handset success have always been about optimal supply chain and not low cost devices. That’s why Huawei never made an impact on Nokia since Nokia’s supply chain was one of the best in the world. However, local manufactuers possibly have lowest cost and best supply chain. So Indian and Chinese manufacturers are making an impact at their respective LOCAL levels in the dumb phone category. Huawei is possibly smart enough to ignore that segment of the market and go for lower cost handsets based on Android in the West. This is a wiser move
Having said that, just like I have always discounted Japan in handsets OUTSIDE of Japan, I also think that Chinese manufacturers could end up making the same mistake as Japan i.e. excellent hardware but no excellence in software and closed systems(which is the real differentiator now)
The OTHER category of vendors includes in India includes spice mobilility micromax and Olive telecom and the impact of Android in India is still to be felt
Google seems to be working with Indian manufacturers like Micromax Informatics Ltd., Spice Mobility Ltd., and Olive Telecom to create an Android device in the $150 to sub $100 range. This will test the brand loyalty of Nokia which is already strained at the lowest end of the Indian handset market by the local Indian manufacturers. Already a price point of $150 has been reached by the Huawei Ascend in the US.
Conclusions – Klingons vs faster features
So, the market is becoming clearer now .. and the dominant players are:
1) Integrated strategy – Apple
2) Modularised – Android with whoever can execute fastest and – currently HTC
3) Dumb phones – dominate by the OTHER
There is scope for innovation in Android as future Android UIs show
However, if we accept the rate of change argument, then the winners will be those who innovate at a much faster rate (faster features). Innovation in itself is not enough, the rate of innovation is the key differentiator.
I may explore this question more in subsequent blogs – ex What about the Operators? i.e. if we see the market evolving in three areas: Services(apps), Integrated(Apple), Network? Is there any evidence of any pure network elements that can be deployed competitively at a service level? Operative word being ‘competitively’ i.e. the network should have a unique advantage from the customer perspective
Image source: Real science