​Google, Apple, Facebook, Amazon, Microsoft etc. – Insights about recent industry developments

The devices and equipment we own are only interfaces and user experience devices that are connected to one another through (dumb) pipes, and all together to the cloud and to the internet. That is where the real service providers sit, watching us, analyzing us, entertaining us, facilitating transactions with us, between us, and practically run our digital life. They want to make it all ubiquitous and seamless, and this is exactly what they are doing. They are not going to leave any component of the value chain beyond their control or their influence because if unexpected disruptions happen, things may collapse.

We all followed recent announcements in the media: Google entering the wireless world, Apple making electric cars, speculations about Apple buying Tesla, Smart watches that can connect to the cloud, enable analytics of our body signals and recommendations accordingly, control our other devices, and on the other announcements from Mobile World Congress about new devices with features that some of us are in favor of and some of us don’t really understand what value they add… In the same week there was media coverage regarding Microsoft increasing market share with more cloud productivity tools, Uber buying a map services company and providing tablets to its passengers, Google becoming an MVNO, and Amazon planning to as well. I have most likely missed some other important news, but that’s enough to start building the puzzle and understand what’s next.

How is it all related? What is the big picture that is uncovered here? Let’s try connecting the dots.

Several trends started to emerge at the same time during the last decade. Some of the trends’ elements are more advanced than the others and some still have a long way to go:

Services

The rise of the Digital Service Providers – The digital service providers own the digital consumption platforms: Google (through owning the search and advertising market), Apple (through owning the iTunes), Facebook (through owning social networks), Amazon (through leading the ecommerce and cloud services), Microsoft who is always there with various services and other giants (sorry for not mentioning more). All of them continuously add new services, and the borders between them can unsurprisingly get blurry from time to time. Some of which have ambitious plans looking forward: Google with the Loons project and $1B investment in SpaceX, and Facebook with the internet.org project aiming to connect the rest of the world to the internet, and it’s only the tip of the iceberg.

Pipes

The connectivity (r)evolution – the capacity improvement, proliferation of WiFi, improvement in 3G and 4G networks and recently the shine of internet of things (IoT) technology aiming to connect essentially everything to the cloud, for diagnostics, analytics and control. Connectivity is enabled by semiconductors companies such as Qualcomm, Broadcom, Intel and others. System integrators and OEMs add value and (traditionally) bring these solutions into the market.

Interfaces

The super duper smart devices – smart phones, smart home, smart cars, smart watches and other smart wearables. This category is also enabled by Semiconductors and Software solutions, OEMs bring them into the market, however the entire usage and adoption is driven and based on the user experience, and that’s where many efforts are invested not only by user experience experts but also by the technology enablers themselves (which was not that obvious by the way a while ago).

People

Before the digital revolution, an apple was an apple, a watch was a watch, a car was a car, and a phone was a phone. The usage and the value of each were obvious. A watch on our wrist to simply show us the time. A car as a vehicle to move us fast and safely from one place to the other, a phone to enable communications, and an apple to bite. The same people, whether they are consumers, users, retailers, content creators, factory workers or “old services” providers are still here… and they are targets of the digital service providers. The People are the suppliers and customers of the Digital Service Providers.

Take a look at the following diagram:

The center of gravity of the digital industry and where the value for the People resides is in the Services circle. The People are interacting with the Services through the Interfaces which are connected to the Services through the Pipes.

But here are a few (out of many) questions that any of the Digital Service Providers may ask:

1. What will happen if the circles above are not aligned and not working in harmony?
2. And if Pipes deployment and lineup is not optimized to bring the services to the interface without any hiccups?
3. And if Interfaces are not always available, and hence are not feeding the service provider with information that can better help them to serve the people needs?
4. Interfaces are not attractive enough so people will spend every single moment connected to the service?

These questions are in fact the problem statement. Each one of them is a potential chasm in the ecosystem:

Failing to handle these issues (for the mid to long term) may result in one or more of the following:

• Competitive disadvantage to other Digital Service Provider who serve the same customers
• Loss of revenues (due to down time of a pipe, user distraction to a non connected scenario, etc)
• Loss of market share and of new markets to one of the existing or new digital service providers

A potential industry disruption, if happens, will be like an earthquake that will make the chasms even bigger, and this can have significant impact on the digital service providers.

None of them can afford it. Especially when two-thirds of the potential market is still not connected and hence is not served yet (see internet.org)…. The game has even not begun!

To avoid these issues, they need to keep things under their control. They should own the chasms.

What we are witnessing now is some industry developments in that direction, here are a few examples:

1. Apple and Google to make cars – I like this sentence by Jason Calacanis: “When cars become driverless you will have every passenger sitting there with nothing to do in front of a piece of glass that is massively larger than any screen Apple currently makes — and for hundreds of hours per year. Can you imagine the number of Apps that will be downloaded when we’re all sitting in our cars, with no need to drive?!?! App store revenue gone wild!”
2. Uber is providing tablets to the passengers in the back seat to keep them all connected (a pilot for now)…. Will one of the digital service providers buy them eventually?
3. Google and Amazon as MVNOs, Google Fiber, FCC auctions and more – will the legacy service providers (such as AT&T) become brand-less pipe makers?
4. Nest acquisition by Google, which grant Google better access and control on the pipes, interfaces and the people
5. Apple making its own chips (CPUs, connectivity), Amazon acquires Annapurna Labs (who makes silicon for data centers)
6. Smartwatches which now put the Interface on our wrist rather in our pocket
7. internet.org by Facebook

I believe that in the next few years we will see more and more developments that will support the “Owning the Chasm” theory.

So what’s next? How will the ecosystem evolve? What disruptions might happen? How can Start-ups add more value?

Would love to get your thoughts and comments.

>> Read Part 2: Owning The Chasms - So Now What?