Nalini Muppala

Analysis, observations, perspectives on mobile space

Archive for the ‘Theory’ Category

Ignorance and Expertise

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There are simply too many things going on for any one person even to know the key basics in every relevant field, never mind become an expert or have some insight.

No-one can be an expert on all of those

Benedict Evans on Limits of Knowledge

I completely agree with Benedict. When one person can not synthesize a multitude of areas, a team of experts is the answer. Each person in this fictional team is a “T” expert — meaning having a decent understanding of a variety of areas and a deep understanding in the area(s) of core concentration. When the understanding of such a team is put together the result is a solid understanding. One needs to be careful to have few gaps between the stems of “T”s to avoid cracks and blind spots.

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Written by Nalini Kumar Muppala

January 30, 2014 at 7:02 am

Posted in Theory

Square

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Square payments is a disruptive innovation. Square started as a new market disruption by enabling people who until then could not accept credit/debit card payments, to do so from the convenience of a smartphone or an iPad. As expected, according to theory of disruptive innovation, there was no response from the incumbents.

Again in line with disruptive innovation theory, as incumbents are expected to, Square moved up market with its Register app that turns an iPad into a register. Register is also a low cost disruption. It is much cheaper to get started with a Square App on a iOS device than to install a traditional “cash” register. Incumbents will start feeling the pressure now.

A primary advantage that Square has over traditional can registers is that it is a software solution. Product enhancements are cheap and easy for the merchant. It rides on the mobile device boom. Imagine the possibilities for the passenger in a Taxi cab fitted with a iPad for Square Register, news updates: news updates, email, … endless.

I think Square activity will be a barometer of the economy. It will be a window into consumer behavior similar to FedEx shipment trends, payroll churn data from ADP. Such insight in its raw form might not be of commercial value to Square. Remember Mint? Mint provided a convenient way to gather credit cards, loans, banking accounts, and stock trading accounts in one place to get a complete picture of one’s finances. Mint was able to gather some insight into consumer behavior. However, Mint failed to create a thriving business model to leverage such insight, and was acquired by Intuit. Mint.com continues to pitch credit card, loan offers that could lead to savings. the pitches are customized based on user activity (annual fee on a credit card, APR, etc.,). However the revenue from providing customer leads was clearly not big. As @asymco says, Square is sitting on a mountain of valuable data. I suspect they will find a way to leverage it and thrill users with better experiences, even if not monetize it directly. Yes, the age of Big Data.

There has been much talk about NFC for payments. NFC requires more change in user habits than the solution pioneered by Square. With Square, people continue to use their credit cards and pay their bills at the end of the month as they always did. Merchants need not retool to accept NFC payments; Square builds on the millions of mobile devices in merchants’ and consumers’ hands. But this leads us to what is missing in Square.

An element of disruption is missing in the way Square works now. Square accepts traditional credit cards and debit  cards as the only mode of payment. The value chain still includes payment clearance houses which presumably take a cut of the 2.75% processing fee that Square charges for every transaction.

I suspect Square is working on a means to eliminate payment processing houses from the value chain. Preloading user account with money is the quickest; direct debit from a bank account might be easy; mimicking credit card functionality is the toughest: there is a lot of risk in providing credit to user and ask to be paid later. Given the prevalence of credit card usage, Square would have to live with payment clearance houses until it cracks the hard one. No wonder then Visa is one of the early stage investors in Square. Linking a checking account to Square might be the best in the short term.

There will be copy cats and the first one is Paypal Here. Again, this includes payment clearance houses. For now, Paypal’s advantages seem minimal: a slightly smaller processing fee at 2.7% (vs Square’s 2.75%), same day availability of funds in merchant’s paypal account (vs Square’s next day to merchant’s checking account). Paypal is limited to Paypal users, Square is open to anyone using a smartphone and a credit card.

Competition is not standing still. The opportunity in mobile payments is big and everyone would love to have  a piece of it. Just one example: Mobile network operators are hard at work via Isis. MNOs have been seeing less love these days though.

Square is promising.

Image source: NYT bits blog

Written by Nalini Kumar Muppala

March 18, 2012 at 8:21 am

Posted in Theory

TIoT – Some Observations

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The-internet-of-things (TIoT) has been a buzz word for a while now. The idea of adding intelligence to devices and appliances around us and connecting them in a manner to help get our job done in an intelligent and intuitive manner is compelling. There are several hurdles to overcome.

What It Takes

I would broadly categorize the pieces of this puzzle into:

  • Equipping the device/appliance.
    • Brains for awareness of the self and the environment.
    • A means to connect to external world and exchange information.
    • Intelligence to adapt itself as instructed over the network.
  • An ecosystem for developers.
  • A compelling business proposition.

The technology to make the devices intelligent and connected have been around for a while: sensors and connectivity are ever more prevalent even in small form factor devices such as smartphones.

Mobile Or Not

As in any battle, there will be winners and losers. The consortium of cellular network operators would love to have all devices connected via their mobile networks. Vendors of connectivity solutions such as Wi-Fi, Zigbee would say the best means is to connect devices to a local network and then connect over the Internet. Each solution has its merits. One can foresee which solution will win in various scenarios by thinking through the lens of the job the user is trying to get done. For a home energy management system controlled by a connected thermostat, Wi-Fi is a good solution. Cellular connectivity for a thermostat would be an overkill. For a  scavenger robot winding its way through gutters, mobile network connectivity is fitting.

Going without mobile network connectivity will be beneficial in a couple of ways:

  • No monthly data service charges.
  • Device vendors can create products faster bypassing MNO’s adoption, approval process. Proof is no farther than this Engadget article: How an AT&T smartphone comes to life.
  • Device vendors can reach customers fast and direct. Case in point: Nest thermostat is sold directly and through Bestbuy.

What We Need

  • A zero configuration mechanism to add devices to a network. For home automation, Bonjour comes to mind. A mobile ad hoc network is due for things more mobile.
  • Intelligent software to process the data.
  • User interface. Smartphone, Tablets, or whatever comes next, are well placed to be the interface between the user and TIoT. Apps for individual devices is a good route.

 

Written by Nalini Kumar Muppala

February 8, 2012 at 7:48 am

Posted in Theory

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Apple Siri for non-phones

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By integration noise reduction technology into A5 and future processors, is Apple planning on bringing Siri to iPads and iPods?

Linley Gwennap has solved the mystery behind, so far not understood, larger than “normal” dimensions of Apple A5 chip.

(A5 measures 10.1mm x 12.1mm. A4 measures 7.3mm x 7.3mm)

Even after accounting for the dual Cortex-A9 CPUs and the large GPU that provides the A5 with industry-leading 3D graphics performance, the remaining die area seems too large for the usual mundane housekeeping logic.

The answer is A5 includes Audience Inc’s noise reduction IP. A4 included a less refined version of this voice processor technology in a separate chip. Siri is at the heart of a new interface. Noise reduction from Audience is at the heart of Siri’s roubustness.

Mr. Gwennap then goes on to ask an interesting question:

Why Apple has not simply purchased Audience is unclear. An acquisition would prevent Audience’s other major customer, Samsung, from using the technology to compete with Apple. The company may be hedging its bets, as it could switch to Qualcomm’s Fluence noise-reduction technology in the future.

Audience is planning for an IPO. I share Mr. Gwennap’s surprise at why Apple did not buy Audience. Audience lists Sony Tablet S, phones from HTC, Pantech, Samsung, Sharp among products using its technology. If Apple had bought Audience, it would have left competitors to flock to Qualcomm’s Fluence noise cancellation technology. Now Apple will continue to use the same technology available to competitors.

But Why? a) Audience did not want to sell out. b) Apple is not happy about Audience’s road map. c) As Gwennap suggests, Apple wants to see if a future version of Fluence performs better.

But they are only speculations.

Written by Nalini Kumar Muppala

February 4, 2012 at 8:46 am

Posted in Apple, Theory

Using Theories To Understand Apple

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Serial Disruptor

Apple has rewarded its investors with spectacular returns in the past 10 years. An investment of $100 at the start of 2001 yielded over $4200 by the end of 2010. How can big companies keep growing at such an impressive rate? According to the theory of Disruptive Innovation, companies have to continue to disrupt themselves and innovate repeatedly. That is exactly what Apple has done in the last decade.

Clayton Christensen and his co-authors have articulated disruptive innovation at great lenghts. At the time of writing The Innovator’s Solution (2003) and Seeing What’s Next (2004), the authors were not convinced that any company has continued to be a serial disruptor for long.(1) Solution lists Sony as the only example of a serial disruptor that went on to create a string of a dozen disruptive new-growth businesses between 1950 and 1982. In Seeing What’s Next, the authors are less enthusiastic about Sony and concluded there were no serial disruptors to date.(2)(3)

The authors might have a different opinion if they were to revise these books today. Apple is an example of a large firm sucessful at serial disruption. In the past decade, Appple has found three growth engines iPod, iPhone and iPad.

To sustain the growth momentum, disruptive innovations need to start early before pressure mounts from slowing growth and profits from existing products. iPhone came out before the profits from iPod slowed down. iPad came before the profits from iPhone slowed down.

PA Semi Acquisition and Apple A5

According to Value Chain Evolution theory, companies ought to control any activity within the value chain that drive performance that matter most to customers.

Apart from the legendary intergration of software and hardware, what do users value most in an Apple mobile device? It is the snappiness and the elegance of user interface.

By being able to develop processors internally, Apple is able to fine tune the heart of hardware to power what it values most — user experience. By developing the processor in house, Apple was able to bring improvements faster to market. It now has the ability to control, tweak the component capability to suit product features that users value most — A5 sports vast improvements to rendering graphics than to the raw processing power of the CPU. This will go a long way to keep the user interface snappier.

iPad

The original iPad is a disruptive innovation. The iPad targeted non-consumption. It is easier to use. The task can be accomplished with fewer skills. It is more inuitive and does not force the user to adapt to the product to get things done.

It is cheaper than a laptop that would have been used to accomplish tasks that an iPad would now do. This is significant considering how Apple products are considered expensive than competition. Almost a year later, competitors are not able to beat Apple at cost.

15 million iPads were sold in the first 9 months. While that number in itself is huge, it is more significant for a first revision product. Early adaptors and enthusiasts are ready to buy a version 1 product, the mainstream user on the other hand tends to wait a bit. Case in point :  slow uptake of first versions of iPod and iPhone.

It could be claimed that Apple has learned from the iPad and iPhone and got the first version iPad closer to the liking of mainstream, or that even the first version of this product was irresistible for a wait-and-see approach.

iPad2 is a sustaining innovation. Segments of the press have derided the improvements to be too small. When sustaining innovations overshoot customer needs, a firm risks commoditization. When product capabilties exceed what customers can meaningfully use, sustaining innnovations are overshooting. In that sense not adding NFC capabilities is the right thing to do at this time. Tablets are not commoditzed yet, and Apple does not have any incentive to expedite that.

Succession Planning

It is beyond argument that Steve Jobs is a genuis and his knack for elegance in product design will be dearly missed when he eventually leaves Apple. All signals indicate that the disruption engine that Apple has morphed into will keep humming.

Successful disruptors are powered less by the genius of the founders than by the processes and values at the firm that identify, cherish and grow dirsuptive ideas. Processes and values more than people.

Managers who have the experience in identifying and nurturing disruptive innovations have gathered the requried skills and put in place the processes to continue disrupting. So, unless there is a mass exodus of the executives, who have driven the company to be a serial disruptor in the past decade, there is no need to panic.

Notes:

1. The Innovator’s Solution, 2003, ch 10: Notes #2
2. Seeing What’s Next, 2004, ch 6, pg 67 … “We can’t yet point to an example of a firm that actually has become a serial disruptor”.
3. Seeing What’s Next, 2004, ch 6, pg 291 … “To our knowledge, no company has been able to build an engine of disruptive growth and keep it running and running”

 

Written by Nalini Kumar Muppala

March 11, 2011 at 6:14 am

Posted in Apple, Industry, Theory

Nokia As A Toyota: Branding And Disruptive Innovation

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Should Nokia have split itself into an incumbent chasing high end smartphones and a disruptor that seeks to bring smartphones to the masses?

Segmenting the market according to user needs, profitability and product capabilities is not new. The automobile industry, for example, has been there — and has taught us a few lessons on the necessity of focus in the process. The big three auto makers in the US had stretched the branding too thin (primarily through retaining acquisitions as independent brands) and had segmented the market to such unsustainable levels that they had to jettison some brands (for e.g., Ford offloaded Volvo, Jaguar, Land Rover) to focus on profitability.

Toyota has been a beacon in segmenting the market according to demographics. The Lexus brand symbolizes luxury, Toyota symbolizes reliability and economy. Sensing that the average age of Toyota owner was 47, Toyota spanned a new brand Scion to address the youth segment.

The phone business in contrast has been a monolithic branding endeavor. Whereas an Apple phone or a Blackberry phone signifies luxury and sophistcation, a Nokia phone or a Motorola phone could be a cheap device or a high end smartphone. Nokia could have started a trend.

As Horace Dediu summarized in a series of articles analyzing Nokia’s partnership with Microsoft, Nokia had to address issues on several fronts: low ASP, unattractive margins, lack of focus, high development costs. Nokia abandoned Symbian in favor of Windows Phone, effectively rendering itself to be a high end player given the high costs of hardware required for Windows Phone.

Nokia has an installed base of 250 million users. Agreed that the platform stickiness is not a big factor, and the current installed base does not guarantee loyal customers in the future. A majority of Nokia’s installed base is from the poor and developing economies. Every one seems to agree that, in the near future, a majority of phones would be smartphones. Who will bring smartphones to the masses?

ZTE and other low cost handset vedors seem to have the momentum at the moment. In his famous burning platform internal memo to employees, Nokia CEO Stephen Elop indicated pressure from low cost manufacturers producing devices based on chips from the likes of MediaTek.

At the lower-end price range, Chinese OEMs are cranking out a device much faster than, as one Nokia employee said only partially in jest, “the time that it takes us to polish a PowerPoint presentation.” They are fast, they are cheap, and they are challenging us.

According to Clayton Christensen‘s theory of Disruptive Innovation, disruptors start off serving customers currently unserved by the incumbents. The poor and the masses are currently unserved by the smartphone vendors.

Should Nokia chase profits at the high end or address low cost handset vendors eating into its installed base? One solution offered for the Innovators Dilemma is to span a separate unit that is independent and is focused on serving the currently unserved. Why did Nokia not take this path?

Written by Nalini Kumar Muppala

February 23, 2011 at 7:34 am

Posted in Smartphone, Theory

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