Editor’s note: Tom Snyder, executive director of rapidly growing Raleigh-based RIoT and a thought leader in the emerging Internet of Things, recently joined WRAL TechWire’s list of top drawer contributors. “Datafication Nation” premiers today. His columns will be part of WRAL TechWire’s Startup Monday package.
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RALEIGH – Last week, I came across a fascinating post by local journalist, Shannon Cuthrell, focusing on the evolving landscape of consumer electronics, with particular emphasis on the dominance of “Smart” TVs, all of which seem quite similar. I highly recommend reading the entire article, but in essence, it highlights how consumers are gradually losing the freedom to purchase and use hardware without sharing personal data.
In the past, we had to provide personal information while purchasing a mobile phone, but most other electronics could be obtained anonymously. For instance, you could buy a “dumb” TV and use separate devices like a cable box, Wi-Fi router, FireStick, Roku box, or Chrome dongle to subscribe to content streaming. This allowed you some control over who could access your viewing habits.
Today, before you begin to use a TV, a gaming system, voice assistants, music players and many smart appliances, you MUST first input personal information that can be used by the hardware manufacturer to tie device usage directly back to individuals. This gives the original equipment manufacturer the ability to track your usage, regardless of which content providers you work with. They have inserted themselves into the data collection chain.
Fundamentally, this is because the Data Economy – i.e. creating value through real-time data analysis and automation – requires real-time collection of data. Fundamentally data is collected through sensors, and sensors are components in hardware.
During the last 20 years, most new “tech value” has been created purely through software. The SaaS (software as a service) company and business model was the most attractive to the venture community and we saw pure software companies become the unicorns of the 2000’s and 2010’s.
In the mid 2010’s, however, we began to see a shift. The biggest software companies in the world began to make massive investment into hardware. Google dove into smoke detectors (Nest) and launched thermostats. Google and Apple are both building cars. Facebook acquired Oculus. Microsoft invested in Hololens, adding to existing Xbox and other hardware products.
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Big Tech has recognized that the competitive edge lies with those who can capture exclusive data. An interesting example is Amazon, which has banned the sale of the Google Home on its platform, aiming to outcompete Google in terms of smart home devices and data collection.
The reason the TV makers are embedding sensors and smarts into the televisions is simple. As Shannon outlines in her piece, the big three manufacturers (Samsung, Vizio, LG) made $1.37 billion in 2021 in advertising related revenue. By 2026, we will no longer see these companies as “manufacturers” but rather “value creators”, projecting that revenue to grow to $6.17 billion.
Not all markets have understood this fundamental value shift towards real-time data at the same pace. Consider the automotive sector. Uber is one of the highest capitalized companies in the world, entirely focused on moving people and goods from point A to point B efficiently. Yet Uber has no idea where any cars are located. Seriously. The sensor Uber leverages is the GPS location of a driver’s phone. What will happen to Uber if the auto manufacturers realize the opportunity to become transportation providers, through self-driving cars and an uber-like customer interface? When the driver (and by extension the driver’s phone) are removed from the equation, Uber loses the real-time data they require to operate. To survive they’ll either need to form strategic partnerships with the manufacturers (or acquire an automaker).
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If we look to the TV industry as a guide, I would anticipate the auto manufacturers will eventually stop behaving like manufacturers and restructure to become value providers. Manufacturing in the past 50 years has been about lowering costs and increasing efficiency. The race to the bottom on price may end. The opportunity for manufacturers today is to move up the value chain by owning the embedded sensors to capture data nobody else has.
Ultimately, the companies that excel in creating the best hardware capable of capturing real-time data for automating customer value will emerge victorious. Intermediary hardware, like the FireStick and ChromeCast, might become less relevant, and pure software companies without the right data partnerships may also face challenges. Indeed, hardware’s prominence is on the rise.
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