Do Dedicated Devices Die? Principles of Convergence

Now that we have the iPad (notwithstanding its flaws), will eBook readers die?  What is the future of Blu-Ray players as TVs converge with the Internet?  Will the Flip die now that we have video cameras built into iPod Nanos? Will handheld GPS devices seem quaint when every smartphone has built-in GPS functionality?  Is there a future for a dedicated TiVo devices? A common theme in all these questions is – do dedicated devices eventually die because devices converge?  Do devices converge as technology advances?  Looking back at history, we see examples of convergence as well as examples of dedicated devices persisting.  The PC is the ultimate convergent device, and many a dedicated device (word processors, fax machines, NCs – Network Computers, etc.) have been sucked inexorably into the pull of the “do it all” PC device.  Even at the software level, Microsoft Office is a convergent suite that sucked up dedicated functionality from WordPerfect, Dbase and Lotus into one package. Yet, dedicated gaming consoles have been able to resist the forces of convergence. And the TV-VCR combo didn’t catch on either. What gives?

My take is that, like all questions in marketing and strategy, the right answer is – it depends!  I believe that convergence (and the consequent death of dedicated devices) is a function of several contingent factors.  So, rather than taking one side or another of this debate, I would like to reflect on som principles that will help predict whether we will see convergence win out in a specific context. So here are some assertions:

1. The more mature the underlying technologies, the more convergence is favored. 

2. The wider the disparity among the converging functionalities, the less likelihood that convergence wins. 

3. The greater the value of “converged scenarios”, the more the  likelihood that convergence wins.

4. The more the cost of a dedicated device, the more the likelihood that convergence wins

5. The stronger the externalities of dedicated devices, the lesser the likelihood that convergence wins

Let’s look at these principles in turn, with some examples.

When technologies are immature, it is difficult enough to do one thing well. It is virtually impossible to do multiple things well. Consider the Apple Newton. Handwriting recognition, display, battery and processor technologies were all relatively immature in the ealry 90s, when the Newton was created. In fact, a whole slew of PDAs (Motorola Envoy, AT&T EO, Bell-South Simon and so on) failed because the devices simply could not do everything acceptably well. But now, the data-voice convergence is virtually seamless (smartphones).  And data-voice-media is also quite easy to do (iPhone/Nexus One).  As a corollary, if you are trying to combine apples, oranges and broccoli, it is difficult to create a convergent device that does very different things well. If the form factor for the different dedicated devices are very different (does a camera look like a phone or does a phone look like a PC keyboard?), it is more difficult to create an acceptable convergent device.  If ”jack of all trades” functionality is acceptable, then convergence wins. But if you need very specific functionality for a dedicated device, as gaming consoles offer, then dedicated devices persist.  Hence, I believe that Digital SLR cameras will sustain as a dedicated device, but the Flip is more vulnerable. 

Sometimes, convergence creates new scenarios – you can do things with convergent devices that you simply could not do (elegantly) with multiple dedicated devices. I still am amazed how I can Google a business and click to call the number on my smartphone.  And how I can take a picture and upload it instantly onto my Facebook account using my smartphone. These are “convergent scenarios”  - new possibilities that convergence opens up.  But bundling a VCR with a TV does nothing new – one plus one is two, not eleven in this case. So the more the possibility of valuable convergent scenarios, the more likely that convergence wins. So, watch out, Tivo!

If dedicated  devices are expensive, then the value of a convergent device (or product) that offers a better deal overall will be greater. That’s how Microsoft Office destroyed the competition in office applications.  It was not only expensive to buy all these dedicated applications, you had to learn each application separately and you could not integrate them easily.

Finally, one of the reasons gaming consoles will persist despite advances in PC and TV technology is that people have a lot invested in the software, and this software is not portable across platforms. The same thing is true for the Amazon Kindle – you can’t move the books over (or at least Amazon won’t make it easy to!).

So these are some principles that might help you figure which way the cookie will crumble.

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Not even 24 hours since the announcement of the much-hyped iPad and much real and virtual ink has already been spilt. Here is my two cents. I think the iPad is aimed squarely at the center – of nowhere. I’m trying to understand the scenarios where the iPad does something that other devices we own (including Apple’s own iPod Touch and iPhone) don’t do well enough to justify the price of the iPad.  Further, I struggle to come up with scenarios where the iPad will be a complete substitute for either a laptop or a netbook or a smartphone.  And I’m forced to make a heretical statement – I’m sorry, Mr. Jobs, I think you messed up on this one. The iPad, in the final analysis is either a) an oversized and overpriced iPod Touch; or b) a Netbook/laptop substitute wannabe that is marvelous at content consumption but is nowhere as good at content creation.  Maybe Apple will conjure up a market of people who don’t own iPhones or iPods or iMacs or Netbooks or laptops, and are willing to pay a hefty price for an admittedly gorgeous browsing experience.  I’m not sure there are too many people like this left. When Apple did the iPod and the iPhone, they created truly breathrough performance, design and usability that reinvented the categories these devices participated in. But with the iPad, Apple is trying to create a new category, a much more difficult task.  There is a hole in the market between smartphones and netbooks, and it is a hole for a reason.

And then there is the TCO (Total Cost of Ownership). If I take the median hardware device (32GB) and add in the 3G coverage (without which the mobile value proposition of the iPad is seriously compromised), I am out $729. If I add the umlimited data plan from AT&T (the 250MB/month plan isn’t enough if I want to watch movies), that’s $30/month additional.  Over a 24 month period, that’s a TCO of almost $1,500. I’m sorry, Mr. Jobs, did you realize that 10% of Americans don’t have jobs? Apple is trying to make money on ALL three elements of the business – the hardware, the connectivity and the content. Amazon swallows the connectivity fees, and the iPod Touch doesn’t require a data plan.

What’s the outlook for the iPad? There will be long lines on the day it becomes available, because a million or so die-hard Apple fanatics will buy anything Apple puts out, even if it is a brick.  Seduction and lust is a powerful emotion and it will drive sales for a while. Once the early adopters have forked over their money, the rest of us will start to ask difficult and incovenient questions about the value relative to the price.  And Apple will be forced to make some drastic adjustments to the pricing and the connectivity fees. The iPad won’t be a failure, but Mr. Jobs, this is no iPhone.

Then again, as Richard Bach notes in the last page of Illusions - “everything in this book may be wrong”. And so may everything I have said. After all, Jobs is the brilliant billionare, and I’m just a modestly-paid academic!

I have been seduced by Apple. Twice. Once by the iPhone and once by the Macbook Pro.  First it was the sexy iPhone, with all its fancy media handling capabilities and the oh-so-sexy interface.  And of course, all the apps.  I chucked my BlackBerry and got in line at the Apple store to buy myself an iPhone.  A few days into my love affair, I discovered that beauty is often skin deep.  Typing on glass is not something I want to get used to at my age. And the email capabilities of the iPhone simply don’t stack up to my trusty BlackBerry.  And the screen tends to get pretty greasy.  Plus, at least when I bought the iPhone, the battery life for 3G was really poor. Now, I know that there are millions of iPhone lovers who will hate me for my opinions, but for me, the iPhone was a brief torrid affair that lasted two weeks. I returned my iPhone to AT&T and bought myself a BlackBerry Bold. And all was peaceful.

Until a few months ago. I finally caved into the charms of the Mac, spurred on by my brother and cousins who swore that “there was no going back” once you got a Mac. So I bought myself the sexiest Mac I could find, with a giant 24 inch HD Cinema display.  And I gave up on my trusty Lenovo laptop, which has the sex appeal of a water buffalo. My excitement faded in a few days when I started using the lousy Entourage email program and the Word for Mac. They simply don’t work as well as the Windows versions.  And other annoyances poked through. The printer connectivity of Snow Leopard with Windows printers leaves a lot to be desired. And who thought of the sharply milled surfaces on the edge of the Macbook? They cut into my wrists when I type. And the Mac doesn’t talk to Live Mesh from Microsoft, one of my favorite cloud services, the way Windows does. Granted that much of my annoyance with the Mac links back to the Microsoft programs on the Mac, but that’s what I’m going to use for the forseeable future. I loved the touchpad and some other things, but when I put Windows 7 on my Lenovo, I find that many of the annoyances of Vista have been fixed and it works quite nicely now.  So my Mac is sitting around, forlorn and unused, while I revert to my trusty ole Lenovo.

So that’s Apple for me. The sexy siren that seduces only to disappoint.  And I find myself returning back to my steady girlfriends – Windows and BlackBerry. 

Now I’m waiting with bated breath for the upcoming Apple tablet. Now that sounds REALLY sexy. Surely my trusty Amazon Kindle pales in comparison…