Tag Archives: Pebble

Crowdfunding Highlights Wearable Startups Shortcomings, but May Prove Valuable for Corporate Players

Crowdfunding – where individuals raise money for a project (campaign) in exchange for a pre-release product – has become a popular method for wearable electronics developers to raise money. Kickstarter, the largest non-personal crowdfunding platform founded in 2009, helped raise $500 million for projects in 2014 and $1.72 billion since inception. Crowdfunding has seen its share of wearable success stories; for example, Pebble (a smartwatch) is currently the third largest crowdfunding project, reaching $20 million by March 2015. Corporations are starting to take the lead and also use crowdfunding for their wearable projects; Sony launched a crowdfunding platform in July 2015, which includes projects like Sony’s SmartWatch.

Only 34% of wearable projects on Kickstarter were able to reach their goal amount, and companies also struggle to hit their crowdfunding commitments. To understand crowdfunding in wearables, we analyzed the top wearable projects from top crowdfunding sites Kickstarter and Indiegogo.

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None of the top five wearable companies on Kickstarter or Indiegogo were able to ship their products out in the estimated timeframe; besides Pebble’s second campaign, these campaigns were on average late by over eight months. This delay reflects the inexperience of such campaigns on their inability to translate from a prototype to high volume manufacturing, and can bring in negative feedback from backers and potential customers. In addition many of these companies required additional funding (both Pebble and Oculus Rift raised rounds over $10 million before their deliveries were fulfilled) as the amount from crowdfunding was not enough. Five companies were able to raise rounds much higher than their initial seed round, which shows that successful crowdfunding demonstrates to investors the market potential for a novel technology.

Post-campaign is another issue entirely; besides Oculus (which Facebook acquired for $2 billion), most of these companies were unable to capitalize on their crowdfunding success. For example, three of these Indiegogo campaigns are unable to deliver; Kryeos went bankrupt before it could complete shipments, Healbe’s product failed to meet consumer expectations, and Ritot doesn’t even have a prototype. Larger companies, like Sony, have a better chance over startups in making successful crowdfunding campaigns. By running its own crowdfunding platform, Sony can get valuable insight on the demographics of customers of new technology to determine if a project in a new area is worth pursuing (like how startups attracted investors with crowdfunding data). Not only does it show which projects are worthwhile, but the demographics and feedback from the campaign can give insight on how to tailor the project further to the needs of customers. Large companies are also able to deliver products in a timely manner as they have the financial backing and manufacturing partnerships to back up the campaign, which will help retain customer loyalty that has plagued the growth of some of the crowdfunded startups.

Google and Facebook’s Drone Strategies, from Buzz to Breakthroughs: The Sky’s the Limit

The technology world is abuzz with the recent announcement that Google is buying Titan Aerospace, a maker of high-altitude unmanned aerial vehicles (UAVs) that Facebook had only recently been considering (it bought Ascenta for $20 million instead). Ostensibly, both companies are looking at UAVs (also referred to as “drones”) as an opportunity to deliver Internet access to the roughly five billion people who lack reliable land-based access today. But that goal still leaves many people wondering about the business rationale – how will billing work, who will pay to advertise to the unconnected masses, and what are those technology giants really up to anyway?

To understand why content providers are spending billions on drones, you have to think about their long-term strategy. Recently, there was a huge defeat for Google and other content providers in a ruling about what’s called “Net Neutrality.” It basically says that landline and mobile carriers like AT&T and Verizon can start charging more for people to access certain sites, even though they swear the action will not be anticompetitive. So, for example, you might have to pay the carrier extra to see YouTube (which Google owns) or Instagram (which Facebook owns) or Netflix or Amazon Prime movies. In fact, just in February Netflix struck a deal to pay Comcast, which supposedly is already showing faster access times, but has not stopped the partners from bickering over unfair competition and exertion of power. Also, AT&T has a $500 million plan to crush Netflix and Hulu, so the competitive backstabbing has already begun.

Where do drones disrupt this strategy? Most obviously, having their own networks would allow Facebook and Google to bypass the domination of wireless and wireline carriers (like AT&T and Verizon in the U.S.) whose business practices – e.g. knocking down Net Neutrality – are geared towards throttling content providers like Facebook, Google, and their partners and subsidiaries like YouTube. Need more bandwidth? New neighborhood being built? Blackout? Natural catastrophe? Launch more drones – and expand service in hours, not years. Drones serving network connectivity allow Google, Facebook, and Amazon to bypass the toll lanes – and, incidentally, make instantly obsolete the landline infrastructure that their enemies Comcast, AT&T, and Verizon have spent decades and tens to hundreds of billions of dollars building out. Connectivity in emerging markets is a feint – look for delivering content in the developed world to be the first battle, and call these Machiavellian strategies the “Game of Drones.”

Could this really happen? Both drone technology and wireless connectivity technology are relatively mature and work well. Both are still improving every year of course, and it is possible to deliver some connectivity via drones today. However, more innovation is needed for them to be commercially viable, and future incremental development will be about integrating and improving parts, so more people can have more bandwidth with greater reliability and lower cost. For example, the engineers might integrate the broadband transceiver antenna with the drone’s wings (as Stratasys and Optomec have tried — client registration required) which could eliminate the cost and weight of a separate antenna, while allowing the antenna to also be very large and more effective. Drones’ needs could drive development of battery chemistries that outperform lithium-ion (client registration required), like lithium-sulfur (client registration required) from companies like Oxis Energy (client registration required). High-performance composites and lightweight, lower-power electronics technologies like conductive polymers (client registration required) will also be key.

What’s next? One of the most obvious additional uses would be to attach cameras, and use them for monitoring things like traffic, agriculture, and parks, even finding empty parking spaces – things that an AT&T repair van can never do. Maybe the drones become telemedicine’s robotic first responders (client registration required), sending imagery of accidents as they happen, and swooping down to help doctors reach injured victims within seconds, not minutes. While these examples may seem far-fetched, it’s really very hard to say exactly what they will be used for, only because our own imaginations are very limited.

Within the autonomous airspace space, there’s much more flying around than just glider-style UAVs. For example, Google’s “Project Loon” has similar stated goals of delivering internet access. The new investment in Titan does not necessarily mean Google is leaving lighter-than-air technologies; it’s just that Google has already invested in that technology and is now looking at other aircraft platforms for doing similar things in different environments. Investments in small satellites from companies like SkyBox and PlanetLabs are also taking off. And of course, there are Amazon’s delivery drones – rotary-wing UAVs more like helicopters: speed and navigation in small spaces are important, and they need to carry the weight of packages, so they need to be small and powerful.

Each of these technologies has spin-off effects – both threats and opportunities – for companies in adjacent spaces, such as materials or onboard power. Only batteries or liquid fuels are dense enough energy sources for rotary-wing aircraft, while Google’s Titan and Loon aircraft are more like glider planes or blimps: big, light, and slow, just staying in roughly the same place for hours, days, or even years. Solar energy needs a large area for collecting solar energy, so big glider and blimp drones can use solar. Technology providers in these areas stand to gain if more companies deploy their own UAV fleets.

So, UAVs are an important strategic technology for both companies, even if the money-making part of the business is far off. Yes, someday you might have a Google drone as your ISP, but that’s not the primary business case behind these investments today. Google and Facebook need to make investments in these airborne platforms for the same reasons that countries did 100 years ago – to defend their territory, metaphorically speaking. For example, Nokia should have done a better job launching smartphones before Apple and Google, and Kodak should have launched digital cameras before all the consumer electronics companies did. If Google and Facebook (and Amazon, and others…) don’t have drone technology in five to 10 years, they may be as bankrupt as Nokia and Kodak (ironically, Nokia launched mobile phone cameras, which accelerated Kodak’s bankruptcy). Instead, it may be today’s mobile phone and cable television providers who go the way of the landline.

Looking beyond the land of information technology, these examples are powerful illustrations of the fact that we seldom actually know what any new technology is really going to be used for. Even today, we dismiss mobile phone cameras, Facebook, and Twitter as frivolous social tools, but where would Tunisia and Egypt be today without them? Local Motors (client registration required) is just making one-off dune buggies – until GE sees that their microfactories are the future of manufacturing appliances, too. Crowdfunding is just a bunch of kids selling geegaws – until products like the Pebble smartphone beat the Samsung Gear (client registration required), start challenging the now-retreating Nike Fuelband, and even attack the smart home market. Google and Facebook might be saying today that they intend to bring connectivity to new places, even if in reality nobody at all can really say what they’ll do in 2018. While they probably have secret plans, those plans are almost certainly wrong – but better than no plan at all. Companies that plan to survive beyond a few quarterly earnings calls have to make sure they are well positioned to catch whatever falls from new technology’s blue skies.

Samsung, Apple, Nokia, HP, and Now Blackberry: A Month of Meh for Innovation and Investors

Technology company buyouts are usually triumphant moments of validation, but this week’s announcement that Blackberry is considering a $4.7 billion offer actually shows how far the company has fallen. It’s hard to recall the time when then-candidate Barack Obama’s avid Blackberry use was a sign of his hipness, and this week’s news heralds not the company’s bright future, but its imminent demise.

But it’s not just Blackberry. Like the maker of the ur-smartphone, several other big bearers of the innovation flag have announced “good” news this September that actually feels bad, and the world’s innovation enthusiasts and investors are feeling droopy. What’s weighing us down?

  • Samsung’s sluggish smart watch. As we noted previously, Samsung’s highly-anticipated “Gear” smart watch came out expensive ($300) and weak (315 mAh battery), with at best 25 hours of battery life, less than a full day with normal use – maybe it keeps bankers’ hours. Geek blogs Mashable and Engadget found it “not as fast as we’d expected” and “noticeably sluggish”, and Forbes said the device “offers little upside” for the company stock. Others opined that the locked, expensive device was unworthy of a leading global devicemaker, when crowdfunded upstarts were already making open, cheaper devices like the Pebble and Omate TrueSmart.
  • Apple’s boring iPhones. Rather than offering more value for less money, Apple simply degraded its flagship product, poorly. A cheap plastic case is meant to lower costs and appeal to emerging market consumers, but Wall Street thinks it’s still too expensive and hammered the stock 4%. The improvements Apple did offer – new colors and fingerprint-based security – were decorative touches that didn’t significantly improve function or user experience and even caused privacy fretting. Influential technology site CNET groaned that “we live in boring times,” and The Guardian asked if Apple has “given up on innovation”.
  • Nokia’s final, fatal fail. After a protracted bout of declining market share (from 35% in 2003 to 14% today), revenue, and profit, the 150-year old company sold its mobile phone business to Microsoft (another company struggling to self-reinvent). Ironically, Nokia did invent the first smartphone (Nokia Communicator) but lost the market battle by stubbornly sticking to its lame Symbian OS as a defense against Microsoft’s equally lame Windows Mobile, distracting both companies from the threat of Apple’s iOS and Google-backed Android (which now have about 20% and 70% smartphone market share, respectively).
  • Hewlett-Packard’s drop from the Dow. The original garage startup, 75-year-old legend HP sat at the pinnacle of hardware innovation as recently as 2010. But after four CEOs and losing some $68 billion in value since then, its stock has fallen so far that it was just dropped from the Dow Jones Industrial Average. The company was so busy selling PCs and printers that it failed to notice that no one was buying them – HP’s growing market share literally blinded it to the fact that competitors exiting, not consumers entering, was driving its success. Arguably, HP’s decline actually began when it sold off its innovation engine, Agilent. Without a culture and pipeline of R&D, a company that had survived massive shifts, like that from desktop calculators to desktop computers – both of which HP invented – has nothing to replace a declining line for the first time ever. Meanwhile, Agilent is doing so well it will soon be able to buy its old parent.

What do these failures have in common? Certainly not a lack of resources; each of the companies has been the top of its field immediately prior to its fall (Apple’s iPhone launch was a commercial recordbreaker, and Samsung’s profit is up too, even as mobile revenue shrinks). Not a lack of technology – each has been early to market with the next-generation technology. It’s a lack of foresight, desire, curiosity, courage, passion, mojo… Leading firms turn to failures when they focus too much on staying atop the current wave and stop worrying about winning the next one – making products that make a big difference makes all the difference. And. Everybody. Knows. This.

Ironically, pleasing the near-term focus of greedy, twitchy institutional investors is often the excuse claimed by CEOs who put quarterly profit ahead of planning for decade-long growth. But as the examples above show, investors scorn small, short-term thinking, too. To get their innovation groove back, these tech stalwarts need to put their sights back out to the horizon with insanely great, mind-blowing products like:

September should have been a banner month, not a bummer month (and there were a few glimmers of recklessly bold vision, like Google aiming to solve Death and rapper Kanye announcing his foray into architecture). If these giants were startups, they could have breakthrough strategies in place by September’s end. Given their girth, they can show customers and investors that they are serious about innovation by getting going now. “Seizing the Innovation Initiative” is the theme of the next Lux Executive Summit, so we look to see bold thinkers from Apple, Samsung, Nokia, and HP – or any company looking to avoid their mistakes – there if they haven’t shaped up by next spring.

A Summer Blue-Ocean Strategy for Manufacturers: the Internet of Things-in-Motion

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“Smartphones plateau and decline.” It could be the title of a scary summer shark flick for the electronics industry, but it’s a reality that a mounting body of evidence supports: handset sales, profits, app downloads, and even innovation itself are flatlining, hitting financials at Samsung and Apple (which both now spend more on patent litigation than R&D) while RIM, HTC, and Nokia struggle to survive at all. In the same process that desktops, notebooks, feature phones, PDAs, and every other information appliance in history has passed through, smartphones are poised to peak and then plummet between now and 2016, leaving electronics industry execs scrambling for the safety – the next big thing, like:

  • Wearables. Smart watches and glasses may buy the industry one more cycle, but competitors like Pebble and Google Glass beat the incumbents to those markets. And how much smaller can computing go after that – smartrings and smartpens? Wearables offer temporary safety, at best.
  • The Internet of Things (IOT). Low-cost computing, communications, and sensors will allow billions or trillions of objects to share data – an internet of things. Hundreds of startups are spawning at places like HAXLR8R, shipping products like the Nest thermostat. But the corporate IOT is mired in unimaginative smart lightbulbs, personal weather stations and coffeemakers that text you when your java – the drinking kind – is hot. In the scary summer movie, the consumer IOT is the red ocean in management strategy terms, full of sharks and blood.
  • Industrial IOT. We certainly see environmental and economic opportunities in the industrial IOT: smarter commercial buildings (client registration required), water management systems (client registration required), electrical grid (client registration required), city infrastructure (client registration required), farms (client registration required), and factories – and have written extensively about them. But as leading manufacturer Bosch put it in a recent Harvard Business Review article, “the mere prospect of remaking traditional products into smart and connected ones is daunting… embedding them into a services-based business model is much more fundamentally challenging.” The technology is hard for outsiders, and incumbent manufacturers will fight consumer electronics companies who try to take too much of the market.

Possibly the biggest promise of all – the blue ocean strategy – is in networking things in motion. The things that move – from smart-textile garments and self-driving cars to robots and satellites – are wholly different from immobile devices, and constitute a vastly greater set of challenges and opportunities. In many industries, the greatest growth over the next years and decades will come from these emerging distributed, mobile hardware platforms.

Why is “motion” a step change? Because it requires real-time interaction with a changing, immediate physical environment – guided by sensors and actuators that can’t rely on network connections that may not be there when needed. Because the virtual environment of nearby devices and protocols is in constant flux, so messages between devices may be incompatible, incomprehensible, delayed, or dropped. And because the physical/virtual hybrid world – optimizing a vehicle’s route through traffic to a fueling station, or a patient’s dose of post-meal medicine – demands real-time calculation of equations that no human yet understands. These critical differences make the IOTIM vastly different from fixed IOT – giving innovative manufacturers an opening they should quickly seize.

Click here to join Research Director Mark Bünger on September 4th, for a complimentary webinar describing the cross-industry threats, opportunities, and strategies identified by Lux Research’s analyst team.

Click on the following terms from the above graphic to open relevant Lux Research profiles, insights, and reports (client registration required): desktop PCs, servers, lab instruments, building automation/mgmt systems, smart grid, charging stations, fueling stations, farms, notebook PCs, factory equipment, in-home medical monitoring, smart packaging, nanosats, food and beverages, pharmaceuticals, cosmetics, smartphones, wearable computers, personal diagnostics, autonomous vehicles, aerial drones, medical implants, smart textiles, mobile robots.