Anticipating disruptive change in the new embedded industry

For mobile industry old-timers such as myself, there was some shocking news recently, in the IDC figures for worldwide mobile phone shipments during July-September 2010. The part of the news that grabbed the headlines was “Apple joins the...

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For mobile industry old-timers such as myself, there was some shocking news recently, in the IDC figures for worldwide mobile phone shipments during July-September 2010.

The part of the news that grabbed the headlines was “Apple joins the top five vendors”. But equally dramatic is the news of which companies are no longer in the top five.

For the first time since records began, this top division contains neither Motorola nor Sony Ericsson. Two of the companies that formed the original “Big Three” phone manufacturers have, therefore, fallen right out of the leader board.

In earlier days, three companies used to have roughly equal bites out of the pie of mobile phone sales, well ahead of the rest of the pack: Ericsson (now Sony Ericsson), Motorola, and Nokia.

Mobile industry observers used to speculate on which new entrants would actually succeed in breaking into the top tier party: would it, for example, be Alcatel, Philips, Panasonic, or Siemens? How wrong we were! Instead, the first wave of new entrants came from the far-off land of Korea: Samsung and LG.

And a second wave of new entrants came from former back-waters of the mobile industry: Canada (RIM) and Silicon Valley (Apple).

I tell this story in order to underline a point. If present-day analysts are going to learn from the mistakes of a previous generation, it should be to expect the unexpected.

New technologies, often coupled with new working methods and new business models, can upset cosy predictions that the future is likely to a simple extension of the past.

What’s particular remarkable about Apple’s entry into the present-day top five is that, only a few short years ago, it sold a total of zero phones.

Another company with an unexpectedly fast growth sales trajectory is Micromax, which is based in Gurgaon near New Delhi, in India, who developed phones with longer battery life and provided early support within one handset for two SIM cards.

According to the Voice&Data100 Indian Telecom Survey for 2009-2010, Micromax has already ascended to a 4.1% share of the revenue of the Indian mobile phone market, within shouting distance of the 5.9% share of the number 3 in that market, LG. From a standing start, that’s a mighty leap forwards. (The top two slots were held by Nokia, 52.2%, and Samsung, 17.4%.)

Readers familiar with the topic of disruptive innovations will recognise what is happening here. Technological improvements, including declining prices and improved reliability, enable new ways of manufacturing components in variant combinations.

Companies who are well established in the older methods risk being blind-sided by the novel possibilities of these emerging markets. That applies both for products entering at the higher end of existing products (such as ‘superphones’), and for those entering at the lower end.

But perhaps the biggest disruption of all, for embedded technology, is neither of the two transformations I’ve just mentioned.

Rather than higher-end entries or lower-end entries, it’s sideways migration that could see the biggest business transitions of the next five years. Technologies that have matured in the context of the smartphone market can now be inexpensively recombined in lots of novel formats.

Start with low cost wireless chips, sensors, seamless roaming over different kinds of network, intuitive UIs on small but crystal clear graphics screens, streaming multimedia, mobile Internet access. Add on some domain specific new technologies. The result is devices that hugely benefit from embedded smartphone technology, but which look nothing like smartphones.

Expect disruption within the automobile industry, healthcare equipment, media and publishing, consumer electronics, toys, education, wirelessly connected industrial mini-robots, and lots more. And expect that the top league embedded players of today will risk being blind-sided by at least some of the new possibilities.

There’s nothing inevitable about any of this. Top league players, big though they are, can still be nimble. And companies who temporarily stumble can set their house in order and bounce back high again.

Yes, it’s a hard task to mix, on the one hand, the industrialisation and reproducibility of processes applicable to continuing existing business lines, and on the other, the agility and the novelty required by disruptive business - but it can be done.

Accenture Embedded Software Services works with both old and new players who wish to extend their embedded product businesses in the light of the wider availability of numerous smartphone technologies.

In fact, Accenture is a silver sponsor of the upcoming Symbian Exchange and Exhibition (SEE) show happening in Amsterdam this week and the MeeGo Conference happening in Dublin a week later.

In both cases, I expect to be talking with numerous companies about the disruptive issues and opportunities of new embedded technology.

Regardless of the operating system which companies adopt for their products - whether the current smartphone heavyweight champ, Symbian, or fast-rising newcomers like Android and MeeGo - these companies can benefit from both technical and business advice.

Blog post by David Wood, Accenture Embedded Software Services

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