Where Ap­ple and Google fall short

Why it’s so hard to in­no­vate in a mar­ket dom­i­nated by Ap­ple, Google, and Sam­sung

Fast Company - - Contents - By Austin Carr

Why the most ex­cit­ing smart­phone in­no­va­tions aren’t com­ing from the usual sus­pects.

Ac­cord­ing to Andy Ru­bin, the mod­ern mo­bile ecosys­tem is bro­ken. He should know: He helped break it.

When Ru­bin, the in­ven­tor of the An­droid op­er­at­ing sys­tem and god­fa­ther of the smart­phone mar­ket, sur­veys the in­dus­try to­day, he sees squan­dered op­por­tu­ni­ties ev­ery­where. The open-source plat­form he brought to the masses while at Google, which com­mands roughly 85% of the mar­ket, is over­whelmed with “bad user ex­pe­ri­ences,” he says. De­vices from mak­ers such as

LG and Huawei are unin­spired. Sam­sung has been too of­ten con­tent with fast fol­low­ing: “Who at Sam­sung is re­spon­si­ble for your de­vice’s look and UI? It’s a name­less, face­less ma­chine.” And Ap­ple? “The world’s big­gest and most suc­cess­ful com­pany doesn’t have a hu­man side to it,” Ru­bin ar­gues. “The in­cum­bents have lost track of why they ex­ist, why they’re build­ing prod­ucts, and what they mean in peo­ple’s lives.”

From con­sumers and tech in­sid­ers, you hear sim­i­lar com­plaints: Why can’t new mo­bile de­vices de­liver the ex­cite­ment they once did? The breath­tak­ing leaps? The cul­ture-shift­ing im­pact? In­stead we’ve set­tled into a sched­ule of in­cre­men­tal roll­outs. In the U.S., the mar­ket is dom­i­nated by duopolies—ap­ple and Sam­sung in hard­ware, and IOS and An­droid (which ac­count for all but 0.4% of smart­phone sales) in plat­form. And then there are the four big car­ri­ers, lord­ing over re­tail dis­tri­bu­tion chan­nels with their out­size mar­ket­ing bud­gets and mul­ti­year con­tracts. These dynamics have sti­fled in­no­va­tion, crit­ics say, with the giants fo­cused on hold­ing their leads and other mak­ers churn­ing out cheap de­vices to avoid be­com­ing round­ing er­rors. This is why early adopters of­ten have to hunt for de­vices from lesser-known com­pa­nies to ex­pe­ri­ence the lat­est specs. And why Amer­i­can con­sumers have had to wait un­til this fall to get an edge-to-edge screen on an Ap­ple phone, a full year af­ter such dis­plays be­gan show­ing up in the Chi­nese mar­ket.

One of the big­gest chal­lenges for de­vice mak­ers in the U.S. is scale. When you’re ex­pected to sell hun­dreds of mil­lions of units, your ap­petite for tak­ing hard­ware risks changes sub­stan­tially, says Tony Fadell, who helped pi­o­neer the ipod and iphone at Ap­ple and went on to found Nest. “[The Ap­ples and Sam­sungs] have to in­no­vate more cau­tiously,” Fadell says, “be­cause they don’t want to lose mar­ket share or trip up their rev­enue, which can be dis­as­trous, as we saw when Sam­sung fouled up.” There’s sim­ply less ur­gency to in­no­vate at the top: Ac­cord­ing to one re­port, Ap­ple swal­lowed up 104% of all smart­phone prof­its one quar­ter last year (a fig­ure made tech­ni­cally pos­si­ble by its com­peti­tors’ losses).

There are pock­ets of dis­rup­tion, even among the big guns (see “Break­ing the Mold,” right). Google’s Pixel phones of­fer the sleek­est im­ple­men­ta­tion yet of An­droid. Ap­ple is re­port­edly ex­per­i­ment­ing with an ul­tra-high-end hand­set that con­tains more new fea­tures than the com­pany has in­tro­duced in years.

Ru­bin him­self isn’t just snip­ing at these is­sues from the side­lines. Three years af­ter leav­ing Google—where he spent a decade—the 54-year-old en­gi­neer turned en­tre­pre­neur has de­signed the de­vice he al­ways wanted through his new startup, Es­sen­tial. Called sim­ply the Es­sen­tial Phone, the $699 de­vice is a stripped-down, car­rier-ag­nos­tic hand­set with a ti­ta­nium shell, a ce­ramic cas­ing that en­hances wire­less sig­nals, and a snap-on 360-de­gree cam­era (which Ru­bin hopes will seed a whole ecosys­tem of at­tach­able ac­ces­sories).

Of course, de­sign­ing a hot prod­uct and mak­ing it a hit that can shake up a multi­bil­lion-dol­lar mar­ket­place are two very dif­fer­ent tasks. As the Es­sen­tial Phone hits shelves this fall, it is a bell­wether for when—and if— in­no­va­tion might fi­nally re-emerge in the U.S. mo­bile mar­ket.

If you want to see a land­scape where mo­bile is thriv­ing, look to China, where com­pa­nies from Beijing to Shen­zhen are pro­duc­ing some of the most in­no­va­tive de­vices and ser­vices. In this en­vi­ron­ment, Sam­sung and Ap­ple can’t rely on sheer scale to sus­tain their leads. And lit­tle-known names can tri­umph seem­ingly overnight. BBK sub­sidiary Oppo saw its mar­ket share grow 122% last year, pro­pel­ling it from fourth place in the in­dus­try to the No. 1 slot.

To sur­vive in this fast-mov­ing mar­ket, Chi­nese com­pa­nies have be­come in­creas­ingly ex­per­i­men­tal. Face­book VR head Hugo Barra, who for­merly ran Xiaomi’s in­ter­na­tional busi­ness, says that hard­ware star­tups in China con­stantly take ad­van­tage of their prox­im­ity to Asian man­u­fac­tur­ers to pounce on cut­ting-edge tech, from the Xiaomi Mi Mix’s near-bezel-less dis­play to the Vivo V5’s ground­break­ing 20-megapixel cam­era.

It’s not that Ap­ple is un­aware of the ad­vances these nim­bler play­ers are mak­ing; it’s sim­ply that, at Ap­ple’s size, its sup­pli­ers can’t keep up with de­mand. “When you’re Sam­sung or Ap­ple and you’re sell­ing tens of mil­lions of units, you need to pro­cure al­most ev­ery­thing—screens, pro­ces­sors, what­ever—many, many months ahead so sup­pli­ers can ramp up,” says Barra. Com­pa­nies op­er­at­ing at a smaller vol­ume can land new com­po­nents 6 to 12 months ear­lier— and that’s es­pe­cially true for a startup headed by Ru­bin, an in­dus­try “demigod,” ac­cord­ing to Barra.

You can see that phe­nom­e­non in Es­sen­tial Phone’s at­tach­able 360-de­gree cam­era (which re­quires no app or soft­ware and can seam­lessly trans­fer data) and its ti­ta­nium body: a thin, re­silient ma­te­rial that en­ables the phone to pack in enough an­ten­nas to work in ev­ery coun­try, re­gard­less of car­rier. “[Our prod­uct-ar­chi­tec­ture head] Ja­son Keats found this small sup­plier in Ger­many that does this to­tally new process for ti­ta­nium in­jec­tion mold­ing,” Ru­bin says. “They told us Ap­ple was there a month ago

“The in­cum­bents have lost track of why they ex­ist, why they’re build­ing prod­ucts, and what they mean in peo­ple’s lives,” Ru­bin says.

and wanted to part­ner, but [Ap­ple] needed like 200 mil­lion units. They were like, ‘There’s no way we could sup­ply that!’ ”

Es­sen­tial’s mis­sion is not just to pi­o­neer new hard­ware. It also wants to un­lock the next phase of plat­form in­no­va­tion—at a time when smart­phones have be­come the re­mote con­trols for our lives. Hard­ware and ser­vices that re­volve around the phone are mul­ti­ply­ing, es­pe­cially in the home. Yet they’re ham­pered by big com­pa­nies’ urge to own those ecosys­tems.

Ap­ple, with Homekit, wants to treat your home like another ios­based plat­form, with your smart re­frig­er­a­tor and mi­crowave re­sem­bling the apps cur­rently on your iphone. Google, with its ac­qui­si­tion of Nest, aims to es­tab­lish an edge by rolling out mass-mar­ket home prod­ucts— ther­mostats, smoke alarms, se­cu­rity cam­eras—that con­nect to your phone. And com­pa­nies from Ama­zon to Xiaomi are push­ing their own strate­gies to be­come the in­dus­try lead­ers in the smart-home space. This is Ru­bin’s pre­oc­cu­pa­tion as well. “I can’t not be in the phone busi­ness and solve the other prob­lems,” he says, “be­cause all of the stuff in your life—the home, the car, the of­fice—or­bit around the main screen in your life.”

In­stead of own­ing the home, though, Ru­bin wants to em­power it. Thus, his next re­lease isn’t another An­droid-based phone—it’s another An­droid. Called Am­bi­ent OS, it is a sim­i­larly spongy plat­form en­gi­neered to hum in­vis­i­bly in the back­ground and al­low frag­mented prod­ucts and ser­vices to co­or­di­nate seam­lessly. “Right now, to just un­lock your door and turn on the lights, you need to launch three apps,” Ru­bin says. “I want [Am­bi­ent] to rise above all the other prod­ucts in your home and pro­vide a holis­tic user ex­pe­ri­ence that bridges all the is­lands.” The first prod­uct built on this plat­form is the Es­sen­tial Home, an Ama­zon Echo–like speaker, but the vi­sion is to en­able all your gad­gets—whether Sam­sung TVS, Google Nest ther­mostats, Mac­books and ipads, or, yes, Es­sen­tial Phones—to com­mu­ni­cate.

While many ob­servers are bullish on Ru­bin’s ef­forts—es­pe­cially the in­vestors, in­clud­ing Ten­cent and Ama­zon, who have plowed $300 mil­lion into his startup—not ev­ery­one is a be­liever. “Nei­ther [Ru­bin] nor the new Es­sen­tial brand is known be­yond the high-tech me­dia and an­a­lyst com­mu­ni­ties,” says mo­bile an­a­lyst Thomas Hus­son, of For­rester Re­search. Ru­bin, nat­u­rally, is aware of the stakes of the ab­surdly large bet he’s mak­ing: “Come on! There’s like 10,000 things that could go wrong!” he says. “We’re in a hits busi­ness. If we fail to make a hit, we’re not go­ing to Mo­town.”

This kind of risk-tak­ing spirit is ex­actly what the big­ger play­ers lack. And Ru­bin sees op­por­tu­nity in their com­pla­cency. But even if Es­sen­tial’s only suc­cess is forc­ing the in­cum­bents to move faster and in­no­vate again, he will have taken a step to­ward rein­vig­o­rat­ing the mo­bile ecosys­tem he helped cre­ate.

If you want to see a land­scape where mo­bile is thriv­ing, look to China, where com­pa­nies from Beijing to Shen­zhen are pro­duc­ing some of the most in­no­va­tive de­vices and ser­vices.

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