Tag: hardware

Pivoting the business of speakers

Changing the speaker industry requires collaboration and innovation but it doesn’t come without cost as Sonos finds

Today I had the opportunity to tour the Santa Barbara headquarters of smart speaker manufacturer Sonos. I’ll be writing up a some more detailed accounts of some of the interesting things this fascinating company does.

One thing particularly interesting thing about Sonos is how it was established by four veterans of the original dot com era who had no experience in audio hardware or technology but had a vision of how they would like the stereo system of the future to look like.

That vision hasn’t come without change for the company, the shift to streaming has meant Sonos itself has had to pivot away from its original business model which entailed layoffs for the fast growing company last year.

How Sonos is navigating that shift, along with fostering a culture of openness and innovation is an interesting story that I’ll be telling over the next few weeks. In the meantime, my head is spinning from information overload.

The Internet of Things runs ahead of standards

As the Internet of thngs develops, industry standards struggle to keep up, leaving users at risk of being stranded with incompatible devices

A week or so ago we reported why LogMeIn’s CEO, Bill Wagner, wasn’t interested in participating in the Internet of Things industry groups as they are too bureaucratic and slow in a fast moving sector.

Last week I asked John Stewart, Cisco’s Chief Information Security Officer, about how the networking giant thinks about this attitude given Cisco is a key member of a number of IoT standards groups.

Stewart’s view is nuanced, “the notion of open operability versus standards is where the world needs to be. We’ve been pushing this notion of open interoperablity knowing that standards might take longer but yet you don’t want to create these islands of operational capabilities that need to be stitched together in weird ways. That would add friction to the world.”

“There’s not much room for non-interoperable systems as they would have to connect with something else,” Stewart added.

In this, Cisco’s Stewart agrees with Ericsson’s Esmeralda Swartz who believes device diversity will beat vendor’s attempts to lock customers into their IoT platforms.

While it may be true that industrial and smartcity technologies will be interoperable in order to work within complex systems, it’s highly likely many consumers devices will be locked into proprietary systems so vendors can monetize them.

For consumers, users and citizens the questions of interoperability and standards are going to be a pressing question as connected devices become common and in some cases unavoidable.

 

Reverse financing a manufacturing revolution

3D electronics printing startup Nano Dimensions illustrates some fundamental changes in finance, business and manufacturing

Nano Dimensions may not have shipped a product since it was founded in 2012 but is worth $49 million dollars and was Israel’s best performing tech stock last year reports Bloomberg Business.

It’s not surprising that Nano Dimensions has caught the imagination of investors, the company was founded in 2012 to develop advanced 3D printed electronics, including printers for multilayer PCBs (printed circuit boards) and the nanotechnology-based inks those machines rely upon.

Should the technology prove successful, the application of those printers in fields like rapid prototyping is immense. The company speculates their devices may even get RFID tags down to the magical one cent figure which opens may opportunities in industries like logistics and retail.

In a GeekMe profile of the company last June, the writer even speculated Nano Dimensions could be heralding a disruption to the electronics industry similar to that the music industry faced when home users could burn their own CDs and stream music.

While that – and the speculation that 3D printing of electronic devices will kill Chinese manufacturing – may be some way off, it isn’t hard to see the potential of this technology.

The Israeli aspect of the Nano Dimensions story is interesting as well, with the company receiving a $1.25 million investment from the country’s office of the chief scientist after it was reverse listed onto the local stock market by taking over a moribund company.

For countries like Australia, Canada and the United States which are likely to have many moribund small mining and energy on their stock markets in coming years, such reverse listings may be an opportunity to spark their tech sectors with fresh capital and talent.

 

While Nano Dimensions is still very a speculative venture, the company illustrates a number of possibilities for 3D printing, electronics, the Israeli tech industry and the future of fund raising at a time when the Silicon Valley venture capital model seems to be under stress.

Another fascinating aspect of Nano Dimensions is that it’s one of the new breed of hardware startups, a field that until recently was dismissed as ‘too hard’ by most tech investors. Overall, the Israeli businesses an interesting company to watch for many of the aspects it touches upon.

Founder therapy and Smiley curves – the tough world of hardware startups

San Francisco’s Highway One incubator looks to ease the pain for hardware startups

There’s no doubt building a hardware startup is hard, whether it’s sensor networks, smart lights or home automation hubs getting physical products to the market is far tougher than launching an online service or app.

In a light industrial part of San Francisco’s Inner Mission district, the Highway One incubator is one of the initiatives looking at helping entrepreneurs bring their ideas to market.

“Our goal is to help hardware startups scale faster,” says Brady Forrest the director of Highway One. “We turn prototypes into products. People come here with an idea and we make sure they can implement it, we bring a lot of design best practices and engineering best practices and make sure they are being honest with themselves.”

“I also end up conducting a lot of founder therapy.”

The selection process

Getting onto the four-month program is competitive with applicants being subjected to a rigorous vetting process, “they fill out a double page application, send in a video of them telling their story and then a video of them using a prototype.”

“Then we start to talk with some business analysts to check the market sizes, competitors and then we go to an engineering review to check the team has the technical chops and that prototype is what they say it and that it’s achievable.”

Once on the program the course is an intense immersion on building a product with access to a prototyping lab, support services and a 10-day trip to Shenzhen, China, to learn about global manufacturing.

The Shenzhen link is important as Highway One is part of PCH International, an Irish company born out of founder Liam Casey’s case work in sourcing Chinese manufacturers. This Fortune magazine profile of Casey and PCH describes how deeply embedded the company is in global supply chains.

Want investors want

At the end of the incubator process is a pitch day before potential investors. Right now Forrest says, “I think investors want to de-risk as much as possible. Right now hardware is so expensive and it’s higher risk. Yet in a lot of ways it’s easier in a lot of ways for people to know what they’re getting.”

smiling_curve

Part of the challenge in funding hardware startups lies in financing the fabrication phase of the product’s development. Forrest cites the ‘Smiley Curve’, originally described by Acer founder Stan Shih, where the value added is at the beginning and ends of the cycle.

“The VC’s don’t like to fund the build part, one nice thing for startups is that they can get manufacturers will take on the build part so they don’t have to seek funding for working capital”

Hardware’s next wave

For investors, this makes funding hardware startups easier for investors. “It’s still not easy though,” Forrest warns. “It’s become harder for hardware startups to raise new rounds, so they have to watch their burn.”

While at the moment a lot of the focus is on wearables and the IoT, Forrest sees the Federal Drug Administration’s new rules on medical accessories changing the sort of devices being pitched to the program.  “I now think we’re moving into a new field where the devices will have an effect on the body. The FDA’s new rules around making it easier to make things around FDA approved devices will open that.”

He’ll find out soon what the next big thing is in hardware startups as applications for Highway One’s May 2016 round of participants is now open.

How long can Intel continue to beat the street?

Chip maker Intel continues to struggle in the face of a transformed marketplace

Earlier today chip maker Intel beat analysts’ estimates with an earnings report showing  the company’s income hadn’t fallen as much as expected in the previous quarter.

As Business Insider explained before the earnings call, Intel’s numbers aren’t look good ahead of the rollout of Windows 10.

In the past, a new version of Windows has been the time many customers upgraded their PCs with Intel and other computer component makers being the beneficiaries.

With this version of Windows Microsoft are giving it away free to users of Windows 7 and 8 which means the rush of upgrading customers is going to be subdued compared to previous occasions.

For Intel, the Internet of Things should be the big opportunity in the post PC world but smart devices require low powered chips rather than the more power hungry chips the company excelled in supplying for desktop computers.

At the moment Intel seems to be focusing on the data centre market that may well be a suitable market for power hungry CPUs but is still very much leaving the company isolated from the bulk of the industry which will increasingly demand ultra low powered chips.

For Intel, like Microsoft, the struggle for now is to keep relevant in a dramatically shifted marketplace.

Niches and needs: necessity and the mother of invention

How one person’s problem becomes an invention

An old saying is necessity is the mother of invention and nowhere is this shown better than walking the exhibition floor of the Internet of Things World conference in San Francisco today.

The Wallflower is a good example of this, thought up of after the founder had to rush home when his partner thought she’d left the stove on (she hadn’t), he thought there had to be something that could monitor this on the market and when he discovered there wasn’t, he invented it.

Snowboarding needs

Probably the sexiest device on the floor is the Hexo+, an autonomous drone designed for video shots. Use the app to tell you what shot you want and it the drone will take off and video you.

Hexo+ was founded by Xavier de Le Rue, a French professional snowboarder who wanted to get shots of his maneuvers but couldn’t afford a crew or a helicopter to do so. The preprogrammed flight patterns represent the most common camera sequences optimised for the GoPro camera.

Probably the most trivial is the MySwitchMate, a mechanical device that fits over a wall light switch. Set it up and you can use its app to flick your lights on and off.

The device was born out of the founder wanting to remotely control his college dorm lights from his bed. While the market seems to be those who don’t want to get out of bed, its main market are those who would like remotely controlled lights but can’t install a smart lighting system.

A niche from a need

What all three of these devices show is how a need by an inventor spurred a  product’s development, in that respect the Internet of Things is no different from any other wave of innovation.

So if you wonder “why doesn’t someone sell this?” it might be an opportunity to set up your own business or invent an IoT device to meet that need.

Microsoft’s server clock counts down

Microsoft’s ending of support for Windows Server 2003 marks the end of the box software era.

One of the challenges facing Microsoft are the millions of users quite happily using the company’s older products.

While Windows XP is by far the biggest problem – only last year the number of systems running the fourteen year old operating system still outnumbered those running the latest version – Microsoft faces similar issues with its server 2003.

This week Microsoft warned support for Windows Server 2003 has entered its last one hundred days and urged customers to look at shifting onto new systems.

Interestingly most of the case studies they cite involve customers moving from on premise servers onto cloud services.

While that’s very good advice as most customers, particularly small businesses, don’t have the capabilities it shows how the industry has shifted in the last twelve years.

For most of those companies a decade ago cloud service, or Software as a Service (SaaS) as it was known then, weren’t available for most business functions. Today they are the norm and usually the best option for smaller operations.

That shift to the cloud has meant an entire industry now faces extinction as the army of suburban IT service companies that once maintained those servers are now largely redundant.

As the clock ticks down on Windows 2003 server so too does it for all the businesses that once depended upon the PC industry.

The internet of insecure things becomes a problem

Security with the internet of things is becoming a serious issue warns HP

Following yesterday’s posts on BlackBerry, security and the Internet of Things, HP Fortify released a report saying seventy percent of IoT devices are vulnerable to hackers.

The list of weaknesses is chilling and illustrates why IoT security is an issue that has to be resolved now.

It may well be that John Chen, BlackBerry’s CEO, has backed the right horse for his company.

So you think services are easy?

The differences between service, hardware and software businesses shouldn’t be understated.

ZDNet columnist Ed Bott is possibly one of Microsoft’s closest followers and among the few to defend Windows Vista, Ed though can’t be faulted for doing the hard yards including reading Microsoft’s stock market10-K  filings.

In their most recent filing, Ed finds Microsoft has used the word “service” 73 times as opposed to 44 appearances last year.

A key phrase in the filing is “a growing part of our strategy involves cloud-based services used with smart client devices.”

This is consistent with the hands on previews of Windows 8 which Microsoft have been giving journalists over the last few months. Something that leaps out is the integration with online services; something that both Google and Apple have also been pushing.

What should worry investors is that moving into services isn’t easy. Service businesses are far more labour intensive and, as a consequence, far less profitable.

Despite having relatively low labour costs, cloud computing services are problematic as many sectors have been commoditised, which is the genius of Salesforce in establishing a profitable niche.

The fat margins Microsoft are used to in their core software business can’t be replicated in the cloud based markets, which is one of the reasons why customers are switching to the cloud.

Microsoft’s problem is shared by telecommunications companies who are finding their cloud offering don’t generate the same ARPUs — Annual Revenue Per User — that they’ve become accustomed to in the mobile phone market. Which means pain for executives whose KPIs are tied to historical performance.

For Microsoft, the problem is compounded by their simultaneous move into hardware with the Surface tablets. Meaning the company’s has to deal with two significantly different business models to the ones they are used to.

Again Microsoft aren’t alone in this, Google is having similar problems adjusting to the hardware market though its acquisition of Motorola Mobility.

Integrating hardware with services and manufacturing isn’t impossible, we only have to look at Apple for how a company can succeed in that space although most managements struggle with the very different demands of each sector.

During the 1980s we saw the rise of the “all business is soap” philosophy where MBAs and management consultants preached that the challenges of running a business were the same regardless of whether you sold cleaning products, soft drinks, computers or automobiles.

Those folk were wrong. Most famously the Australian media company Fairfax hired as CEO a business school professor who preached this philosophy and managed to ignore the rise of the Internet, the echoes of the failed McKinsey ideas haunt Fairfax over a decade later.

While its possible for a software company to succeed at services or hardware, the magnitude and complexity of the management challenge shouldn’t be understated. Both Google and Microsoft will be defined by how well their leaders succeed.

Who will be the future Betamaxes?

A modern version of the video tape standard wars is being fought on our phones

This morning Paypal announced its PayPal Here service, a gizmo that turns a smartphone into a credit card reader.

On reading PayPal’s media release in the pre-dawn, pre-coffee light I found myself grumpily muttering “which platforms?” as the announcement kept mentioning “smartphones” without saying whether it was for iPhone, Android or other devices.

It turns out to be both Google Android and Apple iOS. It adds an interesting twist to the Point Of Sale market we’ve looked at recently.

The omission of platforms like Windows Phone raises the question of which platforms are going to go the way of Betamax?

Sony’s Betamax and JVC’s VHS systems were the dominant competitors in the video tape market in the early 1980s. They were totally incompatible with each other and users had to make a choice if they wanted to join one camp or the other when they went to buy a video recorder.

On many measures Betamax was the better product but ultimately failed because VHS offered longer program times and Panasonic’s licensing out of their technology meant there were more cheaper models on the market.

A few days ago Bloomberg Businessweek listed the Betamax device as one of the “technology’s failed promises”

With a superficial comparison, Apple would seem to the Betamax while Google and possibly Microsoft are the VHS’s given their diverse range of manufacturers their systems run on and Apple’s refusal to license out iOS, which was one of the reasons for Sony’s failure.

But it isn’t that simple.

In the smartphone wars, it’s difficult to compare them to VCRs as the video tape companies never controlled content and advertising the way smartphone systems do – although Sony did buy Columbia Studios at the peak of the Japanese economic miracle in 1987.

This control of content is what makes the stakes so high in the smartphone and tablet operating systems war. A developer or business that dedicates their resources to one platform could find themselves stranded if that platform fails or changes their terms of services to the developer’s detriment.

Another assumption is there is only room for one or two smartphone systems; it could turn out the market is quite happy with two, three or a dozen different systems and incompatibilities can be overcome with standards like HTML5.

In a funny way, it could turn out to be Android becomes the Smartphone Betamax due to having too diverse a range of manufacturers.

One of the first questions that jumps out when someone announces a new Android app is “which version?” The range of Android versions on the market is confusing customers and not every app will run on each version.

More importantly for financial apps like PayPal Here and Google Wallet, smartphone updates include critical security patches so many of the older phones that miss out on updates pose a risk to the users.

In the financial world confidence is everything and if customers aren’t confident their money is safe or will be promptly refunded in the event of fraud they won’t use the service.

Whether this uncertainty will eventually deal Google out of the game or present an opportunity for Microsoft and other companies is going to be one of the big questions of the mobile payments market.

The IT industry’s damaged business models

Can the Information Technology industry deal with a radically changed business environment?

JT Wang, Chairman of personal computer manufacturer Acer believes the release of Windows 8, Microsoft’s next operating system, will see a resurgence of sales for Windows based computers. Market trends suggest those hopes are in vain.

Right now the Personal Computer market can be roughly split into two camps; those happily running Windows XP who have no need to upgrade and those who are delighted with Windows 7 who have no need to upgrade.

Short of their computers breaking down, neither group have any good reasons to change to the new operating system as, unlike Windows 3.1, 95 or XP, there is no new technology breakthrough or advance to warrant making the jump.

To make things worse for the PC manufacturers the rise of cloud computing services extends the life of older Windows XP systems and eliminates the biggest driver of new computer purchases in businesses – the software upgrade.

During the PC era one of the banes of business owners were enforced software upgrades where vendors would release a new version of a program every year or two and withdraw support for the older editions.

Frequently the newer software would require the latest hardware, forcing the business into an expensive and disruptive upgrade of all their IT systems.

Today, software companies following the forced upgrade model are finding customers have viable cloud alternatives which destroys the revenue stream behind those frequent releases.

When a customer moves to a cloud service, they also delay buying new desktop or server hardware which is partly driving the steady increase in the age of business computers.

For computer manufacturers the release of Windows 8 could actually be bad news as customers will probably postpone system upgrades until the first service pack of the new operating system is released.

Even if Windows 8 does deliver increased sales as JT Wang hopes, the trend of steadily falling PC prices as smartphones and tablet computers take market share is inevitable.

The PC industry in both laptops and desktops has been a commodity industry for some years and any hope of establishing premium pricing from tablet computers has been dashed by the iPad’s competitive price points.

Regardless of the hopes of the IT industry’s leaders, both the hardware and software sectors are under a lot of stress. It will be interesting to see who adapts to today’s market.