A post on PandoDaily puts forward the assertion that the mobile industry is ignoring the “rules of consolidation”. First this presumes that the 4 stages of industry development (opening, scale, focusing, balance and alliance). Granted, a number of industries have followed this “curve”, but a substantial number have not. It’s worth discussing the exceptions first, and then look at the mobile industry. The article makes a presumption that 2007 is when “real” smartphones started, but it overlooks 7 years of history before that.
The Consolidation Curve Not Universal
Let’s consider some major, multibillion dollar industries that didn’t follow the “rules of consolidation”. The MP3 player market never followed them. They went straight from “opening” to “balance and alliance” without any of the steps in between. Yes, there were a number of MP3 players on the market, but once the Windows version of the iPod hit the streets, it was pretty much game over. Within a year of its release, the iPod had claimed 80-90% of both the hard-drive based players, as well as all players of all kinds. It was scary.
The mainframe/business computing market never really proceeded this way. Sure, some minor players like CDC and DEC were around, but IBM managed to take a stranglehold early, and it took a complete shift (and some could argue a reboot) of the industry to shake things up. And yes, I realize that those “minor players” will billion dollar companies. But IBM dwarfed them by an order of magnitude or more.
If you consider legal, on-line music sales a new “industry”, here’s another one that went from “opening” to “balance and alliance” with virtually no stops in between. When iTunes came it, it was a bit of an oddball. but it rose with iPod sales, and is now one of the dominant platforms in digital music distribution. Amazon is the only truly serious big player in the space.
But Let’s Say Its Real, Where Did It Start
But let’s look at the mobile market in the context of the Consolidation Curve. The PandoDaily article doesn’t try to argue that the industry is any particular stage, and tries to describe different behaviours by different players as being in different stages. This assumes that corporate behaviour is important. It isn’t. It’s industry behaviour. Let’s start with the first flaw in the article: when smartphones got started.
Yes, the modern smartphone as we know it came into existence in 2007 when Steve Jobs announced the iPhone. And while the iPhone ignited consumer interest in smartphones, the mobile computing industry was a multi-billion dollar beast before Apple came along, and the current crop of smartphones motivated Apple to create something different. To start the analysis at 2007 is actually too late a point in history. To really understand this, you have to go back to 2000, and the release of the first Nokia Communicator.
In reality, the “opening” phase really occurred from 2000-2007, when there were several viable smartphone vendors, and a “changing of the guard” at the top of the food chain. Nokia got an early lead globally, but it always had contenders. North America saw the greatest churn. The Nokia devices never caught on, but the first real leader in smartphones in North America was Handspring, later Palm, with the Treo line of smartphones. They ruled the roost for a while until Windows CE came along, which evolved into Windows Mobile, and eventually supplanted the Treo. Windows Mobile had its day in the sun until RIM took their pager-like device, the Blackberry, and integrated a real phone and more robust data capabilities. The Blackberry became the corporate communication device and king of the hill in smartphones in North America.
Keep in mind that all of this was happening in the context of the enterprise and businesses. Consumers had limited to no interest in smartphones. They were expensive to operate, because of the data plans, and they only did things that were really key to businesses: e-mail, contacts, calendars. People had PDA’s for contacts and calendars, and e-mail was widespread, but not viewed as a “have to answer now” type of service. In fact, the presence of text messaging provided what most people wanted in near-real-time communication.
Scale: Shifting to Consumers
So this brings us to 2007, and the introduction of the iPhone. At this point, the industry had pretty much finished with “opening”, and was on its way to “scale”. There is nothing to say that new technologies won’t be introduced over the course of the Consolidation Curve. So along comes an outsider, and it changes the focus (but not necessarily the rules) of the industry. Like PC’s before it, the focus shifted from enterprise to consumers.
A lot of people overlook or forget the fact that PC’s only started to gain any serious volume when IBM appeared, and they became business devices. For the 1980’s and into the early 1990’s, PC’s were primarily a work thing. Yes, there was a small population of technologists and gamers using them, but the vast majority were on desks in offices. It wasn’t until around 1992 or 1993, when they finally got cheap enough, that people wanted to buy one. And unlike smartphones, home PC buyers ended up getting whatever they had at work. It lessened the learning curve, and you could work from home.
The iPhone was a hit, in part, because it wasn’t the “stodgy old smartphone from work”, but in part because a lot of people buying them never had a smartphone at all. In fact, most Blackberry and Symbian users were at first reluctant to look at the iPhone, or the Android that followed. They were “toys”. They were “playthings” that only had lots of fart apps. But consumers would line up for hours to buy one.
The scaling stage didn’t last all that long, at most a couple of years, when the modern form of the mobile market started to develop.
Focusing and The Supply Chain
If anything, the mobile industry is pretty much in the “focusing” stage, if not into the “balance and alliance” stage, where attention is paid to the supply chain, efficiencies and a degree of consolidation. What was the last, real substantive change in smartphones? Ignore all of the new features, and various improvements. Since iPhone and Android, everything has been about evolution: voice recognition, better displays, more features. But nothing that is totally and completely different. In a sense, the current form of the smartphone has now been defined, and anything “different but similar” is rejected.
Want proof? How about the 2 attempts (in tablets) for HTML5/web standards-based phones? A small but vocal group of people believe that web standards is the “better” way to build software for mobile devices. They aren’t necessarily wrong, but the time isn’t right. Most developers want native SDKs to build rich, engaging apps. Users was to run apps. The Playbook and TouchPad each presented a UI that was weird, odd, different. Some argued it was better. Consumers disagreed. One of those devices is now gone, dead after about 45 days of existence. The other is irrelevant noise in the mobile computing space.
Mobile Computing More Mature That People Realize
It can be really easy to believe that the mobile computing space is in its infancy, that these are early days, and that this is like the wild west of the 1970’s and early 1980’s personal computing market. It isn’t. The heady days of truly new, and massive uncertainty about “winners and losers” (and scaling of the industry) ended around 2009, as Symbian and Blackberry faded, and iOS and Android began their ascendency. Even before IBM PCs were truly the dominant machine, they looked like the dominant machine even by 1984 (the year of Apple’s landmark commercial). The same could be said for mobile computing: even by 2009, iOS and Android didn’t hold the majority of the marketshare. But the held the majority of the mindshare, and that is what defined things.
We are fast entering the final stage of the consolidation curve, balance and alliance. iOS and Android command 85-90% of all mobile computing, with iOS in charge of tablets (at least for now) and Android largely in control of phones. The balance will shift, and it has yet to settle out. But the market has basically decided: they don’t want Blackberry and they don’t want Windows Phone. This isn’t all that different, timing-wise, as the personal computing market. The first real PC’s came out in 1977, with the arrival of the Apple II, the Commodore PET and the Tandy TRS-80. The arrival of the IBM PC in 1981 heralded the beginning of the end of everyone else. Home users weren’t buying anything in real volume, and businesses would eventually buy billions of dollars worth of the machines. By 1989, 12 years after the first “real” PC’s arrived, there was one dominant platform (MS-DOS) and a small number of big hardware vendors (Compaq, HP, IBM).
What About Potential Disruption?
Anything that disrupts the current mobile computing industry will be something completely different. Sure, it may share some technology elements, much like an iPad shares some technology with the PC’s it is starting to displace. But the underlying technology isn’t the important part. Its what the device does, and how it works, that will be important. It won’t be about shaking up the industry as it exists. It will be about creating a new industry. The smartphone wasn’t a simple evolution of the mobile phone. It was a sharp right turn, and the only thing the two devices have in common are the “phone” bits. They are completely different otherwise.
So, the Consolidation Curve Does Seem To Apply
Contrary to the PandoDaily article, I argue that the mobile industry is actually following the consolidation curve, and that we are either in the later portions of stage 3 (Focusing) or in the early phases of stage 4 (Balance and Alliance). The edge players are pushed further to the edge, and power has consolidated into the hands of two major camps. That doesn’t look like Opening or Scaling to me.