Technology, Culture And The Power Of New Markets

We live during a time in which it is increasingly hard to separate technology milestones from cultural milestones.

To take just one example – right now in April of 2015, most of the world is aware of the Apple Watch, but almost no one has one. Despite this, there is no shortage of predictions about the Watch:

  • “It won’t be a device for the masses, just Apple diehards.”
  • “The sales numbers will be disappointing”
  • “Apple won’t meaningfully change the dynamics of the watch market.”

It reminds me a bit of a similar period eight years ago – spring 2007, after the iPhone had been announced, but before anyone owned one. (The iPhone was released in June 2007.) Here are a couple of the (now humorous) predictions about the iPhone from January, 2007:

  • “The iPhone is nothing more than a luxury bauble that will appeal to a few gadget freaks (Bloomberg)
  • “The iPhone will not substantially alter the fundamental structure and challenges of the mobile industry (Forrester Research)

What we know now, of course – 700 million iPhones later — is that the iPhone fundamentally changed not only the mobile industry, but also:

  • The computer industry – Microsoft’s long dominance ended with the iPhone
  • The entertainment industry – we no longer need TVs or cable to get premium content, or PCs to produce it
  • Consumer behavior on a global level

To demonstrate that this isn’t just an Apple story, here are some other things we didn’t have back in spring 2007:

-       AndroidOS  

-       Amazon Kindle

-       Xiaomi (world’s 3rd largest smartphone distributor and most valuable private company; currently valued at $46 billion)

-       Uber (current valuation: $41B)

-       Snapchat ($15B)

-       Pinterest ($11B)

-       Airbnb ($10B)

The point is that when you try and predict the potential size of a new market, it is not necessarily useful to look to existing, mature markets for comparisons. We learned this when:

  • Typewriters gave way to PCs
  • Wired phones gave way to wireless phones
  • PCs got displaced by smartphones

In these cases, the new markets that emerged became much larger than the markets they replaced.

As Benedict Evans has eloquently described, when trying to estimate the market potential for something fundamentally new, you have to do two things:

  1. Look past what is now, and consider how much better and cheaper that product might become
  2. Think about who would buy it now versus who else might buy the product later as it becomes better and cheaper, and how they might use it.

As technology companies become lifestyle companies, and every new sensor creates a new business opportunity, we are going to see this happen not only with well-designed wearable products, but with ioT in general, as well as the new platforms and use cases they engender.

We should never underestimate the ability of new markets to completely upend the current state of things. To the contrary – we should assume they will, and plan accordingly.

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