Tomi Ahonen has a really interesting post on how it is that major, top-selling phone companies -- Siemens, Motorola, Palm, Nokia, Windows Mobile, RIM -- can see their sales fall off a cliff as the whole world seems to decide, en masse, that the phones are no longer the bee's knees. Ahonen marks it up to the fast replacement-cycle with phones, the tenuous relationship with dealers, and the concentration of power among the carriers.
I think there are three factors that help create The Cliff. First, there is the replacement cycle. The average replacement cycle for mobile phones in year 2000 was 21 months. By year 2006 it was down to 18 months. Today it is 16 months (all handsets). For smartphones it is even faster, at 11.5 months. A car is replaced something like every 3 or 4 years on average. A TV set once every 7 years. A personal computer every 3 and a half years. But mobile phones are replaced every year and a half, smartphones replaced every year (on average).
So if you have a bad model car, and your sales suffers because of it, you will not lose all your loyal customers in a year or two, because many of your customers have last year's model and are happy with it, and will not even come to your car dealership until two years from now to consider the replacement model, by which time you have had plenty of time to fix the problems with your current car model.
In mobile phones we do not have that luxury. The pace is so fast. And note that the rate of the collapse due to The Cliff is actually accelerating. This also suggests the replacement cycle and The Cliff are related.
A second point is the dealerships. Some technology is kind of 'protected' from rapid market fluctiations, because it is sold by the manufacturer's own stores (like Sony flagship stores for example) or through branded dealerships (like in new car sales) or by registered partners (like many personal computers, sold through 'VARs' Value Add Resellers, who are authorized with given PC brands). In mobile phones, there used to be no branded shops (Apple changed that of course) and Nokia briefly tried its own Nokia branded flagship stores - most of them have been discontinued. So if you have branded dealers, that helps dampen the fluctuation, even if you have a bad model year of your products, the damaging effect is not as severe. Mobile phones are sold whether in operator/carrier stores, or independent handset retailers, with essentially all handset brands and many of their models on display side-by-side in the store. Note, that of current handset makers, only Apple is a little bit immunized but not completely so, as it also operates its own Apple stores.
The third point is the carrier relationship. The operator/carrier has exceptional influence in the mobile phone handset business. If the carrier/operator decides to push a given phone, it can help it succeed, yes, but that is not dramatic gains. But if the the carrier/operator community decides to punish a given brand, it rapidly dies. We heard just now from Finland (of all places) that a survey of major handset stores in the biggest cities of Finland by the commerical TV broadcaster MTV3 - found that in most handset stores (both operator stores and independent stores) - even if the consumer asked for the Nokia Lumia by name - most sales representatives would not show the Nokia Lumia to the customer, and showed Samsung Android handsets instead. This even as the stores had Lumia in stock and the biggest in-store displays were featuring Lumia.
The 'Cliff Theory' ie How Handset Makers Die, why in Mobile Phones do Companies Collapse so Rapidly (Siemens, Motorola, Palm, Nokia, Blackberry and Windows Mobile) (via Beyond the Beyond)
Are you saying it’s time to replace my six-year-old Motorola PEBL?
Keep it until it’s the best again.
The PEBL is unique. It’s probably considered a vintage classic. Take good care of it, and don’t sell it.
Additionally, if you have a StarTac, you should display it with your Hummels.
1. I think Nokia got hit by the carrier punishment in USA when they launched a phone with built in SIP, and refused US carriers the ability to modify the Symbian firmware and so disable the feature. This is in the middle of the war between US carriers and Skype, iirc.
2. I am not sure the Nokia Lumia is not showing up in Finland because of stores withholding it. I think it is more that Nokia is focusing Windows Phone running products towards the US market. This while still shipping Symbian and Series 40 to other nations. Hell, there are even rumblings about reviving Maemo/Meego on lower end phones.
I dunno, my first four phones were nokias, but after my 5300 had a digital meltdown I decided it was time to jump ship. They used to be not only dependable, but cleverly innovative until like 2006 rolled around and it’s like they just collectively gave up.
Boardroom meddling. The board panicked when all touch phones became fashion, and lost faith in the CEOs ability to guide the company. You can see the same ship with HP, and how they almost replaced the CEO every other year. This while the competition had strong management with long term visions and no board that meddled (Jobs in Apple, Rubin in Google). I wonder if there is a modern financial equivalent of “dutch disease”, where the shareholders (who makes up the board of directors basically) become so focused on the short term sales that they loose sight of the long term viability of a company.
I think a big factor in the future will be security. At present the phones are as secure as an unlatched screen door and will spill their guts to an electronic butter knife.
I would think that if security was an important feature to users, RIM (BlackBerry) wouldn’t be in the mess they are.
“The average replacement cycle for mobile phones in year 2000 was 21 months. By year 2006 it was down to 18 months. Today it is 16 months (all handsets). For smartphones it is even faster, at 11.5 months. A car is replaced something like every 3 or 4 years on average. A TV set once every 7 years. A personal computer every 3 and a half years.”
Are you kidding me? This is nuts! Is there any reason for this? Holy planned obsolescence! How much waste does this generate?
Seriously, who can afford to replace their $100+ smart phone every year??? I can’t even afford to get one in the first place :(
If you don’t compulsively check email or have a social network addiction, you’ll be fine without one. Think of it in similar terms as the money a person saves by not buying a pack of cigs.
Unless you find instant, location based, access to maps, directions, yelp, public transportation info, or google useful…
They are useful to me. I even shell out for one of the most expensive models, designed by a certain company in California.
But I can do w/out and I’d rather give up my smartphone than not buy one organic chicken each month.
There is a reason. We’re all fickle and impulsive when we think no-one is looking.
Just proves we didn’t need all those bells and whistles after all. It mainly satisfies the deep-set feeling of inferiority that we may not have what is perceived as the latest and greatest.
I have a super cheap cell phone and very rarely do I have any situation where I wish I had a smartphone. It would mainly be an expensive toy for me.
I want a brick phone with an up/down scrolling LCD phone book that holds no more than 20 presets, and has 2 weeks of battery life.
I have a Motorola C117, the phone book is larger than 20 entries but otherwise it matches your description. I’ve been happy with it for years.
Why does it have to bad about inferiority? I’m nerd enough to want whatever the latest features are and I don’t consider myself a showoff.
Because Mad Men.
I’m sure advertising has zero effect on you though.
@mdhatter03:disqus Advertising affects everyone but you can’t just hand-wave away my own understanding of my desires by blithely assuming that I’m a drone. For example, I just got a new device that has an upgraded screen and faster data service because those two things are real improvements to a device that I use every day. You’re saying that’s not only not good enough but not even a true explanation — I really got it because I’m enslaved by savvy advertising that has outwitted me, right?
@jaysones:disqus
I’m saying that whatever most people are affected by, affects you. It does. Advertising for coke on the side of trucks works, that is why you will see it around the world.
You preferences may not be swayed, but your options get limited.
I don’t think it has much to do with “planned obsolescence”. My “old” Evo works better than it did the day I got it, but it feels like an ancient stone tablet next to a nice new Galaxy Nexus. It is just the case that, especially in the Android circles, better, faster, stronger, and a handful of side customization (screen size, key board, etc) are the only thing you have to differentiate on. If you want to stay afloat, you need to make sure that when someone goes to buy a new phone, yours is the shiniest.
Battling to have the best phone makes phones advance quickly. If you are the type to start drooling once the new thing comes out, you are going to be buy more phones. When your contract comes up, you are going to feel like you are five generations behind and tearing your hair out for a new phone.
You can kind of see this action happening in slow motion with iOS and Apple. Because the Apple ecosystem makes it hard for people to leave once invested, Android phones don’t always offer up a viable alternative. If you are heavily invested in iOS stuff, an Apple phone is really the only option. I tend to see that iOS folks are generally more content to have an older phone. I think this is so because the while an Android user sees a dozen new phones between the time he gets the phone and it hits their carrier replacement cycle, an iOS person is going to only see one major revision. The phone works just as well as the day they got it, they don’t feel THAT far behind, and so tend to be more sedate about ensuring that their phones is the newest.
I want life and durability in a lot of things. Give me a car that lasts forever, light bulbs that don’t blow, TVs that don’t fail, and coffee machines that last forever… but technology in the middle of a Moore’s law style boom? Screw it. Better, faster, cheaper.
I’m still using my Evo 4g it was my first smart phone, it has been dropped, fully submerged in water, burned lightly (for flavor) and generally just treated like something that gets handled everyday.
I am running aftermarket firmware (cyanogenmod 7 nightly 150 something), the phone is fast bug freee and readily customizable , it works better than it did out of box and the battery lasts longer. It replaced my i-pod and i can used the mobile hotspot when i’m in a pinch for wireless access (say i need to register for classes and i’m not home, etc. etc.)
The gps , mobile broadband hotspot, nice camera and the insanely bright LED flashlight are very useful and make the phone worth every penny.
Mildly off topic, but, ditto to literally everything you said, plus I slapped in a massive after market battery that lets it last forever without charging. My only complaint is that I desperately want more memory. My Evo has last admirably despite the brutal beating I have inflicted upon it.
If your phone is supported by CyanogenMod, you are doing yourself a horrible disservice by not wiping whatever shitware your phone came with and enjoying some delicious open source goodness. You will lose the uninstallable NASCAR app, but I personally think that it was worth it.
Additionally, older Apple phones, get updates for a couple of years too. You can’t do all the latest stuff, but you get bug fixes and maybe a few software upgrades too.
People may have also put off getting new iPhones to get iPads.
Heh. When my parents got a TV, it was 60cm, mono and black and white. I really, really wouldn’t want to watch Game of Thrones on that model.
To quote the author of the original report: “haha”
Thirteen times, to be exact.
His Oxford lectures must be a real riot.
It’s not just phones. It happens with other products when the quality or usability drops or the competition buries your product. Remember, “No wireless. Less space than a nomad. Lame.”
Seen a Packard-Bell PC lately? How about Conner hard drives?
These companies have not gone from top to bottom over night. Both Nokia and BB had time and chances to compete but wasted a few years by sticking their finger in their…
They were checking which way the wind was blowing. Mostly outward.
Also worth keeping in mind that the costs of a smartphone are two-fold: the upfront cost of the phone, and the carrier plan. Of these two, it’s the latter that is by far (usually) the more expensive. So if you are going to be paying for your plan anyway, why not shell out a little for a better phone when one comes along?
That’s only true in countries where phones are usually subsidized, which is the minority.
EDIT: What I mean is that the plan is usually cheaper relative to the cost of the phone when the phone is not subsidized. The plan is still more expensive, but the massive disconnect you see in the US (and other subsidized-phone countries) isn’t there.
just read Joseph Schumpeters Creative Destruction. These companies were also purely engineering companies with no idea of human factors.
Hear hear.
Have you ever pondered about the variety of oil filters out there? There’s over twelve hundred, the difference between some of them is less than half a millimeter in circumference.
A no less eccentric example would be Sony and its’ power cables, over thirty six varieties with the unholy yellow ring at Radio Shack, none of them compatible with my three year old Sony DVD drive.
Once in a while, engineers get together and create a true world standard and guideline, like API for motor oils. Let’s say SAE 40W-20, for example, every engineer in the world can read that and has to follow the guidelines. But it seems to be the exception, not the rule.
Mobile phones are replaced every year and a half, smartphones replaced every year (on average).
I find it difficult to believe that so many people are so technologically trendy, I’m inclined to believe the surprising numbers are due to human error.
Some stuff is very easy to misplace and lose. For a very absent-minded period in the late nineties, I lost a pair of sunglasses every year or so. For the record, I’ve bought only two pairs of sunglasses in the last twelve years, so it seems I’ve focused a bit better on the small things.
The smartphone market is not yet fully saturated. This allows people to sell of their one year old models used and purchase a new model. This will even out, I’ll bet.
The cost of the phones are burried in the contracts, and when your contract is up the carrier makes you an offer to get the latest phone so you keep paying the expensive subscription rather then switch to a cheap sim only contract.
Plus allot of people really do want to have the hot new phone each year to brag at the water cooler. Smart phones turned everybody into tech nerds, and they don’t even realize it.
so you keep paying the expensive subscription rather then switch to a cheap sim only contract.
A what now? In Canada at least, there’s no incentive to stay with your old phone. You can either accept a new phone and pay $X/month or keep your old phone and still pay $X/month.
I bought a Nexus phone so I’d get timely Android updates for its foreseeable life and my phone would therefore last a while.
It’s on a bottom-rung two year contract and isn’t costing me much more than I was paying to feed my African-style Nokia those horrible PAYG codes, except now I have GPS, a camera, a Bluetooth music player, a web browser and all the other modcons. When my two years are up, if it’s not cheaper to end the contract and just pay useage fees, then I might get a new phone because I can wipe mine and sell it for a decent amount.
That image captioned “The Cliff Effect in Mobile Phone Market Share” is another tragic case of Graph Failure. It appears to correlate something-on-the-vertical-axis against something-on-the-horizontal-axis, but neglects to provide any legends or indicate the scales of the data in either direction. On the bright side, the linked article generously offers, “The above image may be freely distributed”, so kids can re-use this exciting and carefully-researched data for their high school term papers and get thegrade they deserve. Ahem.
If the point of this “graph” was merely to show us what a cliff is, the author could have just used an image from Wikipedia.
For the ‘tl;dr’ crowd, is there a Cliff Notes version of the linked-to article?
are they making another series of that? I love the tl;dr crowd.