[Infographic] Top 5 Handset OEMs 2001-2010

In the past 10 years, the handset OEMs landscape has changed dramatically.

Companies that seemed unshakable have lost ground and are gradually being replaced by new and agile contenders, borne from the PC industry. The ‘old OEM guard’ is still being driven by momentum, but as one-by-one these giants fall and smartphone adoption continues to accelerate, the battle for a spot in the top 5 leaderboard is getting more and more heated.

How has the landscape changed, you ask? Well, just take a look at our latest infographic:

Top 5 handset OEM

Feel free to copy the infographic and embed it in your website.

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Haptics and Sensors: The new toolset for handset differentiation?

[Haptics, sensors, gesture tracking, intelligent texting and pico projectors; a taste of the technology soup headed our way. Guest author Peter Crocker discusses how sensor technologies offer handset differentiation, and the challenges ahead for OEMs.]

Haptics and sensors - the new toolset for handset differentiation

Innovation is the name of the game for handset manufacturers. Not just for Apple who keeps expanding the envelope of hardware and UI capabilities, but all major OEMs who are looking to differentiate beyond software. Android and Windows Phone are now providing an end-to-end device recipe for device makers, from hardware to a developer ecosystem. As such, handset OEMs (Nokia, Samsung, LG, Motorola and Sony Ericsson) are finding themselves on the same playing field as PC assemblers (Acer, Dell, plus the likes of Huawei, ZTE and Visio). In the post-Android era, not only is the playing field leveling, but it’s also becoming more crowded. More importantly, unless handset OEMs can find ways to differentiate they’ll have to default to competing on price, which is exactly what they want to avoid; the OEM cost structure is not designed to withstand razor-thin margins.

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One way to differentiate is with phone features – not GHz figures, but the type that would have a major impact to the user experience. Many OEMs would crave to break into the market with innovations such as what the Palm Graffiti handwriting recognition was at its time.

Feature innovation comes today in many forms, as manufacturers try to evolve smartphones into smarter phones; haptics, predictive texting, gesture recognition technology, inertia sensors, digital compasses, and the emergence of pico projectors to name a few.

A taste of feature innovation
– Next Generation Haptics: Haptics, or the process of using motion or vibrations to create tactile feedback on a users hand or finger, has been around for quite a while, with solutions available from Immersion and Synaptics. As an alternative to using touch-sensitive screens, companies like eyeSight and GestureTek are using the built-in phone camera to analyse hand motions and recognize gestures.

– Inertia and direction sensors: handset makers are following Apple’s lead with the integration of accelerometers, digital compasses and gyroscopes into the phone. These sensors can be leveraged to support for example improved location through dead reckoning and gesture recognition. Gyroscopes and compasses are also providing precise data on the location of a device in the three dimensional plane opening the door to augmented reality applications. Companies such as Layar and Wikitude are helping developers walk through that door with AR software platforms.

– Predictive Text & Gesture Tracking: Predictive texting has seen limited innovation beyond plain-old T9; as such a range of vendors have emerged to provide significant improvements in prediction and correction accuracy, namely Keypoint, EXB, TouchType, Cootek, Keisense (now Nuance) and BlindType (acquired by Google). New forms of predictive texting combined with gesture recognition technology such as as Swype and ShapeWriter (acquired by Nuance) is enabling quicker text input on a touchscreen – for example tracking the movement of a finger on a touch screen, a phone moving in space with inertia sensors, or tracking hand movements with infrared technology hand gestures.

– Pico Projectors: While the integration of pico projectors, or mini video projectors, into mainstream phones is still a ways off, the technology from the likes of TI and Micorvision claims to overcome one of the biggest UI challenges of mobile device, small screens.

What’s more, combining such features can yield more than the sum of the parts. For example, gesture recognition technology combined with haptics could allow users to effectively navigate applications. Similarly, the combination of pico projectors, gesture recognition and image tracking technology could eventually enable interfaces that will resemble Sci-Fi movies.

Integration challenges
As easy as it may sound, innovative features are not just about shopping components off the shelf. Cost is an important consideration, especially for technologies that require specialized components that do not enjoy economies of scale. For example, the green laser required in a pico projector represents one third of the cost of the entire system due to the fact that the part has no use beyond a pico projector.

Integrating new technologies into handsets is a further challenge for handset designers. Digital compasses are sensitive to electronic interference and need to be carefully positioned within the phone to avoid interacting with neighboring electronics. The design of haptics mechanisms also presents many problems. In a typical haptics system design, touch screens float in their frames and are held in place by flexible materials that allow the screen to vibrate creating haptics effects. These designs can fail letting dust inside the device or the screen can separate from the frame if the device is dropped. OEM’s are still learning how to effectively incorporate such features into their designs.

A number of start-ups are working on overcoming these barriers in addition to creating new capabilities. Senseg in Helsinki is eliminating the need for moving parts in haptics systems and has created a system that it claims can pinpoint tactile feedback. InvenSense has brought to market a motions sensing MEMS chip that integrates a gyroscope and accelerometer in one chip, making it easier for OEMs to integrate and reduce cost. Light Blue Optics has developed a pico projector that creates a holographic image and infrared sensors to turn any surface into a virtual touch screen. The company also just raised $13 million to shrink the technology.

Innovation of course requires risk-taking. OEMs are finding themselves in a chicken and egg scenario; design cutting edge features first, or wait for the apps to leverage the features? Samsung and HTC seem to be comfortable taking such risks. Samsung was the first to introduce a phone with an integrated pico projector in 2009 and the Galaxy S sports a gyroscope, Swipe technology and an Augmented Reality browser. HTC is also pushing the envelope having developed and launched devices with home grown haptics.

Undoubtedly users will be the biggest winners as OEMs battle to wow new customers. A close second will be application developers who will stretch their imagination to build new applications and businesses around emerging features.  While these opportunities are compelling, progress will not happen overnight. Gyroscopes are still only available in high end smartphones and next generation haptics will only appear in niche devices next year. If you’re interested in building an app for a pico projector, you may be waiting a few more years.

The question is: is this new roster of sensor technologies going to allow OEMs for once to out innovate Apple?

-Peter

[Peter Crocker is the founder and principal analyst at Smith’s Point Analytics (www.smithspointanalytics.com), a full service market research company helping innovators in the mobile and wireless market better understand emerging opportunities. Peter has been in the mobile and wireless industry since 2003 and holds an MBA from the College of William and Mary. Peter can be reached at peter@smithspointanalytics.com]

An X-ray of Mobile Software: The 11 vital organs of mobile

[Sales of mobile phones remain healthy, but can the same be said of the software designed for them? Guest author Morten Grauballe offers a biological metaphor to check the pulse and visualise the evolution of the mobile software business.]

The app store “Long Tail” has recently dominated strategy discussions in the mobile industry. The Long Tail is a captivating and inspiring notion that challenges companies to think beyond mass production and mass retailing. The mobile software market is, however, far from mass production and mass retailing. Tight coupling of software and hardware, combined with platform fragmentation, have created a mass market for mobile phones, but not for mobile software. Hence, the tail is wagging the dog (and its organs) in the mobile software strategy discussion.

I ‘d like to use a biological metaphor – the notion of the 11-Organ System – to represent the core value-adding elements in mobile software and discuss how Apple, China Mobile, DoCoMo, Google, Nokia and RIM have utilised these core organs to their benefit. The 11 Organs interact to create the mobile software.

The Long Tail App Store
The Long Tail concept was coined in a 2004 article by Wired Magazine editor Chris Anderson to describe the notion that a large share of consumer needs rest within the tail of a statistical normal distribution. From a marketer’s perspective, this means you need to sell large quantities of unique items – each in small quantities – often combined with large quantities of a few very popular items.

The idea was coined to describe phenomena in online retailing where companies such as Amazon for books and eBay for auctions were able to cater – profitably – to very small, unique segments of the market. The digital economy allows these retailers to decouple stock from purchase. Later, the notion was proven to apply to some of the most successful business models today, namely Apple’s iTunes music store and Google’s search advertising model.

Lately, the Long Tail has been used to describe and propagate one of the biggest hype waves in the mobile market, namely the app store. Apple recently passed 200,000 applications in its store; fanning the enthusiasm for all major players to develop their own app store strategy.

Whereas books, auctions, music, and to some extent search are well-understood businesses with relatively straight-forward Long Tail effects, the essence of the mobile software business is generally not well understood and analyzed. So, before we pin the app store Long Tail on Eeyore, it is worth taking off the blindfold in an attempt to understand the essence of mobile software.

The Organ Systems of Mobile Software
Like biological systems, the software on mobile phones has value-creating subsystems. The Long Tail app store is like the tail on mammals. It does not have a function without being attached to a healthy body full of strong and interconnected value-creating systems. Apple knows this. Google knows this. Nokia knows this. DoCoMo knows this. They all have strategies in place for these value-creating systems.

Mammals generally have 11 organ systems (see note at the end of the article for a biology refresh). To stay true to my metaphor, I break down the most advanced smartphones into 11 organ systems – five core infrastructure systems and six application level systems. There are of course many more ways these systems can be broken down (see VisionMobile’s Industry Atlas for examples).

The five infrastructure core systems are:

  • Operating system: On a high level, the key value of an operating system is to be found in the abstraction of the hardware into a set of APIs against which applications can be written. More fundamentally, this process of abstraction has a significant impact on the characteristics of the system, including usability, battery life and privacy. There is a long discussion taking place within the industry as to whether the OS is a commodity or not – I believe not, but I ‘ll leave that debate is for future article. Let’s instead list the current choices available in the mobile market: Android, Bada, Blackberry OS, Brew Mobile Platform (BMP), iPhone OS, LiMo, Maemo, MediaTek OS, Nucleus, Series 40, STE OS, Symbian, Web OS and Windows Phone OS.
  • Application Execution Environments (AEEs): Most phones have one or more AEEs that attract developers and hence enhance the ability to “wag the tail”. The list of AEEs is long, but should include Java, Flash, widget and and web runtimes. AEEs and operating systems are generally complementary, but as the recent spat between Adobe and Apple has shown, these value-creating systems do not always coexist peacefully.
  • Software Management System: From a strategy analysis perspective, this is probably one of the fastest developing value-creating subsystems. Software management addresses two ‘bodily functions’:
    • The in-the-hands user experience. Apple has made 22 versions available for its phones since June 29, 2007. That is one release every 6 weeks. Most of the features released have addressed the user experience by enhancing features or the usage of features. In the end, this generates revenue and builds an ongoing relationship with the user.
    • Repair and correction. The ability to protect the phone depends on the strength of the security system (see below), but also on the system’s ability to respond to issues in the system, whether malware or not. Software Management allows us to respond with new pieces of software when needed.
  • Security System: The security system is very similar to the integumentary and lymphatic systems in humans. It protects the system from external threats. Parts of the security system should be built into the operating system, but other parts are application-level components, such as lock and wipe of the device.
  • Business Intelligence System: Similar to the nervous system, the business intelligence system allows you to understand what is going on in the entire organism. This ranges from understanding usability issues over performance problems to actual defects in the system. You want to know what works and what does not work for the particular user, which apps are used the most, which services work and which not, how does service usage vary across devices, etc.

The six core application systems are:

  • Peer-to-Peer Communication: Voice communication is often overlooked in strategy discussions of mobile software, but it is one of the most used applications on any mobile phone. It might be a baseline feature, but it needs to be done well. Integration with other value-adding subsystems is quite important too.
  • Peer-to-Peer Messaging: This includes everything from SMS over instant messaging to push e-mail applications. Similar to peer-to-peer communication, it is generally not considered sexy at this stage of the market. It is however the second largest revenue generator after voice communication and thus should not be disregarded.
  • Search: Most phones already have Web search functions. However, the future of search is in the location-based services (LBS) area, where digital search is combined with the physical presence of the user. Advertising is a part of this subsystem as it connects sellers with buyers of products and services.
  • Content Creation: The biggest craze in the market is social networking. Every new phone has social networking capabilities galore closely integrated into the contact manager. Content creation, however, also includes pictures, video and other types of media produced by the consumer. Most of the data produced by the consumer needs to be shared somehow. That is where the key value creation of the mobile phone comes in.. sharing!
  • Content Consumption: Compared to creation, content consumption is so yesterday. The consumer expects easy access to a catalogue of games, music, video, etc.
  • Browsing: This is such a crucial application that I have classified it as a system of its own. The browser is used as the basis of many of the other systems. Actually, most of the other applications can run via the browser and hence it is even possible to classify the browsing subsystem as an infrastructure subsystem.

Choose your Organs before Pinning on the Long Tail
There is no need to have the perfect business model for each of the mobile software organ systems above, but you need to have considered all of them and, if possible, have three or four strong organs to support an independent software strategy that can then carry a Long Tail app store. Let’s consider a few examples:

  • Apple has been the most aggressive on the OS side, publishing native APIs to developers and building a large developer community. Apple’s software management strategy is well-synced with its OS development and is a real strength. With iTunes Apple also is very well placed in media consumption. Apple’s weaknesses are in the areas of AEEs and search.
  • China Mobile has recently put its weight behind the OPhone, which is running a completely customized branch of Android. The OPhone version of Android is managed by a company called Borqs. At launch, handsets were available from Dell, HTC and Lenovo with plans for further handset models from Samsung, ZTE, Phillips, Motorola and LG. By having Borqs in between Google and themselves, CMCC achieves greater ownership of the operating system and its APIs. This is, of course, expensive as Borqs need to track new versions of Android and migrate China Mobile-specific changes across to the new versions of the OPhone OS.
  • DoCoMo has traditionally been focused on content-consumption and browsing with its i-mode services. i-mode nicely mixes Java, Browsing, Flash and e-mail into a very strong application suite. Customers know what they are getting. These services are built on top of two different operating systems, namely Linux and Symbian. So far, DoCoMo has not exposed native APIs to developers, but has focused on Java. The content market is therefore very strong in Japan, but the software application market is not well developed. Recently, DoCoMo has released its first Android handset, the Sony Ericsson Xperia X10, which gives it access to the Android market. This is the company’s first experience with an application market.
  • Google has combined the introduction of the Android operating with a strong suite of applications (Gmail, Google Maps, GTalk and Android market). While on the surface Android is an open source project, you only get access to the application suite if you agree to Google’s commercial terms.  There is no surprise that Google’s strengths come from its applications – it has less control of the core infrastructure components.
  • RIM has full control of its OS and has used Java as the AEE to create a third-party community of developers. The real strength in the RIM offering, however, is peer-to-peer messaging and this is the subsystem that ties RIM to its users. Over the last three years, RIM has made improvements to the subsystems that are more focused on mass-market consumers, such as content consumption/creation, but it is not considered to be its strength.
  • Nokia is active in all the subsystems above. Focus is probably one of the weaknesses of the Nokia offering. Traditionally, Nokia has been focused on peer-to-peer messaging and communication, but recently it has moved aggressively into search and content consumption, which are emerging as their new areas of strength.

Taking inspiration from Blue Ocean Strategy, it is possible to create an Organ Map. I have included an example below. (Each area included in this map warrants its own discussion, so please take it as an educated view rather than a universal statement of truth).

Getting started on your own Organ Map
Any serious player looking at the app store Long Tail needs to look at the organ system above and decide how to build a serious software strategy first. Some companies, like HP with their Palm acquisition, are at a cross-road and should make tough choices up-front. Others are in the middle of executing on their software strategy and need to evaluate progress. In both cases, key questions to answer are:

–        Which organ systems are the focus of my strategy?

–        What is the right mix of core organs to application organs?

–        What level of control do you want to exert over each organ system?

–        How will the chosen organ system allow me to build a relationship with my customer?

–        How do the organ systems interact to realize value for the customer?

–        How are my organ systems mapping against the competition?

Through the discussion around these questions, you should document the criteria by which you and your organizations determine the scoring of each organ system. That will answer questions like, what is a high-end offering in the browser space and who is offering this in the market.

To have a truly independent strategy, the choice of organ systems need to include at least one core organ system over which you can exert a high-degree of control. This does not have to be complete ownership of the organ system, but you should be able to determine the roadmap and direction of the organ system.

The Long Tail as a Greenhouse for New Organ Systems
Once you have a nice set of organ systems up and running, the real point of the Long Tail app store is to act as a greenhouse for new organ systems. By monitoring the sales statistics and trends on your app store, you get a very good view (from your business intelligence system) as to what the next organ system might be.

It is no coincidence Apple just added iAd to iPhone OS v4. They are on top of their business intelligence game and have been tracking advertising in their app store for a while. As apps or features develop into viable businesses, they get promoted from the tail to the body. They become new organ systems for the value-creation machine called Apple.

What are your own thoughts on strategy as a biology metaphor? What other examples of use of software-based organ systems have you come across? What Organ Systems does HP currently have that would render Palm as successful business? Which new ones should they build?

– Morten

[Morten Grauballe is EVP Marketing at Red Bend and ex VP Product Management at Symbian, and has been in the mobile industry long enough to boast both scars and medals]

Note 1: The 11 major organ systems of the body are:

(1) The integumentary system is the organ system that protects the body from damage – it includes nails, skin, hair, fat, etc. This is the largest system making up ~16% of the human body.

(2) The skeletal system is the structural support system with bones, cartilage, ligaments and tendons.

(3) The muscular system is the anatomical system of a species that allows it to move.

(4) The nervous system is an organ system containing a network of specialized cells called neurons that coordinate the actions of an animal and transmit signals between different parts of its body

(5) The endocrine system is a system of glands, each of which secretes a type of hormone to regulate the body. The endocrine system is an information signal system much like the nervous system. Hormones regulate many functions of an organism, including mood, growth and development, tissue function, and metabolism.

(6) The circulatory system is an organ system that passes nutrients (such as amino acids and electrolytes), gases, hormones, blood cells, etc. to and from cells in the body

(7) The lymphatic system in vertebrates is a network of conduits that carry a clear fluid called lymph. It is used to fight diseases and transport fluids from the cells.

(8) The respiratory system’s function is to allow oxygen exchange through all parts of the body.

(9) The digestive system is the organ system responsible for the mechanical and chemical breaking down of food into smaller components that can be absorbed into the blood stream.

(10) The urinary system is the organ system that produces, stores, and eliminates urine.

(11) The reproductive system is a system of organs within an organism that work together for the purpose of reproduction.