Last week’s San Jose Mercury News (Silicon Valley’s local newspaper) published an article from Bloomberg News titled “TV makers expect a price war.” The article underscores the increasing problem with the “old” revenue model used by electronic system vendors for decades. In an increasingly competitive global economy, it’s very difficult not to fall into a commoditization trap when it comes to product features because any smart design team in any location can quickly replicate almost any feature. It’s very hard to realize full value for your product up front at the initial sale. The article on the TV price wars is a case in point. According to the article, price declines for new TVs are expected to be as high as 25% for the coming holiday gift-giving seasons. Brighter LED-backlit screens and 3D TVs seem to be unable to buck the downward pricing trend. Overlay these issues with the fact that many HDTVs are already recent purchases thanks to the recent US conversion to digital HDTV broadcasting standards and you get a moribund market for TV hardware.
That’s just one more example of why apps-driven design is taking over, as described with respect to smartphones in another San Jose Mercury News article published today and taken originally from the Philadelphia Inquirer. Downloadable applications help mobile phone hardware and service vendors extract far more value from smartphones than the phone hardware itself can generate. The article quotes an interview with Ed Finegold, chief analytics officer at Validas, a Texas company that analyzes cell phone statements:
“As new smartphones come onto the market, the revenue opportunities are enormous,” Finegold said. “You can take a $50- or $60-a-month customer and turn them into a $90- or $100-a-month customer.”
That’s an enviable bump in the continuous revenue stream and it indicates a sea change in consumer spending behavior.
Some TVs are already apps-driven. All will be. Any consumer product that gets lots of “face time” with the consumer is a prime candidate for an apps-driven design approach. In addition, any Internet-connected products that can benefit from updates or upgrades are also prime candidates. The apps-driven approach provides many revenue-boosting avenues for exploration, with revenue streams available from consumers and from content and software providers alike.
However, a product must be designed with an apps-driven perspective to make good use of the idea. That means that the applications or at least the application categories must be in the designers’ minds at the start of a project so that the requirements of an apps-driven design methodology can shape the product’s definition from the very start. Note that this also means the design tools must be shaped to permit the consideration of an apps-driven approach.