While you were outsourced: Last 10 years of mobile design, business and emerging markets

There’s a lot to be said here and I’ve been trying to sort it all out into some kind of logical flow. The global landscape of mobile phones is undergoing a huge shift, and like the iceberg that sank the Titanic, much of it is still under the radar. If I hadn’t gone down the rabbit hole of links after seeing peterme’s latest post which led me to Khoi Vinh’s note on the evolution of Apple’s iPhone design language, I might never have noticed the rest of it. When leading design bloggers start questioning design’s leaders, its a signal of greater problems than maybe apparent.

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Me holding Matti’s Xiaomi, July 2014

What’s going on? A quick synopsis

There’s a new kid on the block and its name is Xiaomi. To be honest, its not a name that had been on my radar until earlier this summer when a friend working in Shanghai showed off his phone to me. As a Finn, his decision to purchase a low cost Chinese smartphone was unusual, and his explanation was that he saw it taking over the market in the future so why not get used to it from now.

Form follows function

There’s been the usual kerfuffle over who copied whom, yet again, and this time Apple’s been whining about Xiaomi not their old favourite, Samsung. I’d tweeted on this a few weeks back saying that the issue wasn’t one of copycats and imitation, and in fact there was no real problem. There’s been a shift in the form factor of handsets and no amount of patenting and protecting was going to change that fact. Look at this random image of “phones” taken from a quick image search.

phone_typesA large screen with a control thingamabob or two encased in an approximately rectangular form. This is what symbolizes a mobile phone these days. And it all goes back to 2006, when the conceptual design shown below won an IF award.

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Market share churn

The second shift that we’re seeing is one of increasingly shorter durations of leadership positions. Just a couple of years ago, I wrote about Samsung’s rise to the top and reflected on patterns seen with previous leaders such as Motorola and Nokia. I’d said that Samsung should keep an eye out by 2016, and am now surprised at the end of 2014 to discover that their hold on the number one position is already under attack by newcomers like Xiaomi.

Saturation and smartphones

Much of their troubles are in the formerly emerging markets of India and China, and this leads me to speculate on a third and more fundamental shift taking place. Earlier, the emerging markets of India and China were where big names made big gains in sales, allowing them to garner that market share required to catapult them into first position and/or hold on to their leadership, such as was the case for Nokia. This doesn’t hold true anymore. A fact to be noted is that for the first time smartphone sales have overtaken feature phones, globally.

Emerging Trends impacting the global, mobile landscape

What’s interesting here is that I don’t see Xiaomi, who just became the 3rd largest phone manufacturer by sales this past week, becoming the next leading brand either. Certainly not in the way a Motorola or a Nokia did, in terms of market creation, product innovation and global impact.

Instead, their emergence is more a signal of the larger shift that’s taken place. The locus of innovation in handset design, product planning and market strategy has moved it’s center away from the erstwhile first world to the former developing world i.e. India and China.

And along with this recentering, ideas on business models and profit margins have changed to reflect those prevalent and appropriate for these new operating environments.

Just look at this statement from Xiaomi’s Hugo Barra from an interview last week:

“Innovation is not a luxury item. Innovation is for everyone.”

The implications of this positioning are enormous, particularly given the conventional wisdom currently prevalent in the industry that the latest, greatest, cutting edge technology is a much sought after premium piece of hardware.

Looking beyond the cliches at Africa

Once we step back to take a look at this price point strategy, and add an overlooked element to the mix, we have dots that connect in ways they have never done so before. And that’s the emerging African consumer market.

Mobiles are the backbone of Africa’s emergence. [Refuses to insert a paragraph here on the critical importance of this device] And that technology is being democratized.

Tecno is another brand you’ve never heard of that has taken on the African market in the vacuum of innovation left behind by Nokia’s faltering in the race to the bottom a few years ago. They do business only in Africa, have set up manufacturing in Ethiopia and painted every wall in rural Kenya with their blue logo.

While they’re the biggest and the best known among the hundreds of Chinese brands on the market, they’re are neither your “cheap chinese fakes” nor OEM devices distributed by operators. These are the original brands who’ve scaled up the classic OEM–>ODM–>OBM–>OSM value addition ladder and there will be more of them.

So what does all this blather actually mean?

The handset is the next form factor in the evolution of personal computing which began with the desktop computer and progressed its way through ever more portable devices such as laptops, netbooks and tablets.

Its importance and position in the developing world relative to the lack of infrastructure and systems is greater than we are able to see from our own perspective.

This means that innovation in services and applications using this device will come from these new markets. Fintech in Africa is a great case in point.

The era of big brands and market dominance is coming to a close.

 

 

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