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The hungry consumer and the software pivot

TechCrunch TechCrunch 25/06/2016 Ben Schippers

The internet has become a lonely space, and consumers are hungry for something new. We don’t talk much anymore about new processors, video cards and faster dialup modems — at least not like we used to. Gone are the days of zip drives, bigger zip drives, faster DVD writing, ripping and pirated versions of Windows 95.

The technology industry, specifically the internet, continues to become further standardized and isolating, which makes it harder for new players to get an edge. New railroad wars have already been fought and the major players are largely defined. This type of definition is good and bad. The ease of use for software and its relationship with hardware is much better understood — fewer blue screens of death.

Also, the shift to the mobile world is understood in most industries. Most consumers, aside from some of the older generations, are comfortable with their technology. We are no longer an exclusive hobby community of nerds.

Not all standardization is good, however, and we’ve seen this shift before. With a handful of companies controlling 95 percent of the pie, the ability to innovate is increasingly difficult.

How long has it taken us to come up with a new car company? When was the last time we saw a new computer company take shape? If you really want to hammer the nail in the coffin, when was the last time you rode on Amtrak and arrived on time? Innovation is hard, and it’s only getting harder as software saturates the market at the expense of any focus on hardware.

The big companies are creating hope and hype for the hungry consumer.

In recent years the biggest change has come from Apple — we all know this. The smartphone should have gone to BlackBerry, but, well… let’s save that for another article. There have been a few very notable movements over the past 10 years, but biggest, far and away, was the introduction of the iPhone. Apple forced Google’s hand to get in the game, and so from 2007-2012, apps have dominated venture capital, programmers have become rock stars and consumers have been amazingly satiated.

But when we look closer, what’s really happened over the past few years is there’s been a huge amount of app fatigue. Platitudes of the connected home, wearables, VR, bots and, most recently, live video have surfaced, and hopefully there will be more. The big companies are creating hope and hype for the hungryconsumer. Hungry for new hardware, we long for the next big movement.

We were teased with the Apple Watch. Nest and Dropcam got us close, but have potentially faded, and the recent focus on the pure software play is maybe interesting but not anything new.

The big companies are forced to innovate, but innovation at scale is hard. The current type of innovation happening feels cheap and a bit trivial. Are bots cool? Does anyone really care? We’ve been building bots for years, why are they being hyped now? Live video is interesting, but it’s an incremental step for companies like Facebook. Where’s the new hardware?

The magic comes from marrying new hardware with software — think Tesla, iPhone, iPod, AWS, Beats Headphones and Roomba, just to name a few. I don’t mean white label software controlling bad, generic hardware. I mean an end to end thoughtful solution built with a single purpose in mind under one roof.

We need to shift our thinking from clouds to clients and think more holistically. The majority of innovation over the past 10 years in the startup space has been around software; I believe it’s time for entrepreneurs to think differently structurally for innovation to continue at this pace.

We need to get back to a time where we were building software and hardware together, but in a more modified and cohesive model. We need to take the learnings from the early days and bring that into the future. New software coupled with new, modern hardware, provides a broader relationship with the consumer to the product.

The challenges are different when you’re building software and hardware cohesively. As we know, few companies can do this well. Low-level programming at the hardware level is a much different craft than consumer-facing, fancy graphical interface development.

Have we reached software saturation in most sectors? Yes.

This newer style of development requires an understanding of how to get functionally different thinkers to play nicely together. Apple versus Microsoft. Tesla versus Ford. Nest versus Samsung. It generally requires more money to get started, but with the ever-impressive Raspberry Pi building prototypes, the playground is becoming friendlier.

Smaller companies owning the end to end experience are where much of the next disruption and investment will come from. I’m spending a lot of my thinking time there, as are other entrepreneurs I deeply admire. We’re all thinking about areas to evolve.

Here are some of my thoughts: The home router is wide open. A well-designed router, coupled with innovative IP, enabling new sharing capabilities over Wi-Fi, is prime. I also believe there’s room for a new type of computer company. A company that’s focused on a forked version of Chromium with a sophisticated ad-driven business model.

Furthermore, there’s big opportunity for a “pre-smartphone” device for children. This device could do everything from communicating location to parents, to acting as a digital allowance and basic communication platform for chosen friends.

To get any of those ideas to truly work means considering owning the entire experience, not just software. Again, this is a fundamental shift from where the majority of time has been, and is being, spent.

Have we reached software saturation in most sectors? Yes. Are the markets reacting because of this? Yes. The next best products will take the learnings from the recent years and evolve them into a single, more impactful experience for the consumer.

The companies that do this the best will open up totally new revenue streams that will be far more defined than the era of the app — and more money will be made.

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