After a fortnight in which Apple, Google and Microsoft all displayed their latest and greatest mobile tech, to me there was one product that stood out as the most impressive: a small yellow pillow that wirelessly charges Nokia’s new smartphones.
If you think that sounds incredibly mundane, you’re quite right. From an iPhone 5 that “changed everything again” by adding half an inch to its screen, to a Motorola Razr whose distinguishing feature was a large battery, the best these new products deserved was an unimpressed yawn.
But if at first glance these uninspiring devices seem like a sign of a stagnating industry, it’s actually quite the contrary. These incremental, even boring, upgrades are the sign of a mature market. As the hardware becomes more and more indistinguishable, the next focus of the smartphone wars will be about locking consumers into an ecosystem of content and services.
Just a short time ago, significant differences separated the iPhone from Android devices and other competitors, but those disparities have essentially disappeared. Despite the fervent protestations of brand loyalists, all of the latest smartphones are essentially the same: they’re fast and fluid, take great pictures and all come with large, crisp screens. Yet that sameness poses a real problem for manufacturers, because it means smartphones risk becoming the next flat-screen TV: a once lucrative product made unprofitable by commoditization.
There were, however, two clear clues recently about what Apple and its competitors intend to do about this situation. First, at the end of Apple’s presentation that saw not only a new iPhone, but new iPods too, CEO Tim Cook emphasized that “what sets them apart and what places us way ahead of the competition is how well they work together.” It’s that focus on how products interact that will become more prominent going forward, and all of it is underpinned by a simple marketing message: our stuff works better with more of our stuff.
But the second and perhaps clearest indication of where the market is headed fittingly came from Amazon, a company that doesn’t even make smartphones (yet). When CEO Jeff Bezos introduced competitively priced Kindle tablets, he suggested the money is not in hawking the gadgets themselves, but in selling media and services to the people using them.
All the major companies now offer not just media and apps for their phones, but also e-mail, cloud storage, task management, maps and much more, each of which is tied into proprietary accounts—identities that happen to be the first thing you’re asked to enter when you buy a new handset. It’s no coincidence that Android phones happen to be at their most functional when paired with Google’s services. The same can be said for consumers of Apple and Microsoft products, too. Suddenly, a smartphone is not so much an individual tool as it is a kind of ticket into a whole ecosystem.
What happens next will likely follow two connected paths. First, Apple’s competitors will continue to ape the approach of proprietary, vertically integrated hardware, software and services that all work—and work best—together. Google and Microsoft’s recent forays into tablets with Surface and the Nexus 7 clearly show they’ve recognized the economic benefits of the Apple way, which ties hardware to ecosystems. Second, the baby steps already made by all three major companies, in which users are asked to pay monthly or annual fees for things like storage or accessing music online, will only increase. Competition will push phone prices lower, and companies will be looking for new revenue streams elsewhere.
Most of all, however, innovation and differentiation will now almost always be about intangible services as much as physical devices, as companies realize that ecosystems sell product, not the other way round. The most interesting things announced won’t be “innovative” little battery-charging pillows, cute as they may be. The real action won’t be the gadget in your hand—instead, it will be found out there, in the cloud.
Navneet Alang is a Toronto-based blogger and technology critic