The world is suddenly obsessed with smart technologies and this time around it seems unstoppable. Our everyday electrical and mechanical industrial object will now be occupied and ran by software and connected to the cloud. It also means each object (as small as some smoke detectors and as large as automobiles) will now be equipped with tons of sensors and can adapt to different environment and individual needs.
It is essential that the next wave of industrial revolution will make us more efficient and powerful (and more human I hope), and data will be at the heart of this revolution. That’s another big conversation.
All the Nest, GoPro and Beats received multi-billion-dollar valuations through private investments or acquisitions and everyone is wondering why these hardware companies suddenly in such high demand. Because hardware and software are going through different commodity lifecycles and now software is becoming a commodity. They used to be difficult and expensive to develop and even to deploy, that that is changing. It is hard for software companys to get into hardware much as hardware companies struggle to get into software. Hardware cannot be done by a few nerds in the basement, and involves massive R&D and specialists including megatronics engineers, electrical engineers, industrial designers, wireless engineers and usually takes a longer time to develop.
Software you can fix with a download and hardware you can’t. There are massive supply chain challenges when it comes to logistics and components supplies. The value of firms who can marry software and hardware will have a competitive advantage over their competitors. Essentially, everything we use today will be fitted with some sensors, processors perhaps, and maybe a screen and will reincarnate and become of the Internet of Things. For the last three decades, software engineering has advanced to a state that sophisticated codes can be embedded into machines. And the availability of cheap sensors and super powerful processors is powering this cycle of data revolution. All of a sudden, software, hardware and communications infrastructure are advancing us into a new era. Old world manufacturing + low cost computer processing + ubligious computing + cloud = smart new world.
It sounds like the Apple story all over again, does it? The hardware and software integration capability of Apple, the ecosystem, the brand and user experience are now not only inspiring consumer gadgets companies, nor its influence is beyond its own industry. I know this is an overused story, but he Apple influence is still here, and perhaps it will be here for a long time even when the company stop creating great stuff. Microsoft ex-CEO Ballmer saw that coming in 2012 in a letter to shareholders. “It’s important to recognize a fundamental shift under way in our business, we see ourselves as a devices and services company.” Microsoft had the strategy right but couldn’t execute it fully with the exception of X-Box. Microsoft’s future revenue will still be coming in from software and it isn’t going to change anytime soon. The transformation from software to hardware is harder that you think.
The idea that hardware is now the new software is pretty real. There is a business model implication here. These hardwares are mostly priced between $100 to $250 and they a gateway and great way to sell software. We are seeing a revival of hardware and, this time, it is hardware first and software and then data on the cloud that will bring new technological advances in cloud-powered hardware that boosts productivity, efficiency and manifests as beautifully designed objects that fit into our hands and homes.