In my New Technology 2016 course at Reykjavik University I got 84 research papers. These papers can be about any technology. One of the paper is about the disruption retail is facing due to the Internet and smartphones. We see news of stores being closed and rise of delivery services. Clearly something in changing. In fact, any retailer that is not visible online is putting their business at risk. Some 81% of purchases originate as on the Internet, even if the item is sold in a store.
Þorkell Viktor Þorsteinsson did research on how e-commerce is changing retail. His paper is titled E-Commerce and its effect on retail.
His conclusion is this:
My conclusion is that traditional retail stores are not disrupting in the near future. What is changing is how we approach the product. Instead of going to the store we can order products and groceries online and get it shipped to our door. Retailers need to be aware of how the e-commerce is changing how we buy our products and follow this technology trend so it won’t fall under and get disrupted. Retailers need to put much more effort to make the in store experience unforgettable so the customer wants to come back. Retail isn’t dying, it’s just transforming.
Adding to this, when customers get used to their products within the 30-60 minutes, like a pizza, this transformation might seed up exponentially.
Download the paper: E-Commerce and its effect on retail
Every major technology has its glory years. The PC had its glory days from 1981 until 1995 and Microsoft dominated the technical industry. Then the Internet took over from 1995 until 2007, when the smartphone era started. It’s start is marked by the remarkable historic lunch of the iPhone by late Steve Jobs. But now the the smartphone era is nearing its end. However, that does not mean it will not become important. In fact, it will be come ubiquitous, “invisible” tool that everyone has. It is like the magic wand to those of Hogwarts. The smartphone is shifting it’s role.
The following chart is the courtesy of Statistica:
You will find more statistics at Statista
Every important technology follows a simple pattern that in business schools is called the S-curve. It is simple to explain. First years of new technology, development is slow with only incremental success. There may be high hopes and big laughs. Think about early cars. People could not image that those things were a threat to the horse as means of transportation. Think about the PC – a toy for crazy hobbyist. And think early smartphones. All of these products were initially overpriced and underperforming. This is the gestation phase. Then, as magic, the progress in innovation starts to kick in. Something works. Performance improvements increase with each iteration. And the increase is increasing. This is the acceleration or growth phase. Eventually, the increase slows down. New features are not as revolutionary just incremental. This is the mature phase. The smartphone is entering the mature phase.
Again, that does not mean it is not important. It is just too powerful to not be. It means it will not see major must have new features, but it will become a platform for the next wave. And there are several coming. Let’s name two.
First, the Internet of things phenomena is real and it is finding new applications all the time. There are thermostats, lightbulbs, thermometers, sports equipment, all sorts of sensors, drones and you name it. All devices from coffee mugs to chairs, seem to connect to the Internet. And where does the smartphone come in? It is the remote control. It is the device to rule all devices.
Second, artificial intelligence is getting to a point that it is useful. In fact the big technologies companies in Silicon Wally are all serious about AI. And this is spreading. As Kevin Kelly pointed out the next 10,000 startups will be AI + something. Again the smartphone has a role. It will be the device that controls your live more than ever.
The smartphone is becoming a platform. It is the device in our hand which controls our lives. Not only does it answer questions and allow you to browse and read email. It will become you personal assistant. It will tell you what you need to do when you need to. It will remind you of you birthdays or your wedding anniversary and what’s more it will order the gifts to need and have them delivered plus it will reserve a table at a restaurant and put in your calendar. It is your new personal assistant. The era of the smartphone may be over, but its importance is far from over.
Every major technology has a period in which it is dominant. For example, the smartphone is currently the most universally dominant technology we have today. In In 2015, there were 2.6 billion smartphone subscribers and on the average they spend three hours and forty minutes using the device every day. This device is so powerful that people keep it within reach wherever they are. Prior to the iPhone was the Internet and prior to that was the PC. So every major technology has its time. And now it seems that the period of the smartphone as the most innovative and dominant technology is coming to an end.
Of course, we will not give up our smartphones just as we are still using the Internet and PCs. But the period where the smartphone keeps improving as fast has it has is coming to an slowing end. Every product goes through what is called an S-curve where the performance improvements are very slow in the beginning than improvement increase exponentially until the impact of improvements slows down and the product enters a sustaining period or a plateau. It may be replaced by other products or just continue to be used as is. Technology adoption also happens in a way similar to this. When the product is new it is often low performance and expensive. This was the case for the personal computer as it was the Internet and as it was the smartphone. The people that will buy the products at this stage are the early adopters people that believe in the idea and want to be part of it. For example, hobbyists where the early adopters of PCs, people that wanted their own computers. Early adopters of Internet were technical people mostly in education and research agencies.
World Economic Forum talks about the coming fourth industrial revolution, assuming that the third used computer and information technology to automate productions. True, but I think within the third there are many waves of revolution where each creates new opportunities. The first generation of the electronic programmable computers were built in 1947. Over the next eighteen or so years, these computes dominated in government and big corporations that could afford these big machines operated by people in while lab coats. The impact of these machine were dramatic change in work called automation, where thousands of clerks processing financial transactions were laid off as invoices, paychecks and other financial transactions become a record on a magnetic tape read into these machines.
However in about 1965 IBM released the System/360 which was a breakthrough in computer and software architectures. Machines like PDP-8 allowed smaller companies to have a computer and the automation continued. However, these machines were still so expensive that they were not affordable by individuals. The were also maintained by professionals. Writing programs for them was difficult and done my companies that sold or leased them.
About sixteen years later, the PC revolution starts. In 1981 IBM released the IBM PC, a generative computer that created the PC industry. It is very much remarkable that a company like IBM could pull this off. Xerox had built a PC in the 70s but the management decided to do nothing with in. Clayton Christensen’s Resources, Processes and Values can explain why Xerox failed. Their resources (among them people), their processes and their values were in the copying business, not the PC business. Remarkably, it also explains how IBM could build the PC. They created a separate unit, far from headquarters that did not go by the traditional IBM ways of doing things. For example they licensed MS-DOS from Microsoft instead of building their own operating system.
The PC dominated for fourteen years. In 1995, the Internet started to take off. There were several events that led to this. One was Tim Bernards-Lee’s World Wide Web. Other efforts were acts by the US government to allow use of the government funded Internet as the “Information Superhighway” as they walled it. Contrary to common believe, Al Gore actually was influential in getting this through. But perhaps the most important was the introduction of WinSock an API (Application Programming Interface) that allow computers to talk to other computers using TCP/IP. Mircosoft implemented this after several loud requests from corporate clients that had big Unix machines all connected using TCP/IP and then separate network of PCs. They wanted them all connected. After WinSock, a programmer in Tasmania, Australia called Peter Tattam released Trumpet WinSock. This allowed people with PCs to get to the Internet. Many ISPs used this program to allow their customers to connect, including my own company founded in 1993, Margmiðlun.
Then after twelve years, the iPhone is released. The iPhone was so revolutionary that it defined how smartphones should be. It was released just before the Mobile World Congress in Barcelona giving existing smartphone makers no time to come up with an answer. Pictures of concept phones were dominant during the congress.
There is pattern in this. The period of the programmable computers was 18 years. The next period was 16 year, and the PC period was 14 years. The Internet period was 12 years and now the smartphone period has lasted for 10 years. So the length of these periods is getting shorter. This suggests that the next period might be about to start.
Another interesting thing is the control of these revolutions, that is who controls them. In the computer revolution of the 50s and 60s, control was very much restricted to the builders of these machines. The mini computers were more open but with the PC the generative pattern emerges. Anybody can write a program to run on these machines. They were made by people that wanted to break the control of the big computer companies. In fact, many of the early PC machines did not come with so much software. The MS-DOS system came on a magnetic floppy disk and that was it. Similarly the Internet became the network of choice due to its generative nature. Vint Cerf, who wrote the original TCP/IP software, calls this permissionless innovation.
As we approach the end of the smartphone period, we see several potential technologies on the horizon. Virtual Reality is finally here with powerful headsets that are consumer affordable. Augmented reality headsets like the Microsoft Hololens is also coming to the market this year. The Internet of Things is also becoming more dominant with many new products, like doorlocks, thermostats, speakers and so on. Perhaps the most interesting though is artificial intelligence. What is interesting with AI is that companies like Amazon and Google are offering their AI engines and vast data centers to developers of AI, placing this powerful technology in the hands of individuals. Whatever will be the next dominant technology it is likely to be smart, very visual, connected and social.
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