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Hardware to Watch in 2007

We’re optimistic that 2007 will turn out to be a year of significant progress in the creation of new types of computing devices. Here are some of the things to watch for, and why we think they’re significant:
Apple’s iPhone
Apple certainly knows how to play a crowd. It’s possible the iPhone may actually live up to its hype, too, although we won’t know for sure until we can use the product, at midyear.
Here are some key factors to watch for:

  • How long will the batteries last? Users are extremely intolerant of mobile devices with short battery lives, and that applies especially to phones. The thin design of the iPhone makes us worry that Apple could have skimped on the battery, and since it’s not user-swappable there could be big dissatisfaction if the device can’t do a full day of heavy usage without a recharge.
  • How will people react to having a phone with no buttons? Many phone users like to dial one-handed, relying on touch to feel where the keys are. That’s impossible on an iPhone. It’s possible users will learn to live with this, but keyless dialing has been a big sales inhibitor on many smartphones.
  • Will users view it as an appliance or as a mobile computer? That’s important, because a mobile computer is expected to have third-party applications, and the iPhone is a closed device.

Can Zune make it?
Although Microsoft’s Zune music player was introduced in 2006, it’s just a babe in the cradle and so is appropriate for a discussion of 2007. So far the product doesn’t have a lot of buzz, and now it has been further eclipsed by the hype over iPhone.
Part of the problem for Microsoft is that the Zune’s most distinctive feature, its wireless music sharing capability, requires a critical mass of users before it becomes useful. Microsoft may get jammed in a chicken-and-egg situation. On the other hand, Microsoft is known to be very patient when introducing a new product category, so the story’s just beginning.
What to watch for:

  • Will Microsoft do something aggressive (deep discounts, perhaps?) to create a critical mass of Zune players?
  • Can Microsoft offer compelling differentiation other than music sharing? Perhaps a more compelling video offering, since the Zune’s large screen looks like it was intended for video? Or games?

Amazon’s ebook reader
Although you know Amazon as an online retailer, more than a year ago it started a hardware development project in Silicon Valley, recruiting a number of former Apple and Palm employees. Exactly what Amazon is developing is not clear. At one time it was rumored to be a music player, but the most recent and authoritative rumors say that it’ll be an ebook reader.
If true, this could be a significant moment for the publishing industry. E-books have been tried before, but were failures because they couldn’t deliver enough books and magazines, at an affordable price, to make the reader purchase worthwhile. If anyone can deliver a critical mass of ebooks, it ought to be Amazon. If successful, this device could do to print publishing what the iPod is doing to music–permanently change the financial model.
What to watch for:

  • What’s the price of the Amazon ebooks? Previous ebook readers have been crippled when publishers insisted that the electronic versions of books be priced at the same price as their print versions. Many consumers expect an ebook to cost less, because it’s a less tangible product.
  • How many books are available, and how well does the store work? The experience needs to be like iTunes, in terms of both user experience and volume of content available.
  • Will Amazon allow authors to sell books directly? In the long run, the greatest opportunity for ebooks probably lies in bypassing publishers.
  • Will Amazon be hurt or helped by Sony’s offering in this category?

Palm’s new product category
This will be a crucial year for Palm. Although Treo sales are growing, they’re not increasing fast enough to offset the declines in handheld sales. Meanwhile, competitors are gradually making competing products more elegant and Treo-like, and RIM is doing much more hardware innovation than Palm. We’re not saying the company is doomed, but if it wants to be seen as a leader, it has to periodically create leadership products.
For more than a year, Palm has dropped cryptic hints that a new category of mobile device is coming in 2007. The very fragmentary rumors are that it’ll be some sort of wireless minitablet device that acts as a light client for accessing PC files and Internet services.
Light client devices have been tried many times before, with far more failure than success. Latency issues and other problems have hindered the products, and they haven’t solved a lot of compelling problems. We assume there’s a lot more to Palm’s upcoming product than what it has discussed so far.
What to watch for:

  • What real-world problems does the product solve? It’s not enough to just be cool; to get broad acceptance, a product must solve a deep customer problem in a compelling way.
  • Can Palm come close to the publicity hype generated for the iPhone? Apple has raised the bar for every other mobile device introduction in the industry.

Lessons for tech companies
In none of these products is the hardware design the most important success factor. It’s the software and services portfolio, and the underlying business model, that will make or break them. Compelling hardware is nice and may win you a design award in Business Week, but if you’re making any sort of tech device, the most important questions to ask are whether you’re solving a real problem at a price the customers can afford, and whether your software can actually deliver easily on the promise you’re making. A majority of the new consumer devices introduced each year can’t pass this test.

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