For those of you who use manual razors, how many times have you declared this time as the last time you’re paying $25 for a pack of replacement razors? And yet, four weeks later, we all do it again. It’s commonly known as the “razor blade model.” Give away the razor at cost and make margin on the continued revenue stream from blade sales. The same principle applies to ink cartridges for printers.
And so it seems, Google is now applying this model to content. The Android OS for smartphones is open-sourced and Google is giving it out for free. Like a razor or a printer. So why is it free? Google isn’t out to win a smartphone battle, they are out to win the content war.
Many consumers make their product decisions based on the the physical features of that product, but content is changing all of that. Consumer electronics are on their march to becoming no more than content delivery mechanisms. And they’re not the only products on this journey. Cars, household appliances, buildings and even road signs are headed down this path. As I’ve said before, whoever owns access to the content will drive the market and the supply chains into those markets. Which brings us full circle back to Google.
The Android OS has been designed to run across multiple products. By end of year, the Android platform will have ~17% of the market at the number 2 smartphone OS. Now that tablets are hitting the market, expect that number to continue to climb. The GoogleTV takes another step in that direction by bringing content directly into homes. The point is that Google is laying a clear stake in the ground that access to content is the battle ground for both hardware and software providers.
The implications for high tech supply chains are huge. Many supply chain leaders now recognize supply chain as an end-to-end enabler of business strategy. A key element of this enablement is the connection of product innovation to demand and supply processes. Today, much of the focus on product connection to demand and supply is on the physical device. In the very near future, supply chain design and planning will have to incorporate content delivery as part of their planning processes.
The ability to sense demand will have to include how consumers are accessing content. What OS is driving adoption? What are the suite of products and accessories that surround content download? These are new questions not currently a mainstay in high tech supply chain planning. This trend is yet another sign that the digital and physical supply chains are converging.
Today’s hardware manufacturers will need to understand the Digital Supply Chain as well as how and where to connect to it. It will require an outside-in perspective that extends competitive benchmarking beyond the typical players. 5 years ago, would Dell or HP have considered Google a serious threat? What about RIM? And would an LG refrigerator manufacturer have considered Google a strategic partner? Not likely.
It all seems very “1990-ish” when Microsoft released Windows 3 and began to encroach on Mac sales. It was the Windows platform that drove PC sales, not necessarily the devices. At that juncture, the switch occurred because of cost and ease of use. Sound familiar? Is Google a threat to consumer electronics hardware manufacturers? What new skills are needed in supply chain organizations to manage through this period of change?