Will Planned Obsolescence Kill Silicon Valley? Rob Coneybeer Shasta Ventures.

Will Planned ObsolescenceKill Silicon Valley?

Rob ConeybeerShasta Ventures

1920’s Automotive Market

1900

U.S

. A

nnual U

nit

Pro

duct

ion

1905 1910 1915 1920 1925

1926: 4 million cars

Planned Obsolescenceis a policy of planning or designing a product with an artificially limited useful life, so it will become obsolete, that is, unfashionable or no longer functional after a certain period of time.

https://en.wikipedia.org/wiki/Planned_obsolescence

New models every yearFins as a proxy for fashionArtificially limited lifespan

Detroit Today

Silicon Valley’s Leading Hardware Product

170 million units shipped in 2014New model every yearLimited lifespan

Non-replaceable batteryHigh repair costsExpensive, fixed memorySoftware rapidly outgrows hardware

What’s Different This Time?

1. Moore’s Law2. Universal Cloud Connectivity3. Constant Threat of Overnight Global Competition

Cutting-Edge TechnologiesEnormous Software EcosystemHigh Consumer Value

Apple’s Playbook for Obsolescence

iPhone 1st Gen(release: 06/07)

iPhone 3G(release: 07/08)

iPhone 3GS(release: 06/09)

iPhone 4(release: 06/10)

iPhone 4S(release: 10/11)

iPhone 5(release: 09/12)

iPhone 5c/5s(release: 09/13)

iPhone 6/6+(release: 09/14)

iOS 1.x

iOS 2.x

iOS 3.x

iOS 5.x

iOS 4.x

iOS 6.x

iOS 7.x

iOS 8.x

iOS 9.x (just announced)

?

Obsolescence Strategies for Connected Hardware

Price Point< $300 > $300

7-10 yrs

1-3 yrs

UsefulLife

Winning Moves:• Deliver real value with every generation• Incorporate functionality from other devices• Build a strong software ecosystem• Make upgrading to new hardware easy• Enhance margin with tiered pricing (such as

for larger memory)

“Apple” Quadrant

SmartphonesVirtual reality systems

Risks:• Products may move into a longer-life

quadrant

“Apple” (short life, high price)

UsefulLife

Price Point< $300 > $300

7-10 yrs

1-3 yrs

UsefulLife

Price Point< $300 > $300

7-10 yrs

1-3 yrs

“Point Product” Quadrant

Fitness trackersAction camerasHeadsetsHealth monitors

Winning Moves:• Design with a 2-year timeframe in mind• Focus on a single, well-defined use case• Relentlessly drive down cost• Encourage multi-unit sales

Risks:• Watch out for integration into an adjacent

quadrant

“Point Product” (short life, low price)

Winning Moves:• Design with a 10-year timeframe in mind• Land and expand into related devices• Relentlessly distribute free software over the

cloud to improve devices in the field• Build a strong ecosystem that enables

valuable device-to-device interactions

“Land & Expand” Quadrant

Home IoT:ThermostatsSpeakersDoorlocksScalesSecurity

Risks:• Not properly designing hardware for a 10-

year timeframe

“Land & Expand” (long life, low price)

UsefulLife

Price Point< $300 > $300

7-10 yrs

1-3 yrs

Winning Moves:• Design with a 10-year timeframe in mind• Relentlessly distribute free software over the

cloud to improve devices in the field• License enabling tech to other players• Create a software ecosystem for 3rd parties

Risks:• One-and-done relationships with customers

due to long timeframe between purchases

“Detroit” Quadrant

TVsCarsKitchen appliancesGaming consolesDSLR cameras

“Detroit” (long life, high price)

UsefulLife

Price Point< $300 > $300

7-10 yrs

1-3 yrs

Quadrants Can Shift

Price Point< $300 > $300

7-10 yrs

1-3 yrs

“Apple” Quadrant

PCsLaptopsTablets

“Detroit” Quadrant

UsefulLife

Products Can Be Subsumed

Price Point< $300 > $300

7-10 yrs

1-3 yrs

“Point Product” Quadrant

Point & Shoot Cameras

“Apple” Quadrant

UsefulLife

Success Possible in Every Quadrant

Price Point< $300 > $300

7-10 yrs

1-3 yrs

“Point Product” Quadrant “Apple” Quadrant

“Land & Expand” Quadrant “Detroit” Quadrant

UsefulLife

Planned Obsolescenceversus

Planning for Obsolescence