Who will be the 800-pound gorilla of digital convergence?
Communications and consumer electronics now drive the high-tech industry. Which companies will be the new power brokers as we transition from the computing era to the era of digital convergence?
Way back in the dark ages--before cell phones, reality TV, or social networks--there was big iron. In those archaic times, computers were actually used for computing, as opposed to watching porn or idiotic video clips. The computing giants of the day included IBM, Digital Equipment, Unisys (the marriage of Sperry and Burroughs), Data General, and Wang Laboratories.
The transition to personal computing and networking changed all that. IBM and Unisys survived by refocusing on services. The others didn't fair so well. Markets change. Companies that change with them survive. Those that anticipate change do better still. Those that resist change or change too slowly go the way of the dinosaur.
So, in the '90s, Cisco Systems, Compaq, Dell, Hewlett-Packard and Sun Microsystems became the new system powerhouses. IBM was still very much in the game. And of course there was Microsoft and Intel, owners of much of the PC's intellectual property.
In recent years, we've seen personal communications and consumer electronics overtake computers to grab the high-tech limelight. Cool devices like TiVo, PlayStation, BlackBerry, Treo, Razr, iPod, Slingbox, and iPhone have taken center stage.
Waiting in the wings are robotics, nanotechnology, and virtual reality--technologies with the potential to really change the way we live, down the road.
So why the history lesson? Because, it helps me set the stage for what's next. We're clearly in the midst of another big transition. As an industry, we've been talking about convergence for so long the word has become almost meaningless. Nevertheless, convergence--whatever that means--is upon us.
The big question on my mind is this: which companies will be the new power brokers of the post-computing era of digital convergence?
First, let's look at today's market leaders. We've already discussed computing; now add consumer electronics, mobile-handset technology, video gaming, Internet software, and various odds and ends. That gives us a laundry list of companies that looks something like this:
Amazon, Apple, Cisco, Compaq, Dell, eBay, Google, HP, IBM, Intel, LG Electronics, Matsushita Electric Industrial, Microsoft, Motorola, Nintendo, Nokia, Palm, Qualcomm, Research In Motion, Samsung Electronics, Sharp, Sony, Sun, Texas Instruments, Yahoo.
Now we determine the key criteria for leadership in the new digital age. Here's my stab at that:
Intellectual capital. That includes a broad range of technologies and design expertise, plus the ability to integrate those diverse technologies into innovative platforms.
Breakthrough marketing. That includes powerful brand loyalty and recognition, coupled with innovative promotion and market development for groundbreaking products and services.
Content delivery. This is about the ability to develop creative relationships with leading media content companies, and deliver that content through a spectrum of consumer channels, worldwide.
Then we take all those companies, their market leadership positions, their capabilities with respect to the three criteria, add some intangibles, and voila, we have our answer. In my opinion, these five companies are best positioned to be the giants of the post-computing era of digital convergence:
Sony has a leadership position in more markets than any other company. It also meets all three criteria, despite an inspirational drought as of late. The entertainment business and an early lead in robotics certainly don't hurt, either. Sony is in the best position of the five.
Not so apparent from the data, but Apple has several leadership products and a demonstrated ability to create new markets and category killers. The company that Jobs built also meets all three criteria and nobody can claim better marketing. Apple's on a roll, what more can I say.
This company has come a long way and now boasts a powerful brand and leadership in several key categories. Samsung also meets two key criteria and is working on the last one. The Korean giant is certainly firing on all cylinders as it continues on its blistering trajectory.
While Microsoft has been struggling for a foothold in convergence products, the game is far from over. With a powerful brand, a huge installed base, $40 billion in cash, leadership in several key markets, and moderate strength in all three criteria, I wouldn't rule out the software giant.
Here's where intangibles come into play. Although the company has never developed or marketed a product per se, it has the brand, the channel, and the cash-generating machine to make a serious go of it. It all depends on where Google, the youngest and the long shot of the five, goes from here and how well it executes.
Of course, there is a big caveat to all this. The leaders of tomorrow may not even exist today. Back in the days of big iron, nobody could have predicted that you'd be reading this post on a Web site with your eyes glued to a flat-panel display on your networked PC.
If history repeats itself, there's a high probability that a new market, category, or product will set the consumer world on fire. If digital convergence ends up in the virtual reality domain, for example, then the next Sony might develop in Second Life. Stranger things have happened.
The point, of course, is that your start-up may challenge Sony, Apple or Samsung for the title of 800-pound gorilla of digital convergence.