Want to know why companies make their moves? Look to the world's most valuable resource
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Want to know why some companies are making the moves they are? Look to the world's most valuable resource
Google held its big annual developer conference this week, and it was full of new software announcements, plus plenty of AI, of course.
But Google also shared a lot of hardware at I/O 2023: 3 new phones, including a cool foldable one, and an updated watch.
Why is Google, a company that makes 80% of its revenue from advertising, doubling down on the difficult, much less profitable hardware game?
To be sure, there are plenty of reasons a software firm like Google would want to make its own hardware.
Owning the hardware “stack” (as the pros say) lets software firms exercise greater control over pricing and integration.
This can also mean faster iteration cycles, since firms don’t have to test their software on a myriad of devices before shipping.
It also makes logical sense that dedicated hardware would deliver superior performance and efficiency for specific tasks, like rendering graphics, generating audio, or doing large scale generative AI work.
BUT. HARDWARE IS HARD
And it’s really hard to be good at both. You’ve probably experienced that first hand if you’ve ever squinted at a remote, trying to log into Netflix on a Samsung TV, or tried to figure out how to connect Bluetooth audio in a nice, new BMW or Mercedes.
It’s easy to forget that making good hardware and good software requires crazily different skill sets, knowledge, and experience.
Hardware needs smart electrical engineers, systems experts, supply chain gurus, and industrial design maestros. Software development needs talented programmers, software architects, and product managers. Thus, being halfway decent at both requires 2x the recruiting, hiring, and management infrastructure.
OK, let’s say you’re a tech company CEO, and you’re moving full speed ahead on both. Good news: you’re able to recruit, hire, and onboard all of your software and hardware pros.
Guess what: your problems have only just begun. For starters, hardware and software have totally different development cycles. (Hardware, obviously, takes much longer to conceive, test, produce, and ship.) Yeah, you knew that, but what you didn’t know is how complex and time consuming it is to align these two wildly different cycles.
The wider software and hardware industries evolve at different paces, too. Since hardware development cycles are longer, it can be super hard to adapt any hardware to ever-changing software trends, not to mention market demands.
tl;dr— hardware and software are totally different business models, and businesses.
Nevertheless. Amazon, Facebook, Google, Apple, Microsoft are all full speed ahead on both. Why?
The most valuable resource in the world isn’t lithium or platinum, or diamonds, or oil.
In the same way that oil needs to be extracted from the ground, and then refined into fuels so we can use it to power our cars, planes, and lawn mowers, data also has to be collected, analysed, transformed into information before it can be really properly used.
Turning raw data into information, and then insights is the business model of the next 100 years.
And this, my friends, is what Google is up to with their fancy new foldable phone.
You have to know that if you use a Pixel phone or smart watch, your every motion is somehow being tracked, harvested and analyzed, right?
ONCE AGAIN, FOR THOSE IN THE BACK
Data is the world's most valuable resource, and any company that is not doing their best to harvest it and transform it into higher value information and even higher value insights is not doing their job.
Everyone knows that having more access to more data is a competitive advantage. What fewer people realize is that —in addition to be valuable in its own right— data also exhibits network effects.
STAY WITH ME
As firms accumulate and interconnect more and more data, datasets become increasingly valuable. Firms can use those ever fatter datasets to analyze broader and broader patterns, see correlations they otherwise wouldn’t, and build more accurate predictive models. In other words, increased supply increases the value of data.
But network effects fuel demand as well: as more and more firms figure out more and more ways to utilize the information and insights that data provides, data, in general, becomes more valuable still.
That is to say, the value of data increases as more people contribute it, interact with it, and figure out what to do with all the info and insights embedded in it.
More data is more valuable.
Remember that any time you want to figure out what’s behind any smart company's decisions.
Just follow the money and look for the data angle.
Oh, and maybe hold off pasting hella personal info into ChatGPT.
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Written by Jon Kallus. Any feedback? Simply reply. Like this? Share it!👇