Essential Products – The obvious clue

Must-have, not me too needed to survive.

• The clue to a recovery for Essential Products Inc. is in the name but so far, none of the rapidly diminishing workforce appear to have really taken this to heart.
• I continue to stand by my position expressed in January 2017 (see here) which is: for Essential Products to have any chance in the brutal cutthroat world of consumer electronics it has to launch a must-have product not a “me too”.
• Unfortunately, the Essential phone was anything but essential and the result is that the company has fallen on very hard times and is now being forced to cut 30% of its workforce.
• About 40 out of 120 positions are being cut mainly as a result of cancelling its follow-up to the Essential Phone and putting its smart home development on hold.
• At that time, Essential Products was put up for sale (see here) in a bid to bring in more capital as well as support from a larger company to give Essential’s technology a head start in the market.
• Unfortunately, no buyers appear to have emerged, leaving Essential with no choice but to cut the staff from the cancelled and paused programs and to try and stand on its own two feet.
• However, this is also going to be problematic because if one wants to build an ecosystem, one really needs a smartphone which is why Essential Products has shifted direction again.
• The plan now is to build a smartphone with a smaller screen where the majority of the interaction is voice-based.
• The idea behind this is to have the device do more for the user such that direct interaction with the device is less.
• This could mean the device answering texts and emails on behalf of the user as well as booking appointments and so on.
• What Essential is getting at here is an AI phone so intelligent that the user has the confidence to allow the phone to manage his Digital Life so that he can enjoy his real life more.
• This idea is sound in the very long-term but in the here and now there are two major problems:
  • First, the pleasure principle: Users still enjoy interacting with their phones as Gaming, Social Networking, Media Consumption and Instant Messaging are the four biggest uses of phones.
  • Consequently, a phone that does all of these things for the user, is likely to only appeal to a very small minority of phone users.
  • Furthermore, users like to have a phone to play with when they are standing around or waiting for something to help them feel less awkward.
  • This is very similar to the way many people viewed smoking cigarettes in the days before mobile phones could fit in one’s pocket.
  • Consequently, to appeal to most users, the AI would have to revolutionary in its ability, which brings us to problem two.
  • Second, AI: Essential Products is a small company with no AI pedigree and almost no devices in the market with which to collect data.
  • RFM views Google, Baidu and Yandex as the kings of consumer AI mainly because they have been working on this for more than 20 years and have massive amounts of data to crunch (see here).
  • Similarly, RFM views IBM as very strong in enterprise AI mostly because it has been working on this since the 1960’s.
  • Consequently, how Essential Products is going to come up with an AI assistant that soundly beats Google Assistant with no experience and no data crunching is a complete mystery.
• Consequently, I continue to think that the outlook for Essential Products Inc. is extremely bleak and that it has very little hope of surviving long-term.
• The next time Essential does a funding round to push this strategy forward, I would politely decline to participate.