RFM 2019 – Top 5 at CES.

2019 demands delivery not more hype.

Automotive & infotainment

• CES 2019 is likely to be even more dominated by automotive than it was last year and, in that vein, the landscape is likely to become clearer this year.
• A shakeout (like in XR (see below)) in autonomous driving is still some way off, but I expect to see the infotainment landscape meaningfully crystalise this year.
• RFM research has found that infotainment is the strategically most important piece of the vehicle (see here), which is why there are so many players all jockeying for position with more coming.
• Currently, infotainment is very fragmented with every OEM using their own proprietary implementation, making life very difficult for developers.
• Developers are at the core of any ecosystem (RFM Law of Robotics No. 4) and the OEMs need to enable this if they want to be successful in digital services.
• Just saying “come and develop for our proprietary platform” is unlikely to be enough as no one has either a large enough share of vehicles or the power of Apple to make this work.
• Consequently, OEMs need to enable some commonality across their vehicles while maintaining their individuality.
• Google is already offering this with Android Automotive but this comes with the cost of the vast majority of the revenues and user loyalty being ceded to Google (see here).
• Hence, I think there will be a number of offerings being made available to address this problem while helping OEMs keep out of Google’s clutches.
• Expect some announcements at CES 2019 as well the other big automotive events throughout the year.

Smartphones: Mature yet flexible

• The bold attempt by the premium smartphone makers to continue growing in a mature market is backfiring badly.
• As Apple most clearly demonstrated last week (see here), there appears to be a ceiling on how much users are willing to pay for a new device.
• This has resulted in users replacing their batteries and keeping the devices for longer, thereby lengthening the replacement cycle.
• This has the result of causing a temporary decline in smartphone shipment growth before stabilisation at a lower level due to lower replacement.
• However, 2019 is also going to be the year when flexible screens finally make it to market.
• The biggest question, of course, is: what is the use case for these products other than cool gimmicks?
• Samsung has chosen to recreate the Nokia Communicator from 20 years ago (see here), underlining the enterprise focus of its product which will also allow it to justify the very high price that will have to be charged for this device.
• Hence, I don’t think that flexible screens will be nearly cheap enough to offset the lengthening replacement cycle, meaning that 2019 is going to be a tough year for device makers.
• I want to steer clear of this segment for now.

Medical wearables – holy grail.

• Heart rate monitoring and ECG is going to become table stakes for wearables focused on fitness and health this year, which leads me to look elsewhere.
• Two of the biggest killers in the developed world are hypertension (blood pressure) and diabetes (blood sugar) which are currently diagnosed with expensive, one-time and, in many scenarios, invasive medical devices.
• Hence, I have been on the look-out for small, low-cost devices that can continually measure/diagnose these conditions in a non-invasive fashion.
• There have been several attempts at this but so far none have amounted to anything.
• However, the number of companies claiming to have cracked these problems to a medical grade is increasing rapidly leading me to think that progress may finally be being made.
• It is estimated that around 70% of healthcare costs in the developed world are lifestyle related meaning that prevention of these two conditions would have a huge impact.
• Hence, the returns to be had here are very significant underlining why I am watching it very closely.

XR (AR, VR & MR) – Long and winding road

• The creation of virtual worlds that are distinct from (virtual reality) or integrated with reality (augments and mixed reality) remains very difficult to execute.
• VR is the easiest of the three to create but even this remains plagued by weight, comfort, user experience, cabling and nausea issues that have limited its uptake.
• AR and MR are even more technically challenging which has resulted in a mediocre user experience despite billions of dollars of investment on an annual basis.
• The result is consolidation with VR shipments being lackluster at best and AR start-ups either struggling (Meta) or going out of business (ODG Group and Blippar) (see here).
• I continue to believe that consumer interest in AR delivered via a smartphone will be very limited and that real take off will not come until a fully immersive world can be delivered in a device no larger than a pair of regular spectacles.
• I expect the consolidation and shake-out in this space to continue.
• It looks like it will be another miserable year for this segment.

Digital Assistants – everywhere and nowhere.

• Digital assistants have more than doubled their points of presence in 2018 and much more is to come in 2019.
• Unfortunately, ubiquitous presence does not necessarily mean a great user experience and here, all offerings fall far short of the expectations that they have set.
• Consequently, outside of asking trivial questions, setting timers, playing music and turning lights on and off, digital assistants are a novelty that soon wears off.
• They still lack the intuitiveness and ability to perform in noisy environments that have the potential to make them really useful.
• While the noise environment problem is a relatively simple fix, the intuitiveness is an AI problem and here progress remains glacial.
• Promoters of assistants have used very narrow use cases to demonstrate their advances (e.g. restaurant booking with Google Duplex) but I do not consider these to be real advances.
• A very narrow use case only has a set number of possibilities, making it much easier to program with brute force as opposed to a general personal assistant that can sort out any problem that the user might have.
• This is the real promise of digital assistants which in my opinion, remains many years away.
• Hence, while assistant points of presence will continue to grow quickly, I think 2019 will see them struggle to generate real engagement.
• 2019 is also going to be a crunch year for Apple’s Siri which has fallen way behind market leaders, Google, Amazon and Baidu.
• Apple insistence on using differential privacy as well as its decision to implement Siri locally are at the heart of its problems.
• Apple needs to rectify these issues if it wants to prevent the lead that Google, Amazon and Baidu have from becoming unassailable.