Will Planned Obsolescence Kill Silicon Valley? Rob Coneybeer Shasta Ventures

1920’s Automotive Market 1900 U.S. Annual Unit Production : 4 million cars

Planned Obsolescence is 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.

New models every year Fins as a proxy for fashion Artificially limited lifespan

Detroit Today

Silicon Valley’s Leading Hardware Product 170 million units shipped in 2014 New model every year Limited lifespan Non-replaceable battery High repair costs Expensive, fixed memory Software rapidly outgrows hardware

What’s Different This Time? 1.Moore’s Law 2.Universal Cloud Connectivity 3.Constant Threat of Overnight Global Competition Cutting-Edge Technologies Enormous Software Ecosystem High Consumer Value

Apple’s Playbook for Obsolescence iPhone 1 st 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> $ yrs 1-3 yrs Useful Life

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 Smartphones Virtual reality systems Risks: Products may move into a longer-life quadrant “Apple” (short life, high price) Useful Life Price Point < $300> $ yrs 1-3 yrs

Useful Life Price Point < $300> $ yrs 1-3 yrs “Point Product” Quadrant Fitness trackers Action cameras Headsets Health 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: Thermostats Speakers Doorlocks Scales Security Risks: Not properly designing hardware for a 10- year timeframe “Land & Expand” (long life, low price) Useful Life Price Point < $300> $ 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 3 rd parties Risks: One-and-done relationships with customers due to long timeframe between purchases “Detroit” Quadrant TVs Cars Kitchen appliances Gaming consoles DSLR cameras “Detroit” (long life, high price) Useful Life Price Point < $300> $ yrs 1-3 yrs

Quadrants Can Shift Price Point < $300> $ yrs 1-3 yrs “Apple” Quadrant PCs Laptops Tablets “Detroit” Quadrant Useful Life

Products Can Be Subsumed Price Point < $300> $ yrs 1-3 yrs “Point Product” Quadrant Point & Shoot Cameras “Apple” Quadrant Useful Life

Success Possible in Every Quadrant Price Point < $300> $ yrs 1-3 yrs “Point Product” Quadrant“Apple” Quadrant “Land & Expand” Quadrant“Detroit” Quadrant Useful Life

Planned Obsolescence versus Planning for Obsolescence