The Rise of Smartphones and the Galápagos Syndrome

Stephen DeAngelis

August 03, 2009

Depending on your point of view, the rise of smartphones has been one of the greatest boons to business or one of the banes of your life. For me, a smartphone is essential. I can’t run my business sitting behind a desk. I’m generally found on the road, in the air, or in a business meeting. Without my smartphone I’d be hard-pressed to accomplish all that needs doing each day. I know a lot of business people who are in the same situation. It comes, then, as no surprise to me that even during these difficult economic times, “people are still opening their wallets for smartphones” [“Smartphone Rises Fast From Gadget to Necessity,” by Steve Lohr, New York Times, 9 June 2009]. Lohr reports that “sales of BlackBerrys, iPhones and other smartphone models are rising smartly and are projected to increase 25 percent this year” even though “total cellphone sales are expected to fall.” That’s a pretty stunning development. It underscores the fact that people want to be connected and connected in as many ways as possible. Lohr continues:

“The smartphone surge, it seems, is a case of a trading-up trend in technology that is running strong enough to weather the downturn. And as is so often true when it comes to adoption of new technology, the smartphone story is as much about consumer sociology and psychology as it is about chips, bytes and bandwidth.For a growing swath of the population, the social expectation is that one is nearly always connected and reachable almost instantly via e-mail. The smartphone, analysts say, is the instrument of that connectedness — and thus worth the cost, both as a communications tool and as a status symbol.”

Lohr observes that there are social assumptions being made about people (beyond their status) who aren’t connected nearly continuously. If you don’t answer an email the assumption is that “you are out to lunch mentally, out of it socially, or don’t like the person who sent the e-mail.” Business leaders in this day and age who insist they can do their jobs without being connected electronically are not likely to survive the pace of business in the future. At least, Lohr reports, that is the message that smartphone makers and cellphone providers have pushed in the past. Now, it appears, that it is the non-business user of smartphones who is driving the market.

“James L. Balsillie, co-chief executive of Research in Motion, maker of the BlackBerry, said the company’s introduction of less business-oriented phones, with the general spread of mobile communication, explained the snowballing growth in BlackBerry users. They now number 25 million, nearly double the total a year ago and a tenfold increase in the last four years. The smartphone wave, industry analysts say, should continue to build. The room for gains is ample because, though rising, smartphone sales will still account for only a quarter of total cellphone shipments in the United States this year.”

Lohr concludes his article with a warning about the negative side of smartphone use.

“The perils of obsessive smartphone use have been well documented, including distracted driving and the stress of multitasking. CrackBerry, a term coined years ago, is telling. The smartphone, said Mr. Meyer, a cognitive psychologist, can be seen as a digital ‘Skinner box,’ a reference to the experiments of the behavioral psychologist B. F. Skinner in which rats were conditioned to press a lever repeatedly to get food pellets. With the smartphone, he said, the stimuli are information feeds. ‘It can be powerfully reinforcing behavior,’ he said. ‘But the key is to make sure this technology helps you carry out the tasks of daily life instead of interfering with them. It’s about balance and managing things.”

I suspect that part of the appeal of Apple’s iPhone is its ability to provide fast, living color “stimuli” for its users. The number of applications available for the iPhone has made it a big hit with non-business sector users and more software offerings are on the way for all smartphones. To see how smartphones are used by non-business users, one only has to look at Japanese society. Japanese cellphone users have been using fully-loaded gadgets for years; but surprisingly makers of Japanese cellphones haven’t found a global market for their wares [“Why Japan’s Cellphones Haven’t Gone Global,” by Hiroko Tabuchi, New York Times, 19 July 2009]. Tabuchi reports:

“Japanese cellphones are a gadget lover’s dream: ready for Internet and e-mail, they double as credit cards, boarding passes and even body-fat calculators. But it is hard to find anyone in Chicago or London using a Japanese phone like a Panasonic, a Sharp or an NEC. Despite years of dabbling in overseas markets, Japan’s handset makers have little presence beyond the country’s shores. ‘Japan is years ahead in any innovation. But it hasn’t been able to get business out of it,’ said Gerhard Fasol, president of the Tokyo-based IT consulting firm, Eurotechnology Japan. The Japanese have a name for their problem: Galápagos syndrome.”

The reference, of course, is to the famous Galápagos Islands that contain such unusual creatures that they started Charles Darwin thinking about his Origin of the Species. That is how Tabuchi describes Japanese cellphones. They are “fantastically evolved and divergent from their mainland cousins.” One would think that Japanese cellphones would be the ultimate Skinner boxes, but that hasn’t turned out to be the case. One group in Japan is asking why.

“Takeshi Natsuno, who teaches at Tokyo’s Keio University [and also] … developed a popular wireless Internet service called i-Mode, assembled some of the best minds in the field to debate how Japanese cellphones can go global. ‘The most amazing thing about Japan is that even the average person out there will have a superadvanced phone,’ said Mr. Natsuno. ‘So we’re asking, can’t Japan build on that advantage?’ The only Japanese handset maker with any meaningful global share is Sony Ericsson, and that company is a London-based joint venture between a Japanese electronics maker and a Swedish telecommunications firm.”

Tabuchi reports that Japan’s lack of clout is all the more surprising because it introduced “e-mail capabilities in 1999, camera phones in 2000, third-generation networks in 2001, full music downloads in 2002, electronic payments in 2004 and digital TV in 2005.” He reports that Japan has over twice the number of smartphone users (100 million) as the U.S. Having positioned itself in what appeared to be a dominate position, the Japanese were left wondering what happened.

“Japanese cellphone makers were a little too clever. The industry turned increasingly inward. In the 1990s, they set a standard for the second-generation network that was rejected everywhere else. Carriers created fenced-in Web services, like i-Mode. Those mobile Web universes fostered huge e-commerce and content markets within Japan, but they have also increased the country’s isolation from the global market. ‘Then Japan quickly adopted a third-generation standard in 2001. The rest of the world dallied, essentially making Japanese phones too advanced for most markets. At the same time, the rapid growth of Japan’s cellphone market in the late 1990s and early 2000s gave Japanese companies little incentive to market overseas. But now the market is shrinking significantly, hit by a recession and a graying economy; makers shipped 19 percent fewer handsets in 2008 and expect to ship even fewer in 2009. The industry remains fragmented, with eight cellphone makers vying for part of a market that will be less than 30 million units this year.”

Considering that U.S. smartphone sales are expected to increase by 25 percent this year, Japan looks much like a man dying from thirst while looking through a fence at a lake he can’t reach. Several Japanese companies are hoping to tear down that fence. Yet, for all of their sophistication, Japanese cellphones also have some problems.

“Despite their advanced hardware, handsets here often have primitive, clunky interfaces. … Most handsets have no way to easily synchronize data with PCs as the iPhone and other smartphones do. Because each handset model is designed with a customized user interface, development is time-consuming and expensive, said Tetsuzo Matsumoto, senior executive vice president at Softbank Mobile, a leading carrier. ‘Japan’s phones are all “handmade” from scratch,’ he said. ‘That’s reaching the limit.’ Then there are the peculiarities of the Japanese market, like the almost universal clamshell design, which is not as popular overseas. Recent hardware innovations, like solar-powered batteries or waterproofing, have been incremental rather than groundbreaking. The emphasis on hardware makes even the newest phones here surprisingly bulky. Some analysts say cellphone carriers stifle innovation by demanding so many peripheral hardware functions for phones.”

Japan’s case study underscores the importance of both connectivity and standards. Having isolated itself from the rest of world and having concentrated primarily on the domestic market, Japanese manufacturers painted themselves into a corner. The lesson is that the more broadly and easily you connect with others the more likely you will be to achieve favorable outcomes. As I observed in a post entitled The Coming Age of Franken-products, there is going to be battle in the marketplace between smartphones and netbooks and the eventual winner is yet to be determined. I conclude by repeating my conclusion in that blog: The point may well have been reached where smartphones are good enough to become a person’s only phone and only computer. New York Times’ reporter Jenna Wortham indicates that software companies are now asking themselves, “How can we get on the iPhone?” Smartphones may still be too pricey for many in the developing world, but the more useful they are the more cost effective they become. It will be interesting to see whether small computers or smarter cellphones become the next big thing in emerging market countries. In many ways, the answer doesn’t really matter. What matters is that people, businesses, and governments get connected.