The Broken Leg of the Stool

Consumer technology is a three legged stool.

The first leg is the personal computer where much of the original innovation in consumer technology happened.  Today, the personal computer business is fairly mature dominated by Microsoft on the software side and Intel on the hardware side. Apple remains a formidable player and provides an alternative to Microsoft which both encourages innovation and gives consumers a choice. But even with the fairly mature nature of the personal computer sector, innovation is possible because the personal computer is by definition an open platform where consumers have the power to configure their device however they choose.  The recent peer to peer file sharing (Kazaa/Grokster/etc) and voice over IP (Skype) revolutions are good examples of the fact that innovation is alive and well in the personal computer sector.

The second leg is the Internet, a veritable wild west of innovation. Consumers reign supreme on the web and anyone can launch a new web service whenever they want. The mid 90s ambitions of Microsoft to take a toll on every web transaction are laughable in hindsight and showcase the power of the ultimate open platform to keep things honest and keep the consumer in control. Venture capitalists have been criticized for focusing so much of their recent investment in web services, but the reality is that there is nowhere in the technology business where the pace of innovation and the ability to compete is as high as the Internet.

The third leg is consumer electronics, an industry that is much older than the other two. I do not have data on the size of the three sectors but if I had to guess, I’d bet that consumer electronics is the largest of the three sectors as it includes cell phones, game consoles, and portable music players, three of the most important and popular consumer techology devices.

But this third leg is broken, even though it remains a vital and growing sector. It’s broken because its nearly impossible for the consumer to take control of their consumer electronics experience and it’s broken because its almost impossible for an entrepreneur to innovate in this sector.

I have a love/hate with all of my consumer electronics devices. 

I love my iPod for its functionality but I hate it because the hard disk crashes, the battery dies, and I can’t get in there and fix/replace them.  I hate it because the software is closed and I am stuck with Apple’s god awful DRM system.  I hate it so much that I have thought often of how I could replace it.  But I can’t.  And that sucks.

I love my Treo 650 for its functionality but I hate it because it’s camera sucks, because it crashes on me all the time, because the software is counter intuitive, and because it costs over $600 if you buy it unsubsidized by a carrier.

I love my Canon SD550 camera because it is small, light, easy to use, and takes wonderful pictures in the light.  But I hate it because the videos it takes are huge files.  I hate it because I can’t upload the pictures to Flickr directly from the camera like I can with my Treo.  And I hate it because when they come up with a 9mp chip, I can’t simply swap out the chips, I have to get a whole new camera.

The fact is the consumer electronics industry is not consumer centric.  In fact, it makes an art out of being consumer unfriendly.  It’s MO is all about locking consumers in, not opening things up. The carriers and cable operators make things even worse when telephony and/or television come into play.  They lock you down even more with subsidies, proprietary products, and high price points.

Something has to be done about this.  Entrepreneurs and VCs need to be able to play in the consumer electronics space.  To date the venture capital industry has had pretty awful results in consumer electronics.  There have been some successes, like Danger in the smart phone business. RIM is another example of a company where entrepreneurship succeeded in consumer electronics.  But in reality, the venture industry is a trash heap of failed consumer electronics startups. And with VCs being wary of consumer electronics, entrepreneurs find it very hard to drum up the money to do interesting new things in this sector.

I am not writing this to propose any solutions.  I have some ideas, but they are unformed and not ready for public consumption.  I am writing this as a call to action.  We need to take the principals behind the personal computer revolution and the world wide web to consumer electronics. To make devices that are truly by the people for the people.  They certainly aren’t that today.

#VC & Technology