Looking at companies or industries ripe for disruptive can lead to finding disruptively innovative companies or products. In that vein, this post at ZeroHedge sparked my curiosity.
The recent attempt by AT&T to expand into the smartphone leasing business company in order to encourage customers to upgrade their equipment more frequently only confirms something that most industry observers have suspected for a long time: end customers have finally had it with annual (or even biannual) cell phone updates. And now we have proof. According to the WSJ, fewer people are upgrading their smartphones: "The rates at which American cellphone users have traded in their devices for more advanced models have declined over the last few years, according to analysts at UBS. They turned negative last year, when about 68 million people upgraded their phones in the U.S., down more than 9% from a year earlier." That was the first year in the past decade in which the turnover rate was below 0%. Sadly for Apple, Samsung and their competitors, 2013 is not shaping up any better: "UBS predicts upgrades will fall again this year."
It is unclear precisely which reason dominates for this plunge in end demand: the simplest of course is a drop in disposable income. The WSJ suggests two other: "With smartphone penetration approaching 70% of contract subscribers last year in the U.S., there are fewer customers left to upgrade to the Internet-ready devices and data plans. And among existing smartphone owners, fewer are seeing the need to buy the latest Apple iPhone or Samsung Galaxy as the pace of innovation slows."
Conner Green of Huntsville, Ala., said he won't upgrade his Samsung
Galaxy S2 smartphone because he isn't eligible and it would be too
expensive to do so. But he has also been less impressed with the latest
models from handset makers.
"They haven't thrown anything out that's just like, 'Wow,' " said Mr. Green, who is 26. "There is a cycle every four or five years. It will be a few years before a breakthrough and people buy phones like when Apple first introduced the iPhone," he said
The highlights in the above excerpt are mine. Although one article does not make a trend or should serve as the sole source for an investment thesis for that matter, the comments do highlight that the value proposition in the smartphone market has likely or has begun to overshoot customer needs or wants. It also suggests that disruptive innovators now have an opportunity to enter the market. The entry point could be through business model innovations, differing product specs, differing ways to market, or other innovative processes.
Of course I am talking more in a what if or potential basis here. However, information like the above should serve as the starting point for further research into finding disruptive innovators and potentially lucrative investment opportunities.
The recent attempt by AT&T to expand into the smartphone leasing business company in order to encourage customers to upgrade their equipment more frequently only confirms something that most industry observers have suspected for a long time: end customers have finally had it with annual (or even biannual) cell phone updates. And now we have proof. According to the WSJ, fewer people are upgrading their smartphones: "The rates at which American cellphone users have traded in their devices for more advanced models have declined over the last few years, according to analysts at UBS. They turned negative last year, when about 68 million people upgraded their phones in the U.S., down more than 9% from a year earlier." That was the first year in the past decade in which the turnover rate was below 0%. Sadly for Apple, Samsung and their competitors, 2013 is not shaping up any better: "UBS predicts upgrades will fall again this year."
It is unclear precisely which reason dominates for this plunge in end demand: the simplest of course is a drop in disposable income. The WSJ suggests two other: "With smartphone penetration approaching 70% of contract subscribers last year in the U.S., there are fewer customers left to upgrade to the Internet-ready devices and data plans. And among existing smartphone owners, fewer are seeing the need to buy the latest Apple iPhone or Samsung Galaxy as the pace of innovation slows."
"They haven't thrown anything out that's just like, 'Wow,' " said Mr. Green, who is 26. "There is a cycle every four or five years. It will be a few years before a breakthrough and people buy phones like when Apple first introduced the iPhone," he said
The highlights in the above excerpt are mine. Although one article does not make a trend or should serve as the sole source for an investment thesis for that matter, the comments do highlight that the value proposition in the smartphone market has likely or has begun to overshoot customer needs or wants. It also suggests that disruptive innovators now have an opportunity to enter the market. The entry point could be through business model innovations, differing product specs, differing ways to market, or other innovative processes.
Of course I am talking more in a what if or potential basis here. However, information like the above should serve as the starting point for further research into finding disruptive innovators and potentially lucrative investment opportunities.
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