Collection: Consumer Electronics

Consumer Electronics

You may have heard Marc Andreessen’s now-famous quote: “Software is eating the world.” But where does this leave hardware? With companies like Jawbone, Juicero and Hello going through very public failures in recent years, many would have you believe that the industry is struggling. Those failures, however, provide valuable lessons on the challenges consumer electronics companies face and how they need to adapt.

There are many reasons for companies not succeeding. For startups with a transactional model, the need to forecast inventory build for the year in advance of consumer demands is tough, with even small deviations proving costly. Revenue is onetime and unpredictable, while the need for continuous investment in sales and marketing to acquire new customers can burn cash fast.

Today, the most nimble and innovative consumer hardware startups are adapting to the traditionally tough hardware market by optimizing their products and their business models. As a result, these companies are offering such products as smart speakers and home thermostats for little to no upfront cost in exchange for premium paid services or access to a software marketplace or simply your data.

Having a competitor’s hardware in the consumers’ hands is a big barrier to entry. One of the most valuable companies in the world — Apple — has been built off of that. When a hardware product is owned and installed, it becomes very sticky. Unlike Uber and Lyft, it is much harder to switch between pairs of Sonos and Bose headphones or between a Nest and a Google Home thermostat. Owning the consumer through a physical product establishes a great moat. For consumer electronics companies, the shift to a new “software-like” approach, where the device is basically free, is a big deal. Once the customer has the hardware, the next challenge is to monetize it.