The Great Indian B School Debate Semifinal One – The Tablet Computer has no future – (IIM Trichy AGAINST)
Ford handed the book to Arthur.
“What is it?” asked Arthur.
“The Hitchhiker’s Guide to the Galaxy. It’s a sort of electronic book. It tells you everything you need to know about anything. That’s its job.”
Arthur turned it over nervously in his hands.
“I like the cover,” he said. “Don’t Panic. It’s the first helpful or intelligible thing anybody’s said to me all day.”
“I’ll show you how it works,” said Ford. He snatched it from Arthur who was still holding it as if it was a two-week-dead lark and pulled it out of its cover.
“You press this button here you see and the screen lights up giving you the index.”
A screen, about three inches by four, lit up and characters began to flicker across the surface.
The following are excerpts from the book: A hitchhiker’s guide to the galaxy, written by Douglas Adams
Douglas Adams in 1968, envisioned a device in his books, what we refer today as the tablet. The tablet was often considered as a ‘device of the future’, with writers fantasizing about humans in the future decked in their spacesuits penning notes on hand-held devices and talking with each other through them.
A move towards technological convergence
Well, the world hasn’t diverted a lot from these ideas, but what we see today is something people refer to as ‘Technological convergence’. We can never say what device is at the end of its life cycle, simply because, through this process of convergence, they take the form of something new and suddenly, they are at the beginning of their life cycles all over again. With smartphones becoming phablets and tablets merging with keypads and smart devices to form laptops, can we really say which device is being replaced by what?
The era of tablets is not on a decline, but is just on the rise, we say. This is primarily owing to this phenomenon of convergence, wherein devices with different utilities are merging into one. The tablet, with its compact size stands to gain the most because it is large enough to display HD images and videos to ensure a multimedia experience and it is small enough to be portable, giving it the mobility it requires. A tablet is neither a PC nor a smartphone but it sure does serve the unmet demand created because of the (technological) gap between these two devices. Firms are creating tablets that are compatible with other devices of their own. Eg: The Apple smartphone, tablet, TV, etc. are all synced together to create an ecosystem of their own where people use these devices interchangeably with a remarkable ease.
Now what do the numbers say? The world-wide tablet sales to end users increased by 68% during 2013, according to a report by Gartner. In the emerging markets the tablets (sales) grew at a rate of 145% while in developed markets they grew at 31%. Android emerged as the market leader with 61.9% share in 2013. What’s the cause for this sudden increase? The ubiquitous lower end tablets that are affordable to everyone.
A new wave of demand in its infancy
People might argue that the target audience for tablets is limited, that only business executives favour this device when they travel, in order to read. But when we see our next generation, our daughters and nephews and nieces playing games on these very devices and their parents reading them stories that take life through the bright lights and moving images emanated through these very technological marvels, does it still warrant us to talk about a saturation in the market for tablets? With price ranges spreading across spectrums, the uses of these devices is rapidly increasing. Here are some of the few we observed:
1) In restaurants, flights, hotels for taking orders
2) Courier service for taking up digital signatures
3) In showrooms to promote paper-free catalogs
4) In schools (smart schools) as a tool for interactive learning
5) As a device for young children to play and learn
6) A remote control for devices at home
7) In the field of art, digital music, digital art, a mobile way to mix sound
And none of these conform to the traditional view of tablet usage, i.e. reading. Facts and figures (although still showing growth) do not incorporate latent demands, which might result in the tablet being increasingly used as ‘The Home device’; the device for the entire family, increasing the estimated growth rates for the future. With technologies like Retina Display, Intel’s 14 nm technology for fanless tablets, WiGig enabled technology, technology which incorporates an audio digital signalling processor into a die reducing the load on the battery and many more such technological breakthroughs focused primarily on tablets, there is clear indication that these devices are here to stay.
The dual-market phenomenon
Bigwigs like Lenovo and Microsoft are reportedly ramping up their R&D capacities by opening up new centres in Asia. Low-cost manufacturing seems to be the new buzz-word in an industry marked with a higher demand concentrated over the low-priced segment in recent times. At the same time, companies are focusing on differentiating their products for the other segment which focuses solely on product attributes and brand value. There is clearly emerging a chasm between budget tablets and the ones which are high on innovation and firms are thus adopting this two-pronged strategy of creating products keeping the needs of these two consumers in mind. Tablet sales aren’t reducing, it is just that two separate customer segments (based on their needs), are creating two huge markets in the process: One which has the potential to make the tablet as ubiquitous as a mobile phone and the other which can make it as ‘high involvement’ as a luxury watch.
With the launch of the Surface Pro 3, the lines between the laptop and the tablet are being erased. So, what do we say here? Is the laptop replacing the tablet or the tablet replacing the laptop? Either ways, none of them are nowhere close to being out of the race. This can be demonstrated by observing the R&D spends of the leaders in this field. In 2013, tech giants Google, Microsoft and Apple invested more than five times the amount spent by five of the largest US defence firms on R&D (US Defence reports). The combined figure was more than $18 billion! When we include the leader in these spends: Samsung, these numbers reach more than $30 billion. We are not quoting these figures to indicate spends on R&D for tablets, but to stress on the fact that these companies are spending so much on research which ultimately focuses on the phenomenon of ‘technological convergence’: Phones becoming tablets, watches becoming phones and laptops becoming televisions, thus in a way extending the growth phase of tablets.
Tablets and advertising
Tablets present more engaging and innovative opportunities for advertising. Firstly, they provide a greater space for the adverts than do smart phones. Firms are rapidly creating advertising content specifically for tablets. Eg: The media and entertainment industry has a unique opportunity to promote their creative content on tablets. A study by the Association of Magazine Media showed that Tablet media results in higher brand awareness for the advertiser than mobile campaigns.
Starch Advertising Research found that high-end tablet readers were young and well-off; almost half of them being in the age group of 18-34 and having incomes of $75,000 or above. This presents a niche targeting opportunity for a number of luxury brands. Marketers are making the most of this phenomenon by creating (tablet) applications for their brands. The tablet apps are also being used for advertising where the user can switch from one app to another through the ads. To further corroborate this fact, a study conducted by the Internet Advertising Bureau (IAB) showed that digital ad spends on tablet devices have increased by 400% in 2013 compared to the year before.
Leading brands are also increasingly creating campaigns targeted at tablets. Axe created a graphic novel, specifically for iPads, which achieved a click through rate which was 30% higher than the benchmark. IBM too teamed up with Ogilvy to create a “Smarter Cities” iAd where iPad users could just tilt the device to graphically ‘fly over’ cities to learn what makes them unique and the problems they face. This is an excellent example of how an advertisement took advantage of the landscape of the tablet to create rich animated content.
In short, tablets are a win-win situation for both the consumers and marketers as they provide an enhancing experience which improves the interaction between them both.
Newspapers going digital, the phenomenon of ‘tablet news’
Publications have gone mobile. Rather, they have gone ‘tablet’. This is seen in the huge number of tablet applications for leading publishing houses. A report by MPA (Fact Book 2013-14) showed that the US tablet users spend 75% of their ‘engagement time’ reading magazines on their tablet applications. This usage can be attributed to the fact that the tablet is portable and provides a much bigger screen size compared to smartphones. Forward thinking publishers such as The Newyorker and The Economist developed their digital versions long ago. By offering videos and photos, digital magazines are able to increase consumer engagement and the tablet is proving to be just the right platform for the same. The average ‘tap’ or ‘interaction rate’ for tablet adverts is 0.8%, according to a report by the Marketing Bureau of UK newspapers. This shows that tablet adverts are 40 times more effective than web ads.
The phablet as a positive
The hybrid of a smartphone and a tablet: The phablet, is the new kid on the block, with a screen size between 5.5 and 6.99 inches. Their shipments are projected to increase to 175 million in 2014, according to International Data Corp (IDC) and are projected to capture more than 32% of the smartphone market by 2018.
Isn’t the phablet just another version of a tablet? There can be a whole continuum of products in between a laptop and smartphone with variations in screen sizes and weights. Aren’t they more or less the same product? This phenomenon is just another indicator that the demand for tablets is on the rise. When users are preferring to buy larger and larger smartphones, isn’t this a step towards a move towards tablets? This is what we ask.
The consumer angle indicates a huge wave of demand that is yet to hit the tablet market, courtesy of it being adopted by the quintessential ‘family’. The business side shows optimism by virtue of revenue opportunities (advertisements and subscriptions) that smartphones don’t offer. Combining these two together just proves how our estimate of the growth rate for tablets has been more on the conservative side. New-age tablets taking various forms will shape the future of technology, influencing how we use our products. Individuals and families across the world will incorporate this device in their daily routines, in ways that we have yet to discover. We all know how Xerox invented the personal computer and then totally forgot about it (due to a perceived lack of demand). The tablet is far from maturity, it is on the cusp of a new wave in demand. The sooner firms realize this, the better it is for them.
Bhanu Putumbaka and Venkat Iyer
This is an entry for the semifinal round of the Great Indian B-School debate conducted by InsideIIM.