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Serious musings

When hardware outlasts a business model

I just shared some thoughts about the Sonos debacle and, were this an isolated incident, it's possible Sonos or another manufacturer could survive in this decision. But already in the first weeks of 2020, I'm seeing similar stories in other parts of technology. UnderArmour is ending support for its scale, wristband, and heart monitor products. Charter/Spectrum is tired of being paid to secure homes, giving affected customers one month to rip out their old hardware and switch to a new service.

It is really incredible that when Amazon, Apple, Google, and lots of venture-backed companies are developing hardware and software platforms to better know what people are doing in their homes, Charter decides to shut this business down. I'm particularly impressed that they couldn't find a buyer for any portion of the technology stack. To be clear, the home security product was originally built by Time Warner which Charter acquired two years ago. Since Time Warner didn't design this hardware itself, it's likely standard home security products with Time Warner stickers all over it. Given this, the primary costs in selling these customers is migrating them from Charter/TimeWarner's account system to the buyer's and switching the home security products connectivity from Time Warner's DSL internet to some other service. This shouldn't be that hard.

But stepping back from Charter, for as much as "hardware is hard", these companies have actively-used hardware but could not find an organizational or business structure to provide the supporting service. While I'm eagerly awaiting the case studies and books that are being and will be written about Boeing's 737 mess, the key role of financialization in Boeing's decline may also be lurking here, in the inability for well-known companies to create products that meaningfully contribute to corporate goals.

Both of these products are accessories, extensions of the core brand (UA: apparel, Charter: cable&internet) into new terrain (UA: connected health, Charter: home security). As such they need a different business model than the existing products (UA: one-time purchases to subscription, Charter: subscription internet service to subscription home monitoring). Both were likely developed and launched under a value proposition that has fallen out of priority for the company.

Financialization encourages an undue emphasis on profit margins to the detriment of the long-term interests of the organization and its customers, because profit, etc. are much easier to measure than the long term health of the company. The systematic hollowing of Boeing's engineering divisions made the short term numbers better while seeding the present disaster. Trust is very hard to earn. In the case of Under Armour, casting off the connected health products angers customers who bought into their ecosystem, disrupting their routine and forcing them to evaluate competing products, thereby making them less likely to buy another UA product. At least UA's customers have other options for apparel and fitness tracking; though Charter is not a dominant home security provider, it is a telecom monopoly which prevents the full measure of brand damage from being realized.

To be continued, I'm sure.