In the past two posts I've shown that the consumer electronic industry, with few notable exceptions, has consistently failed to address and meet the need of the buying public; that the semiconductor industry that follows that lead has delivered suspect information regarding market demand; and that the support industries to the semi industry has no solid idea what their value is to their customer, much less express that value to them. How have we got to to this place?
First off, we have a leadership in place; and a generation of engineers in marketing that were trained by that leadership, whose frame of reference rests in the 1980s markets -- back when electronics was still in the entrepreneurial phase of its life. In the 1980s, Lockheed Missiles and Space Division was still putting together technical documents with pen, ink and typewriters. Semiconductor-based products were just the province or technology early adopters (nerds) and were considered generally beyond the ability of less mortals to comprehend, much less work with.
Today, however, there are people in IT departments with high-school equivalency certificates building desktop computers with components they get at Fry's. Most cell-phones are upgraded every 20 months and some are considered disposable. Consumer electronics has crossed the chasm and marketing needs to focus on late adopters to expand the market. But what does the industry market to? Engineers who think Twitter is stupid.
No, that's not fair. There are many engineers that find Twitter to be quite valuable and they buy these products. No, it is more accurate to say that the market is addressed by companies, run by engineers who think Twitter is stupid. The people who buy the products that are made by these companies have adopted social media in totality. More than half of the US population has Facebook account. These people are talking among themselves about these products, but the engineers in charge of marketing... or at least those engineers in management who are telling marketing that Twitter is stupid... have no idea what is being said. Instead, they are talking, by email, phone and tradeshow meetings, with their friends who agree that Twitter is stupid about how smart they are.
They are living in a virtual biodome of their own construction that has preserved a 30-year-old paradigm perfectly. It is a fantasy.
Is Facebook really worth $50 Billion? They create a product that more than half the country uses and has spawned multiple additional industries with companies also valued in the billions. The company is creating a lot of wealth and business. It is a source of optimism and news. The real question is, what is an EDA company really worth? They create products used by a very small group of users to create products that 95 percent of the market will send back because it isn't what the customer wants.
So what is the answer to this problem? I really think it comes down to management. And the electronics/semi industry management is filled with engineers who are making marketing decisions based on 30-year-old paradigms. These guys are remarkably talented and knowledgeable -- when it comes to making complex technology, but they need guidance from people who are equally remarkable in talent and knowledge about the market.
A few weeks ago when I was considering writing this series, I got a call from a journalism buddy who encouraged me to go for the jugular on this subject. He was royally PO'ed at a particular industry that does little to no advertising for the simple reason "they say they know their customers and what they want" so advertising doesn't help them. And yet, this editor says he gets calls from company after company, that uses this same excuse for not supporting an industry publication, and that still expects the magazine to take their calls, send out editors, take meetings and write stories about their cheap little companies. "If the customers already know everything they need to know about these companies," he wondered. "Why do I need to write about them? Why do they still send me their lousy press releases? Why do they even go to trade shows?" And why are they still not profitable?
Over the past 20 years, B2B publications have taken a major hit as more companies took this attitude to the point that we almost lost them altogether. What many people may not realize is that these publications found gold in social media and are using it to gather information about companies while, at the same time, creating sources of revenue. They no longer need top go after these little companies to advertise once or twice a year, because they can sell their content to engineers who DON'T think Twitter is stupid. They have found new, exciting industries to write about and less and less of those industries reside in the electronics world.
The engineers running the majority of electronics, semiconductor and EDA companies have run the market into the ground. They have received a brief stay of execution in the current turn around, but don't expect it to last.
To get out of the cycle some drastic changes need to be put in place.
To be continued.