The smartphone is changing everything

The smartphone is changing everything. How we shop, how we organize our lives, how we spend our time, how we connect with people. The smartphone is changing how businesses compete, changing the landscape of winners and losers across the consumer electronics, PC, Internet, media and telecom spaces. The smartphone is rearranging the technical architecture of the world, spreading it out, flattening it, impacting industries as diverse as paper and pulp, transportation, energy and gaming. Smartphone operating systems are branching out and up, becoming the primary interfaces through which we reach the Internet and blurring the lines between computers and everything else. Even in areas where we won’t use a smartphone, smartphones will impact our expectations around responsiveness, usability and, well, “smarts.”

Within the next five years, 80 to 90 percent of US consumers will carry a smartphone, up from around 25 percent today. Most of these will be iPhones, Android devices and BlackBerries. The jury is out on Windows Phone Series 7, but Symbian, webOS and other LiMo variants will have a much smaller share. Globally, smartphones will represent greater than 50 percent of mobile phone shipments, more than 75 percent of mobile phone industry revenues and around 90 percent of mobile phone manufacturer gross margins. Like McDonald’s hamburgers, billions will be sold, making the smartphone the most popular and successful consumer electronics product in history.

People love smartphones because they make our lives easier. They make us smarter, providing access to a world of information at our fingertips. They make us more organized, putting our calendars, to-do lists and shopping lists all in one place. They help us stay connected by integrating contacts, social networking, email, instant messaging, SMS and now even video chat. They are giving us increasing control over our lives: navigation and traffic prediction, dinner reservations, travel planning, energy management, remote car starters. And, of course, they are fun – our entire collections of music, video and gaming all in one handy package.

These amazing devices are doing more while costing less. Underlying technologies are becoming cheaper, smaller and more powerful by the minute, so that today’s smartphones are as powerful as a full-featured PC from 2005. Yesterday’s smartphones are already available for under $100 and soon will be free. Unlike cell phones of the past, last year’s Droids and iPhones will run most of this year’s hundreds of thousands of applications.

Consumer electronics companies who build leading smartphones will grow and prosper, while those who don’t will struggle. Will BlackBerry figure out touchscreens? Who will be the “Apple of Android”? Will there be a low cost “Dell of Android”? Can BlackBerry and Microsoft attract enough apps? These are questions with billions of dollars in market value attached.

Meanwhile, tablets, netbooks and other connected devices are running smartphone operating systems or being connected together and managed through smartphones. The Nook eReader is an Android device. The iPad runs iOS – and iOS across the iPhone, iPad and iPod Touch now suddenly represents the world’s largest gaming platform. Sony televisions are coming with Android and Google TV. Smart meters, automotive navigation systems and a wide variety of home appliances will be accessible and manageable from smartphones. You will be able to see how much energy you are using (and what you are paying for it), see where your children or employees are with your vehicle (and how fast they are driving!) and turn off the TV if you left it on or set the DVR if you forgot.

Perhaps surprisingly, more than half of smartphone usage occurs in the home or office, so when you are sitting on your couch you will use your smartphone or tablet as your remote control (and not have to search around for it because it will already be in your hand or pocket or purse). And once you are controlling your TV with this remote, it won’t be long before you are controlling everything else with it, too. Not just while away from home, as in the examples mentioned above, but while sitting right in your living room. Lights. Heating and air conditioning. Music. TV. Everything. These are not far-fetched, dreamy ideas. These are things that lead users are doing today, right now.

Smartphone, eReader and tablet readership are rapidly replacing books and magazines, impacting the media space, advertising markets and even the value chain for forests and paper production. The paperless office was a myth a decade ago; now it is feasible. From a media perspective, everything digital is growing while everything physical is dying. If it is digital and mobile, then all the better.

Where Google’s dominance of the Internet advertising space seemed assured just a year or so ago, now things appear more complicated. More and more of our online activities begin with a smartphone app rather than a browser window and a search box. More and more of our discovery activities involve referrals from social networks or recommendations from smart algorithms rather than searching for something specific. Google, Apple, Amazon, Microsoft and Facebook are all battling for a slice of this pie.

Remember when Internet time felt fast? It felt like a 24/7 onslaught of innovation and new services and new business models, but it wasn’t – not really. It was constrained by wired connections in homes and offices and clunky desktop and laptop computers – things that don’t fit in your pocket, things you need to go out of your way to use. Smartphones move faster – literally all the time, everywhere. The mobile phone has been the ultimate disruptive technology, swallowing landline phones, the pager, the digital camera, the portable music player, the portable game player, the portable video player, the portable navigation device and now much of the computing and Internet applications and services landscape.

And for those things that are left over, our expectations have been completely transformed. Why can’t I touch that screen and manipulate things directly? Why can’t I pause and rewind my car stereo if I miss a song or some key piece of information? Why can’t I click on my car navigation system to get restaurant reviews or make a reservation? And why-oh-why would I wait until tomorrow to receive that report from you or even drive ten minutes to your store to pick up that book?