google's modular smart phone
DESCRIPTION
These slides use concepts from my (Jeff Funk) course entitled Biz Models for Hi-Tech Products to analyze the business model for Google’s Modular Smartphone. Google is planning to provide a few standard exoskeletons and modules for a price of 50USD that enable standard voice calls, messaging and limit downloading of data. Users can pay a higher price for a phones that includes other modules and they can also upgrade the phones at any given time with a wide variety of modules that are expected to be available for this modular smart phone. These slides describe the specific value proposition for various types of final users, service providers, and app developers. The low price of this modular smartphone enables service providers to substantially reduce their subsidies for phones and thus introduce a new method of value capture that includes lower prices for users. This presentation also discusses other aspects of the business model such as scope of activities, and method of strategic control.TRANSCRIPT
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GOOGLE ARA – BUILDING THE
MODULAR SMARTPHONE
PRESENTED BY: BRIAN, HARI, KREMY, NACH & VARUN
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• Modular Phone Structure
• Market Segmentation
• Value Proposition
• Value Capture
• Scope of Activities
• Strategic Control
CONTENT
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PROJECT ARA
• Google’s hardware platform
for modular smartphones
• The Ara phone - skeleton
and interchangeable
modules
• Users can customize
device hardware and look
• Opens up mobile devices
market for parts
manufacturers
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MODULAR STRUCTURE
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ENDOSKELETON
• Endoskeleton consists of network
circuits and interfaces for
modules
• Electro-permanent magnets
used to attach modules
• Emerging standard “UniPro” for
communication
• Plug and play
• Endoskeleton has slots of
varying sizes
• Made from aluminum
• Comes in three sizes: mini;
medium; jumbo
• Water and dust-proof
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MODULES
• A third party ecosystem
• Encase single functionality
• Independent & interchangeable
• Can be swapped between different phones
• Water and dust proof
• Niche tech
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MODULE CUSTOMIZATION
• 3D printed module cases
• Customers can select:
• Color
• Material
• Image
• Text
• Inscriptions
• Easily replaceable cases
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PRICE
• Price starts at $50!
• Depends solely on modules used
• Google plans to sell “barebones” version at $50 consisting of:
• Wi-Fi chip
• Processor
• Screen
• Battery
• Ara is versatile
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PRICE
Nokia Lumia ~ $140 Samsung Galaxy Y,
Ace, Mini ~ 110$+
Sony Xperia E ~ $105 Xiomi Redmi ~ $160
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TARGET
CUSTOMERS
ARA CAN PENETRATE THE
MARKET!
Survey of 50,000
respondents in 25 countries
state that Battery Life,
Screen Size, and Camera
Resolution are important
needs in a smartphone.
Google Ara will answer
those needs
http://bgr.com/2014/05/12/best-smartphone-battery-life/
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TARGET CUSTOMERS
Cost Conscious Customer
Industry Specific User
Environment Conscious Customer
Developer and Technology Enthusiast
Telecommunication Operator
Module Manufacturer
END USER
Social Conscious
Customer
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• Cell phone manufacturers currently targeting “macro segments”.
• Modularity offers great flexibility and customization
serve “micro segments”
• Applies to both high and low ends of market
• Final product price is configured by customers
Types of customers:
• Smart phone users
• Developers and technology enthusiasts
• Module manufacturers
• Telecom companies
VALUE PROPOSITION
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Cost Conscious Customer
Industry Specific User
Environment Conscious Customer
VALUE PROPOSITION
SMART PHONE USER
Variable cost, set by user
Easy to repair & longer device life
Easy to upgrade
Average Android phone cost- $335
Modules for specialized work e.g.
measurement related, military,
medical, photography.
Back up modules for emergencies
Recyclable parts
Less impact on environment due to
replacement of individual modules
Social
Conscious
Customer
Full control over phone specifications
High Customization and
Personalization.
Receive social recognition
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Developer and Technology Enthusiast
Telecommunication Operator
Module Manufacturer
VALUE PROPOSITION
Develop new modules
Contribute to development of
technology
Sell apps using specific modules
Change in business model
Access to cheaper phones - lower
subsidy spending
Savings can be rerouted to gain
competitive advantage
Bigger & simpler market - direct sales
to final customer
Lower R&D costs
Access to smartphone market for
virtually any company
Build up brand value & recognition
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A CHANGE FOR TELECOMS
• Telecoms worldwide spend a fortune on phone subsidies – nearly $40 Billion in 2011
alone.
• Major operators started cutting subsidies for new users in order to reduce data and
cellular costs because of
• High competition
• Pressure from regulating bodies
• Led to loss of customers
• How does Google Ara change things?
• Access to cheaper high quality
device
• Help reduce subsidy expenses
• Provide alternative to subsidized
phones
• Reroute savings to offer lower
data/call prices
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VALUE CAPTURE
Sources of revenue
• Physical Google stores to complement online services
• Online platform to facilitate customization, sale, and resale of
modules
• Licensing fee for Ara modular smartphone technology
• Revenue from New Apps
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VALUE CAPTURE
Physical stores displaying various Google products
• Ara endoskeleton and modules
• Real time 3D printing of module covers with custom designs
• Profit from endoskeletons go to Google and from modules goes to
manufacturer
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VALUE CAPTURE
Physical stores also facilitate
• Loaning of modules
• Google loans costly modules like high resolution camera modules,
attachment lens for camera module, bar code reader etc.
• Consumers pickup and deliver back the module at the same physical
store to get back their deposit
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VALUE CAPTURE
Online platform to facilitate
• Customization, sale, resale and lending of modules
• Ara modules could be sold under devices section of Play Store
• Profit from modules go to manufacturer and from resale go to the
seller
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VALUE CAPTURE
Licensing fees
• License the Ara modular smartphone technology to other smartphone
manufacturers and OEMs
• Licensing fee of 5% for every module sold
• Profit from endoskeletons go to Google and profit from modules go to
manufacturer
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VALUE CAPTURE
Revenue from New Apps
• Due to Ara modular smartphone technology, addition of a specialized
module may require a specific app to be installed from Google Play
Store
• Revenue from apps are split 90% and 10% between developer and
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SCOPE OF ACTIVITIES
R&DEndoskeleton Design
& EngineeringSales & Marketing
Manufacturing
Distribution
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STRATEGIC CONTROL
• IP rights on module technology and endoskeleton
• First mover advantage in respect to modular smart phones
• Network effects
• More people using the phone, more people can share modules
• Ara community platform
• For developers
• For users
• Complementary assets
• Google’s communication and distribution channel
• Existing distribution capabilities
• Brand value
• Long tail effect
• Users more willing to buy new modules rather than buy a new
phone
• Enthusiasts/niche market customers to incorporate technology
not available in current phones
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DISRUPTIVE INNOVATION
• Modules manufactured by
third party ecosystem
• Do not need intricate
knowledge of phone design
• Require only component
knowledge
• Open innovation encouraged
– new designs
• Competition amongst module
manufacturers
• Resulting in cost reduction
• Phone manufacturers no
longer responsible for entire
design
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THANK YOU!