Nokia’s doing OK in smartphones. It’s superphones, where Apple and Google Android is winning

Ever since Apple, and later Google started the smartphone revolution we are in the middle of right now, one thing has been bugging me.

It’s the way the smartphone market trends are tracked,  described and discussed.

You know the drill – mobile upstart (iOS and Android) camps crowing how they have already won the smartphone game, talking about the developer ecosystems, app and app download numbers, mobile web browsing trends and the like. And older smartphone/mobile incumbent camps (Nokia, RIM, and even Miscrosoft until a year ago)  – citing the hard numbers and market shares that show that, while they may have some problems, overall the incumbents are doing quite OK.

They can’t be both right, can they? I’m just starting to figure these things out, but I think that yes, they are both actually right.

Two different device categories – smartphones and superphones

It’s because we are talking about two different device categories here. Smartphones and, for the lack of better name yet –  superphones.

Yes, smartphones and superphones share some common characteristics – always on connectivity, ability to make phone calls and send SMS/MMS, access the internet and  install third party software apps.  But the way these devices  are used, are very different. As different as the iPads/tablets are different from laptops/netbooks.

The main function of a smartphone – is a mobile phone.  You use it primarily to do voice calls and send/receive short text mesages via SMS/MMS.  Yes, your smartphone can do a lot more things – take pictures,  browse the Web, play music, stream audio/video from the net, make use of various third party apps.  But you use those additional functions only  when you really need it, or there‘s no better option then a device in your pocket, or when there‘s some  particularly interesting mobile service/app that requires your attention – e.g. Facebook, Twitter, Foursquare, or other status updaters.   But they are secondary functions for your smartphone. And, due to the design limitations – small displays, crammed keypads/keyboards, button navigation,  etc; – using those additional „smart“capabilities is a chore.

On the other hand, your smartphone is a perfect device for the stuff it was meant to do – calling and texting.

Your address book and call history is just a physical button click away,  you can speed dial those important to you with two/three clicks, with one hand, without even looking at your handset. If it happens to have full QWERTY keyboard, the texting experience, most likely, is great. And even if you have a traditional  phone keypad, predictive T9 input most often works like a charm. Your smartphone usually is a very frugal data user, and doesn‘t need an expensive  plan with big or unlimited data allotments. And it has an excellent battery life, so you don‘t have to worry about your phone dying in the middle of the day, because some apps just had to be constantly connected to the net.

Superphones, on the other hand, are not phones anymore. They are truly small mobile computers in your pocket, with phone/texting as just another app among many. The user experience – big displays, (multi) touch , high quality browsers,etc;  – is optimized to transfer big screen PC  interaction models to the limitations of mobile device that can fit in your pocket. While the overall experience doing various things on your superphone is a bit worse then doing those same things on your laptop, it‘s not much worse, and is actually good enough for the extensive use on the go.

And we do use our superphones as a small computers that they are. Browsing the Web, tweeting and posting pictures to Facebook while sitting at  cafe, watching movies  on a plane, downloading, trying and quickly forgetting  dozens of apps… Just like we used to do  with all those Web 2.0 services not long ago, or  various freeware and shareware PC apps before that.  And it‘s a pleasure to do so. With a superphone I feel much more connected and entertained then when I only had my smartphone. I find myself whipping it out and checking Twitter timeline, feed reader and/or favorite websites, when I‘m in a slow moving line or waiting for a doctor’s appointment. I never worry that I won‘t have anything to read/do while on a bus ride. And I know that all the info I need is just a click away and easy to  find, when I‘m on a business trip in a strange town.

But there are some trade-offs that we came to accept for having a small computer in our pockets.

First is the actual „phone“ part of the device. Some do it better, some do it worse, but since mobile telephony is just another application on your superphone, overall calling and texting experience is usually worse on it. You might not notice it much if you are a moderate or casual user. But if you are used to  blind-type 50 SMS messages a day , Nexus One or iPhone may not be an option to you

Then there‘s a battery life. I can usually go for several days without charging my smartphone. And I never had to worry if I‘ll last through the day with it, no matter how much I used it. With a superphone, constant worry about it‘s battery life has become a fact of life.  Plugging it in whenever I can, just in case , is a habit now, while only two or three bars of battery indicator while i‘m out somewhere without an access to charger, gives me chills.

And  the need for  unlimited, or at least high allotment, and pretty expensive data plans. Yes, you could  get by with only very limited cellular data and  Wi-Fi hotspots. But where‘s the fun in that? To fully utilize the new capabilities  the superphone gives you, you  have to have a plan that lets you use net connectivity whenever you  feel like it. And that means some serious additional monthly costs.

Why we need  to track smartphones and superphones separately

When Steve Jobs announced iPhone, Apple didn‘t just make a better smartphone. They have invented a new device category –superphone. Just like they did with the iPad three years later. But because iPad is so different from the laptops it has evolved from, and because we already had this tablet computer category cleary  defined and tracked before iPad came along, we know that tablets are a new/different device category , and we track tablet market trends accordingly, as competitors are scrambling to catch up.  We do not lump them into a single portable computer category together with laptops, netbooks and whatnot.

Unfortunately, because Apple decided to market it‘s iPhone as a smartphone, and everybody else blindly followed their line, we now have this big confusion on our hands. According current mobile taxonomy – Nokia C5 is a smartphone and HTC Desire is a smartphone too. Except for the ability to install third party apps, how much in common do these two devices have?  With such different devices lumped into one pile, everybody is following the datapoints that paint a prettier picture for them and screaming that their apples are much better then the oranges in adversary camp.

But once you separate them into two distinct categories – smartphones and superphones – it all starts making sense. In a more or less traditional Clayton Christensen‘s innovative disruption kind of way, only a bit in reverse.

Disruptive power of Superphones

When separated into two distinct smartphone/superphone categories, the changes happening in mobile device industry right now look a lot like a classic Clayton Christensen’s innovator‘s dilemma.

Incumbients, like Nokia and RIM , who have invented and perfected the smartphone game, continue to rule the smartphone market. New challengers – Apple, Google – having invented  a new superphone market niche/category, continue to dominate and grow there with new ways of doing things, new competitive advantages and business models.  While the old incumbients, after first ingnoring the emerging new market, now struggle to catch up with the challengers on a new superphone turf.

Where the traditional disruptive innovation process in mobile industry is reversed – is that disruption here started at the top.

Usually, disruptive innovations occur at the low end of the industry, where profit margins are slim and, at first, the challengers start nibbling at them with different, cheaper, but usually inferior way of doing things. Incumbients easily abandon the low end to challengers, for better more profitable opportunities at the top. They start moving upmarket, allowing the upstarts to perfect their business models and processes at the low end, create new markets and chase the incumbients from below. By the time the incubient wakes up, it‘s usually game over, and once industry dominating firms get relagated to niche luxury suppliers at best, or go belly up at worst.

But things are different in mobile  – disruptive change here started at the very top. In the most profitable market tier, and now it is moving down market. So while the incumbients might have  missed this new disruptive change at first, they‘ve got their wake up call pretty quick, and now are pouring the resources to catch up, like crazy.

And, also, while  we may talk about incumbients and upstarts/challengers in mobile biz, this is not a fight between huge established industry behemoths and scrappy startups. All players currently slugging it out for the domination in the next iteration of mobile device evolution are huge companies, with billions in revenues, thousands of employees, and a lots of experience and resources to  put into play.

It is also  still very early in the game. So far we have only seen a couple of rounds of this multi-round fight. We‘ve seen Apple create a new Superphone category, take over and completely dominate it for the first two years. Then Google  entered the game , and claimed their own big piece of the superphone pie. We‘ve seen incumbients like Nokia and Microsoft try to bring their old smartphone business ways to superphones, and totaly fail.

Microsoft always sort of wanted to create their own superphone,  but  never knew how. When shown the light, they completely abandoned their old dead end smartphone efforts,  and are now ready to to dive into a fight with fresh new Windows Phone 7 OS. Nokia, on the other hand, managed to keep a tight grip and even expand their traditional smartphone market, and is also getting ready to enter superphone  fight with Meego OS, and, maybe even Symbian^4 devices next year. RIM is also doing pretty well in smartphones, and is slowly trying to leverage their strong presence there to eventual success in superphones.

It is way too early to tell how this superphone fight will play out, and anyone who says he knows who the winners are is full of BS. Apple and Google are clear winners of the first couple of rounds. But look at how Google Android managed to upstage iOS in less then year, starting from nothing. All it took – was a strong commintment by one carrier in the U.S. and couple of handset vendors making a few interesting devices.  With a number of new players entering into the fray: Microsoft, Nokia, HP/Palm, Samsung/Bada, just to name a few, eventual outcome is impossible to tell.

One thing is for sure though. This will be one hell of a fight, and it‘s  great fun to be covering it.

And, please, can we think of some better name for these superphones. I cringe every time I have to use it. But the alternatives I heard are even worse.

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