Researched and written by Shelly Palmer & Jim Turner
Table of Contents
- Introduction
- Human/Machine Interaction
- Smart Speakers/Digital Assistants
- AR & VR & MR
- Mobile and Computing
- More Data, More Connectivity
- Networks
- TVs & Screens
- Cybercrime
- Streaming Is Unstoppable, But …
- The Las Vegas Auto Show
- Smart Home
- Wearables
- Digital Health
- Things to Think About
- Learn more about GS1 US our presenting sponsor
Three Mega-Trends Are Changing Everything
On Demand
People are not only willing to access goods and services when they need them, they are getting used to living in a world where their demands are instantly met.
Autonomy
Things are beginning to work automatically and are requiring less and less human attention to operate. Autonomy is starting to touch every aspect of our daily experiences.
Machine Learning
From simple algorithms to complex neural networks, machines are learning to think with us and for us. No matter what you do, there’s a thinking machine in your future.
The year ahead promises to be both innovative and iterative. We’ll see accelerating advances in all of the technologies that support turning data into action, including autonomous vehicles, machine learning, and the forces that will empower consumers to “get it now!” Here are four observed laws that will help you think about the impact of the media and tech trends in this report.
Moore’s Law
The number of transistors on integrated circuits doubles approximately every two years.
This isn’t accurate today – it’s more like one year, and the rate of change is accelerating. However, Moore’s law does speak to the idea of exponential growth.
Metcalfe’s Law
The value of a telecommunications network is proportional to the square of the number of connected users of the system (n²).
While the math here, as that in Moore’s Law, is debatable, it is obvious that the value of a network increases with each additional user. The only question is, by how much?
The Law of Accelerating Returns
The rate of change in a wide variety of evolutionary systems tends to increase exponentially.
This law is the least obvious of the four laws, but understanding the exponential rate of technological progress is critical to understanding how consumer behavior is likely to evolve.
Cooper’s Law (aka the Law of Spectral Efficiency)
The maximum number of voice conversations or equivalent data transactions that can be conducted in all the useful radio spectrum over a given area doubles every 30 months.
Taken together, these observed laws suggest that today you are experiencing the slowest rate of technological change you will ever experience.
If the lily pads grown exponentially each evening, tomorrow the lily pond will be completely covered.
Introduction
We are living in the age of exponentiation. Many of the things that have been previously viewed a prophecy or the musings of overzealous futurists seem to suddenly be happening all around us. Such is the nature of exponential change.
One of the most dramatic examples is the relentless increase in the capabilities of AI systems over the past year. There is a great deal of hype around 2018’s biggest buzzwords. Here we offer some facts about the industry, some thoughts about the future, and a single question to help you navigate our increasingly complex world.
What Do You Believe?
Tomorrow will be nothing like today. It may look and feel a lot like today – you’ll get up, have breakfast, exercise, go off to work, etc. But tomorrow will be nothing like today. Tomorrow there will be 600,000 new smartphone activations, 540,000 new computers sold, hundreds of thousands of new cloud computing credentials issued, hundreds more petabytes of data traveling through the internet, thousands more miles driven by autonomous vehicles, millions of new words interpreted by Natural Language Understanding (NLU) systems, billions of new patterns learned by machines, and billions of new lines of code created. Tomorrow will be nothing like today.
With that in mind, here are some trending topics (in alphabetical order) that may help you formulate your theses about the future:
- Accelerated Disruption of the Media Business
- AI and Machine Learning
- Augmented Reality (AR)
- Blockchain and Smart Contracts
- Chat as an App Killer
- Cognitive Cloud Services
- Datafication
- Emerging Network Technologies (5G, WiGig)
- The Evolution of Retail (Augmented Retail)
- Human/Machine Partnerships
- Identity and Identifiers
- Internet of Things (IoT)
- Open Source
- Policy Changes
- Quantum Computing
- Robotics and Artificial Muscles
- Sensor Technology
- Social Media Addiction
- Streaming Video and Streaming Data
- Well-matched Algorithms and Training Sets
Theses for 2018
- Data are more powerful in the presence of other data
- Access is as valuable as ownership
- Anything that can be connected will be connected
- Anything that can be hacked will be hacked
- Anything you can talk to will understand and talk back
- Everyone wants everything on-demand
- Distribution channel disruption is accelerating
Human/Machine Interaction Is Changing Forever
A key trend at this year’s CES will be the application of AI/machine learning, chip/processing technologies, and sensor technologies which will continue to evolve man/machine interfaces. Voice input and response, image, vision, and biometrics will impact nearly every product category at the show.
Digital assistants and voice control will continue enabling interoperability across devices from smartphones to appliances, smart home and Internet of Things (IoT), televisions, and even autos. Augmented Reality (AR) will become more consumer-mainstream as it is distributed across a huge smartphone base. Virtual Reality (VR) will find its place in the ecosystem as it becomes less expensive and easier to use.
Last year, voice control broke into the mainstream thanks to Amazon’s Alexa. This year, voice is joined by computer vision and “virtual things” as computers can now “see,” recognize images and objects, and inject “things” into our reality.
Smart Speakers/Digital Assistants Are on Track to Be Adopted by Consumers Faster than Any Other Device
Smart speakers, led by Amazon’s Echo products with over 22M units sold in 2017 [201], are on track to a penetration of over 55% of US households by 2021 [156] and becoming the fastest-adopted device in consumer electronics, reaching a 50% penetration in just 3.5 years (the smartphone took 5 years) [128].
Sales of smart speakers, however, are likely to peak in 2019 or 2020 as homes average 2.4 devices per household and voice control becomes a standard feature in most other consumer technologies [128].
Consumers who have smart speakers love them – 50% of Echo owners use their devices daily [81], and over 30% of owners have more than 1 device in their home (64% in the living room, 37% in the master bedroom, and 30% in the kitchen) [38]. Most owners use the devices for listening to music (78%), getting information about the weather, getting the news, and setting timers [190]. More than 29% use their devices to shop [34], and it is projected that Amazon Echo devices will generate $7B in retail sales by 2020 [117].
Augmented Reality and Virtual Reality Are Getting Real
AR is the big news. Software for smartphones by industry leaders Apple and Google had over half a billion AR-capable devices in the market by the end of 2017. That number is expected to grow to 4.25B devices by 2020 [202].
Consumer VR had a slower year in 2017 than anticipated but saw an uptick late in the year as VR headset shipments crossed the 1M unit mark for the first time in Q3 [194]. Two thirds of the headsets sold were lower-priced units designed for use with smartphones, where Samsung led the market with its Gear VR. [79]
While VR seems to have found a niche in games and commercial applications, the market for AR is clearly going to be exponentially bigger. Global spending on AR and VR technology will grow from $11.4B in 2017 to $215B in 2021 [65], with VR headsets leading until 2019, when AR headsets are expected to take the lead and dominate sales [105]. AR has already found early use in the $30B digital segment of the home furnishings market with Augmented Retail applications from Ikea, Wayfair, Lowe’s, Williams Sonoma, Amazon, and others.
VR sales will increase in 2018 with lower-cost headsets entering the market (e.g., Oculus Go) and a new high-speed connectivity standard called WiGig that will allow headsets to be wirelessly connected to the powerful computers that powerful VR requires.
Mobile and Computing: Slower Growth as the Market Continues to Shift
The world is increasingly mobile and connected, with the average household having 8.1 connected devices, up 76% in 2010 [81]. The market for screens continues to shift, and the smartphone is reaching maturity with 264M people in the US owning phones (82% penetration) and using them 12 billion times per day [170]. However, smartphone sales slowed to about 2–4% in 2017, only the second time that sales have ever been below double digits [51]. But with the addition of AR, biometrics, and a continuing trend of 2/3 of owners upgrading every two years to new phones like the iPhone X, sales are expected to climb again in coming years.
Tablets continue their sales decline, dropping 3–4% in 2017 as the focus shifts to larger devices for business uses and ultramobile PCs take market share. However, Apple did see its first increase in tablet sales in 14 quarters in Q2 2017 [63].
PC sales have stabilized and showed a modest increase of 1–2% growth for the first time in years, primarily supported by the growing sales of very low-cost Chromebooks – Chromebooks outsold Macs for the first time in late 2017 [50].
More Data, More Connectivity
The velocity of data is increasing and will always increase. Estimates suggest that global traffic will increase 3x by 2021, while the number of global internet users is expected to expand from 3.3B in 2017 to 4.6B, 58% of the world’s population by 2021 [80]. Video consumption, one of the largest data uses, will grow from 73% of total IP traffic to 82%, reaching 3 trillion internet video minutes per month (that’s 5M years of video each month, or 1M video minutes per second) [80]. Smartphone traffic will exceed all PC traffic by 2021, and WiFi and mobile traffic will generate 73% of all IP data. [80].
Cybercrime
Cybercrime is growing as well, and damages are projected to reach $6 trillion annually by 2021, double last year, while ransomware costs will exceed $5B in 2017, up 15x in just 2 years [168].
Faster Networks
On the horizon, two technologies promise new high-speed connectivity for consumers. LTE-A, an advanced version of today’s LTE, can deliver wireless speeds of 225–300Mbps. It is already being deployed by Verizon and is compatible with most current phones at no additional cost to subscribers. 5G, a new technology still in early trials, promises wireless speeds of 5–10Gbps with very low latency, making it ideal for fixed wireless broadband (wireless replacement for wired cable), IoT applications, connected autos, and much more. Verizon has announced early deployments starting in 2018 of fixed wireless, and industry-wide deployment is expected by 2020.
More and Cheaper TVs, More and Better Streaming, More Ways Consumers Are Watching
As we say every year, this year TV sets have the best picture quality ever and are bigger, thinner, and less expensive than ever before. Television sales overall declined slightly in 2017, but 4K TVs continue to be adopted faster than their earlier HD counterparts. HDR-capable sets are projected to increase from 23% of sales this year (12.2M units) to 47.9M units in 2021 [151]. Smart capabilities were built into 70% of all units shipped in 2017, and penetration of smart TVs hit 29%, up from 10% just 10 years ago [55]. Prices for 4K sets continue to fall faster than prices for any consumer device in the past – Black Friday sales offered 45” 4K sets for under $200.
Sales of TVs that are connected to the internet increased 10%, reaching 168M viewers in the US [5], and 58.7% of US households have at least one device capable of streaming video to the TV [182]. Streaming boxes and sticks account for 41% of connections to the TV [192], with Roku leading with 37% of market share [56].
Streaming Is Unstoppable, But …
The shift to TV as a stream is gaining momentum. TDG predicts that by 2030, legacy pay TV subscriptions will shrink by 26% and virtual services like SlingTV or DirecTV Now will command 14% of the TV market (just 4M subscribers today) [191]. Complementing linear TV, there are now over 200 subscription video services [137], reaching 64% of TV households and expected to grow to 70% by 2022 [78]. At the same time, the number of households using an antenna to watch TV increased 21% since 2015 to 15.2M homes [45]. But the TV is still the favorite device to watch TV content – 90% of all internet-delivered programming is viewed on a TV set [127].
Coming in the next few years, 5G delivery of video and “Next Gen TV” (ATSC 3.0) promise to change TV once again, with new delivery options and new over-the-air capabilities from local TV stations.
The “Las Vegas Auto Show”: More Electric, More Connected, More Autonomous
This year, manufacturers bring autonomous vehicles closer to mass production and more electric cars to their fleets, and connected cars with semi-autonomous features are becoming the norm.
GM announced a new model (based on its Chevy Bolt) that will have all the hardware needed to be fully autonomous, with the software coming when it is ready [16]. Cadillac will introduce “Super Cruise” into production as well, which offers Level 3 autonomy (self-driving on highways), and GM said it expects to have a self-driving ride-hailing service on the road by 2019 [196]. Uber has made a significant commitment to building an autonomous ride-hailing fleet, buying 24,000 Volvo XC90s outfitted for autonomous operations in a $1.4B deal that is expected to start delivery in 2019 [181].
The US government is taking steps to make development and testing of autonomous cars easier by creating federal guidelines easing the differing laws that exist in 21 different states [44, 102]. The federal actions are based on the expectation that autonomous cars will reduce accidents (94% of US accidents involve human error) and allow more densely packed traffic, which will reduce congestion [175]. Testing that expectation, Google’s Waymo has now racked up over 4M miles of road experience in its cars, which would take the average driver over 300 years to accumulate [175]. Many key issues remain, including insurance, but at least one manufacturer has addressed that issue: Volvo has announced that it will self-insure its autonomous vehicles.
Nearly every major manufacturer has announced new commitments to electric or hybrid cars across their fleet by the mid-to-late 2020s, including 20 new cars from GM, 12 from BMW, and full fleet commitments from Volvo, Jaguar/Land Rover, Mercedes, VW, and Audi [106].
In 2018, cars will get even more connected, adding voice controls (Ford and BMW will build in Alexa capability), and vehicle-to-vehicle communication tests using technologies like 5G will be underway [109]. Statista is predicting that there will be 190M connected cars on the road by 2021 [74], and Juniper Research predicts that by 2022, half of new vehicles will have vehicle-to-vehicle communications (about 2.7% of the market) [27].
As a side benefit, Hollywood is becoming very interested in autonomous cars because the media business believes the cars could boost new consumption. Ernst and Young projects that in the next decade, connected cars (and autonomous cars) could add $20B of revenue to Hollywood. Intel and Warner Brothers have already jumped in with a partnership to provide that entertainment to passengers in self-driving cars [197].
The Smart Home Market Continues to Grow – Security and Voice Lead the Way
Consumers’ interest in smart homes, led by security-related devices, is propelling continued growth, more than doubling in the next 5 years from $24.1B in 2016 to $53.4B in 2022 [52]. By 2020, consumers are expected to purchase nearly 55M devices a year, with the most popular being security systems, thermostats, locks, cameras, and connected appliances [180].
Security and home management top consumer interest, with 37% of homeowners who own at least one smart home device making their purchase to keep their homes safe and 29% to monitor their home when they are away [142]. Sales of professionally monitored home security services will top $14B by 2020 [142].
Major companies like Comcast and Samsung have significant efforts in this space, building on security as a foundation for whole-home smart automation. Comcast’s Xfinity Home service now has over 1M subscribers, up over a third in the last year [165]. Samsung has combined its various smart home groups into SmartThings Cloud, including a partnership with ADT for professional monitoring [101].
Voice control has helped integrate the previously disparate devices in the home and is highly desirable to consumers, with voice-controlled lighting, thermostats, door locks, and security systems all topping the list of consumer interests [81].
Wearables Finding Their Way – Moving More to Become Digital Health Products and Fashion Items
Consumer interests are shifting the wearable market toward devices that are more fashionable, are smarter, and provide more health and wellness monitoring. Wearables shipped about 125.5M devices in 2017, up 20.4%, and are projected to grow to 240M devices in 2021 [48].
Smartwatches are the largest wearable category other than Bluetooth headsets. Apple leads the category, selling 41.5M devices in 2017 [28]. The smartwatch business is predicted to grow to 81M devices by 2021, and fashion watches will become increasingly significant, accounting for 25% of sales by 2021 [28].
Fitness continues to be a primary driver of wearables, as fitness app usage grew 330% between 2014 and 2017. Three out of four users opened their app at least twice a week, 25% more than 10 times per week, and workout and weight loss apps made up 73% of usage [88]. Biometrics in wearables will become ubiquitous by 2020, including fitness tracking and digital health capabilities – in 2017, about 54.5% of wearables have biometrics [21].
However, Bluetooth headsets remain the leading wearable category, representing 48% of sales in 2017 [28]. Building on this demand, a new category of earbuds is emerging that includes body-monitoring capabilities, voice control of other devices, and real-time language translation, and some that act as OTC hearing aids (Personal Sound Amplification Devices [PSADs]).
Digital Health
Digital health incorporates technology from smart homes, wearables, and medical technology, and the market is poised for significant expansion over the coming years. Close to 60% of heads of household in US broadband households have at least one chronic condition, and 27% of those want a monitoring device [70]. Devices that monitor a wide range of medical and health conditions as well as sleep are becoming part of consumers’ smart homes and wearable interests.
A recent study found that a current Apple Watch can accurately detect hypertension at an 82% accuracy rate and sleep apnea at 90% accuracy, and it can detect abnormal heart rhythm to 97% accuracy [163]. Other experimental technologies that are on the horizon will address even more conditions, including breath monitors that can detect 17 diseases including Parkinson’s and some cancers [153].
Combined with a dramatic coming shift in the population distribution of people of age 65+, the need for digitally assisted health care will expand significantly. The number of people in the US population over age 65 will double by 2060, rising from 15% of the population today to nearly 24% [70], and by 2020, 45M Americans will be caring for 117M seniors [112].
Best Buy’s “Assured Living” service is an early entrant in this space, offering a starter package for health monitoring at $389 along with $29/mo. for monitoring. Best Buy also teamed with United Healthcare to provide a wellness coaching service on top of the base package for an additional $59/mo. [112].
Closing Questions
In closing here a few things to think about:
- What is the impact of a consumer saying: “Alexa, I need toothpaste?”
- Is “performance” a marketing benefit of an autonomous vehicle?
- What if we sell 20 percent less automobiles in the USA?
- Do you understand the strategic value of blockchain technology (distributed ledgers) well enough to identify and solve business problems with it?
- Are you studying AI and machine learning to the point where you are ready to partner with the technology to create competitive advantage for yourself?
Hopefully, you can use the topics and information above to formulate questions that will help you achieve your business goals. Thank you for reading.