Why Embedded Computing Is Like Rice Krispies

24 July 2014

SONY DSCThe famous writer Arthur C. Clarke  (2001: a Space Odyssey, many others) coined the phrase “Any sufficiently advanced technology is indistinguishable from magic.” (This is part of his “three laws”:  it’s interesting - look it up). We have all seen ‘magic’; it’s the ‘the next big thing’. When it arrives on the market (the iPad comes to mind) consumers are crazy for it. So thoroughly intrigued are they that they run out and buy these things without regard to price or the absolute hassle of getting them. They truly must be “magic” - but why?

‘Magic’ happens when a potential user sees and internalizes what a product can do for him or her. A new product by its mere existence does not create excitement. It is its utility, its function that creates the excitement, makes the magic. Magic appears like a camera flash; arriving suddenly, capturing a moment in time and then just as quickly it disappears; magic products become mundane:  this is commoditization.

Making magic

Making magic, developing the “next big thing” is a crap-shoot. It has been said many times that any really innovative idea has only a 10% chance of ever succeeding, yet every idea takes work to realize and it takes courage to carry on in the face of such odds. As an aside, I should mention that despite the flash analogy I used above, innovation is not a sudden burst of brilliance; it is years of hard work and expense in both monetary and human terms. Our company founder, Thomas Edison, when asked why it took so long for him to develop the light bulb, said: “I didn’t fail a thousand times; I eliminated 999 possibilities.” Tom succeeded where others’ drive flagged: our company was built on equal parts of brilliance and tenacity.

Those of us in Business Development spend a great deal of time listening: to our scientists creating new ideas; to our engineers putting those ideas into practice; and to our customers, expressing their needs. Together we work to create the magic; utilizing technology in new, exciting ways. This is a constant process as last year’s ‘big thing’ becomes today’s commodity. Our challenge is to keep the magic alive.

Products have an analogy in world economic theory. In world economic theory, there are ‘core’ economies and ‘peripheral’ economies. A core economy is one that produces, distributes (and often finances purchase of) finished goods for customers. A peripheral economy is an in-feed for core economies, providing commodity or marginally-finished goods (a peripheral economy provides rice; a core economy provides Rice Krispies, finances the machines that make the breakfast cereal and leases the vehicles that distribute Rice Krispies to your neighborhood store). Selling rice makes money, but it is a low margin commodity (that does not deliver growth), whereas making Rice Krispies adds value to rice, makes it worth substantially more and delivers growth. Why? Because it gives the end user something they can – well – use.

The counter to commoditization : adding value

We have a saying in our business: “It’s not what it is, it’s what it does.” The ‘does’ is a value-add; a functionality. These value-adds come in many forms; in our business, embedded computing, it’s reducing the size of a product, making it do more with a little or no additional cost or reducing risk by higher reliability, obsolescence protection or higher performance. For us (and many others) adding value is increasingly the domain of software; both internal and external to the core product.

Internal software ‘adds’ include middleware to make development on our platforms easier and applications to reduce the time and expense of system-level integration. Both of these support solving the end user’s needs and help our customer (who sells to the end user) be successful. External software includes such functionalities as support methods; development tools and documentation; simulation tools that can test run use scenarios; a life cycle management program; and a steady roadmap of development to offset obsolescence.

Given the great cost of product development, it just makes sense that these value-adds be considered as part of the initial development process.

Slipping into the periphery: products becoming commodities.

We all know of products that have had the magic and then become commonplace. I’m old enough to remember the HP35 calculator (the first “scientific” calculator). It cost $400 ‘in the day’ and boy, was it magic. Today, calculators like these are give-aways at trade shows. Why? Because competitors emerged, finding ways to make the magic at less expense, in-feed technologies improved as volume increased. Demand for the magic was really high, competition got brutal; margins dropped and weak players folded. It is fair to say that every product made will suffer one of two fates; it will either be commoditized - or it will become superfluous. You can’t stop this trend, but you can delay it – by adding value. What did HP do? They added value by answering a need for functionality; specialization. Volume fell, but margin slide was limited.

Think about the things you make, and ask yourself: “Am I building (or developing) a commodity (am I peripheral?) or am I building (or developing) products with added value (am I core?)?”  How long before what I am building (or developing) becomes commoditized? What does my customer need and want and can I deliver those things now - and in the future?

Larry Schaffer

Larry Schaffer has been with us in a business development role since 2001, and works to create and maintain long-term, strategic relationships with key companies engaged in embedded computing for ground systems applications with a strong emphasis on image processing and distribution. He was born in Pennsylvania and educated as an Electrical Engineer in New Jersey and California (where he now lives). Just don’t ask him to tell you about being a war baby…