The hype surrounding wearables needs some belt-tightening.

Photographer: Michael Nagle/Bloomberg

The Next Big Thing Isn't at CES

Leonid Bershidsky is a Bloomberg View columnist. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru.
Read More.
a | A

The narrative surrounding the Las Vegas Consumer Electronics Show this year is about hardware makers looking for new revenue drivers. The consumer electronics industry only posted 1 percent growth last year, after shrinking by 1 percent in 2013. It is stagnating without new devices such as the laptop in the late 1980s or the iPod in 2001. So what could be the next breakthrough device?

A video posed by the Harvard innovation lab shows how some killer gadgets changed our lives, or, to be more precise, our physical desktops. Physical record collections died out in the same way. Technology has uncluttered our environment, making it easy to transport our cultural and social wealth -- or get access to it from anywhere.

Businesses that provide these solutions are now mature. Sony can try to reinvent the Walkman as a high-resolution audio player with a $1,200 price tag, and Apple can still sell smartphones and laptops at premium prices. But the devices we commonly use are now commodities. The smartphone became one in 2014, when Chinese producers such as Lenovo, Huawei and Xiaomi mounted a credible challenge to the Apple-Samsung duopoly. A price of about $300 for a flagship phone is sustainable if advertising spending is low and especially if, like Xiaomi, the manufacturer builds a content and services business on its platform, lowering its dependence on hardware margins. That start-up is now valued at $45 billion, more than Uber, precisely because it has adapted to a commodity market.

Survival in mature markets is about boring things such as supply-chain management, cost optimization and, sometimes, the successful marketing of insignificant improvements. Smart TV manufacturers are doing a lot of that at the CES this year: ultra high-definition sets have been a growth niche. Only 6.4 million units have been shipped, though: A TV is still a TV, a commodity. 

The next big thing will only take off if it helps to further reduce the clutter in our lives, if it allows us to throw something away or to stop doing some hated chore. This is the test that will determine whether technologies presented at CES this year will be growth leaders. They mostly fail.

The Internet of Things is big in Vegas. Something called the Symphonic Light Speaker -- essentially a connected lamp that can serve as a speaker -- is getting positive reviews. But does it, or any other connected object, reduce clutter or increase it? Buying these devices will mean buying special gadgets to make the expanded networks secure. It means more perplexing, nonstandardized gizmos to maintain, fix or reconnect, and keep track of on your phone. There is a wealth of forecasts touting the Internet of Things as the next big breakthrough, and plenty of big numbers  (a nice collection of links to them can be found here). Nonetheless, these devices increase everyday complexity instead of reducing it. 

The same can be said of most modern wearables -- another field that is getting a lot of attention at CES. Despite the  hype, only about 52 million devices were sold in 2014. That's fewer than the number of smartphones sold by Xiaomi. That's because these devices mostly add to the clutter: They require a smartphone to be useful, and a smartphone can do pretty much everything they can. Apple Watch will probably do well when it hits the market this year, but only because it's a beautiful object from a cult manufacturer, not because it's really useful.

Then, there are self-driving cars: They, too, are a CES highlight. The question to ask, though, is whether driving is a chore or a pleasure. If most people like driving -- and many car owners do -- then self-driving vehicles are just another niche product.

The next big thing is probably not on display at CES -- and that's fine: Breakthroughs don't happen every year.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Leonid Bershidsky at lbershidsky@bloomberg.net

To contact the editor responsible for this story:
Max Berley at mberley@bloomberg.net