Smart devices and Silicon Valley-driven consumer electronics are not very ecological or sustainable businesses. In most cases, the Silicon Valley approach to consumer electronics forces consumers to buy a new device model every second year, as opposed to traditional Swiss watches that last decades or generations and can be repaired. The latter business has been sustainable for ages – how can the smart device business become likewise?
Many people buy a new laptop, a phone, and/or a smartwatch every second or third year. The same is starting to happen with many wearable devices too. Generally, many Silicon Valley companies want to represent all the nice values and be very relevant for the younger generations. But their hardware and consumer product businesses are not really ecological. IN fact, one could claim they don’t do too well in any ESG dimension when data and privacy are problematic for social concerns. Furthermore, corporate governance culture is sometimes an issue in some tech companies. Apple has actually had to pay settlements when it has made old devices intentionally slower.
I wrote earlier about how luxury brands can survive in the smart devices business, which is now based mainly on walled-garden ecosystems that have also tied consumers to use a certain brand that includes the device and an app; their users must follow its upgrade cycles for the device to keep working. This walled-garden model makes it more challenging to make the device business sustainable because it is very much based on the idea that users must buy new, expensive devices.
Sustainable business models
At the same time, data and applications are now playing a more central role, which suggests smart devices may become commodity-type hardware in the future. To make the business more sustainable, the following three things are minimum requirements:
- Devices should have longer life cycles – they could be repairable and upgradeable by changing only the components that need to be changed.
- The business model for the device companies should not be based on selling new devices all the time.
- Intelligence and value-add should shift from devices to software and platforms.
An example of a more sustainable model is a project where a sensor tech company, a sports equipment brand, and Prifina (which is a personal data platform company) are developing a concept where sports equipment is built with recyclable materials. They include sensors and components that can be changed, while the most of the intelligence is in the apps that are built on the consumer’s personal data cloud. In this way, the sensors can be quite simple, and their life cycle longer, which also means that manufacturing them requires fewer resources. Most upgrades, intelligence and new features can be developed with user data in the cloud.
Another example is to have sensors and some other components in traditional long-lifetime luxury watches. It is possible to replace outdated parts, but most hardware can last years or decades. These devices are also linked to users’ personal data clouds, and applications are built on that data. This means that many objectives can be achieved by merely adopting new software or upgrading some small hardware components.
Big Tech companies are just now starting to awaken to this idea – for example, Apple and Microsoft plan to enable users to buy original components to repair smart devices. It’s worth adding they took this idea seriously when the Biden administration asked the Federal Trade Commission to investigate anti-competitive restrictions on repair markets.
Luxury brands, consumer electronics, and ESG
It hasn’t been easy for luxury brands to come to the consumer tech business. One reason has been that luxury items are longer-term ‘investments’, while consumer tech life cycles have become very short. New, more sustainable models can also help luxury brands better bring smart devices, clothes, and personal items to the market.
As a whole, we need a more modular approach for the whole market so that devices can be repaired and that their outdated technology components can be upgraded. Further, it also means we need more versatile data and software platforms that can work with different devices and versions, with most upgrades implemented in software.
In one of my previous articles, I explained that sooner or later, activist investors start to look at the tech companies concerning all aspects of ESG. Meanwhile, younger generations who become essential customer groups for most tech companies are also more concerned about sustainability aspects of the products they buy and use.
From a purely technical standpoint, these more sustainable and modular models to make wearable and other consumer smart devices are now feasible. Therefore, we need more companies that not only see that the old model is very unsustainable, but also realize that there is a huge opportunity in building a sustainable business.
In the next few years, we will see a transition to new models where it is possible to repair and update personal smart devices and equipment, where data and application layers are more independent from hardware, and where data and applications are based on open platforms to constantly make better services with new software.