Every year, around this time, I try to update my thinking about the world. What’re the most important trends that are going to impact us over the next 5-10 years? On an annual basis, the trends don’t necessarily change year to year. And they’re never comprehensive (mostly because they’re limited by the small goopy mess residing between my ears) -- but for the last 5 years or so, I’ve tried to be systematic this time every year about what’s coming.
Going into 2016 I wanted to make these predictions public. And to go a step further, I also want to follow each with a controversial implication associated with each prediction. I may be far from right or I may be dead on. The one thing I can guarantee is that I believe them to be true and that most investors and innovators wouldn’t agree with them off the bat. If they weren’t controversial, they wouldn’t be interesting.
1. “Developer Tools” will become more interesting than SaaS
Application development has long been a story of hundreds of engineers trying to understand complex workflows and building monolithic services to automate processes. Whether it was something as simple as Excel (building in its own charting and visualization tools) or it was something as complex as SAP (building in calendar management, document rendering, invoice management, etc.), the world of software was dominated by these types of comprehensive solutions.
Today, however, it’s becoming easier than ever to piece together best of breed components in the process of application development. Through APIs, data can migrate easily between clouds allowing developers to rely on other vendors like Google for predictions, Twilio for communications capabilities, or Box for document hosting and rendering. And with these micro-services focused on simplifying the complexity of software development gaining traction, the capabilities of each will improve - increasing the divide in quality between the off-the-shelf component and the build-it-yourself approach.
Going into 2016, I think this microservice conversation is going to come from the periphery to mainstream. And what’s more, my guess is this will be the year that folks realize the next great “IT companies” are going to be developer focused, not CIO focused. All the tailwinds are there. IT organizations are transforming to groups responsible for stewarding digital transformation (whether or not they have the requisite skills). SaaS isn’t interesting anymore, it’s the technology that will enable companies to build new experiences for their customers. As such, the most interesting IT companies in the world will be building the tools to simplify development and streamline assembly. If you’re not convinced, just look at the waves Slack, Atlassian, and Twilio are already making along these lines today.
2. People will start to obsess over “Identity” instead of “Messaging”
Over the last few years, an incredible amount of attention has been paid to messaging and marketing automation services. Effectively, anything that can help a business or an individual reach out to the audience they care about. My observation is that in most of these situations, the subject of communication is known and the only thing that changes is the medium through which the message is delivered.
The stickiest businesses of the last few years have been the ones with strong network effects derived from indirect relationships; value conferred to users by understanding who someone is that they wouldn’t already know. The businesses that create this value tend to offer some sort of solution that captures identity. LinkedIn knows who you are at work. Facebook knows who you are in general. Netflix knows what sort of content you enjoy. Amazon knows what you like to buy.
In 2016, I think that people will start to realize the communications layer of the IT ecosystem is just the front end. Sure, you can add incremental platform capabilities - enabling app development and incremental integrations. But the thing that is going to drive truly differentiated businesses is going to be an understanding of identity. Without that understanding, it’s virtually impossible to create strong recommendations that simplify users lives and tie people into an ecosystem.
For investors and innovators, I think we’ll see some of the darlings of enterprise chat, consumer messaging, and marketing automation struggle to do big things - while businesses and individuals start doubling down on solutions that aggregate information about users and maintain identity.
3. At least one well-funded VR Company goes under, in an otherwise successful year
I am a big believer in the potential of VR. And I believe that 2016 will be a successful year for VR.
However, I also believe that people over-estimate how many early adopters will shell out hundreds of dollars to plug a headset into a small computer and walk around their living room alone. We also estimate how easy it will be to translate content designed to display on a small rectangular screen sitting meters away from our faces to lenses that effectively touch our eyeballs.
My prediction is that in 2016, we see the first profitable VR companies emerge - likely creating short form content for the small number of consumers out there. I’m skeptical, however, that these companies will be the well funded venture backed startups we all know. Instead, I think that (just like mobile gaming) there will be some simple content that create early hits for specific studios and that enables companies to keep producing more and more content. The early revenues will be low, but it will get the ball moving. If I had to make a bet on where early traction would come from, my guess would be early winners would come from puzzle apps. Think Myst for VR.
But while I do believe we’ll have at least one VR content company at a 100M run rate by 2020, I think we’ll see a bunch more corpses first. In particular, while my guess is we’ll start to see real consumer traction in 2016, we’ll also see the first well funded startup collapse. Too many of these companies are investing ahead of the market, burning cash, and creating expensive content targeted at a mass market… in an industry that will be populated by early adopters for some time.
4. Cleantech will become mainstream again
Over the past year, I’ve been surprised at how many companies have built interesting businesses based on sustainability. Whether it’s solar, water conservation, or food production, the opportunity is there. The explanation can probably be found in the dropping cost of the hardware that enables these more sustainable businesses. Sensor costs are dropping, remote monitoring is improving with the use of satellite imagery and drone reconnaissance, and solar cells and EVs are starting to hit a point of parity from a cost perspective. Yet with all of the innovation that is occurring, every entrepreneur I meet strategically avoids talking about “Cleantech” wherever possible. After a decade of getting burned, that makes sense.
But my guess is that 2016 is the year investors realize that 10x improvements in resource efficiency are within grasp in a lot of places. Whether it’s cutting emissions by 1/10th through Tesla batteries and solar cells (Tesla and SolarCity are “clean”), reducing gas and infrastructure costs through ride-sharing (Uber is “clean”), improving revenue by keeping returned goods from going to landfills (Optoro is “clean), or reducing the cost of food by 10x by reimagining the production process (Impossible Foods is “clean), my guess is that 2016 is the year many investors realize that “Clean” is often just business.
(Consequently, investors may also realize that the one fund that had confused “Clean” with ridiculous technology moonshots subsidized by the federal government may have been the one that gave “clean” such a bad name)
5. The most exciting tech products of the year will come from the tech giants (Google, Facebook, Amazon, Apple, and Microsoft)
For years, I’ve always looked to young companies to offer cutting edge innovation that truly wows me. Even if the technology challenges aren’t enormous, I’ve been consistently amazed over the last decade by how deeply companies like Facebook, Twitter, Uber, Airbnb, and Oculus have impacted the way I look at the world.
But as I look out, the most interesting technological shifts underway - innovation in things like artificial intelligence, robotics, telecommunications, machine vision, quantum computing, and the like - are all being driven by the big technology companies with different types of leaders. Larry Page, Jeff Bezos, and Mark Zuckerberg don’t care too much about Wall Street’s expectations. They care far more about using their massive sources of cash and massive user bases to keep their businesses deploying the types of technologies that will change the world. And the amazing thing is that it’s working.
I am sure that 2016 will surprise me. But my intuition is that while we’ll see some unbelievable tech-enabled services pop up in 2016, the most interesting technological innovations of the year will come from the giants.
----
Photo Courtesy of Jeff Golden