• DirecTV Now!

    In early 2015, satellite TV provider Dish Network unveiled Sling TV, a vastly scaled back Internet version of its traditional television offering; a product for "cord cutters", or those without a traditional pay TV package. Twenty channels for 20 bucks a month. It's simple and so far it is a bright spot amidst an overall annual loss of customers at the company. Dish surely will be investing heavily in this platform.

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    And so DirecTV has finally entered the fray, after being digested by new parent AT&T, and will introduce a 60 channel package that includes ESPN, HGTV, CNN, Nickelodeon, and other high profile names for $35 per month. The "DirecTV Now" plan is well below the 150 plus channels I get from Dish for about $85, and there will also be a 100 channel plan for $60 per month.

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    This is the new normal. Almost all of the decent content that we purchase on TV will also be fully available online in the very near future. It will not be "free" or advertising driven as we have become accustomed to in our online reality, but rather a scaled back version of what we have been buying to watch on our traditional TV's over the past 35 years. The primary difference for the internet version will be the lack of extra channels included in theTV bundles of today. One hundred channels is a lot of channels and $60 sounds much more reasonable that the $85 I pay for 50 additional channels that I will never watch. Another benefit of consumer choice is the fact that these lower prices on the internet will eventually drag down the inflated TV prices many of us are paying once the internet package start generating enough money for companies like Dish and DirecTV. Pretty soon we will all be able to access the same content on any device, for a price. Free content? There will be some of that in limited supply, but until advertisers are happier with the internet advertising results they have been getting, revenue must be generate through content subscriptions. All of this is challenging for those in the industry, but great news for those who consume their content. For internet purists, mor econtent is on the horizon, and for traditional Pay TV users, a better deal is in motion.

  • Third-Party Intervention at Facebook

    These days the average consumer is not really all that gullible, but rather is a much more cynical creature than in years past. By the time we reach adulthood we have received and filtered hundreds of thousands if not millions of marketing messages, which means means that less principled marketers can't fool too many of the people too much of the time. And it is primarily for this reason that marketers, and of course decision-makers within other functional areas of the organization, should employ methods of third-party verification whenever and wherever feasible. Savvy business professionals, like the ones pictured below, understand this.

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    This is why it is a good thing that Facebook, in the wake of some bad publicity a few months back regarding the accuracy of its advertising metrics (analyzed in a recent KnowNow! Marketing post), has finally decided to include more independent verification of its internal metrics. All of this after the company more recently found even more problems, or what the company calls "bugs", that led to inaccuracies on four separate measures. Additional independent review will assuage many of the fears that ad buyers now have about the integrity of the information they are getting from this place where they spend so many of their marketing dollars. The sheer reach of the site makes it difficult for ad buyers to have much leverage with the social media behemoth, but Facebook does want good relations with its customers and also wants to avoid any government regulation that might stifle efforts by the company to grow in the future. It's better to nip this problem in the bud, and third-party verification is a step in the right direction for Facebook. And let's face it, regular, third-party auditing would be an appropriate additional step if Facebook is really serious about transparency.

  • Black Friday Transformed

    A few years ago in a Chicago Tribune story I observed an obvious phenomenon that I called  "Holiday Creep", that is the tendency for retailers to offer large and larger "Black Friday" deals earlier and earlier in the year. This practice over many years has resulted in the dilution of the importance of the actual Friday itself, a day which has traditionally not only been important in terns of revenue, but also as a key indicator for how the entire holiday season might work out for the retailer. And so the deals, as well as much of the actual buying, are now spread over several days.

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    Another factor in play has been the very recent lack of huge crowds in stores on Friday itself. It's still busy in lots of places, but the news pieces showing mobs of who I affectionately call "Adventure Shoppers" trampling one another to get limited supply, "door buster" deals seem to have all but vanished. This is not only due to the rapid rise of e-commerce and its cannibalization of brick-and-mortar sales, but also the fact that traditional retailers are seeing the benefits of having ramped up e-commerce platforms and harmonized in-store and online marketing mix efforts. Best Buy, for one, is on the rebound even in the face of Amazon's lower cost business model. Kudos to Best Buy. And so at most major retailers folks can easily access almost all of the same alleged promotional deals online as those that exist in the stores themselves. So why get off the couch and fight a bunch of people who get an adrenaline rush from the "adventure" of competitive shopping? There is plenty of football to watch.

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    Online sales this Black Friday set an all time record and eclipsed brick-and-mortar sales for the first time. And so the day itself, while still being a huge leisure day for the legions of Americans who get time off, will still be important for the shopping culture, the huge crowds are probably gone for good. And good riddance. Unless, of course, retailers begin to see other benefits in attracting massive amounts of bargain-hungry shoppers to its cost-intensive physical locations, in which case the momentum might shift back in the other direction. For now, however, it is unlikely that this trend will reverse; and with Amazon now owning and operating its own fleet of delivery trucks, it looks like the retail landscape will continue to change for the betterment of the shopper.

  • Faster Casual

    With the blurring of lines between fast food (not sexy) and fast casual (somewhat sexier) sectors of the food service industry, it seems one of the factors that would most certainly separate the two categories would be table service. Fast food just doesn't have it. But all of that is about to change.

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    In a paradigm-shifting announcement, McDonald's has decided to add table service to all of its locations in the near future. This move will further confuse the two categories, but who cares? Table service might be just the ticket to alleviate the service time problems that the company and its customers have been experiencing for many years now. New positions will be created to serve food and help customers with questions, but much of the labor should be shifted from the counter to that function as pressure on the counter is alleviated by touchscreen ordering via self-service kiosks, so it's not expected that McDonald's would increase its labor costs very much. This is especially important for the company to consider now that minimum wages are rising in many areas of the country.

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    In a world of increasing consumer expectations, McDonald's simply isn't measuring up, and with only one out of five Millennials never having even tried a Big Mac, the brand could be in for some real trouble in the future. With Taco Bell moving upscale with a new "Cantina" format, marketers feel that they need to do something to improve the customer experience, which has waned of late. But unlike Taco Bell, marketers aren't introducing a new format, but rather are dramatically changing the existing format. These are very different brand strategies indeed. Mobile ordering will also be a part of this transformation, featuring an expansion of the company's smartphone app. Both Taco Bell and McDonald's are making bold moves in this brave new world of consumer empowerment. For McDonald's, this looks to be a good start, but it will also need to make major improvements to its product mix going forward. Don't you think? The next post will be after the holiday weekend. Happy Thanksgiving!

  • Meat Without The Slaughter

    There are some vegans, vegetarians, and animal activists out there who are salivating at the opportunity to enjoy the flavor (and nutritional value) of meat without killing any actual animals. And if marketers at companies like Impossible Foods have their way, such a product is not terribly far from being a reality on a wide scale. But investors in this technology are less interested in addressing the niche meatless crowd than they are making a product that's palatable to meat eaters as well. Veggie burgers have come a long way since they were introduced in the 1970's, but quite frankly they still need lots of dressing up to have much appeal to anyone but the most health-conscious of consumers.

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    In one case, pea, soybean, and beets have been mixed together by food scientists at the molecular level to create flavors and textures that mimic real meat. A rather delicious-looking burger is already available at high end eateries in New York City, but at up to $19 for a burger, it's still a bit out of reach for most people. In fact in 2014, it cost Impossible Foods $20 to make a single patty. Hopefully, these costs have since come down. Another marketer, Beyond Meat, has been continuously developing its Beyond Burger since 2009, and the product sells well in high-end specialty stores like Whole Foods Markets. Another player, Memphis Meats, is taking a different approach, using self-renewing animal cells to make meatballs and burgers. This is really happening!

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    There is clearly a need for meat substitute products, and an increasing number of consumers (2/3 in a recent study) say they will pay more for "sustainable" brands. Real meat is not all that sustainable for a variety of reasons, and so a product that tastes good and doesn't harm the environment would theoretically be very desirable to the majority of people. After all, it has worked well in a variety of other product categories. And so currently, there are a number of well-funded start-ups working towards developing and marketing products of their own. Delicious, sustainable, reasonable-priced. It might not be too long before the hockey puck-esque veggie burgers of today are replaced by much more authentic substitutes brought to you by R&D chemists messing with plant and animal molecules. Pretty cool stuff. This is certainly a very exciting new development in the relatively unexciting meatless meat category.

  • Booze At The Bell

    Taco Bell is doing well, but it, like so many other aged fast food companies, needs something to refresh its brand. Sure, it ain't easy coming up with new products based on the same eight ingredients, and the marketers at Yum Brands are absolute masters at this. I thought they "jumped the shark" with the "Chalupa", but I realized how wrong about that I was when I saw the "Quesalupa". And now these clever marketers are up to something much bigger than a Chalupa.

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    And it's not a new product, but rather a new concept. The company is opening the flagship Taco Bell Cantina location on the Las Vegas Strip, an area in a city that now stands with New York as a place that all walks of life visit. It's an excellent way to say to the world, "We are still here". But that's not all. Taco Bell marketers are now saying, "We are still here. And we now serve beer". The new, high profile location will not only serve alcohol, but will also feature a retail shop, an open kitchen, a tapas-style menu, and of course a Vegas-friendly 24-7 operating format. It's all part of a master plan to increase store count by 2,000 locations globally through 2022 in hopes of reaching $15 billion in annual revenue.

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    McDonald's, a flagging brand for sure, and Subway, whose best days are probably also behind it, already have a presence on the Strip, and so Taco Bell won't be too lonely. But this new concept is arguably a move above even a fast casual play, from fast food straight up to casual dining. Will such a leap work? Can Taco Bell steal some of that Chipotle market share still sitting out there, or is it too late for that now? It's hard to imagine a higher-end Taco Bell or the traditional and cantina formats co-existing, but with most fast food chains struggling to stay out of the decline stage of the Product Life Cycle, Yum feels like it needs to do something drastic to compete in the long-term, and a brand overhaul is apparently a big part of the plan. Perhaps the old concept will be phased out if this new concept proves to be fruitful. The company is even making some changes to the logo for the first time in several decades so that people recognize that major changes are indeed in motion. The advertising and other Integrated Marketing Communications tactics employed during this process should prove interesting as well. For now McDonald's, Burger King, and Wendy's are content to watch from the sidelines since this is a pretty risky proposition. But it might be a risk worth taking. Good for Taco Bell.

  • AFL On Last Leg

    The Arena Football League (AFL) has been around for 30 years. When it debuted with four teams in 1987 I was a senior in high school, and the "novelty" sport was seen as football's answer to indoor soccer or indoor lacrosse that is, indoor versions of outdoor spectator sports. The products basically consist of a much shorter field, crashing into walls, lots of scoring, and lots of action. And the AFL product performed relatively well for over 20 of those years drawing big name owners like John Elway, Bon Jovi, the 70's band KISS, and a number of NFL owners as well. Perhaps this could be a sort of developmental league for NFL players, some thought. It was popular enough that, not too long ago, there were three indoor football leagues. Labor problems and a lousy economy caused a shutdown several years back, resulting in the merger of the two top tier leagues to create one healthy, top-tier product. Or so it was planned.

    Although the current lower league (the IFL) is stable at present, the new AFL looks like it's on its last leg. Over the past few years the league has lost most of its franchises (some of which defected to the lower league) and at the end of this last season, the product featured only nine teams. Five of those teams, including the Arizona Rattlers, a team that been there from the beginning, have just left the league. Arizona is moving to the IFL (which only has 10 teams ) and the other franchises are shutting down including the LA KISS. And in the case of a bunch of 70's-era rockers with painted faces owning a professional football franchise, perhaps that's for the best.

    But despite the fact that there are only four teams remaining, the league is somehow confident that it can survive, as it did a few years back. After all three of the remaining teams are owned by very wealthy NFL owners. But will that be enough? Will four financially healthy teams provide the level of competition necessary to please fans or will a four team "league " be a tough sell for marketers? Can the AFL expand before the next season begins? Who would invest in a failed product? The IFL has no employee union and thus enjoys a much lower cost structure, but it too is struggling to remain relevant with only 10 teams. Wouldn't it be better for the two surviving leagues to merge? What a mess this has become and, quite frankly, the fan base has always been pretty limited to teenage boys and their families so there doesn't seem to be a great deal of untapped market potential out there. And, let's face the facts, teenage boys aren't what they used to be. Do today's teenagers really care about this stuff?

    Ah but don't expect that these inconvenient truths will stop overzealous (and sometimes irrational) sports marketers, as new lower league is also in the works.  So there will be even more indoor football for an almost non-existent market! For my money, I have little use for these novelty sports. There are simply too many entertainment options out there, and watching a bunch of guys running around a hockey-sized field, scoring 20 touchdowns a game isn't my idea of a good time. But I must remind myself that I am not in the target market. And with interest in football as a spectator sport stalling, does this product even have a chance? Can it generate enough revenue from the combination of media rights, sponsorships, attendance, and merchandise necessary to turn a profit? We shall see.

  • Downsizing For A New Era

    After decades of seemingly everything being offered in ever larger sizes and quantities, social trends like the obesity epidemic have driven marketers to re-think product sizes, number of servings, and nutritional content of their products. Americans have simply enjoyed too much of everything in too short of a time, and unfortunately it shows. So, recently much smaller sizes have emerged here in the U.S. But smaller sizes have been rather common in Europe over the years, and Europe doesn't have quite the obesity problem facing the U.S., Mexico and others. But more often than not, downsizing a product doesn't result from addressing a social trend, but is rather due to cost of ingredients and price point. Or more accurately, such a move usually stems fro a number of factors rather than only one.

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    For example, Coca Cola now offers a smaller can size so that it can offer a lower price point for cash strapped consumers while also appearing to be less impacting from a negative nutritional standpoint, since calories, salt and sugar counts are lower when product sizes are lower. Another marketer, global snack food giant Mondelez, haa decided to decrease the weight of its Toblerone chocolate bar by increasing the space between the product's signature gaps. The smaller product has been downsized from 170 grams to 150 grams (sold at discount stores), while the larger bar went from 400 to 360 grams. The company cited the increasing cost of "many ingredients" for the move (cocoa in particular has risen quite a bit over the past three years), and also said that it didn't want to raise prices as competitors have done. So when you don't want to raise the price, you must downsize the product. There is also the matter of the drop in European currencies versus other in the world, which makes it harder for companies that do business in Euros or Pounds to turn a profit. There are so many factors to consider.

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    While downsizing is perfectly legal, it is only really ethical if it's not too sneaky and consumers are made aware of the change. And perhaps brands can grow their markets through downsizing as greater number of  people are more apt to indulge if the snack food products are smaller in size and thus "less bad" for them. These strategies seem to be working everywhere so for whatever reasons, small is getting pretty big!

  • Dish Seized, Mom Charged

    It sounds somewhat ridiculous, but a recent situation involving a woman with an Internet business and state health authorities not only raised some eyebrows, but also serves as a reminder of the controversy surrounding laws enacted decades before the Internet that might or might not apply to contemporary society. This is one such case.

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    The single mother of six kids was cited with two misdemeanor counts after launching an online forum called "209 Food Spot", which allows people in Stockton, California to exchange recipes and sell their specialty dishes. You might guess that it's the selling of the prepared food that has health inspectors concerned. One side argues that the entrepreneur in question is part of the emerging gig/shared economy enabled by social media and compares what she is doing to what Uber and Air B&B have done.The other side argues that she does not have a business permit or, more importantly, does not undergo necessary health inspections that help protect consumers from eating food that harms them. Despite the best efforts of regulators, many consumers still get sick.

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    Who knows which way this case will go, but it will certainly provide some precedent for future issues involving the sales of unregulated prepared foods over the Internet. How important are these health inspections? In the wake of what happened at Chipotle, they seem rather important indeed. Do kids who sell cookies on the side of the road need permits and health inspections too? It would follow that they would, but that sounds a bit ridiculous. Doesn't it? This one should be interesting.

  • E-Sports League On Horizon

    Activision Blizzard, one of the original video game companies from way back in the day (the 70's), has big plans for the next generation of gaming. Sure, there have been video game competitions for many years now, and over the past few years some of these events have begun to draw healthy audiences. Welcome to e-sports, competitive gaming for the player and spectator alike. It's nothing new. But what marketers at the world's largest video game company have in mind will take the gaming phenomenon to an entirely new level.

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    Apparently, an e-sports league is in the works, and Activision is currently in talks with about 100 e-sports team "owners" and trying to obtain data pertinent to forming a league. Barring the usual arguments that e-gaming is indeed not a sport, it is hard to argue that if it isn't a "spectator sport", it most certainly qualifies as "spectator entertainment". And if people want to watch, who are we to judge a market that is expected to grow to 88 million people and comprise 10% of sports viewing by 2020? Hey, perhaps this is where all of the NFL viewers are going!

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    It remains to be seen whether or not a league is viable at present, but it does seem like a logical step in the evolution of e-gaming. There have been a few marketing gimmicks in the past, but nothing approaching a serious league, and a league could unify fans in a way that would be difficult to duplicate through other marketing efforts. Perhaps it would be advantageous for all of the major video game companies to band together and form a joint venture so that a league has a better chance of surviving, rather than letting Activision go it alone. Hulu is an example of such an arrangement as traditional TV companies decided to join forces to penetrate the online channel as opposed to individual efforts. 

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    But there is no evidence of such an alliance, and one might not be necessary. Activison plans to hold tryouts starting in 2017 for city-based teams around the globe that will compete in a popular shoot-em-up game called "Overwatch", so this could be the beginning of something big. yet it is unclear at present how the company expects to generate revenue since e-game spectators are currently used to seeing games for free and actively employ advanced ad-blocking technology, reducing the value of any advertisement placed. But generate revenue this product must! The e-sports industry is expected to reach just over $1 billion by 2019 so first mover opportunities are still available for a company that gets the formula right. And it looks like Activision, in a fitting nod to an industry it helped create, will be the first to take a major plunge into organizing e-gaming as a money-making machine. 

  • Innovation at Apple

    Apple is one of the most valuable companies in the world, and it's iPhone product is not only a smartphone, it has become an important part of global culture. Apple has been an incredible company for many decades. Until recently, that is. For Apple, the last several years have been pretty boring by Silicon Valley standards. Other than the iPad, which had a brief moment of glory when it was introduced, it's been quite a while since marketers have come up with something truly innovative. But perhaps all of that is about to change.

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    If investment in research and development is any indication that something big might be in the works, then one need look no further than the $10 billion that the company has spent on R&D during the past year. That is a considerable chunk of change, a sum larger than the annual revenues of almost half of the public companies on the S&P list. But don't worry because $10 billion is only 5% of the company's total revenue for the year, and the allocation represents the lowest such among the 10 largest tech companies. So the investment is large by itself, but not necessarily large as a percentage of revenue. Indeed Apple could be spending more to develop the next big thing.

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    Here is the bottom line. Apple needs to make something new and quickly. It's a tremendously successful company and one of the most globally recognized brands in the world, but it hasn't really done anything exciting for quite some time. One would hope that a $10 billion R&D investment would lead to at least one major innovation, but Apple has struggled to innovate since the death of Steve Jobs, the company's former guru. Perhaps Apple marketers should look at outsourcing some of this R&D or perhaps by purchasing more start-ups, as Google has done over the years, and the company might have access to more ideas. Right now, Apple rests on its laurels selling mature products while accumulating massive amounts of cash that it has trouble spending. Not a bad spot to be in. But innovation? Not so much.

  • Don't Ostracize the Plus Size

    Despite the best efforts of government, industry and even diet-obsessed consumers, our obesity epidemic is still getting worse, and the problem is especially acute among women, 40% of whom now meet the standard government definition of obese. And with 35% of men meeting that metric there seems to be no end to our expansion. Certainly, this has been the reality for a very long time, but it is interesting that most marketers have been slow to recognize the marketing reality of a $20.4 billion segment of the apparel industry that is growing twice as fast as the overall U.S. apparel market.

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    Most models are still unrealistically skinny and despite the success of a few TV shows and movies as well as a few plus-sized celebrities, we are still a society that aspires to be thin. And this may never really change since it's the healthiest way to live, but with the continued proliferation of consumers needing larger sizes, it is truly a wonder that retailers in particular have yet to integrate these larger sizes with the rest of the product mix, instead opting to hold on to the ancient tradition of relegating these goods to "plus size" sections and/or plus-size store formats. Isn't it time to get with the times?

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    Well it is for one 230-store retailer, Michigan-based Meijer's, which has decided to place what the retailer calls "extended sizes" alongside the "straight sizes" so that "all customers (can) have the exact same experience at Meijer's". A bold move for a market follower to make, as this shift in the kind of consumer that marketers want to attract will result in higher costs from vendors who charge more for larger sizes. Until this supply chain dynamic changes, those costs will have to be absorbed by the retailer and/or the consumer. The retailer already has comparatively low price points and so doesn't have much margin to play with, but are clearly thinking of the potential gains employing such a market development strategy. And with retailers like high end Swedish retailer H&M (which pulled plus sizes from its New York stores to conserve floor space) moving in exactly the other direction, there is clearly ample opportunity to address the needs of this growing market .

  • Ultramobile Grows, Tech Sector Woes

    Although the PC market, which includes devices such as desktops and laptops, has been in decline for several years, a growing number of consumers are moving towards an emerging PC category, "ultramobile premium laptops"., which are really just lightweight laptops that are easier to carry. This high-end segment includes Apple Mac's and Microsoft's Surface products and it has grown from about 10 million units sold around the world in 2012 to over 50 million units this year and will expand to almost 80 million units by 201 if all goes as projected. This is a high growth subcategory.

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    Meanwhile, the PC category on the whole has dropped from 350 million units sold in 2012 to slightly over 200 million units today, and that number is expected to slowly decrease from that point. Who knows what may happen down the road, but it is clear that mobile devices are beginning to replace their larger, heavier predecessors and that more consumers are keeping their large devices for much longer periods of time. There will always be a need for PC's (as opposed to smartphones an dtablets) but just not in the growing quantities consumers have been buying for the past 30 years. New models don't have much that old models don't have these days and so people are more likely to hold onto their devices for longer periods of time. Meanwhile, while the category declines, it looks like many folks are upgrading their larger, older devices with new products from the ultramobile category, currently dominated by Microsoft and Apple. Ultramobile, which has been in the rapid growth stage of the product life cycle since 2012, is expected to comprise 23% of all PC's sold next year versus 15% last year. This is impressive growth indeed.

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    The MacBook Pro commands an 87% premium over the average PC, so the growth the brand (and the category) can achieve is somewhat limited due to this high price point. Microsoft is content to offer competitive products at competitive prices as high quality showcases for its ubiquitous Windows product. Many strong competitors have emerged in this young category, and the tablet category, also relatively young, peaked in 2015 and is now in decline as well. The smartphone market, for its part, is deep into maturity. Overall, it looks like the tech sector could use a little innovative boost. Without some new product categories emerging to creatively destroy old ones, it isn't just the big volume PC producers such as Lenovo and HP who are in for a steady decline.