November 21, 2004

Does Technical Advancement Breed Disposability?

By Ian

I'll spare you all the frustrating-but-possibly-amusing-in-the-retelling story of dealing with the customer service people for my cell phone. Suffice it to say that it took several phone calls and multiple conversations each time to determine that my phone needed to be taken to the local cell phone retail location. Since it's my only phone, I promptly went to the store. Surprisingly, the line was short, the service friendly. I explained my problem, and they said they'd take a look. I went to the rack of amazingly expensive phones to indulge my techo-fetish issues. I thumbed a Pa1mOne, then turned around to ask how long the process would take. That's when they handed me my new (though identical) phone.

That was it. They threw out the other one without even checking the parts, transferred my numbers to a new phone, and washed their hands of the whole thing. Mind you, no one ever proved the problem was with the phone. When asked, the person behind the technical service counter said yes, it really was cheaper to just give me a new one than to order parts and repair the old one. Of course, it's deeper than that. Turns out, it's cheaper to give me a new phone than to even explore the possible problems with the old phone, let alone get new parts if such were required. What surprised me, though, was that it goes still deeper. Turns out that there isn't anyone at the store that knows how to even go about assessing the technical issues of the phones. The "tech department" focuses almost entirely on software issues. The physical phone is a toss away item.

If it's not worth hiring or training people to work on phones at their current state of technology, I'd expect the situation to only get "worse". That is, with the growth of cell phone/PDAs there will be more things that could go wrong, each of them more technically complex than the last, and thus there will be more reason to pitch them every time a customer comes in with a technical problem (a problem that could itself increase, since fitting more features in a relatively similar space to less sophisticated phones might require using parts ever more sensitive to shock). This, I'd guess, means that the technical advancement of phones has to keep a breakneck pace; the newest phones can command the highest prices and make up for the fact that cell service providers will end up throwing a certain percentage away.

Of course, that pace of increased sophistication (if I'm on to something) increases the amount of "slop" phones that have to be purchased by service providers and resellers like Best Buy/Circuit City/etc. Makes me wonder if there's an opportunity out there for good technicians to buy up the discarded phones, fix them, then resell them internationally where cellular networks are outpacing land-line development, but don't have the disposable income of more developed nations.

UPDATE: After less than 24 hours with the new phone, I can report...nothing's changed. As I suspected, there was nothing wrong with the phone itself. Not that I'm surprised that the service for cell phones is bad.

Posted at November 21, 2004 06:41 PM


Hi -

It's not just in the phone business.

Fundamentally, it's a question of manufacturing efficiency, MTBF and costs. If a widget maker makes a $20 widget that fails 75% of the time after 3 years where consumers have a two-year warranty, why would they have someone earning $40/hour spend 45 minutes figuring out what was broken to fix it with a 3cent part for a total cost of $30.03 when they can simply replace it with a new model for $20?

Let's look at the life cycle of a product: imagine you're making cell phones. You get a batch order for 25,000 phones. Average cost $10. The model involved is a variant on an existing model, so your design and development costs are minimal. You can make the 25,000 phones for $250,000. Now, you know that of the 25,000 phones you will probably have 250 that fail catastrophically, another 250 that will have something screwy with them, and another 250 that the customer probably screwed up but you don't want to make them pay for customer relations purposes. So that's 750 out of 25,000.

Theoretically, you could hire a team of repairfolks to handle the 250 or even 500 phones that are repairable. But we're talking an inital outlay of $7500 for the additional telephones for two years, as opposed for a minimum of three people for two years: you can't pay these three $7500 for two years even in Bangeldesh - remember, we're talking about trained personnel - so the right business decision is to make 25,750 phones and make sure that the 750 phones go into a warehouse where they are then parcelled out as needed (largely to replace existing stock).

So it's not a question of not being able to repair them, it's simply not cost-effective to do so. I used to recycle PCs from local businesses for a local grade school, and ultimately it cost the school more in dealing with ancient hardware problems than it would have cost them to simply buy really cheap, inexpensive PCs. The same is true for developing markets: here you use older designs that have been completely amortized and are - or should be - highly reliable (older Nokia models, for instance) and do a single production run of, say, 3 million or so for the Indian or 250,000 or so for the Nigerian market. You sell the color models with bells and whistles to the elite and the less expensive models to the masses, rarely earning any money doing so, and cash in on the massive increase in people calling each other.


Comment by John F. Opie at November 22, 2004 05:14 AM | Permalink

The only real surprise here to me is the extension of cost effectiveness to include the probability of the phone being the culprit for the problems. As I mentioned in the post, it turns out the phone I had was fine.

I can see where the fixing might not be cost-effective at any price. The question, then, is if there is a cheap way to determine whether or not there is anything wrong with the phone. If not, someone might be able to get a few bucks for it, or several bucks for large shipments to be sold somewhere else. Perhaps not.

This is the reason I'm not a highly succesful entrepreneur.

Comment by Ian at November 22, 2004 09:07 AM | Permalink

Hi -

It's not so much a question of determining what the problem is with the equipment/service, but more making sure the customer is happy: if you go in with a cell phone that isn't working (for whatever reason), customers are usually very pleased to be simply handed a new item no questions asked. This has enormous corporate image benefits.

The only way to check the hardware is to have someone qualified look at it to see what the problem is. This person costs money, and given the low costs as per ut supra, it doesn't make any financial sense for the company to do so.

From an ecological viewpoint, we're talking a whole different picture, but that's a completely different topic...


Comment by John F. Opie at November 22, 2004 10:50 AM | Permalink

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