What kind of crazy scheme is Motorola hatching?

Motorola and Google say in a new ad their upcoming Moto X phone will be designed by users. Here's what I think they're planning.

Rumors, leaks and speculation around the first Motorola phone to fully reflect Google's ownership of that company have been loud and many.

The craziest and most unlikely of those rumors has now been confirmed by Google.

A full-page ad appearing in the national papers this week says, "The first smartphone designed, engineered and assembled in the USA is coming" and that it will be "the first smartphone that you can design yourself."

How will you design your own smartphone? And why would Google let you do this?

The commoditization wars

Steve Jobs' "thermonuclear" war against Google has devolved into a war of commoditization.

Commoditization is the process by which products become indistinguishable by their features in the eyes of consumers. For example, heating oil would be a perfect commodity -- consumers don't shop around to find the attributes and qualities for heating oil that they prefer. They just buy heating oil. It's all the same.

De-commoditization then is the process of taking something that's a commodity and giving it attributes that consumers might prefer. For example, in the last 40 years, coffee has been largely de-commoditized. It used to just be coffee and it came in a can. Now, people go looking for organic, fair trade, espresso-roasted coffee beans from Kenya's Kirimara Estate.

Apple sells hardware and software. To Apple, services are free things they offer to support the sale of their hardware and software. So Apple wants to de-commoditize hardware and software and commoditize services.

That's why Apple is always suing everybody -- by keeping other companies from designing hardware and software that consumers might believe is the same as Apple's, the company can emphasize the unique design elements.

That's also why Apple's upcoming iOS 7 looks and feels so different. Just being different is an important attribute when you're trying to sell a non-commodity user interface.

Similarly, Apple is keen to match many of the functions of Google Now. Apple's message is: Oh, sure, we do that, too. No big deal -- these kinds of virtual assistant features are a commodity, and therefore have little value.

Google, on the other hand, is a services company that makes hardware and software to support its services. So Google wants to make services less commoditized and hardware and software more commoditized.

In Google's world view, Google Search, Gmail, Google+, Google Now, Docs and all the rest working together are unique, special and valuable. The software that runs them and the hardware that they run on are just commodities.

In reality, however, that's not true at all. Hardware and software are not commodities. Android tablet and handset makers work hard to de-commoditize these things through hardware and materials design and software interface innovation.

Some of this de-commoditization cuts Google right out of the deal. For example, Amazon uses Android as the operating system on its tablets, which direct people not to Google's app store, downloadable movies and music and books, but to Amazon's.

Others, such as the leading phone maker, Samsung, essentially treat Google stuff as the commodity and Samsung hardware and software as the non-commodity. Samsung is even driving the development of an alternative to Android, called Tizen.

Tizen is just one brand-new Linux-based Android alternative to come out on the market this year. And with each new alternative, Android becomes more of a commodity.

This is a problem from Google's point of view both as an idealist company and also as a business.

Google believes the best thing about a smartphone and the best experience with a smartphone is the use of Google Now, Search, Translate -- the whole long list of Google services working together in a mobile device.

Many of their customers agree. But that vision isn't shared by the companies who make the hardware. Why should they bang out zero-margin handsets so Google can keep getting most of the mobile advertising revenue?

So let me put this in the starkest possible terms. Google relies on other companies to realize its vision for mobile computing. But those other companies have a strong financial incentive to reduce or eliminate Google's visibility and importance on the devices they sell. They do this by de-commoditizing their stuff and commoditizing Google's.

Enter Moto X

I believe Moto X will attempt to commoditize smartphone hardware. It will do this via its design-your-own-phone feature.

Google will no doubt sell its phone online. When you buy one, you'll probably be able to accept a standard phone. Or, you'll be able to choose a variety of customization options -- different color, more storage or other options. The bare-bones version will be very inexpensive. Additional features will cost more.

Samsung's strategy is to give you any kind of phone you want. You want a cheap phone? Samsung's got a dozen of them. You want a powerful one, big one, a phone with a stylus? Samsung's got them all. And they're not commodities either, but heavily branded with names like Galaxy S4, Galaxy Mega and Galaxy Note.

The Google version of that is to reduce the importance of differentiating features by making them easy options.

The design-your-own approach finds a space between Apple's and Samsung's approaches.

The good thing about Samsung's model is that they've got something for everybody. The bad thing is that all those options give people what economists call "choice paralysis" (I can't decide!) and "buyer's remorse" ("maybe I should have bought the other one!").

The good thing about Apple's one-phone model is that there's no "choice paralysis" or "buyer's remorse." The bad thing is that if you want something else, they don't sell it. For example, if you want a big-screen iPhone, well, there's no such thing.

Google's design-your-own strategy may be the best of both worlds. You can just get that one phone, but then get the options you want.

With a high-quality screen and a blisteringly fast processor forming the basis of the phone, the Moto X done right could commoditize smartphone hardware. Most of the major features that other companies are trying to promote as selling points are just check-boxes on the Moto X shopping cart page.

Motorola's Googlish message to the world is: These features are no big deal. You want 'em? We got 'em.

What matters is not speeds, feeds, colors and hardware options. What matters is Google services, which will no doubt be central to the Moto X.

I predict that there will, in fact, be de-commoditizing hardware differentiators in the Moto X, but mostly those that favor Google services. For example, I believe they're going to make it super easy to use Google Now without pressing buttons.

This is my prediction, speculation and analysis. But we won't have to wait long to find out what Google is really up to here. The company has invited a few dozen journalists to come to the Google campus next week and see the new phone. (I'm one of those journalists.)

So if you're planning on buying a phone this month, you might want to hold off until you see what kind of crazy scheme Motorola and Google are really hatching here. It could be crazy good.

This article, What kind of crazy scheme is Motorola hatching?, was originally published at Computerworld.com.

Mike Elgan writes about technology and tech culture. Contact and learn more about Mike at http://Google.me/+MikeElgan. You can also see more articles by Mike Elgan on Computerworld.com.

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