Appcessory Economics: Enabling loosely coupled hardware / software innovation

Abstract: An appcessory (app + accessory) is a smart phone accessory that is combined with a specially written app to perform a useful function. An example is a toy helicopter controlled by a smart phone app: the full value proposition involves both new hardware outside the phone and new software running inside the phone. Like the smart phone itself and like a PC, the appcessory hardware is a platform: it has the property that it becomes even more valuable if innovative new software is written for it. It is technically possible that innovation in the appcessory space becomes loosely coupled, with different parties specializing to innovate on either the hardware (accessory) side or the software (app) side. However, we are not seeing this loose coupling yet in the current market. We argue that the reason for this is economical: a market framework in which loosely coupled software parties are adequately rewarded is not yet in place. We describe a technical solution for creating the needed market framework, consisting of an automated micropayment system by which money can flow from appcessory hardware makers to app software innovators. This solution also has a broader applicability to the problem of innovation in the Internet of Things.