Final Project
Ivan Ardemagni
Diego Diaz
Hussein Nasreddin
Meg Robinton
Henrique Thielen
Luis Gonzalez
Introduction:
Background
Bluetooth is a wireless technology standard that connects devices in close proximity. Bluetooth
technology was first developed in 1994 by Ericsson in Lund, Sweden. Ericsson’s engineers were looking
for a way to enrich the functionality of the mobile phone.1 In the process they found more uses to their
development than that of the mobile phone and decided to bring more companies on board the project.
In 1998, the Bluetooth Special Interest Group (SIG) was formed between five companies (Ericsson, IBM,
Intel, Toshiba, and Nokia) that brought different expertise to the table in order to dictate and overview
the Bluetooth technology specifications and standards. The number of member companies in SIG has
been increasing ever since and has reached a base of 17,000 members as of today2. As it will be noted
throughout the analysis, SIG is one of the main reasons why Bluetooth technology still exists today. The
SIG is divided into 5 Bluetooth Ecosystem Teams: Automotive, Consumer Electronics/PC, Health and
Fitness, Mobile Phone, Smart Technology.
The technology itself has experienced dramatic growth since its launch, reaching 7 billion
cumulative shipments of Bluetooth devices by the end of 2011. The technology is expected to continue
to grow quickly as evidenced by the projections below3:
1
“Presenting the (economic) value of patents nominated for the European Inventor Award 2012”, epo.org,
http://documents.epo.org/projects/babylon/eponet.nsf/0/39F611EACF119B21C12579F30036D7E4/$File/haartsen
_en.pdf
2
“SIG Membership Introduction”, Bluetooth.org, http://www.bluetooth.org/Membership/introduction.htm
3
“SIG Membership”, Bluetooth.com, http://www.bluetooth.com/Pages/sig-membership.aspx
Value Proposition
The first intention for Bluetooth technology was to create a wireless connection between two
devices (specifically PCs and mobile devices) in order to exchange data and get rid of cables. Since its
original development, the number of devices and applications of the technology has dramatically
increased. In the beginning, it was mainly used to synchronize data between computers and mobile
phones/PDAs as well as connect PC peripherals (e.g., mouse, keyboard, printers) to PCs. Now, the
technology has spread to many consumer electronic goods such as wireless speakers, hands-free
headsets, gaming console controllers, and health sensor communication (to name a few).
Competitive Landscape
Bluetooth technology was originally meant as a replacement for the serial port cable. The serial
port cable had been out since the 1980s and was the most used form of communication between a
computer and any I/O device. The data rate speed of the serial port cable was very limited (below 0.5
Mbit/second).
At the same time that Bluetooth technology was being developed, a group of seven technology
companies was also developing a substitute for the serial port cable. Their solution was the Universal
Serial Bus cable or USB. USB technology brought faster data transfer rates and promised to be the
replacement for not only the serial port cable but most other computer I/O ports (i.e., PS/2, parallel
port, etc.) as well.4 At the time of Bluetooth’s introduction, Bluetooth had a transfer rate of 1 Mbit/s,
which was faster than the serial port cable but slower than the USB standards of 1.5Mbit/s and
12Mbit/s. Although Bluetooth offered the convenience of wireless connectivity, faster data
transmissions were possible through USB and thus USB was preferred by many.
Another wireless standard was under development before the introduction of Bluetooth: the
IEEE 802.11 standard, which is more commercially known as Wi-Fi. Although it was created to replace
4
“USB brief overview, history and specifications” Usblyzer.com, http://www.usblyzer.com/brief-usb-overviewand-history.htm
the ethernet cable, the IEEE 802.11 standard could have potentially overlapped with Bluetooth as a
wireless solution as it could communicate between further distances at a faster data transfer rate
(11Mbits/s). However, the main difference between these two technologies is that Wi-Fi communicates
to a network and Bluetooth connects to another device.
Bluetooth technology was in a tough spot with all these competing technologies surrounding it
but it had its advantages. The USB port was faster but Bluetooth gave you the option of a wireless
connection. Wi-Fi was also faster than Bluetooth but Bluetooth offered greater security in the
connection and also was more power efficient.
Frameworks:
Ecosystem Analysis
Bluetooth Special Interest Group (SIG)
The SIG owns the Bluetooth word mark, figure mark and combination mark. These trademarks
are licensed out for use to companies that are incorporating Bluetooth wireless technology into their
products or that are developing the technology. To become a licensee, a company must become a
member of the Bluetooth SIG. Therefore, Bluetooth SIG consisted of a variety of players: chip
manufacturers, application developers, device makers, service providers, etc.5. The membership
requirement is critical as it creates mandatory interaction between all parties who use Bluetooth
technology in their products or services.
It is important to understand the importance of SIG in this whole process as there is no single
company that “owns” this technology. The SIG and all of its members are responsible for management,
development, and standardization of Bluetooth technology meaning that any company can have access
to Bluetooth specifications by becoming a member of SIG at one of the various levels of membership:
Promoters, Associates, Adopters, Individuals and Universities. Depending on the level of membership,
members have the right to participate in the various groups (study groups, expert groups, working
groups, committees) that SIG uses as structure to manage the technology.
Distributors
In this ecosystem, the largest retailers buy directly from OEMs/producers, but smaller retailers
purchase the products through distributors, such as Avnet, Arrow, etc.
Retailers
Bluetooth devices reach the final user through a multitude of ways:

PC & Mobile retailers: Bluetooth devices are made available to the end-user across the full
spectrum of hardware and mobile shops. From large chains such as Best Buy and RadioShack to
small shops and online vendors.6

Health & Wellness: Hospitals and healthcare facilities widely utilize Bluetooth technology for
devices that operate in a sensitive to interference environment, in order to offer to their
patients a safe medical treatment.7
5
“SIG Membership Introduction”, Bluetooth.org, http://www.bluetooth.org/Membership/introduction.htm
http://www.bluetooth.com/Pages/Consumer-Electronics-Market.aspx
7
http://www.bluetooth.com/Pages/Sports-Fitness-Market.aspx
6

Automotive: Auto manufacturers offer Bluetooth connectivity in certain models in order to
facilitate the connection between the stereo system and devices such as mp3 readers and
phone headsets.8

Sport & Fitness: Gyms offer their clients heart-rate monitors that connect to a Bluetooth phone
or a treadmill, elliptical machine, or other exercise equipment at the gym. The heart-rate
monitor displays the heart rate during the work-out and sends performance metrics wirelessly
to a Bluetooth-enabled phone, where the end-user can analyze it after their work-out. This
fitness niche is expanding to other fitness-related devices such as Bluetooth-enabled sports
watches that can connect wirelessly to a heart-rate strap, foot pod, or phone9.

Smart Home: The vast network of Bluetooth devices includes phones, tablets, PCs, and TVs in
use worldwide. These devices can not only talk to each other, but also communicate with
Bluetooth enabled appliances, heating and cooling systems, and other devices in the smart
home. Companies commercialize this emerging market by selling smart home devices with
Bluetooth technology offer their clients a so called Bluetooth network effect, ensuring their
products can work with the phones, tablets, PCs and TVs homeowners already own.10
End Users
The Bluetooth end-user includes a multitude of individuals and companies. The largest market is
composed of individuals that use Bluetooth to connect their personal devices to each other, but also
auto buyers (who benefit from the car connectivity offered) and homeowners (who want their home
devices remotely connected). Other end-users include companies and small businesses such as,
restaurants that utilize devices to take orders and track inventory.
8
http://www.bluetooth.com/Pages/Automotive-Market.aspx
http://www.bluetooth.com/Pages/Sports-Fitness-Market.aspx
10
http://www.bluetooth.com/Pages/Smart-Home-Market.aspx
9
Stoplight Analysis
Ecosystem Players
Main Players
Developers (SIG)
Ericsson, Arm
OEMs/Producers (SIG)
Ericsson, Intel,
Motorola
Distributors
Avnet, Arrow
Retailers
Best Buy, RadioShack
Stoplight
End User
Developers
All the developers of Bluetooth technology have to be part of the SIG. Promoter members and
Associate members of SIG participate in the Expert Groups, which deals with issues of technical
importance to all aspects of Bluetooth development and in Working Groups, which develop new
Bluetooth specifications and enhance adopted specifications11. They are responsible for the vast
majority of published standards and specifications. We think these hard-core developers deserve a
green light in the flow of the ecosystem as it is composed of believers in the technology since its
inception.
OEMs/Producers
Producers have to be part of SIG as well but we assigned a yellow light for OEMs within SIG (e.g.,
PC & peripherals and mobile device manufacturers) as they had a variety of competing technologies to
choose from (e.g., serial port cable, USB, Wi-Fi) and may be hesitant from completely investing in
emerging Bluetooth technology as the risk in investing too much in a dead-end technology could be
devastating for their future.12
11
12
http://www.bluetooth.org/Membership/overview.htm
http://www.pcworld.com/article/101942/article.html
Distributors
We don’t see any concern regarding distribution, as, this market is mainly driven by consumer
demand and the distributors’ interests are generally aligned with the end-users’.
Retailers
As we saw before, retailers in this industry are of a diversified nature. We assigned them a
green light as we think that the technology has low cost for certain niche services and that retailers will
be eager to offer their customers the connectivity enhancements offered by Bluetooth.
End User
Despite the initial buzz around Bluetooth, we assigned the end-user a yellow light due to the
initial difficulties in matching the device and the poor reliability of the first versions13. One of the factors
that slowed down the adoption of Bluetooth in the first years was the complexity of the technology, in
which the Bluetooth specification defines basic connectivity but specific uses require separate "profiles."
Not all Bluetooth-enabled devices supported all the profiles, which led to confusion for buyers who
expected a Bluetooth PC adapter, for example, to do things it wasn't set up for. Therefore, due to the
potential adoption-risks with the end-user we believe this player in the ecosystem is a yellow light for
SIG.
Analysis:
“There is much scope for Bluetooth to literally make a clean sweep. Avenues for various kinds of
applications do exist and the potential is huge. Wireless communication is the basis of tomorrow’s
world. The stage is set. But does Bluetooth have it in it to be the invisible link? Or is it just hype –
full of sound and fury - about technology that just won’t work? Just as there is a lot going for
Bluetooth, there is much that can be said against it… Bluetooth still has miles to go before it can be
accepted as the standard of wireless communication in tomorrow’s world14.”
- Jayanthi Kamalaratnam, July 2002
13
http://www.pcworld.com/article/113404/article.html
Kamalaratnam, Jayanthi. “Bluetooth – Teething Problems?” http://www.frost.com/sublib/display-marketinsight-top.do?id=JRAN-5JXCYV
14
A decade ago, the jury on Bluetooth technology was still out. Sure, there was potential for
impressive market growth, but was this emerging technology going to be a fad? Would the technology
be surpassed by a competing technology? As evidenced by the “yellow lights” in the Stoplight Analysis
above, Bluetooth faced no shortage of challenges. This analysis will discuss the risks that Bluetooth SIG
faced when launching Bluetooth technology and the steps that were taken to manage these risks.
Co-Innovation Risk and Management
Given Bluetooth’s main value proposition of wirelessly connecting two separate devices, one
would assume that there was substantial co-innovation risk at play given the need to coordinate the
development and implementation of the technology between independent device manufacturers.
However, the first players in the Bluetooth industry (Ericsson, Intel, Nokia, Toshiba, and IBM) greatly
reduced the co-innovation risk by deciding to reconfigure the ecosystem and form the cooperative
alliance, Bluetooth SIG.
Despite having already developed competing technologies on their own, the original founders of
Bluetooth SIG realized that greater success would come to all if they standardized the technology in
order to prevent the technology from becoming fragmented. Therefore, rather than have each
developer coordinate with the individual OEMs (who likely would have been mutually exclusive given
the different technologies and standards used by each developer), the developers decided to combine
the ecosystem and form Bluetooth SIG to create a single, standard Bluetooth technology that would be
compatible with all of the various OEMs.
This reconfiguration reduced the co-innovation risk in several ways. First, creating a single,
standard technology made innovation using the technology easier. Because the standards are
documented and enforced, OEMs that enable their devices with Bluetooth technology can feel confident
that it will work with other Bluetooth-enabled devices without having to coordinate development with
each individual device manufacturer on their own. The Bluetooth SIG goes as far as to require anyone
who “uses Bluetooth technology in their products, uses Bluetooth technology to offer goods and
services, or rebrands products that use Bluetooth technology”15 become a member of the organization.
By having the upfront commitment from all parties to cooperate, the co-innovation risk for each
individual member is greatly reduced. Second, because both the Bluetooth developers (e.g., chip and
software developers) and the OEMs make up the Bluetooth SIG, they are each involved throughout the
process of setting and implementing the standards. This gives each party the opportunity to influence
the standards to ensure that their individual requirements are met before the standards are finalized.
Another element that reduced the co-innovation risk was the technology itself. Because
Bluetooth is an open specification, rather than a product, it is relatively easy for OEMs to enable the
technology in their own products. Furthermore, the technology is publically available and royalty-free.
The only requirement is to be a member of the Bluetooth SIG and the basic membership is free16.
15
16
http://www.bluetooth.org/Membership/introduction.htm
“What is Bluetooth?”, InformIT.com, http://www.informit.com/articles/article.aspx?p=27656
Adoption Risk and Management
At the launch of Bluetooth, Bluetooth SIG faced significant adoption risk from both OEMs and
end-users. Bluetooth SIG needed to both convince the non-member OEMs to build Bluetooth
technology into their products and offer a unique value to the end-user that would motivate them to
purchase Bluetooth-enabled products despite the higher cost17.
Unfortunately, the initial Bluetooth technology (v1.0 and v1.0B) had two critical issues as far as
OEM adoption: interoperability between devices and security (hardware device address transmission
was a requirement for pairing)18. Fortunately, Bluetooth SIG learned of these critical issues through a
testing event for member manufacturers, called “UnPlugFest”. As a result of the feedback, they
updated the specifications and released v1.1 (the first main-stream version) which resolved these
issues19. It is unlikely that these issues would have come to light as early in the process without the
structure of Bluetooth SIG, which regularly brings the OEMs together in a cooperative environment.
Even after the first main-stream release, Bluetooth SIG continued to stay engaged with the
market by listening to complaints from end-users. In response to the complaints, they released
subsequent versions of the technology (i.e., v1.2, v2.0, v2.1, v3.0) with improvements: increased data
transmission speed; diminished power consumption; improved security options; improved pairing
ability/interoperability; backwards compatibility. Not only were these improvements essential for enduser adoption, they also were important for continued OEM adoption as well. Because the Bluetooth
technology was built into their own products, OEMs faced the risk of damaging their own brands and
reputation if the Bluetooth technology had deficiencies that caused their own product to be less
valuable to the end-user.
17
“The History of Bluetooth”, GSMFavorites.com, http://www.gsmfavorites.com/documents/bluetooth/history/
Bluetooth® in the Warehouse Environment.” May 2010. http://www.intermec.com/vocollect/public-files/whitepapers/wp-Bluetooth-in-the-Warehouse-Environment.pdf
19
“Why Bluetooth 1.1?”, informit.com, http://www.informit.com/articles/article.aspx?p=21323
18
In addition to taking a reactive approach (listening to complaints and improving the technology
in subsequent versions), Bluetooth SIG also took a proactive approach to building both OEM and enduser adoption by forming industry-specific “ecosystem teams”. Formed in 2010, these teams set out “to
focus on developing and expanding these key markets: Consumer Electronics/PC, Health and Fitness,
Smart Energy, Automotive, and Mobile Phone.20” Each one of these ecosystem teams is led by industry
leaders who are focused on ensuring that the subsequent versions of Bluetooth are compatible and
relevant to their respective markets21. By forming structured groups around these end-consumer
markets, Bluetooth SIG is able to leverage the knowledge and resources of partner SIG companies in
order to set specifications that align with the consumer need and ensure that Bluetooth technology
continues to innovate within these consumer markets.
In summary (and as depicted in the chart below), Bluetooth SIG reduced adoption risk by
continually improving the technology (through version releases) and expanding to new markets
(through “ecosystem teams”). The constant technology updates improves end-user satisfaction which
ultimately leads to increased adoption-rates of both the end-user and the OEMs (who are then more
likely to want to build Bluetooth-enabled products). The expansion into new markets also increases
adoption-rates in the sense that the larger the network of Bluetooth-enabled devices, the more useful
and valuable the technology is to the end-user. For OEMs that offer products to a variety of markets,
the expansion to new markets also increases their ability to offer Bluetooth-enabled products (which
allows them to offer a more compelling value proposition to their customers).
20
Bluetooth 2010 Annual Report,
http://www.bluetooth.org/About/AnnualReport/AnnualReport10/Specification_Advancement.htm
21
“Bluetooth Technology Bringing Unprecedented Functionality to Wireless Devices in Fitness, Health, Home and
Automotive.” March 2011. http://www.bluetooth.com/Pages/Press-Releases-Detail.aspx?ItemID=126
Future Outlook
As Chris Hansen, chairmen of the Bluetooth SIG board of directors stated last month: “Bluetooth
technology is experiencing its second wave of growth, moving into devices and markets where wireless
technology previously had no foothold.22” The latest version of Bluetooth (v4.0, “Bluetooth Smart”),
that features minimal power consumption, has pushed the technology into new dimensions, from
creating new markets (mobile advertising, smart-home builders) to new applications (pedometers, heart
rate monitors).
In addition to increasing products’ longevity, this newfound low power consumption allows
them to break into new markets. More specifically, these improvements open up new doors in the
world of healthcare and sports/fitness. With the ability to safely transmit biometric information,
Bluetooth v4.0 has allowed SIG member companies to innovate in the growing portable health tech
market23. From thermometers to heart rate monitors to NikeFUEL bands, the presence of the Bluetooth
22
23
Hansen, Chris. October 2012. http://www.bluetooth.com/Pages/Press-Releases-Detail.aspx?ItemID=158
“The Future of Bluetooth.” June 2011. http://mail2web.com/blog/2011/06/future-bluetooth/
name, logo and technology is growing daily. With the stated goal of shipping five billion devices by
201524, the technology is well on its way.
In addition to expanding markets, the usability of Bluetooth technology could be further
improved in the future by an emerging technology, called Near Field Communication (NFC). NFC would
make it possible for two Bluetooth-enabled devices to be paired together after just a simple tap.
Fortunately, NFC just enables the connection between devices at a single point in time and therefore is
not a substitute for Bluetooth technology25.
As the markets and usability for Bluetooth technology increase and the size of Bluetooth SIG
inevitably grows (beyond its current base of 17,000 members), it is possible that the group could run
into the challenge of having “too many cooks in the kitchen”. Bluetooth SIG has tried to combat this by
forming special mini-groups within the organization and also setting up different levels of memberships
(which have different levels of power). However, as the organization continues to grow, it is possible
that even these smaller groups could become unwieldy. Similarly, there may come a time when a single
standard may not be able to meet the requirements of all of the various members within the group as
they may have competing goals (speed, power consumption, price, etc.).
Conclusion
In conclusion, Bluetooth technology has been able to grow quickly, much to the credit of the
original founders who made the wise decision to reconfigure the ecosystem. Had Bluetooth SIG not
been established, it is likely that the technology would not have been able to withstand the coinnovation risks and adoption-risks it would have faced from the OEMs and the end-users. The unique
structure of Bluetooth SIG, which includes both developers and OEMs, helps ensure continued
improvements and proliferation of the technology.
24
Bluetooth Press Release. June 2011. http://www.bluetooth.com/Pages/Press-Releases-Detail.aspx?ItemID=132
“Near Field Communication versus Bluetooth”, Nearfieldcommunication.org,
http://www.nearfieldcommunication.org/bluetooth.html
25