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The Analyst’s Guide to Apple Category Entry

Understanding Apple’s intentions seems to be a popular parlor game and there are many attempts at divining intention from data and market study. These attempts at market research for answers are futile because Apple does not compete in existing markets but rather it creates new markets. For instance, the market for the Apple II could not have been assessed from research into the computing market of 1974. The intention for Apple to enter into music devices and services could not have been predicted through an analysis of MP3 player market in 2000. The iPhone was also not predicated on the market for “Internet Communicators” in 2006 or 2002 when the iPad was first contemplated.[1]

Instead of measuring the size of pre-existing markets, surveying the functionality of existing products, or weighing toxically financialized ratios like margins and market shares, I recall this ad (Our Signature, first seen at 2013 WWDC):

This is it
This is what matters

The experience of a product
How it will make someone feel
Will it make life better?
Does it deserve to exist?

We spend a lot of time on a few great things
Until every idea we touch
Enhances each life it touches

You may rarely look at it
But you will always feel it
This is our signature
And it means everything

My interpretation of these lines, coupled with additional public statements can be used to create a “litmus test” for new product categories:

1. The experience of a product. Read: They will work on things to which they can make a meaningful contribution. To me this means that they will build things which require an integrated approach. As Apple is “the last integrated company standing” it means they will work on problems where the system is not good enough. This means that they will not work on problems where an individual modular component is not good enough. By system I mean, in the largest sense: production, design, distribution, sales, support and services must work in a seamless way. Systems analysis implies a broad understanding of the causes of insufficient performance along the dimensions of “experience”. The experiences are what differentiate the products (and lead to high margins) and these experiences are possible only through the control of interdependent modules.

2. Does it deserve to exist? Read: They will work on very few things. They will say no to many things. It’s still true that all of Apple’s products can fit on one table. That may not be true forever, but their product space will not grow as quickly as sales grow. This means that there is no notion of “marginal value” or portfolio theory where products are added because they can be justified as “moving the needle” or balancing demand. Rather, the few things which will be worked on will address non-consumption. Non-consumption of experiences.

3. Enhance life. Read: The things they release are inevitable even though nobody asked for them. The reason this is possible is that there are unmet and unidentified “jobs to be done” which are powerful sources of demand and whose satisfaction leads to unforeseen rewards. The problems that can be addressed are uncovered through a process of conversation with a few people. They are not uncovered through surveys or large n statistical studies. Without the ability to ask the right questions, big data only leads to big misdirection. In contrast, good taste in questions allows small n to lead to big insight. Apple’s ability for finding the right problem to solve comes from this greatness of taste in questions.

So given this litmus test, will Apple build a Car?

I believe the problem of transportation and its proxy, the automobile, provide all the requisite demand for Apple’s attention. Technical questions abound and they may still prove unsurmountable before a launch happens, but there are no doubts in my mind that this is a problem Apple would see fit to address.

Non-consumption of unmet and unarticulated jobs to be done can and should be addressed with systems solutions and new experiences.

The poetry is pretty clear on the matter.

 

Notes:
  1. The market for phones was large but the iPhone pricing and features made it incompatible with any reasonable segment of it. []
  • stefnagel

    Apple is a philosophical organization, more romantical than reductionist in its character. The ad text above reflects all the four causes that Aristotle argued define any object: the material (tech), the formal (feel), the final (life), and the efficient (Apple).

    More often, in science and business, all the causes are stripped down to one cause, expressed in numbers and not poetry.

  • Jeff g

    I feel 1.7% mind-expanded after reading that set of observations, analysis and word-creations.

    Like Apple, you help to expand people’s consciousness in certain arena’s.

    One of the most enjoyable, and also predictable occurrences is to hear the inevitable talking-heads (or read the writing-heads) commentary on, as you said, things like “moving the needle” or why Apple won’t be successful with product A, B, C, or X. They list their reasons, analysis of existing markets, personal credentials, anticipated profit margins, or whatever… As if those things
    had been effective in past predictions for Apple. They haven’t.

    The safest bet seems to be most everyone will continue to underestimate Apple.

  • Marc_in_Chicago

    Wow. This article is the perfect intersection of Technology and Liberal Arts! Horace, you should teach at Apple University.

  • stefnagel

    “The problems that can be addressed are uncovered through a process of conversation with a few people.” I once asked an expert in qualitative research how results were verified. She said that when she heard the same thing so often she wanted to throw up, she knew the response was valid.

    • http://www.asymco.com Horace Dediu

      The reason artists don’t do market research is because they don’t know what questions to ask the audience.

      • stefnagel

        Not sure a scientist would know any better what questions to ask. “Dialogical thinking requires courage and strength of character and considerable maturity. It means giving ourselves to the truth and letting come what may.” Howe, The Miracle of Dialogue

      • Jeff g

        I don’t know if I’ve ever mentioned this Horace, but it seems apropos to the poetry theme, but here’s a book I wrote it contains about 50 original poems of mine, some serious soul searching, and my best effort at inspiration and wisdom passed down through the ages. If you want a copy email me, and I’ll send you one comp:

        http://www.amazon.com/Awakening-Oneself-Jeff-Geiser/dp/1939625211

  • Mark

    I appreciate the insight about the “value” of big data when useful questions are absent. I work in OD and there is a continuous noise marketing the virtues of big data which I have found troubling for the following reasons:

    1. Assumes the future will reflect the past. Gives undue credence to experience, which is the induction thinking problem.

    2. Leads us to easily think that large scale patterns are replicated at the individual level. Like saying that because 90% of those in my demographic uses ABC product I use the same product 90% of the time too.

    3. Masks the assumption that any data we choose to collect and track is based on a theoretical assumption about relevance. We can only see what we look at. What we overlook may become very important in the future when changes occur. Related to this is when we track and extrapolate from history we have created a boundary (past) that we do not incorporate into our data base, perhaps we miss something important?

    4. Masks the reality (for me at least) that we are more often exposed to uncertainty than risk. Risk is based on our ability to assess and plan for variance based on experience (2 above suggests that 10% of the time people do not use ABC). I think of uncertainty as “surprises” in one’s life (small or big). The strategies for dealing with surprises include tactics that are different than those targeting risk like situations. For example we can meter risk by metering variances (process dominate plants do this extensively as well as airplanes). How do we monitor for any uncertain like event?

    We all use experience, so big data has a place in our decision making lives. For me it is critical that we pay attention to what is is signalling that we are getting outliers occurring. Disruption in its myriad of forms would always seem to me to initially be an outlier. The psychological problem for me is the label itself: “outlier”. A term that makes it easy to ignore, discard, pooh pooh, treat as just noise, etc. often the case, BUT, not always.

    This is why I am fascinated in disruption theory. It is a story about how we create an uncertain like moment for others by changing the “rules of conduct” on them. Because I work in OD, I view that most uncertainty in our lives arise out of “social” sources. This would include Apple changing music, computing, mobile computing, etc.

    Horace, I so much appreciate your work and your sharing it with us. Thank you
    Mark

  • Fran_Kostella

    A beautiful expression of the poetry that answers the question “would they?” but which does not address the “can they?” and “will they?” side very much. These other questions are the ones that concern me more at this point.

    The Apple II didn’t require a public infrastructure, other than electricity, in order to succeed. The iPod did require the innovation of high compression for audio, and it required that others clear the path and prove the concept first and for the public to be open to these devices. To me, these stand in for the required infrastructure. Likewise, the iPhone needed the cellular networks and enough competing carriers for one of them to be willing to give up control of the device to bootstrap the process of changing the system.

    For a car, the public infrastructure is large and complex and car technology is comparatively simple. We have the road systems, the existing regulatory systems, the fuel and maintenance and dealership systems. Apple has limited leverage in these areas. The road system is a huge and complex set of intertwined government and business and labor groups with a very conservative bias and not open to innovation. I don’t think Apple (or Google or Uber) has much power there, so they have to live with existing roads and can’t go the route of embedding sensor networks or other kinds of smart road approaches, or of new kinds of roads. So this is off the table, for decades I imagine.

    The regulatory system can be influenced, but this requires spinning up major political operations. Can it be done? Sure, but this requires time and effort and money. In the short term there is a limit to what can be done, so, expect very little in this arena soon.

    Fuel, maintenance and dealership? The maintenance will likely follow if a market arises, but might require seeding. The dealership issues is the same as what Tesla faces, so there might be common cause and most people have a deep dislike of dealerhips, so it can be overcome. Legal/political spending can turn that to their advantage, so I don’t think it is a permanent obstacle. A decade or so?

    The most interesting issue to me is the fuel issue. We’re all constrained here, the existing gasoline system in the US means that my occasional 900 mile drive into the wilderness doesn’t require any special planning or extra time or expense as I can find fuel easily, inexpensively and can fuel up in mintutes. The only viable alternative, which has yet to reach the point where I can arbitrarily go on a long trip, is a battery based system. This might be something Apple can do something about, but it isn’t clear how much. At least their work over the last few years on improving battery use on OSX and iOS shows that they get how critical battery use has become. Really, we need an order of magnitude improvement here. I can’t predict this one, but pray for some breakthroughs to catalyze lots of innovation everywhere.

    Looking at this I see some systems that are going to require a complex long-term effort to change. I’m not sure if Apple can create something poetical by avoiding these systems. Maybe so, but it looks like a long road from here. I’d love to see them do it, as these isn’t a single car out there I want to own or use, so I’m open to some innovation–and right away!

    • stefnagel

      Spot on. Too many atoms, not enough electrons, for Apple’s taste.

    • katherine anderson

      … What would you think of an AppleCar that falls somewhere between an Airstream Sport (16 ft long) and a Fiat Doblo, a mobile computing device that not only carries its operator and cargo, but also serves as a multi-use space designed for living … an office, playroom, tv room/reading space, overnight camper, even a small salon … Imagine the open beauty of this Apple designed interior landscape, with lots of windows offering generous views, while at the same time providing a feeling of a safe and protected, peaceful nesting place.

      … Women would finally have a vehicle that in its own adaptable, metabolic way, we could truly enjoy … but that’s not to say it couldn’t be enjoyed by everybody.

      … it could appeal to resourceful young people, for example, who could use it as an affordable alternative to expensive, life-limiting, chain-downed apartment living.

      Oh, and not by chance, an AppleCar needs to be wheelchair accessible from the back and two sides, with a floor that lowers to curb level allowing for ease of unassisted access.

      • Fran_Kostella

        Katherine, that’s a lovely concept and fits in with the small home living movement, but I can’t say anything about that. I love the idea of zen living, but I accumulate interesting objects and would find myself hip-deep in clutter in no time! 🙂

      • marcoselmalo

        I agree with Fran. Great concept!

    • Martin

      Maintenance and dealerships are intertwined. If you make a nearly maintenance-free car, then you’ll bankrupt all of the dealerships. They can’t make enough on the sale of the car to compete with online sales. Make a very mechanically simple, durable platform and the problems of service and dealerships both get solved quite directly.

    • pk_de_cville

      Why so pessimistic? There are many challenges for sure, but these can be met “easily” within Apple’s innovation meta model.

      It’s similar to MLB’s scouting system. Apple is constantly and powerfully scouting for its required “inventions to be found”. It will be buying 20 or more brilliant startups a year for several years to complete its shopping list.

      All those challenges you’ve named. They’re nothing to meet for a company with $150B of cash. Apple probably spends $100M a year in scouting alone. Money well spent. Then, it’s all just a bunch of Legos to snap together.

      Apple’s genius is in designing the architecture and go to market strategy for the driving experience and then finding and buying the nuts and bolts it needs to deliver it.

      Voila! Another $100B revenue stream delivered!

      • Fran_Kostella

        I hope you’re trolling. The idea that Apple can have any notable effect on road construction is laughable. Dealerships? Maybe. Batteries? Maybe. Car software and integration? Sure. Is that good enough to make it worth doing? Not my call, but the issues are not trivial.

      • laughing

        Yeah. Similarly laughable to think they could have any notable effect on wireless infrastructure just by selling phones.

      • Fran_Kostella

        The US has over 4 million miles of paved roads, 170 thousand of them being highways, according to Wolfram Alpha. Two lane roads cost over $120 thousand per mile to pave, four lane roads cost over $500 thousand per mile to pave, according to some Ohio DOT documents from the last decade, I think these numbers could vary a great deal. If you multiply these out you get 550 billion dollars, not bad for an estimate, I imagine it is much higher and perhaps an order of magnitude higher. Costs do not generally decrease in road construction.

        Wireless networks can be upgraded in parts and devices can support multiple technologies concurrently. I can’t find figures on the total cost, but my gut take is that the US carriers spend a few billion each year on growing and maintaining their networks and keeping up with technology. My wild guess is that it cost in the $25 billion range, somebody please correct this with real data!

        The two things are vastly different, roads are not controlled by the handful of players as the wireless networks seem to be, but thousands and thousands of political, social, commercial and regulatory entities. Great political battles take place over decades for control of road budgets. Efforts are constantly made to cut cost to the bone or put off needed road infrastructure, as the alarming state of bridges in the US demonstrate. Changes here are hard and there are plenty of well placed vested interests who don’t want to give up any of their part of the pie.

        Roads are a slow and expensive technology that take place in the decade to half-century time frame. Wireless technology changes from year to year. Yes, I believe it is laughable to pretend they are equivalent.

      • Eric Gen

        I don’t know about other states, but Texas has always had a very powerful highway lobby. There are probably many reasons that I don’t understand for many of their decisions, but I have looked at many of the road building choices over the years and referred to it as the “full-employment act for the highway industry”. Many of the decisions are obsolete before they are completed.

        I’m sure that some of this is covered by one of Horace’s retweets: http://www.citylab.com/commute/2015/03/the-one-chart-that-explains-all-your-traffic-woes/386594/ . But, some of it clearly looks like it is designed to setup and force the next highway modernization project. It’s likely a mixture of the two.

        Anyway, it reinforces your point about the difficulty overcoming entrenched interests to change roads.

      • pk_de_cville

        Fran,

        Not a troll.

        I think almost every expert sees that the self driving car will happen beginning with simple stop-go city traffic jams within 5 years and ending in fully autonomous driving in perhaps 20 years.

        Given the agreement on this, I think the experts have thought about roads and concluded that whatever needs to happen with roads will happen. “There Will be Roads.”

        I’m not saying Apple will be big in cars; I’m only saying they //could// be and they have a proven method of acquiring or inventing the parts needed to produce a profitable product.

      • Fran_Kostella

        I think we only differ in *when* we think these things can happen. I tend to push them much further out.

      • marcoselmalo

        The naysayers scoffed at the Segway, saying it would never . . . Wait a minute, bad example. 😀

        Backing up a bit, I’m not sure refueling infrastructure is that big of a deal. If you’re driving 1500 km into the wilderness, you’re already hauling jerry cans of fuel with you and possible prearranging fuel caches. For more typical use, I expect to see all sorts of creative solutions. For example, shopping malls could set up solar arrays on their rooftops and offer charging stations in their parking lots. (Parking in the charge station area would be free with validation).

        A lot of the points you make, however, is why I think autonomous self-driving cars will remain in the realm of science fiction for the foreseeable future. You really need 99.99% conversion to “smart roads” and I just don’t see this happening.

        Wait, I just figured it out. The road sensors could be imbedded in beer cans and candy wrappers, and anti-litter laws struck from the books. That’s not just thinking out of the box. It’s thinking out of the garbage bin.

      • Fran_Kostella

        There might be inexpensive solutions coming down the pike to make roads smarter, so maybe your Litter Network is not so far from the truth? 🙂

        Reading your remarks about the Segway reminded me of some of the absurd media blather at the time. I recall reading an article that claimed cities would be redesigned around Segways since they would change everything into a transportation utopia. I could not see it at the time since the age of ripping up cities for amusing “improvements” is long gone and most people now think that lots of those efforts were rather misguided. And at that time I had been working at a materials science startup that was trying to sell sensors to the construction industry to reduce the cost of concrete batching. We had a hellish time getting customers for techniques that were proven and deeply tested for over a decade. Construction is a conservative business and very slow to adopt technology.

    • handleym

      Complaining that niche cases can’t be satisfied by an electric car (or any other product) is as silly as claiming that pocket computers are a hopeless idea because you couldn’t use them to run a company.

      Sure, an electric car is not an appropriate vehicle for a 900 mile trip into the wilderness. Neither is a Ferrari. But most people don’t use their cars for such trips, just like most people (in spite of what enthusiasts claim) don’t much give a damn about the performance characteristics of their cars.

      I’ve seen ten years of video-game enthusiasts look at the world first in bemusement then in fury as it has become clear that they are not, in fact, the center of the computing universe. I suspect car enthusiasts are in for the same sad awakening.

      • Fran_Kostella

        I wasn’t complaining, just pointing out the areas that constrain products in this space and which may decide if they will proceed to the product stage. As I said, I’d love to see them hit a home run, but I’m having trouble seeing where they have the freedom to innovate with such constraints.

      • Childermass

        Do you think Carl Benz worried about gas stations or highways?

      • Fran_Kostella

        I’m sure I have no idea what Carl Benz was thinking, but if I had to guess I would say he was definitely thinking about sources of fuel and the existing road systems. It would be no accident that the first automobile was the size and shape that fit existing roads. Benz had a background in engines, so I image he was aware of the possible fuels his engine could use and that he settled on gasoline for good reasons, including availability. So, roads and fuels, yes. He lived at a time when chemistry and chemical processes were the cutting edge high technology and I can’t imagine he was ignorant of the existing context in which his invention was to be introduced. If you have a reference that suggests he was ignorant of this context it would certainly count against this and I’d love to hear about it.

        I’ve been lucky in my tech career to work with a few brilliant people who approach that ideal of being real innovators and visionaries. I have not noticed that they are ignorant of the world or the areas and context of their concerns. Contrary to that, I’ve noticed that they know a lot more about more things than we mere mortals. Deeply educated, curious and knowledgeable and aware of their place in the world and systems operative at their time, they seek the fulcrum that will allow them to change the world. At least, that’s what I’ve noticed.

      • http://www.asymco.com Horace Dediu

        Gas at the time was purchased from pharmacies. Roads existed in abundance but they were not paved to a standard that could absorb high traffic. See http://en.wikipedia.org/wiki/Bertha_Benz#First_cross-country_automobile_journey

      • Fran_Kostella

        Great story, thanks for the link! My conjecture was based on the world that existed later, so I was off base here.

  • berult

    An artist, with nothing but a brushstroke, a color palette, and a soul, builds with unbounded imagination what some, with reflexes, ideals, and principles, deconstruct with bonded rationales.

    Steve Jobs’ once unattainable dream, a ‘sub judice’ addendum to a classic Jobsian truism…

    a car ought to be a uni-cycle for the mind;

    all what the literal entails, whence the figurative unwinds;

    a Home at rest, a Home unrests, a Home as best;

    and all…and all, that ‘more than the sum’ suggests.

    berult.

    • Sacto_Joe

      Asymco’s very own poet laureate. You’re a treasure, berult.

      • Eric Gen

        Ditto!

  • Space Gorilla

    Great insight, especially your first point “The experience of a product”. I’ve been thinking for a while that Apple’s product, what Apple sells, is really the user experience. Viewed through that lens, can Apple be disrupted? Maybe not, since the user experience can never be good enough, the experience of using a product and all the facets of that, can always be improved upon.

    • Childermass

      Two points.
      One. The user experience is where the user meets the used. Interfaces. People with information, and information with people, but also machines and surfaces. And machines and machines. In-car, within-car, car-on-road, power and delivery.
      Two. Apple is lauded for being unafraid of self-disruption, the true disruption will occur when they stop.

      • Space Gorilla

        I’ve always appreciated that Apple pays attention to the details, and isn’t afraid to make choices.

  • r.d

    Volvo is testing their self-driving cars. Here is list
    of sensors. Now ask yourself can electric battery have
    enough power for all this and more.

    • ❑ 76 GHz radar (rear view mirror)
    • ❑ 4 radars behind front and rear bumpers
    ▼ ❑ 4 HDR cameras
    – two under outer rear-view mirror
    – one in the rear bumper
    – one in the grille

    • ❑ multiple beam laser scanner in front below the air intake
    • ❑ trifocal camera placed behind the upper part of the windscreen is three cameras in one, 140 degree view, a 45 degree view and 34 degree view
    • ❑ two long range radars placed in the rear bumper.
    • ❑ 12 ultrasonic sensors around the car to identify objects close to the vehicle.
    • ❑ 3D high definition digital map giving information like altitude, road curvature, number of lanes, geometry of tunnels, guard rails, signs, exits. the position geometry is in centimeter level.
    • ❑ high performance GPS enhanced by combination of an advanced GPS, a 3 degrees of freedom accelerometer and a 3-degrees of freedom gyro.
    • ❑ V2V connectivity and current traffic and map data.
    • ❑ redundancy brake, steering system, control computers.

    • Martin

      That seems like an odd question. A Tesla’s battery can power an average home for 2 days. The more interesting question is how much of an internal combustion engines power would need to be redirected through an alternator to generate the needed power and how much loss do you incur from yet another conversion?

      Most of what you list is pretty low-power stuff. Cameras and ultrasonic sensors are all pretty lower power. GPS is. Redundancy computers are. Radar is just a couple of watts as is the laser scanner.

      The whole package manufactured in volume (eg, optimized for the job) will consume less power than a pair of LED headlights. Nobody is questioning whether EV cars will have headlights or not.

      Digital is cheap – cheap on power, too.

      • r.d

        New England Avg Power Consumption per month is 649 KWh
        which is 21.6 KWh per day.

        Tesla Batteries are 40-60 KWh
        1K = 5 miles

        1000 Watts = high performance
        with 4 TFLOPS high end game
        can barely do 60 FPS 2K Games for 1 hour.

        For 4K Games 20 FLOPS is needed.
        Now translate that to real time GPU based computing
        model the real world to drive car.

        Car manufactures have been testing drive by wire for 20 years
        have yet to adopt it.

        Computing is cheap only for toy problems which what PC has been peddling for 40 years. Remember GM joke about if Microsoft made a car.
        http://www.snopes.com/humor/jokes/autos.asp

      • Sacto_Joe

        Actually, the bit about Apple is very interesting indeed. How many cars is “5%”? BTW, that 5% comment is way out of date. If you count iPads as computers (which I do), then Apple is the biggest single computer manufacturer in the world. 5% is long gone.

        I don’t know what Apple is working on. But to say that computer tech can’t dramatically impact the transportation system is, as an aquaintance used to say, not even wrong….

    • http://sumocat.blogspot.com Sumocat

      Once upon a time, only electric or hybrid cars had the power for all this. Onboard computing, the kind required to coordinate this data, was a unique selling point in early hybrids. Tesla built their brand on advanced tech. Combustion vehicles caught up, in part because of increased computing efficiency, but if you need electricity, I’d take an electric motor/generator or mega-battery over an alternator.

    • Childermass

      Good summary of all the reasons why not. The Wright Brothers did not think like you do. Audere est facere.

  • Get Serious

    Too many people over think what Apple might do.
    Apple is made of regular people that experience life like everyone else. Apple doesn’t ‘focus group’ because they are the focus group. They make products and enter markets that address problems in their lives. Problems that would make them Feel better if the problem were fixed.
    If you want to know where Apple is going think of things in your life that bother you and what kind of solutions you could bring if you focused and worked really, really, really hard to make them better.
    In my 36 year automotive career I can tell you there is a lot that Apple could change to make the experience Feel much better, from purchase to ownership to service. But I would caution Apple the business is a sinkhole that could consume the company.

    • Childermass

      Focus groups. When you want to know what folk think worked well, have a focus group. (Most of which are hopelessly unfocused, by the way.) When you want to know what to do next, just do it. Fly or don’t fly. Ask them afterwards.

  • katherine anderson

    Horace, your tweet today on Fetishism … I hope that’s a hint at your next post … apropos Ferrari, Lamborghini, Porche etc, and all that is attributed to their supernatural powers.

    We can pick up on your commentary relating to taste, and speculate whether Apple has plans to disrupt the crude appetites of the fetish worshippers.

    • marcoselmalo

      Apple Car Edition, anyone?

  • peto1

    “The poetry is pretty clear on the matter.”

    I love it! Thanks, Horace …