The Critical Path #161: Who’s Jack Dorsey

Lots of talk about cars, Elon Musk et. al. and even Twitter.

Source: The Critical Path #161

Metamorphosis: The Critical Path #160

On what it means to be great, Apple’s 13 Million iPhone weekend and the iPad Pro and a lot of listener questions on the 160th episode of The Critical Path.

Source: The Critical Path #160

Ep. 27 – Horace Dediu on The Disruptive Nature of Apple TV and Apple Car by The Eric Jackson Podcast 

Eric spoke with Horace Dediu about how disruptive the new Apple TV will actually be, the nature of the media landscape, how Apple could draw viewers away over time, and the potential for live events and interactive apps. We also explore what would make a new car from Apple disruptive and why Apple didnt just buy Tesla.


Asymcar 25: Cars Online, The Selfie Experience with Mathew Desmond of Capgemini

Mathew Desmond of Capgemini joins us to discuss Cars Online 2015: “The Selfie Experience, The evolving power of the connected customer.”

We begin with the finding that “One-half of customers are interested in buying a car from a tech company like Apple or Google. This is true even of customers who are satisfied with their current brand and dealer experience. It is particularly true of young customers (65%) and those in growth markets (China: 74%; India: 81%).

Backing up a bit, we discuss the automaker’s dilemma, that is the legacy manufacturing, distribution and support infrastructure and contrast that with the “clean slate” approach an entrant might enjoy.

The concept and inherent conflicts of a “Master Customer Record” fuels a deeper dive into “Continuity”, the buyer’s desire for a seamless experience.

Finally, we reflect on the perils that may lie ahead as the auto ecosystem attempts to improve the retail experience.

Listen via Asymcar.

The Modularity Revolution. How markets are created

My presentation at Aalto University in Helsinki on The Modular Revolution. This is what you get if you give me a whole hour to talk.

What it means to be great

What makes a product great? I struggle with this question because being great is not just being better than good. Greatness is to goodness as wisdom is to smarts. Just like getting smarter and smarter may never make you wise, getting better and better does not mean ever becoming great.

Greatness is transcendental. It’s hard to pin down. It inspires debate. It divides as much as it unites. It creates emotions as much as thoughts. It builds legends. It engages and persists. It lives in memory and penetrates culture. It implants itself in our consciousness persistently, to linger and dwell in our minds while we are bombarded with stimuli.

We use words such as “iconic” or “epic” to capture this permanent “mental tattoo” that we get from greatness. As important as this notion is, we struggle to define it. We don’t even have a proper word for it. Perhaps it is what art tries to be, or what drives us to achieve beyond surviving. As vague a notion as it may be, it is one of the most important notions I can think of. Greatness is the cause, perhaps, of our ascent.

In the absence of any measurement of greatness, how do we spot it?
It may just be down to “knowing when we see it”. But not everybody does.[1]

  1. Language is another indicator. When people attach brands to entire categories we get an indication of ubiquity and permanence. As much as the brand owner fears it, the genericization of a trademark is very probably an indication of greatness in consumer products. Aspirin, iPod, xerox, jell-o and app are examples where brands became words. []

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Meaningful Contribution

What if Apple did make a car? How significant could their products be? What would it take to influence the industry’s architecture?

The global market is forecast to reach 88.6 million vehicles in 2015 and there are many ways to segment it. One could look at geography or at product configurations or the emergence of new powertrain technologies.

One could also look at the participants.

In 2014 Toyota was the top selling automaker with a total sales volume of 10.23 million vehicles. The following graph shows the leading 15 producers and the percent of total production.

Screen Shot 2015-09-25 at 9-25-2.19.47 PM


Critical Path #159: The Appification of TV, Revisited

Horace and Anders revisit Apple TV and answer listener questions in this special 2 hour episode.

Source: 5by5 | The Critical Path #159: The Appification of TV, Revisited

Soft Underbelly

Executives at car companies have suddenly had to answer questions about potential entrants into their business. This is a big change. I don’t recall a time when this was necessary for over 30 years. For decades the questions have been about labor relations, health care costs, regulation, recalls and competition from other car makers. To ask questions about facing challengers posing existential questions must seem terribly impertinent.

For this reason, Bob Lutz, in his dismissal of Apple’s entry, is not alone. The has a century of history and has seen little disruption in the classic sense. I wrote a long piece on the fundamentals of the industry titled “The Entrant’s Guide to the Automobile Industry” which explained why this industry has been so resistant to disruptive change. At best a massive effort over multiple decades usually leads in a small shift in market share.

However, one should read that post as a thinly veiled threat. Just because disruption seems hard does not mean it isn’t possible. Indeed, the better you understand the industry the more easily you can observe its vulnerability and the more rigid the industry seems the more vulnerable it may be to dramatic change.

The formula for successful entry is the same for all industries: compete asymmetrically. This means introduce products which change the basis of competition and deter competitive responses by making your goals dissimilar from those of the incumbents. This is classic “ju-jitsu” of disruptive competition.

Here’s how it would work.

Bob Lutz suggests that there is no profit to be gained from selling cars on the premise that costs are very high while pricing will be held down by competition. That may be true but entrants could deploy new processes that lower the costs of production. Traditional car making is capital intensive due to the processes and materials used. There are however alternatives on the shelf. iStream from Gordon Murray Design proposed switching to tubular frames and low cost composites.  BMW has an approach using carbon fiber and other composites. 3D printing is waiting in the wings. All offer a departure from sheet metal stamping.

With new materials, costs for new plants can be reduced by as much as 80% and since amortizing the tooling is as much as 40% of the cost of a new car, the margins on new production methods could result in significant boosts in margin.

There is a downside however. What is usually compromised when using these new methods is volume and scale of production. So that becomes the real question: how many cars can Apple target? 10k, 50k, 100k per year? Could they target 500k? That would be 10 times Tesla’s current volumes but only a bit more than the output of the Mini brand.

Now consider that the total market is 85 million vehicles per year. For Apple to get 10% share would imply 8.5 million cars a year, a feat that is hard to contemplate right now with any of the new production systems. On the other hand selling 80 million iPhones and iPads in a single quarter has become routine for Apple and that was considered orders of magnitude beyond what they could deliver. Amazing what 8 years of production ramping can offer.

So the answer to the operating margin might be in a combination of new processes and new ramp strategies.

But there are more levers of change.