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Author Horace Dediu

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The smartphone market continues to grow. 2013 saw total shipment of around one billion units (up from 683 million in 2012). In contrast, non-smartphone shipments continue to decline, with shipments around 800 million (down from 987 million in 2012).

This pattern is shown below:

Screen Shot 2014-03-18 at 3-18-12.45.12 PM

Note that prior to 2012 the non-smart market seemed to be holding steady in spite of the growth in smartphones. The notion that smartphones would become universal was widely dismissed. I certainly heard many objections to my 2010 hypothesis that not only would smartphones become ubiquitous but that it would become increasingly difficult to find anything else to buy. (This in spite of the clearly evident demand for “low-end” non-smart devices.)[1]

I also suggested that the notion of distinguishing phones with the”smart” tag would become irrelevant and that we would just call these devices “phones”.

Notes:
  1. The analogy I used was that of the black-and-white TV market as color TV became increasingly popular. There probably was a market for monochrome screens for a long time after they were discontinued but that is beside the point: the old technology becomes increasingly scarce because of economies of scale []

The Thin Red Line | Asymcar

We explore the strategic and tactical considerations behind BMW’s i sub-brand. Why did BMW attach a new BMW sub-brand to a new powertrain rather than using another brand, like Mini? The answer helps explain how innovations and brands inter-relate and how incumbents can attempt to absorb what is potentially non-sustaining.

We consider the pros and cons of innovation within an operating business – “intrepreneurship” – compared with creating an autonomous enterprise for the “new new thing”. I contrast BMW i with General Motors’ failed Saturn experiment.

We consider the burden that regulation, girth, cycle times, legacy practices, financialization and strategy taxes place on incumbents.

Finally, we look at what it takes to cross over the line which separates the device-based nice-to-have infotainment options from the must-have driver and ownership assistants that will inevitably find home in these devices.

via The Thin Red Line | Asymcar.

Sponsor: Tab Dump

There was once a time when websites published only what mattered and nothing else. But thanks to the way content is monetized, today’s journalists have become the equivalent of 1950s factory floor workers. Tab Dump aims to wind back the clock to a simpler time by rethinking what a news site should look like.

First: Forget rich media, and forget stories in reverse chronological order. Tab Dump has no images, so it loads instantly, and it’s split into two sections: Tech News and World News. Each section has stories listed alphabetically, making it easier to find the exact story you care about.

Second: The “stories” are only a few sentences long, packed with as much detail as possible, because your time is valuable, so why waste it with filler?

And third: Tab Dump has opted out of the page view race, there’s only one Tab Dump per day.

tabdump

On Google’s Future. Part 1

From 2005 through 2012 Google site revenues[1] have risen at a rate consistent  with the growth in global Internet population excluding China[2]. The Internet population and Google.com revenues for the period 2005-2012 are shown in the following graph.

Screen Shot 2014-03-13 at 3-13-3.17.02 PM

The correlation is shown in the following graph:

Screen Shot 2014-03-13 at 3-13-3.17.21 PM

Taking into account costs and expenses, on a per-user basis profitability per user (assuming all non-Chinese internet users are Google users) is shown below:

Screen Shot 2014-03-13 at 3-13-3.17.14 PM

The simple conclusion is that Google earns approximately $1.2 per user per quarter (net income is the blue area above). This figure is relatively constant with a slight increase (~20%) over 3 years.

If the company does not alter its business model then the future potential of the business could be measured as a function of Internet (ex. China) population growth.

How hard can that be?

The next post will answer this question.

Notes:
  1. Google revenues are reported as “Google.com”, “Network”, “Motorola” and “Other”. For this analysis I am including only the Google.com revenues []
  2. Internet population is calculated as a combination of penetration as reported by the ITU and population data from the World Bank []

Review: Jony Ive by Leander Kahney

I don’t usually find books about Apple to be quotable. There are certainly some interesting anecdotes and observations but few appeal to the analytical mind. The popular books on Apple have tended to cover what close watchers have already known and are thus compilations with few revelations.

This is not the case with Leander Kahney’s book on Ive. It certainly is the best compilation of detail on product development at Apple during the Ive years (and some time before.) Moreover, it’s also filled with choice insights into the process of development.

This process-orientation is what makes the book stand out for me personally. There are character observations and personality intrigues but they are not the main focus or ambition for the author. Rather, as befits the book’s subject, there is an exposition of detail about how things are done. It’s not a complete exposition–nor can there be one–but it goes much further than any other Apple book I’ve read.

For this reason I found myself tweeting quite a few quotes from the book. Here are some examples:

“In a company that was born to innovate, the risk is in not innovating. The real risk is to think it is safe to play it safe” – Jony Ive

“Scott Forstall wasn’t allowed to visit. His badge wouldn’t even open the door.”

“Design is the fundamental soul of a man-made creation” - Steve Jobs

“I have seen buildings where, as far as the eye can see, you see machines carving, mostly aluminum.”

“I do not want any of my guys thinking about cost. They should not care…that is not their job”

“The thing is, you could transplant me and this design group to another place and we wouldn’t work at all”

“they wanted to give PowerPoint presentations, but Jobs quickly banned them. He saw PowerPoints as rambling and nonsensical”

The book mostly follows Ive’s career with chapters covering most significant episodes chronologically, however there are deep dives into the “how” rather than just the “what” happened. There is a hint of causality rather than correlation between events and outcomes.

For example, there is a mesmerizing description of the actual Apple design studio even though it has never been depicted in any public photo or video or diagram. There is a great attention paid to manufacturing and materials, as indeed there should be if talking about Apple design (but not necessarily if talking solely about design in general.)

There is an amazing revelation of the existence of the “ANPP” or the Apple New Product Process. This process directs the “extreme detail [for] every stage of product development”. The presence of such a “giant checklist” implies a degree of process and rigor which is in contrast to the “heroic” effort that prevails in popular folklore about how Apple develops its products.

If there was one disappointment it was that I felt as if half was missing. The half which would tie the dots together and see where they might lead. But that’s perhaps too much to ask for what is essentially a biography of an individual rather than a company.

Nevertheless, for anyone interested in the process of innovation that remains Apple’s principal asset, Jony Ive, The Genius Behind Apple’s Greatest Products by Leander Kahney is available at the iBookstore.

The billion dollar hobby

During the latest shareholder meeting Tim Cook revealed that Apple TV sales were above $1 billion in the last fiscal year (ending September 2013). The company later clarified that this figure includes device and content sales.

This poses a problem. In previous statements the company cited device (unit) shipments rather than value. The statements made to date suggested that cumulative volume of 3rd (current) generation Apple TV totaled 6 million units as of January 1, 2013.

The following graph includes an estimate of quarterly Apple TV sales based on comments made to date.

Screen Shot 2014-03-02 at 3-2-8.07.43 PM

As there were no additional comments during 2013, the “Billion Dollar” quote is all we have to go with for the year.  The problem with trying to separate content from hardware is complicated by several factors:

Horace Dediu drops in to chat on MWC 2014

It’s a good thing Horace Dediu got ready to start our Mobile World Congress #MWC14 tweetchat #IBMMWCChat on 2/24 a few minutes early – because as usual, the dialogue took off fast and went full steam ahead for an hour. Here is our basic topic list (ordering is mine, chat was slightly different)

  • Android Commoditization
  • Nokia,
  • Microsoft and Google
  • The OS, The Platform and the Ecosystem
  • Tizen
  • Wearables
  • Monetize This
  • The Operator Challenge
  • Nest again
  • The odds and endings

Read Tweet transcript here: Horace Dediu @Asymco drops in to chat on #MWC14 | Electronics industry.

The Critical Path #112: Business Model Diversification

We examine Facebooks acquisition of Whatsapp: What’s being acquired? Resources, processes or values? We also begin a look at The Capitalists Dilemma.

via 5by5 | The Critical Path #112: Business Model Diversification.

Nokia welcomes Android developers

Barcelona, Spain – Today at Mobile World Congress, Nokia unveiled five new affordable handsets including a new family of smartphones debuting on the Nokia X software platform. Based on the Android Open Source Project AOSP, and backed by Nokias deep ties with operators, the Nokia X platform gives AndroidTM developers the chance to tap into, and profit from, a rapidly expanding part of the market.

via Nokia welcomes Android developers; expands global developer footprint with momentum across Lumia and Asha » Nokia – Press.

It’s worth remembering the distinction between operating systems, platforms and ecosystems.

Today’s announcement is consistent with the declaration of Nokia is engaged in a “war of ecosystems.” Note that this is in contrast to “a war of platforms” or a “battle of operating systems” or a “competition of devices.”

Devices are commoditizing, operating systems are commodities and the Android platform is a commodity. Value will not be captured in any of these technology modules. Ecosystems are another matter. It’s where Facebook (and its acquisitions) reside. It’s where Google lives and it’s where iTunes has been for a decade.

Nokia’s adoption of AOSP as an operating system is consistent with the ecosystem strategy set forth three years ago, and is also consistent with Microsoft’s competitive strategy.

Which is why I believe Microsoft is not only comfortable with this development but had agreed to it over a year ago when work on this initiative was already well under way.

Apple’s Growth Scorecard

Apple revenues grew at the rate of about 6% in Q4, while earnings grew at 5%. These were improvements over Q3 and Q2 but the rate of top line growth is has not been this low since 2009. The bottom line is also slower than it’s been for the entire “epoch” or era of the iPhone.

The components of sales growth are shown in the following table:

Screen Shot 2014-02-05 at 12.05.10 PM

The company delivered performance inline with its own guidance so there should not have been surprises in the top and bottom lines. However, the disappointment might be in the low growth for iPhone (at 6%) and iPad (at 7%). The Mac and iTunes grew at moderate rates (16% and 19% respectively) while the iPod continued its decline with -55% growth and Accessories remained fairly flat.

As the graph below shows, the iPhone and iPad are the bulk of the business so their performance is a large part of what is observed.