Search term: tablet

What next for iPad?

ComScore suggests that there are 100 million tablet owners in the US. On a per capita basis that implies penetration of about 30%. As a percent of mobile phone subscribers (above age of 13) that implies 40%. As a percent of smartphone users that implies 43%. As a percent of iPhone users that represents 47%. As a percent of households assuming one device per household that implies 85% penetration. By another measure (Pew) household penetration is around 50%.

Regardless of the difficulty in defining what is the correct “addressable market”, the more important question is whether tablets will be an ubiquitous object. Perhaps what we are seeing in the US is something similar to the MP3 player market or video game console markets where penetration saturated at around 50%. Perhaps tablets will reach PC levels which are closer to 80% of population or perhaps they will reach phone levels which are above 90%. The reason we can’t answer the question of ubiquity easily is because competing solutions can carve the usage out of a category “disrupting” it with alternatives.

The idea that jobs are the segments into which products fit and not demographics or product attributes is key to understanding this migration. The reason phones have subsumed more jobs onto themselves is because they have a rapid rate of evolution and because they have larger scale of economy and because they are conformable to our life spaces. As phones get better they take on more jobs and some of those jobs are those of tablets. The MP3 did not become ubiquitous because the phone took its job. Same for the video game and same perhaps for the PC and tablet.

The Battle for The Wrist

The Apple Watch offers a hierarchy of surfaces onto which software can compete for attention:

  1. The Complication Layer
  2. The Notification Layer
  3. The Glances Layer
  4. The App Screen

These surfaces are arranged in a hierarchy where the highest is the most accessible and the lowest is the least accessible. In a similar fashion we can consider the hierarchy of screens a person could reasonably be considered to be exposed to:

  1. The Watch
  2. The Phone
  3. The Tablet
  4. The TV
  5. The Personal Computer
  6. The Public/Work Computer

Note that this hierarchy is correlated to the size and hence the portability and persistence of proximity to the user. Each of the screens has its own “surfaces” which expose software to the user with various degrees of ease. For instance the iPhone has Notifications, Control Center, Home Screen, etc. The OS X personal computer has the Desktop, Notifications, the Dashboard, the Browser etc.

It follows then that software which is located at the top of each hierarchy on each device will have the greatest exposure to user interaction and that the device which has the nearest proximity to the user will provide the greatest value to software developers.

This implies further that the most valuable “real estate” for software will be the Complication layer on the Watch.

The software which receives either default placement there or which convinces the highest number of users to opt for placement there will have the greatest potential value. As suggested in my post on how the Watch will be valued, how software will be valued will be by the probability of its Settings being enabled for display on the Watch and its presence within Glances.

The jostling for position within the constrained real estate on the wrist will be analogous to the competition for positioning on the phone. You’ll note that the winners on the phone were different than the winners on the PC. My bet is that the winners on the Watch will be different than the winners on the Phone.

And that’s not a bad thing.

The Monopolist

When the Apple Watch will begin sales, there will have been dozens of “smart watches” released. At CES this week at least 56 “wearables” were on display. One could be forgiven for thinking that Apple’s Watch will compete with at least that many alternatives. Those alternatives don’t even include the entire existing mechanical and electronic watch market, which, surely, is also filled with competitors.

When analyzing competition, it’s easy to get caught up in one-on-one competitive comparisons, each posited as a decisive life-or-death battle. Consider the list of competitors that Apple has been declared as being in a death-match with:

  • Real Networks. Yes, there was a time when Apple’s survival depended on success vs. alternative media encoding technologies.
  • Adobe. Remember Flash? No Flash support meant that Apple’s fledgling phone would fail.
  • “The Music Industry”. Unhappy partners could surely shut down the iTunes music store, and their insistence on DRM would surely cripple the experience.
  • IBM. In nearly every aspect, their business/strategy/inclination and glimmer of intent was an existential threat the Apple.
  • Microsoft. In nearly every aspect, their business/strategy/inclination and glimmer of intent was an existential threat the Apple.
  • Google. In nearly every aspect, their business/strategy/inclination and glimmer of intent is an existential threat the Apple.
  • Samsung. Obviously. But not just phones or tablets. They have control over key components that Apple used in many of its products, before the iPhone even.
  • Palm/BlackBerry/Nokia/HTC/Huawei/Xiaomi Every phone maker (and every phone) was/is an existential threat to Apple.
  • Dell/HP/Asus/Lenovo et. al. Every PC maker was a threat to Apple. Some of them made MP3 players. Some of them make tablets.
  • Amazon. Obviously. Not only as an iTunes killer but as a device disruptor. They are working on drones, after all.
  • Sony. Remember them? No longer a PC maker but they moved in many circles Apple moved in. While we’re at it, add all the consumer electronics companies in Japan.
  • Dropbox. “If Apple can’t do iCloud right, they’re doomed”.

This is a very short list (feel free to suggest more) and it becomes clear that the total count of competitors that Apple has to counter “or else” seems to number in the thousands. Practically every hardware, software and service company is positioned as an “Apple Killer”. in fact, the more interesting question might be which companies are not competing with Apple.

Another interesting question relates to why there is no transitive property of competition. I.e. if company A competes with Apple and Apple competes with company B then it does not follow that company A competes with company B.

To wit, whereas HTC competes with Apple and so does Dropbox, it does not follow that HTC competes with Dropbox. So it’s entirely possible that it’s axiomatic that

“Most companies compete with Apple but few of them compete with each other”.

Recognizing a pattern, one could build a model of the technology world where Apple is the focus of all competitive efforts. But this starts to sound absurd.

Indeed, the flaw in the logic is that these competitive pairings are based on the overlap of features of products/services being offered. The features become the attributes of a product which supposedly defines their competitive power. But this is false for the same reason that the attributes of a buyer do not determine their buying behavior. Buyer attributes[1]  are easy to measure and they may correlate to purchasing behavior but they don’t cause it.

Similarly, product or company attributes are easy to measure and they may correlate to competitive behavior but they don’t cause the substitution of a purchase.

Therefore, appealing to Apple to change its strategy, operations or even its core beliefs in response to a competitor’s behavior is deeply misguided. The cause of success and failure in the marketplace is based on being hired by the customer to get a job done. Once hired, the chances are that the trust is secured and the relationship continues even if alternatives are available. There is comfort in the knowledge of whom you’re working with.

This aspect of trusted relationship between the buyer and the product and the interweaving of ‘brand’ (aka intentions) of the hired is the root of loyalty. Of course, loyalties can be betrayed and trust can be lost. But that implies that the primary responsibility of the manager is the creation and preservation of trust. When seen in this light, an alternative axiom becomes clear:

“Great companies don’t have any competition.”

Great companies are “monopolists of customer trust” and are unaffected by alternatives. They are positioned on and nailing the job their products and services are hired for. The alternatives must not only duplicate the exact job (which they almost never do), but they must also overcome the switching costs.

Remember this when analyzing the impact of yet another competitor and considering the “Apple must fix/do X or else” assertions.


  1. E.g. demographic, sociographic []

The Critical Path #126: Making the world go round

Horace and Anders on the irrelevance of shareholders. Anticipating an Apple October 2014 event they discuss how the iPad and tablet designs could evolve. Diving into how brands can manage disruption through a whirlwind tour of products from cameras to watches to cars.

via 5by5 | The Critical Path #126: Making the world go round.

Open always wins

ABI Research estimates that AOSP (or forked Android) is the fastest growing mobile operating system with a total share of units shipped of about 20%. This is not surprising considering that most Chinese vendors don’t include standard Android into their products. Indeed the current leader in China, Xiaomi has its own take on Android and includes a unique UI and set of services. This is also not a new pattern, Amazon’s fork of Android has been in development for many years and powers the second most used tablet in the US.

If one looks at the volumes of smartphones shipped by vendor, the most rapidly growing (Huawei, Lenovo, Xiaomi, ZTE, Coolpad and “others”) are likely to be using forked versions of Android.

Screen Shot 2014-08-07 at 7.06.09 PM

The reasons for this are many: a reluctance to deal with Google’s obligations,  Microsoft’s IP licensing costs[1] , potential litigation, politics (including bans on Google services in certain markets), etc. But the most likely reason is flexibility. Vendors competing on price and localization are looking to move quickly against each other and can’t wait for blessings from above. Belonging to some “Alliance” and all that it entails is just too much to ask for companies that are, so to say, delicate.

  1. which even Samsung seems to be eschewing []

Ten years ago: Clayton Christensen on Capturing the Upside

You can hear this as an MP3.

[It’s important to understand just how much the theory has evolved in the last 10 years. Much more perhaps than in its first eight.]

Doug Kaye: Hello, and welcome to IT Conversations, a series of interviews recording and transcripts on the hot topics of information technology. I am your host, Doug Kaye, and in today’s program, I am pleased to bring you this special presentation from the Open Source Business Conference held in San Francisco on March 16 and 17, 2004.

Mike Dutton: My name is Mike Dutton, and it is my pleasure to introduce to you today Clayton Christensen. Professor Christensen hardly needs an introduction. His first bestseller, “The Innovator’s Dilemma,” has sold over half a million copies and has added the terms “disruptive innovation” to our corporate lexicon. His sequel — and you have to have a sequel to be a management guru — is entitled “The Innovator’s Solution” and is currently Business Week’s bestseller’s list. Professor Christensen began his career at the Boston Consulting Group and served as a White House fellow in the Reagan administration. In 1984, he cofounded and served as chairman of Ceramics Process Systems Cooperation. Then, as he was approaching his 40th birthday, he took the logical step of quitting his job and going back to school, where he earned a doctorate in Business Administration from Harvard Business School. So, today he is a professor of Business Administration at Harvard Business School where teaches and researches technology commercialization innovation. Professor Christensen is also a practicing entrepreneur. In 2000 he founded Innosight, a consulting firm focused on helping firms set their innovative strategies. And according to a recent article in Newsweek, “Innosight’s phones ring off the hook, and the firm cannot handle all the demand,” very similar to all the startups in open source here today. So, please join me in welcoming Clayton Christensen.

Clayton Christensen: Thank you, Mike! I’m 6 feet 8, so if it’s okay, I’ll just…the mic picks up okay. I’m sure delighted to be with you, especially because there is blizzard in Boston today; my kids have to shovel the snow!

As Mike mentioned, I came in to academia late in life, and the first chunk of research that I was engaged in was trying to understand what it is that could kill a successful, well — run company. And those of you who are familiar with it, probably know that the odd conclusion that I got of that was that it was actually good management that kills these companies. And subsequent then to the publishing of the book that summarized that work, “The Innovator’s Dilemma,” I’ve been trying to understand the flip side of that, which is if I want to start a new business that has the potential to kill a successful, well — run competitor, how would I do it? And that’s what we tried summarize in the book, “The Innovator’s solution.” It’s really quite a different book than the “Dilemma” was, because the “Dilemma” built a theory of what is it that caused these companies to fail. And then in the writing of this solution, I’ll just give you analogy for where we came out on how to successfully start new growth businesses.

I remember when I first got out of business school and had my first job. I was taught the methods of total quality management as they existed in the 1970’s, and we had this tool that was called a “statistical process control chart.” (Do they still teach that around here?) Basically you made a piece, you measured the critical performance parameter and you plotted it on this chart, and there was a target parameter that you were always trying to make the piece to hit, but you had this pesky scatter around that target. And I remember being taught at the time that the reason for the scatter is that there is just intrinsic variability and unpredictability in manufacturing processes.

So, the methods that were taught about manufacturing quality control in the ‘70’s were all oriented to helping you figure out how to deal with that randomness. And then the quality movement came of age, and what they taught us is, “No, there’s not randomness in manufacturing processes.” Every time you got a result that was bad, it actually had a cause, but it just appeared to be random because you didn’t know what caused it. And so the quality movement then gave us tools to understand what are all the different variables that can affect the consistency of output in a manufacturing operation. And once we could understand what those variables were and then develop methods to control them, manufacturing became not a random process, but something that was highly predictable and controllable.

Postmodern Computing (Summit)

Screen Shot 2014-05-12 at 7.03.42 AM

Steve Jobs famously said that Apple stands at the intersection of of Technology and the Liberal Arts. He said it more than once because he thought it was an important distinction of the company.

In an intuitive way, the message may have gotten through to the average person, but I don’t think professional observers and managers of technology have quite grasped what he meant.

It’s not a glib throw-away marketing phrase. I can imagine many other, more evocative ways of saying that Apple blends the hard and the soft; the heart and mind, if you will.

His choice of words makes me believe that he meant it as a fundamental blending of two disparate and considered-opposite concepts, rather like yin-yang: things which do not naturally mix but which are complementary, interconnected, interdependent, and give rise to each other.

This interaction however is not well understood and even more rarely exploited. The reason they don’t mix well in business in particular is that individuals are typically not trained in both. Our education systems (from where these phrases originate) are unwilling or incapable of providing us with a grounding in both, so individuals tend to absorb only one or the other.

But it turns out that the interaction between these nominal opposites have determined our world to date and will continue to determine our fate. A cursory review of history shows that the “soft”, perceptive and feeling-based disciplines always combined with the analytical and judgmental to create a future which neither could create alone.

I note how Apple uses this combination to an advantage and have also used this methodology myself to understand and sense the future. Taking this method further, I would like to share it with others. I would like to recognize some faint but powerful patterns and bare some of the more audacious conclusions of my analysis.

The method chosen is a forum we are convening called The Post Modern Computing Summit.

It’s a small gathering where we are inviting the most enlightened thinkers of the future of computing to lead us into its next age, and perhaps, tentatively, the next era of civilization.[1]

  1. We’ll also answer the questions of where tablets are going, and where they will takes us, what is the future of apparel computing, what does intimate computing mean and who will benefit and who won’t. []

The iPad discontinuity

iPad sales were unexpectedly slow in Q1. Tim Cook explained it as follows:

iPad sales came in at the high end of our expectations, but we realized they were below analysts’ estimates and I would like to proactively address why we think there was a difference. We believe almost all of the difference can be explained by two factors.

First, in the March quarter last year we significantly increased iPad channel inventory, while this year we significantly reduced it.

Second, we ended the December quarter last year with a substantial backlog of iPad mini that was subsequently shipped in the March quarter whereas we ended the December quarter this year near supply demand balance.

We continue to believe that the tablet market will surpass the PC market in size within the next few years, and we believe that Apple will be a major beneficiary of this trend.

Tim Cook went on to say “over two-thirds of people registering an iPad in the last six months were new to iPad”

In a later discussion, Luca Maestri said:

As Tim explained earlier, our iPad results and the comparison to the March quarter last year were heavily influenced by channel inventory changes. Specifically, this year we sold 16.4 million iPad into our channel and sold through almost 17.5 million, reducing our channel inventory by 1.1 million units.

Last year, we sold over 19.4 million iPads into our channels and sold through 18 million, and therefore increased channel inventory by 1.4 million units. As a result, the year-over-year sell through decline was only 3% compared to the sell-in decline of 16%.

We exit the March quarter with 5.1 million of iPad channel inventory which left us within our target range of four to six weeks. iPad continues to lead all other tablet by far in terms of user engagement, size of ecosystem, customer satisfaction and e-commerce.

In a later Q&A:

Innoveracy: Misunderstanding Innovation

Illiteracy is the inability to read and write. Though the percent of sufferers has halved in the last 35 years, currently 15% of the world has this affliction. Innumeracy is the inability to apply simple numerical concepts. The rate of innumeracy is unknown but chances are that it affects over 50% of us. This tragedy impedes our ability to have a discourse on matters related to quantitative judgement while policy decisions increasingly depend on this judgement.

But there is another form of ignorance which seems to be universal: the inability to understand the concept and role of innovation. The way this is exhibited is in the misuse of the term and the inability to discern the difference between novelty, creation, invention and innovation. The result is a failure to understand the causes of success and failure in business and hence the conditions that lead to economic growth.

My contribution to solving this problem is to coin a word: I define innoveracy as the inability to understand creativity and the role it plays in society. Hopefully identifying individual innoveracy will draw attention to the problem enough to help solve it.

One example is in the following quote:

“Lastly, nationally circulating tabloid Ilta-Sanomat gets a look at Nokia’s fabled tablet computer that was developed nine years before the iPad hit the market. According to the paper, Nokia had its own innovative tablet device ready in 2001, but unfortunately it never made it to the shops. A former Nokia expert Esko Yliruusi says that the project was suspended a heartbeat before the tablet hit the market because it was thought that there was insufficient demand for such a device.”[1]

To explain what’s wrong with this usage we need some definitions.

The definition of innovation is easy to find but it’s one thing to read the definition and another to understand its meaning. Rather than defining it again, I propose using a simple taxonomy of related activities that put it in context.

  • Novelty: Something new
  • Creation: Something new and valuable
  • Invention: Something new, having potential value through utility
  • Innovation: Something new and uniquely useful

The taxonomy is illustrated with the following diagram. The position of the circles shows the embedding of meaning[2]

Screen Shot 2014-04-18 at 7.54.26 AM

To illustrate further, here are some examples of the concepts.

  • Novelties: The choice of Gold as a color for the iPhone; the naming of a version of Android as “Kit Kat”; coining a new word.
  • Creations: The fall collection of a fashion designer; a new movie; a blog post.
  • Inventions: Anything described by a patent; The secret formula for Coca Cola.
  • Innovations: The iPhone pricing model; Google’s revenue model; The Ford production system; Wal-Mart’s store design; Amazon’s logistics.

The differences are also evident in the mechanisms that exist to protect the works:

  • Novelties are usually not protectable but since their value is very limited the copying is not seen to cause harm.
  • Creations are protected by copyright or trademark but are not patentable since they lack utility.
  • Inventions can be protected for a limited time through patents but can also be protected indefinitely by being kept secret. Their uniqueness may also be the means by which they can be kept a secret.
  • Innovations can be protected through market competition but are not defensible through legal means.

Note that the taxonomy has a hierarchy. Creations are novel, inventions are creations and innovations are usually based on some invention. However inventions are not innovations and neither are creations or novelties. Innovations are therefore the most demanding works because they require all the conditions in the hierarchy. Innovations implicitly require defensibility through a unique “operating model”. Put another way, they remain unique because few others can copy them.

To be innovative is very difficult, but because of the difficulty, being innovative is usually well rewarded. Indeed, it might be easier to identify innovations simply by their rewards. It’s almost a certainty that any great business is predicated on an innovation and that the lack of a reward in business means that some aspect of the conditions of innovation were not met.

The causal, if-and-only-if connection with reward is what should be the innovation litmus test. If something fails to change the world (and hence is unrewarded) you can be pretty sure it was not innovative enough.

Which brings us to the quote above. The fact that the Nokia tablet of 2001 not only did not succeed in the market but was not even released implies that it could not have been innovative. The product was only at the stage of perhaps being an invention (if it can be shown to be unique) or merely a creation (if it isn’t.) Furthermore, if the product is so poorly designed that it is literally unusable then it is just a novelty. A design, sketch or verbal description might be novel but it does not qualify as an innovation or an invention or even a creation. How far the depiction went toward making a dent in the universe defines its innovativeness.

Why does this matter?

Understanding that innovation requires passing a market test and that passing that test is immensely rewarding both for the creator and for society at large means that we can focus on how to make it happen. Obsessing over the mere novelties or inventions means we allocate resources which markets won’t reward. Misusing the term and confusing it with activities that don’t create value takes our eye off the causes and moves us away from finding ways of repeatably succeeding.

Recognizing that innoveracy is a problem allows us to address it. Addressing it would mean we could speak a language of value creation that everyone understands.

Wouldn’t that be novel?

  1. A video showing the device is here, in Finnish. []
  2. The size of the circles also suggests degree of effort required and potential reward. Note that this is not a Venn diagram. []

Tim Cook’s outburst [Updated]

When trying to assess the success of an ecosystem, the primary measure is the size of the user base or the “audience” for the product. Companies like FaceBook and WhatsApp and Twitter are measured first and foremost on this metric. Companies like Google, Amazon, Apple and Microsoft are less so. When revenues are firmly attached to products the focus shifts to “follow-the-money” rather than “follow-the-users” metrics.

That’s as it should be, but for the sake of understanding the competition between ecosystems, they should be compared on some similar basis. If the basis of competition in this day and age is ecosystems[1] how does one evaluate Facebook’s vs. Microsoft’s? Or, more poignantly, how does one compare WhatsApp’s valuation with that of iMessage?

It’s common to value a company which aggregates audiences at a multiple of that audience size. The implication being that each member of the audience returns a certain cash flow to the aggregator and the discounting of those flows is the net present value. Which is why, for example, a newspaper is valued in terms of its subscribers. As is a TV network and as might be a social network. Using this metric, a WhatsApp (i.e. free messaging) user is worth $40 and the average social media user may be worth around $100.[2]

The implication is that users/subscribers/audience members are loyal and will stay with the programming for some time. There is also a second implication that businesses which are not measured by audience size don’t have this loyal and recurring revenue base. The absence of an “audience” implies transience and impermanence and results in deep discounting of long-term viability.

  1. As Microsoft, Apple and Google seem to agree it is. []
  2. The degree to which a user is actually worth the sum of all the subscriptions she may have made is a good topic for discussion. []