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Author: Horace Dediu

Two turkeys don't make an eagle, but no penguin will ever soar.

Vic Gundotra of Google tipped off the world two days in advance that on Feb 11 Android would play no part in Nokia’s strategy. To be sure, Elop said that Nokia didn’t choose Android because of “differentiation challenges and commoditization risk” (begging the question of how these challenges and risks are mitigated by licensing another openly available OS).

But I won’t weigh the merits of one module vs. another. Rather, the more pertinent discussion should be on why license instead of build. Clearly, Nokia threw in the towel. Not because they could not build, but because their building processes could not create greatness.

But can greatness ever come from modularity? I’ve argued that it can’t. I’ll maintain that argument as long as what is being built is not good enough. In other words, as long as innovation remains relevant, improvements will be absorbed and rewarded. Once innovation exceeds what can be absorbed, the basis of competition will shift to convenience and price which are best served with a modular business architecture.

Android is a fast follower. The first Android prototypes looked like Blackberries because that was the input paradigm of 2006. When capacitive touch was shown to be a better input method, Android reacted swiftly. When app stores created a new medium Android reacted swiftly. When the iPad demonstrated that computing can be done in new settings, Android reacted. At such time when there will be nothing to follow Android will be the king of the last commoditized innovation, but as long as there is something worth inventing Android will be there to reproduce it.

This is not a judgement, but an observation: Nokia and Microsoft may not make an Apple but neither will Android ever create the future.

Changing places: Microsoft trades HP for Nokia

The juxtaposition of HP’s strategy of increased independence and Nokia’s new strategy of increased dependence can’t be more striking.

HP is probably Microsoft’s biggest customer. As the largest licensee of Windows it probably generated more revenue for Microsoft than any other company. The fact that HP invested in a new operating system for its mobile efforts shows a level of discomfort with the lack of strategic leverage.

Nokia, on the other hand, has been resolutely independent in its software strategy. For over a decade it held out against licensing any OS, especially one from Microsoft. The pantomime theatrics that took place over that decade will make a great case study some day.

Continue reading “Changing places: Microsoft trades HP for Nokia”

Visualizing jumping off a burning platform

Here’s what a platform jump looks like:

The devil is in the details. Although there was great excitement among investors at the prospect of platform agnosticism, the reality of the press releases shows that Nokia may have some significant short term pain.

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A review of Asymco Predictions on Nokia’s new platform strategy

Predictions on Nokia’s new platform strategy: new OS for the US | asymco.

Here are my predictions from January 27 for the February 11 Nokia strategy announcement followed by the actual quotes from Nokia’s press release: Continue reading “A review of Asymco Predictions on Nokia’s new platform strategy”

The (iPod)Touch(i)Pad

The world’s largest PC company just launched a “media tablet[1]”. Conflating the iPod Touch and iPad brands into “TouchPad” HP joins RIM in announcing an integrated OS/device product to compete as a platform vs. iOS and Android (and to some degree even against Windows).

There are others waiting in the wings. Presumably, Microsoft is hard at work to release a tablet-compatible Windows sometime near the middle of this decade. MeeGo is also going through its gestation period targeting Atom-based tablets. John Gruber notes the excitement around tablet platforms in his article about this post-PC renaissance in computing alternatives. I also noted that the end of the PC era was marked by the end of WinTel at CES.

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Why focusing on a few products is hard

“Focus is about saying no.” This quote is perhaps apocryphal but it’s credited to Steve Jobs. It’s not a novel idea. Many companies chant this mantra but do they really understand what focus implies?

Focus is the antithesis of portfolio theory. Portfolio theory is a great concept. Every pedestrian in New York City has experienced it. While the weather is fine, street vendors sell their regular wares, but when a rainstorm appears it seems everyone is selling umbrellas.

The idea that you keep umbrellas in stock seems very prudent. It’s a hedge that people will need a different product under different circumstances. Maintaining a product portfolio is a way of selecting a collection of products that has collectively lower risk than any individual product. The formulation of this even earned its creators the Nobel prize.

But “focus” is the willful rejection of this theory. By saying no to alternatives you increase risk disproportionally to the reward. If you have the means to maintain a portfolio it certainly seems imprudent not to do so.

So why would someone want to focus?

The answer is that too much diversification is dangerous. It’s dilutive to everything the company uses to create value: its resources, its processes and its priorities. It dulls the mind and tarnishes the brand.

So focus is not just saying no. It’s being supremely confident in what you say yes to. It’s having the ability to call the winners and the losers. A company that lives and breathes product gains this confidence. A company that puts markets or profit formulas first never obtains the confidence to focus, inflates its portfolio and thus risks everything.

The Apple doctrine

The best way to get to the essence of any company is by evaluating its priorities. These priorities are like an unwritten constitution. The analog in theology is dogma which when codified becomes doctrine. In law it’s common or case law.[1] In business, priorities are hard to discern and are usually only anecdotally observed.

At Apple the top priority is the product.

Sounds trivial, but very few companies place product first. Those who do tend to be producing creative works (e.g. movie or advertising studios, companies built around a creative process). Most companies place either production or distribution first.

Placing product first forces the bizarre behavior that Apple is well known for: being innovative and quixotic. It makes them foolish and hungry. Sometimes it even makes them catastrophically destructive to competitors.

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Smartphone users still prefer branded phones

The smartphone market has grown threefold in the span of three years. However, as noted previously, the share of units running a licensed OS has not grown dramatically. The following chart shows the vendors’ shares with the same brown/green dichotomy between licensed and unlicensed OS’s.

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Comparing Share of Growth: Integrated smartphone vendors held their own in Q4

The smartphone market grew to about 100 million units last quarter. That’s nearly double what it was a year earlier and triple what it was three years earlier, the year the iPhone made its debut.

Few markets grow this quickly, especially as this tripling happened during one of the worst recessions for a century. 100 million units a quarter is not a small number. The rate at which smartphones are growing makes clear the trajectory of where all phones are going.

As I’ve shown in profitability charts, vendors have been benefiting to differing degrees. The overall smartphone market with individual vendors is shown below: Continue reading “Comparing Share of Growth: Integrated smartphone vendors held their own in Q4”