Category: Theory

Theory.

Apple's product trajectories

In a well written and reasoned essay, John Gruber observes how Apple evolves their products after starting with a perfectly narrow new product definition.

Toward the end he brings us to the iPad saying:

That brings us to the iPad. Initial reaction to it has been polarized, as is so often the case with Apple products. Some say it’s a big iPod touch. Others say it’s the beginning of a revolution in personal computing. As a pundit, I’m supposed to explain how the truth lies somewhere between these two extremes. But I can’t. The iPad really is The Big One: Apple’s reconception of personal computing.

Absolutely right.  The iPad is as big as it gets.

But in my way of thinking, the iPad itself is but a “rolling” of the original iPhone which itself was a “rolling” of the gesture-based UI that they gestated in Apple’s labs for more than five years.  That UI itself was made possible by the modular nature of OS X and the frameworks on top that have their roots in Next Step. Next Step itself owes a lot to Unix which was born in 1968.

via This is how Apple rolls | Tablets | Macworld.

Why Nokia's board backed the CEO in a stay-the-course strategy

Nokia chairman Jorma Ollila said the company’s management is fully supported by the board

via Nokia board backs CEO, new device strategy | Electronista.

In my assessment of Nokia’s competitive response to the mobile computing disruption I had anticipated an effective re-organziation to begin in 2013, so it came as no surprise that a stay-the-course plan is still being supported at this stage.

This is to be expected because a disruption, by definition, discourages a symmetric response from the incumbents.  Indeed, management would face serious scrutiny and probable dismissal if they did address the challenge head on. A symmetric response would begin with a declaration that the entire asset base of the company is a sunk cost to be written off.  That would include its products, distribution network, development processes, resources and priorities.  Such a response can only come about from a near-death experience.

You can certainly see the dilemma: It would be absurd for management to declare that their top rank position in the mobile phone market is an undesirable situation to be in.  It would be even more absurd if they suggested scrapping their entire world-leading volume business to re-focus on a new business–doing basically what Motorola has done when they were facing oblivion.  The chances are, however, that this is precisely what needs to be done, and the sooner the better.

So being sensible is the path always chosen.  Being bat-shit crazy is not an endorsable strategy.

Essentially, management is paid and incentivized to protect an eroding asset, not to destroy and replace it.

Misdiagnosing Failure: Why Disruptive Innovation Models Miss on Apple

In a thought-provoking article in The Motley Fool (Predicting Failure: Testing the “Disruptive Innovation” Model ) summarizing recent research in disruptive innovation, the following quote jumped out at me:

Then again, the model is dead wrong 15 percent of the time. Lest you think Thurston won’t admit to failures, he points out several instances where his own predictions are wrong. Take the Apple iPhone, he says — if you apply the model to this specific product, instead of the company as a whole. Apple was a new entrant in mobile phones. The iPhone provided better Internet performance and a better interface at a higher cost — not poorer and cheaper — yet it was very successful from the start. “When it’s wrong, it’s interesting,” Thurston says. “We hope to improve the theory.”

This is of particular interest to me because I’ve always felt that Apple had a disruptive track record that was not recognized by disruption theory practitioners.  I think the reason is that casual observers place Apple’s products in narrow categories rather than seeing the real jobs that the products are hired to do.

The reason iPhone gets misdiagnosed by disruption theory is that it is placed alongside other phones and looks sustaining. That’s what the quote above implies and it’s a common mistake. I first did that myself. However a cursory review of how the product is used (see ComScore and Nielsen surveys on usage) shows that it’s used for browsing and applications more than for mobile telephony.  These jobs it’s hired to do have more in common with personal computing. Therefore, when you put an iPhone next to a computer, its disruptive potential becomes clear. This placement also leads you to think of a trajectory that predicts the iPod touch and the iPad as natural improvements for Apple.

That is why I classify the category the iPhone competes in as Mobile Computing–a category of products that is undoubtedly disruptive (less powerful but more convenient and often cheaper) vis-a-vis traditional personal computing.

Similar analyses for the iPad, the iPod would also reveal a pattern of new market disruption for Apple.

On Apple's Two Monopolies

I argue that Apple now has not one but two monopolies:

I)    A nearly-total monopoly on computer (and pocket computer) systems designed with good taste.
II)  A total monopoly on the Microsoft-free, hassle-free personal computer.

Imagine that every car maker save for Toyota insisted on using the infamous East German Trabant as a standard of quality – yet blindly imitated random elements of Toyota’s visual design.  How long would it take for the whiners to appear on the scene and start making noises about monopolistic tyranny?  How long would it take for Toyota to start living up to these accusations in earnest?  And why should it not do so?  What is to be gained from corporate sainthood? …

Of course, Apple’s competitors cannot actually copy the secret of its greatness, because Apple is a fundamentally different type of organism.  Rather than a brainless government-by-committee, it is an extension of one man’s will, projected with the aid of a small group of trusted lieutenants: no focus groups in sight.  For the Apple-imitators to turn into genuine “Apples” would be as fantastic and unlikely as it would be for a slime mold to spontaneously become a true multicellular animal, equipped with a central nervous system.  It is also unclear that, from their own perspective, they should want to grow brains – for a creature with that kind of centralized point of failure is decidedly no longer immortal.

via Loper OS » Non-Apple’s Mistake.

I’ve always thought that Apple had only non-consumption to compete with.  The non-consumption of hassle-free technology.

On Toys

Don’t be discouraged if what you produce initially is something other people dismiss as a toy. In fact, that’s a good sign. That’s probably why everyone else has been overlooking the idea. The first microcomputers were dismissed as toys. And the first planes, and the first cars. At this point, when someone comes to us with something that users like but that we could envision forum trolls dismissing as a toy, it makes us especially likely to invest.

via Organic Startup Ideas.

On a mobile device Search hasn't happened

This is one of the most thought provoking things I’ve ever heard.  Some of the implications are unfathomable.  Before we dive into the implications of iAd, here is the exact quote from the Apple Special Event, April 2010 (iPhone 4.0 launch) around 45 minutes in.

When you look at a mobile phone, it’s not like the desktop.
On the desktop, Search is where it’s at.  That’s where the money is.
But on a mobile device Search hasn’t happened. Search is not where it’s at. People aren’t searching on a mobile device like they are on a desktop.
What’s happening is that they’re spending all their time in apps.
When people are looking for a place they want to go out to dinner they’re not searching. They’re going into Yelp. They’re using apps to get the data on the internet rather than a generalized search.
And this is where the opportunity to deliver advertising is.
Not as part of search but as part of apps.

Jobs is making a set of huge claims:

  1. There is no search on devices.
  2. There is no money in search on devices.
  3. Apps create an inventory of billions of ad impressions every day
  4. Apps are better at delivering the data from the internet than a browser
  5. Apps are therefore the new browsers and eyeball aggregators

This is heavy stuff.  I believe what gives Apple the confidence to make these claims is the vast amount of data on user behavior that the app store collects. It’s possible they’re wrong, but it’s more likely they’re right.

If they’re right, what are the implications?  First, obviously, iAd adds up to a lot of cash « Asymco.  Second, this has dire consequences for Google.  Jobs could not be more blunt: search is not where the money is at.

I can chip in some personal experiences that confirm this preference for apps over browser interfaces, but I leave it as an exercise to the reader.

Palm Minnow is Swimming with Sharks

Palm CEO “I’ve never used an iPhone” Rubinstein quoted in the earnings conference call:

“We had an arrangement with Sprint that when we launched with Sprint that they would invest in marketing and carry the product and for that they would get an exclusive for a period of time. That really determined when we could do our launch at Verizon. I agree with your premise that if we could have launched at Verizon earlier, prior to Droid, that we would have gotten the attention that the Droid got and since I believe that we have a better product, I think we would have even done better.”

So we are led to believe Droid launched into a window in Verizon’s launch schedule. A window which was shut to Palm due to their exclusive with Sprint. It’s a matter of timing.

Then again, Droid got $100 million in advertising and marketing budget from Verizon and Motorola. It’s unlikely that Palm could leverage that kind of muscle, and their product ended up being positioned on a female demographic.

Palm was either late or under-funded or mis-positioned or all of the above.

Essentially, Palm’s problem is not the quality of the product (which is arguable) but their ability to market and distribute in a highly competitive market. In other words, it’s not that they’re not smart enough, but that they’re not strong enough.

Sadly, it’s not enough to be smart or good. They’re in the wrong market if they think having a clever product is a winning strategy. Mobile Computing is the toughest technology market today. Because the stakes are so huge, it’s a market that is targeted by enormous resources.  This is no place for start-ups.

Palm is simply too weak to make it.


Google thinks trying to predict the stock market is illegal

There are many, many things that Google could do, that we chose not to do… One day we had a conversation where we figured we could just try to predict the stock market. And then we decided it was illegal.

link: MacDailyNews

This is so insane that I have to assume he was mis-quoted.


The Below Average CEO: Olli-Pekka Kallasvuo

I vehemently disagree with this premise:

Nokia did not take advantage of any of the opportunities that it had by being in first place. It failed to leverage its partnerships with carriers, manufacturers, software developers, and content companies.

link: The Below Average CEO: Olli-Pekka Kallasvuo Of Nokia (NOK) – 24/7 Wall St.

When disrupted, large incumbents invariably fail to respond adequately to the threat.

You can only blame management if the threat is symmetric and they fail to take up the challenge. This failure almost never happens.

Asymmetric competition is intractable in almost all instances. This failure always happens. A response in kind by management is usually worthy of dismissal “for cause”.


The day the Windows died

I always thought Windows 2000 was the point of over-service for Microsoft. The book linked below puts a date on the point when Microsoft could and should have created an autonomous division whose task would be to create the platform that would eventually disrupt its core business.

Clearly Microsoft did not do this but Apple, with iPad, did.

In September 1999, Kodesh wrote a memo to Gates and Ballmer under the heading “Starting from Scratch.” We need to kill Windows CE for those categories, he argued. Win32 is not an advantage; it’s a tax on device design. It served to further Microsoft’s strategy but not to help consumers. Given all their other alternatives, electronics manufacturers wouldn’t pay the tax. Kodesh wanted to take a small group of developers and work solely on developing the best software for information appliances, unconstrained by the needs of the rest of the company. Gates rejected the suggestions. “It’s very disappointing you feel that way,” he told Kodesh. “We don’t have time to start from scratch.”

link: Who Fatally Wounded Microsoft? It Was Bill Gates. « Mike Cane’s iPad Test