What People Really Think About Online Privacy

Grandstanding politicians are always ready to pillory Facebook and other online services as destroyers of privacy. Silicon Valley tries to avoid thinking about igt. But how do ordinary folks really feel about the issue?

It’s hard to generalize based on a sample of four not randomly selected individuals. But based on what I heard from a panel of consumers at the Privacy Identity Innovation conference in Seattle May 14, these folks, at least, have a nuanced and generally accurate view of the state of online privacy.

Ralph Munro

One interesting conclusion from the panel, moderated by my friend and CBS Radio technology analyst and ConnectSafely.org co-director Larry Magid, is that privacy concerns are focused much more on the use of information by friends, enemies, potential employers, and other individuals than the on the possible sale of data by corporations. “My generation is pretty aware of the implications of putting information out,” said Landon Bennett, a University of Washington-bound Seattle high school senior. “It’s at the back of my mind at all times.” He admits that the world is becoming “more fishbowl like.”

Ralph Munro, born in 1943, brought the perspective of another generation. The former Washington secretary of state noted that the loss of privacy is nothing new. “I was raised in a house with no phone,” he said. “Our first phone was a party line and there was no privacy.” (For those of you too young to remember, a party line was a phone line shared by two or more families–a sort of primitive voice Twitter. To make a call, you had to listen to see if anyone else was using the line, and once there, you could eavesdrop to your heart’s content.)

Munro noted that people are perfectly willing to surrender privacy for small rewards. “People worry about privacy, but everybody signs up for a Safeway card. People are giving up their own privacy.” And when Munro suffered a serious illness a few years ago, his family sacrificed privacy to put out daily reports on CaringBridge. “I got messages from all over the world. I can’t tell you what that meant to me.” But, he admits, “Most people my age have no idea of the lack of privacy on the internet.”

Diana Henneuse, the mother of an eight-year-old daughter, shared the typical concerns of parents: “I’m concerned because of all the temptations out there. I worry about bullying and stalking. I want to be with her when she is on the computer.” And she worries that both children and adults spend their lives distracted by technology.

Imei Hsu is a psychotherapist and belly dancer and has the possibly unique problem of managing those two very different identities online. As a psychotherapist, a major preoccupation is protecting patient privacy and complying with the laws, such as the Health Insurance Portability and Accountability Act. “The laws need to catch up,” she said.”HIPAA and the like can interfere with the practice of medicine” by preventing practitioners from taking full advantage of communications technology.

When you listen to politicians such as, say Senator Al Franken (D-Minn.), you get the impression that Americans are cowering at the assault on their privacy by Facebook and Google.  “The more dominant these companies become over the sectors in which they operate, the less incentive they have to respect your privacy,” Franken told the American Bar Assn. “When companies become so dominant that they can violate their users’ privacy without worrying about market pressure, all that’s left is the incentive to get more and more information about you.”

But based on what I heard from an admittedly limited sample in Seattle, that’s not where real peoples’ concerns lie. Their worries about online privacy are less corporate and much more personal and intimate. Privacy concerns are real, but the policy responses can seem like solutions in search of problems.

 

 

The Challenge of Competing With Apple

One of the more interesting questions I get asked as an industry analyst, that has followed Apple since 1981, is why Apple is so successful? And another question I often get is, why Apple’s competitors can’t make any headway against them? These are honest questions and to those really not familiar with Apple, the companies rise and current dominance in non-PC devices is somewhat puzzling.

There are many books out about Apple these days that talk about everything from Jobs’s history, tenets of Apple’s business models, to secrets about Apple’s internal management ideas. And most know that they differentiate themselves through great industrial design, incredible software and a rich ecosystem of software and services. However, after years of watching Apple close up and personal and having dealt with every one of their CEO’s from the beginning, as well as interacting with various Apple execs over the years, I would like to suggest that the reason Apple is hard to catch is that there are five additional principles, that guide Apple, that makes competing with Apple so difficult.

For any products that Apple creates, the people who create them have to want it themselves.

So many times, in projects I do with other tech companies, the goal is almost always based around the technology first and then if people really want to use it second. Geeky engineers are dazzled by the technology at their disposal and often create something because they can. But Apple’s approach is quite different. The engineers who are creating Apple products actually make them for themselves. And Jobs was the chief “user” of Apple products when he was alive. All of their products are based on his intuition that represented the real customer. And his engineers had to come to grips that in designing a product, it has to be something that they personally would have “technolust” for and could not live without.

The products have to be easy to use

Steve Jobs was a stickler on this point. While industrial design is a critical component of any product they make, if it is not easy to use, it is considered worthless to the consumer. This is what drove their user interface designs from day one and is still the mantra pushed to their software and hardware engineers every day they come to work. All of the products they create have to be intuitive, easy to understand, and learn. As technology has become more intricate and users want more features, the task of keeping things simple is sometimes difficult. And Apple creates tools for power users to rookies, which can mean a broad range of ease-of-use issues. But even with that, Apple is the only company I deal with where ease of use is more important then the product itself and Apple makes this a critical goal of their approach to creating anything for the market.

Keep things simple

I was in Paris for the last two weeks and had talks with various French telecommunication officials on many mobile computing issues. But one conversation I had in particular emphasizes this keep-it-simple point. We were discussing how to compete with Apple, a major pastime for all Apple competitors and carriers these days, when the question of why Apple is really successful came up. And one exec nailed it when it when he said he felt that the real reason Apple is successful is because they have one product, in this case the iPhone, and minimize the decision making process for the consumer by making things simple. The person speaking was with a carrier in France and he said that in their stores, they have to have as many as 25 different models of phones available. That makes it hard for his staff to be really knowledgeable about all of them all of the time and their customers just have too many options to choose from.

But Apple only has one iPhone model and anyone who has gone into an Apple store understands that every staff member there knows a great deal about each of the four major products they carry in their stores. They don’t have 5 iPhone models to choose from; they have only one. While this may seem limiting given the amount of smartphones available to users, the truth is the reverse. Our company has done consumer research for over 30 years and consumers constantly tell us that while choice is nice, in reality they want the process of choosing a tech product to be simple and easy to do and not complicated by a plethora of choices.

Yes, there are tech savvy people who like more choices and sometimes even like complexity, but from years of experience as a market researcher, I can tell you that in the end, the majority of users are not tech savvy and keeping things simple for them is a plus. Apple understands this and is never tempted to add multiple versions of an iPhone, iPad or even more then one or two types of iPods to make buying an Apple product simple. And consumers seem to appreciate this considering the huge number of iDevices they are selling each year. I know the tech media and techies are the most vocal about this issue of choice, but in the end, while choice is good for competitive pricing, what non-techie consumers really want is simplicity.

Offer great customer service and in-store experiences

Steve Jobs understood one of the major conundrums of technology. That conundrum is that even if you create products that are easy to use, the variety of things people want to use their technologies for often creates complexity, and because of this, consumers at all levels may need some hand holding from time to time. I was one of the most vocal critics of Apple when they introduced their first retail store in Tokyo in 2002 and thought it was crazy for them to try and go into retail. At the time, and even today, tech retail stores are in decline and big box stores like Costco and Walmart sell products on price and nothing else. I thought that if price were the issue, an upscale retail store would be DOA. Wow, was I and other naysayers on Apple’s store strategy wrong about this.

Apple uses this conundrum to their advantage. Because they keep product SKU’s simple, the salespeople inside their stores know their products really well. Notice that when you go into an Apple store and are greeted by one of their sales staff, you are not asked “how can I help you?” Instead they ask “What would you like to do today.” They go right to the heart of any technology users question that is always related to what they want or need to do with the technology they are interested in.

And once you explain your needs, in most cases they can take care of it on the spot. Or if you need more hand holding, they turn you over to the Apple Geniuses. No wonder 50% of people buying Apple products are new to Apple. Apple’s products are simple to understand and use but if you do have a problem, Apple can take care of it at their stores or over the phone quickly.

Apple only makes a product if they can do it better

Apple normally doesn’t invent a new product or product category. Sure, they did invent the first commercial PC with the Apple II and the Mac improved on PC’s with a graphical UI and the mouse input. But since these were introduced in the late 1970s and early 1980’s, all of their other products were recreations of existing products. They did not invent the MP3 player-they reinvented and made it better. They did not invent the smartphone-they reinvented it. And they did not invent the tablet-they reinvented it. Or in essence, they made it better.

As Apple designer Johnny Ives said recently, “Our goals are very simple – to design and make better products. If we can’t make something that is better, we won’t do it. Clearly, Apple applied that thinking first to iPods, smartphones and more recently, to the iPad.

Apple stays at least two years ahead of their competitors.

This is the one that scares Apple’s competitors the most. While those competing with Apple are just getting products to market that are competitive with a current Apple product, Apple is already working on the products at least two years out. For example, the new iPhone that will most likely go to market in Oct, was designed and signed off two years ago. And the iPhone they are working on now is for the fall of 2014. The same goes for the iPad. The new iPad that we will most likely see next March was signed off two years ago. The one they are working on now we will probably see in 2015. This is a nightmare for Apple’s competitors and will continue to be for some time. Besides having geniuses in design, software and retail, they also have the cash to invent components, manufacturing processes, etc., which almost makes it impossible for the competition to make any real headway against Apple. And don’t let the fact that Android has become the #1 smartphone OS make you think that it is the big winner. Yes, Android has gained ground by the sheer numbers of companies and products pushing Android. But the real measure of success is in the profits and Apple is making as much as 70% of all the profits in smartphones and about 85% of the profits in Tablets. Just ask any Android competitor which they would like more, market share or profits and you get the answer to the real measure of success in this market.

These five principles may seem a bit simplistic given the fact that they also have great software, industrial design and a powerful eco system of content, apps and services as part of their success equation. However, I can tell you that from my three decades of following them, that it is these five key principles that are what really makes them successful. And as long as they adhere to them, it is pretty likely that Apple will continue to grow and command a relatively large share of the market in the product categories where they compete and continue to give their competitors real headaches for some time to come.

Tablet Computing in Portrait Mode

Last week I wrote about my two must have iPad accessories. In that list I included the Logitech Ultra-thin Keyboard Cover. Among the many reasons I like this case over similarly good ones like the Zagg Folio or the Adonit is because it allows me to do computing on my iPad in portrait mode. It is very interesting to me that so many companies who make keyboard accessories assume that when you want to use the keyboard you want to use it with the screen sideways or in landscape mode. Even the Logitech Ultra-thin case has the smart cover magnet in the dock groove assuming you want to prop it up with the screen horizontal. Notice most tablet manufacturers orient their buttons and ports in a way that assumes mostly a landscape over a portrait mode of use. The iPad is the exception where the buttons and ports seem to by oriented for more portrait mode–at least in my opinion.

Interestingly, I have found that my preferred use for docking the iPad and using the keyboard is in portrait mode. I am convinced that computing in portrait mode is far superior to landscape mode for many different tasks. This hit me the hardest when I used the iPad for the first time for browsing the web. Browsing the web in portrait mode is by far the best way to browse the web. This should be obvious since many websites are designed with up and down scrolling rather than left to right. Browsing the web in portrait mode allows you to see more of the website at one time. Beyond browsing the web there is another use case that I believe computing in portrait mode is far superior for and that is writing.

Better In Portrait Mode

I do quite a bit of writing whether it be reports, columns, or even responding to clients with lengthy emails. This is one of the reasons that using a keyboard accessory with my iPad is a must. Writing while using the iPad in portrait mode is a powerful experience. The primary reason for this is because you can see more words on the page when writing in portrait mode. Throughout human history, whether penned by hand, or while using a typewriter with a paper stand in the back, producing the written word on a medium that is longer than it is wide has been the norm. When you see people using pen and paper today you don’t normally see them turning the pad of paper sideways. Yet if you think about it, writing, working, and being productive while looking at a medium that is longer than it is wide is something that is foreign to the world of computers.

Computing in portrait mode is relatively unexplored territory. Since the beginning computers have had square monitors which eventually evolved into the norm for today which is 16:9 landscape. Due to the standard landscape orientation of computers to date, software has mostly been written with this screen orientation in mind. What happens, given the massive growth of tablets, and the fact that they are also computers, if software developers start thinking of writing software for use while in portrait mode? Most apps today, with the exception of things like games, support different screen orientations. What is missing is that the user experience with the software does not change much based on my screen orientation. Apple’s Mail app actually does change the UI when in portrait or landscape mode. However, when I am in portrait mode I can focus on the email because the side bar containing my inbox goes away. But when in landscape, the inbox sidebar is present and stays in sight.

This is a good example of a software interface being designed to make the application useful whether it is in portrait or landscape mode. Different screen orientations will present different looks and ways to use screen real estate. I believe that as software developers re-imagine their software for tablets they will also consider dual screen orientation experiences with the same software.

Portrait vs. Landscape

With this in mind I have been thinking a lot about the types of things I prefer to do while in portrait versus landscape modes with the iPad. Nearly all tasks that would qualify as productive I prefer to do in portrait mode. While the other tasks, with the exception of web browsing, like playing games, watching video, etc., I prefer to do in landscape mode. Reading is sometimes productive and sometimes for entertainment but either way reading is far better in portrait mode over landscape. This of course makes sense for things like video since they are produced in widescreen not portrait. For games it depends on the game since there are many great games that use both screen orientations. What has stood out for me though was how many tasks that were considered working or productive tasks that I preferred using the iPad in portrait mode.

This is something that is only possible with tablet computers since laptops and desktops are not designed to allow you to change your screen orientation based on the software experience you desire to have. This also makes a very compelling case for a keyboard accessory for a tablet.

One of my biggest complaints with the iPad’s virtual keyboard is not that I can’t type fast on it because I actually can. My biggest complaint is that I can’t use it for any real productive input while in portrait mode. And when I use it in landscape mode it takes up nearly half the screen leaving me with very little of the software application to see while typing. This completely defeats the profound experience I have while writing in portrait mode due to how much of the screen and words I can see at one time.

These are the kinds of experiences that are only available on the tablet form factor. I hope that as keyboard accessories continue to get refined and perfected, so will the software that will change not only our computing paradigm from mouse and keyboard to touch but to also break away from landscape computing as the only mode for working on a tablet.

RIM Needs to Stop Embarrassing Itself

I haven’t seen a company embarrass itself as much as RIM has in the last year or so. From failed products to sad attempts at marketing, it seems that RIM doesn’t know when it’s time to take a step back.

There’s a lot to be said for the bravery of a fighter that repeatedly gets back up after being knocked down. However, RIM has been knocked out. The company needs to take a step back, regroup and do something substantial.

In its latest debacle, RIM hired a busload of protesters in Australia to hold up signs outside the Apple store that read “WAKE UP.” Really? Apple needs to wake up?

While nobody knew it was RIM that organized the protest, sleuths on the Internet quickly tracked it back to them. A couple of weeks later RIM followed this up with its “Wake Up. Be Bold.” Web site. The site contains the most confusing message directed at Apple.

It reads:

It’s time to mean business.

Now, before you go looking for your suit and briefcase, we’re not talking about that kind of business.

Business is no longer just a suit-wearing, cubicle-sitting, card-carrying kind of pursuit.

These days being ‘in business’ means you’re the kind of person who takes action and makes things happen.

You don’t just think different… you do different.

It’s a simple choice:

You’re either here to leave your mark and eat the opportunity for breakfast

OR

You’re satisfied to just float through life like a cork in the stream.

Now, we know some people will choose to float on by and that’s fine.

Being in business is not for everyone, but unfortunately… there is no middle ground. You’re either in business or you’re not.

For those of us with our eyes wide open, we need to realize there’s only one device for people who mean business… the brand that’s been in business from the very beginning.

The only word I could come up with to adequately describe this campaign is pathetic.

RIM is talking to Apple, the company that changed the smartphone and tablet markets forever. Apple is defining every market they enter, forcing all of its competition to rummage for the second place scraps.

These days, RIM isn’t even on anyone’s radar as a competitor. Remember this is the company that made it’s name with secure email and then released a tablet that couldn’t do email.

What RIM needs to do is keep quiet for a while so it can work on products that will appeal to consumers and businesses. It is the quality products, not silly marketing campaigns that will win people over.

RIM is right about one thing. “Being in business is not for everyone.”

Mobile TV May Make A Comeback

I have been tracking the mobile TV space since the early 2000’s and mostly given up after the last push, using DVB-H failed. I tracked quite a bit of research around mobile TV in North America and we performed our own use case research as well. North America as a market for mobile TV is very different then markets like Asia and other parts of Europe.

Large parts of North American populations don’t spend long periods of time commuting on things like trains. In many other parts of the world this is the case and those markets are the ones where Mobile TV has had more success. However, with the rise of tablets, and perhaps even greater installed base of smartphones I wonder if Mobile TV could make a comeback.

While here at CTIA I got caught up with an organization called the OMVC or Open Mobile Video Coalition. This organization is helping launch a new service in the fall called Dyle.tv. What makes this solution different, and perhaps what gives it the best chance to succeed, is that it is built upon the existing ATSC digital broadcast infrastructure. DVB-H required quite a bit of new infrastructure investments and many did not make them. By integrating right into the existing ATSC infrastructure for broadcast today many broadcasters and networks immediately take advantage of this solution. There are two requirements to make this work. First the broadcast stations need only spend between 15,000-25,000 dollars to add the additional infrastructure to broadcast their existing ATSC signal to mobile devices. This, I am told, is very simple to install and would take a technician about two hours install. Second, the DTV chip needs to be embedded in a mobile device or built into an accessory for a mobile device like a tablet or smartphone.

Dyle.tv will be a free service and will be available as an Android and iOS app. The only cost associated is what is added to the cost of the hardware or can be purchased separately as an adaptor for things tablets and smartphones. The key point is that the rights from every major North American broadcaster have been secured and broadcast content from every major network will be available through the Dyle.tv service.

Dyle.tv will launch in the fall and details about the launch, supporting devices, and adapter accessories will be released around that time as well. It will launch in 210 markets in the US.

Although the market and the infrastructure may be right for mobile TV to make a comeback there is something a bit more interesting with this service. Networks who choose to use their existing infrastructure to deliver mobile TV via Dyle.tv to consumers will deliver up to 19.4 mbps bandwidth to devices enabled with the DTV chip. This means that it is possible, should the major networks participating in this service, to also make their streaming content available for catch up TV through this application. And oh by the way the group behind Hulu is the same group who is helping drive this service.

My opinion of mobile TV is that it is only good for live content like news, sports, and check-in-tv. The concept of “check in” TV is where you quickly flip to see what’s on when you are bored or standing in line or want to kill time. It breaks down when you come up against content you have not seen yet due to missing the narrative. Plus with the time shifting habits of most American TV watchers most shows are sitting on the DVR waiting for them at home. So the concept of mobile TV as a time killer is more the value proposition. Integrating this solution into automobiles could be interesting as well. However, if catch up TV solutions via a streaming model get integrated with the Dyle.tv service then it could present a much more compelling value proposition.

I will be curious to see more of the details when this service launches in the fall. There are some interesting elements, that if done right, could become an interesting feature and a differentiator for some hardware vendors.

The Spectrum Shortage That Isn’t

Photo of Dan Mead
Verizon CEO Dan Mead

If you listen to wireless operators, their industry is on the brink of a catastrophe caused by success. “Innovation is at risk today due to the spectrum shortage that we face,” Verizon Wireless President Daniel S. Mead said in a keynote at the CTIA Wireless 2012 show. “There is no doubt there is a looming spectrum crunch.” CTIA President Steve Largent says we are “on the brink of a major wireless traffic jam.”

Demand for wireless data is definitely growing quickly, though just how fast is subject to dispute (as in the glory days of wireline internet growth in the late 1990s, there’s a tendency to overstate current growth rates and then project them into the indefinite future.) But despite the claims that we will exhaust our wireless data capacity by 2014, or 2016, or 2020, the evidence that a shortage of capacity is crippling wireless now, or will anytime in  the near or medium term future is simply lacking.

And that’s a good thing, because notwithstanding the wailing of the wireless carriers and their trade association, the CTIA, the prospects for any major new allocation of spectrum are grim. Congress has authorized a complex scheme known as incentive auctions, in which television broadcasters will receive part of the proceeds if they allow the government to auction off spectrum they are not using.

It’s a fine idea, but it’s complicated by the fact that creating usable blocks of bandwidth will require some TV stations to move to new frequencies. Broadcasters are not flocking to offer spectrum. Bottom line,  it’s going to take a lot longer to free any bandwidth for wireless data and in the end, the amount of  new spectrum is likely to be substantially less than the 120 MHz that the Federal Communications Commission was hoping for. Wresting unused or underused spectrum from federal agencies (especially the military) is likely to prove even harder.

Promoting spectrum shortages serves carriers’ interest in several ways. AT&T used it as a major justification for its failed acquisition of T-Mobile and Verizon makes the argument to support its proposed purchase of unused spectrum from a group of cable operators. Considering bandwidth  a scarce resource  helps justify high prices and restrictive usage caps.

What carriers can do.

Speed LTE deployment. But there is a lot the carriers can  do–and in some cases are doing–to alleviate any crunch. The first is an accelerated move to LTE technology. The carriers have promoted LTE as being faster than existing technologies and, in general, it is, but its real importance is that it that it uses its bandwidth far more efficiently than the 3G EV-DO and HSPA technologies. Verizon, which had hit a speed wall in EV-DO has been the most aggressive in deploying LTE, but AT&T is catching up. Sprint,  which made a bad bet on alternative WiMAX technology, and T-Mobile are starting to move.

More Wi-Fi offload. Especially in the locations where demand is greatest, carriers can ease the pressure on their wireless networks by moving data traffic to Wi-Fi. The new Hotspot 2.0 (IEEE 802.11u) standard  should provide for seamless transfer  of sessions between wireless broadband and Wi-Fi. But the carriers have to support the hotspots and provide adequate backhaul capacity.

Small cells. Cellular communications is based on the concept that bandwidth can be reused by having each base station provide coverage to a relatively small  area whose size is governed by power levels and the height of the antenna. In rural areas, carriers use very tall towers to cover big, but lightly used, areas, while in dense city cores, antennas are mounted much lower. Carriers could provide for much greater reuse of spectrum by going to even smaller microcells, which would be more like Wi-Fi hotspots in coverage. The downside is that this required building, paying for, and siting many more base stations, but it could greatly increase capacity. Ericsson, Alcatel Lucent, and Cisco are all developing small-cell gear and AT&T plans to begin testing service later this year.

Agile radios. From the beginning of wireless communications, the basic approach has been to assign dedicated spectrum to each user, with hardware designed to operate at very specific frequencies. This guarantees am environment in which some assigned frequency bands are very crowded while others are underused. There may be plenty of spectrum in the aggregate, while specific slices of it are clogged. For years, the dream has been to move to the use of agile, or software-defined, radios that could operate on  any available spectrum. The technology is finally reaching the point where this sort of agility is technologically possible. But the transition will be very complex: We have a nearly century-old regulatory regime based on discrete spectrum slices. Licensees have valuable assets in their assigned spectrum, which also serves as a powerful barrier to new entrants. And billions of existing devices  would have to be replaced to take advantage of an agile system. Needsless to say, a move to a new system is going to take a very long time.

Wireless is clearly the future and a powerful driver of innovation and economic growth. More spectrum is always better. But there are good solutions to alleviate shortages in the short and medium term. The situation is nowhere near as dire as the carriers would have us believe.

 

 

 

Why Facebook Might Make A Smartphone

There have been a lot of rumors flying around these days that Facebook could be bringing out a smartphone of their own and that HTC is making it for them. Facebook has denied they would do a handset, but rumors and industry buzz around this continues to be strong and usually where there is smoke, there might be a fire.

It seems odd that given the competitive market conditions in smartphones that Facebook would even consider doing a smartphone, which is why some people I talk to dismiss the idea of Facebook even venturing into this crowded market. But I believe there is a scenario that could actually allow them to do something innovative and interesting even with the smart phone market competition at an all time high.

Today, most smartphones are based on a specific OS, whether it is iOS, Android, Blackberry, etc. And while a dedicated OS is important given the need for local apps, there is another way to approach this market, especially on a device that you know will be always connected to a 3 or 4G radio. I think that Facebook is smart enough to not get drawn into the iOS and Android wars and if they do release a smartphone, I believe it will be strictly an HTML phone. I have started to hear some rumblings that this is the approach they will take if they enter the smartphone market and in many ways, this would be a smart and potentially disruptive idea.

With iOS and Android, there are very rich development tools for creating apps and with both of these operating systems; local apps make a lot of sense since these apps can be used on things like the iPod or tablets with no Internet connection. However, anyone who has used apps on connected devices knows that it is the wireless connection that allows most of these apps to really sing and dance. But if the goal of Facebook is to strictly bring out a mobile connection to Facebook and have their smartphone serve as a portable vehicle for them to deliver a whole host of social, commercial, and media related services then HTML would work just fine on a smartphone that always has a connection.

This would mean that the Web browser would be the OS, so-to-speak, and all of the apps would come through this HTML browser. And since it would be always connected, it could deliver some pretty rich applications and services if done right. This is a rather intriguing idea since the operative word here is doing it right. Mobile Web browsers have come a long way in the last five years and are capable of delivering pretty good renditions of Web pages and Web apps even on devices that have localized apps. But if a browser is to serve mainly as the way to get apps as well as Web content then this browser needs to be pretty smart in its own right.

But with this move, Facebook would be really moving into new territory. Besides not having any history as a smart phone vendor, they would have to be dealing with the carriers, something that Palm has shown in the past is quite difficult to do right. And, I would like to think that if the only way to gain access to apps is via the Web, then the data deal I would want on a Facebook smartphone would probably need to be an all-you-can eat plan. A plus is that they don’t need a special SDK for apps and, at least in theory, any HTML app should work fine in mobile mode.

Now I have no clue personally if Facebook is really doing a smartphone even though there are a lot of things pointing to the fact that this may be happening. But I do feel that if they jumped into the smartphone market with an Android device it would just be another me-to smartphone.

On the other hand, taking an HTML approach with a smartphone that is really optimized for Facebook’s social experience and using it to deliver more personalized content, apps, information, and games through Facebook–could be quite interesting. It would allow this phone to have broad access to Web content and apps, and if done elegantly, keep Facebook users in the Facebook ecosystem longer and thus helping their cause of monetizing more apps and services tied directly to their mobile handset.

In a way, Apple already does this with the iPod, iPhone, and iPad in that they are all tied directly to Apple’s ecosystem of apps and services. However, Apple lacks the social connection that Facebook could have with their smartphone. And given the fact that Facebook already has close to a billion users, if they could get this smartphone priced cheap, their handset could be quite disruptive as it could take potential buyers away from Apple, Andrid and Windows mobile phone vendors who are especially coveting new users in emerging markets.

Facebook continues to be quite coy on whether they are doing a handset and their denials could be true. Also it would be a risky move given the current glut of cell phones and smartphones already on the market. But if I were a betting man, I would bet that they have surveyed the market for smartphones and, at the very least, have done some serious R&D around this idea of creating an HTML based smartphone that is tied to the Facebook ecosystem and their social community. And it would not surprise me at all if later this year they actually introduce something like this to capitalize on a growing Facebook community around the world that just might be interested in a Facebook smartphone.

Dear Industry: Focus on Profit Share Not Market Share

The interest in the tech media world around market share is fascinating. Each quarter reports come out, for the quarter only, pointing out different vendor and software platform market share for things like tablets and smartphones. As interesting as it is to look at market share of hardware and software platforms, it is more interesting and relevant to look at profit share–a metric I think is more important.

Apple is perhaps the best example in this metric as a recent statistic points out. Asymco shared that in the smartphone segment Apple obtained 73% of operating profits, Samsung 26% and HTC 1% while everyone else lost money. Apple continually captures significant profit share of the markets they compete in, and to Apple profit share is more important than market share.

A common thread of thought in the tech industry, which I believe seriously lacks perspective, is that industry history will repeat itself to the degree that a platform will have the majority share of a market for a long period of time. What I truly believe many are waiting for or looking to happen is for the “open platform” like Google or Windows will rise to dominate the market since open should always win–a premise I reject. If anything I would place my bet on the closed system in a pure mature consumer market.

In my last Dear Industry column I pointed out many reasons why I don’t believe history will repeat itself. My whole argument is based on other consumer goods in other mature markets where there is simply not a dominant market share leader. Again this is true because consumer preference drives segmentation in mature markets.

If you look at other companies in mature or post mature markets like consumer goods or automobiles, you find that each of them focus more on operating efficiency in order to maximize profit share. Of course they would love to see their market share increase dramatically but in post mature markets consumers are driven by personal preferences. Consumers driven by personal preference know what they want and why they want it. Because of preference driven choices, market share shifts simply don’t happen often due to preferences being established. Think Coke and Pepsi, or Mercedes and BMW, or Nike and Adidas.

There are, of course, a number of differences between the computing market and consumer goods. But there is something about consumer markets that I think is interesting that may shed light on how to focus on profit share over market share.

A Deeper Look at Consumer Preference

What is interesting about consumer preference is that it is largely subjective. Although their preferences become refined over time that refinement often comes from subjective perceptions rather than objective ones.

To what extent subjective refinements around personal preference take place over time as consumers shop for computing products is yet to be determined. However, as the market for products like smartphones and tablets matures; I have a hunch that many early perceptions and experiences happening currently with technology products will shape future consumer preference.

On that point, a common foundation shaping consumer preference is the experience they have with a brand, product, or service. If consumers have a poor experience with a brand, product, or service, it becomes increasingly difficult to win them back. The importance of first impressions with consumers can not be overstated.

Understanding consumer preference is a key to understanding how to focus on profit share.

Create Features of Value

The second key point to drive better profit share is to focus on creating features consumer segments find valuable. If you look at any mature product strategy striving for profit share you find that the strategy is to maintain price but layer on features with each new product generation.

The key to that specific product strategy within a segment is to identify value and anticipate future value through research and development. Companies that do that well continually introduce new features that the market segments they are focusing on find valuable. Creating features of value is one of the better strategies to maintain a desired price within a segment and to avoid a race to the bottom.

Specifically in regards to the computing segment it is important to create products that do things better than other products on the market. Right now I am seeing a number of smartphone vendors start do this around the camera. The HTC One X for example is touting several features specific to the camera that is differentiated from the pack. For this strategy to work a “better” camera needs to be perceived as a feature of value that is important enough to sway consumers.

In an increasingly segmenting market feature centric products and product experiences are key to sustainable differentiation. When this strategy is employed it creates a better foundation to focus more on profit share of a specific segment.

Of course operating efficiency is key as well to drive better profit share. But both of the above points of understanding consumer markets and focusing on creating valuable products and experiences will shape operating decisions all the way down to the supply chain.

A strong argument can be made that by focusing on profit share by creating valuable features and experiences could lead to better market share. My overall point is that the right way to approach strategic product and roadmap decisions is to focus more on strategies that drive profit rather than market share.

Companies that employ a market share only strategy run the risk of gaining no market share and making no money.

Tablets: Numbers and Observations

Both IDC and Display Search released updated numbers for the tablet segment. There are some interesting key take aways from both sets of numbers.

IDC confirms Apple’s dominant position with regards to iPad share and points to slumping Android shipments for tablets which is no surprise. The Display Search data is a bit more comprehensive which includes forecasts as well as OS share in the press release.

There is one thing that sticks out to me and it is related to Windows 8. In the IDC press release they make it clear that Windows 8’s impact is too early to tell. Whereas Display Search takes a stab at forecasting share for Windows 8 and RT but gives the advantage to Windows RT over Windows 8. This is interesting because it implies that from Display Search’s standpoint they do not have much confidence in Windows 8 on X86 but have some confidence in Windows RT to gain some traction in the tablet market.

If you look at the updated numbers from all the major forecasting firms, it is becoming clear that most, if not all, acknowledge that the tablet market could be larger than the notebook and desktop market. Regardless of your belief on that point the bottom line is that tablets and smartphones are the only real growth segments of the computing industry. IDC still is committed to calling all tablet “media tablets” which I think is wrong. There is no doubt at this point in time that tablets are computing platforms not just media consumption platforms.

In Display Search’s numbers, I think they are being overly generous to Android given the trouble it has said so far in tablets. I personally tend to believe that Windows 8 or Windows RT has more of a chance in the tablet market to succeed.

I still remain convinced that Apple will remain the undisputed leader in tablets due to the iPad becoming the standard in terms of tablet computers. In this release, my friend Richard Shim rightly points out that as the tablet market matures there will be opportunities for segmentation within the sector as vendors carve out differentiation.

As with all forecasts we have to take them with a grain of salt to a degree. Things can change quick and a couple of factors, like subsidization, could drive tablet shipments much faster than is currently being forecasted.

The bottom line is, vendors who are not establishing a tablet strategy may very well be left out of one of the hottest segments of computing we have seen in some time.

The iPad May Kill Laptops and Save the Desktop

Photo of IBM PCThe iPad–and other tablets if we ever get some good ones–poses an existential threat to the laptop. But it might provide a new lease on life for the much-ignored desktop PC. My colleague Ben Bajarin touched on this theme in his a post Notebooks Are the Past, Tablets Are the Future. I want to take a look at it in more depth.

I’m starting from the increasingly uncontroversial premise that a good tablet is all the computer most people need. The biggest weakness of tablets, the lack of local storage, is being solved in the cloud. For the times that you want to write more than is comfortable with the on-screen keyboard, a lightweight Bluetooth keyboard does the trick.

For some of us, though, a full-featured PC remains very much a part of our everyday toolkit. I frequently work on complex documents with a large number of windows open at one time. I do a fair amount of research. I edit video and work on databases. These are tasks that range from inconvenient to impossible on my iPad. So I have a Windows 7 desktop, which I use primarily for accounting and as a sort of poor man’s file server, and a 27″ iMac, which is my desktop workhorse.

What I am finding however, is that is use my laptops less and less. I spent this past weekend at a family event in North Carolina. I took both an iPad and a 13″ MacBook Air and the MacBook never came out of my bag. Everything I wanted could be done more conveniently on the iPad. Even on business trips, I’m finding the laptop doesn’t get used unless I really need it.

My first notebook was a Hewlett-Packard OmniBook 600c in the mid-1990s and since then I have used everything from tiny netbooks to a dual-screen ThinkPad (barely) mobile workstation. And the truth is that every notebook has felt like a compromise. The displays were never big enough, even on units too heavy to carry comfortably. Except on the ThinkPads that I favored for years and the more recent MacBooks, pointing devices ranged from barely adequate to awful.

Ergonomic nightmares. The ergonomics are just plain bad because a keyboard permanently attached to the display meant that the positioning of the keyboard or the display or most likely both was less than optimal. (This is why I prefer my separate ZAGGkeys Flex keyboard  to more integrated units.) The push to include touch screens on Windows 8 laptops is going to make bad ergonomics worse. I tried many Windows Tablet PCs over the years and the awfulness of using touch in laptop mode was not due entirely to Microsoft’s dreadful software.

Desktops are actually a much happier solution for heavy-duty computing. Feature for feature, you get more for your money than with laptops. Storage is cheap and all but unlimited, and even with the cloud lots of local storage is a good thing to have. You can buy the keyboard, pointing device,  and displays you prefer and put them where you want relative to the keyboard.

The trend in recent years has been to use a laptop as an all-purpose computer, perhaps connecting it to a bigger display and an external keyboard when it’s at home on your desk. That made a fair amount of sense in a pre-tablet world. Today, however, even most heavy users of computing power will be happy with a tablet when away from their offices (there are exceptions, say, engineers and software developers.) And instead of settling for the compromises of a laptop when in your office, why not go for a no-compromise desktop. And if you really want touch in a desktop, the displays can be designed so they will tilt nearly horizontal for better ergonomics; HP has been using this feature in their TouchSmart all-in-ones. It’s time for a lot of businesses that have replaced desktops with laptops to rethink the policy.

I can’t see myself giving up a laptop just yet. There are still times when I need a full computer while traveling or when I have to work out of an office (someone else’s) and bring my own computer. But these occasions are getting rarer and rarer, and I could be laptop-free sooner than I think. But the desktops will survive and maybe even prosper.

My Two Must Have iPad Accessories

Accessories are a key part of any platforms ecosystem. I was at the Apple store in a mall in San Jose recently and I couldn’t believe the amount of accessories for iPad now on the market. I was especially surprised about the amount of iPad mounts for all around your house or yard—more on that later. Right now there are two accessories that are getting used quite a bit in combination with my iPad. The first is the recently announced BIG JAMBOX by Jawbone.

BIG JAMBOX

I have been reviewing the BIG JAMBOX from Jawbone for a little over a week. My conclusion is that it is one of the best wireless speakers available. Particularly however for my use cases it fits like a glove. If you have used the initial JAMBOX by Jawbone you got a taste of what big sound from a little portable speaker could sound like. But the use cases for the JAMBOX are more for travel. And although decently loud it is not quite loud enough for places like the beach, pool, backyard, park, etc.

The recently announced BIG JAMBOX is built specially for big portable sound perfect for outdoor use particularly. This is where the BIG JAMBOX was ideal for my needs.

I have an above average sized yard for California. I spend a lot of time outside in my pool, yard, garden and micro farm. While outside in all those areas I like to have music playing. And unfortunately running wires is just not an option. So from the beginning I have tried to solve my outdoor audio needs using wireless technology. This usually works as long as you are in close proximity to the speakers. In the pool area this works but not during parties or while working the fields. Enter BIG JAMBOX to solve my outdoor speaker problems.

Where the JAMBOX failed for me in long range, high volume sound the BIG JAMBOX did the trick and with a quality sound experience without distorted audio. When I was briefed by the folks at Jawbone on this product they promoted the speakers capabilities outdoors. The BIG JAMBOX lived up to the hype and performed admirably outdoors.

My backyard has outdoor audio challenges many for a range of reasons. The primary one, leading to my largest issue with sound, is that I have no solid fences. So sound has nothing to bounce off and can get drowned out quickly. To truly test the BIG JAMBOX’s audio capabilities I turned it all the way up and walked as far as I could and still hear the music clearly and cleanly. Below is a picture from the point of view of the BIG JAMBOX to where I was standing to still hear the sound clearly and cleanly.

The BIG JAMBOX’s ability to fill such a large open area with sound was what impressed me most and primarily why it is a must have iPad accessory for me and my go to wireless speaker.

The Logitech Ultrathin Keyboard Cover for iPad

I have been trying nearly every new iPad keyboard case that hits the market. Many are very good and nicely pair a keyboard with the iPad in an elegant case. Yet the new Ultrathin Keyboard Cover for iPad by Logitech is the best one I have tried yet.

There are several reasons why this is the case. My prior favorite case was the Zagg Folio case. I used this case and found it very nice. The only real problem was how the iPad slipped into the keyboard case made it difficult to quickly get the iPad out to use without the keyboard attached. The new Ultrathin Keyboard Cover for iPad pairs with the iPad like a smart cover via a magnet allowing it to easily detach for usage in tablet mode.

The other element that is very nice is that the groove to “dock” the iPad in to hold it up in landscape or portrait also has a magnet in it allowing it to snap in nicely and securely for use while typing. Due to this implementation it was also easy to dock the iPad in portrait mode while the Zagg Folio case could only be used in landscape mode due to its design. I actually prefer to use the iPad in portrait mode most of the time, especially when writing.

The Ultrathin Keyboard cover is also extremely thin when secured and shut with the iPad making it very nice for travel and mobility. The Ultrathin Keyboard Cover’s smart use of magnets both for using as a cover for the iPad as well as for docking while typing are two great features setting this iPad keyboard apart from the rest.

Runner Up – Seagate GoFlex Satellite Drive

Also making it very close to my top two iPad accessories is the Seagate GoFlex Satellite drive. When take the iPad with me when I travel as my only mobile computer, I need to make sure all my files are accessible. I use the cloud for storage of certain files but some files like our presentations, research material, and even my HD movies are more quickly accessible via a portable drive. The GoFlex Satellite’s wireless features allow me to keep all my key files and data quickly accessible with the iPad.

These are the things that are adding even more value to my iPad experience. Feel free to share any accessories that making your iPad experience that much more enjoyable.

Would Hemingway have used an iPad?

For most of the week I have been in Paris, a city that I have traveled to regularly since 1971. Back then, communications to the US was dismal and a letter sent from here could take 2 weeks to get home. In fact, General Charles De Gaulle was still ruling when I first came to Paris and he was not a big fan of telecommunications. Consequently, the French phone systems were antiquated and in need of serious attention.

But about 7 years after his death and with new open minded rulers now in charge, France actually leap frogged much of Europe when they introduced the Minitel systems, which was really the first in home computer terminals that connected to a broad range of services. In fact, from its early days, users could make online purchases, make train reservations, check stock prices, search the telephone directory, have a mailbox, and chat in a similar way to that now made possible by the Internet.

Over the years, communications in France, and much of Europe, has come a long way and today just about everybody here has a cell phone. And interestingly, pretty much every tourist I have run into is snapping pictures on their smartphones. It seems that cell phones and smart phones have almost replaced the local phone and the need for a MiniTel system is long gone thanks to the Internet. A side note to this is the amount of iPhones I have seen in use. On Saturday as I road the Metro or subway to a street market, there were 12 people in the subway car I was on using an iPhone. And while I saw a stray Blackberry or even a Nokia phone once in awhile, iPhones seem to be everywhere.

If you have been to Paris, you know that this is a city with a very rich history and reminders of this are all around. From the Eiffel Tower, to the Arc De Triumph to the century old paintings lining the walls of the Louvre. Next to Rome and Athens, Paris is perhaps the richest city when it comes to historic landmarks. But there is one part of Paris’ history that is of real interest to anyone serious about literature and that is the time when many expats moved to Paris to find inspiration and freedom of expression in the 1920’s. And while there were a lot of artists and sculptors in Paris during this time, it is the writers of this period that interests me the most.

As I write this column, I am in a café called Les Deux Magots at about the same spot Ernest Hemingway use to sit and write during the early 1920’s. I can almost see him leaning over his pad of paper, writing furiously as he sat there day after day for hours at a time writing out his masterpieces in long hand. At that time, Hemingway was in Paris representing a Canadian newspaper and writing on the side, so-to-speak. At this time he was introduced to Gertrude Stein and Ms. Stein referred to Hemingway, James Joyce and Ezra Pound and others such as Pablo Picasso and Joan Miro as the “Lost Generation”.

But in those days, the process of getting any of Hemingway’s works accepted, approved, edited and often rewritten took a great deal of time. There was limited air postal service and the telegraph was only used for short news items. As I sit here writing this column, I can’t help but think of how different it might have been for Hemingway and the great literary minds of those days, who have had so much influence on our literature today, if they had the tools of our modern era.

In fact, I am writing this on an iPad with a Bluetooth keyboard and when I send this off it will go over the Internet and to our editors in mere seconds. This got me to wondering if Hemingway had these tools available to him if he would have used an iPad? Or for that matter, would he have used a laptop or PC? He had a typewriter at his disposal but history reports that a lot of his writing was done in long hand.

Even today, I sometimes run in to writers who still use paper and pen, although they are a rare-breed these days. Most writers now use a laptop or desktop with a good word processor and use the Internet to send their work to editors instantly. Now, getting a response about a writers work could come to them in hours or days instead of the months it took in Hemingway’s era.

Of course, this is an empty exercise since most writers of that day used the modern day tools of their time, which in most cases was with pen and paper and typewriters if they were stationary. But in doing research about that period of time, even with typewriters available, I found that some writers thought them to be too new fangled and stayed with their most comfortable form of writing, which was with pen and paper. Hemingway typed when at his office but used pen and paper when in café’s, parks and anytime he was away from his tiny office.

But I can’t help wondering what other great works of literature Hemingway and his writer colleagues of that time would have given us if they had the tools of today at their disposal. What if Hemingway could have penned more novels during his era if he had the advanced tools of our time? Perhaps we would have the dozens of manuscripts he had written that were in a suitcase that his wife lost at Gare De Lyon when she was coming back to Paris from Geneva to meet him in 1922. If they had been in digital form and backed up, we may today be reading dozens of other works by him to enrich our literary life.

In Woody Allen’s fascinating movie “Midnight in Paris” he examines the idea of people of one age romanticizing about a different age of the past and wanting to go back and discover what it would be like to live during that time. But time travel in reverse is not my cup of tea. Rather, I love the age of technology and instant communications, not to mention the improved healthcare of our time. But if I could go back in time I would like to hand Hemingway an iPad and see if he would use it to create new literary masterpieces. Now that would be a picture worth a thousand words and perhaps we could prevail on Picasso to paint it!

Notebooks are the Past, Tablets are the Future

This may be one of the more controversial columns I have written in sometime, although my goal is not to be controversial but to spur thought- so please hear me out. It is no secret that I am very bullish on the tablet form factor.

I have written extensively about them since the launch of the first iPad about my beliefs in this product’s role in the future of computing. But there are still many in the industry who have long watched, predicted, and benefited from the evolution of the desktop computer to the notebook and its success world wide that disagree with the more bullish thinking about tablets replacing laptops eventually.

At analyst meetings I attend and during many conversations with industry folk, I constantly hear a theme of tablets turning into notebooks. In essence there is a belief that the tablet form factor will evolve in form and function to look more like a notebook rather than less. This device is in essence the convergence of a notebook with a tablet. There is a good chance that with Windows 8 this form factor will appeal to a segment of the market. Even if that happens, and because of Windows 8, I believe that it is inevitable that all major software going forward will be re-imagined for touch interfaces first and foremost.

Notebooks of Old Will Become Relics

Because of the incredible growth of the iPad and smartphones over recent years, nearly all software developers have turned their eyes to touch. I have been one of the foremost proponents of touch computing and I firmly believe it is the foundation of our computing future. With that reality in mind, it seems clear to me clear that the software industry has been reborn around touch computing–R.I.P Computer-Aided Display Control (aka Mouse).

It is because of this new computing paradigm built from the ground up around touch that when I see notebooks I feel like I am looking at the past. Yet when I see how kids, elderly, non-techies, first time computer users in emerging markets, and more, all use the iPad, I am convinced I am looking at the future.

If you read my column on the new era of personal computing, I made the statement that notebooks are not actually mobile computers but are really portable desktops with compromises made on behalf of portability. In fact it was fascinating to hear Apple’s COO Peter Oppenheimer refer to the Mac business as desktops and portables–that’s my kind of industry terminology! Many desktop use cases are the same on notebooks. The only difference between the two is that one is portable and one is not. The iPad is however much more of a personal mobile computer than a notebook ever was or will be and the drastic change in use cases between the iPad and notebooks is significant.

I don’t know anyone who owns an iPad who has stopped using their notebook or desktop entirely. Sometimes there are times when you want a larger screen and a keyboard to accomplish some tasks. This is the best argument for the hybrid tablet / notebook computer. However, acknowledging that for some tasks a larger screen and keyboard are convenient, there is another scenario I can see playing out that may make the notebook form factor irrelevant for many consumers.

The Desktops New Role

Believe it or not, I see desktops making a comeback due to a role change. There is an interesting trend emerging around desktops. Consumer all-in-one Desktops (Like the iMac) are being designed to be showcased prominently in the house rather than stuck in the den or office. These computers will be very elegant, very powerful, and very affordable. So rather than try to converge a notebook and a tablet, I think a better solution is to pair a desktop all-in-one with a tablet. This would especially be interesting in consumer markets.

In this solution, when you want a big screen, keyboard, etc., you get it in a no compromise package with more processing power, graphics, memory, and storage than you would ever get in a converged tablet / notebook or a laptop. Then when you want a mobile computer you get a no compromise mobile computer with a tablet. I think this makes a lot of sense, perhaps even more than a converged notebook / tablet for the mass market.

Without fully testing one of these converged notebook / tablet devices it is hard to say this with absolute confidence but my fear with this converged form factor is that it will be a compromised notebook and a compromised tablet. Even though it is trying to be the best of both worlds, my fear is that it fails at both, or at the very least is heavily compromised on both fronts. Plus, if you buy my logic that a notebook is just a portable desktop, then the notebook becomes irrelevant in a desktop / tablet solution.

Of course the cloud and specifically the relationship between a desktop and a tablet would need to evolve quite a bit more than it is today for this to work. That is why I refer to it as a solution because it would need to have solution based thinking for this particular scenario to be done right.

This even works in a family setting where each person of the house has their own tablet screen and the desktop remains the communal screen for more “heavy lifting.” Each person’s cloud would have to work harmoniously on a personal level and also at a family level.

I have in fact been trying this experiment for myself at my house. Using a desktop as my primary big screen computer and a tablet for all my other mobile use cases. It is surprisingly sufficient already even without being built with this specific use case in mind.

Now realistically the notebook form factor will always exist for a certain segment. This model may not work for business users or mobile professionals. But I am beginning to wonder whether this desktop paired with a tablet solution may be a very attractive proposition for the mass consumer market. In this scenario everyone in the home has their own personal tablet rather than everyone having their own personal notebook. This scenario is not tomorrow, next year, or even a few years away but I would not be shocked if this solution gains traction at some point in time in the future.

This topic again is meant more of a thought exercise around a scenario that I could see playing out. Rarely am I struck with such a feeling that when I look at the excitement from many vendors around notebooks that I am sensing they are investing in the past, not in the future. But that is exactly the feeling I am having of late.

Reports of Apple’s Demise are Greatly Exaggerated

The past few weeks have brought out some interesting commentary around the imminent decline of Apple. Yesterday perhaps the most forceful view yet came from Forrester’s CEO, George Colony.

George and others root their argument on the absence of Steve Jobs to influence vision, leadership, and charisma. There is absolutely no doubt that Steve Jobs is irreplaceable and that his vision and overall product decision making helped make Apple what it is today. That being said, he didn’t do it alone and more importantly, the culture of innovation he created internally at Apple is what is unique to Apple and the central part of Steve Jobs legacy. Management theories backing up George’s and others claims are just that theories, and they may be generally true but they are not universally true.

I have written quite extensively about why Apple is poised to remain dominant for quite some time so I won’t go over all those points again. Quickly, however, Apple’s fundamentals as a vertically oriented organization, retail strategy, brand, marketing, ecosystem, and more, are fundamentals that don’t go away just because Steve Jobs is no longer with us. For my thoughts on that specifically, I welcome you to these columns. For this topic I’d rather focus on Apple’s culture as I think it is a point that is broadly missed.

Related Reading:
Do Apple Competitors Make Bad Products?
Why Competing With Apple is So Difficult
Apple Will Still be Apple, Even Without Steve Jobs
Apple Turns Technology Into Art

A Culture of Innovation

I have a number of good friends at Apple in positions up and down the organization. There is a culture internally at Apple that I don’t see anywhere else inside large organizations. The only way to explain it is to use the analogy that the energy, excitement, and passion with employees inside Apple is like that of a startup. Steve Jobs has even used this analogy himself. The conventional wisdom is that once a company reaches a certain size that startup energy goes away and generally that is true, however, this is not the case internally at Apple.

Even in a recent interview with Apple’s SR VP of Industrial Design, Sir Jonathan some very telling differences about Apple’s unique culture came to light. He made a specific statement:

“Our goals are very simple – to design and make better products. If we can’t make something that is better, we won’t do it.”

That may seem entirely obvious and of course this is not a goal unique to Apple. However, Apple’s definition of “better” is different from their competition. Their definition of better is based on their drive to make better products that “they” want in their life. Apple employees are not content with just “OK” products. Steve Jobs was the ultimate end user with a keen eye for user experiences but I would argue that there are thousands of people at Apple who think the same way because that is the culture Steve Jobs created. For Apple employees, to make things better, and make products they enjoy is the only real competition Apple needs. What’s more, Apple’s three-businesses-in-one orientation around hardware, software, and services is what enables Apple’s definition of “better” to become reality.

Can that Culture be Sustainable?

If there was an argument against this thinking it would be that because Steve Jobs is no longer there driving that culture and passion through his charisma, it cannot be sustainable. This is in essence the root of the inevitable Apple demise argument. I agree there are plenty of examples where a charismatic leader is no longer in the picture and the culture is not sustained. But, there is another Steve Jobs company in which he was the CEO, set the culture, and then departed where this culture has also been preserved and it is still intact and flourishing today and that company is Pixar. Pixar thrives because Steve Jobs’ vision was instilled in John Lassiter and his team and he left them a rich framework in which to continue to innovate and grow.

It is interesting to me that those who use the post Steve Jobs argument about Apple’s demise never mention Pixar. I read one of the most fascinating case studies of Pixar in the Harvard Business Review several years ago. It contained many interviews with employees and countless examples of the pains they went through to make a consistently better product and maintain a consistent high quality bar of everything with the Pixar name on it. Pixar employees were not content with just “OK” movies and nothing went out that door that didn’t meet a certain bar. This is a culture that was driven by Steve Jobs internally at Pixar. Although Steve Jobs may have not had the same kind of product impact since movies are different than computers, it is that culture he specifically drove in both Pixar and Apple and they remain intact.

That culture attracts a certain type of person. Again some may balk at comparing a company like Apple to Pixar due to the creative and artistic work of Pixar; however, I think Apple attracts equally creative and artistic employees.

Disney at large is another interesting case study. I have heard this company used in these examples but with a missed perspective. It is true that since Walt Disney left that the successive management teams have had their ups and downs. However, there is a philosophy, outlined nicely in a book called “The Disney Way”, which maintains a consistent experience with Disney products. This is why the experience at Disney theme parks, cruises, etc., has no equivalent. That philosophy and culture created by Walt Disney still remains intact today and is still evident in the Disney experience. Even with that in mind there are still huge differences between Disney and Apple. Disney had lost its drive to innovate around animation and they fixed that by buying Pixar.

Apple is a company is filled with thousands of people who aren’t content with the status quo and drive to push the bar higher making every successive product better. That is something I don’t see elsewhere in the industry. That culture is one that runs extremely deep inside Apple and is likely to keep them growing well into the future.

I could see George’s and others point if Apple was just another company. I simply don’t believe Apple is like any other company. Apple is different because they think different and that is not going away any time soon.

East Coast, West Coast: The Startup Difference

Last week I watched several dozen launch demos at the DEMO 2012 conference in Santa Clara. Yesterday, I watched 10  startup pitches at  the New York Entrepreneurs Roundtable Accelerator’s Demo Day, and was struck by a dramatic difference in style and substance.

Photo of Jenny Wu
Founder Jenny Wu demos Stylyt in New York

It’s risky to generalize from a sample this limited. some of the difference certainly resulted from the different rules and expectations of the sponsors. But I think reflected a real difference in thinking between New York and Silicon Valley.

The Valley loves technological cleverness and the coder is king. Many of the things shown at DEMO look less like products than features waiting to be incorporated into something else. The exit is often more important than the business plans.

By contrast,  there was little about the New York offerings to excite the technologist. But they all looked like a lot of thought had gone into the business end of things. Most seemed to be using well known technologies to fill niches in existing markets. They won’t all make it–they’re early stage startups, after all–but they all look like they have a shot.

Consider Appy Couple. You’d think that weddings would not provide much room for on-line innovation. But it turns out that there is really no service that lets couples build sites that cover all aspects of their wedding plans.  Its sites start at $49 and it also gets a revenue stream  from leader generation and commissions from sales. “We’re disrupting an industry that hasn’t seen innovation since the advent of digital photography,” says founder Sharmeen Mitha-Sehgal. “We make money first from the couples then from the guests.”

Stray Boots seems like another idea someone should have had a long time ago–the gamification of travel. Instead of a mobilized version of the traditional guidebook, Stray Boots turns a city visit into a scavenger hunt, collecting points that can be turned into real goods. Again, there’s a dual revenue model, selling the tours and partnering with local businesses.

Stylyt is an online retailer with a difference.  It lets users creates variations, such as new color schemes, on the offerings of designers. Site visitors vote on the the designs and the winners get produced as limited editions sold through the Generation Y-targeted site. The company also offers its on-line design tools as a software-as-a-service product for established retailers.

Triple Lift sees a big opportunity in Pinterest and it’s not in pinning cool web pages. Instead it plans to help businesses profit from Pinterest by selling them analytics, promoting user engagement and managing display advertising buys. Although it looks like a viable business on its own,  Triple Lift was one of the few ERA demonstrators that looks more like a buyout candidate because of its obvious appeal to Pinterest itself.

Overall, I was very impressed by the quality of the companies coming out of the ER Accelerator and especially their very polished, complete, and informative presentations. The New York startup scene is alive and seemingly very well.

 

 

 

 

 

 

 

 

An Act of Folly: Smartphones in Five Years


BlackBerry Curve 8300
2007's hot smartphone

Let’s take a quick trip in our time machine to survey the smartphone market in the spring of 2007, five years ago. The iPhone had been announced but not yet shipped, and many were skeptical about its success. Android was still mostly a gleam in Andy Rubin’s eye. The hot smartphones of the day included the consumer-oriented BlackBerry Curve and the Windows Mobile-based Samsung BlackJack. The general expectation of forecasters was that Symbian’s dominant market share would shrink, but stay strong, Windows Phone would at least hold its own, while BlackBerry surged and Palm shriveled.

Fast forward to the present. Smartphone unit sales have nearly quadrupled, but the market has become jumbled in ways that few expected. Apple sells nearly one in five of all smartphones, but is the standard against all else is judged. Symbian is disappearing and BlackBerry is hanging on for dear life, especially in developed markets. Android has gone from nothing to a nearly 40% share, while Microsoft, having replaced Windows Mobile with the snazzier Windows Phone continues to bleed market share.

Smartphone Market Share

Operating system 2007 2011
Symbian 63.5 19.2
BlackBerry 9.6 13.4
Microsoft Windows Mobile/ Windows Phone 12.0 10.8
Apple iOS 2.7 18.9
Linux 9.6
PalmOS 1.4
Android 38.5
Other 1.1 3.4
Data: Gartner

Given this background, talking about what the smartphone market might look like in 2017 seems like a fool’s errand, but I’m going to take my chances. To some extent, smartphones are beginning to look like a mature market, at least in North America, Europe, and Japan. One characteristic of mature markets is consolidation of producers. And in the case of smartphones, this trend is complicated by the delicate interplay of handset makers and operating system providers.

The hot issue of the moment is the pressure toward combining hardware and software into vertically integrated producers. This thinking has been inspired by the staggering success of Apple, though it requires overlooking the struggles of vertically integrated Research In Motion and the implosion of Hewlett-Packard/webOS.

Ingtegration and consolidation. The industry seems well on its way to more integration and more consolidation. My colleague Tim Bajarin thinks that despite its demurrals, Google will make an integrated Motorola the prime producer of Android products. There’s a lot of reason to believe that if Microsoft doesn’t buy Nokia outright, it will formalize an arrangement in which Nokia becomes its official premier Windows Phone partner. I think both Nokia and Motorola will end up as the official flagships of their operating systems.

Apple should be able to fly above this storm. As demonstrated by its latest blowout quarter, there is every sign that it will be able to hold on to the high end of the business for some years to come. The iPhone has lost some market share, and this trend will continue because much of the growth over the next few years will come as low-end smartphones displace feature phones in markets and geographies that are not Apple’s métier. But Apple doesn’t much care about market share; it will dominate the much more important categories of mind share and profit share.

The company most threatened by MicroNokia and MotoGoogle is Samsung, which has just displaced Nokia as the leading phone maker by worldwide unit volume. Samsung is highly integrated on the hardware side. It makes its own processors, displays, and flash memory, among other components. But it has never been a leader in software. It has its own operating system, but Badu has gotten little traction and for its high-end phones, Samsung depends on Android and Windows Phone. Samsung is not going to be happy as a second-class manufacturer for either Microsoft or Google.

Samsung’s tough choices. Samsung’s options, however, are limited. It could buy RIM, which seems destined to fade away unless it can team up with someone. But given RIM’s struggles trying to bring a new BlackBerry operating system to market, this might not offer Samsung much of a solution. A more promising course might be for Samsung to claim an open-source operating system as its own. It’s partnering with Intel on a mobile OS called Tizen, but this seems headed for the same ash heap as Intel’s other OS efforts. (Meego, anyone?)

webOS offers a more intriguing possibility. HP owns it, but has open-sourced the code and made it freely available. It’s a sophisticated modern OS that needs work, but one that Samsung might be able to use as its own platform for phones and tablets. Another possibility would be simply to grab Android and definitively strike out with its own fork without regard to Google’s development path. Either course would require Samsung to get deeply into software development, developer relations, and everything else that goes along with being a full-service provider. This has not been a Samsung strength, but the alternatives may be far worse.

One way or another, I expect Samsung to be a significant player in the 2017 phone market. I’m much less sure about the smaller Android and Windows Phone manufacturers. HTC, with a foot in each camp, has stumbled of late and could have difficulty getting its mojo back. I would not be at all surprised to see Sony, which recently became the sole owner of what had been Sony Ericsson, exit the phone business after struggling, successively, with Symbian, Windows Mobile, and Android. LG, which has never quite gotten the hang of smartphones, could also leave the market. ZTE, Huawei, and Lenovo can trade on their strength in the Chinese market, but may make little impact elsewhere.

The market in 2017. In unit volumes, the 2017 smartphone market will be dominated by low-end phones sold in emerging markets. If Nokia can survive the stormy present, either in partnership with Microsoft or as part of it, the combination of Nokia’s strength in these markets and Windows Phone’s ability to perform well on modest hardware , could again make it a formidable player. Android may be a big force in two flavors, the official one and a Samsung variant. Many of the smaller phone makers will be out of the market. RIM will hang on in some form, perhaps as a supplier of back-end enterprise services and specialized secure phones. And Apple will be Apple.

The biggest question mark is MotoGoogle. Left as it is, it seems doomed to become a second-tier Android handset maker, some thing of little use to Google. Integrated and turned into an Android flagship, it puts Google head to head with Apple and possibly Microsoft. It would probably forsake the current Android licensing model, which is not working very well anyway, and would have to develop new talents such as supply chain manage, channel strategy, and carrier relations. Google has the money and the brains to do all this, but I’m not sure it has the desire, patience, and discipline to pull it off.

 

 

 

The Curious Case of Microsoft Marketing

Is it just me or am I missing or not seeing much marketing effort by Microsoft these days? Generally I am very observant to marketing campaigns within our industry due to my conviction of its importance. Because of that I try to pay close attention to tech companies consumer marketing efforts on every medium. This is why it is surprising to me to not see the kind of marketing I would expect for a company with an critical strategic asset in the market with Windows Phone and one that is coming up on the most important Windows launch in over a decade.

When it comes to Windows Phone, most of the marketing efforts I am seeing is either driven by the carriers or by Nokia at this point. Perhaps Microsoft is playing a role in those as well but to be honest even what I am seeing marketing wise around Windows Phone is not enough in my opinion. Windows Phone is incredibly strategic to Microsoft from a Windows brand and platform standpoint. Because of its importance I would have expected Microsoft to saturate the market with branding, messaging, and positioning.

Marketing Like a Record Label

Perhaps Microsoft is taking the approach record labels do when one of their artists is launching a new album. The music industry is so incredibly saturated with artists all competing for consumer mind share. It is nearly impossible, although becoming more possible with Twitter, to keep artists top of mind share all year. Because of this, labels store up marketing budget until the months prior to an artist’s album release in order to raise the artist back into the publics mind. As much as I disagree with this approach in the tech industry perhaps this is the approach Microsoft is taking.

Whatever approach Microsoft is taking they need to take immediate action to elevate their brand and Windows / Windows Phone mind share. This would prime the pump for when Windows 8 finally launches and hopefully make their partners lives easier driving mind share of new Windows products for this fall. I hope Microsoft has a massive marketing campaign planned because I believe it is one of many things critical to the success of Windows 8.

Interestingly, Apple has cracked the code when it comes to branding. I would argue that Apple, more so than any company in this industry, maintains a consistently elevated mindshare. This is due to the tech media’s fascination with all things Apple, their marketing strategy, their event and product release strategy, their retail stores, and host of other well-executed strategies. Due to those strategies employed by Apple it is not surprising that the results of a Nikkei Brand Asia 2012 results show Apple as the number 1 consumer brand in China, Japan, and Taiwan and No. 2 in South Korea ahead of Samsung.

Marketing is best done strategically spread out over time rather than in bulk bursts. The goal should be to maintain share of consumer mind not spike the interest then let them get interested in the next shiny thing to catch their attention.

Yahoo!: Tactics Masquerading as Strategy

Last week on Yahoo!’s earnings call, CEO Scott Thompson outlined six points the company would pursue to return the company to a proper focus. When I looked at the list, they all made sense as operational principles or even action items. The big problem is that unfortunately, operating principles or action items aren’t a strategy, and this does not bode well for employees, stockholders, advertisers and even end users. The best strategies are set in the context of a strong mission and vision, neither which Yahoo! has communicated to anyone.

My Personal Yahoo! History

I remember telling a colleague that I invested my entire life into Yahoo!. I had Yahoo! Mail, had all my contacts, my calendar, read all my news through My Yahoo, all my notes in Notepad, and even got weather and movie times from them. I would even start at My Yahoo! for search as My Yahoo! was the first place I started in the morning. Now, I start my day at Pulse News on a tablet or phone over coffee, listen to podcasts while taking my kids to school then then go to Twitter and Facebook for “cultivated” news. I rarely go to a Yahoo! property with the exception to check out stock prices on Yahoo Finance. I’m not alone as Yahoo users have fled to Google for search and mail, Facebook and Twitter for social media, and vertical, specialized sites like Instagram, Pinterest, Foodspotting, and Goba. It all makes sense, though, the story of a big company’s downfall.

Being the 800 lb Gorilla Difficult

Being the largest kid on the block is great at times. I know; I worked for AT&T and Compaq at their peaks. I worked for companies who created and took markets. It was fun as I worked for the more entrepreneurial divisions. I saw IBM in the late 80’s and early 90’s almost left for dead before they became untouchable as they appear at least today. Then there’s AOL who keeps fading farther into the background, buying content brands that are full of conflict. The jury is out on Microsoft and Google if they have already peaked or can move to where they are perceived as the leader. Net-net, being the 800 lb gorilla isn’t an easy thing because of three primary reasons. First, large, successful companies when they get large, become slower and bureaucratic. The inventors are replaced by people who are great at process and but light on vision. Secondly, these companies are concerned more with playing defense and protecting their ground and less out about winning in new markets. Third, these companies face the innovator’s dilemma, where they incrementally improve their services as opposed to investing in disruptive exploration. It’s hard being the 800 lb gorilla. So how does Yahoo! intend to deal with this?

Yahoo!’s Six Points of “Strategy”

On the Q1 2012 earnings call, Yahoo! CEO outlined six “essential elements of [the] plan.” This was after layoffs and after a reorganization. Most companies let strategy dictate organization, but I don’t believe that’s not the case here. Here are the six strategy elements verbatim:

  1. consolidating technology platforms and shutting down on transitioning roughly 50 properties that don’t contribute meaningfully to engagement of revenue
  2. defining our core media connections and commerce businesses, including News, Finance, Sports, Entertainment, Mail and a handful of others. Those properties that generate the majority of our engagement and revenue.
  3. moving engineers into our commerce businesses to put them closer to our user and dedicating some of our best and brightest Yahoo!s to meaningful innovation in those core businesses.
  4. accelerating the deployment of the platforms and technologies we’ve built to make each of our properties more scalable, nimble and flexible, and therefore, less costly and time consuming to run.
  5. making better use of Yahoo!’s vast data to personalize user experiences and dramatically improve advertiser ROI.
  6. refocusing our R&D on Owned and Operated properties and stopping development of a number of initiatives, including platforms for outside publishers and theoretical science that were outside of our core.
These are great tactics and action items but don’t provide any insights into what matter first and foremost.

Where Does Yahoo! Intend to Win?

The tactics above are great in the context of a solid mission, vision and objectives, but Yahoo!’s says nothing about where it wants to win. You see, getting every Yahoo! employee working in a single direction is the right thing to do, but what if it’s the wrong direction? This would be catastrophic and at least what I see communicated this is exactly where Yahoo! is headed. The first question is, “where does Yahoo! want to win that is uniquely valuable to consumers and to advertisers?” That piece is a mystery for Yahoo!. Yahoo! needs to lean into something, and they have a lot of choices as they are still in the large growth segment:

  • local
  • deals
  • mobile
  • social
  • photos
  • living room
  • specialized verticals

I’m not advocating for any one of these at this moment, but Yahoo! needs to choose something, anything, to get the remaining 12,000 employees focused on. I won’t be enough presumptive to say Yahoo! doesn’t have a strategy floating around on the Executive Staff’s desks, but it certainly isn’t being communicated to stakeholders who need it.

Yahoo! Next Steps

Yahoo! needs to regroup after the last few weeks and in the next few months, decide where they want to win,communicate this broadly, then create a supporting strategy, then organize to deliver on that strategy. The last month has been nothing but triage, and if they need to quickly reorganize again to support a real strategy, most of the few weeks will have been a waste of time for the employees. Yahoo! has two paths they can go as a former 800 lb gorilla; the Apple/IBM way or the Excite/DEC way. I’d like to see Yahoo! make a comeback for more than the nostalgia; I’d like to see a Yahoo! comeback to inspire everyone in the industry that comebacks can happen and employees and key leaders can make it happen. That’s good for everyone. Who doesn’t love a comeback?

Why Google Will Use Motorola To Become Vertically Integrated

If you look closely at the most successful company in tech today, it is Apple. And they are in this position for a major reason. They are completely vertically integrated. They own the OS, the hardware and the ecosystem. And although they don’t manufacture their own chips, the IP in their chips are homegrown and designed to meet the needs of their advancements in OS and hardware designs. The result of this vertical integration is that they have complete control of their future.

Another company that is pretty much vertically integrated is Samsung. They do their own design, their own chips, and in their case they even do their own screens and manufacture their own products. Their only weak link is with the OS since they are licensing Android for their smartphones and tablets. However, they are about to launch their own cloud services and take even more control of their destiny by tying all of their products together to cloud based applications and servers. And as you know, they have gained great ground in smartphones and while still struggling against Apple in tablets, they have become more aggressive in looking at alternative operating systems to Android and could soon deemphasize their use of Android in favor of their own OS solution to guarantee even tighter vertical integration in the future.

But there are two companies today that at the moment have very little control of their future because of their lack of vertical integration and that is Google and Microsoft. And without out being vertically integrated, their prospects of wide spread success in the future in my viewpoint is highly questionable.

The Vertical-ization Trend

Ironically, at the moment, Google is actually in a better place than Microsoft to develop a vertically integrated strategy but Google is in denial about how important this is to their future at the moment. In their case, they own the software OS and a lot of the services layer but have little control of the hardware and the marketing needed to guarantee that Android will be successful in the future. In fact, if you read a lot of the recent posts about Android, you see numerous reports that suggest that Android is in trouble and losing ground, especially in tablets.

Today, Google has to completely rely on their Android hardware partners to drive Androids success. While this has been OK with smartphones, their partner’s performance in advancing Android in tablets has been dismal. Now to be fair, a lot of this is Google’s fault in the way they have handled the various versions of Android and the uneven, if not disastrous way they handle upgrades and OEM relationships.

But Google is about to have an even bigger problem on their hand when it comes to partners. To date, Android has been the only game in town when it comes to alternative operating systems for smartphones and tablets. But that is about to change. With Microsoft now entering the market with Windows based operating systems for smartphones and tablets, these vendors now have a solid alternative to Android. And pretty much every one of them will be doing a Windows Tablet. And with doing a Windows Tablet comes major marketing dollars from Microsoft as well as huge industry interest for this tablet platform since it includes backward compatibility with existing Windows Apps.

This means that Google has even less control of their partners push for any Android tablets and this probably translates into Android tablets in general losing steam. Sure, Amazon will continue to use Android and in a sense advance Android in tablets. But their version of Android is their own amalgamation of the Android OS and their own special tweaks and in no way really advances Android itself in the market.

Now, when Google is asked about their Motorola purchase, they say it was for the patents and they plan to treat Motorola just as if it is another Android vendor and not give them any preferential treatment. Well, if you buy that, then I have bridge in NYC that I want to sell you very cheap! I believe Google knew full well that at some point Android could become really challenged and that their vendors could desert them. So the Motorola purchase was insurance. At first they could just gleam value from the patents and hope that this alone was worth the price. However, having Motorola in their backpocket that would let them become vertically integrated at the turn of a switch was the real goal of this acquisition.

Now, in my opinion, it is not a question of “if” they make Motorola their hardware arm. It is a matter of when and I believe that this will happen this summer. Put yourself in their position. By the fall, all of their key Android vendors will also be backing Windows 8 and you can be sure that this will be the beginning of these vendors de-emphasizing their Android products. Google better be ready to pick up the ball with Motorola by then or their ability to control their own destiny will take a real hit given the momentum that will come in Windows 8 tablets this fall.

More Acquisitions Will Happen to Go Vertical

A week before Google bought Motorola, my son Ben wrote an article in Tech.pinions arguing that Google should buy Motorola if they wanted to control their destiny. Although Google continues to deny that it will make Motorola its hardware ARM, both us believe that Google has no choice if they want to see Android succeed for their own purposes.

Related Column: Why Google Should Buy Motorola

So what about Microsoft and this issue of vertical integration? Aren’t they also completely beholden to their OEM partner’s to carry out their OS dreams and must trust them to be successful in hardware if Windows 8 on tablets and Windows Phone are to be big winners? Absolutely. Their model of using vendors for Windows 8 on desktop and laptops is intact and will succeed on its own. And perhaps even with tablets this will be the case since Windows 8 backward compatibility will be a big driver for these products and all PC OEMs will use this to extend their reach in tablets. But where Microsoft is very vulnerable is in smartphones since they pretty much are relying on Nokia to make Windows Phone–and beyond–succeed in these devices. Early this year, I wrote an article in Tech.pinions saying that Microsoft “will” buy Nokia and reasoned that in the end, when it comes to smartphones, Microsoft is so late in the game that ultimately they need to control its hardware destiny.

Related Column: Why Microsoft Will Buy Nokia

With the news last week that Nokia lost $1.9 billion last quarter and rumors of bankruptcy swirling around them, I am more convinced then ever that Microsoft will buy at least Nokia’s handset business. Although Nokia officials have denounced reports of bankruptcy, if they have another bad quarter their long-term position in the market could be even more questionable. In the end, Microsoft will have to be at least vertically integrated when it comes to smartphones if they want to guarantee the ultimate success of Windows phones.

Take a close look at why Apple is successful and you will see that their vertical integration allows them control their entire ecosystem and as a result, be master of their destiny. I don’t see any way for Google or Microsoft to ultimately control the success of Android in tablets and Windows Phone/8/9 on smartphones and tablets without becoming vertically integrated in these areas. If they do not do this, Apple will continue to eat their lunch and leave them in the dust.

A Cloud Computing Primer

Photo of cloudsThe DEMO conference may not be the stellar event it with once was, but its still a good indicator of the computing zeitgeist. At least week’s edition in Santa Clara, CA, it was pretty clear that the tech world is still buzzing about clouds. As a result, anything with online components–and that is pretty much everything–is being billed as a service in the cloud. It’s time to take a look at what the cloud is, and isn’t.

Even if we try to be fairly rigorous about the meaning, its clear that the term “cloud computing” refers to two very different things. One, which I will call the personal cloud, refers to services provide both online storage and allow you to sync content to local storage on multiple, diverse devices. And What I’ll call the infrastructure cloud provides flexible, remote computing capability as a service to companies.

The personal cloud has been around for a long time in various forms. Email has functioned as a cloud service since the development of the POP3 and IMAP protocols. But lately we have seen enormous growth in generalized clouds  that provide storage and syncing with various degrees of integration into desktop and mobile apps: DropBox, SugarSync, Apple MobileMe/iCloud, Microsoft SkyDrive, and the imminent Google Drive are all examples of such services.

The services are going to become increasingly important as personal computing shifts from PCs with abundant local storage and often limited connectivity to tablets and other mobile devices with very limited storage  and no real file system but ubiquitous connections. And the limited processing power of mobile devices argues for greater apps in which much of the computational load is carried by a server. These apps are sometimes called cloud computing, too, though the more traditional “web services” is probably a better description.

The infrastructure cloud is a very different beast. It’s what allows organizations,from startups to large enterprises, to do their processing on someone else’s computers,adding and shedding capacity as needed and paying only for what you use. It has been particularly revolutionary for startups, since it lets them both provide services without any capital investment and to scale very rapidly if their offering takes off.

The infrastructure cloud exists in three forms, though the divisions between them are not always very sharp. Infrastructure-as-a-Service (IaaS) offers basic servers, set up with your choice of operating system, storage, and connectivity. Amazon Web Servicesi s the best-known purveyor of IaaS, especially with its Elastic Cloud Computing (EC2) and Simple Storage Service (S3). You pay Amazon for the number of virtual servers you use (with different charges for varying  amounts of processing capacity), your storage, and the amount of data you move in and out of the system, with additional charges for added services, such as load-balancing.

Platform-as-a-Service (PaaS) moves a step up the software stack. Instead of a bare server, you get a system provisioned for a specific platform. well known examples are Microsoft’s .NET-based Azure, Google’s App Engine, and Safesforce.com’s Force.com.

At the top of the stack is Software-as-a-Service (SaaS), which offers specific applications or clusters of applications. SaaS is not conceptually very different from familiar Web apps such as Gmail, but on an enterprise scale. Leading examples include Google Apps for Business and Salesforce.com’s cloud-based customer relations management software.

Cloud services are hot right now, but they aren’t the solution to all business technology problems. They are terrific for startups, which typically are cash-poor and need to minimize capital expenditures. They  also have great advantages for companies that need to meet highly variable demand or need to scale rapidly. Investing in a server infrastructure designed to meet peak demand but then sits idle much of the time is generally a bad way to allocate your resources.

On the other hand, many companies are not comfortable trusting all of their data to third-party hosts, or may face legal or regulatory restrictions in doing so. Some folks just want to have control over their own systems. and at some point of scale, the economics often tip in favor of running your own servers.

 

 

Apple TV and the Trojan Horse Strategy

Apple TV is one of the things I get asked quite a bit about during my industry analysis presentations. It seems that everyone out there wants to know what Apple has planned for the big screen. Although no one knows, and there is much speculation, my key thoughts about this all along have been that Apple will in some way turn the TV screen into a platform to deliver rich content and services. If you think about it, the TV screen is the last of major screens in consumers lives to truly become a smart. Many vendors have tried, but the technology in many ways is still not here to really make TV’s smart.

I believe there is a tremendous amount of interest in Apple’s moves in this area because of the massive opportunity to re-invent what we experience through our TV. But the opportunity is much larger than simply consuming video content in new ways.

A Platform Unlike Any Other

The untapped opportunity for the large piece of dumb glass sitting in hundreds of millions of consumers living rooms and bedrooms is to create the ultimate entertainment platform. This is a big deal if you think about it. Today most platforms are computing platforms where things like entertainment are secondary to things like productivity, communication, etc. This is what has always intrigued me about game consoles. I have felt from very early on in my digital home research that game consoles were the ultimate entertainment platforms which would evolve into trojan horse entertainment gateways for more than just video gaming. With many of the updates brought to both the Playstation and the XBOX, it is clear that this is exactly what is happening. In fact, I believe that the value of game consoles for today’s and perhaps even future consumers, will be less about gaming and more about other entertainment services.

That being said, gaming is an important part of living room entertainment. That is why I believe Apple is betting seriously on gaming across all of the screens in which they compete. Game Center for Apple becomes the glue tying consumer gaming experiences together and the foundation of a gaming service akin to XBOX Live. A holistic video game strategy both immersive and casual is key to the future of Apple TV as an entertainment platform.

A Set Top Box is a Trojan Horse not a Large Piece of Glass

I will believe that Apple is making a large piece of glass when I see it. In my opinion the current strategy with Apple TV is that it is a small, yet powerful, set top box and is their best plan of action. Mainly because there is absolutely nothing that can be built into a large piece of glass that can not also be accomplished with a small, yet powerful, set top box. If Apple wants to sell hundreds of millions of Apple TV’s it will accomplish this with a set top box not a large, and expensive, piece of glass. Even if Apple does decide to sell a large piece of glass in the shape of a TV, they would still have to employ the Apple TV set top box strategy in order to provide an identical experience to the hundreds of millions of consumers who already have large pieces of glass and don’t intend on buying a new one any time soon.

Interestingly, Microsoft is in a position to compete when it comes to entertainment platforms. The XBOX 360 is much more than a gaming console and is evolving into a fairly mature entertainment gateway. The XBOX 360 has been called a trojan horse before and I believe it is but Microsoft can not sit still.

We may analyze and probe from every angle Apple TV in its current implementation and yet I don’t believe Apple or Microsoft has yet implemented the key growth features for this category–namely apps. The next frontier of the TV platform is to let developers begin to invent new applications and software designed specifically for the large screen. This does not mean a repurposing of existing apps and blowing them up to fit on a larger screen. It means re-inventing the way we think about software and entertainment experiences for the big screen Similarly, touch computing required a new software development paradigm built from the ground up to work with touch; so I believe the TV needs software purposely built for that screen and its role in consumers lives.

What makes the TV fascinating is how different of a relationship consumers have with it versus other screens, or platforms, in their lives. For example, the TV is not a personal screen like a notebook, tablet, or smartphone. The TV is a communal screen where in a family environment it is enjoyed by multiple people simultaneously. In this scenario it doesn’t make a ton of sense for me to run Twitter or Facebook, or at the very least those aren’t the most interesting applications for the TV. What gets me excited is that when the TV becomes a platform for software developers to take advantage of, I believe we will see an entirely new set of applications developed with more communal experiences in mind.

The family or communal cloud will become an important ingredient in this scenario. I wrote about the need for more family and communal clouds last week and the more I think about it the more I am convinced it is an unmet need in the market. Communal screens will require communal content and that is when the family’s digital media becomes an important part of the experience. The experience of seeing up to date photos of loved ones and family members (of my choosing) on my TV is one I feel would be of great value.

Lastly, I would add that although I believe Apple TV is a trojan horse, I am not convinced Apple has yet employed the strategy fully. I think this is where gaming and apps will come in to round out the platform. I know we want to kick our cable providers to the curb but I don’t think that is the entry point. I believe games and apps will deliver the value propositions that get the Apple TV trojan horse strategy going. Then once in the door in masses, hopefully the Hollywood industry will begin to invest in business models that will keep them from extinction in the future.

The Fallacies of How To Compete with the iPad

I take articles like this claiming the iPad will drop below 50% market share by as early as next year with a grain of salt. I don’t want this article to be about all the reasons why we believe the iPad will maintain significant market share, we have written quite extensively about those reasons. I’d rather examine a few flaws in competitors thinking about how to compete with the iPad and to do that I’d like to start off by making a point. I genuinely believe that it is possible to compete with the iPad. I don’t think it’s easy. I don’t think many companies can; but I don’t think it is impossible.

There is always room to innovate. The problem is simply that the companies attempting to create competing touch computers don’t understand touch computing or the market dynamics for tablets. It seems as though many vendors and software platform providers believe that by simply slapping a touch screen on a piece of hardware, regardless of what that hardware looks like, that it will hit the market and instantly be competitive. This is the fallacy number one.

Touch computing requires a touch based ecosystem. This is everything from carefully designed hardware, software, and to a degree services, all around touch (not mouse and keyboard) as a computing paradigm. This is no trivial task. Android is a weak touch computing ecosystem in my opinion. Mostly due to Android being an advertising strategy not a software strategy to Google. Time will tell with Windows 8 what kind of touch computing platform it truly becomes. Windows 8’s success rests largely on the hardware manufacturers and software developers ability to understand touch computing and develop a truly competitive ecosystem.

Fallacy number two is that the number of designs in the market on a particular platform is a competitive advantage. When I ask why a particular platform release may be competitive, often number of designs is the answer. “There will be over xx designs in the market,” is a phrase I hear often. I don’t believe that number of designs alone makes a particular platform competitive. In fact, it is perhaps quite the opposite. There is a book I like to reference called The Paradox of Choice by Barry Schwartz. The overall premise of this great book is that too much choice or too much variation in choice can overwhelm the purchaser to the point of frustration and lead to the inability to make a decision. My concern with too many products on a particular platform is that consumers may find the decision making process painful and confusing. This is why I believe there is a lot of merit to the argument for very limited product offerings per vendor and per platform to a degree.

Fallacy number three is that low cost always wins. I don’t believe that today’s consumers in mature markets want things that are cheap. I believe they want things that are valuable to them at a personal level. A key point to understand is that in mature markets what is valuable varies quite a bit. This is because in mature markets consumers make specific purchases for specific reasons. Often in mature markets consumers know roughly what they want, why they want it, and they are shopping with a pre-set of conditions. What one segment finds valuable may not be the same as another group. This is why product segmentation is important. The key is to create products in a segment–hopefully a large one– that consumers in said segment find valuable. In the automotive industry, for example, minivans target a segment, trucks target a segment, motorcycles target a segment, economy cars target a segment, and so on and so forth. In this case, the automotive manufacturer understands the segment a product is being created for and then innovates and delivers solutions to meet that segments needs on an annual basis. This understanding of the market dynamics for tablets is what I think is largely being missed by those desiring to create competitive tablets.

The question anyone who desires to create a tablet to compete with the iPad needs to answer is “What will my tablet do better than the iPad.” And what can they do with it that they can’t do with an iPad?

If there is not a well reasoned answer to this question then get back to the drawing board and innovate. The answer may not be obvious or easy to figure out but just trying to be me too is a recipe for disaster. Perhaps if these new Windows tablet vendors can create a product that is unique, does specific things the iPad doesn’t, and meets additional needs that the iPad can’t (or Apple isn’t interested in), then they might have a chance to truly deliver a competitive product that gains market traction.

Ultrabooks, MacBook Air, and the Need for Inspiration

Inspired by Intel stickerIs the laptop business doomed to slowly ebb away as tablets capture more and more of the mobile market? It’s not hard to see a future where the world is divided into tablets and smartphones for the overwhelming majority of uses and workstations for heavy-duty computing, with very little in between.

This is not a very pleasant world for Intel to contemplate. Its efforts to date to win a share of the phone and tablet market have been unavailing and the success of a new generation of low-power Intel chips is far from assured.

Photo of Dell XPS 13 Ultrabook
Dell XPS 13 Ultrabook

This explains the marketing logic behind Intel’s $300 million campaign to promote Ultrabooks, its trademarked name for very thin and light laptops. If the past is any guide, a fair chunk of that $300 million is flowing straight to computer manufacturers who produce laptops that follow Intel’s specifications and display an “Inspired by Intel” slogan on their products and in their ads.

Whose inspiration? The problem is that a sticker is a poor substitute for actual inspiration, which has been in painfully short supply for years in laptops designed to run Windows. And it’s painfully obvious that the inspiration for Ultrabooks can not from Intel but from the Apple MacBook Air. Comparing the specifications of the Dell XPS 13 Ultrabook and the MacBook Air 13″ make it hard avoid the conclusion that the Dell was intended as a sincere form of flattery:

Dell XPS 13 Ultrabook Apple MacBook Air 13”
Display 13.3” , 1366×768 13.3”, 1440×900 *
Processor 1.6 GHz Intel i5 1.7 GHz Intel i5 *
Memory 4 GB 4 GB
Storage 128 GB SSD 128 GB SSD
Dimensions 12.4”x8.1”x.24-.71” 12.8”x8.94”x.11-.68”
Weight 2.99 lb. 2.96 lb.
Price $999 $1,299
MacBook Air photo
MacBook Air 13"

A few Ultrabooks, like the $1,399 Hewlett-Packard Envy Spectre with a striking all-glass lid, avoid being Air lookalikes, but even HP admits the Spectre is intended more as a design statement than a mass-market product. By and large, PC makers seem determined to make their products look as much like MacBooks as possible.

Inspired by Microsoft? The introduction of Windows 8 at the end of this year could prove a major turning point for laptops. The problem is that it is difficult at this point to tell in which direction.

One thing that is clear is that Win 8 will cause a major fragmentation in the Windows hardware/software platform next year. There will be:

  • Traditional Windows notebooks, including Ultrabooks, and desktops powered by an assortment of Intel and AMD processors.
  • Intel-powered tablets that, like traditional systems, will be capable of running both new applications designed to Microsoft’s touch-centric Metro user interface and traditional Windows Desktop programs.
  • Tablets that, like the iPad and Android tablets, are based on ARM processors. These will run a separate version of the operating system, called Windows RT, that only supports Metro apps, plus Metro-ish versions of the Windows file manager and Microsoft Office.

Windows hardware will be competing with the iPad, a refreshed line of MacBooks that will probably include an Air-like 15” model, and Android tablets that can only get better. Is there some real innovation that computer makers can bring to the game.

One obvious point of differentiation for notebooks would be touch screens. Apple has made clear its distaste for touch on laptops and desktops, opting instead for sophisticated touchpads that support many of the gestures used on the iPad and iPhone. The latest version of  OS X, Mountain Lion, retains the windows-icons-menus-pointing device design that works best with a hardware keyboard and a mouse or touchpad.

Microsoft, by contrast, is reportedly encouraging OEMs to go for touchscreen laptops. Metro, of course, works with a mouse and keyboard but it screams for touch. I am not convinced that the ergonomics of a touch laptop will ever be very happy (and using an iPad with a keyboard presents the same sort of not entirely satisfactory compromise.)

Touch may or may not be the right answer. But Windows laptops need something –yes, some inspiration–to stay relevant. Just chasing Apple isn’t going to do it.

*–The processor speed and display resolutions were incorrect in the original post. These are the corrected values.

 

 

 

 

 

The Case Against a 4-Inch iPhone

As a regular part of my job I evaluate many different devices. I don’t always publish this analysis publicly but nearly every new device passes through our “labs.” When it comes to smartphones, or pocket computers as I like to call them, I get to test and review and analyze all the new android devices, Windows phone, and Apple products. In case you haven’t noticed the trend, smartphones are getting larger screen sizes all the time.

For me, to do the kind of analysis I want, I always use the device as my primary phone. The current device I have been using is the HTC One X, which I like a lot. As I review these devices one very interesting thing stands out. As much as I love using a larger screen smartphone, you notice very quickly that it is very difficult to operate with just one hand. What I mean by that is that my thumb cannot reach all four corners of the screen without having to shift the phone a bit and adjust my hand somewhat awkwardly. This is less of a big deal on Android devices home screen because generally app icons don’t fill the entire home screen. However, during the using of applications, all of the screen real estate is used and with many apps this is when the difficulty of one handed operation becomes noticeable. This is something that does not become glaringly noticeable until you use a smartphone with a larger screen as your everyday phone in everyday situations.

I’m roughly the average height for a US male and I have to imagine that my hands are roughly an average if not slightly smaller than average size. The iPhone’s 3.5 inch display is exactly perfect for me to hold the device in one hand and reach all the active areas of the devices screen. This is not the case with every phone that I use where the screen size is larger than 4-inches. I can only imagine the pains humans with smaller hands go through in using such large screen smartphones.

Yesterday I came across an article pointing out roughly the same thing but making a bigger deal about some of the developer issues around a 4 inch screen and particularly apps being used in landscape mode. There’s a lot of merit to that argument but I would emphasize that the lack of being able to operate with one hand easily could be the strongest case against a 4 inch iPhone. On that point Dustin Curtis makes the same point about screen size issues and one handed navigation on this post and has a nice chart between the iPhone 4s and the Galaxy S II.

I genuinely like using smartphones with larger screens but they certainly come with tradeoffs. I firmly believe that a 4.3-4.7-inch screen is probably the largest possible screen size for the mass market with 4.7 perhaps pushing it. Many of these larger screen smartphones sell well and I do believe there are segments of the market that desire 4-inch and larger smartphones.

So the debate really comes down to how important is an uncompromising one handed operation to the overall smartphone experience. One of the things I have found in my own personal analysis is that because I use an iPad regularly I find less of a desire for a larger smartphone. This is why a strong case may be made for larger smartphone screen sizes in other parts of the world where the smartphone is the primary computing device–for the time being. I believe this is why the 5-inch Galaxy Note is selling well in Korea.

Of course, should Apple decide that a 4-inch screen should become the new normal or as a part of a larger iPhone lineup, I would have to imagine that they would take this issue into consideration. Perhaps one way to solve this problem could be adding more device operation support into Siri. This way voice would become a more fundamental way to operate your iPhone. This would eliminate to some degree any issue with one handed device operation and make voice operation a more prominent feature.

Speaking of lineups, Apple clearly now has a strategy to have an iPhone portfolio of products in the market. Currently it is a good, better, best, strategy with the 3GS, 4, and 4S. The question will be in the longterm about how different form factors may play into this good, better, best, product lineup. The same can be said with the iPad, which is why I think the iPad Mini is such a hot rumor.

Ultimately, variety in a product portfolio is a good idea. Apple is yet to vary the screen size offering in the iPhone and iPad–yet they do with other computing products. I do believe it is logical that this trend would continue in all the screens in which they choose to compete in hardware. My personal use case may be that 3.5″ is the right screen size given how I use the device but for others their use cases may demand a larger screen. That being said, understanding the tradeoffs and use cases for different size screens is key for both the device experience and the problems that need to be solved in order to maintain a consistent quality experience.

I’d love to hear more opinions on this topic.

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Two Sides of the Consumer Coin to Windows RT

Yesterday, Microsoft unveiled via a blog the different Windows 8 editions and comparing the different features and functionalities.  There are three versions, Windows 8, Windows 8 Pro, and Windows RT.  One of the biggest changes in Windows 8 versus previous editions is the support for the ARM architecture with NVIDIA, Qualcomm, and Texas Instruments, and the new naming reflects it.  The Windows 8 on ARM, or WOA for short, gets its own name, called “Windows RT”.  I believe that this naming cuts both ways, some positive and some challenging for the ARM camp, but can be mitigated with marketing spend and education.

Windows RT (ARM) versus Windows 8 (X86)

Windows RT and Windows 8 are very similar but in other ways very different, and in some ways reflect Windows RT’s shedding of legacy…. but not completely.  The Microsoft blog had a lengthy line listing of differences, but here are the ones I feel are the most significant to the general, non-geeky consumer.

The following reflects relevant typical features Windows 8 provides over Windows RT:

  • Installation of X86 desktop software
  • Windows Media Player

The following reflects relevant typical consumer features Windows RT provides over Windows 8:

  • Pre-installed Word, Excel, PowerPoint, OneNote
  • Device encryption

Again, this isn’t the complete list and I urge you to check out the long listing, but these are the features most relevant to the non-geeky consumer.

What isn’t Addressed

What I would have like to seen discussed at length and in detail was support for hardware peripherals.   I will use a personal example to illustrate this.   Last week, I bought for $149 a new HP Photosmart 7510 printer, scanner and fax machine.  Will I am confident I will be able to do a basic print with a Windows RT machine, will I be able to use the advanced printer features and be able to scan and fax?  We won’t know these details until closer to launch, but this needs to be addressed sooner rather than later.

Next, I would have also liked to see some specifics on battery life and any specific height restrictions for Windows RT tablets.  If these devices are intended to be better than an iPad, they will need some experiential consistency to provide consumers with confidence, unlike Android.  As I address below, this wasn’t overt, but a little covert.

The Plusses with what Microsoft Disclosed with Windows RT

There are some positive items for the ARM camp that came from Microsoft’s blog post that covered Windows RT.  Windows RT does support the primary secondary tablet-based needs a general consumer would desire.  In the detailed blog posts, Windows RT supports many features.   This comes to light specifically when you put yourself in the shoes of the general consumer, who doesn’t need features like Group Policy, Domain Join, and Remote Desktop Host.  Also,  I don’t see the absence of Storage Spaces or Windows Media Player as major issues for different reasons.  Storage Spaces is very geeky and I do not believe the typical consumer would do much with it.  I believe Windows RT will have many, many methods of playing video as we see on the iPad and Android tablets, so the absence of Windows media Player isn’t a killer, specifically for tablets.

Windows RT also contains Office, specifically Word, Excel, PowerPoint and OneNote which sells for $99 today. Finally, while details are sketchy, Windows RT supports complete device encryption.  I can only speculate that all data, storage and memory operations are encrypted.  This can potentially leveraged with the consumer, but it’s not something that has kept the iPad from selling.

A final,  important note, is the consistent experience I expect Windows RT to deliver.  By definition, all Windows RT systems will be lightweight with impressive battery life. While this doesn’t come out as clearly in the blog post, I do read between the lines and see where this is headed.  I believe Microsoft wants to deliver the most consistency with Windows RT and leave the experience variability to Windows 8.

There will be challenges, though.

The Risks with what Microsoft Disclosed with Windows RT

While there are positives in what Microsoft disclosed on Windows RT, there are risks and potential downsides, too.  First of all and primarily is the absence of the “8”.  Regardless of how much Microsoft may attempt to downplay the “8”, consumers fixate on generational modifiers to add value to something.  Consumers do this because it makes it easy for them.  When a consumer walks into a store and sees Windows 8 and Windows RT, I expect them to ask about the difference.  What will the answer be from the Best Buy “blue shirt”?  Without a tremendous amount of training on “RT” I would expect them to say, “RT has MS Office, but won’t run older programs.  8 runs all your old programs but doesn’t come with Office.” With that said, the street price adder for Office isn’t public knowledge, but I know that it does add at least $50 to the street price.  This is a discount to $99, but then again, I don’t miss not having Office on my iPad.

As I discussed above, Microsoft needs to disclose more on backward hardware compatibility.  Every day that ensues without a more definitive statement, Microsoft draws in the skeptics.  What wasn’t discussed in the industry 6 months ago is being discussed now.  Finally, how can the lack of X86 desktop software be turned into a positive?  The basic consumer, if offered something more in their minds for the same price, will always choose more, unless they see a corresponding behavior to give up something.  Apple has done a fine job with this on the iPad.  When the iPad first launched, many focused on what it didn’t have, namely USB ports, SD cards, or the ability to print.  The iPad can print in limited fashion, still has no USB or SD card slot and is still selling great.  Windows RT needs a distinct value proposition related to Windows 8 but different too.

What Needs to Be Done Next

If I were in the ARM camp, I would plead with Microsoft to reconsider the naming.  Even adding an “8” to the naming to render “Windows 8 RT” would at least recognize it’s in the same family.  Without it, Windows RT looks like part of the Windows family, but not “new Windows” table. This can be overcome by spend on a unique value proposition.  This distinct value proposition may be that all RT units are thin and light weight and provide a consistent experience, something that Windows 8 cannot guarantee.  The ecosystem then would need to fill “RT” with value and meaning which will be expensive. Finally, the Windows RT ecosystem needs to start better communicating about peripheral compatibility, as every day passes, the broader ecosystem gets more nervous.  With six months to go, there’s a whole lot of work to do, and a lot more in the Windows RT camp than the Windows 8 camp.