Over the past year, Verizon, AT&T, and T-Mobile have each launched rewards programs. The most recent entry is T-Mobile Tuesdays, an app where T-Mobile customers are given freebies every week, such as a Domino’s Pizza or a Wendy’s Frosty (John, how about some lower-cal options?) and customers can enter to win more substantial prizes. Verizon offers Smart Rewards — customers earn points that can be redeemed for savings on merchandise. AT&T joined an existing rewards program called Plenti, where customers can accumulate points for savings at Plenti partners such as Exxon, Macy’s and Rite Aid. AT&T also introduced AT&T Thanks last week (curious timing), which offers discounts on movie tickets, Live Nation Priority Pre-sale seats, and some unique content for DirecTV customers.

The wireless industry has never had a successful loyalty program. I would argue the current offerings are largely rewards programs and giveaways, not loyalty programs. Smart Rewards and Plenti are basically discount programs where customers have to buy something in order to save, say, 10% on a gift card or a gallon of gas. Of course, this is what T-Mobile CEO John Legere poked at when he introduced T-Mobile Tuesdays, which is more of a giveaway program than a rewards program. In typical ‘Uncarrier’ fashion, TMO Tuesdays is more innovative, edgy, and fun (and a tad gimmicky) than the Verizon and AT&T programs.

Let’s be honest: how many of you Verizon and AT&T customers really use Plenti or Smart Rewards, much less know about them? And do these programs make you loyal in any way to your carrier? T-Mobile’s program might have a bit of an edge in that customers might enjoy entering the weekly sweepstakes for what look like some really fun prizes and trips. I see this as more part of a package of items that make T-Mobile distinct, such as free international roaming and BingeOn, than a loyalty program in and of itself.

It is interesting to me that wireless carriers have never had a true loyalty program, in the vein of airlines, hotels, and some retailers. The average wireless customer spends some $600-800 annually on wireless services and a household can easily spend $2,000 per year. This is a competitive industry, where the name of the game is taking customers from another operator. Reducing churn (or, keeping customers) is a huge priority for the operators. Lowering churn by 10 or 20 basis points has billions of dollars in impact to a large operator. Isn’t it curious operators rarely proactively reward customers for their loyalty or tenure — “thank you for being a customer for five years – we’d like to offer you some free data or a discount on your next device purchase”?

In order to attract or keep customers in this highly competitive industry, I think the operators should consider offering a real loyalty program. What might this look like? It would be more focused on incentives to stay and expand a relationship with a service provider. Points could be accumulated for any of the following:

• Tenure (years of service) with the carrier
• Spend
• Number of devices attached to plan – good incentives to add a tablet, car, etc.
• Adding a family member to a group plan
• Referring a friend

Points, or rewards, could be used for things such as:

• free data
• a discount off a monthly plan
• dollars toward a new device or accessory purchase
• free apps and content

Importantly, this would be a reward for loyalty and spending. For example, how about one GB per month added to your plan for every year of service? The other aspect of this is the program creates positive additional touch points with the customer, whether in the store, online, or through an app. This type of plan is much closer to what airlines, hotels, credit cards, and some retailers offer: “You’re going to fly or stay in a hotel and we would like you to do it with us”.

This could also be an opportunity to offer something differentiated in the small business segment. None of the operators has really nailed an effective small business program. This would be a nice incentive for a business of, say, 5-20 lines to incentivize its employees to select a particular service provider.

I think an effective loyalty program could make a difference in customer retention. It would be interesting to see one of the carriers try it.

As widely reported in the press on Monday, Microsoft released an update for its preview members which included access to Cortana. Cortana will be on the Xbox One dashboard and users will be able to access her via the Kinect sensor or a headset. Initially, Cortana’s abilities will be limited to basic tasks such as seeing which friends are playing and launching a party.

We have been talking a lot about digital assistants in the past few weeks. Microsoft positions Cortana as “your new clever personal assistant.” The Windows website goes on to say, “Cortana will help you find things on your PC, manage your calendar, track your packages, find files, chat with you and tell you jokes. The more you use Cortana, the more personalized your experience will be.” This all sounds good but Microsoft started with the disadvantage of not having its own army of smartphones to show off Cortana so it made it available on both iOS and Android. User reviews are generally positive but point to the fact the experience is more limited than on a Windows device. From looking at the review pages and the number of reviews, it seems Android users are embracing Cortana more than iOS users which means Microsoft is missing out on a very valuable part of the consumer base.

Cortana is, of course, also available on the Microsoft Band and works with Windows and Android phones in the US but, due to the limited uptake of Band thus far, this does not extend Cortana’s addressable market by much.

PCs are not the ideal partner for a digital assistant

While Cortana is present on PCs running Windows 10, usage remains limited. While Microsoft helps consumers find Cortana, in our recent consumer study we ran in the US, a whopping 77% of the panel said they never used Cortana.

Even though consumers have started to use Cortana on a more regular basis on their PCs, I believe the relationship will feel more transactional and usage will be limited in scope — mainly around calendaring and search. This is because Cortana will only be “alive” when the PC is on, which is certainly not all the time the same way a phone or a dedicated device like the Amazon Echo or Google Home. While notebooks have replaced many desktops, they still tend to remain relegated to the home office or the bedroom rather than accompany us around the house. Also, many users, especially those who use their PC mainly for work, have a tendency to mute their sound and microphone. This would considerably limit the depth of interaction and therefore, the depth of the user’s relationship with Cortana.

Xbox One brings Cortana to the center of family life but not for many

Xbox One currently has around nice percent of the game console installed base in the US. A rough estimation puts that at less than one percent total household penetration. If you compare this to Amazon’s Echo, it is not a bad position to be but, while almost double the current number of US-based owners are interested in purchasing an Xbox One, the potential will likely never be as big as that of a music speaker while the price is remains 50% higher. For most consumers, Xbox is either in the family or living room which offers Cortana a better opportunity to be more at the center of family life but still does not allow for Cortana’s full potential.

Will an army of bots come to Cortana’s rescue?

It is clear to me it would be a mistake to think relying on Windows 10 PC will give Microsoft enough ammunition to win the battle against Alexa, Siri and Google assistant. More devices are needed in and outside the home that connect to Cortana.

In the smartphone market, Microsoft had been struggling to engage developers with their platform. When it comes to digital agents, it is obvious Microsoft wants to lead, not catch up. At Build, Microsoft’s developer conference that took place in San Francisco at the end of April, Microsoft introduced the new concept of “conversation as a platform.” CEO Satay Nadella outlined his vision of computing that relied on users, a digital assistant, and bots. He then went on to describe bots as “applications you can converse with.” Microsoft’s end game is to have these bots interact with Cortana to benefit the user. Creating a platform with Cognitive Services and Bot framework APIs to enable this, so early on in the game, might see Microsoft fight a different kind of battle than the one they fought and lost in the smartphone market.

Ultimately, bots can help Cortana get much smarter without dedicated devices. What remains to be seen is whether users will still want a Cortana that not only has brains but a body too.

Servers are probably not near the top of your list for conversation topics nor are they something most people think about. But, it turns out there are some interesting changes happening in server design that will start to have a real world impact on everyone who uses both traditional and new computing devices.

Everything from smart digital assistants to autonomous cars to virtual reality is being enabled and enhanced with the addition of new types of computing models and new types of computing accelerators to today’s servers and cloud-based infrastructure. In fact, this is one of the key reasons Intel recently doubled down on their commitment to server, cloud, and data center markets as part of the company’s evolving strategy.

Until recently, virtually all the computing effort done on servers—from email and web page delivery to high performance computing—was done on CPUs, conceptually and architecturally similar to the ones found in today’s PCs.

Traditional server CPUs have made enormous improvements in performance over the last several decades, thanks in part to the benefits of Moore’s Law. In fact, Intel just announced a Xeon server CPU, the E7 V4, which is optimized for analytics, with 24 independent cores this week.

Recognizing the growing importance of cloud-based computing models, a number of competitors have tried to work their way into the server CPU market but, at last count, Intel still owns a staggering 99% share. Qualcomm has announced some ARM-based server CPUs and Cavium introduced their new Thunder X2 ARM-based CPU at last week’s Computex show in Taiwan but both companies face uphill battles. A potentially more interesting competitive threat could come from AMD. After a several year competitive lull, AMD is expected to finally make a serious re-entry into the server CPU market this fall when their new x86 core, code-named Zen, which they also previewed at Computex, is expected to be announced and integrated into new server CPUs.

Some of the more interesting developments in server design are coming from the addition of new chips that serve as accelerators for specific kinds of workloads. Much as a GPU inside a PC works alongside the CPU and powers certain types of software, new chips are being added to traditional servers in order to enhance their capabilities. In fact, GPUs are now being integrated into servers for applications such as graphics virtualizations and artificial intelligence. The biggest noise has been created by NVIDIA with their use of GPUs and GPU-based chips for applications like deep learning. While CPUs are essentially optimized to do one thing very fast, GPUs are optimized to do lots of relatively simple things simultaneously.

Visual-based pattern matching, at the heart of many artificial intelligence algorithms, for example, is ideally suited to the simultaneous computing capabilities of GPUs. As a result, NVIDIA has taken some of their GPU architectures and created the Tesla line of accelerator cards for servers.

While not as well known, Intel has actually offered a line of parallel-processing optimized chips they call Intel Phi to the supercomputing and high-performance computing (HPC) market for several years. Unlike Tesla (and forthcoming offerings AMD is likely to bring to servers), Intel’s Phi chips are not based on GPUs but a different variant of its own X86-based designs. Given the growing number of parallel processing-based workloads, it wouldn’t be surprising to see Intel bring the parallel computing capabilities of Phi to the more general purpose server market in the future for machine learning workloads.

In addition, Intel recently made a high profile purchase of Altera, a company that specializes in FPGAs (field programmable gate arrays). FPGAs are essentially programmable chips that can be used to perform a variety of specific functions more efficiently than general purpose CPUs and GPUs. While the requirements vary depending on workloads, FPGAs are known to be optimized for applications like signal processing and high-speed data transfers. Given the extreme performance requirements of today’s most demanding cloud applications, the need to quickly access storage and networking elements of cloud-based servers is critical and FPGAs can be used for these purposes as well.

Many newer server workloads, such as big data analytics engines, also require fast access to huge amounts of data in memory. This, in turn, is driving interest in new types of memory, storage, and even computing architectures. In fact, these issues are at the heart of HP Enterprise’s The Machine concept for a server of the future. In the nearer term, memory architectures like the Micron and Intel-driven 3D Xpoint technology, which combines the benefits of traditional DRAM and flash memory, will help drive new levels of real-time performance even with existing server designs.[pullquote]Today’s servers have come a long way from the PC-like, CPU-dominated world of just a few years back. [/pullquote]

The bottom line is that today’s servers have come a long way from the PC-like, CPU-dominated world of just a few years back. As we see the rise of new types of workloads, we’re likely to see even more chip accelerators optimized to do certain tasks. Google, for example, recently announced a TPU, which is a chip they designed (many believe it to be a customized version of an FPGA) specifically to accelerate the performance of their TensorFlow deep learning software. Other semiconductor makers are working on different types of specialized accelerators for applications such as computer vision and more.

In addition, we’re likely to see combinations of these different elements in order to meet the wide range of demands future servers will face. One of Intel’s Computex announcements, for example, was a new server CPU that integrated the latest elements of its Xeon line with FPGA elements from the Altera acquisition.

Of course, simply throwing new chips at a workload won’t do anything without the appropriate software. In fact, one of the biggest challenges of introducing new chip architectures is the amount of effort it takes to write (or re-write) code that can specifically take advantage of the new benefits the different architectures offer. This is one of the reasons x86-based traditional CPUs continue to dominate the server market. Looking forward, however, many of the exciting new cloud-based services need to dramatically scale their efforts around a more limited set of software, which makes the potential opportunity for new types of chip accelerators a compelling one.

Diving into the details of server architectures can quickly get overwhelming. However, having at least a basic understanding of how they work can help give you a better sense of how today’s cloud-based applications are being delivered and might provide a glimpse into the applications and services of tomorrow.

The idea of talking conversationally to computers has been a long time in the works. Science fiction is so often a self-fulfilling prophecy as it provides a vision for humans to chase after with technological innovation. For those of us who have watched voice-based computer interactions evolve, we have seen it go through many manifestations as it grew up. We now find ourselves in a world where using voice to interface with a computer is commonplace on a regular basis for the masses. While I’m not quite confident we have reached an inflection point, I am confident we are at least on the cusp of one with voice-based user interfaces and the vision of the Hal 9000 (The AI assistant of Arthur C. Clarke’s Space Odyssey series) and Jarvis (the voice based AI assistant of Iron Man).

In anticipation of this and the many other “voice first” based products and experiences we believe will come to market in 2016-2017, we sought to do a quantitative study of Amazon’s Echo, Apple’s Siri, and Google’s Ok Google. We conducted two separate studies in early May, since our intuition told us voice would be a major theme of Google I/O and at Apple’s upcoming WWDC. We focused the Amazon Echo study on our early adopter panel since we knew we would not get a statistically significant number of Echo owners in our mainstream representative US consumer panel. We collaborated on the Amazon Echo study with my friend Aaron Suplizio (@aaronsuplizio) from Experian. Experian is also studying how the Echo is being used, specifically in the context of conversational commerce. (Experian didn’t pay us to do the study but did cover the costs for the raffle where two respondents won a $100 gift card.)

The second study was focused on our mainstream consumers to understand how they use Siri and Ok Google (or any Google voice-based search technique) to better learn how both are used and what the overall perception of each is by mainstream consumers. I’ll start by sharing what we learned about the Amazon Echo.

Amazon Echo and the Voice First User Interface
By spreading our study across 1300 early adopters, we found 13.86% of the panel owned an Amazon Echo. It came as no surprise to us the overwhelming majority of Echo owners also owned an iPhone (83.72%) as iPhone owners at large tend to show more early adopter tendencies vs. Android owners. What was most enlightening, in contrast to the Siri and Google voice study, was how different usage of the Echo was vs. Siri and OK Google. This was interesting both in terms of location of usage but also most common tasks.

We first wanted to understand where the Echo is used in most consumers’ home (we had a hunch it was either the kitchen or the living room). As you can see, the kitchen has the edge on the living room with 51% of consumers saying they have their Echo in the kitchen.

Given the type of things the Echo does, and perhaps in alignment with Amazon’s goals in delivering services to consumers via the Echo, knowing the primary usage room is important. Particularly because it is likely that the things we ask of our voice assistants may vary based on the context of the room or physical location we are in. For example, asking the Echo to turn the TV on is less relevant as a primary task unless the Echo is in the living room. We can certainly make the case someday voice assistants will be available at all times in all rooms. Click to enlarge the graph.

We followed this question by asking respondents to choose the top two things they do most often with their Echo. The top three most common use cases done regularly were: play a song (34%), control smart lights (turn on/off lights) 30%, and set a timer (24%). A few quick thoughts on Echo usage.

Playing a song as the top use case is not surprising given the product is positioned as a smart speaker. Bluetooth speakers have actually sold well at retail. The idea of having portable sound around the house is compelling for consumers. It also makes sense as the entry point for a smart voice assistant given the need for a speaker, microphone and accompanying components for microphone arrays and noise cancelling tech for better speech recognition. Controlling the lights is, in my opinion, a solid indicator of voice controlled smart home technologies which will someday become commonplace. As our homes get smarter, it makes sense that the way we will interact with our smart objects is through voice. It may be the catalyst to drive the true smart automated home into the masses.

In terms of overall satisfaction from Echo owners, most were satisfied with the overall product but satisfaction ranked highest when we asked specifically about the voice recognition capabilities of the Echo. Owners felt it delivered on recognizing what they were saying and performing the task they asked of it. This has a lot to do with the Echo’s microphone tech and noise cancelling capabilities as well as its connection to persistently good broadband which is often where Siri and Ok Google break down when trying to use while driving and/or operating in areas of poor quality service in mobile broadband networks.

Only 13% of Echo owners stated they noted declining usage since they acquired it. The top reason listed by those using it less was “the novelty of using my voice is wearing off”.

Understanding how Siri and Ok Google Are Used

Perhaps the most important observation we came away with from our study was Siri is the most used voice-based user interface. In our mainstream panel of 518 consumers (44% iPhone owners, 40% Android owners, 2% Windows Phone or Blackberry, 13% don’t own a smartphone), 65% indicated they had used either Siri, Google’s “Ok Google or voice search,” or Microsoft’s Cortana. Of all three, only 21% had never used Siri. Which compares to 34.8% who have never used Google’s voice solution, and 72% who have never used Microsoft’s Cortana. More consumers across the spectrum of operating systems (iOS, Android, Windows) have used Siri than any other voice UI. I credit the success of Apple’s iPad as assisting with this observation since many Android phone owners, non-smartphone owners, and Windows PC owners have iPads as well.

Looking at how they used each voice UI, we see for the most part people use Siri and OK Google/Voice search in the same ways on their smartphones. Contrasting these common usages against those of Echo, we see the distinct differences having a voice user interface to a communications device like a smartphone differs from one that is stationary in the home and positioned as a smart hub vs. a personal computing product like a smartphone, PC, or tablet.

Search is the most common task done on smartphones or tablets using Siri or OK Google/Google Voice. Google announced at Google I/O that 20% of all Google search queries are now done by voice. Looking at the data, we can conclude more voice search queries are done with Siri than with Google’s voice-based search. When I look at these most common tasks, they strike me as fairly basic. Which is an important observation to understand given where the market is today. These most common tasks may be simply because the products are still somewhat limited in their capabilities but could also be because they are the ones that work the best and most consistently.

Overall satisfaction with the voice recognition of Siri and OK Google/Google Voice search was relatively similar and only different slightly from the grades iPhone owners gave Siri and Android owners gave OK Google/Google voice search. Both were also below 80% which is not bad for where these technologies are today. The Echo’s voice recognition capabilities did yield higher satisfaction rates than both Siri and OK Google/Google voice search but I interpret that due to the technological variables of being stationary, having better noise cancellation, and a persistent high bandwidth connection to the internet. All things that are variables which impact the experience of voice-enabled user interfaces.

Finally, context of location usage for voice-based user interfaces is another important factor to understand. For those who use Siri or OK Google/Google voice search most regularly, the primary location is the car with 51% of consumers saying this is their primary location to use voice-enabled actions. The home was second with 39%. From a cultural perspective, it should come as no surprise that both these locations offer an element of privacy which is why only 6% of respondents said they commonly use Siri or OK Google/Google Voice in public.

Going Forward

I walked away from this study with confidence the voice user interface has gone mainstream. What’s more, mainstream consumers seem to recognize the value and convenience with them. Consider these statements from consumers:

1. It does not always work but when it does it is very useful – 55% Strongly agree
2. I would use my devices voice capabilities more if I could speak to it more naturally – 43% strongly agree
3. If it worked more often, I would use my devices voice assistants more – 48% strongly agree
4. I want my device’s voice interface to integrate better with more devices and apps that I use regularly – 66% strongly agree
5. I am not comfortable speaking to my technology – 41% strongly DISAGREE

It is encouraging, from a sentiment perspective, that voice looks to be a natural extension of our keyboard/mouse/touch-based input and output methods. Consumers seem to recognize the value and desire for it to work in more ways. I’ve long said the true test of a great feature very early in its life cycle is when it combines both delight and frustration. Once you use it, you’re hooked but you want it to be great all the time because you can see the potential. This is why we snuck this question into the sentiment segment to see if consumers agreed and 47% strongly agree and 38% somewhat agree that, when their voice assistant works, it is great and, when it doesn’t, they get irritated.

The battle for the voice-based assistant is on. This is another area where the one with the biggest ecosystem built around their Voice UI/Voice OS has the best shot of being “hired” by the masses.

We appreciate all our panelists and their willingness to share their thoughts on consumer technology products. If you are interested in participating in our consumer studies, please click here.

ARTICLE OUTLINE

This is part 6 of 7 in a series of articles that explores Innovation at Apple.

1. Who is Apple innovating for?
2. Where should Apple’s innovation be focused?
3. How does Apple innovate?
4. When should Apple introduce its innovations?
5. What does innovation inside of Apple look like to someone outside of Apple?
6. Why does Apple do what it does?
7. Why not be Apple?

Why

Why Does Apple Do What It Does?

 

To be a great company, it is not enough for one to have the know-how. One must must also have the “know-why”.

You’ve got to have an idea, or a problem, or a wrong that you want to right that you’re passionate about, otherwise you’re not going to have the perseverance to stick it through. ~ Steve Jobs

Somebody once told me, “Manage the top line, and the bottom line will follow.” What’s the top line? It’s things like, why are we doing this in the first place? What’s our strategy? What are customers saying? How responsive are we? Do we have the best products and the best people? Those are the kind of questions you have to focus on. ~ Steve Jobs

Why is the “why” so important? Why does it matter so very much? I think Friedrich Nietzsche said it best:

He who has a ‘why’ to live can bear almost any ‘how.’

Without the why, life is filled with obstacles. With the why, those self-same obstacles become the stepping stones to success.

Before we ask Apple to change what they are doing, let’s first ask ourselves why Apple does what it does.

NOT ABOUT THE MONEY

Let’s start with what Apple’s “why” is not.

It may seem counterintuitive, or even strike you as naive, but it’s important to understand that Apple is not in business in order to make money. Oh sure, they need to make money to survive as a company, but making money is not their raison d’être (their reason for being).

If you keep your eye on the profit, you’re going to skimp on the product. But if you focus on making really great products, then the profits will follow. ~ Steve Jobs

Sure, it was great to make a profit, because that was what allowed you to make great products. But the products, not the profits, were the motivation. ~ Steve Jobs

We don’t take so long and make the way we make for fiscal reasons. ~ Jony Ive

Apple doesn’t make nice things in order to make money. It’s the other way around.

We make money to make nice things. Ive at Design Museum

The goal of Apple is not to make money but to make really nice products, really great products. That is our goal and as a consequence if they are good, people will buy them and we’ll make money. ~ Jony Ive

Our goal isn’t to make money. Our goal absolutely at Apple is not to make money. This may sound a little flippant, but it’s the truth…. Our goal and what gets us excited is to try to make great products. We trust that if we are successful people will like them, and if we are operationally competent we will make revenue, but we are very clear about our goal. ~ Jony Ive

We’re not focused on the numbers, we’re focused on the things that produce the numbers [emphasis added] ~ Tim Cook

My passion has been to build an enduring company where people were motivated to make great products. Everything else was secondary. ~ Steve Jobs

GREAT AND BEST

So if Apple isn’t in it for the money, what are they all about?

If you listen to what Apple says about itself, the words “great” and “best” recur over and over again. But the words are not being used to describe Apple, the company. They are being used to describe the products that Apple, the company, makes.

We don’t strive to appear cool. We just try to make the best products we can. And if they are cool, well, that’s great. ~ Steve Jobs

Our goal is to make the best devices in the world. It’s not to be the biggest. ~ Steve Jobs

We’ve always believed that our role in life is to make the best, not the most. ~ Tim Cook

Our business model is very straightforward: We sell great products. ~ Tim Cook

Our north star is to make the best product. Our objective isn’t to make this design for this kind of price point, or for this arbitrary schedule, or line up other things or have X number of phones, it’s to build the best. ~ Tim Cook

A QUESTION OF CULTURE

What is Apple’s mission? To make the very best products in the world that really deeply enrich people’s lives. That’s what we’re about. And now it’s not to make the most. It’s not to have the highest market cap, but that’s the result of doing the first one well. That’s what we’re about. And hopefully you can see that in our products and, more importantly, feel that in the experience you have using them. That’s what we’re about.

And everybody here knows that. That’s the beauty of this place. We don’t have to put posters on the wall to remind people of that. Everybody knows it. [emphasis added] ~ Tim Cook

Go back and re-read the last paragraph of the above Tim Cook quote. Do you see what he is saying there? He is talking about everyone at Apple knowing what’s expected of them without being told. When you’re talking about knowing what you have to do, i.e., knowing what your mission is, without being told, you’re talking about culture.

The only purpose for me in building a company is so that it can make products. Of course, building a very strong company and a foundation of talent and culture is essential over the long run to keep making great products. ~ Steve Jobs

If [people] are working in an environment where excellence is expected, then they will do excellent work without anything but self-motivation. I’m talking about an environment in which excellence is noticed and respected and is in the culture. If you have that, you don’t have to tell people to do excellent work. They understand it from their surroundings. You may have to coach them at first, but then you just get out of their way, and they’ll surprise you time and time again. ~ Steve Jobs

(Steve was) (a)lways expecting the very best. Apple has a culture of excellence that I think is so unique. [emphasis added] ~ Tim Cook

A startup’s culture develops — usually spontaneously — in order to solve an initial problem. If the culture is great at solving that problem — and if that problem is one worth solving — the company becomes great.

[pullquote]First you create the culture…then the culture creates you[/pullquote]

It’s important to understand that first you create the culture…then the culture creates you.

Whenever a subsequent puzzle arises, the company intuitively, but absentmindedly, solves the new problem in the old way. No edicts need be issued, no instructions need be given, no words need be said. “This is how we do things” becomes the explicit mantra of the company. “This is why we do things” becomes the implicit mantra of the company.

Product is easy to copy. The culture that produced the product is hard to copy ~ Alex Y. (@jitbit)

This gives the company a huge competitive advantage. The company instinctively, and almost effortlessly, solves problems that their competitors struggle to deal with.

QUESTIONING CULTURE

Yes, culture is the solution…but it’s also the problem. Times change, but culture does not.

(W)hile a company can reinvent itself around new products and new categories, and continue to thrive, I believe culture is the sort of pie that can only be baked once. ~ Ben Thompson

Newly hired CEO’s of struggling companies are always talking about changing the company’s culture…

It’s tempting for execs of disrupted companies to focus on “changing culture”. It seems more doable than admitting the business is obsolete. ~ Ben Thompson

…but culture doesn’t change.

If you hear that a mountain has moved, believe; but if you hear that a corporation has changed its culture, believe it not. ~ pseudo ancient wisdom

When Steve Jobs returned to Apple in 1997, he didn’t talk of changing Apple’s culture. He talked of returning Apple to its original culture.

One of the things that happened when we got back to Apple was, we said, Apple’s all confused. Apple’s forgotten what it is. Who is Apple? Why is Apple here?

What we’re going to do…is to get back to our core value. A lot of things have changed, the market’s a totally different place than it was a decade ago and Apple is totally different and Apple’s place in the market is totally different…but values, and core values — those things shouldn’t change. ~ Steve Jobs, 1997

Go back and re-read the last sentence of the above quote. It might be the most important quote in the entire series.

— Things change.
— Markets change.
— Apple changes.
— But Apple’s values, and core values…they should remain the same.

To forget one’s purpose is the commonest form of stupidity. ~ Friedrich Nietzsche

STRATEGY

Pundits glibly talk about a company changing its strategy, but everything — including strategy — is built on top of culture. No strategy can survive if the underlying culture does not support it.

Let me stop here and repeat that, because it is really, really important and it is also really, really ignored by both the ignorant and the intelligent alike.

[pullquote] You can’t change your strategy unless your underlying culture supports the new strategy.[/pullquote]

You can’t change your strategy unless your underlying culture supports the new strategy.

Culture eats strategy over breakfast. ~ Peter Drucker

If a company is being asked to employ a strategy that is incompatible with its culture, they are not being asked to change themselves, they are being asked to change their very nature, their very being.

Company cultures are like country cultures. Never try to change one. Try, instead, to work with what you’ve got. ~ Peter Drucker

Asking a company to use a strategy that is incompatible with its culture is like asking a fish to fly or a hawk to swim. Yet this is exactly what the critics — smug in their naiveté — ask of Apple.

THE “WHY”

What is Apple’s “why”?

We do these things not because we are control freaks. We do them because we want to make great products, because we care about the user, and because we like to take responsibility for the entire experience rather than turn out the crap that other people make. ~ Steve Jobs

If you are working on something exciting that you really care about, you don’t have to be pushed. The vision pulls you. ~ Steve Jobs

Ideals are like stars; you will not succeed in touching them with your hands. But like the seafaring man on the desert of waters, you choose them as your guides, and following them you will reach your destiny. ~ Carl Schurz

Apple wants to make a significant contribution.

Our objective isn’t to make this design for this kind of price point, or for this arbitrary schedule, or line up other things or have X number of phones, it’s to build the best. … Can we make a significant contribution far beyond what others have done in this area? Can we make a product that we all want? ~ Tim Cook at AllThingsD

Apple wants to make things better.

Some people see innovation as change, but we have never really seen it like that. It’s making things better. ~ Tim Cook

Apple wants to be the bridge.

Apple has always been, and I hope it will always be, one of the premiere bridges between mere mortals and this very difficult technology. We may have the fastest PCs, which we do, we may have the most sophisticated machines, which we do. But the most important thing is that Apple is the bridge. ~ Steve Jobs, 1999

Apple wants to change the way you live your life.

We want to change the way you live your life. ~ Tim Cook

Apple wants to make the world a better place.

The competitors, like Commodore and Kaypro, were all doing speeds and feeds, whereas Steve always wanted things like “What is the significance in the world? How might this change things? ~ Steve Hayden, copywriter on the Apple account for Chiat\Day (later vice chairman of Ogilvy & Mather) ((Excerpt From: Max Chafkin. “Design Crazy.” iBooks. https://itunes.apple.com/WebObjects/MZStore.woa/wa/viewBook?id=697961602))

The reason I went back to Apple is that I feel like the world would be a better place with Apple in it than not. And it’s hard to imagine the world without Apple now. ~ Steve Jobs

Thank you for your support of this company. I think the world’s a better place for it. ~ Steve Jobs

Apple is a conspiracy to change the world. ((A great company is a conspiracy to change the world. ~ Peter Theil))

We said, “Well, these are our roots. This is why we’re here. The world doesn’t need another Dell or Compaq. They need an Apple.” ~ Steve Jobs

Critics take note. Not every company should do things the way Apple does. But neither should Apple do things the way every other company does. The world doesn’t need Apple to be Google or Facebook or Amazon. They need Apple to be Apple.

ARTICLE OUTLINE

Tomorrow, part 7 of 7.

1. Who is Apple innovating for?
2. Where should Apple’s innovation be focused?
3. How does Apple innovate?
4. When should Apple introduce its innovations?
5. What does innovation inside of Apple look like to someone outside of Apple?
6. Why does Apple do what it does?
7. Why not be Apple?

Much has been made over the last few years of the battle between Apple and Google in the education sector. Chromebooks, which have sold in small numbers elsewhere, appear to have found their niche in education and are now frequently said to outsell iPads (Microsoft seems to be an also-ran here as in the mobile market). But both Chromebooks and iPads are designed primarily for other uses and neither Google nor Apple has invested anywhere near as meaningfully in the education market as in other segments such as health and the enterprise. Given how much education is prized in Silicon Valley, it’s time for all its standard bearers to change that.

Google and Apple Dominate Education Devices

Apple has always had a strong position in the education market through the Mac for most of its history and, more recently, through the iPad. Education programs and discounts for K-12 education and college students have helped Apple to drive far higher share among both schools and students than among the broader population. It’s not uncommon to see entire college lecture halls filled with glowing Apple logos with few Windows laptops to be seen, in a reversal of the previous pattern. iPads, in turn, have been at the center of Apple’s recent programs in schools, with many school districts purchasing large numbers of iPads for use by students in the classroom.

Also more recently, Google has made significant inroads with Chromebooks, which haven’t sold nearly as well in other settings. Recent research suggested Chromebooks had gained majority market share in education, while Apple’s market share fell significantly. Other studies have confirmed these broad findings, even if not the specific numbers. Chromebooks seem to be a real success story in the classroom, where their low cost, simplicity and ease of management set them apart from other devices. Microsoft retains a meaningful but minority share in the same market, far lower than it enjoys in either the broader consumer or enterprise markets.

Devices and Operating Systems Aren’t Everything

However, devices and operating systems alone aren’t everything. These devices obviously need to be either loaded with software (in the case of iPads and Macs) or pointed at websites and web apps (in the case of Chrome OS) which provide the tools students need to learn. Interestingly, both Google and Apple now have solutions called Classroom which help manage both devices and students’ work, but much of the students’ work itself still gets done in generic Apple tools such as iWork or the Google productivity suite. The Apple App Store and Chrome store provide access to many third party applications, but Apple and Google have yet to produce education-oriented apps for students.

This is interesting in the context of both companies investments in the enterprise and Apple’s recent heavy investment in health care. Apple’s deals with IBM, Cisco, and SAP are designed to push its devices deeper into the enterprise, while its ResearchKit and CareKit efforts are intended to enable innovation in health research and care. Google, too, is making a big push to get its Chromebooks adopted in the enterprise and its productivity suite and related products are also popular among startups and other companies. And yet, neither company has made similar investments in student-facing applications or tools. These are companies with enormous resources and creativity when it comes to creating useful software and applications but we’ve yet to see that innovation applied to the learning end of education.

It’s Not Just About Apple and Google

Even though Apple and Google are the leaders in devices and operating systems for education, there’s no reason why they should bear the sole burden of developing software for use in education. There’s obviously a large number of specialized education software makers which create many of the tools used in educational settings. But Microsoft, Facebook, Amazon, and others also have the capacity to create the tools students could use for research, projects, and coursework. Interestingly, Mark Zuckerberg has largely chosen to use his personal funds to invest in education, rather than putting Facebook’s corporate resources to use in this sphere. Given how much Silicon Valley needs well-educated, tech-savvy employees, it behooves the entire industry to make a greater investment in fostering education and not just with financial contributions but with their technology expertise. Education has been one of the sectors of the economy most resistant to the technological transformation that’s disrupted and improved so many other sectors and it’s ripe for some major change. Tech companies should be not just enablers but drivers of that change.

ARTICLE OUTLINE

This is part 2 of 7 in a series of articles that explores Innovation at Apple.

1. Who is Apple innovating for?
2. Where should Apple’s innovation be focused?
3. How does Apple innovate?
4. When should Apple introduce its innovations?
5. What does innovation inside of Apple look like to someone outside of Apple?
6. Why does Apple do what it does?
7. Why not be Apple?

Where

Where should Apple’s innovation be focused?

 

Critics seem to think that Apple needs to do more, to try more, to risk more, to say ‘yes’ to more, to fail more, to take more ‘moon shots.’…

The history of success is one of great leaps of faith, big risks. … And we haven’t seen any risk from Apple in a long time. ~ Bob Lefsetz, Apple’s Numbers, 2016/04/27

I will offer a suggestion. To thrive in the next era of tech, Apple needs to take a series of bigger, bolder risks. … It should be more nimble and slightly more public with its experiments, and push more of them out sooner. When it releases stuff, it should move faster to fix and improve what is wrong. Above all, it should take more risks; it should say yes more often. … What it doesn’t have quite yet is enough of an appetite for the speed and risks that come with creating and maintaining new services. ~ Farhad Manjoo, Apple, Set to Move to Its Spaceship, Should Try More Moonshots, May 4, 2016

…but that’s not how Apple rolls.

FOCUS ON YOUR STRENGTHS

First, no company is good at everything. If you’re good at everything, you’re good for nothing.

The abilities of man must fall short on one side or other, like too scanty a blanket. ~ Sir William Temple

Demanding a company do everything well is asking them to be the best at nothing. ~ Ben Thompson (@benthompson) 9/7/14

A company does best that which it does most.

We are what we repeatedly do. Excellence, then, is not an act, but a habit. ~ Aristotle

Apple — and every other company — should focus on doing those things that they do best and — just as importantly — those things that others do poorly or not at all.

If you don’t have a competitive advantage, don’t compete. ~ Jack Welch

Never do things others can do and will do if there are things others cannot do or will not do. ~ Dawson Trottman

What another would have done as well as you, do not do it. … Be faithful to that which exists nowhere but in yourself — and thus make yourself indispensable. ~ André Gide

FOCUS ON A FEW THINGS

Second, what Apple is famous for — and what Apple is infamous for — is focusing on just a handful of projects.

Focusing is powerful. A start-up’s focus is very clear. Focus is not saying yes. It is saying no to really great ideas. ~ Steve Jobs

People think focus means saying yes to the thing you’ve got to focus on. But that’s not what it means at all. It means saying no to the hundred other good ideas that there are. You have to pick carefully. I’m actually as proud of the things we haven’t done as the things I have done. Innovation is saying no to 1,000 things. ~ Steve Jobs, WWDC 1997

What did I learn from (Steve Jobs)? We could be here all night, probably all week, maybe even a month. I learned focus is key, not just in running a company but in your personal life as well. That you should do only a certain number of things great, and you should cast aside the rest. ~ Tim Cook

We believe in saying no to thousands of projects so that we can really focus on the few that are truly important and meaningful to us. ~ Tim Cook, Acting Apple CEO, January 2009 FQ1 2009 Earnings Call

We don’t believe we can do things at the level of quality and link things as we want to between hardware, software and services so seamlessly if we do a lot of stuff. So we’re going to stick with our knitting with only doing a few things and doing them great. ~ Tim Cook

Just get rid of the crappy stuff and focus on the good stuff. ~ Steve Jobs [Advice given to Nike CEO Mark Parker]

What are the five products you want to focus on? Get rid of the rest, because they’re dragging you down. ~ Steve Jobs

If you really want to know what focus means to Apple, watch the first 1:45 of this 3-minute Jony Ive video from November 11, 2014. At the 1:00 minute mark, pay particular attention to what Jony Ive says about “saying no.”

Power is not revealed by striking hard or often, but by striking true. ~ Honore de Balzac

STOP! I know and you know and we both know you skipped the video. Go back and watch it RIGHT NOW. Skip ahead to the one-minute mark if you’re so pressed for time. But watch it. You’ll thank me later. Who knows, you may even thank me now.

FOCUS ON A FEW BIG THINGS

Third, not only does Apple prefer to focus on just a few things, it prefers to focus on just a few BIG things.

We are inventing the future. Think about surfing on the front edge of a wave. It’s really exhilarating. Now think about dog-paddling at the tail end of that wave. It wouldn’t be anywhere near as much fun. Come down here and make a dent in the universe. [said to a job applicant] ~ Steve Jobs

We’re here to put a dent in the universe. Otherwise, why else even be here? ~ Steve Jobs

At Apple, we were always asking, What else can we revolutionize? ~ Tony Fadell, now CEO of Nest Labs

I have a great respect for incremental improvement, and I’ve done that sort of thing in my life, but I’ve always been attracted to the more revolutionary changes. I don’t know why. Because they’re harder. They’re much more stressful emotionally. And you usually go through a period where everybody tells you that you’ve completely failed. ~ Steve Jobs

Every once in a while a revolutionary product comes along that changes everything. It’s very fortunate if you can work on just one of these in your career. Apple’s been very fortunate in that it’s introduced a few of these. ~ Steve Jobs

As long as you’re going to be thinking anyway, think big. ~ Donald Trump

Make no little plans; they have no magic to stir man’s blood. ~ Daniel Burnham

SOLVE BOTH PROBLEMS

The critics want Apple to take more moon shots. I don’t know why. It certainly hasn’t done Google any good.

Google’s moon shots look more like a disease than a cure. It’s hard not to look at Google’s extravagant expenditures without being reminded of Microsoft’s meandering, and ultimately pointless, research efforts in the late 90s and early 2000s. Microsoft suffered, and Google suffers, from having too much money and too little direction. The ‘moon shots’ that pundits so admire don’t strike me as admirable attempts at exploration. They look more like a desperate attempt by Google to hit a target they cannot see.

The odds of hitting your target go up dramatically when you aim at it. ~ Mal Pancoast

Begin with the End in Mind ~ Stephen Covey, author of “The 7 Habits of Highly Effective People”

Apple has their own version of moon shots, but they do them the Neil Armstrong way.

You only have to solve two problems when going to the moon: first, how to get there; and second, how to get back. The key is don’t leave until you have solved both problems. ~ Neil Armstrong

The difference between Apple’s moonshots and Google’s, is that Google knows how to launch a product. Apple knows how to stick the landing.

It is not the going out of port, but the coming in, that determines the success of a voyage. ~ Henry Ward Beecher

PRECISION AND PERFECTION

More advice from Farhad Manjoo:

Apple’s last decade and a half, mostly under Mr. Jobs, has been defined by perfectionist focus. As its executives and marketing videos repeatedly boast, Apple says no to a thousand ideas before it says yes to one. That attitude was perfectly suited to a particular era in tech — the rise of mobile devices, which were the ultimate expression of Apple’s expertise in creating jewel-like hardware.
But the next moment in tech is likely to be dominated by data-driven online services — more products like Siri and Apple Pay, fewer stand-alone hardware innovations like the iPhone.
In that environment, the slow search for precision and perfection might no longer be in Apple’s best interest. ~ Farhad Manjoo, Apple, Set to Move to Its Spaceship, Should Try More Moonshots, May 4, 2016

In other words, times have changed and what worked for Apple in the past won’t work for Apple today or in the future.

I like Farhad Manjoo’s work and I have a lot of respect for his opinion. However, in this instance, I think he’s got the wrong end of the stick. There will always be a place for products and services created by “the slow search for precision and perfection.” Just because that place isn’t every product and every service in every instance, does not mean that “precision and perfection” aren’t appropriate for some products and some services in some instances. Apple will cede the fast and the furious to their competitors and focus their efforts on the slow and the sublime.

There never has been, and there never will be, a time when well thought through, quality products and services weren’t, and aren’t, appreciated by a segment of the buying public.

SIX THOUSAND WAYS

Let’s step into the wayback machine and explore a cautionary tale from Oct. 21, 1879.

It is well known that Thomas Edison — who may well have been viewed of as the Steve Jobs of his day — was the inventor of the electric lightbulb. It is well known — but it is also completely untrue. Thomas Edison did not invent the lightbulb. Electric lights — as an alternative to gaslight — were being used on a street-wide scale long before Edison entered the field.

[pullquote]I have not failed. I’ve just found 6,000 ways that won’t work. ~ Thomas Alva Edison[/pullquote]

Edison’s great insight into — and his great contribution to — the lightbulb was realizing that the tricky part would be choosing a filament that would be durable but inexpensive. Rather than enter the market half-cocked, Edison retreated to his laboratory where he and his team in Menlo Park, New Jersey, meticulously tested more than 6,000 possible materials before finding one to fit the bill: carbonized bamboo.

[As an aside, I feel confident that had today’s tech analysts been reporting on Edison and his team during the time when the they was conducting their experiments, the pundits would have confidently interpreted Edison’s seeming lack of activity as proof positive that “Innovation at Menlo Park is dead.”]

Edison didn’t invent the first lightbulb. Edison invented the first lightbulb that was practical, and affordable for home illumination. Edison wasn’t first, he was first to get it right. So it is Edison who got all the credit, got all the glory, got most all the profits, and it is Edison who is remembered as having invented the lightbulb on Oct. 21, 1879.

Apple didn’t invent the first computer, the first MP3 player, the first mobile phone, the first tablet. They weren’t first. They were first to get it right. And they did it, not by exploring 6,000 products, but by exploring 6,000 ways to perfect one product.

If you think there isn’t a place in today’s time — as there was in Edison’s time — for goods and services that are lovingly designed and meticulously crafted, then you are a very dim bulb indeed.

We believe that customers are smart, and want objects, which are well thought through. ~ Steve Jobs

ARTICLE OUTLINE

Tomorrow, part 3 of 7.

1. Who is Apple innovating for?
2. Where should Apple’s innovation be focused?
3. How does Apple innovate?
4. When should Apple introduce its innovations?
5. What does innovation inside of Apple look like to someone outside of Apple?
6. Why does Apple do what it does?
7. Why not be Apple?

These days, there are a lot of questions swirling around Apple and the biggest question of all is whether Apple has forgotten how to innovate.

Of course, this question is not new.

CAPTION: February 1996

The company once notorious for its ability to upend convention and revolutionize markets may no longer have what it takes, worry some technology journalists. Call it the iPad or the iPlod, but the message seems clear: Apple may have lost its mojo. ~ Jeremy A. Kaplan, FOXNews.com, 28 January 2010

I was talking recently to someone who knew Apple well, and I asked him if the people now running the company would be able to keep creating new things the way Apple had under Steve Jobs. His answer was simply ‘no.’ I already feared that would be the answer. I asked more to see how he’d qualify it. But he didn’t qualify it at all. No, there will be no more great new stuff beyond whatever’s currently in the pipeline. So if Apple’s not going to make the next iPad, who is? ~ Paul Graham, March 2012

Two years ago I wrote that without its charismatic founder, Apple would move from being a great company with high growth and high innovation to being a good company with moderate growth and attenuated innovation. After this week’s set of announcements, I stand by that analysis. ~ George Colony, Bloomberg, “Apple Follows” September 2, 2014

Key take aways: Innovation at Apple is over… Just incremental improvements, nothing ground breaking. The best is over for Apple. iPad mini is playing catch up to Google Android, probably will have a mediocre customer adoption. ~ Trip Chowdhry, Global Equities, 23 October 2012

Remember when the iPhone was truly innovative? Think hard, because you’d have to go back to 2007, and the release of the first iPhone. But since then, Apple has been tossing out retread after retread, and this year’s iPhone 5C and iPhone 5S represent a curious creative nadir for the firm. A new Windows Phone video shows how hard Apple must have worked to come up with these turds. Hint: Not that hard. ~ Paul Thurrott, Supersite for Windows, 13 September 2013

Apple’s innovation problem is real. And it’s unlikely to silence the critics if it simply unveils multi-colored iPhones on Tuesday. Rivals have caught up to Apple in the markets it once dominated, and the tech giant’s rumored future products appear to be more evolutionary than revolutionary. ~ Julianne Pepitone and Adrian Covert, CNNMoneyTech, 8 September 2013

They only have 60 days left to either come up with [an iWatch] or they will disappear. –Trip Chowdhry >[Written in April, 2014, one year before the Apple Watch became available.]

Apple lacks innovation, it copies. ~ Denise Garcia, CNBC, Thursday, 24 Mar 2016

While the more affordable products are seen as buying Apple time until its more blockbuster hardware event in September, Apple’s bigger problem is innovation. The company continues to be criticized for failing to innovate in the same way it did when Steve Jobs ran the company.

It has released just one new product category, the Apple Watch, since Tim Cook took the reins in 2011…. ~ Jennifer Booton, Apple sacrifices innovation for mistier market, Mar 23, 2016

The deeper question is whether Apple can keep its place as the North Star of the tech firmament. Can the company build the next great platform in computing, as it did the last one? Are its best days ahead of it, as Timothy D. Cook, the chief executive, insists — or is the new campus the capstone of an era of Apple dominance that we will never see again? ~ Farhad Manjoo, Apple, Set to Move to Its Spaceship, Should Try More Moonshots, May 4, 2016

Apple has always been renowned for being innovative and setting the rules for others to follow. … Ever since the Jobs’ death, Apple has repeatedly failed to truly innovate and offer something in the market, something that the users have never experienced before. ~ Ken Bock, Has Apple Inc. Lost Its Mojo After The Death Of Steve Jobs?, May 24, 2016

Stated simply, I don’t see any present innovation or prospective creativity at Apple. … Innovation is slowing and competitive threats are mounting. … Indeed, Facebook (FB) and Amazon (AMZN) are already challenging Apple’s position as the world’s most popular company.  For many like myself, Apple is already a distant third. ~ Doug’s Daily Diary, Apple in Wonderland (April 27, 2016)

So, are the critics right? Has Apple forgotten how to innovate?

Or, is it we who have forgotten how Apple innovates?

SERIES OUTLINE

This is part 1 of 7 in a series of articles that explores Innovation at Apple.

1. Who is Apple innovating for?
2. Where should Apple’s innovation be focused?
3. How does Apple innovate?
4. When Should Apple Introduce Its Innovations?
5. What does innovation inside of Apple look like to someone outside of Apple?
6. Why does Apple do what it does?
7. Why not be Apple?

Who

Who is Apple Innovating For?

 

Critics seem to think Apple needs to create the next breakthrough product in order to satisfy their desires and the demands of stockholders. Let me be frank: If Apple brings out a product or service because the critics or the stockholders say they have to…then Apple is screwed.

If shareholders imagine companies exist for their benefit, they’re delirious. ~ Horace Dediu (@asymco)

It’s important to remember that the opinions of tech writers… are of no consequence to these companies. ~ @natebarham

(N)either Wall Street nor the tech press have any bearing on what matters. ~ Horace Dediu on Twitter May 16, 2016

THE CUSTOMER

Apple doesn’t do what it does for the critics or the shareholders. Apple is customer-centric. They put the customer, not the company — and certainly not the critics or the stockholders — at the center of their decision-making process. Apple bases everything on understanding their customers’ problems and what their customers might want or need in order to solve those problems.

Our DNA is as a consumer company, for that individual customer who’s voting thumbs up or thumbs down. That’s who we think about. ~ Steve Jobs

(T)he most important thing is that customers love our products and they are using them and the satisfaction has never been higher and the loyalty rates have never been higher. And that is what is really important for us. That’s the most important thing for the long term of Apple. ~ Tim Cook

As James Allworth argues in his HBR article, Steve Jobs Solved the Innovator’s Dilemma, the most profound contribution Steve Jobs made was in demonstrating a radically new way of a running a company: the goal of the firm shifts from making money for the shareholders to delighting the customer.

THE JOB TO BE DONE

Perhaps you’re thinking ‘Hey, every company is customer-centric.’ Not so. It’s not always easy to discern why buyers buy what they buy. The entire field of ‘Jobs To Be Done’ was created for the precise purpose of tackling this very thorny issue. The truth is, what seller’s sell and what buyer’s buy are, far too often, two very different things.

Examples abound. Take the Microsoft Kin, or Windows RT, or Google Glass or the Nexus Q…

…please!

It’s never easy to perfectly match what the seller sells with what the buyer buys, but a customer-centered approach — like the one Apple uses — helps to align the product design with the purchaser’s desire.

TARGET MARKET

Knowing the customer comes first is a huge part of Apple’s success. However, it is not enough to know your customer comes first. You must also first know your customer.

The technology isn’t the hard part. The hard part is…[determining] who’s the customer. ~ Steve Jobs

‘Who’s the customer?’, is a question that is not asked — and therefore is not answered — nearly enough.

APPLE’S TARGET MARKET

Let’s start with who Apple does not target. Apple does not target ‘everyone, everywhere.’

I am hearing disturbing rumours that Apple is selling a [product] that’s not right for everyone’s needs. ~ Benedict Evans @BenedictEvans

‘Everyone’ is not a target — it’s the opposite of a target. Targeting everyone is targeting no one and it’s one of the surest ways for a business to fail.

I cannot give you the formula for success, but I can give you the formula for failure–which is: Try to please everybody. ~ Herbert Bayard Swope

Apple targets only a small segment of the total market.

It is not Apple or Google’s job, or skill, to fix every vaguely Internet-related UX you’re unhappy with. Mostly they stick to their knitting ~ Benedict Evans (@BenedictEvans) 10/17/14

And that’s okay.

Today’s reminder: just because Apple makes a product that doesn’t meet your personal needs, that doesn’t make it a crappy product. ~ jcieplinski on Twitter

So, if Apple doesn’t target everyone, who do they target?

Say what you will about Apple…but it knows its market. And so do you, probably. Quick, picture an iPhone user. You’re probably picturing somebody young-ish, urban. Somebody who likes a simple user experience that doesn’t change much from model to model. Somebody who admires good industrial design, and who has the money to fit a $600-$800 phone into their budget.

Now, picture a [competitor’s] user. It’s much harder [to do]. ~ C. Custer, TechInAsia

Apple targets that part of the market that buys with intent. And Apple eschews that part of the market that buys by default.

Apple targets those who value their time a little more and their money a little less; those who value raw power a little less and ease of use a little more; those who care a little more and care to pay a little more.

Has Apple been successful in attracting the customers who care?

Damn straight they have.

PCs mostly had people who cared but mobile has everyone, including lots of people who don’t care at all. Apple has most of those who do care. ~ Benedict Evans (@BenedictEvans) 11/29/14

The value of smartphone users is distributed on a curve and Apple has most of the best ones. This has been clear for years ~ Benedict Evans (@BenedictEvans)

Does Apple get every customer they target? Of course not. There are many people who actively choose competing products and those are precisely the prospective customers Apple seeks to acquire. Apple does not, however, seek to acquire the penny pincher or the passive purchaser.

The paradox is that it’s the open, geeky OS that’s given to non-techy late adopters & vice versa ~ Benedict Evans (@BenedictEvans)

[pullquote]Those who do not pay more to get more, pay less to get less[/pullquote]

That’s not really a paradox. That’s the way of the world. Some people are willing to pay to avoid the open, geeky OS. Some people are not. Those who do not pay more to get more, pay less to get less.

And just because there is a small, but vocal, minority who PREFER the geeky OS and who are willing to pay MORE for the geeky OS, does not make any of the above any less true.

Think of it this way. Apple runs a five star restaurant. The fact most people eat at McDonald’s does not make the proprietor of the five star restaurant ‘unpopular,’ ‘clueless,’ or — more to the point — profitless.

In mobile, selling a niche-high-end product turns out to make you the biggest company on earth. ~ Benedict Evans on Twitter

And the fact that many people actually PREFER the food served at McDonalds over the food served in a five star restaurant (you know who you are) does not make the patrons of the five star restaurant cultists, religious fanatics, sheep or mindless fanboys.

In [computing] as in love, we are astonished at what is chosen by others. ~ paraphrasing André Maurois

I like chez Applé, you like McAndroids. It’s all good. Eat. Enjoy.

ASPIRATIONAL

Apple’s target market is niche, yes, but it is larger than most observers realize. It is not just those who are currently interested in — and able to afford — Apple products. Apple products are aspirational. Not everyone can afford them but many desire them and will acquire them when they are able.

And we’ve found that all throughout the world, there were so many people advising us…that people weren’t going to pay for a great product there. Well, let me tell you, it’s a bunch of bull! It’s not true! People everywhere in this world want a great product. And that doesn’t mean that everyone, every single person in the world can afford one yet. But everyone wants one [emphasis added]. And so, if we do our jobs right, and keep making great products, I think there’s a pretty good business there for us. ~ Tim Cook

(T)here are a lot of people in the world who don’t have the pleasure of owning an iPhone yet. ~ Tim Cook

(I)t turns out that people in every country in the world there’s a segment of buyer that wants the best [emphasis added] product and the best experience. And that’s what we’re about providing. ~ Tim Cook

HOW APPLE MEASURES SUCCESS

The critics say Apple is off target; that they’ve missed the mark. But that’s only because the critics don’t know the mark Apple is targeting.

Once you understand WHO Apple is making their products for, you can then — and only then — begin to understand how Apple defines success and failure.

We are winning with our products in all the ways that are most important to us, in customer satisfaction, in product usage and in customer loyalty. ~ Tim Cook

Customers love our products and that is the only thing that really matters. ~ Tim Cook

If you measure success by whether Apple annually ships a new product as profitable as the iPhone — and many critics do — then Apple is one of the least successful companies — if not THE least successful company — in the world.

If, however, you measure success by customer satisfaction, product usage and customer loyalty — and Apple does — then Apple is one of the most successful companies — if not THE most successful company — in the world.

ARTICLE OUTLINE

Tomorrow, part 2 of 7.

1. Who is Apple innovating for?
2. Where should Apple’s innovation be focused?
3. How does Apple innovate?
4. When should Apple introduce its innovations?
5. What does innovation inside of Apple look like to someone outside of Apple?
6. Why does Apple do what it does?
7. Why not be Apple?

Given how focused four of the other major consumer technology players are at the moment on Virtual Reality and Augmented Reality, many people are reaching the conclusion Apple must act fast or be left behind. It’s certainly true virtual reality is having its moment and appears to have reached a tipping point of sorts between its long history of over-promising and under-delivering and something that’s actually compelling. However, that doesn’t mean Apple has to introduce VR hardware in the very near future in order to keep up. In fact, following Apple’s long-established patterns of product introductions suggest a different approach.

The Apple Watch as a pattern

In a previous column, I talked about Apple’s slow, subtle build to new products and the way in which eventual product introductions often build on earlier moves which act as enablers, even though the meaning of those earlier moves isn’t always transparent. I used the Watch as an example and cited nine earlier innovations Apple had made as key enablers of the Watch, when its time arrived. There’s definitely a pattern here Apple could follow with an eventual VR hardware product. It means introducing software and, to a lesser extent, hardware features today that would enable such an accessory in the future.

In the case of the Watch, one of the key enabling technologies was Bluetooth LE and the Bluetooth notification extensions Apple introduced in 2012. This enabled third-party hardware manufacturers to create wearable devices which could pair with an iPhone and receive notifications from in a way that was far more efficient than was possible previously. This, in turn, helped enable a market for smartwatches such as the Pebble which tapped into this functionality, several years before Apple introduced its own hardware into the market. In the process, Apple allowed third-party hardware vendors to do a lot of the experimentation, to drive awareness and interest in the category, and to iron out kinks in the model. When it was ready with its own hardware, Apple was able to quickly dominate the smartwatch category and build on things that had and hadn’t worked well with earlier third-party hardware. And importantly, the Apple Watch didn’t require everyone who wanted one to go out and buy a new iPhone, because the companion functionality had been built into several generations of iPhones by that point.

Apple’s first step in VR might not be hardware

If we apply this pattern to Apple’s possible VR strategy, we might well see something other than a VR headset as the first step. In fact, it’s more likely we would see a series of subtle advances in other areas over the next couple of years before Apple finally launches a VR accessory or device. What might some of those steps be? Here are some possibilities:

• New sensors – iPhones already have a pretty robust set of sensors including accelerometers, gyroscopes, and so on, which can be used by third-party manufacturers for VR experiences. But these aren’t optimized for VR specifically. Tweaking and augmenting these sensors is an obvious thing for Apple to do as an enabler of both its own and third-party VR devices. It might or might not explicitly say this when they’re introduced – such sensors could potentially improve iPhone gaming experiences too, so they could be introduced under that cover rather than as explicit VR enablers.
• Smart Connector – Apple introduced the Smart Connector into the iPad Pro line last year, but there’s no reason why similar technology shouldn’t come to future iPhones too (early rumors have been inconsistent on this point as regards this fall’s new iPhones). The Smart Connector passes both information and power between the iPad (or iPhone) and an accessory, and would make a great enabler for VR headsets, which could either draw power from the iPhone in this way or provide it with power. Again, it’s likely Apple would have a different announced purpose for the Smart Connector but it could certainly be repurposed for both Apple and third-party VR headsets (just as the iPad Pro Smart Connector is already open to third parties for additional functions).
• Displays and processors – Apple continues to enhance its displays and its proprietary A-series chips in new versions of the iPhone. The new iPad Pro introduces new color technology which will likely make its way into future iPhones as well, for example. But VR has specific requirements in terms of processing power and displays which will need to be enabled in iPhones that are to be used for optimized VR experiences in future. Again, these enhancements might well be made in the normal course of the iPhone upgrade cycle, but would be critical enablers for better VR experiences in future too.
• APIs – although some third party VR accessories for the iPhone already exist, truly optimized experiences are likely to require more specialized APIs designed specifically for VR devices. This would be harder for Apple to enable without giving the game away, and perhaps the APIs come later than some of these other advancements as a result. But I wouldn’t be surprised if we saw VR-specific APIs announced at next year’s WWDC.

Apple will be nowhere in VR – until suddenly it is

The point of all this is to say it looks like Apple is nowhere in VR and that’s technically true from the outside. It has no announced hardware, no software that’s specifically designed to support VR, and the best indicator we have Apple is even aware of the technology is some vague comments from Tim Cook that the category is interesting. And yet, what we could see in a few weeks at this year’s WWDC, and in a few months with the new iPhone launch, is a series of subtle indicators Apple is indeed taking VR seriously and laying the groundwork for a future product in this space. Some of those indicators may be fairly transparent, while others will be harder to discern ahead of time. But, if you’re looking, I bet you’ll start to see them over the next year. This activity will slowly ramp until suddenly Apple reveals a product — and then the strategy will become obvious in hindsight.

Last week at Google I/O, we saw the introduction of Google Home and Google assistant. Like Amazon before it, Google made a distinction between the object Home, an Echo-like smart speaker, and Google assistant. Unlike Amazon, who called the brains inside Echo Alexa, Google did not give its agent a name and just referred to it as “assistant”. This detail did not go unnoticed as tech enthusiasts and commentators took to Twitter to have their say.

Incredibly odd how Google refuses to name its AI system. Apple has Siri. Amazon has Alexa. Microsoft has Cortana. Google … nada. #io16

— Stefan Constantine (@WhatTheBit) May 18, 2016

Google’s take on the matter was that people are already used to interacting with Google.

“People talk to Google for many different reasons…are already looking to Google to help get things done.” #io16 https://t.co/IxPHLFNMZp

— Google (@google) May 18, 2016

This is certainly true, not so much for “OK Google” which some still find a little unnatural, but for how Google has become a verb we now use to mean “internet search”. So many times questions that start with “Do you know…” are answered with “Google it!”

Aside from Alexa, we have Microsoft’s Cortana, Apple’s Siri, IBM’s Watson, Facebook M and a new kid on the block, Viv. Most vendors seem to opt for personification when it comes to an assistant.

Who is the user supposed to build a relationship with?

Ultimately I think this is the question vendors are trying to answer when deciding whether or not to give their assistant a name. Many, myself included, argue giving a digital assistant a name deepens the relationship with the user by making it more personal.

Amazon lets you wake up your Echo with Alexa, Echo or Amazon. Yet, most of the people I know with an Echo use Alexa. Personifying the assistant might also make it easier for some people to understand what exactly the role is it has in their life. The hope for all the companies experimenting with digital assistants is for their assistant to become your primary agent, if not your one and only. Giving it a name allows for it to change shape and form like a genie in a bottle — one moment being in your home speaker, the next in your phone, the next in your car helping you with different tasks throughout the day. If the digital assistant is very successful, you might even forget who is powering it. Alexa might indeed become bigger than Amazon.

It seems to me Google’s approach wants to make sure that, whatever I do, whatever I use, and whoever I use as a medium, especially on a non-Google product or service, I am very clear Google is the one making it possible. Soon after introducing Google Home, a new messaging app called Allo was presented and Google assistant was embedded into that as well. This approach is perfectly fine. At the end of the day, if the Google Home video played at Google i/o becomes reality, who would not want Google to run their life?

Yet, while I entrust my life to Google, I am still very aware it is a corporation I am dealing with. Building an emotional connection would be much harder. After the initial Echo set up, my eight-year-old daughter asked Alexa to play a song and, as soon as the song started, she said excitedly, “Oh mom! She is awesome! Can we keep her, please?” I very much doubt Amazon would get that level of bonding. Humanizing our assistant however, creates expectations on how naturally we can interact with it. Expectations that, at this stage of the technology, are probably going to be unmet more often than not.

Going with linking the assistant to the company name, like Google or Amazon, increases the risk of having any negativity around the company impact the relationship between user and agent. Think about the Google antitrust investigation as an example. I would also argue that, while Google consumers are accustomed to relying on it for questions in the form of search, other vendors do not have such an advantage. For most consumers, Amazon is mostly associated with the brown box that shows up at my front door with what I ordered; Apple is about hardware and Microsoft is mostly relegated to my PC and work life.

Are most digital assistants female because of sexism or user preference?

Once the decision of humanizing your digital assistant has been made, there comes the even more difficult task of deciding on which sex said assistant should have. Thus far, it is clear that most lean to making their assistant female. Even in cases where the name is not explicitly female and the default voice is different in different markets, like in the case of Siri, (male is the default voice in the UK), general consensus tends to refer to it as female.

Why is that?

Some women link this to the fact assistants in the real world are predominantly female. Others link it to the fact that tech is still a very male-dominated industry and most women have supporting roles at best.

30 mins in to the #GoogleIO2016 keynote and no women yet. Not even The Assistant is a woman (thank God). hahahaha

— Shara Tibken (@sharatibken) May 18, 2016

Some argue it is easier to find a female voice than a male voice most people will like. Maybe I am naïve or just a wishful thinker but looking more broadly at old GPS devices to automated call prompts, I found that those voices tend to be more female than male helping back up this theory.

Ultimately, I am convinced that diversity will come to digital agents in the same way it came to emojis. Well, hopefully it will come faster. Nothing will deepen that bond with our personal agent than a voice with an accent, a vocabulary, and a gender I can personally relate to.

A few weeks back, I attended the Collision Conference in New Orleans. This is my favorite “food city” so, when I found out Collision would be held in the Crescent City, I booked a flight and made a point to attend this year’s event. Collision has become one of the best shows for up and coming startups with a conference program that caters to them and a broader industry audience wanting to keep up with what’s new in tech.

I like to go to this show just to talk to these young entrepreneurs from all over the world who come to pitch their startups and get noticed. I saw over 100 new companies showing everything from new travel apps to new vertical social networks and a host of others dealing with health, education, regional solutions, and finance.

They all got to spend about seven minutes pitching their startups on a “Pitch” stage and they had a small kiosk in the demo area where everyone could come by and check out what they were doing. This to me has become a really worthwhile show to attend and one that keeps my perspective on the startup world fresh each year.

As you can imagine, VR was a hot topic at the show and there were multiple sessions on this subject during the conference. But there was one session that really stuck out to me. Its focus was on VR being a new platform for storytelling. The panel included two executives from Samsung, David Eun of Samsung’s Global Innovation Center and Marc Mathieu from Samsung Electronics America. Also on the panel was Jacques Methe of Cirque Du Soleil Media.

All three focused on the fact VR is set to become one of the most important tools for telling stories, whether by professionals or regular consumers. In fact, Mr Methe of Cirque du Soleil said VR, “Is inventing a new way to tell a story.” He referenced Cirque Du Soleil’s 360-degree VR app in the Oculus Store called KURIO. He said they “put the 360-degree camera in the center of the performance and people come up and say hi, putting you in the center of the action.” I have played with this app and it was one of the first VR videos I saw that made me realize how VR will someday revolutionize all forms of entertainment. If you have a Samsung Galaxy VR headset and a Samsung smartphone 5, 6 or 7, I encourage you to download the Cirque Du Soleil KURIO VR app to see for yourself how this could change story telling within the entertainment industry.

Mr Mathieu of Samsung said that, when cavemen came back from a hunt, they told the story of the hunt in pictures in a cave on the walls. Eventually, storytelling was moved to a frame in paintings and pictures where it has stayed for the centuries. Even today, our HD video is shown within a frame whether it is on a TV, PC, tablet, or a smartphone. According to Mr. Matheiu, 360-degree VR breaks us out of that frame and delivers the scene as if one was at the event and viewing it from the center of the action. He went on to say, “This may be the closest to teleportation we will ever have in our lifetime”. I agree with that view. The really good VR apps puts you in the center of the story and tells it all around you in 360-degree views.

David Eun agreed that professional storytelling like the content from Cirque Du Soliel would be big, but he added he felt normal consumers may actually create the greatest amount of content over time for themselves and their friends. He said to imagine capturing your child’s first steps with a 360-degree video camera and, using the proper goggles, go back and relive this any time you wished. VR puts you back into the experience so that it is always there to view in the future. One could imagine putting a 360-degree VR camera on the table at a child’s birthday party and being able to share that experience with the other parents who were not there. Or using a 360-video camera at a wedding and placing it at the center of the ceremony so friends and relatives who did not attend could view the ceremony as if they had.

To that end last February. Samsung introduced their 360-degree camera and expects it to be a key content creation tool for consumers and semi-professionals to use to tell their VR stories for use especially with the Gear VR in the near future.

Our research at Creative Strategies on VR shows that user-created content will be an important catalyst to getting consumers to back VR in the future. But what is not clear from our research to date is what type of VR headsets or platforms consumers will adopt to drive VR into a broader consumer mass market. The prices are too high on the Oculus Rift and HTC’s Vive to see any serious interest from consumers beyond the high-end gaming market. But the Samsung Gear VR headset and the low-end Google Cardboard headsets are too low quality to really drive broad adoption, although Mr. Eun of Samsung said they have sold over 1 million Samsung Great headsets to date.

The good news is the industry is moving fast to try and create new VR headsets at better prices. In my column next week, I will report on what I found while on a trip to China a few weeks ago to check with suppliers on what the Chinese are doing create top of the line headsets at cheaper prices.

But, after listening to the folks on this VR panel at Collision and especially hearing Mr. Jacques Methe of Cirque Du Soleil talk so excitedly about how his organization is embracing VR as the next big thing in storytelling, I am convinced storytelling could be at least one of the killer apps that will drive VR adoption in the future.

Yesterday, Google announced its answer to Amazon’s Echo home speaker product, which will be known simply as Home. But it also announced what it called “the Google assistant”, which will operate both on the Home device and in a variety of other products. These announcements, and some recent news from Amazon, highlight the fact that these devices, while important, are merely examples of the endpoints that will be part of a broader picture and not the endgame in and of themselves. That understanding is important for seeing these announcements in the proper context and figuring out where this technology goes from here.

Home is a new endpoint for old services

The key thing to understand about both Home and the Google assistant is that they’re new instantiations of old tricks to a great extent. One of the big challenges of Google’s efforts in this area to date is that they’ve been disjointed and hard to refer to in a holistic fashion. Apple has Siri, Microsoft has Cortana, Amazon has Alexa, but Google has only had Google Now, Google voice search, and the “OK Google” function on certain devices along with plain old Google search on the web or inside of apps or widgets.

One of these things, to put it simply, was not like the others. What’s good about the Google assistant branding (though not necessarily the strange use of a lowercase “a”) is it starts to put a name to this collection of functionalities. That, in turn, should allow users to begin to grasp that these things are part of a coherent whole and not just islands of functions floating in a Google sea.

What Home does is give this new assistant a physical embodiment. That should allow users to more easily grasp the concept of what the assistant does and what functionality lives within it. What’s strange, then, is it appears the assistant will take its first bow as part of the Allo messaging app, also announced at I/O, and not within the Home device. Chances are that’s simply a matter of timing driven by the relative development cycles of hardware and software. But it means the assistant will be somewhat buried at first and, quite possibly, in a software product few people will use (but that’s a topic for another post).

The key thing is the assistant is separate from the Home device and that’s actually a good thing. Though Home will perhaps be its best example, what makes the assistant powerful is precisely that it doesn’t live in any single device but exists in the cloud and becomes available to users through a variety of devices. That’s important because we won’t be carrying our Google Home devices with us everywhere we go. Rather, we’ll use our smartphones, tablets, smartwatches, computers, and other devices throughout the day and the Google assistant will be most useful as it follows us around, building a profile on us from interacting with it many times during the course of the day.

Amazon’s vision for Alexa is also expansive

In this context, it’s worth thinking about what’s been happening recently with Alexa, too. It started out as functionality within a single product, the Echo, but it’s clear Amazon’s vision for it is more expansive than that. Not only has Amazon recently introduced two other dedicated hardware products that provide Echo-like functionality in the form of the Dot and Tap, but it’s started putting the core smarts into existing devices as well. The Fire TV box and Stick have been getting Alexa features recently and there are rumors a forthcoming Fire tablet might also feature Alexa prominently. In this way, Amazon is ultimately pursuing the same vision as Google — that of a virtual assistant that’s truly virtual, inhabiting all the different devices we interact with throughout the day.

Amazon’s biggest challenge is it hasn’t provided those omnipresent devices to most of its users. Yes, it’s gained a certain amount of market share with its tablets and TV devices but its smartphone effort failed spectacularly. As such, it remains absent on the most omnipresent device of all. It’s likely that a standalone version of the Alexa app for iOS and Android will appear eventually but, just as the Google and Cortana apps for iOS are inherently second-class citizens to Siri, Amazon will likely never match its success in the home in more mobile scenarios. It’s easy to be blinded by Amazon’s success with the Echo but the reality is its broader virtual assistant strategy will remain handicapped until it solves this problem. It’s overcome that problem in part by majoring less on knowing everything about you than on playing nice with the services that already do, whether that’s third party calendars, music apps like Pandora and Spotify, or your smart home gear. But that’s still a step away from knowing you the way a true assistant does. Google has an advantage here and it’s one it would do well to play up.

Apple has the components but not the home device

Apple, of course, is coming at all this from the opposite end of the spectrum from Amazon. It does provide the omnipresent smartphone and to hundreds of millions of people at that. Its virtual assistant, Siri, is on all those devices and more in the form of iPads and it’s recently added Siri to the Apple TV, too. But as long as the Apple TV requires a screen to perform most of its functions, it can’t truly compete with an always-on device in the home. To be sure, Apple’s vision is one of personal devices and one possible solution is that everyone who needs to interact with such an assistant simply uses their own iPhone or iPad. But of course, many people don’t always have these devices within arm’s reach (or within the sound of their voice), and Apple Watches aren’t yet ubiquitous enough to make up the difference. Does Apple, too, need a home speaker device in the vein of Echo and Home to remain competitive and fill in this gap in its coverage? The evidence it does is getting stronger all the time.

User profiles and shared devices

Perhaps the toughest challenge ahead for all three companies is how to manage individual user profiles on what will inherently be shared devices. That applies to the Home and Echo, of course, but also to the Apple TV and, to some extent, to tablets. Google made a point of talking in its I/O keynote about how your Home and the Google assistant would (with your permission, of course) get to know you over time and therefore get better at their jobs. But that raises the question of who “you” is in this context. Is it the person who set the device up? Is it whoever happens to be asking it questions at any given time? Is it some aggregated profile based on all the members of the household? There are lots more questions than answers for me at this point about how Home (and other similar devices) will resolve all these issues over time.

Siri on the Apple TV deals with this by being utterly impersonal – it provides the same answers to everyone rather than attempting to personalize itself based on who’s asking the questions and deliberately knows nothing about the user. But, if Google wants to make its learning a differentiator, it needs to figure out how to tell the difference between users and share only the right information with the right members of the household. TV box and service creators have long wrestled with this issue and user profiles have usually been the answer proposed, although it rarely works all that well in practice. People hate manually switching profiles and so the solution usually has to be smart enough to tell which user it’s engaging with automatically and respond accordingly. That may require voice recognition, some sort of detection of nearby devices, or perhaps a different trigger phrase for each user. I’m not sure any of this is going to be ready by the time Home launches,o but it’s something Google needs to be thinking about. It’s also an area where Amazon falls short with the Echo – it doesn’t do well with multiple calendars, for example, which is odd for a device that’s explicitly designed to support households and not individuals.

More endpoints to come

I started this piece by saying these home devices will be endpoints but not the endgame. Let me return to that. Yes, these are the newest endpoints in this broader mission of providing intelligent assistants to respond to our needs in a variety of situations. But they won’t be the last – smartwatches obviously have a role here too, but then so do cars, future wearables, and many other devices not yet conceived of. What makes these assistants most useful is they will move through our lives with us on our different devices. That in turn will require either a greater willingness by users to commit to single-vendor device portfolios or by vendors to take their applications cross-platform. History suggests Apple will likely try the former route, while Google and Amazon will probably favor the latter. But this will only get more challenging as the variety of devices on which personal assistants live continues to proliferate.

Software upgrades are commonplace. We have them in apps, video games, computer software. Pay an additional amount and the products can seamlessly acquire new capabilities.

Now, there’s an equally seamless hardware upgrade: Tesla will upgrade the battery in an owner’s $71,000 Model S70. The owner pays an additional $3250 for the company to do an over the air upgrade to activate an additional battery that’s built into the car. Once activated, the 240 mile range electric vehicle increases it to 260 miles, turning the car into a Model S75.

No, they don’t teleport the battery over the air. It’s already built into the car. You might think Tesla shouldn’t charge extra for hardware that’s already there. But actually, it’s quite ingenious. A clever way for Tesla to sell their car at a slightly lower price, knowing they’ll recoup a profit from many of the buyers later on.

It also allows Tesla to produce fewer variations of the car, simplify the design, and eliminate the labor and inconvenience of installing an upgraded battery. But its biggest advantage might be customer satisfaction: giving the owner a way to improve his driving distance with a phone call or tap on the display.

Is this the beginning of something new? Just imagine how hardware upgrades, or “in-hardware purchases (IHP)”, might offer designers and marketers all sorts of new possibilities. A company could sell a phone or computer with built-in memory that can be expanded with an online purchase. Cameras could have features turned on for an extra charge, such as increased resolution or a wider zoom range. Tablets and computers could have built-in cellular modems in all of their models. An over-the-air purchase would turn on the cell service.

Yes, these add costs to the bill of materials, but that’s offset by simplifying the supply chain, reducing inventory and shortening the buying decisions. Additionally, the new revenue stream of after-sale purchases provides a competitive advantage and customer convenience.

There’s also a precedent for Tesla’s IHP. GM cars offer OnStar that, when activated, turns on a built-in cellular modem to connect and make calls. There are probably numerous other examples we’ve just not noticed.

Building in extra hardware that can be enabled after the purchase can not only be done for making a new sale but also to improve performance. The Chevy Volt is powered by a battery that typically needs to be recharged 5-7 times per week, depending on the owner’s driving habits. But, just as they do on our phones and computers, Li-Ion batteries deteriorate after successive charges. Chevy solves this issue by only using 10kWh of the Volt’s 16.5kWh battery capacity. This allows the car to maintain the same driving range on the battery, even as it degrades with use. As the battery’s capacity diminishes, more cells are turned on, maintaining the same performance for the life of the car.

Imagine if Apple or Samsung did this with their phones. Instead of a battery needing to be replaced after 2-3 years, just turn on a spare cell to maintain the original performance.

But IHP applies to more than just tech hardware. Several trends are at work that make hardware upgrades more practical. More devices are connected than ever, particularly in the IoT area, and the cost of hardware is falling, with computers-on-a-chip costing under ten dollars and large displays not much more; tablets cost as little as $25.

Companies need new sources of revenues after the initial purchase, beyond just offering an extended warranty. Appliances, such as refrigerators, washers, dryers, and HDTVs could come with a built-in computer, display, speakers, or an Echo-like device activated as an option by the customer. That provides an aftermarket sale direct to the manufacturer plus the option of recurring revenue.

The opportunities are endless and only subject to the imagination of engineers and marketers.

OK, be honest. When was the last time you really thought about desktop PCs? Especially new desktop PCs?

Probably not recently. Heck, with all the press about the death of PCs we’ve seen over the last several years, you would be excused for thinking that new desktop PC shipments had essentially stopped.

But in an ironic case of what’s old is new again, desktop PCs are not only not dead, they’re seeing a rebirth of sorts. To be clear, I’m not predicting a massive resurgence, but they’re actually holding their own and even growing in several different sub segments of the market.

Traditional consumer desktop PCs have taken a big hit, with most consumers who opt for a new PC choosing a notebook. However, there are still a lot of existing desktop PCs in use by consumers and, if they’re anything like the main desktop in my household, still doing some important tasks.

Our primary family digital photo library (now at 50,000+ photos), for example, still lives on our desktop (as well as in the cloud), as do our Quicken finances, TurboTax taxes, and other critical files. When my son comes home from college, it’s also the machine he often gravitates to for gaming.

In fact, gaming is one of the critical drivers for renewed vigor in the desktop market. With the explosive growth of eSports, Twitch and computer gaming overall, there’s very strong interest in desktop-based gaming rigs. Of course, unlike the early days of computer gaming, you no longer have to own a desktop to get high quality graphics, but for fixed installations, many people still prefer them. Throw in innovative new small form factor desktops like Intel’s Skull Canyon NUC (Next Unit of Computing) and you have people who may not have considered desktops giving them a serious second look.

In the commercial world, desktop PCs are far from dead. Believe it or not, desktops still make up more than 50% of all PCs purchased for business. That number is expected to eventually fall below half, but in many business environments, a fixed, large computing device is still very much an asset. After all, most people in businesses don’t travel and don’t need a notebook. As a result, commercial PC desktop volume is expected to increase in the latter years of the decade as businesses start completing their Windows 10 migrations and upgrading their existing PCs.[pullquote]VR headsets from the likes of Oculus and HTC have the most demanding compute and graphics requirements of any consumer-focused application, and they need the raw horsepower that you can now only get from a desktop.”[/pullquote]

The most compelling and newest demand for desktop PCs, however, is being driven by virtual reality. VR headsets from the likes of Oculus and HTC have the most demanding compute and graphics requirements of any consumer-focused application, and they need the raw horsepower that you can now only get from a desktop. If you want the latest iterations of the powerhouse graphics cards from AMD (the Fiji-based Radeon Pro Duo) and nVidia (the Pascal-based GTX1080), for example, you have to buy a desktop.

As a result, we’re seeing long-time desktop PC brands like Dell-owned Alienware, as well as Dell itself, developing complete new lines of desktop PCs specifically for VR. For now, Alienware (which is celebrating it’s 20-year anniversary in October, by the way) is offering specialized configurations of its X51 small form factor desktop, but it’s not hard to imagine them offering a whole new line of VR-optimized desktops in the future. In addition, Dell has informed me (exclusively) that they will be offering a new high-power and expandable XPS desktop this fall that’s specifically designed for VR applications.

Desktop PCs will never again reach the high-level stature that they once held, but that doesn’t mean they’re going to go away either. They still provide the best experience for a wide variety of consumer and business computing applications, and for that reason, will continue to hold an important place among technology solutions for some time to come.

I’ve been thinking about pricing for various consumer tech products and services and there are some aspects that are incongruous. For example, how is it you can host a conference call for 150 colleagues for free using FreeConference, yet the minute you leave the U.S. with your cell phone, pricing leaps to the stratosphere? So, here’s my admittedly subjective list of the biggest rip-offs and best bargains in consumer technology.

Rip-offs

1. International Cellular Roaming. This is the last bastion of 1970s era telecom pricing. Voice calls can average $1.00 per minute or more and data pricing can be 10x what it costs in the U.S. T-Mobile offers more favorable international roaming rates, especially within North America but exorbitant international roaming rates are one of the most common consumer frustrations in tech.

2. Apple Storage. There’s storage. Then there’s Apple device storage. Apple charges $100 more for an iPhone 6s with 64GB of storage compared to the 16GB model. By contrast, a 32GB microSD card for Android costs $15 or so. To really put things in perspective, $60 buys a 1TB external hard drive for a PC.

3. Cable Box Rental. If you are a cable TV subscriber, you’re likely paying some $200 or more per year for the privilege of renting a set-top box. And there’s no choice in the matter. This is a bonanza for the cable companies, sort of like the $4 billion in baggage fees collected by the airlines every year. The FCC is onto this, with its recent proposals to unlock the set-top box and promote competition.

4. Most extended warranties. Much ink has been spilled (what’s the digital equivalent of that term?) advising consumers not to buy the extended warranty on most consumer electronics products. But the extended warranty is still a part of the pitch, especially when purchasing at a retail location. Usually it’s not worth the price, although Apple Care and some of the cellular ‘insurance’ programs are worth it if you’re a serial phone dropper or need a lot of tech support.

5. Printer Ink. This is the consumer tech’s best ‘razors and blades’ product. HP might well be out of business were it not for high margin ink sales over the years. There are some workarounds and the occasional bargain if you look hard enough, but nobody who buys printer ink is happy about the price.

6. Cable Unbundling. A significant percentage of cable subscribers are paying for a bundle of broadband, pay TV, and phone services. Most consumers believe they’re paying too much for that bundle. But try taking that bundle apart and the picture gets even worse. Ask for a broadband only plan from your provider and that cable part of your bill starts looking more attractive.

7. Wi-Fi Access Points. For the important role that Wi-Fi plays in our daily lives, dropping $100 for a decent Wi-Fi AP seems like a reasonable expenditure. My beef, however, is it’s very difficult for the average consumer to determine the right mix of quality and value in this product category. Many Wi-Fi APs have similar specs (generally undecipherable to the average consumer) but prices are all over the map. There are some clearly superior APs, but they come at a significant price premium.

8. Fees on Most Telecom and Cable Bills. Telcos and cable providers are great at turning that $99 plan into $140, once taxes and fees are included. My latest cable bill has 10 separate “taxes, surcharges, and fees” on it. Call to complain and they largely blame it on the government and the FCC. But I am sure there are certain fees that are not all going into that specific regulatory coffer. An example of fee creep: RCN, which offers a competitive cable and broadband service in some markets, has separate ‘surcharges’ for broadcast TV, sports, and entertainment. Sort of like a ‘movie surcharge’ if you go to a movie. Hmm…

9. International Voice Calling. It is still easy to fall into the trap of paying some exorbitant price for the occasional international call. You see it on the phone bill and say Whoaaa! For those who make a lot of international calls or who hunt around, there are tons of inexpensive options – Skype, FaceTime, some specific international calling plans offered by the telcos – but for the casual caller there’s bound to be the occasional gotcha.

Bargains

1. Music Streaming Services. Compared to the physical or digital download world, paying $10-15 per month for access to a vast library of music content is one of the best values available in the digital world. In reality, these services should cost a lot more because I’d like to see more money go to the artists.

2. Netflix and HBO. I separate these folks out because they are spending billions on creating fantastic original content. Paying $10-20 per month for access to their entire library, on demand, on any device, is great value for money.

3. Amazon Prime. Even though the price went from $79 to $99, the vast majority of Prime subscribers believe they are getting a great bargain, even if they just use it for the free shipping benefit. There are, of course, several other features of Amazon Prime that make it an even better value. This will be one for the business case history books.

4. A mid-priced Android phone. Many people believe that, even though smartphones are good products, they’re expensive. That’s certainly true of the high-end, flagship phones, such as the latest iPhone or Samsung Galaxy device. But there’s an increasingly impressive array of very good Android phones in the $300-400 range that offer nearly the same capabilities as top of the line products. This is not a huge outlay considering the range of things one can do from a smartphone today.

5. Free Conference Calls. This is one I have never been able to figure out. How do services such as Freeconference.com, which allow you to host a call for up to 100 people, for free, make money? Yes, I know – it’s a freemium model. But you have to admit to wondering, “how can this be free?”

6. Web site domain names. It’s $10 a year or so to own a domain name. That’s one of the best bargains in digital real estate. It’s a bit incongruous given the many smarty pants who bought a domain like clothing.com on the cheap and sold it for a gazillion dollars. But the domain name party has been the digital version of the 1860s Homestead Act.

7. Voice calling. Voice calling has become practically free. It’s included in most cell phone plans and cable/telco ‘triple play’ type services. Even if you’re still dependent on a ‘landline plan’, there are inexpensive VoIP plans, provided you have a decent broadband connection. So, with a few exceptions, if you’re paying more than $10 a month for domestic voice calls, you’re paying too much.

8. Tax Software. Yes, there’s a bit of baiting and switching here with the more popular services such as TurboTax. It’s free! No, wait, if it’s more than 1040 EZ, then it costs. Then there’s the State return, and so on. But even at $50-100, which is what most people spend, it’s a pretty good bargain. And these folks seem to do a pretty good job of keeping up with our increasingly complex tax code.

9. Google Maps. I have kept free, ad-supported services such as Gmail and Facebook off the ‘bargains’ list, but then I started thinking about what app or service would I be glad to pay $100 a year for and came up with Google Maps. First, it’s a valuable product, used frequently, that continues to improve and second, the advertising component of this is a lot less obvious or intrusive than many other apps or services.

I’d welcome your thoughts and ideas on this list!