The Mainstreaming of the Mac

There’s been lots of talk since Apple’s event last week about the reception to the new MacBook Pros, especially among the Apple commentariat. It’s fair to say the backlash against these new devices is stronger than for any MacBook announcement I can remember and yet it’s mostly coming from two particular sets of people – those who use heavy-duty creative applications such as Photoshop and those who develop for Apple platforms. This is easily Apple’s most vocal audience and so such a response must be at least a little disheartening. But it’s also worth remembering that Apple – and even the Mac in isolation – has long since gone mainstream and is bigger than these groups. Apple’s challenge now isn’t serving this hardcore base but pleasing the much larger mainstream Mac user base without alienating the power users.

Apple’s increasingly diverse base

I wrote a post a while back about the counterintuitive liability Apple has in its growing customer base. On the one hand, this customer base is a huge asset, especially given the upgrade cycles for devices like the iPhone and the ability to sell services to a captive group of users. But on the other hand, the increasing diversity of this base can also be a liability, because Apple now has to please many groups in a much less homogeneous base than in the past. The problem is the public image of Apple among many in the media and beyond continues to be of a company that serves mostly creative professionals. This perception has led to a lot of misguided commentary over the past week, both about the damage Microsoft’s Surface Studio could do to Apple’s Mac base and about the perceived shortcomings of the new MacBook Pro line.

Apple’s Mac base today

The reality is that Apple’s installed base of Macs today is likely around 90 million. That’s up enormously over the last fifteen years or so – it was around 25 million in the early 2000s. As that base has grown, it’s diversified considerably. Just visit any college campus to see row on row of MacBooks in lecture rooms and study halls. These aren’t creative professionals and they’re not even using their MacBooks for particularly resource-intensive tasks. But, of course, there are still creative professionals and Apple developers who use Macs for work. So it’s worth thinking about what percentage of the overall base these users might represent.

Here are some data points:

In 2013, Adobe estimated it had an installed base of around 12.8 million users of its Creative Suite software, with another 250,000 on Creative Cloud. Around 40% of this revenue came from what Adobe described as creative professionals, with another 25% coming from other creative people in businesses, 10% from creative people using it at home, and 25% from education
Adobe currently has around eight million Creative Cloud subscribers (this is how Adobe now sells its creative suite, including Photoshop, Illustrator, Premiere, and so on)
At WWDC this year, Tim Cook announced Apple had 13 million registered developers

If we put these numbers together, we get a picture of 8-13 million users of Adobe’s creative products and another 13 million or so Apple developers. Of course, of those Adobe users, a good chunk will be using Windows versions rather than Mac versions. At the absolute outside, though, it gives, at most, around 25 million total users in the two buckets that have been most vocal about the MacBook Pro changes, out of a total base of around 90 million, or around 28%. Realistically, that number is probably quite a bit smaller, perhaps around 15-20% of the total. Of these, not all will share the concerns of those who have been so outspoken in the past week. To look at it another way, Apple sold 18.5 million Macs in the past year, which might end up being roughly the same as the combined number of creative professionals and developers in the base.

In the end, the picture that emerges is of a base of Macs with the kinds of users that have been expressing concerns or frustration with the changes in the minority. The vast majority of the user base is in other categories, principally general purpose consumer and business users. How does the rest of the base feel about the new MacBooks? Well, of course, that base is much less vocal and less visible – the general purpose Mac user tends not to blog or host podcasts about Apple. They’re much more likely to quietly keep using the products they have and occasionally upgrade to something new. The best place to look for their feedback is sales numbers for the Mac. Those have been down a little lately as the existing Macs have been getting a little long in the tooth and those in the know have been waiting for upgraded machines.

However, Phil Schiller said this week online orders for the new MacBooks were higher than they’ve ever been for a new product before, suggesting that some of this pent-up demand is being released now. Mainstream users – and likely quite a few from among the professional class of MacBook users too – are buying this new product despite the misgivings some power users have. We won’t know until at least three months from now – and probably longer – the actual numbers on how these MacBook Pros are selling. But my guess is those sales numbers will suggest the mainstream base cares a lot less about some of the subjects of the criticism from the past week and a lot more about a decent bunch of spec upgrades, thinner and lighter hardware, and some interesting new features.

Keeping the pro base happy

Of course, Apple can’t simply ignore the professional base – though these users may be a minority among the overall set of Mac customers, they are an important segment an,d as we’ve already seen, a vocal one. Pleasing them is important in its own right but also as a way to influence broader perceptions of the Mac and Apple as a company. Apple likely needs to do more here to mollify this base. For starters, it needs to update the desktop Macs, especially the Mac Pro, quickly. The current version of the Mac Pro suffers from being less upgradeable than its predecessor. With that being the case, it requires hardware refreshes more – not less – frequently. It might also be a reasonable concession to the complaints from this base to make it more upgradeable. I suspect Apple will have to think hard about how to please those who want a portable yet ultra-powerful machine, which is really the even narrower segment that’s been criticizing the new MacBooks. The portability/power tradeoff it’s made in the new machines seems to be fine for the mainstream, but that’s the one thing that seems to be creating the most problems for the hardcore base and that’s worth addressing.

Two Fears regarding AI and Robots

Bill Gates, Elon Musk and Stephen Hawking all have something very important in common. All three have gone on the record sharing their concerns and fears about AI and Robotics.

While these technologies hold a great deal of promise and will have a real impact on our future, it would behoove us to understand the ramifications and impact they could have on us personally as well as on the future of jobs.

My first concern about AI was recently highlighted in a New York Times piece by John Markoff who wrote that, while AI has great potential for good, it also has great potential for criminals to use it for their own goals.

In the article, Markoff writes:

The thing people don’t get is that cybercrime is becoming automated and it is scaling exponentially,” said Marc Goodman, a law enforcement agency adviser and the author of “Future Crimes.” He added, “This is not about Matthew Broderick hacking from his basement,” a reference to the 1983 movie “War Games.”

The alarm about the malevolent use of advanced artificial intelligence technologies was sounded earlier this year by James R. Clapper, the director of National Intelligence. In his annual review of security, Mr. Clapper underscored the point that while A.I. systems would make some things easier, they would also expand the vulnerabilities of the online world.

The growing sophistication of computer criminals can be seen in the evolution of attack tools like the widely used malicious program known as Blackshades, according to Mr. Goodman. The author of the program, a Swedish national, was convicted last year in the United States.

The system, which was sold widely in the computer underground, functioned as a “criminal franchise in a box,” Mr. Goodman said. It allowed users without technical skills to deploy computer ransomware or perform video or audio eavesdropping with a mouse click.

The next generation of these tools will add machine learning capabilities that have been pioneered by artificial intelligence researchers to improve the quality of machine vision, speech understanding, speech synthesis and natural language understanding. Some computer security researchers believe that digital criminals have been experimenting with the use of A.I. technologies for more than half a decade.

To some degree, we already saw this play out recently when sites like Amazon, Netflix, and others were almost knocked out by bots that used unprotected IoT devices in a Denial of Service attack. This particular attack does not appear to have a criminal link at the moment and it will take time to figure out what the goal was. But as Markoff points out the criminal potential of AI and bots is real and needs to be understood now to try and head off these kinds of attacks in the future. My fear is it is inevitable that criminals embrace AI and use it to their advantage.

The other area of AI and robotics that has me concerned is its role in replacing people and eliminating jobs. I am hearing more and more from people who look at the job market that this fear is very real, not imagined, and could present a serious problem for our world in the future.

In a piece from the UK’s Telegraph from last April, Science Editor Sarah Knapton wrote:

Robots will have taken over most jobs within 30 years leaving humanity facing its ‘biggest challenge ever’ to find meaning in life when work is no longer necessary, according to experts. Professor Moshe Vardi, of Rice University, in the US, claims that many middle-class professionals will be outsourced to machines within the next few decades leaving workers with more leisure time than they have ever experienced. Speaking at the annual meeting of the American Association for the Advancement of Science annual meeting in Washington, Prof Moshe said the rise of robots could lead to unemployment rates greater than 50 per cent. “We are approaching a time when machines will be able to outperform humans at almost any task,” said Vardi, a professor in computational engineering.

While a life of leisure may be appealing to many, the fact is, work and jobs are important to our overall lifestyle and identity and, even more importantly, they provide our livelihood. Forecasters believe that, by 2050, there will be close to ten billion people on the earth. If Professor Vardi is right and robots could replace as many as 50% of the workers in the market, we have a disastrous problem ahead of us.

It is easy for my generation or even the one behind me to cast this off as a problem for the next generation to deal with. But I don’t think we can wait that long to head off this potential nightmare that could be very destructive to our world. Silicon Valley needs to see this issue as one of the tech world’s biggest moonshot problems, and opportunities, and start to factor in this serious threat to all of the products and services they are creating today.

Those working on AI and robotics need to see this threat as Gates, Musk and Hawking do and build safeguards and strict security into the products they create. Our education system needs to begin seriously looking at this threat and working hard to retool our education system to emphasize STEM and the kinds of skills that will be needed to work in a time when technology and automation could wipe out so many types of jobs our school kids are preparing for today.

While I see the good in AI and Robotics, I also see the bad potential it has as well and its impact on our society at all levels. Silicon Valley, the tech world, and our education leaders need to understand this problem and start now to work on dealing with it since the generations behind us will be negatively impacted beyond what we can even imagine today.

The Financial Impact of the Note 7 Recall

Samsung reported its earnings for the third quarter last week and the impact of the Note7 recall was understandably a major focus. Since I track Samsung’s financials on an ongoing basis and, since I haven’t seen a lot of coverage of what Samsung reported last week on this topic, I thought I’d share some of the details with Tech.pinions Insiders and put the impact in the context of Samsung’s broader business.

Samsung’s reporting structure

Samsung Electronics has three main business divisions:

CE (Consumer Electronics) – TVs, printers, AC units, fridges, and other consumer and medical devices
IM (IT & Mobile) – phones and tablets, but also PCs, digital cameras, and mobile network infrastructure
DS (Device Solutions) – components for consumer devices, including DRAM, NAND flash, modems, displays using LCD and OLED technologies, and more.

From a financial perspective, Samsung reports these three but also breaks out some of the constituent parts:

CE – Samsung reports divisional results but also breaks out TV sales specifically
IM – reports at a divisional level but also Mobile revenues specifically (though not margins)
DS – split into two parts: semiconductor (of which memory is again broken out separately) and display panels.

Impact on the IM division

The IM division is where smartphone sales are reported and it’s here the impact of the Note7 recall was greatest. The chart below shows revenues and profits (in trillions of Korean Won) for this division):

Note the dark gray bar for Q3 2016 isn’t missing – it’s just so tiny you can’t see it. In other words, the Note7 recall basically wiped out profits for the quarter for the division. Technically, they were 0.1 trillion Won, or about $87 million, compared with over $2 billion profits a year earlier — nearly $4 billion in profit in Q2. You can also see a revenue dip there, from 26.6 trillion Won both a year earlier and in Q2 to 22.5 trillion Won ($19 billion). That drop is about $3.5 billion, approximately the size of the gap in revenues left by the recall. When Samsung decided to fully recall all Note7 devices, it revised its earnings guidance downwards by around 2 trillion Won, so roughly that much of the impact was from reversing the revenue recognition for those devices which had actually been sold and not recalled at that point. The rest is from sales which had been expected but never happened because of the recall. Interestingly, the impact on profits was even higher – those dropped by almost $4 billion in the financials, as we’ve already seen. The reason is revenues were only impacted by foregone sales, whereas profits were impacted by the cost of the devices sold and the additional costs associated with the recall itself. Samsung doesn’t report expenses by business line, but its Selling, General and Administrative expenses overall rose by around 600 billion Won, or $525 million, year on year, and the company largely attributed this to the cost of the recall.

Overall impact

However, the overall impact of the recall on Samsung Electronics was much more muted, in part because other parts of the business performed well in Q3 and in part because Samsung sold some assets in the quarter in anticipation of the early phases of the recall. A summary of Samsung’s overall financial performance is shown below:

As you can see, while there certainly was a dip in operating margin in the quarter, it was much less dramatic than in the IM division, where margins dropped effectively to zero. A large part of that is because the IM division accounts for less than half of the company’s overall revenues and only around a third of its operating profits. The semiconductor segment of the components division actually accounts for the largest chunk of operating profits and happens to have done particularly well this quarter, which helped offset some of the drop in the IM division. But Samsung also sold some of its stake in components vendor ASML in the quarter, which basically offset the increase in SG&A driven by the cost of the recall when it came to net margins. As a result, Samsung’s net margin was only slightly lower year on year and quarter on quarter.

Guidance for the future

Samsung has provided some rough guidance for the future impact of the Note7 recall as well. In essence, Samsung is expecting the impact to run through the current quarter (Q4 2016) and the next quarter (Q1 2017). In the current quarter, the impact is expected to be around 2 trillion Won, while in Q1 it’s expected to be around 1 trillion Won. Of the 2 trillion in Q4, around 1.5 trillion of the impact will hit the IM division, while the other 500 billion will hit the semiconductor division, which would make some of the components used in the Note7. In the grand scheme of things, this roughly $2.6 billion hit isn’t enormous, though it’s not nothing. But, of course, Samsung will also seek to replace many of these would-be Note7 sales with Galaxy S7 or S7 Edge sales instead, which will help mitigate the impact on overall sales, though the costs already incurred for manufacturing devices which will not now be sold along with the ongoing costs of the recall will still be felt.

It’s worth looking at Samsung’s overall guidance for the fourth quarter as it relates to smartphone sales, too. It sold around 89 million total handsets (including feature phones) in Q3 and expects to sell a similar number in Q4. Of that total, around 75 million were apparently smartphones and the company expects to sell a similar number of those in Q4 as well. As with Q3, that would be down significantly on last year, when the company sold 80-85 million smartphones in the fourth quarter. Interestingly, this also puts the likely total within touching distance for Apple, whose guidance suggests it will sell somewhere in the high 70 million range. We could therefore see Apple outsell Samsung in a quarter for only the second time ever (the first was Q4 2014, when the iPhone 6 began selling in volume).

Apple’s Future Is Ear

Apple’s Transition From Looking and Touching to Listening and Talking

Part 1: Looking Back

Angst

As you may well know, there’s an awful lot of angst concerning Apple’s removal of the headphone jack from their latest model iPhones.

Every new idea has something of the pain and peril of childbirth about it. ~ Samuel Butler

I won’t rehash it all other than to say that a lot of people — and I mean a LOT of people — disagree with Apple’s decision to remove the headphone jack from the recently released iPhone 7. And when I say a lot of people disagree with the removal of the headphone jack, I mean they VEHEMENTLY disagree.

[pullquote]Taking the headphone jack off the phones is user-hostile and stupid[/pullquote]

Taking the headphone jack off phones is user-hostile and stupid. ~ Nilay Patel

Wow. Strong words.

Don’t worry about people stealing an IDEA. If it’s original, you will have to ram it down their throats. ~ Howard Aiken

If you’re going to sin, sin against God, not the critics. God will forgive you, but the critics won’t. paraphrasing Hyman Rickover

So, are the critics right? Is Apple doing their customers a disservice?

New ideas come into this world somewhat like falling meteors, with a flash and an explosion, and perhaps somebody’s castle-roof perforated. ~ Henry David Thoreau

Or is it we who are doing Apple a disservice?

Our dilemma is that we hate change and love it at the same time; what we really want is for things to remain the same but get better. ~ Sydney J. Harris

Looking Back

Before we try to answer the questions posed above, let’s first take a step back in order to gain a broader perspective.

Acquire new knowledge whilst thinking over the old, and you may become a teacher of others. ~ (probably not) Confucius

I believe that the past can teach us a lot about the future.

The further back you look, the further forward you can see. ~ Winston Churchill

So before we discuss the removal of the headphone jack and the viability of Apple’s new Bluetooth AirPods, let’s first take a look back on some computing history.

Smaller, Ever Smaller

Since the advent of the Apple II and the rise of the mass-market consumer PC, you hear “computer” and you think “monitor, mouse, keyboard,” in some variation. ~ Matt Weinberger, Business Insider

But that’s not the way it’s always been.

Computers have gone from Mainframes that took up an entire floor, to Minis that filled an entire office, to PCs that sat on desktops, to Notebooks that laid on our laps, to Smartphones that rested in pockets, to watches that wrapped around our wrists. I can’t be the only one who sees the pattern here. Every generation of computer has gotten smaller and smaller. And that trend is not going to stop. It’s not a question of “if” computers are is going to get smaller, it’s only a question of and “when.”

Well, let me correct myself. It’s not only a question of “when” computers will get smaller, it’s also a question of “how.” Making computers smaller is relatively easy. Making them smaller while maintaining their usefulness is not so easy and does, in fact, pose a significant challenge.

The Windows Mobile Mistake

We may not know what the next User Interface should be, but we know what it shouldn’t be. It shouldn’t be a smaller version of the current User Interface.

Remember how Microsoft tried – for years and years and years – to squeeze its desktop User Interface into tablets and phones? Nowadays, we look back and mock Microsoft for those early, lame attempts to create a modern phone interface. But that smug point of view is simply retroactive arrogance. We now know what Microsoft should have done, so we’re astonished that they too didn’t employ the same 20/20 hindsight that we now do. But at that time — although almost none of us liked the tiny menus or the easy to lose styluses — no one had a better idea.

Not only that, most of us didn’t even know that a better idea was needed.

Unique User Interface

So a smaller version of the current User Interface provides a bad experience for the User. What then is the solution?

The solution, of course, is a brand new User Interface. It turns out that each successive generation of computer requires its very own unique User Interface — a User Interface specifically tailored to work with the new, smaller form factor.

Unfortunately, creating a brand new User Interface is easier said than done, in part because it’s extremely counterintuitive. In hindsight, all the best user interfaces look obvious. In foresight, those self-same user interfaces look like obvious failures.

Macintosh

Take, for example, the User Interface employed by the Macintosh.

The User Interface of the Macintosh was soon to become the standard for desktop PCs, with many of its features still in use today. But at the time, Xerox — which created several of the building blocks for the soon-to-be Macintosh User Interface — didn’t know what they had.

When I went to Xerox PARC in 1979, I saw a very rudimentary graphical user interface. It wasn’t complete. It wasn’t quite right. But within 10 minutes, it was obvious that every computer in the world would work this way someday. ~ Steve Jobs

Yeah, Steve Jobs instantly saw the promise of what was to become the Macintosh User Interface…

…but most of us aren’t Steve Jobs. Like the engineers at Xerox, we don’t recognize the value of a new User Interface even when we’re looking right at it.

By the way, anyone who thinks that Steve Jobs and Apple “stole” the UI form Xerox, needs to read this article and see this video.

iPhone

Another example of not knowing what we had was the iPhone. I think most everyone would now agree that, with the introduction of the iPhone, Steve Jobs and Apple knocked the Smartphone User Interface out of the park. But that’s not how people saw it at the time.

Some thought the iPhone was an embarrassment to Apple:

Apple should pull the plug on the iPhone… What Apple risks here is its reputation as a hot company that can do no wrong. If it’s smart it will call the iPhone a ‘reference design’ and pass it to some suckers to build with someone else’s marketing budget. Then it can wash its hands of any marketplace failures… Otherwise I’d advise people to cover their eyes. You are not going to like what you’ll see. ~ John C. Dvorak, 28 March 2007

Internet commentators were no more impressed with the newly announced iPhone than were the press:

Im not impressed with the iPhone. As a PDA user and a Windows Mobile user, this thing has nothing on my phone..i dont see much potential. How the hell am I suppose to put appointments on the phone with no stylus or keyboard?!…No thanks Apple. Make a real PDA please….

lol last i checked many companies tried the tap to type and tap to dial … IT DOESNT WORK STEVIE, people dont like non-tactile typing, its a simple fact, this isnt a phone its a mac pda wow yippie….I mean it looks pretty but its not something i forsee being the next ipod for the phone industry…

im sorry but if im sending text messages i’d rather have my thumb keyboard than some weird finger tapping on a screen crap.

Touch screen buttons? BAD idea. This thing will never work.

Apparently none of you guys realize how bad of an idea a touch-screen is on a phone. I foresee some pretty obvious and pretty major problems here. I’ll be keeping my Samsung A707, thanks. It’s smaller, it’s got a protected screen, and it’s got proper buttons. And it’s got all the same features otherwise. (Oh, but it doesn’t run a bloatware OS that was never designed for a phone.) Color me massively disappointed.”

And, of course, even years after the iPhone appeared on the scene, competitors continued to overlook its significance:

Not everyone can type on a piece of glass. Every laptop and virtually every other phone has a tactile keyboard. I think our design gives us an advantage. ~ Mike Lazaridis, Co-CEO, Research In Motion, 4 June 2008

So globally we still have the world running on 2G internet. Blackberry is perfectly optimized to thrive in that environment. That’s why the BlackBerry is becoming the number one smartphone in those markets. ~ Mike Lazaridis, Co-CEO, Research In Motion, 7 December 2010

Lessons

The lesson here is fourfold:

First, new user interfaces are hard. Really, really hard.

Second, we often don’t realize a new user interface is even needed.

Third, each user interface is unique — radically different from the User Interface that preceded it.

People should think things out fresh and not just accept conventional terms and the conventional way of doing things. — Buckminster Fuller

Fourth, even when a new user interface is introduced, and even if it ends up being the perfect solution in the long run, in the short run it’s not met with cries of “Thank goodness you’ve arrived!” No, it’s met with scorn, derision and dogged resistance.

Why Bother?

Before we go any further, I guess we should ask ourselves: “Why do we even need smaller computers that require a new User Interface anyway? Smartphones are great, right?”

Well, yes and no.

Smartphones are wondrous supercomputers that we carry in our pockets and which can solve a multitude of problems. But for some tasks, Smartphones are far from ideal.

One problem with Smartphones is that they are demanding. They cry out for our attention. They buzz, they beep, they ring, they flash, they vibrate. They call to us, “now, Now, NOW! Pay attention to me now, damn it!”

“The word ‘now’ is like a bomb through the window, and it ticks. ~ Arthur Miller

Another problem with Smartphones is that they are intrusive. To interact with a Smartphone, we must look at it. When our focus is on the Smartphone, our focus is off everything else.

This can be socially awkward when we hunch over our Smartphones and ignore those around us. It can be amusing as we watch those using Smartphones bump into walls or walk into water fountains. It can be deadly as we walk into traffic while staring at our Smartphones or foolishly attempt to text while driving.

Part 2: The Next User Interface

Just as we needed a brand new “touch” user interface in order to turn smaller Smartphone form factors into a usable computing device, we now need a brand new User Interface in order to turn even smaller computer form factors into usable computing devices.

— PCs used a mouse and a monitor;
— Notebooks used a trackpad and a monitor;
— Smartphones used a touch-sensitive screen and a monitor; and
— Watches are still a work in progress, but they currently use a variety of interfaces , like touch, 3D touch, Digital Crown, Taptic Engine…and a monitor.

But this presents us with a new challenge. Ever since the Apple I was introduced in 1977, every User Interface has had one thing in common — a monitor. But usable screen sizes have gotten as small as they can get. How then do we make a computer both smaller AND more usable?

Google Glass

Google Glass was an early attempt at creating a User Interface suitable for a smaller computer form factor. It solved the screen size dilemma by resting the screen on one’s face like a pair of glasses. It used augmented reality to superimpose bits of helpful information over the world as viewed through a small camera lens. The vision was for the device to always be present, always be watching, always be listening, always be ready to assist with some digital task or to instantly recall some vital piece of information. People had very, very high hopes for Google Glass.

Google glasses may look and seem absurd now but (Brian) Sozzi says they are “a product that is going to set the stage for many other interesting products.” For the moment, at least, the same cannot be said of iPhones or iPads.” ~ Jeff Macke, Yahoo! Breakout, February, 27 2013

So did Google Glass “set the stage for many other interesting products”? Not so much. It failed so badly that it came and went within the span of three short years.

So what went wrong?

Well…other than that picture, what went wrong?

Google Glass was incredibly intrusive, both for the user and, significantly, for those in the presence of the user. From the outside, Google glass stood out like a sore thumb. From the the inside, Google Glass inserted itself between the user and the world.

Google Glass is in your way for one thing, and it’s ugly…It’s always going to be between you and the person you’re talking to. ~ Hugh Atkinson

Further, Google Glass was a pest, always bombarding the user with distracting visual images.

I don’t think people want Post-it notes pasted all over their field of vision….The world is cluttered up enough as it is! ~ Hugh Atkinson

Perhaps even worse was the way Google Glass intruded upon the lives of others. People resented the feeling that they were being spied upon and began to call those who wore the devices “Glassholes.”

Finally, Google Glass just wasn’t that useful. It didn’t do many things and the things it did it didn’t do all that well.

Enter The Voice User Interface

[pullquote]We’re moving from view first to voice first[/pullquote]

I’m convinced that Voice is going to be the next great User Interface; that we’re moving from touching and looking on our Smartphones to talking and listening on our Headphones; That we’re moving from View First to Voice First.

Most agree the next major UI shift after touch is voice. ~ J. Gobert (@MrGobert)

More importantly, I’m convinced that Apple is convinced that Voice is the next great User Interface…

…which is no big deal, because Amazon, Google, Microsoft and most others are convinced too…which is why they’re all investing so heavily in the area.

(D)igital assistants are poised to change not only how we interact with and think about technology, but even the types of devices, applications and services that we purchase and use. ~ Bob O’Donnell

The User Interface Company

Apple is a User Interface company. Their business model is to:

— Create a revolutionary new User Interface;
— Use design principles to build an integrated hardware and software product;
— Iterate the hell out of it;
— Carefully select another area of computing ripe for disruption; and
— Do it all over again.

Some past examples:

— The Apple I added a monitor.
— The Macintosh added the Graphical User Interface (GUI) and the Mouse.
— The Apple Notebook added the recessed keyboard and trackpad.
— The iPod added a click wheel and related all the heavy lifting to the Personal Computer.
— The iPhone and the iPad added a touchscreen.

In 1976, with the Apple I, Apple started the modern era of personal computing by adding a monitor to the User Interface. In 2016, Apple intends to extend the era of the personal computer by removing the monitor from the User Interface.

The new User Interface would be — as all User Interfaces must be — a radical transition. It would take us from touching to talking; from looking to listening.

The most interesting disruption comes from attacking an industry from what looks like an irrelevant angle. ~ Benedict Evans (@BenedictEvans)

Introducing The AirPod

Apple recently announced a line of wireless headphones, called AirPods. The AirPod appears to represent Apple’s vision for the visionless User Interface of the future. With advanced bluetooth audio, a powerful W1 chip, two microphones, and yes, the elimination of the 3.5mm audio jack, the AirPod is the beginning Apple’s transition from User Interfaces for the eyeballs, to a User Interface for the eardrums.

So what’s the big deal? We’ve had wireless headsets for a while. True enough. But they’ve been confusing to pair, frustrating to use, had limited battery life, and were, overall, relatively powerless. The AirPods are not just another set of headphones. Rather, they are the start of a whole new generation of headsets. The new AirPods provide:

— Painless Pairing;

— A Charging Case that stores, charges, and pairs the earbuds;

— Optical sensors, that that make the first earbud in the ear the primary earbud for phone;

— Sharing between two people.

— A long tube that provides room for a larger battery, thus providing longer battery life;

— Microphones at the end of the tubes which reduces the interference provided by our head and allows better ear-to-ear communication; and

— Activation of Siri either by saying “Hey Siri” or by double tapping on either of the earbuds.

Good Design

The AirPods’ simplicity and demure demeanor is consistent with the principles of good design.

Good design is unobtrusive. Products fulfilling a purpose are like tools. They are neither decorative objects nor works of art. Their design should therefore be both neutral and restrained, to leave room for the user’s self-expression. ~ Dieter Rams

The advance of technology is based on making it fit in so that you don’t really even notice it, so it’s part of everyday life. ~ Bill Gates

If it disappears, we know we’ve done it. ~ Federighi 9/10/13

Technology is at its best and its most empowering when it simply disappears. ~ Jony Ive

I like things that do the job and kind of disappear into my life. Like Levis. They just kind of get faded and disappear, and you don’t think about it much. ~ Steve Jobs

The Invisible Hand

[pullquote]Apple has a secretive project in the works named “Invisible Hand”[/pullquote]

Bloomberg has reported that Apple has a secretive project in the works that would dramatically improve Siri. Currently, the Siri voice assistant is able to respond to commands within its application. With an initiative code-named “Invisible Hand,” Apple is researching new ways to improve Siri. Apple’s goal is for Siri to be able to control the entire system without having to open an app or reactivate Siri. According to an unnamed source, Apple believes it’s just three years away from a fully voice-controlled iPhone.

Note that the report said that Apple thinks it is three years away form employing all of these features. Not today. Not tomorrow. Not the day after tomorrow, but three years. So don’t expect to see these advanced features anytime too soon.

Veteran Apple engineer Bill Atkinson — known for being a key designer of early Apple UIs and the inventor of MacPaint, QuickDraw, and HyperCard—saw this coming a long time ago. He gave a presentation at MacWorld Expo back in 2011 in which he explains exactly why the ear is the best place for Siri. ~ Fast Company

— AirPods don’t require we look and touch. They only require we talk and listen.
— The AirPod will be always with us.
— The AirPod will be always on us.
— The AirPod does not require the use of our eyes.
— The Smartphone stands between us and the world and demands our eyes and our attention. The AirPod stands behind us and discretely whisper’s in our ears.

“Yuck,” you say. “Always on?. Who wants that?”

We all will.

— We can have the AirPod in our ears at all times.
— We needn’t reach into our pockets to look at our Smartphones.
— We needn’t even turn our wrists and glance at our Smartwatches.
— Tap, tap or “Hey Siri.” Computing at our beck and call.

Apple has already started down this path. If you’re activating Siri using the home button of your iPhone, Siri more often directs you to look at the screen. If Siri is activated hands free via “Hey Siri”, Siri is more talkative and less visual.

Today And Tomorrow

The possibilities for Voice activated computing are endless.

Of course, you can request music or even a specific song.

A Voice Interface will allow us to listen to our emails and texts.

Driving directions might best be served by using both visual and audio instructions. But walking instructions — which are in their infancy, but on their way — are a different matter. It’s not a good idea to look at a screen while walking. Audio only instructions are the way to go.

Third party apps will have access to all of the the AirPods’ functionality.

Using a double-tap, the user can quietly request information.

Soon we’ll be able to identify a document, and simply say “print” and the artificial intelligence will do the rest.

AirPods will one day be spatially aware. They’ll remind us to take the mail with us when we leave the house, and to buy toilet paper when we pass by the local supermarket.

Soon we’ll be able to simply say “help” in order for the system to help the us navigate a particular task or application.

We don’t have immediate recall, but our AirPods — which hear everything — will.

Siri might soon be able to recognize people, know places, identify motions and connect them all with meaningful data.

Sensors in the device will know if we are in conversation and will break in only with the most important verbal notifications.

As Siri becomes more environmentally aware, it will start to recognize important sounds in the environment. For example, if the AirPods detect a siren while the user is driving, they might temporarily mute any messages or other audio.

Soon we’ll be able to request that our intelligent assistants ask someone else a question, get the answer, and then relay that answer back to us.

Or we’ll be able to schedule a meeting, with the artificial intelligence navigating all the various questions and answers required from multiple parties to make that happen.

Proactive assistance will remind us that we have an upcoming appointment and — knowing the time and distance to the meeting — prompt us to leave for it in a timely manner.

Or better yet, a truly intelligent device will know us and understand us and remind us when our favorite sports team is scheduled to begin play.

————–

“Science fiction,” you say? Really? Look how very far we’ve come since the iPhone was introduced in 2007. Just to take one small example, people forget that Smartphones were out for years and years and years before we were able to ditch our dedicated GPS devices and switch to using GPS on our phones instead. Now using the GPS on our phones is so normal that many can’t even imagine how we managed without it.

Apple opening up Siri, is like everything else they do. Building the momentum slowly and for the long haul. ~ Nathan Shochat (@natisho) 9/26/16

Like great men and women, great computing starts from humble beginnings.

Over the years, many of the most important features to come to the Apple ecosystem were launched as somewhat basic and rudimentary iPhone features.

• Siri told funny jokes.
• Touch ID unlocked iPhones.
• 3D Touch made Live Photos come to life.

In each case, a feature was introduced not to set the world on fire overnight, but rather to serve as a foundation for future innovation and functionality. Siri has grown from giving funny, canned responses to being one of the most widely-used personal assistants that relies on natural speech processing. Touch ID is now used to facilitate commerce with Apple Pay. 3D Touch has transformed into an emerging new user interface revolving around haptics and the Taptic Engine. ~ Neil Cybart, Above Avalon

Untethered

Reviewers who have worn the Apple Watch have written that it has untethered them from their phone — that their iPhone has joined the MacBook as the “computer in the other room.” That is all going to be doubly so with AirPods and other sophisticated headphones.

— Yesterday, people used their computers when they were at their desktops or when they carried their laptops with them.

— Today, people use their phones all the time and their second screen devices – Desktops, Notebooks, Tablets — some of the time.

— Tomorrow, people will listen to their headphones all the time and look at their phones, tablets, notebooks and desktops some of the time.

Not One Device, But Many

So, am I saying the Smartphone is going away?

Hell no.

Did the mainframe go away? Did the PC go away? Did the freaking fax machine — which was invented in 1843 — go away?

Old tech has a very long half-life. ~ Benedict Evans on Twitter

Bill Gates foresaw what was going to happen to computing as far back as 2007. Well, he ALMOST foresaw what was going to happen:

MOSSBERG: What’s your device in five years that you’ll rely on the most.

GATES: I don’t think you’ll have one device

I think you’ll have a full screen device that you can carry around and you’ll do dramatically more reading off of that – yeah, I believe in the tablet form factor – and then we’ll have the evolution of the portable machine and the evolution of the phone will both be extremely high volume, complimentary, that is if you own one you’re likely to own the other…

Reverse “phone” and “tablet” and Gates got it just about right. We’re not going to have just one device with just one user interface. We’re going to seamlessly move from device to device as best suits our needs at that particular time, at that particular place.

Part 3: Critiques

Fantasizing Fanboys

Nilay Patel thinks the Apple fanboys who are buying into the whole AirPod thing are as bad as Google fanboys who bought into the whole Google Glasses thing.

Watching Apple fans repeat the mistaken dreams of Google Glass is super fun. ~ Nilay Patel (@reckless) 9/16/16

I think Nilay Patel is a really, really smart guy who’s being incredibly, and inexcusably, short-sighted.

The most important things have always seemed dumb to industry experts at the beginning. ~ Jeff Bezos

Professional critics of new things sound smart, but the logical conclusion of their thinking is a poorer world. ~ either Benedict Evans or Ben Thompson ((Sadly, I don’t know who to attribute this quote to. My notes have both saying it and a search did not reveal the original source. My bad.))

The AirPod isn’t obnoxious, like the Google Glasses were. They aren’t building a barrier between you and me; between you and the world. And while Google Glass was incredibly intrusive and incredibly useless, AirPods are not intrusive at all while they’re incredibly useful today and will become even more useful with each passing tomorrow.

Echo Chamber

Many, many, very intelligent and respected technology observers really like the Amazon Echo and think it is the wave of the future.

I’ll admit I’m swimming in dangerous waters here — there have already been reports that Apple is working on an Echo-like device — but I don’t think Apple is going to go in the direction of the Amazon Echo. Based on Apple’s investor call, held on October 25, 2016, Tim Cook doesn’t think so either:

Most people want an assistant with them all the time. There may be a nice market for kitchen ones, but won’t be as big as smartphone.

Here’s my issue with the Echo and Echo-like products:

First, the Echo, and competing devices like Google Home, are fixed to one room. It makes no sense to have your Artificial Intelligence anchored to a single location when you can have it with you anywhere, anytime.

Second, the Echo and its lookalikes are designed to be used by multiple people. That’s convenient…but it also means that it muddles the information the artificial intelligence receives which, in turn, muddles the information that the Artificial Intelligence can provide. In other words, devices used by many people will not be able to provide data tailored for single individuals.

Many, many, many, many very smart, very thoughtful, very respected industry observers disagree with me.

When I wrote my original Siri Speaker article in March, I heard from a lot of people who didn’t understand why Apple needed to make such a product [as the Echo] when our iPhones and iPads and Apple Watch can do the job…It’s a very different experience to have an intelligent assistant floating in the air all around you, ready to answer your commands, rather than having that assistant reside in a phone laying on a table (or sitting in your pocket). ~ Jason Snell, MacWorld

[pullquote]What if your intelligent assistant were always in your ear and always with you?[/pullquote]

Well, that’s true, but what if your intelligent assistant were always in your ear and always with you?

Job To Be Done

There are those who argue that Voice Input may be a nice supplement to computing but a voice Interface is not sufficient because it’s inadequate — it doesn’t do everything that we can currently do on our Smartphone, or even our Smartwatch.

Maybe this’ll feel retrograde in a decade, but how many people really want to control everything with their voice? It’s handy for some stuff, but not everything…. ~ Alex Fitzpatrick, Time

Don’t we say the exact same thing at the introduction of every new generation of computer?

— The Notebook couldn’t do what the Desktop did.
— The Tablet couldn’t do what the Desktop or the Notebook did.
— The Smartphone couldn’t do what the Desktop, the Notebook or the Tablet did.
— The Watch couldn’t do what the Smartphone did.
— The AirPod can’t do what the Smartphone, or even the Smartwatch does.

OF COURSE the new device is not as good as the old device at doing what the old device did best. A Notebook computer is a lousy Desktop computer. A tablet is a lousy Notebook. A Smartphone is a lousy Desktop, Notebook or Tablet. And a passenger vehicle is a lousy truck. But we don’t hire a passenger vehicle to be a truck. Neither will we hire a device using a Voice-First Interface to be a Desktop, Notebook, Tablet, Smartphone or Smartwatch.

We don’t recognize the value of a new User Interface because we measure it against the wrong standard.

Lesson #1: The New User Interface is not trying to “replace” the old user interface.

Tablets will not replace the traditional personal computer. The traditional PC is changing to adapt to the customer requirements. The tablet is an extra market for some niche customers. ~ Yang Yuanqing, Chief Executive Officer, Lenovo Group Ltd., 11 Jan 2012

The above quote misses the mark because it assumes that tablets WANT to replace the traditional personal computer.

‘This new thing will be great – once we can do all the old things on it in the old way’ ~ Benedict Evans

Each new computer form factor is being hired to do something different than its predecessor, otherwise, we wouldn’t want or need to migrate to the new device in the first place.

[pullquote]The goal is to use the new device for something it can do extremely well, especially if that something is something the old device did poorly or not at all[/pullquote]

The goal is not for the new Interface to duplicate the functionality of the old Interface; to use our new devices to do what our old devices already do well. The goal is to use our new devices for those things that they do best.

Lesson #2: We shouldn’t judge a User Interface by what it CAN NOT do.

Instead of judging a new User Interface by what it can not do, we should judge it by what it CAN DO EXTREMELY WELL, especially if it can do something well that the old User Interface does poorly or not at all.

Before you can say ‘that won’t work’, you need to know what ‘that’ is. ~ Benedict Evans

Socially Awkward

Some observers say we will not want to use Voice First because — well frankly, because it makes us look like socially awkward nerds and sound like socially oblivious geeks.

I personally still feel self-conscious when I’m using Siri in public, as I suspect lots of folks do as well.

This kind of thinking is already passé in China.

(Voice may be awkward) in the US. 100% not true in Asia. Voice is dominant input method whether public or private. ~ Mark Miller (@MarkDMill)

(F)or certain markets, like China…voice input was preferred over typing. ~ Ben Bajarin (@BenBajarin)

But let’s forget for a moment that the social awkwardness we fear is already irrelevant to a minimum of 1.3 billion people. Even for those of us who live in the West, our fear of social awkwardness is — well — it’s a little bizarre.

Apparently, this is considered ‘normal’ looking:

…but this in considered abnormal and abhorrent.

Who knew?

Don’t fool yourself into thinking that resistance to the new AirPods is anything new. There has never been a meaningful change that wasn’t resisted by self-righteous, holier-than-thou, know-it alls — like me.

People are very open-minded about new things – as long as they’re exactly like the old ones. ~ Charles Kettering

You don’t believe that resistance to the new is the norm? Then I strongly suggest you follow Pessimists Archive @pessimistsarc. (Even if you DO believe me, I still strongly suggest you follow Pessimists Archive @pessimistsarc)

Here are just a couple the things that the guardians of goodness have deemed irredeemable:

— CELL PHONES: Don’t you remember when cell phones were considered anti-social?

And pretty dorky looking, too.

— WALKMAN: In the 1980s, in response to the Walkman, a town in New Jersey made it illegal to wear headphones in public. That law is still on the books today.

— RADIO: A 1938 article opined that it was “disturbing” to see kids listening to the radio for more than 2 hours a day.

— AUTOMOBILES: Early automobiles caused as much controversy then as driverless cars do today. It was common for people to yell “Get a horse” as the new fangled cars passed them by (both literally and figuratively).

— BICYCLES: Yes bicycles. First, bicycles were decried for allowing the youth to stray far from the farm. Second, bicycles were blamed for leading to the “evolution of a round-shouldered, hunched-back race” (1893).

— PHONOGRAPH: In 1890, The Philadelphia Board & Park commissioners “started a crusade against the phonograph.”

— KALEIDOSCOPES: Yes, kaleidoscopes! In the early 1800s kaleidoscopes were blamed for distracting people from the real world and its natural beauty.

— BOOKS: You read that right. Books. Novels were considered to be particularly abhorrent. In 1938, a newspaper ran an article with some top tips for stopping your kids from reading all the time.

Little men with little minds and little imaginations go through life in little ruts, smugly resisting all changes which would jar their little worlds. ~ Zig Ziglar

————–

[pullquote]This isn’t the first time Apple has changed the way we do things[/pullquote]

You know, this isn’t exactly the first time that Apple has changed the way we do things.

The Macintosh got us to use the mouse. And that wasn’t a given.

The Macintosh uses an experimental pointing device called a “mouse”. There is no evidence that people want to use these things. ~ John C. Dvorak, In a review of the Macintosh in The San Francisco Examiner (19 February 1984)

(emphasis added)

Remember the day-glow colors of the first iMacs?

Remember the iconic white earbuds of the iPod (just 15 years ago, this week).

Remember what it was like before the Smartphone and how quickly we adapted to having a Smartphone with us all the time?

You think going from the Smartphone User Interface to AirPod User Interface is going to be hard? Are you kidding me? This is going to be the easiest User Interface transition ever.

If you’re strong enough, there are no precedents. ~ F. Scott Fitzgerald

[pullquote]How hard will it be to go from using headphones with our smartphones to simply using headphones all by themselves?[/pullquote]

AirPods build upon already existing habits. We’re already talking into our phones and bluetooth devices. Who cares if we start talking into our AirPods instead? And we already use headphones with our Smartphones. How hard will it be to go from using headphones with our smartphones and smartwatches to simply using headphones all by themselves?

Good products help us do things. Great products change the things we do. Exceptional products change us. ~ Horace Dediu (@asymco) 9/4/16

Siri Sucks

If you want to doubt Apple’s ability to create a truly meaningful Voice-First User Interface, look no further than Siri. If Apple is going to rely on voice for input, and Artificial Intelligence for output, then Siri needs to be top-tier. Right now, not only isn’t Siri “good enough”, it’s just plain not good. True, sometimes Siri can be magical…but far more often it’s maniacal.

Some people think Siri is a joke. I disagree. There’s nothing funny about the way Siri fails to do what it’s supposed to be doing.

The good news is Apple is very well aware of the fact that Siri is moving from backstage to center stage. The bad news is that Apple has yet to prove that they have the ability to transition Siri from the role of a bit player to that of a lead actor.

If you’re an optimist, like me, one hopeful precedent is Apple Maps. They too were widely panned when they first appeared. But gradually — year after year after year after year — Apple improved them until, over time, they have became “good enough” (although the title “best” still resides with Google Maps).

Part 4: The Apple Way

Nilay Patel, and other critics, can’t understand why Apple is doing what it’s doing.

Invention requires a long-term willingness to be misunderstood. ~ Jeff Bezos

There’s nothing new in that. Apple has always been misunderstood.

Human salvation lies in the hands of the creatively maladjusted. ~ Dr. Martin Luther King, Jr.

Apple has always been willing to take chances.

Success is the child of audacity. ~ Benjamin Disraeli

Boldness has genius, power and magic in it. ~ Johann Wolfgang von Goethe

And they’ve always been mocked for doing so.

The price of originality is criticism. The value of originality is priceless. ~ Vala Afshar (@ValaAfshar) 9/27/16

But why take chances?
Why do things that you know are going to be heavily criticized?

Clear thinking requires courage rather than intelligence. ~ Thomas Szasz

Well, for one thing, that’s where the opportunity lies.

The biggest opportunities are going after complex solutions that incumbents trained everyone to think could never be made simple. ~ Aaron Levie (@levie)

For another, Apple knows that the real danger lies in NOT taking chances.

Don’t play for safety. It’s the most dangerous thing in the world. ~ Hugh Walpole

Avoiding danger is no safer in the long run than outright exposure. The fearful are caught as often as the bold. ~ Helen Keller

If you risk nothing, then you risk everything. ~ Geena Davis

The trouble is, if you don’t risk anything, you risk even more. ~ Erica Jong

It is better to err on the side of daring than the side of caution. ~ Alvin Toffler

Nilay Patel doesn’t understand what Apple understands. You can make small incremental changes — baby steps, if you will — to improve an existing product. But designing a new User Interface is revolutionary and requires radical change.

A truly great design is innovative and revolutionary. It’s built on a fresh idea that breaks all previous rules and assumptions but is so elegant it appears simple and natural once it has been created. ~ David Ngo

You can’t get to a new User Interface by taking baby steps. You get there by making a leap.

[pullquote] The most dangerous strategy is to jump a chasm in two leaps[/pullquote]

The most dangerous strategy is to jump a chasm in two leaps. ~ Benjamin Disraeli

Apple is not going to sit around and wait for their competitors.

If you’re competitor-focused, you have to wait until there is a competitor doing something. Being customer-focused allows you to be more pioneering. ~ Jeff Bezos

The competitor to be feared is one who never bothers about you at all, but goes on making his own business better all the time. ~ Henry Ford

[pullquote]Apple is not going to sit around and wait for Nilay Patel’s permission[/pullquote]

And they’re not going to sit around and wait for Nilay Patel’s permission either, that’s for damn sure.

Standing still is the fastest way of moving backwards in a rapidly changing world. ~ Lauren Bacall

Apple thinks AirPods are going to be a significant part of their future.

The future lies in designing and selling computers that people don’t realize are computers at all. ~ Adam Osborne

So they’re moving toward that future today.

Most important, have the courage to follow your heart and intuition. ~ Tim Cook 10/5/16

Why is that so hard to understand?

With Touch Bar, Apple Again puts Faith in Third-Party Developers

Apple this week introduced new MacBook Pros and, in addition to bright new screens, fast new processors, and–of course—ever thinner form factors, Apple introduced a new hardware feature called the Touch Bar. It’s a high-quality miniature screen that runs the length of the keyboard, replacing the old F Keys row above the numeric keys. In person, this display looks great and it has a unique coating that makes using it feel super smooth.

As you might expect, Apple’s Mac OS and first-party apps use Touch Bar right away but, if it is going to become a must-have feature worthy of driving Mac buyers to upgrade, third-party developers will also have to embrace it. At launch, Apple already had buy-in from big firms such as Microsoft and Adobe. But the real question is whether the rest of the developer community will follow suit and, if so, how soon?
Sticking to its Guns
I’ve lamented before that, after using a number of touch-enabled Windows notebooks, using a non-touch Mac notebook felt like a step backward. It’s easy to see Apple’s decision to put a small touch screen above the keyboard as a simple, stubborn unwillingness to bend to the larger trends in the PC industry just as it once resisted larger smartphone screens. To its credit, with the Touch Bar, Apple has put together a touch technology its executives clearly believe is a better option than a touch screen.

Apple has long suggested that reaching up to touch the screen of a Mac is unnatural and that it breaks the usage model of the notebook. In theory, I agree touching a notebook screen seems unnatural. But I also know, now that I’ve been doing it for a while, it feels pretty natural to me to reach up to touch the screen to scroll a Web page.

Keeping the Touch Bar on the horizontal axis means, as a user, I’m not reaching for the screen. But it also means I’m looking down from the screen toward the keys to find the specific, custom keys each application serves up on the Touch Bar. I suppose over time you could develop some muscle memory for unique Touch Bar keys you use often, but that seems unlikely.

After the keynote on Thursday, I participated in a deep-dive session and had the chance to spend some time with the new hardware. I can tell you this much: The Touch Bar is addictively enjoyable to use.

It works as you would expect for tasks such as scrolling through pictures and video (fast and fun), changing system settings (precise as physical buttons), and using the calculator (it’s the killer app, seriously, you heard it here first).

But where the Touch Bar really shows promise is with large, complicated apps such as Microsoft Word and Excel, and Adobe Photoshop. These apps tend to have tons of features that get lost in icon-dense ribbons or buried deep in drop-down menus. With Touch Bar, the developer can surface some of these features, making them visible and more easily accessible for the average user. Power users might scoff but, for many people, this level of increased visibility could lead to real productivity gains.

Apple tells me it is very easy for a developer to enable the Touch Bar for their apps and noted that partners appearing on stage this week did so in a very short amount of time. It will be interesting to see if other major Mac software developers do the same in the coming weeks. And perhaps more telling if smaller developers, with more constrained development time and budgets, decide such an update is worthwhile for their users.

Touch ID Impact or 3D Touch Impact?
What’s not clear to me yet is whether the Touch Bar is one of those new features that will instantly resonate with customers and become a part of their daily lives or if it is merely an interesting technology that makes for a great demo but never really takes off in common use. A good example of the first was Apple’s introduction of Touch ID on the iPhone (and available now on the MacBook Pros with Touch Bar). That technology fundamentally changed the way the vast majority of iPhone users interact with their phone every single time they pick it up. An example of the latter is 3D Touch, an interesting technology I often forget is on my phone unless I accidently trigger it. 3D Touch may eventually become an integral part of the iPhone interface but, right now, it doesn’t feel like most people see it that way. It’s too soon to tell which way the Touch Bar will go.

One thing is clear: Apple sees it as a feature some customers will pay to have, as the 13-inch MacBook Pro with Touch Bar carries a roughly $300 premium over a comparable model without it (Note: The Touch Bar model also has a better CPU). After a brief hands on, the Touch Bar feels to me like an important refinement to a tried-and-true interface. I’m not sure yet if it’s better or worse than a touch screen, but I look forward to testing the hardware in the coming weeks to see how it impacts my usage. And I’ll be watching closely to see which developers embrace the technology and which do not.

Reflections from a Day with Microsoft and a Day with Apple

Getting Thing Done vs. Doing New Things – by Ben Bajarin

My friend Benedict Evans had a great post a while back where he outlined how, when a technology is toward the end of its cycle, it tends to be at its best. This sticks in my mind as I reflect on the last few days with both Microsoft and Apple releasing some of the best PCs we have seen in some time. In fact, if you look at the modern PC lineup from all major PC OEMs overall, they are they best we have ever been.

This makes sense for a category over 30 years old. By now, we know exactly what people do with these devices and are able to focus innovations in hardware and software on the tried and true behaviors of PC users. Here again, Steve Jobs’ metaphor of the PC being a truck is proving true. When you look at the modern innovations of trucks — how much they tow, innovations in the truck bed for more durability and heavier loads, the lowering of the tailgate with a gesture, etc. — they are optimized for workflows of a very specific type of worker. This is exactly what we are seeing with the PC category.

The focus of all hardware and software in the PC category is not about doing new things. It’s about doing the things we need to do even better. There is a hyper-optimization trend for the specialized user who values things like a full tough screened all-in-one computer, or pen input, or a TouchBar. But we must not forget this is a very small segment while also a valuable one. It makes perfect sense for Apple and Microsoft to focus their innovations in hardware for a group who values it. This, again, is exactly how trucks are made and why trucks are not cheap.

We are expanding our tools for computing so that we are now in a space where the type of job you have will dictate the type of tool (PC) you use. This reminds me of hammers. I have a hammer. It is a very basic hammer and, as far as hammers go, there is nothing special about it. My brother-in-law, who is a carpenter, has a different kind of hammer. His hammer is specialized to the task he does every day and makes his life easier. He has a framing hammer which has a longer, curved handle, larger head, better weight distribution to drive framing nails into studs with less effort, yet innovations in wood, carbon, and steel make it lighter than my hammer. It also costs $100. He hammers nails every day and I hammer maybe once a month. Hence, I’m not spending $100 on hammer. Yet, while he could get away with using my hammer in his day job, he uses a tool better suited for the task. This is exactly what we have now in the PC category.

When you hammer nails all day, you look at framing hammer features and functions and can see why they are valuable to you. You are self-aware of your pain points and what products have features which speak to you and help you do your job better.

Looking back, competition is what got us here. It was Microsoft’s desire to respond to the competition of the iPad that led them down the path of an ecosystem of touch-based PCs in the market today of all shapes and sizes. I’d argue it was competition from touch-based PCs which led Apple to the TouchBar. All desktops and notebooks used to look the same in form and function but now we have a diversity of the portfolio, each focusing on a piece of the pie instead of the whole pie itself. This is good for everyone who needs a PC on a daily basis to get stuff done.

From a hardware standpoint, what I found interesting was how the difference in philosophy between desktops and notebooks and between Apple and Microsoft have led the Mac to be on an island all by itself. No touch screen, but TouchBar. Which, in my mind, means the iPad Pro is what is actually competing with Windows PCs and tablets that are pushing touch experiences and software as a part of their work flow. If consumers compare the tools this way, I think things may get very interesting from a sales perspective.

Now, thinking about the future. Everything from this week is about getting things done, not doing new things. The big question facing the industry is, what’s next? Inevitably, letting humans do things not possible before with any previous tool is part of what is next. My gut says it is something in the AR/VR/AI spaces. This is where Microsoft’s announcement around Windows that the upcoming release will support Windows holographic VR and AR experiences is interesting. Arguably, by the end of next year, Microsoft could have well north of 400 million PCs in the market capable of having an AR/VR experience with hardware built on the Windows Holographic platform which can start as low as $299. As software developers start enabling humans to do new things, then we are breaking new ground. This is exciting and the next decade is going to be very interesting but the PC, as we know it, is nearing its end. Parts of the old will still linger in the new but it will be all the new things made possible with the latest tools that will lead us to look back at PCs of old and reminisce.

What Was at Stake this Week for Microsoft and Apple? – by Carolina Milanesi

Ben focused on the touch approach of these two companies and the impact of what was announced this week might have on the market. I would like to take a moment to talk about how different these two events were as far as the impact they will have on the two brands.

For Microsoft, we were at their device event yet we were asked to imagine what we could do with Windows 10 and with the Creators edition in particular. It took almost an hour to get to the new devices in Microsoft’s attempt to continue to balance a platform for all the partners and their own portfolio of devices. Overall, however, the day did a lot to lift the Microsoft brand and Windows ecosystem.

Paint 3D and the whole focus on bringing 3D to the masses; People, the new app that puts people at the center of your communication flow; HoloLens in B2B and B2C — all point to a Microsoft really focusing on setting the foundations for the next era of computing and investing in becoming the go-to brand for the next generation. As I mentioned on Twitter during the event, it is so refreshing to see Microsoft looking ahead to the next generation of users without letting the current users drag them down and limit their possibilities.

Surface is the best showcase for that next vision. A vision that started with Panos Panay’s team rethinking the PC in 2012. A vision that, while from a hardware perspective required a few iterations, it was one others within the Windows ecosystem as well as Apple and Google validated by launching similar products. What we saw yesterday however, is even more powerful than the first Surface as software, apps and hardware really came together with the Surface Studio to an extent we have not seen before. Validating Steve Job’s vision: “People who are really serious about software should make their own hardware.”

So let’s forget about the fact the Surface Studio might not be for everyone because of pricing and the focus on drawing/sketching. Let’s focus on the excitement the device is bringing to the Microsoft brand and Surface by drawing people into stores. Let’s look at the impact the Surface Dial might have in having developers think of how to take advantage of it. Finally, let’s think of the people that might end up considering a Surface Pro because of Surface Studio.

At Apple, the story was different. Apple did not need to re-energize its brand. Nor did it have to show they can deliver a piece of hardware very much in tune with its software. Apple needed to deliver a new MacBook Pro many have been waiting for. Apple could have easily followed the trend and delivered a touch-screen enabled MacBook Pro – at the end of the day they said they would never do a pen for the iPad until they did a pencil. Instead, they remained true to their idea that, when you have a keyboard, touch should be close to where you fingers are most of the time — is close to the keys, not the screen. So the MacBook Pro gets the Touch Bar. Apple reinvents the MacBook Pro, not its brand or its vision.

As I looked at the Touch Bar, I started thinking about how iPad Apple reinvented Mobile Internet Devices and Tablet PCs by focusing on apps and building on the ecosystem they created for the iPhone. Through apps, we did things differently. The Touch Bar has the potential to do the same for the MacBook Pro. Touching something with my finger in the same way as I would do with my mouse does not necessarily change my workflow. But we saw today how Photoshop and Final Cut Pro took advantage of the bar to perform common editing tasks differently. This is the power the Apple ecosystem has over Windows. While the Mac app store has not been as vibrant as the iOS one, the Touch Bar might ignite more interest, especially as the MacBook Pro is now clearly positioned as a higher-end device with users that are prepared to invest more in their tools both for work and play.

Apple also had to explain where the MacBook Pro and the iPad Pro sit and, although the rationalization of the story here might be a little more difficult to follow, I believe it boils down to one thing: Apple offers choices. Their computing offering spreads from the iPad Pro 9.7″ all the way to the MacBook Pro 15”. This explains the pricing we saw today – aside from the fact Apple might also want to make a statement this was not a simple refresh.

Two school of thoughts on touch, no right or wrong. Two brands that, despite their differences, have done a lot this week to show that the PC market still has innovation and, while sales will not bounce back overnight, we might see much more engaged users going forward.

Microsoft’s Two-Pronged Creativity Push

Microsoft has been refining its identity and strategy since Satya Nadella took over as CEO, and much of that focus and strategy has been centered on productivity and helping people get things done. That vision has married well with Microsoft’s renewed emphasis on business products and services but it has also reinforced the sense that Microsoft doesn’t get consumers or, at least, the consumer halves of its users’ lives. Microsoft has needed a rallying point for a set of efforts around consumer use cases, and it appears to have decided on creativity as the catchphrase for this push, as demonstrated at Wednesday’s event in New York City.

A two-pronged strategy, not a single device

That creativity push has two main strands to it and it’s important to look at the totality of what Microsoft announced to see the full picture. I’ve seen a lot of people talking about the hardware side of the announcements – the Surface Studio – as evidence this effort will be marginal but I think that misses the point. This new creativity emphasis includes both new creative tools within existing products like Windows and Office and new hardware in the form of the Surface Studio and the existing Surface product line. Microsoft seems determined to challenge Apple’s historic edge among professional creatives but it is also making a play for the creative element within a broad base of consumers and professionals.

Yes, the Studio is a high-end PC that’s going to be out of reach for the vast majority of consumers, most of whom will be left with traditional PCs that don’t have all the capabilities Microsoft showed off today. But the role of the Surface Studio is, arguably, to put a stake in the ground that says Microsoft is serious about serving the creative community, not to address the needs of its mainstream audience. However, by unveiling premium hardware that’s both beautiful and innovative, Microsoft is sending a broader message about its commitment to this space and to creativity more broadly.

Where most ordinary consumers will encounter Microsoft’s creativity push first is not in hardware but in software. Microsoft’s new Paint 3D app what looks like a GarageBand competitor called Groove Music Maker. Other enhancements in the new version of Windows 10 are more mainstream attempts to establish Microsoft as a creativity brand. Whereas the Surface Studio is a niche product, Microsoft now has over 400 million users of Windows 10 who will get the free Creators Update in the spring (or earlier, if they’re on the Windows Insider program). That’s a more mass-market strategy around creativity and has to be seen as part of the same concerted push to demonstrate leadership in this area.

Changing perceptions takes time

Though Wednesday’s announcements are a good start, it takes a long time to change deeply entrenched perceptions. Microsoft has its work cut out in trying to convince potential customers its products are more than just the workhorses they’ve always been for many. Workflows and cultures in many creative companies are built around Apple products and that won’t change overnight. However, Microsoft’s timing for these new products is great, coming at a time when Apple has been accused of neglecting its creative community. Apple, of course, has its own event on Thursday and will get an opportunity to make its case for its own vision of the future of computing.

It’s also easy to overestimate the role creative professionals play for Apple – though its Mac base was once heavily skewed towards these users, it’s long since broadened its appeal well beyond those users and well into the mainstream. Though losing creative professionals as a constituency might be painful for some at Apple, its mainstream appeal is what matters. It needs to shore that up with its announcements this week and beyond. In addition, Microsoft still largely relies on third-party developers to meet the needs of professional creators, whereas Apple does much more to meet those needs directly through products like Final Cut Pro and its add-ons, Logic Pro, and so on. Microsoft has Office for more generic work tasks but still doesn’t have a direct presence in the more creative fields specifically.

Lastly, the 3D enhancements to Paint and other apps were a mix of interesting and gimmicky. I’m not sure how many people are actually interested in creating 3D scenes of their trips to the beach but 3D animations in PowerPoint could enrich presentations in useful ways. The 3D push feels as much about finding a useful way to tie HoloLens into the consumer story as it is about creativity. Microsoft has put a lot of its next generation interface efforts into augmented reality with HoloLens but it has ended up with a product that’s far from mass market in nature. Its VR announcements on Wednesday are a concession to the reality that VR is where today’s mass market opportunities are, though Microsoft’s PC-centric push with $300-plus headsets will have a smaller addressable market than existing smartphone-centric solutions selling for around $100.

Cue Apple

Of course, now we all wait and see what Apple has in store Thursday. It obviously won’t respond directly to announcements made the day before but, as I wrote on Tuesday, it does need to demonstrate whether the next round of competition between Windows laptops and MacBooks will be defined by hardware performance advantages or by philosophical differences. Apple has been using the iPad lineup to meet many of the needs Microsoft has in its more PC-centric Surface products for Windows users, so it will be interesting how Apple sets its new MacBooks apart. Not only creative professionals but mainstream users have been waiting for updates to the MacBook Pro and either an update to or replacement for the MacBook Air. Apple’s event on Thursday will need to give them compelling reasons to upgrade to new devices rather than jumping ship to Windows.

Could AR be Apple’s Next Big Thing?

In August, I wrote a piece suggesting Apple did not have any VR products that could hit the market any time soon.

Since then, Apple CEO Tim Cook has gone on record stating AR seems to hold more promise for the market than VR and, while not ruling out a VR play directly, it seems AR may be where Apple is focusing more of its energy these days.

As you know, AR and VR are one of the hot new areas the tech industry is focusing on. In fact, as I stated in a recent column, AR and VR will most likely become the next major user interface that will drive the next generation of computing at all levels.

But I think AR and VR, in what is called “mixed reality”, may be one of those transformational technologies that actually changes the computing experience altogether.

At the recent Wall Street Journal D conference, Microsoft’s CEO Satya Nadella made an interesting observation. He stated, “The ultimate computer is this mixed reality world, where your field of view becomes this infinite display”.

Indeed, the concept of having an infinite display to see and interact with your digital content is fascinating. We got a taste of this with Pokemon Go but take this to more extreme visuals. Walking down the street, one can see their outside world but relative images, content and data could be superimposed on these scenes and would deliver a richer view of your surroundings. Or, if you need directions as you walk, the map is right in front of you and shows you where to turn and guide you to your location in a more visual manner.

In listening to Tim Cook talk about AR, I get a sense he has a similar vision of an infinite display being important to any product they bring out in the AR category. However, I suspect his ways of delivering on this may be a bit different than the one Nadella and Microsoft envisions. Microsoft has already shown their hand via their AR-focused HoloLens platform, delivered through large and expensive goggles. The good news is the entire computing experience is built into the headset, unlike the VR headsets from Oculus and HTC’s VIVE that are tethered to a special PC or laptop with a dedicated graphics card to drive the VR experience.

But scuttlebutt in the AR and VR circles is Apple’s approach to delivering AR may be more through an iPhone and, perhaps at a touch of a special strip on the bottom of the screen, it could instantly overlay AR-based info and content in the context of what you see through your iPhone screen. When I first heard this idea tossed around from some VR researchers, it got me wondering if this made sense.

One of my big concerns about delivering AR through goggles or glasses goes back to my own experience with Google’s Glass that I tested when they first came out. Besides making me look like a geek and like I was threatening the privacy of anyone I was with, they just did not work well as a vehicle for delivering data and information through a small screen that was hard to view. These glasses or goggles make sense for use in dedicated applications like VR gaming or in vertical markets where these types of VR/AR glasses can be used for specific needs but not as everyday digital eyewear.

On the other hand, if I just hold up my iPhone and point it at a site and AR-based images and content are superimposed on the screen, this would be more culturally acceptable as well as being a very effective way to add AR to the smartphone user experience. For this to happen, Apple would have to do a great deal of work in software tied to AI and machine learning. It goes beyond what they do with Siri right now. At the moment, Siri is a voice-based AI. But, superimposed AR images and content would need to draw from an even larger data base of pictures, images, and information with contextual context coupled to AI and machine learning for this to work.

Recently, Apple hired some top talent in AR, VR, AI and machine learning and most thought this was specifically related to making Siri smarter. But, if Apple’s next big thing is AR delivered via an iPhone, these new hires make even more sense.

Now, this does not preclude them from doing some type of goggles to augment this AR iPhone experience, especially if their ultimate solution would be mixed reality applications where VR is also a part of their solution.

However, given Tim Cook’s rhetoric that is centered more around AR, maybe optimizing the iPhone for AR apps is their starting point and, as it evolves and the technology gets better, perhaps they expand what they do and can offer apps also include VR.

But if AR is their next big thing and it comes initially via a new iPhone, it would not surprise me if Apple becomes the one who brings AR to the masses while most competitors focus on the higher end of the AR and VR market.

Painting a Clearer Picture of the Global Smartphone Market

Oftentimes, our peers in the analyst community put out press releases on category and vendor market share numbers and the true insight of the market gets lots in a set of very generic statistics. I understand why they do this. They make them fuzzy on purpose so people inquire about their data and pay them for the broader cuts. My frustration with this approach is it almost always leads the press astray with a headline because the media rarely understands how to ask the deeper questions. So a headline like “Nobody is buying an Apple Watch” gets published when it is total nonsense. I cleared this up in this piece where I outlined why we are revising some parts of our model for wearables going forward. That was just one example (of many) that happens when market share numbers get reported. In an ever increasing effort to more thoroughly educate our readers, I’ll make this point. Statistics are not insights. The insight comes from how those statistics are interpreted and the deep truths of what is happening in the market and why are communicated. Prepare yourself for a flood of similar headlines around the smartphone market.

I’d like to make a few generic smartphone market points then focus the rest of the article on what is happening in China, since that is where I foresee most of the disingenuous data will come from.

Globally, there are only six brand names worth keeping an eye on right now. They are, in no particular order: Samsung, Apple, Huawei, Xiaomi, Oppo, and Vivo (I am leaving LeEco out for the moment until I see where they are in six months). Oppo and Vivo are subsidiaries of a larger Chinese company called BBK, who also has a financial interest in OnePlus. Only Samsung, Apple, and Huawei sell more than 100m smartphones per year and it remains to be seen if any other brand can cross the 100m annual threshold.

This chart, which I have adapted from Morgan Stanley research, paints what I think is the best look at understanding a critical point about the smartphone market — pricing.

As you can see, the chart paints a picture of who makes money and who barely does, even if they ship large volumes of smartphones each quarter. This also tells you where their focus on the market is and thus, where their growth can come from.

Apple sells annually more than any other brand in the premium tier of the market. They have a near monopoly on the high-end and that is extremely unlikely to change anytime soon, if ever. Only Samsung should even be considered in the conversation for high-end smartphone sales. For them, that equates to around 60-70 million high-end phones each year (potentially declining) to Apple’s 180-190m high-end phones sold annually (potentially increasing). For Apple, in nearly all the big markets where they compete, they have nearly saturated the number of customers who can afford north of $500. So, their cycles are now largely replacement driven or driven by switchers. Either way, it’s a slower growth curve than when they were adding tons of new users. This is why analyzing Apple’s growth prospects now largely depends on understanding replcement cycles, payment plans, and other dynamics of replacement markets.

Interestingly, it appears global smartphone shipments may be up in 2016 which is contra to what most were forecasting early on. I attribute this to a much more predictable upgrade cycle in the developed markets than what was anticipated in early 2016. This, however, is leading many to believe 2017 may be more of a down year and most consensus data we see has people shifting the dynamics that were leading to negativity toward 2016 to 2017. Then again, look for accelerated growth overall for the category in 2018.

When it comes to a big key market like the US, we are seeing what looks like a bigger upgrade cycle this fall than originally thought. Which means it is possible next year’s cycle is not as strong. For Apple, the idea of a 2017 super cycle may be more myth than reality. Right now, China is the most interesting market to talk about as some new developments are starting to take shape.

What will get missed in a lot of the China market share forecasts is the biggest factor changing the shape of market share is tier 3-6 (the lower income tiers of China) are starting to contribute to the growth of China as a whole. When you look at brands I mentioned before like Oppo and Vivo, which look to having impressive gains, they are acquiring those gains given their strategy to attack the tier 3-6 parts of China with offline stores and nicely designed phones and specs in the $200-$300 range which is largely considered mid-range nowadays.

The rise of Oppo and Vivo are showcase examples of a major theme about how developing a strategy for the next 1-2 billion consumers who are yet to get smartphones in the least developed parts of the world is a completely different strategy than how you go after the current most profitable billion plus consumers with more mature and refined interests and greater disposable income. Only a handful of companies can do this and globally I think Huawei is building this strategy as they look to Africa and other continents with hundreds of millions of people yet to get a smartphone. This dynamic will likely boost the market share of certain vendors but it will be important to know what price point they are shipping in volume as it will be in the lower tier. Apple is clearly not going after this audience and it is unknown how Samsung will go after them. Both of these companies seem to be hunkering down to go after customers who don’t want to compromise and that self-identification only comes with time as consumers themselves learn what they want.

An interesting example of this is in India where it is clear Apple is not the favorite (due to their high prices) to see a big share gain any time soon. However, in a recent study my firm conducted in India, we asked which brand consumers felt was the market leader. Overwhelmingly, 61% of consumers in India said Apple was the clear market leader citing a range of reasons, mostly around software quality, design, etc. They acknowledge Apple is the best and said Apple is the phone they WANT to buy. Yet, they still are not going to, for a variety of reasons our research indicates Apple can solve.

This is a prime example of my thesis that, as portions of consumers in immature markets mature, they will slowly gravitate toward Apple. Even if the growth happens incrementally, I’m convinced Apple will still grow their unique consumer base, which could hit a billion users in the not too distant future.

There will always be tiers of smartphones but I maintain the strongest fuel for growth is brand. We can bet on those who have strong global brands. Companies like Xiaomi, Oppo, and Vivo are attempting to make a global brand but they will live or die on their success to become a brand consumers trust and love.

There is no question China is a very big market where we will see many companies attempt to create a global brand. Right now, Samsung, Apple, and Huawei remain the most fundamentally sustainable global brands, with a variety of different market nuances helping each independently. The main story to watch is if Vivo, Oppo, Xiaomi, and perhaps LeEco can break free from the cutthroat China market and become global brands. This is the hill they have to climb and it is going to be more costly than I believe they anticipate.

One last point on pricing. I maintain that, if you start in the low-end/low mid-range, it will become nearly impossible to ever go upstream too far. Once you sell a cheap phone, I think a “cheap” stigma will always be on the minds of consumers and will be very hard for those brands to compete in segments with Apple and Samsung. This is still a thesis but we have yet to see evidence it is not true in computing segments. I’m happy to be proven wrong and will point it out as a key case study if it happens.

I leave you with my estimates for Q4. While the line looks bad for Samsung, our research indicates it is likely they can recover from this as most of their customers will remain loyal. It could impact their growth prospects, however, which is a key dynamic to keep an eye on.

Creativity Is the New Productivity

Every three months, we are reminded of the doom and gloom of the PC market. As PC vendors report their earnings and various bean counters – I used to be one – publish their market share numbers, we are reminded replacement cycles remain long and consumers do not seem interested in upgrading.

I’ve discussed before what I see as a crucial step in breaking this process: stop talking about PC replacement and start talking about what the new PCs have to offer and the role they play in your portfolio of devices. This week, with both Microsoft and Apple holding their device events, I hope this is exactly what we are going to see.

If we look at the invites the two companies have sent out, there is not much to go on. Microsoft is a little more generous in giving us a taste of what the announcement will be. We assume it is a device event because of the time of the year, although the invite itself says, “What’s next for Windows 10”. We are also invited to “Imagine what you’ll do”, which is as fluffy as an invitation can be to open our minds to new possibilities. Yusuf Medhi, VP of marketing of the Windows and Devices group, urges us to “get ready to get creative”. So it would be safe to guess it is about a device that is going to focus on creativity.

Apple’s invite was even more cryptic, saying. “Hello again” — which many connected to the “Hello” used for the Mac launch in the 80s. Rumors have it we will see three different devices: a 13” MacBook and a 13” and 15” MacBook Pro. Aside from the device specs, what will be interesting is how Apple positions these new devices against the iPad Pro. As many of you will remember when the iPad Pro was launched, Apple had an ad that asked, “What if your PC was an iPad Pro?” Of course, while their focus was on the competing Windows devices, the question raised doubts in certain minds on what the role of the Mac will be going forward vs the iPad Pro.

Mobility Changed the Meaning of Productivity

I think it is important to look at how our workflow has changed over the past few years to understand what role different devices could play in our life.

According to the dictionary, productivity is a measure of the efficiency of a person, machine, factory, system, etc., in converting inputs into useful outputs. Productivity is computed by dividing average output per period by the total costs incurred or resources (capital, energy, material, personnel) consumed in that period. When we moved from analog to digital productivity and creativity were very much intertwined as thanks to computers we were able to do things we had not been able to do before and in much less time.

I strongly believe that mobility change the meaning of productivity.

The “connected anytime, anywhere” world we live in has put more emphasis on the speed of that output rather than the complexity or quality of it. Gone are the days when people put their “out of office” hat on and are not available while they are out. The only time I put my out of office hat on is when I am traveling in different time zones and it is really more to apologize in advance for the delay in getting back to people than warn them I will not be available. Whether through social media or email, mobility made it all about the timeliness of the information we create and exchange. Because of this, we have become accustomed to triaging our work on the go with devices that are very light weight, have smaller screens, and have, in more cases than not, built-in connectivity. While we might not be creating a full presentation on the go or might not be writing the next New York Times bestseller, we see what we accomplish in our day on the go as being productive. These devices have allowed for what used to be down time during travel or in between meetings to be an opportunity to keep up with what is going on at the office when we are not physically there. It has also created the opportunity to turn us all into control freak workaholics but that is a different story.

Work and Play is More Fluid

The other side of the coin for this always-on world is work and play are more blended. Both with content and tools, we cross boundaries all the time. Consumerization of IT, bring your own device, bring your own app, the cloud, and real–time collaboration are some of the result or the spark of such blending. This means when we look at our next PC/Mac to buy, we want to see familiar technologies we have come to love and depend on like touch, voice, high-resolution screens, fast processors, and even pen support. Having all the apps we use every day on our PC/Mac would also be great but, given that our phones are never far away from us, this is not necessarily a must.

Creativity Is All About Thinking Outside the Box

So, if productivity has more to do with our response time, making highly mobile devices more suited for it, what is creativity and what kind of devices does it require?

According to the dictionary, creativity is the mental characteristic that allows a person to think outside of the box, which results in innovative or different approaches to a particular task.

First, let me say I realize not all white collar jobs are created equal and require the same skills and tools. I also realize there are many verticals, from health to education that, depending on where you look, are either stuck in an analog world or are full on into a digital one.

If I consider how my job has changed over time, I cannot help but see the impact of creativity in what I do. I see my job as delivering insights and advice to my clients. That has not changed since I started over 16 years ago. What has changed is what I deliver and how. I used to engage in three main ways: writing reports, delivering presentations and taking calls. Today, while I continue to engage that way with clients, it is not the only way I deliver value to them. Social media, interactive webinars, podcasts, and blog posts are added to my output list. Having the ability to manipulate charts as I present using Pixxa, or to draw a mind map on my iPad Pro or Surface during a meeting, I am embracing new technologies and devices to make my workflow more effective. When I am not on the go, I appreciate a device that gives me a non-compromised experience. A device that allows me to be immersed in what I am doing whether that is combing through thousands of data points, following a tweetstorm, watching a live stream of an event or recording my weekly podcast or experiencing a mixed reality environment.

This is good news for PC vendors because, if I am not alone, it could mean consumers shopping for PCs will be looking to invest more money for that non-compromised experience. It is also good news for platform owners who will have another platform for consumers to engage with. This last point is, of course, particularly important for Microsoft who needs to continue to build engagement with Windows 10.

In order for this to happen, however, we need to see more than just a beautiful design, which has been the focus for many vendors. Looking like a MacBook Air is not going to be enough for users who really want to have a rich experience. The focus should be on pushing the boundaries of how hardware, software, and apps all come together. While this gives an advantage to the Microsoft Surface family, and Apple’s Macs, over other manufacturers who do not control their entire destiny, I strongly believe this will be a win for the entire industry but most of all for the consumers.

Context for Microsoft and Apple’s Events

This week will see PC-centric events from both Microsoft and Apple, with Microsoft launching its latest Surface devices on Wednesday and Apple updating its Mac line on Thursday. As such, it’s interesting to think about the context for these announcements as a way of thinking about what might be announced and how we should see it. It’s also interesting to think about these things in the context of earnings – Microsoft reported earnings last week and Apple will report on Tuesday this week. In both cases, ahead of these announcements.

Microsoft – a growing but small Surface revenue line

Microsoft’s earnings (see here for a deeper dive) showed the Surface revenue line is growing at a decent clip – 29% year on year and 38% on an annualized basis. Trailing 4-quarter revenues for the Surface are shown below:

However, quarterly revenues are settling into a pattern where the fourth quarter is the biggest and each subsequent quarter drops off a bit until the next refresh of the hardware. So, if the trend is to continue, this week’s event needs to give the line as big a boost as previous years’ events have. However, it seems more likely we’ll get modest spec bumps to the existing hardware alongside a new all-in-one PC. If that’s the case, revenue will more likely dip year on year for the first time because spec bumps alone likely won’t drive a new buying cycle for the existing products and an all-in-one won’t drive the same demand as the existing Surface products. Microsoft has effectively conceded as much, as its guidance for this quarter suggests a drop in Surface revenue.

In the grand scheme of things, Microsoft’s Surface revenue, though useful, is still a tiny fraction of overall PC revenues, or even of Mac or iPad revenue at Apple. This is a narrow strategic play for now and, although the all-in-one will expand the addressable market, it won’t do so dramatically. The original purpose of the Surface line was to show OEMs what could be done – what’s the purpose of this line now? Satya Nadella is famously more skeptical of the value of first-party hardware than Steve Ballmer was, so why stick with this product and what’s its future?

Apple – if iPad is the future, what is the Mac?

The question for Apple is quite different. The Mac was always Apple’s core business until first the iPod and then the iPhone came along, but has recently been either Apple’s second or third largest hardware product line by revenue and is consistently the third by shipments after the iPhone and iPad. Mac sales have been slipping lately, in part because it’s been such an unusually long time since much of the Mac line received a significant refresh.

Perhaps more significantly, Tim Cook has recently referred to the iPad Pro as “the clearest expression of our vision of the future of personal computing” and recent iPad Pro ads have referred to the iPad Pro as a computer. So, if the iPad Pro is both a computer and Apple’s vision of the future of computing, what is the Mac? In an interview with Backchannel a few months ago, Phil Schiller suggested a possible answer in talking about his philosophy of Apple products. He first said the philosophy should be to use the smallest or most portable device that was up to the task and then, when asked about the role of the desktop Macs, said:

“Its job is to challenge what we think a computer can do and do things that no computer has ever done before, be more and more powerful and capable so that we need a desktop because of its capabilities,” says Schiller. “Because if all it’s doing is competing with the notebook and being thinner and lighter, then it doesn’t need to be.”

The role of the laptop was described as basically doing almost everything a desktop could so, in some ways, it’s Schiller’s vision for the MacBook line, too. Given how the recent iPad Pro ads have highlighted the capabilities of that device relative to traditional computers, what is it that computers – and Macs specifically – can do iPads can’t? I’d guess we’ll get some answers to that question on Thursday. Given Schiller’s remarks, this will probably be about sheer power, among other things, but I’m curious to see what else is part of this story.

The broader picture – hardware capabilities versus philosophical differences

Despite all the individual motivations for both companies, perhaps the most interesting thing to think about is how competition between the Windows and Mac lines has evolved over time. For quite some time, Macs enjoyed meaningful hardware advantages – they were better looking, more portable, had better battery life, and so on, especially once the MacBook Air launched. It took several years before Windows laptops even came close in terms of some of these key features and so the hardware advantages were an important element of the competition between the two.

But recent advances in Intel chips and other enablers have permitted Windows manufacturers to get a lot closer in terms of hardware performance. While design differences are a matter of opinion, at least some Windows laptops are better looking and a number of premium Windows laptops now combine MacBook Air-like thinness and battery life. They even have trackpads that perform well too, something Windows laptops seemed bafflingly unable to achieve for a ridiculously long time. At this point, I’d argue the main differences between Macs and Windows PCs are philosophical rather than grounded in meaningful hardware performance differences. Do you prefer the Apple or Microsoft approach to software? Do you prefer the Apple or Dell (or HP or Lenovo) approach to hardware? Does the tight integration of those things matter to you and who does that better – Apple or Microsoft?

With that in mind, one of the most interesting questions in my mind with regard to this week’s events is how this competition looks at the end of the week. Has Apple re-established a meaningful hardware advantage that will again take Windows PCs years to claw back? Or does Apple reinforce the philosophical differences that have arguably become more important over recent years? The release of the 12″ MacBook last year suggested Apple could still open up hardware advantages in portability relative to Windows laptops but did so at the expense of performance, much as the original MacBook Air did. Can Apple now bring some of the same hardware chops to the more powerful members of the MacBook line, improving their portability without sacrificing power? Or will we see more subtle improvements in hardware performance combined with an emphasis on the power of macOS?

I’ve focused here on Apple’s role in moving this competition forward because we largely know the state of the Windows PC market. Yes, it’s possible Microsoft may innovate in interesting ways on the all-in-one side, but I think we’re all expecting more meaningful across-the-board updates from Apple rather than Microsoft this week. But Microsoft’s event may also change these competitive dynamics subtly. Rumors of a revamped Paint app for Windows would highlight an attempt to hit Apple in one of its traditional strongholds – bundled creativity software – so it will be interesting to see how that plays out as well. All told, I think what we see this week from both companies will set up a new phase in the competition between these two companies and their respective ecosystems.

Securing our Internet of Things

If we learned one thing from the DDoS attack that took down many websites on Friday, it is we still have a long way to go when it comes to securing all the connected things in our lives. This particular attack used insecure devices like IP-connected cameras with weak security as tools to perform the attack. This type of focused attack is one way to interrupt internet service and could be used to take down, not just websites, but our payments grid or any number of things which could wreak significant havoc on our society. Let’s hope this attack serves as a wake-up call for the industry.

This whole ordeal caused me to think about the range of connected devices I have in my house and wondering about their security. Most of the devices I have, I have personally secured and I don’t have my DVR (one of the types of IoT devices used in this attack) connected to the Internet. In most cases, I know the security I have in place for my IoT devices but one in particular I had to look into more deeply–my solar panels. Our solar array is connected to our network so I can monitor how it is performing. We secured the log-in with a strong password but they can also be remotely accessed in case we need support from the company we purchased the system from. It was this remote access that I was not aware of the security measures in place.

In many cases, I was fairly aware of the security measures. I’m guessing most consumers are not. The challenge the industry has is to bear the burden of taking the necessary steps to provide increased security and encryption of these devices because the reality is many consumers will not know to take additional measures themselves.

Apple outlines the security measures in place for Homekit devices and this is a solid initiative to provide a framework for security. However, many of the companies selling connected refrigerators, thermostats, IP cameras, coffee pots, etc., are likely not to use just Homekit but other emerging standards as well. The burden of responsibility is on companies providing these consumer products to enforce either stronger passwords or two-factor authentication (or both) in order to make sure consumers are taking the nececcesary steps to secure their IoT devices so they can’t be used for malicious cyber attacks.

Interestingly, in this case, it wasn’t necessarily the fault of the brand selling the IoT products but the component company behind them. Hangzhou Xiongmai Technology admits its products were used in the attack as a malicous worm exposed the weakness in the default security in many of the products their components are found in. The company has said they have sinced patched this vulnerability and consumers should update their firmware if they haven’t already.

My concern with the state of the market right now is the companies rushing to capture a part of the growing connected and smart home market are not fully thinking through the implications of dozens of connected devices in consumers’ homes they may not secure correctly. Consumers, although they will say they want and understand the value of security, rarely take the steps to ensure their own security and privacy. This is why it is so important for companies to bear the burden of this for consumers where they can or making sure they help consumers step up the level of security around their connected products.

Podcast: Dell-EMC World, Le Eco Launch, Apple Car

In this week’s Tech.pinions podcast Jan Dawson, Carolina Milanesi and Bob O’Donnell discuss the recent Dell/EMC World event, debate the potential impact of new Chinese content/device maker LeEco, and analyze recent news around Apple’s rumored car efforts.

If you happen to use a podcast aggregator or want to add it to iTunes manually the feed to our podcast is: techpinions.com/feed/podcast

Digital Assistants: Me Smart or World Smart?

Digital assistants are hot, that much is clear. What is less clear is what role they will play in our life. More importantly, how much we will let them be part of our life. I personally believe the extent to which we will feel comfortable including them in our lives will depend on how much we can trust they know us and how human-like our interaction with them can be.

I have spoken in the past about Jarvis and Mary Poppins as the two types of assistants I see vendors currently focusing on. One being very personal and one being more shared across family members. Both these roles imply quite a deep knowledge and understanding of what I as an individual and we as a family unit do, how we function, what we like and dislike. While asking our assistant for weather updates, fun facts of the day, alarm settings and correct spelling is quite fun, the novelty quickly wears off and the perceived return on investment is not actually life changing. Context and personal knowledge is what will deepen our relationship: warning you it will rain on Sunday when your assistant knows you are going to a BBQ, setting the appropriate timer for the cupcakes you just put in the oven, reminding you of what happened to you personally on a day 4 years ago — this is the kind of intelligence that will leave users wanting more and thinking about the assistant like a true genie in a bottle. Think about it this way: we all turn to Google to ask questions, so often that some even wonder if we might no longer be trying to remember because we know we can Google everything any time. Yet, I would argue, Google search does not evoke any emotional connection. Facebook memories, however, by serving you posts from your past that happened on a specific day, makes you relieve that experience – although more intelligence could be applied here when it comes to sad events in someone’s life – and really playing on people’s emotions while subconsciously making you appreciate Facebook and making you want to invest more time posting.

It’s all about me
One of the most annoying things for me when I start using a new assistant is to have to train it to say my name correctly — “Caroleena” not “Carolina”, like the US states. If you know me personally, you might have heard me say that, if I do not correct the way you say my name, it is because I do not expect to see you again. However, if we work together or I see you socially on a regular basis, I will correct your pronunciation. Why? Because if you keep on calling me Carolina I feel you do not really know me and, more importantly, you are not actually interested in knowing me. Right now, there is not much our assistants know about us that they are actively using to serve us. They might know where we live, where we work, might recognize my husband and daughter but there is little to no pro-activity in using that information in the exchanges we might have. Some have security concerns about just how much information they share with their assistant but the reality is you are not likely to share more than what you are already doing in various social media posts, online calendars and emails. The key difference, however, is what you share with your assistant will make a difference to you: reminders, alerts, suggestions, recommendations. Not everything can be learned automatically, though. So, at least initially, you will have to enter information, which is not very different from what most of us do today with our calendars, either digital or the old fashion one on the kitchen wall.

Better than us

Aside from being about me, I want my assistant to interact with me in a natural way. Last Friday, I had the pleasure of being a guest on Science Friday to discuss Digital Assistants together with Justine Cassell, one of the researchers at Carnegie Mellon behind SARA, the Socially Aware Robot Assistant. It was fascinating to hear that SARA spent 60 hours watching human interactions in a team environment and how those interactions changed over time — not necessarily for the better. One observation was as the humans became more familiar with each other over time, praise went down.

We have seen Microsoft’s bot Tay fail miserably because it became too human. Tay was modeled on a teenage girl, used millennial slang, knew about pop stars and TV shows and was quite self-aware, asking if she was ‘creepy’ or ‘super weird’. Sadly, she quickly started to be inappropriate, possibly succeeding in being a teenager but failing to be the marketing tool Microsoft wanted her to be. That was an extreme case, but it really showed the dangers of having bots and assistants learn from human interactions. At the time, Ina Fried wrote an essay I thought was exactly on point in how bots need to be better than humans, not equal to them.

The “I do not talk to technology” hurdle

Most consumers are not comfortable talking to technology, especially in public. This feeling is not just driven by talking into a phone or a PC – headphones would easily solve that problem – but it is more about having to learn to speak in a certain way in order to get a response. As humans, we do not talk to each person we encounter in a radically different way. We might be more or less polite or more or less formal, depending on the relationship we have, but the core of our question stays the same. We do not start each question by reengaging the interlocutor by saying their name like we have to with the assistants most of the time. We also do not always say everything we should or mean what we say. With current assistants, there is no real margin of error on the human side. We must be precise and offer all the information needed in order for the assistant to serve us. This is just too much work to put in especially as most people see assistants as nothing more than a voice search.

The combination of knowing us personally and letting us speak naturally will be key in growing our interactions and, ultimately, our dependence on our assistant. We might use different generalists but we will likely want one optimized assistant. It is interesting that this week, Russ Salakhutdinov, a computer science professor at Carnegie Mellon University, announced on Twitter he will be joining Apple as their director of AI research. I trust Apple will know its users the most because of the trust they have in the brand and the level of engagement they have with the products and the ecosystem. What Apple needs to focus on now is making Siri more conversational and proactive. This, of course, will take time. While we wait, we should be able to see continued improvements in the smartness of the device and apps we are using every day — from the camera, to Photos, to our calendar. Let’s appreciate the brains more as we wait for the pretty voice to become more and more part of our life.

LeEco’s Big Vision for the US Needs Fleshing Out

Chinese consumer technology and content company LeEco held its US coming-out party on Wednesday, introducing several new products to the US market for the first time and articulating its strategy for this most challenging of markets. It’s certainly not the first Chinese company to attempt to break into the US but, for most of the others, it’s either been a dismal failure or a long, hard slog with only modest success to show for it. What we got on Wednesday from LeEco was long on vision and buzzwords but with relatively little meat on the bones from the perspective of execution.

From LeTV to LeEco

LeEco has a complex company structure and an interesting history. It was originally LeTV, an online streaming service in China but changed its name to LeEco last year as it began to build what it describes as an ecosystem bringing together hardware, software, and services. However, where others pushing a similar vision tend to put hardware at the center of the vision, LeEco puts content first. That’s been the core of its strategy in China, building loyalty to its content services and then parlaying that into a presence in devices. It looks likely to be the thing that will set it apart the most in the US, too. No Chinese company coming to the US has yet tried a content-first strategy and the reasons are obvious: the content that works in China is very different from what will attract consumers here in the US.

To that end, LeEco has apparently signed lots of partner agreements with major Western content providers – a slide flashed up briefly at the event had names like Magnolia Pictures, MGM Studios, Showtime and others on it, while Lionsgate and Vice Media executives briefly spoke on stage. But it’s far from clear yet how this content will actually show up on or add value to LeEco’s devices. There will be an EcoPass subscription at some point but neither pricing nor all the content included have been announced yet (there will be a follow-up event on November 2nd to announce an additional content partner beyond the Fandor movie streaming service already announced). Two other video apps – one referred to inconsistently as either just “Le” or LeApp and the other as either Live or LeLive – were also discussed and it appears these are bundled into the devices and will offer additional content, though it’s not clear yet exactly what that content will be.

Given how critical content is to the LeEco value proposition, this was an odd omission. It suggests that, even though LeEco’s vision may be grandiose, its current ability to execute on that vision is a little pedestrian in comparison. That’s a shame because, although the value proposition is a challenging one, it is at least unique and could be effective if delivered in the right way.

Branding and marketing

Aside from the unfinished content story, LeEco’s other big challenge will be branding and marketing. Today, the brand is entirely unfamiliar to US customers, although the company did acquire TV maker Vizio recently. Unless that changes, none of the ecosystem or other benefits the company talked up on Wednesday will make any difference, because no one will ever know about them. LeEco talked up the economic benefits of its direct sales model (its LeMall website is a sort of single-brand Amazon) in terms of cutting out middlemen and reducing marketing and branding spend but the big disadvantage of going online-only is customers won’t encounter the LeEco brand in familiar stores. Vizio TVs will presumably continue to be offered through third-party distribution but it’s less clear that LeEco-branded devices will be.

The other major Chinese consumer tech companies have used both wireless carrier relationships and sponsorships of sports teams and events to gradually familiarize US consumers with their brands but it’s unclear whether LeEco has any similar plans. Starting from the ground up without either third party distribution or a massive brand awareness campaign seems like a recipe for failure. It doesn’t help that, as executives joked on stage, the “Le-” prefix conjures up misleading French associations, as well as being plain awkward when it’s so widely and inconsistently used (some sub-brands use the Le prefix joined to a word, like LeEco, while others use it as a separate prefix, as in the Le Pro3 phone, while the Eco element is used separately in lower case names for product lines like “ecophones” and “ecotvs”).

Though the ecosystem itself is more fully fleshed out than is typical from companies just entering the market, it’s still not clear what the on-ramp for consumers will be. It appears the LeMall e-commerce site is one such entry point but when US consumers have never used any LeEco products and that’s all the site appears to sell today, it’s not obvious why people would go there in the first place rather than to a more familiar site like Amazon (or even BestBuy.com or Walmart.com). When it comes to content, it appears the various offerings are all tied to device purchases, which makes that a tough entry point as well. It might be a lead generator were it available as a standalone app or a service users could try on their existing devices.

A fascinating new player

As you can tell from everything above, I’m rather skeptical LeEco can make a big dent in the US with what we saw outlined on Wednesday. However, what’s clear is the company is committed to the US in a big way – it’s already hired hundreds of employees and apparently intends to hire thousands more and the big flashy launch event was another sign it’s serious about the US market. The content partnerships are also impressive for a company that’s never done business in the US in a meaningful way. The focus on creating an ecosystem rather than a pure-play low-cost consumer electronics play is perhaps the most unique aspect of the LeEco proposition. In short, there’s lots here that makes LeEco a very interesting player to watch – certainly the most interesting to enter the US market for some time. While I’m bearish for now, much of what I’ve written above will be subject to revision as LeEco fleshes out its strategy, perhaps addressing some of my concerns as it goes. For now though, it’s certainly worth watching as the company begins to execute on its vision for success in the US.

Apple and Microsoft’s Battle for the PC Market

Next week looks to be an interesting one. Microsoft is having a hardware launch event where we expect new Surfaces to, wait for it, surface. Apple is also having an event the day after, which we assume is to update the Mac line.

When we look at the trajectory of the Microsoft Surface, it is clear they are going after the same high-end professional audience Apple has had a monopoly on for some time. Many of the things I predicted for the PC market are starting to happen.

Things like, we are seeing ASPs rise. In fact, premium Windows hardware, not just Surfaces, are starting to gain in share against the Mac in quarterly sales. Part of this includes a steady rise in high-end gaming systems but, even as consumers and enterprises start to refresh their PCs, we are seeing them spend more money not less. The behavior behind this is due to PC buyers knowing they will hold onto their machine for 6,7, or even 8 years and are therefore willing to spend the money to make sure it lasts.

We are slowly seeing PC consolidation. Acer is not the player they once were. They are falling slowly and their share is being taken by more established brands. White box, or less established brands, are shrinking in sales again as the market consolidates around brands.

The PC industry overall continues to decline as we are still waiting to see where the bottom is in annual shipments.

We suspected the dynamics were changing around these points and that is indeed what has happened. The market for people who still need PC hardware is likely around a billion, maybe slightly more. That is not a small market and a reason why it is a key market and will remain so for some time. Humans everywhere still work, learn, play, and more on these devices. We simply don’t refresh them as often as we used to. They last longer, the technology is good enough, and a host of other things have changed the dynamics. They are still important. But they are no longer the main computer device in consumers’ lives.

Microsoft got into PCs about four years ago and has been going along with roughly ~1m units of sales per quarter but making solid margins and strong ASPs. Microsoft has targeted the high-end from day one and their partners tend to target the lower price tiers for their volume sales. Microsoft is, in my opinion, the one PC brand that can actually challenge Apple. I say this for a few reasons.

First, they have been building a strong PC brand around Surface. We continually see the Surface brand rising in sentiment among consumers and, in particular, millennials. I have said this before — Macs are a dominant PC brand with the younger cohort and enterprises everywhere will tell you they can’t hire millennials unless they offer or support Macs. Microsoft is the only other brand besides Apple where we see strong sentiment and purchase intent from this group. But Microsoft is strengthening their case in enterprise as well. They also are showing up on the IT menu of offered devices, much to the chagrin of their partners. Microsoft, with their 4th generation of products, is viewed as a credible maker of quality PCs and that is what is driving their upward trend.

Second, the first party hardware group inside Microsoft is very much like a mini-Apple, culture wise, inside Microsoft. The more time I spend with Panos, who runs this group, and the team he has assembled, the more I see things that resemble the Apple way of doing things. This continually impresses me and is a key reason I am bullish on the Surface family of PC hardware.

Both Microsoft and Apple seem to be positioning themselves to go after the same target customers. Those who value design, experience, integration, ease of use, brand, and are willing to spend more than others to get the things they want. Apple customers don’t settle, they don’t compromise, and I’m finding similar profiles of the growing customer base for Microsoft Surface.

My keys for both Apple and Microsoft next week is to show me they understand the customer they are going after and provide unique innovations for this group of people who still know and love their PCs because they use them for many hours every day. I want to see unique software for this form factor and how both will foster novel development of software from third parties for both their high-end PCs. Mobile platforms have seen most the focus of third party developers but both Microsoft and Apple need to foster different software that caters to the everyday PC user.

The everyday PC user is a key and valuable demographic. They want to have tools which focus and cater to them and their workflows. This is what I hope the emphasis of both new Surfaces and new Macs includes.

Another Key Impact of AR and VR

For the early part of my career in computers, the only user interface I had to work with was via a keyboard. I started out working with mini-computers and the keyboard is what we used to program it and do data input. When the Apple II and the PC came out, they were controlled by a keyboard. But, in 1984, Apple created the Mac and introduced the graphical user interface with a mouse and a whole new way to interact with a computer was born.

For us old timers only familiar with PCs and keyboards, it took us a while to get the hang of using a mouse and dealing with a GUI but eventually it became second nature. Today, all of our computer and mobile devices use some form of a graphical user interface and either a mouse, touch, or a pen to navigate the computing experience.

But after 32 years of using GUI’s and a mouse or touch to interact with a PC, we are about to enter the next major advance in user interface thanks to AR and VR. While most people think of AR/VR or mixed reality as a means towards interacting with apps, the reality is AR and VR will become the next major technology to impact user interfaces and how we interact with computers over the next 10-15 years. That will be another important part of its impact. Using voice, gestures and VR and AR related inputs for navigation will drive a lot of new innovation in both hardware and software and create new types of apps that take full advantage of this new generation of a user interface.

However, this will not happen over night. A recent Fortune article took a look at the adoption cycle of just VR headsets:

For all the hype around the new Sony PlayStation VR, Microsoft HoloLens, or Nolan Bushnell’s new Modal VR gear, just 6% of Americans will own any of these devices this year.

According to Strategy Analytics research, roughly 11.4 million American adults will pony up for one of the aforementioned devices—or a Google Cardboard or HTC Vive, among other gizmos—by year’s end. In aggregate, the category will drive almost $556 million in sales within the U.S. during that time period.

While this is a good start and, in a way, serves to introduce AR and VR to the high end of the tech market and more importantly, introduce them to this new form of user interface, it will take some time to get this new UI adopted by the masses. As this chart shows, even by 2022, only 44% will be using some form of VR headset or a mixed reality solution by then.

However, the reality is most people will not want to be using goggles as part of their overall interaction with computers. Instead, things like 3D monitors and VR and and AR-based interfaces will be where we see the most innovation on the PC, while AR may be the killer app with mobile devices.

In fact, I think Apple is taking aim specifically on making AR a key part of iOS, perhaps as early as next fall with the introduction of the iPhone 8. Indeed, Tim Cook has said multiple times he thinks AR, not VR, will have the most impact and broad acceptance within next generation mobile computing.

Although Facebook with Oculus, Sony with Playstation VR, Microsoft with Hololens and HTC’s Vive and even Google’s Daydream will blaze the early trails with AR and VR interfaces, I think Apple would like to be the one that brings at least AR to the masses. Apple brought the PC world into the mouse and touch age and it would not surprise me if they plan to make AR their next big contribution to the evolution of computing interfaces. If they got this right on the iPhone, whether it is next year or the following year, the sheer volume of iPhones sold on an annual basis could get AR accepted into the mass market quickly.

That is not to say Apple will be the only one trying to push the envelope in AR/VR as next generation user interfaces. App’s like Pokemon Go already introduced the concept of AR to the masses although it still uses a traditional touch UI for navigation. The real breakthrough would be to to add various AR or VR interfaces such as sensors that capture hand motions above the screen to play games and work with apps in the way of devices like Sony’s Playstation VR and Oculus’ Rift. Or to use AI-based voice commands and gestures in new ways to navigate these AR apps on a smartphone.

Although the mouse and keyboard and even touch has allowed us to be very productive when it comes to interacting with our various personal computers, it is time to take these user interfaces up a notch and I believe adding AR and VR user interfaces to our digital device experiences is the next evolution in interface design.

Samsung’s Challenges Reveal Need for Greater Vendor Diversity

Much has been written about how a debacle like the Note7 happened and what Samsung might do to repair its reputation. Samsung’s challenges also shed light on a unique fact about the U.S. smartphone market: the high degree of vendor concentration. Industry research houses show Apple and Samsung represent nearly 75% of smartphone share in the US (Apple about 45%, Samsung 29%) and about 90% of the profits. The remaining share is spread among several vendors, with LG at nearly 10% and Motorola at about half that. Concentration has been creeping up in recent years. Four years ago, the combined Apple/Samsung share was just under 60%.

The picture is quite different in other parts of the world. Globally, as of Q2 2016, Samsung was the leading vendor at 23%, Apple had a 12% share, Huawei had 10%, and all others had 55% combined, according to IDC. The vendor share picture varies quite dramatically by region and even by country. Chinese vendors Huawei and ZTE have made significant progress in Europe, having captured some 25%+ share between them in certain countries. China, the world’s largest handset market, is a veritable vendor free-for-all. Nowhere is the market as concentrated as in the US.

Why is this the case? Well, one factor is our iOS-centricity: Apple’s share in North America is some 2x that of just about anywhere else. We also like our flagship devices. Average selling prices here are among the highest in the world, and US consumers show a particular penchant for the ‘latest, greatest’ iPhone or Galaxy. Another factor is the strong role the carriers play in the US market. Many of their pricing promotions and ad campaigns are centered around iconic iPhone and Galaxy launches.

This fall’s handset developments have revealed why this might be a problem. First, Apple introduced the iPhone 7 which, although a terrific device, received mixed reviews. I am sensing a bit of Apple ennui, particularly among younger users. Sales have been pretty good but replacement cycles are creeping up. Then there’s the Note7 debacle. It is hard at this point to gauge the long-term damage to Samsung’s reputation and whether it will significantly affect the company’s market share. But this has been both difficult and costly for Samsung’s major customers in the US, the wireless carriers, who play an outsized role in distribution compared to operators in other countries. We learned last week that Samsung is offering $100 vouchers to consumers, among other measures, but little has been said about what Samsung is doing to repair its reputation with the operators.

I believe US operators and consumers are left vulnerable by this concentrated market. First, Apple has never been all that operator-friendly — in fact, it continues to do things in the crosshairs of the operators, such as last year’s move into equipment financing. Second, what if the next iPhone is a dud or gets delayed by a few months? Operators have become pretty addicted to that clockwork September iPhone launch to meet their 4Q numbers. What if Samsung’s supply chain and QA problems are more far-reaching? What are the fallback options?

The challenge other handset OEMs have had in capturing share in this market over the past several years is a bit baffling. LG, Motorola, and HTC, among others, make excellent devices. In segments of the market where price is more of a factor, such as prepaid and MVNOs, their combined share is proportionately higher. But they can’t compete with the gargantuan ad budgets of Apple and Samsung and the carriers just haven’t given them all that much love.

I’m surprised the operators haven’t pushed harder. Why are they leaving themselves so vulnerable to an Apple or Samsung hiccup? Why haven’t they put more pressure on pricing? Why aren’t they exerting more influence on the phone’s user experience? With a leveling off of smartphone growth and longer replacement cycles, I am a bit surprised at operators’ order-takery mentality on devices.

Perhaps this is why Google is taking a renewed and more vigorous crack at the handset business with the recently announced Pixel phones. It realizes the market is increasingly tilting toward ecosystems and software—areas where it can exert an influence as long as the hardware is good (which seems to be the ante needed to play in developed country markets). Consumers buy iPhones, in large part, because of the Apple ecosystem. There is no single torchbearer for the Android ecosystem or even a device that maximizes Android’s potential to deliver a fantastic user experience. So, Google is thinking that embedding Google Assistant into the Pixel, plus the ability for Pixel to integrate with other announced Google hardware, such as Home, Hub and even the fledgling Project Fi service, could be part of a next-generation ecosystem play.

Why would vendor diversity be good? As protection in case of an Apple or Samsung hiccup (or worse); a hedge against said vendors’ occasional arrogance; a lever on inflated prices; and as a spur for innovation. This would also give the operators more skin in the game—a position they had not so many years ago.

Q3 2016 Earnings Preview

Earnings season is here again. Netflix reported its results on Monday afternoon and seemed to provide a pleasant surprise for investors, who sent the stock up 20% after hours. We’ll see all the other big names reporting results in the next two or three weeks as well, so I’m providing my usual roundup of what to expect from some of the most important consumer technology companies.

Alphabet

Following stories which suggest a certain amount of belt-tightening at Alphabet, it’ll be interesting to see if there’s evidence of that in its financial results this quarter. There has been some sign of this already in things like Alphabet’s capital expenditures and the performance of the Other Bets segment but I suspect there should be more evidence in this quarter. There will also be increasing pressure on the Google segment to start quantifying its cloud revenue, given its recent heavy emphasis on this business and the continued lack of financial transparency here relative to Amazon and Microsoft. There will also no doubt be questions on the call about pre-sales for Google’s new hardware products – Home and Pixel – though of course these started selling and shipping after the quarter was over.

Amazon

Speaking of Amazon, it will likely continue to show strong progress both in its core e-commerce business and in its AWS cloud services. Another interesting milestone to watch for is the percentage of paid units which come from third party sellers, which is due to cross the 50% mark this quarter. That’s symbolically quite important for Amazon, whose own sales have always been a majority of total sales on the site. But it’s also important financially, because Amazon’s gross margin on these third party sales is higher than on its own sales. We might well see AWS cross 10% of total revenues in Q3, though it’ll quickly drop well below that again in Q4, as e-commerce sales rise dramatically in the fourth quarter each year. Also worth watching is whether Amazon can achieve four straight quarters of profitability in its International business, which has historically struggled to drive a profit. Capital expenditures and the associated depreciation and amortization have also been falling lately as a percentage of revenue, which has helped drive the improving margins we’ve seen lately. Is that a sign Amazon has run out of ideas for things to invest money in?

Apple

With its car efforts in the news again this week, it’s inevitable Apple will be asked about Project Titan on its earnings call and at least as inevitable executives will refuse to answer questions about it. Near term, however, all the attention will be on pre-sales of the new iPhones and for indications these may provide a potential rebound in iPhone sales and, therefore, Apple’s overall revenues. I think Apple’s revenues will rebound either at the tail end of this year or early next year and we’ll have official guidance for calendar Q4 2016 from this quarter’s earnings. That guidance number will be particularly interesting as it will be issued two days before a rumored event to announce new Macs. Macs don’t have an outsized impact on overall revenues, especially in a December quarter typically dominated by iPhone sales, but I’d expect analysts to try to tease out the effects of pent-up demand for Macs given how long in the tooth the current product line is. It’s also well worth watching the iPad revenue line, which was positive in growth terms last quarter for the first time in years off the back of much higher ASPs driven by the 9.7″ iPad Pro. Will that happen again this quarter?

Facebook

Facebook continues to be one of the few companies that consistently provides impressive results quarter after quarter with little let-up. Even at its current scale, it achieved 60% year on year revenue growth last quarter and that’s even before any of its recent acquisitions make any significant contribution. Ads continue to provide over 95% of that revenue so one of the big questions this quarter has to be whether there’s any sign of that changing. Though there may be little evidence of it so far in the actual results, I’d expect analysts to ask how new initiatives like Workplace, Marketplace, and others will contribute over time to the non-ad revenue at Facebook. I’d also expect to see ongoing requests for more transparency in how Instagram performs, given many of Facebook’s ARPU metrics somewhat misleadingly include revenue but not user numbers for Instagram. I would also expect ongoing scrutiny on the question of ad load and whether Facebook is approaching peak loads yet, especially in its most mature markets.

Microsoft

Interestingly, Microsoft has already announced it will provide a couple of additional financial metrics this quarter, including both gaming revenue and gross margin for its “commercial cloud services”. The former will include revenue from hardware, software, and services, which is a business line that’s a little under $10 billion a year at present. The latter will be useful for gauging the profitability of the cloud business at Microsoft on an ongoing basis. This is another useful step toward more transparency from Microsoft in this area but, given how many things Microsoft throws onto the “cloud” pile, it’s hardly a like-for-like comparison versus Amazon’s AWS segment. Because Microsoft doesn’t break this cloud business out separately, it doesn’t currently have a reporting segment that does better than single digit growth on an annual basis and it badly needs to tell a better story of where future growth will come from, especially in the consumer market.

Samsung

Samsung has already – twice – provided preliminary numbers for Q3 and they’re obviously heavily impacted by the Note 7 issues, which will be a major area of focus when the full and final numbers are reported. The Note 7 will have a significant impact on revenues and on profits, both from forgone sales and the cost of the recall and the devices involved. But it’s worth looking beyond that too – Samsung has been growing and increasingly profitable again in recent quarters and, although it will certainly take a hit here this quarter, it’s worth looking for longer-term signs these trends will continue (or evidence to the contrary). The semiconductor business, in particular, has been unpredictable lately, and it would be good to see some more stability there going forward.

Can IT Survive?

If you’ve ever worked at a business with at least 20 employees, you’ve undoubtedly run into “them”—the oft-dreaded, generally misunderstood, secretly sneered at (though sometimes revered) IT department. The goal of Information Technology (IT) professionals, of course, is to provide companies and their employees with the technical tools they need to not only get their jobs done, but to do so in an increasingly fast, flexible manner.

Frankly, it’s a tough, and often times thankless job. If your computer stops working, the network goes down, or some aspect of the company web site stops functioning, IT gets the brunt of the frustration that inevitably occurs. Beyond these day-to-day issues, however, IT is also tasked with driving changes to the infrastructure that underlie today’s modern businesses.

For that reason, IT has long been considered a strategic asset to most organizations. In fact, this central role has also turned the CIO—who typically runs IT—into a critical member of many business organizational structures.

But the situation for IT (and CIOs) appears to be changing—ironically because of some of the very same factors that led to its rise: most notably, the need for increased agility and flexibility.

The problem is, after several years (or more) of IT driven technological initiatives designed to improve reliability, increase efficiency, and reduce costs for key business processes, a large percentage of these companies have come to realize that the best solution is to have someone else outside the company take over. From more traditional business process outsourcing, through the evolution of nearly everything “as a service,” to the growth of public cloud computing resources, we’re witnessing the trickle of projects leaving the four walls of an organization grow into a fast-moving stream. As a result, IT departments are often doing less of the technical work and more of the management. In the process, though, they’re moving from a strategic asset to a growing cost center.

The implications of this change are profound, not only for IT departments, but to the entire industry of companies who’ve built up businesses designed to cater to IT. All of a sudden, equipment suppliers have to think about very different types of customers, and IT departments have to start thinking about very different types of partners. Arguably, it’s also driving the kinds of consolidations and new partnerships between these suppliers that seem to be on the rise.[pullquote]All of a sudden, equipment suppliers have to think about very different types of customers, and IT departments have to start thinking about very different types of partners.”[/pullquote]

The causes for these kinds of changes are many. Fundamentally, the revolution in the technology side of the business computing world has been even more extensive over the last few years than many first realized. To put it another way, though we’ve been hearing about the impact of the cloud seemingly forever, it’s only now that we’re really starting to feel it in the business computing world.

Another cause is an interesting bifurcation in the challenges and complexities of the products and services that have traditionally sat under the watchful eye of the IT department. On the one hand, many previously complex technologies and systems that required specialized IT expertise have become easy enough for non-IT line of business leaders to purchase and successfully deploy. Converged and hyperconverged appliances, for example, have brought datacenter-grade compute, networking and storage capabilities into a single box that even moderately technically people can easily manage through a simple interface.

In addition, managed service providers, hosted data exchanges, public cloud providers and a host of other companies that didn’t even exist just a few years back are offering utility-like computing services that, again, are offering increasingly easy solutions for business departments and other non-technical divisions of a company to quickly and economically put into production. More importantly, they’re doing it at a significantly faster pace than what many overburdened and highly process-driven IT organizations can possibly achieve.

Some IT professionals are dubious (and highly concerned) about these type of rogue shadow IT initiatives, but they don’t appear to be slowing down. In fact, in the case of a hot new area like Enterprise IoT, research has shown that it’s often a branch of a company’s Operations department (sometimes even called OT, or Operations Technology) that’s driving the deployment of devices like smart gateways and other critical new IoT technologies—not the IT department.

At the other technological extreme, many companies are also finding that making the move to more cost-effective and more agile cloud-based solutions is actually proving to be much more technically complex and challenging than first thought. In fact, there’s recently been talk of a slowdown within some companies’ efforts to move more of their compute, software and services offerings to the cloud because of the lack of internal skill sets within IT to handle these new kinds of tasks. In addition, much of the most advanced computing work, in areas such as machine learning, AI and related areas, often requires access to specialized hardware and software that many companies don’t currently have.[pullquote]Many IT departments are finding themselves in an awkward position in the middle where the now-easier tasks no longer require their help, and the tougher tasks take a larger supply of employees with skill sets or resources they don’t currently have.”[/pullquote]

The result is that many IT departments are finding themselves in an awkward position in the middle where the now-easier tasks no longer require their help, and the tougher tasks take a larger supply of employees with skill sets or resources they don’t currently have. Ironically, the very technology that started to create new opportunities for IT professionals (and which many feared would take away more traditional jobs) is poised to now start taking back jobs from IT as well. Needless to say, it’s a tough spot to be in.

Despite these concerns, however, there is still clearly an important role for IT in businesses today—it’s just becoming much different than what it used to be. For CIOs and IT to succeed, it’s going to take a different way of thinking. For example, instead of evaluating products, it’s increasingly going to require evaluating and managing partners and services. Instead of sticking with slow, burdensome, “we’ll build it here” types of internal processes, it’s going to require a willingness to explore more external options.

The importance of technology in business will only continue to increase over time. As technological solutions become more ubiquitous, however, the concept of distributed responsibility for these solutions will likely become the new reality.

How does a Problem Like the Note 7 Happen?

Those involved in the design and manufacturing of hardware products understand that one of the most important phases of the process is testing. That’s the point when all of the assumptions that have been made need to be validated. The only way to do that is to build hundreds or thousands of units and subject them to a battery of tests. Even then, you might still find problems not anticipated once devices get into the hands of thousands of customers but the goal is to be sure they are relatively minor.

The basic tests conducted include subjecting the products to a wide range of temperatures, humidity and physical abuse, including shock and vibration. The goal is to insure the product performs the same before and after and that the product remains intact and safe. Other tests include real life user testing and measurements to insure the product complies with regulatory requirements.

The testing typically takes several months to perform properly by a large group of quality and manufacturing engineers. Companies have rooms full of test equipment, including large ovens, shake tables, and fixtures that exercise buttons and switches millions of times to simulate actual use.

Yet, in the case of the Samsung Note7, it is puzzling they claimed they were able to identify the problem with their initial shipment, fix it, test it, and ship a half-million replacement units in just two weeks. That just doesn’t compute and apparently, that suspicion was verified by the failures of the second batch of units.

So now, it’s quite possible the problem might have been caused by another component that interacts with the battery, rather than the battery itself.

Testing of smartphones is particularly important because batteries pack a huge amount of energy into a small volume. They contain circuitry to prevent a run away condition should the battery or charging circuitry fail or go out of spec. The batteries are custom made to fit into the allotted space. Often, several companies or divisions are involved: the company building the battery cells, the company packaging the battery and adding the circuitry and connector, and the company putting the battery into the phone. But here’s another opportunity for error. The company doing the assembly may have assumed the battery integrator has performed sufficient testing. I’ve often found communications and clear division of responsibility among companies are often a weak point.

Yet in spite of a product passing all of this testing and having a sound design, there’s another thing to be worried about. It’s how well the product is manufactured on the assembly line. Most lines rely on the use of many workers that perform the assembly operations and not on automated assembly using robotic equipment. Each operator has instructions and tools to do a job that varies from attaching a circuit board assembly to the chassis, positioning and screwing the display in, or soldering a large component in place.

But it’s not uncommon for an operator to make a mistake: not tightening a screw sufficiently or shorting out a circuit. To minimize this, other operators are interspersed in the assembly line to test the partial assemblies, and then the completed product will go through some functional tests to insure it’s working.

But mistakes do happen. One electronic product I was involved in had a screw that was not tightened sufficiently. With little effort, it came loose and rattled around inside the product. That could be catastrophic because the metal screw could short out a battery or blow a circuit. In this instance, the line was building two thousand units a day on two 8-hour shifts and, by the time the problem was discovered, 8,000 units were effected. It was traced to one operator on one shift that failed to tighten the screw, even though she had a calibrated screwdriver that should have prevented this. So, one individual that might have been distracted or wasn’t sufficiently trained, caused a massive problem that required thousands of units to be opened, fixed and reassembled.

Imagine a factory building 100,000 units a day and you can see how a small error can have huge consequences. Much like the analogy of a butterfly flapping its wings and causing a hurricane halfway across the globe.

Unpacked for Friday, October 14th, 2016

Amazon Demonstrates Its Pragmatism with Physical Retail for Groceries – by Jan Dawson

The Wall Street Journal reported this week that Amazon is planning to build convenience stores and curbside pickup locations for groceries, in an expansion of its existing grocery delivery business. The convenience stores would sell basic items, while the pickup locations might make use of clever technologies to automate and speed pickups.

This investment, assuming the reporting is accurate, is a great demonstration of Amazon’s pragmatism when it comes to expanding its business. Yes, its retail business is almost entirely about online ordering and delivery but it’s not religious about either of these things. Ultimately, what Amazon is building is an online-first and not an online-only business. That gives it the flexibility it needs to dip its toe into physical retail when it makes sense, as it has already done with its first brick-and-mortar bookstore in Seattle.

Why groceries? Well, this is easily one of the largest retail categories and doing well here would boost overall spending on Amazon considerably. However, it’s not one that lends itself well to traditional e-commerce – it often involves last-minute purchases as well as heavy, bulky, and perishable items which are not well-suited to traditional shipping. First-party delivery can solve some of these problems but still runs into issues with people not being home, traffic, and so on. Shifting to a physical retail model turns this from a customer delivery model into a store logistics model, something that eliminates many of the challenges associated with selling groceries. The convenience stores also support the impulse buy on the way home, which Amazon.com can’t manage for most purchases.

Amazon, of course, isn’t the only online company dabbling in physical retail. Google has announced it will have a pop-up store in New York in the coming months to support sales of its new hardware products. These companies are learning that, when it comes to certain product categories, online retail just doesn’t cut it, while third-party retail also has its downsides. It’s interesting, though, that all this is happening in the context of a very challenging overall market for physical retailers, with many closing stores in the face of higher e-commerce sales driven by – among others – Amazon.

The big benefit for these online-first retailers, however, is they can be very strategic and selective about their physical retail presence, creating new categories of stores rather than following traditional models, and thereby avoiding some of the pitfalls their offline-first competitors are struggling with. In addition, because these stores are complements to, rather than competitors for, online retail they don’t have to offer everything – just those categories of products that make sense in a store. These stores, then, are best seen, not as a standalone strategy for Amazon, but as part of a continuum of options for both ordering and receiving goods which will likely to continue to evolve over time.

Of course, for those of us that don’t live in the major coastal cities, this will be yet another example of a service that exists only in theory, as Amazon tends to invest ever more heavily in additional shopping and delivery options in the most densely-populated areas first. Citizens of New York and other such cities already enjoy one-hour delivery and other perks the rest of us can only read about online.

Sony PlayStation VR Brings Virtual Reality to the Masses – by Bob O’Donnell

The buzz and hype around virtual reality has been extremely high for the last few years but the real-world impact has been fairly muted. Sure, there’s been some interesting experiments with Google Cardboard, Samsung’s Gear VR and other mobile-driven VR headsets, but most people acknowledge those products can’t really compete with more powerful PC-driven options from Oculus and HTC when it comes to a truly immersive VR experience.

Sony, however, is looking to take a different tack with its new $399 PlayStation VR headset, which works along with the 40 million+ PS4 game consoles already in people’s living rooms. Essentially, they’re bringing what many reviewers are saying is a VR quality of experience similar to those higher-end headsets but at a more affordable price. Even more importantly, they’re providing it as an accessory to a device people already own.

The result is an opportunity to really bring virtual reality to the masses in a way no previous offering from other vendors has. Plus, because much of the early compelling content for VR is gaming and entertainment-focused, it’s a great match from both a product and a customer perspective. Anyone who has invested in a PS4 is clearly interested in gaming and the PlayStation VR promises to bring a new, higher-level of gaming immersion than most have ever experienced.

This is an important point to remember because the vast majority of consumers have still had very little or no experience with VR. For many of them, PlayStation VR will be their introduction to virtual reality. As a result, I think is likely going to get some of the benefits that come from being first to market—it’s bound to create a lot of buzz and excitement around the product and the Sony brand. Given how long it’s been since Sony has had a truly groundbreaking product, it’s likely going to provide a much needed boost.

Though it’s still early, initial reaction from Japan suggests the company could have a big hit on its hands. Customers travelled long distances and formed lines outside of retailers in an Apple-like way to purchase or place an order for a PlayStation VR—that’s something we haven’t seen for a Sony product in quite some time.

Moving forward, Sony is also hoping to expand beyond gaming and possibly even bring new customers to the PS4 and forthcoming PS4 Pro updated gaming console by providing entertainment-related “experiences” tied to Sony-owned media content, as well as educational and virtual travel type offerings.

It’s still early days for VR, but I have a feeling Sony is making a strong debut.

PC Market Shows Little Sign of Improvement – by Carolina Milanesi

It is that time in the quarter when IDC and Gartner publish their PC market share and, while the numbers differ slightly due to methodology (Gartner does not include Chromebooks and iPads), the sentiment is similar. IDC is calling for a 3.9% decline while Gartner puts the year on year decline at 5.7%. The US market was practically flat for Gartner while IDC recorded a second quarter of positive growth.

In their commentary, both companies cited slower replacement rates in the consumer market and lack of upgrades generated by Windows 10 in the enterprise. Nothing new really. Back in April, we ran a study in the US market to understand intention to purchase and the picture was not encouraging. Of the 550 consumers we interviewed in the US, only 12% had upgraded their PC in 2015 and 26% had a PC that was five years old or older. When asked about intention to upgrade, 62% said they were not upgrading over the next 12 months. When asked why, 70% of owners of a five years old or older PC said their current PC works fine and they do not see the need for a new one. Only 9% said they could not afford it. Looking at usage paints the entire picture. Users of newer PCs are more engaged and use their PCs for a wider variety of tasks. Most users with PCs 5-6 years old say they do social networking (28%) and manage files (22%). In comparison, only 10% of owners of PCs 1/2-year-old use their PC to manage files.

Vendors need to re-engage consumers with the PCs by making them appreciate the rich experience a PC can deliver compared to a smartphone and a tablet. When mobility is not the priority, consumers need to perceive the added benefit of a PC experience. Clearly, price is not an issue as that only comes up with less than 10% of consumers who are not intending to purchase a new device. They are clearly saving that money or using it on something else. With more devices being pitched as smart, consumers no longer see the PC as the only device with brains. The biggest problem I see in the Windows ecosystem remains the lack of applications which would bring some of the most used features and experiences people love on their phone to the PC.

If vendors can crack this “added value” point with consumers, they could see an increase in ASP even though sales might not return to growth quite yet. Times remain tough, as shown by the recent news from HP that they will lay off 3,000 to 4,000 employees over the next three years in an attempt to save $200 to $300 million per year beginning in fiscal 2020. Earlier in the year, HP had already announced they will be laying off 3,000 employees by the end of December. HP is currently number two in the market ranking very close to leader Lenovo.

Apple Increases Its GPU Talent Acquisition – by Ben Bajarin

Business Insider broke some news that Apple is increasing its talent in the GPU department by hiring key folks from Imagination Technologies. Apple uses a GPU license from Imagination and does some customization to the IP but it is unclear how much. It has been rumored Apple was looking to design its own GPU. However, I’m not sure starting from scratch is the likely way they would accomplish this.

The GPU is increasingly becoming one of the most important parts of our computing devices. When it comes to computer vision, AI, AR/VR, and anything related to the visual and graphic elements, the GPU is involved. Knowing Apple likes to own and control the full stack when it comes to the critical components of computers, it seems inevitable this will continue to spread to the GPU given how critical it is for future computing experiences. This is a matter of when not if.

The De-Democratization of Online Publishing

One of the wonderful things about the rise of the web, twenty-something years ago, was the way in which it democratized publishing – suddenly, anyone with an idea could set up a website and make them available to anyone. Early on, publishing online required at least a rudimentary understanding of code. To be an online writer meant you also had to be a coder. But, services quickly emerged that created WYSIWYG editors for online publications, so literally anyone who had used a word processor could create online content.

Recently, however, we’ve seen the rise of proprietary formats like Google’s AMP, Facebook’s Instant Articles, and the Apple News Format, which threaten to de-democratize publishing on the web. To be clear, I’m not making a philosophical argument about the closed nature of these platforms but something much more practical: creating content for these formats reintroduces a coding requirement and online code is vastly more complicated today than it was in the mid-1990s.

A personal history

I first encountered the web when I entered university in 1994. It was a pretty primitive thing back then, with very limited ways to access it, and it was almost entirely text-based. But over the next four years, things moved forward rapidly, with additional web browsers improving the process of browsing the web and hosting and other online services making it easier for ordinary people like me to set up an online presence. By the time I graduated in 1997, not only was browsing the web a big part of my life but I had a website of my own. In order to build that website, I had to learn HTML which, at the time, was a very simple thing to grasp, at least at a basic level. But that coding requirement still prevented many people from creating an online presence.

Interestingly, I basically took a two-year break from the web between early 1998 and early 2000 while I was serving as a missionary in Asia. When I returned, the web had again moved on significantly. Blogger had launched in 1999 and was one of the first sites that enabled people to create their own websites without knowing anything about coding, web hosting, or any of the other more technical aspects that had previously characterized online publishing. Almost all of my online publishing since has been based on various blogging platforms and, for the last ten years, almost exclusively on self-hosted WordPress sites. Along the way, because I’ve always had something of an interest in coding, I’ve beefed up my understanding of HTML, grappled with CSS style sheets, and even done some messing around with PHP. But I’m always enormously grateful I don’t have to try to build sites that would perform well from the ground up – I’ve long since given up on that idea.

Enter AMP, Instant Articles, and Apple News

So much for my personal history. Since last summer, we’ve seen what I’d argue is the latest phase in this online publishing evolution. It involves the creation of a variety of proprietary formats for online publishing. Google has been spearheading the Accelerated Mobile Pages project (AMP), which launched officially almost a year ago. Facebook introduced its Instant Articles format last summer, with a similar objective of accelerating the delivery of articles on mobile devices. And Apple introduced News as part of iOS 9, opening it up to publishers over the summer and to most users in the Fall, albeit with different intentions.

Here’s what’s these platforms have in common, however: each uses proprietary formats to deliver articles to readers. Technically, these formats use standards-based elements – for example, AMP is a combination of custom HTML, custom JavaScript, and caching. But the point here is the outputs from traditional online publishing platforms aren’t compatible with any of these three formats. And, in order to publish to these formats directly, you need to know a lot more code than I ever did back in the mid-1990s before the first round of WYSIWYG tools for the web emerged.

As a solution, each of these platforms has provided tools intended to bridge the gap – all three, for example, have WordPress plugins to convert content to the appropriate formats. But a quick read of the reviews for the Facebook and AMP plugins tells you they don’t seem to be doing the job for many users. The Apple News plugin has a higher rating, but I know from my own experience that it’s problematic. Both Facebook and Apple also offer RSS tools to import existing content but there are limitations around both (Apple News doesn’t allow advertising in RSS-driven publications, while Facebook IA requires a custom RSS feed with IA-specific markup, which is again going to be beyond the ken of most non-coding publishers). Apple news offers a WYSIWYG tool, but it’s extremely basic (it doesn’t support embeds, block quotes, or even bullet points).

Why does all this matter? After all, no one is forcing anyone to use any of these formats – publishing to the open web is still possible. While that’s technically true, at least two of these formats – AMP and Instant Articles – are being favored by the two largest gatekeepers to online content: Google and Facebook. Google now favors AMP results in search, while Facebook does the same within its News Feed, though less explicitly (by favoring faster-loading pages, it gives IA content a leg up). Apple News is different – it’s a self-contained app and it’s basically irrelevant to you as a publisher unless your readers are using it. But if you do decide to use it, unless you publish in Apple News Format, you can’t monetize your content there and Apple is pushing the News app heavily to its users.

Turning back the clock

The upshot of all of this is, unless you’ve comfortable with fairly advanced web coding, or can pay someone who is, your online publication is likely to become a second-class citizen on each of these new platforms, if it has a presence there at all. And, as these platforms – especially AMP and Instant Articles – suck up an ever greater proportion of online content, that’s going to leave smaller publishers out in the cold. That, in turn, means we’re effectively turning back the clock to a pre-web world in which the only publishers that mattered were large publishers and it was all but impossible to be read if you didn’t work for one of them. That seems like an enormous shame and, from a practical standpoint, matters a lot more to me as an online writer than more philosophical debates about open vs. closed platforms.

CarPlay: The Best Incarnation of Apple’s Ecosystem

Apple is making a car. The code name is “Project Titan.” Apple brings back Bob Mansfield from retirement to lead the project. Apple lays off dozens of employees who were presumably working on the car project that was never confirmed. Apple might no longer be making a car. There! You are all caught up on the months of speculation around Apple and cars!

What I do know for sure is Apple is in my car today. A new car I have had now for about 10 days. A totally unnecessary purchase justified by the fact that my old car – a 2014 Suburban – was not technologically savvy enough. Now, I have the 2016 model and it does all sorts of things for me — warning me about lane departures, making my seat vibrate when a car or pedestrian is approaching me while reversing, and showing me the direction with a big red arrow on my screen. The most interesting part, however, is having CarPlay and Android Auto.

As I am currently using an iPhone 7 Plus, I tried out CarPlay and the results are quite interesting.

I have been using Google Maps pretty much since I got to the US four years ago. My old car had a navigation system but I hated it so I was using my phone with a Bluetooth connection. I had tried Apple Maps when it first came out but went back to Google and soon got used to certain features, such as the multi-lane turn as well as the exact timing of the command. I got comfortable with it and, aside from trying out HereWeGo and Waze, I have been pretty much happy with Google.

Having CarPlay made me rediscover Maps and features like where I parked my car, the suggested travel time to home or school or the office, suggestions based on routine or calendar information — all pleasant surprises that showed me what I had been missing out. It also showed me how, by fully embracing the ecosystem, you receive greater benefits. Having the direction clearly displayed on the large car screen was better and, while there is still a little bit of uneasiness about not using Google Maps, I have now switched over. Maps on Apple Watch just completes the car experience as the device gently taps you as you need to make the turn. It is probably the best example I have seen thus far of devices working together to deliver an enhanced experience vs. one device taking over the other.

Music has been in my car thanks to a subscription to Sirius XM but, at home, we also have an Apple Music subscription as well as Amazon Prime Music. With CarPlay, my music starts to play in the car as soon as the phone is connected and, despite my husband’s initial resistance, this past weekend, he was converted. He asked Siri to play Rancid and he was somewhat surprised when one of his favorite songs came on. My daughter is also happily making requests to Siri and everybody catching a ride is quite relieved not to be subjected to Kidz Bop Radio non-stop.

The best feature, however, is having Siri read and compose text messages for you. I know I can do that outside my car as well but I rarely do, because, well frankly, I don’t have to: typing serves me just fine. When I interact with Siri, the exchange feels very transactional, i ask a question I get an answer and that is it. The car is the perfect storm when it comes to getting you hooked on voice commands. You are not supposed to be texting and driving, the space is confined, and there is little background noise as the music is turned off when you speak (I have to admit a switch to turn off the kids would be nice too). Siri (she) gets commands and messages right 90% of the time which gets me to use her more. Interestingly, it is also the time where I have a more natural, more conversational, exchange with Siri:

Siri: There is a new message from XYZ would you like me to read it to you?
Me: Yes, please.
Siri: (reads message)
Siri: Would you like to respond
Me: Yes
Siri: Go ahead
Me: Yada Yada Yada
Siri: You are replying Yada Yada Yada, ready to send?
Me: Yes

At the end, you have a pretty satisfied feeling of having achieved what you wanted and not once moving your eyes from the road ahead.

Our Voice Assistant survey did show a preference for consumers to use their voice assistant in the car. Fifty-one percent of the US consumers we interviewed said they do, so I am clearly not alone. I would argue that interacting through car speakers vs the phone – assuming you are not holding the phone to your mouth which would not be hands-free – gives you higher fidelity and therefore a better, more engaging experience.

While we wait for autonomous cars (maybe even one by Apple) to take over and leave us free to either work or play while we go from point A and B, it is understandable that CarPlay stays limited to functions that complement your driving but do not interfere with your concentration. That said, I think there is a lot of room for Apple to deliver a smarter experience in the car if it accesses more information from the car and the user. Suggesting a gas station when the gas indicator goes below a certain point, suggesting a place to park when we get to our destination, or a restaurant if we are driving somewhere where we have not been before and are close to lunch time. The possibilities are many.

The problem with CarPlay is it relies on consumers upgrading their cars to one of the over 100 models available or integrating CarPlay kits — which range from just under $200 to over $700 depending on brand and quality. This is a steep price to pay when you are not quite sure what the return on your investment will be. Apple needs to find a way to lower that adoption barrier for CarPlay so as to speed up adoption. The more users experience CarPlay, the easier it will be to get them to take the next step when it comes to cars, whether an Apple-branded car or a fuller Apple experience in the car.

A Post-Note Samsung

It looks like the hammer has finally dropped and Samsung has instructed its partners to stop selling all Note7 phones and instructing users to stop using both the original devices and the supposedly safe replacements. I’ve spent a fair bit of time over the last few weeks talking to reporters about all of this and again this week as the latest installment in the saga has unfolded, so I thought I’d share with Insiders some of my thoughts about what happens next.

A quick note: this article was written on Monday, before Samsung announced that it was permanently ending production of the Note7.

The difference between a one-off and a pattern

Though in some ways the issue that appears to be plaguing the replacement Note7 devices is the same as the original one, the situation has now changed dramatically. In the beginning, Samsung could claim this was a one-off, put it down to one of its partners, and entirely resolve it with speedy intervention and a plan to replace all the potentially faulty devices with replacements. But now, several things about this scenario have changed:

Samsung’s claim to have found the source of the problem seems to be wrong
Samsung’s proposed solution (swapping battery suppliers) doesn’t seem to have worked
The simple safety features on both the packaging and the device which were intended to flag safe devices are now useless (and downright misleading)

As a result of all of this, owners and potential buyers of these devices will now find themselves questioning whether Samsung really knows what caused the fires in the first place and, therefore, whether any future proposed solution can actually solve the problem definitively. In other words, we’ve gone from a one-off – an outlier – to a pattern and that’s about the worst thing that could have happened from a Samsung brand perspective.

I’ve written previously about the dangerous power of negative narratives in tech. What’s happening here is we’re seeing a narrative developing around Samsung’s devices, especially once you add in recent reports about exploding Samsung washing machines as well.

Where we go from here

The question now becomes where Samsung goes from here. The taint of the faulty devices isn’t going to vanish immediately and the second round of problems means, not only is this going to be in the news for even longer, but the perceptions will linger beyond that. At the very least, Samsung needs to kill off the Note7 at this point but, even worse, it may have to kill the Note line entirely (at least by that name) in order to shake off the negative associations. The best case scenario is Samsung is able to continue the line under another name come next Fall. The worst case is it has to abandon this whole line of devices entirely.

However, the impact won’t be limited to just the Note line. The narrative discussed above could spill over into how people view future devices, which could be even worse. Given Samsung’s usual launch dates for new devices, it is going to have to do a lot of work between now and the Spring to ensure the next Galaxy S phones aren’t hampered by lingering concerns about quality and safety. If it fails to do that, we could see some long-lasting effects that could put Samsung back into the sort of tailspin they found themselves in a few years ago. As I’ve said previously, that would be a great shame, because Samsung had appeared to be finally recovering from all that.

Competitive benefit

The other big thing I’ve been asked about is to what extent competitors will benefit. Samsung issued a number suggesting a large portion of original buyers had replaced their faulty Note7 phones with replacement ones, once those phones became available. But between the early window when those replacements weren’t yet available and the fact almost all the devices sold in the US and other markets will now have to be replaced with other phones, those numbers are now meaningless. The big question is what phone people buy instead. There are four possibilities:

Buyers simply get refunds and wait until later to upgrade, perhaps holding out for a similar future device from Samsung
Buyers choose another Samsung device – on a net basis, the best outcome Samsung can hope for and probably quite likely for a lot of buyers who have an affinity for Samsung devices
Buyers choose another Android device – if they’re keen on Android but now wary of Samsung
Buyers switch sides and choose an iPhone (or go back to one if this was to be their first Samsung phone)

Only the last two options are really bad for Samsung in the long term and they’re probably the least likely. I would guess many buyers will either hold off on upgrading (assuming they still have their old phone) or switch to another Samsung. But, given the timing of all this relative to the launch of the Note7, the coming availability of the LG V20, and the launch of the Pixel from Google, there may be a decent number of buyers who switch to one of those, too. In many cases, Samsung may struggle to ever win those customers back – this has been something of a nightmare scenario for the small number of people who have bought one of these devices and potentially been through not one but two device replacements.

Overall, it’s very clear this has gone very badly for Samsung and it’s only a question of how long and how far the ripple effects will be felt. At the very least, Samsung is going to have a bad end to 2016 and it’s quite possible that its 2017 could be significantly impacted as well.