Both IDC and Display Search released updated numbers for the tablet segment. There are some interesting key take aways from both sets of numbers.
IDC confirms Apple’s dominant position with regards to iPad share and points to slumping Android shipments for tablets which is no surprise. The Display Search data is a bit more comprehensive which includes forecasts as well as OS share in the press release.
There is one thing that sticks out to me and it is related to Windows 8. In the IDC press release they make it clear that Windows 8’s impact is too early to tell. Whereas Display Search takes a stab at forecasting share for Windows 8 and RT but gives the advantage to Windows RT over Windows 8. This is interesting because it implies that from Display Search’s standpoint they do not have much confidence in Windows 8 on X86 but have some confidence in Windows RT to gain some traction in the tablet market.
If you look at the updated numbers from all the major forecasting firms, it is becoming clear that most, if not all, acknowledge that the tablet market could be larger than the notebook and desktop market. Regardless of your belief on that point the bottom line is that tablets and smartphones are the only real growth segments of the computing industry. IDC still is committed to calling all tablet “media tablets” which I think is wrong. There is no doubt at this point in time that tablets are computing platforms not just media consumption platforms.
In Display Search’s numbers, I think they are being overly generous to Android given the trouble it has said so far in tablets. I personally tend to believe that Windows 8 or Windows RT has more of a chance in the tablet market to succeed.
I still remain convinced that Apple will remain the undisputed leader in tablets due to the iPad becoming the standard in terms of tablet computers. In this release, my friend Richard Shim rightly points out that as the tablet market matures there will be opportunities for segmentation within the sector as vendors carve out differentiation.
As with all forecasts we have to take them with a grain of salt to a degree. Things can change quick and a couple of factors, like subsidization, could drive tablet shipments much faster than is currently being forecasted.
The bottom line is, vendors who are not establishing a tablet strategy may very well be left out of one of the hottest segments of computing we have seen in some time.
Let’s take a quick trip in our time machine to survey the smartphone market in the spring of 2007, five years ago. The iPhone had been announced but not yet shipped, and many were skeptical about its success. Android was still mostly a gleam in Andy Rubin’s eye. The hot smartphones of the day included the consumer-oriented BlackBerry Curve and the Windows Mobile-based Samsung BlackJack. The general expectation of forecasters was that Symbian’s dominant market share would shrink, but stay strong, Windows Phone would at least hold its own, while BlackBerry surged and Palm shriveled.
Fast forward to the present. Smartphone unit sales have nearly quadrupled, but the market has become jumbled in ways that few expected. Apple sells nearly one in five of all smartphones, but is the standard against all else is judged. Symbian is disappearing and BlackBerry is hanging on for dear life, especially in developed markets. Android has gone from nothing to a nearly 40% share, while Microsoft, having replaced Windows Mobile with the snazzier Windows Phone continues to bleed market share.
Smartphone Market Share
Operating system
2007
2011
Symbian
63.5
19.2
BlackBerry
9.6
13.4
Microsoft Windows Mobile/ Windows Phone
12.0
10.8
Apple iOS
2.7
18.9
Linux
9.6
—
PalmOS
1.4
—
Android
—
38.5
Other
1.1
3.4
Data: Gartner
Given this background, talking about what the smartphone market might look like in 2017 seems like a fool’s errand, but I’m going to take my chances. To some extent, smartphones are beginning to look like a mature market, at least in North America, Europe, and Japan. One characteristic of mature markets is consolidation of producers. And in the case of smartphones, this trend is complicated by the delicate interplay of handset makers and operating system providers.
The hot issue of the moment is the pressure toward combining hardware and software into vertically integrated producers. This thinking has been inspired by the staggering success of Apple, though it requires overlooking the struggles of vertically integrated Research In Motion and the implosion of Hewlett-Packard/webOS.
Ingtegration and consolidation. The industry seems well on its way to more integration and more consolidation. My colleague Tim Bajarin thinks that despite its demurrals, Google will make an integrated Motorola the prime producer of Android products. There’s a lot of reason to believe that if Microsoft doesn’t buy Nokia outright, it will formalize an arrangement in which Nokia becomes its official premier Windows Phone partner. I think both Nokia and Motorola will end up as the official flagships of their operating systems.
Apple should be able to fly above this storm. As demonstrated by its latest blowout quarter, there is every sign that it will be able to hold on to the high end of the business for some years to come. The iPhone has lost some market share, and this trend will continue because much of the growth over the next few years will come as low-end smartphones displace feature phones in markets and geographies that are not Apple’s métier. But Apple doesn’t much care about market share; it will dominate the much more important categories of mind share and profit share.
The company most threatened by MicroNokia and MotoGoogle is Samsung, which has just displaced Nokia as the leading phone maker by worldwide unit volume. Samsung is highly integrated on the hardware side. It makes its own processors, displays, and flash memory, among other components. But it has never been a leader in software. It has its own operating system, but Badu has gotten little traction and for its high-end phones, Samsung depends on Android and Windows Phone. Samsung is not going to be happy as a second-class manufacturer for either Microsoft or Google.
Samsung’s tough choices. Samsung’s options, however, are limited. It could buy RIM, which seems destined to fade away unless it can team up with someone. But given RIM’s struggles trying to bring a new BlackBerry operating system to market, this might not offer Samsung much of a solution. A more promising course might be for Samsung to claim an open-source operating system as its own. It’s partnering with Intel on a mobile OS called Tizen, but this seems headed for the same ash heap as Intel’s other OS efforts. (Meego, anyone?)
webOS offers a more intriguing possibility. HP owns it, but has open-sourced the code and made it freely available. It’s a sophisticated modern OS that needs work, but one that Samsung might be able to use as its own platform for phones and tablets. Another possibility would be simply to grab Android and definitively strike out with its own fork without regard to Google’s development path. Either course would require Samsung to get deeply into software development, developer relations, and everything else that goes along with being a full-service provider. This has not been a Samsung strength, but the alternatives may be far worse.
One way or another, I expect Samsung to be a significant player in the 2017 phone market. I’m much less sure about the smaller Android and Windows Phone manufacturers. HTC, with a foot in each camp, has stumbled of late and could have difficulty getting its mojo back. I would not be at all surprised to see Sony, which recently became the sole owner of what had been Sony Ericsson, exit the phone business after struggling, successively, with Symbian, Windows Mobile, and Android. LG, which has never quite gotten the hang of smartphones, could also leave the market. ZTE, Huawei, and Lenovo can trade on their strength in the Chinese market, but may make little impact elsewhere.
The market in 2017. In unit volumes, the 2017 smartphone market will be dominated by low-end phones sold in emerging markets. If Nokia can survive the stormy present, either in partnership with Microsoft or as part of it, the combination of Nokia’s strength in these markets and Windows Phone’s ability to perform well on modest hardware , could again make it a formidable player. Android may be a big force in two flavors, the official one and a Samsung variant. Many of the smaller phone makers will be out of the market. RIM will hang on in some form, perhaps as a supplier of back-end enterprise services and specialized secure phones. And Apple will be Apple.
The biggest question mark is MotoGoogle. Left as it is, it seems doomed to become a second-tier Android handset maker, some thing of little use to Google. Integrated and turned into an Android flagship, it puts Google head to head with Apple and possibly Microsoft. It would probably forsake the current Android licensing model, which is not working very well anyway, and would have to develop new talents such as supply chain manage, channel strategy, and carrier relations. Google has the money and the brains to do all this, but I’m not sure it has the desire, patience, and discipline to pull it off.
First let me clarify that due to my line of work I do not invest personal money into any public tech stock. That being said, even if I did, I would not put my own money into Facebook when they go public.
This has been an interesting week for Facebook. They acquired an extremely popular piece of software for iOS and Android called Instragram for roughly $1 billion dollars. Instagram had an extremely loyal, engaged, and opinionated customer base (judging by their harsh reaction to the acquisition). In fact, fellow Tech.pinions columnist Patrick Moorhead wrote in his Tuesday column about the conversation he had, via text message, with his daughter after the deal was announced. If you haven’t read it already I encourage you to read it as she very deliberately called Facebook stupid and for old people, which is in fact the title of his column.
Along those same lines I wrote a column for TIME in December entitled “The Beginning of the End of Facebook?” This column led to a raging debate in the comment section as some folks disagreed with me and others felt that Facebook may not be the king of social networks forever.
Facebook Becomes Routine
My premise was simple. I interviewed approximately 100 high school students in Silicon Valley, all who have been on Facebook at least two years and many had been on for four years or more. In every case with every interview the results were the same. They found themselves using Facebook less and less and were generally using it to simply get quick updates of friends and family. Since that column (and if you read the comments) I have gathered over 100 more responses all indicating the same thing. Those who have been on Facebook for a significant period of time see their time spent with the service decline.
Yet comScore tells an opposite story. The year over year increase of individuals average monthly minutes on Facebook is increasing at almost 50% each year. Now, comScore is looking at the total number of minutes not the number of minutes an specific individual averages. I am not sure if it is possible to track this but I would be 99% certain that the average number of minutes per month spent on Facebook actually declines the longer you have been on the service.
In my own experience and in many of the high schoolers I spoke with, the first year or so on Facebook was the most intense. Discovering and keeping up with new or old friends. The lure to share socially and show off all the things you are doing, eating, etc. All of it becomes very addicting, but after a while that drive goes away. This is at the heart where I think the problem with Facebook lies. It commands a high average of a persons time for a short while but then Facebook becomes more of a routine rather than a passion.
The numbers that ComScore is observing is because much of the globe is still having its first year on Facebook. There is also no doubt in my mind that even for those for whom Facebook becomes routine go through a season of more intense usage. Like when a friend or loved one goes on a trip or moves to a different location.
However, even with my theory of average time spent declining and the longer a consumer has used the service is correct, it is only one small part of why I wouldn’t put money into Facebook. Ultimately, however, I don’t believe the time spent on Facebook averages we are seeing today is sustainable in the long term.
The Economics of Pleasing Everyone
The problem I see with Facebook’s business in the long term is that it is trying to be all things to all people. Within that vein of thinking it is also trying to develop an advertising / revenue strategy that is also all things to all people. Generally speaking, when a service tries to be all things to all people, it is not actually good for anything.
In 2008 I was on a panel at the OnMedia summit in NY talking about this very thing. I highlighted a few networks of interest at the time. One was called Dogster.com which still exists today and is simply a social network for those passionate about Dogs. It links people up by region or just by type of dog in order to link up people of like minded interest in dogs or even certain types of dogs.
Similarly a few years prior I was spending quite a bit of time with the folks of LaLa.com and its founder Bill Nguyen. As you may know Apple has since acquired LaLa and used its technology to build Ping into iTunes. The premise of LaLa.com was simple in the beginning. Link people together who had similar tastes in music and let them help each other discover new music. The results were as expected as for quite a length of time LaLa.com’s average time on site per customer exceeded two hours per day. The allure in the case of LaLa.com was like minded people and the discovery of new music. Lala’s customer base continued to spend significant time on the service until LaLa changed their strategy.
This is the power of vertical social networks and where I believe the best advertising strategies will lie in the future. In the case of Dogster.com the community is an extremely interested one in all things related to dogs. If I was the head of marketing at Purina, would it make more sense for me to advertise on Facebook or Dogster? Similarly, how about social networks for car lovers / aficionado’s, mothers, fitness fanatics, artist lovers, etc. The total size of one of these vertical networks may not be nearly as big as Facebook’s but the target audience would more engaged, more targeted, and more passionate about the interest and thus more valuable to advertise to in my opinion.
We are already seeing these vertical networks creep up and I assume we will see many more in the future and this reality isat the root of my concern over Facebook’s long term sustainability as a profitable business. My concern is that these vertical social networks will become more valuable to brands and advertisers and command more of their ad spends than does Facebook.
The bottom line is that if I am a brand looking to advertise to a certain type of consumer, I am going to want to go where those consumers are in big numbers. My belief is that brands will find more success marketing with vertical social networks that are oriented around special interests rather than a network like Facebook which is trying to be all things to all people and not doing a good job of it.
Steve Jobs said of the PC as he was developing his post PC theme, “PCs are going to be like trucks; less people will need them. And this is going to make some people uneasy.” Well he was right, if not accurate. A whole lot of trucks are sold. In just the US in February 2012 612, 145 cars were sold, and 537, 251 light duty trucks were sold, plus an additional 225,621 Cross-over trucks. So more trucks sold than cars, and even if you add SUVs (97,825) to the cars, there were still more trucks sold in the US, and that’s not counting the bigger ones that chew up your streets and bring stuff to your shopping center or gas station.
No doubt about it tablets and smartphones are popular and selling well. What most folks seem to miss (or want to miss) is we do have cars and trucks, and motorcycles, and we will continue to have smartphones (motorcycles), tablets (cars?), and PCs (trucks?) Because Tablets are popular doesn’t lead to the conclusion that PCs suddenly aren’t. But if all you’ve got to sell is a tablet, well then the world looks a little different. And even if you have a truck to sell, if it’s getting hammered by the competition, but your car or motorcycle is showing a better margin and/or shipment level, well your interest and emphasis is pretty predictable isn’t it?
So Apple wants to promote the “Post PC” concept as a way of casting the PC in a no longer important, been there done that, obsolete technology. And because they are Apple, the only company capable of original thought or charisma, and the role model for all other computer, electronics, and phone companies, the term “Post PC” will be adopted, and heralded as the coming, the new era, the I’ll follow Apple into hell slogan of all the wantabees—which is everyone from Microsoft to the smallest Chinese cloner.
Actually, Apple makes life so much simpler for the rest of us. We don’t have to invest time and money in clever ideas, or marketing, we just have to wait for Apple to tell us what’s cool now and then copy it as best we can.
The PC/Tablet/Phone industry reminds me of a bunch of teenage girls, watching the cool girls in order to find out what is in and what’s out. Nobody wants to get caught with something that’s out and not cool, that’s worse than a zits breakout on prom night. And it’s a caution to the buyers of all this non-Apple, Apple defined cool stuff. If the company you’re considering buying something from is an Apple follower you should think twice about buying anything from them. It’s unlikely they are going to be a faithful supporter of that currently cool copycat thingie—you’d be better off buying the real deal from Apple.
But it’s tough not being Apple when it’s so big, so rich, and so trend setting. Right now the only company that seems to have a chance at standing up to Apple is HP. All the rest are still in the beige/black box PC world where this year’s machine looks just like last year’s machine and the year before it. Where this year’s big breakout product is an Ultrabook that looks like every other Ultrabook which in turn is trying to look like Apple’s Air. It’s pathetic.
So if the PC industry turns into the unexciting truck industry, regardless of shipment numbers, it’s its own fault for being lazy and scared – get some backbone PC makers, take a chance—do something original. You might find you actually like it.
As I was reflecting on my first experience with the new iPad and its retina display I was intrigued with a thought. There has always been something about the iPhone’s retina display and now with the iPad’s display that has me mesmerized. When I first saw the new iPad and the screen at Apple’s event I couldn’t stop looking at it. Even today I sometimes just turn it on to look at it and shake my head in disbelief.
The thought that I was intrigued by is how the visual appeal of Apple’s devices, and in this case of the screen, causes us to be so emotionally attached to them. Even this NY Times article in September of last year points out that consumers do actually love their iPhones. I believe this affect however as everything to do with the visually appealing experience with Apple products.
In a TIME column I wrote last year, I pointed out that Apple’s desire to create products that are at the intersection of liberal arts and technology drives them to create technology products that are in essence art. Apple turns technology into art we can use. Apple exhibits an unparalleled focus in the technology industry to design some of the most visually appealing hardware in all of computing. This focus of creating objects of desire is one part of many that encompass the Apple experience. That experience, the visual and emotional experience tied to Apple products creates an emotional response in consumers of Apple products that create as much passion around a brand as I have ever seen.
The Most Passionate Community
I would challenge you to find a more passionate community anywhere in computing. I have attended many industry conferences and trade shows and the Macworld’s where Steve Jobs spoke had a level of energy associated with them that I am yet to encounter anywhere else in this industry.
The experience around Apple products is what I think many who compete with Apple take for granted and simply don’t understand. I’ve said often at industry talks I have given that consumers don’t buy products they buy experiences and that is what Apple delivers.
Consumers in droves are discovering what the hard core long time Apple community has known since the beginning and are converting in droves buying iPads, iPhones, and even Macs. It all leads with the visual experience and beautiful and attractive hardware. Believe it or not, however, beautifully designed things are easier to use.
What is Beautiful is Usable
In 2000 a scientist from Israel named Noam Tractinsky, wrote a book called “What is Beautiful is Usable.” He started with a theory and built the scientific evidence to back it up. To quote his report on the subject:
two Japanese researchers, Masaaki Kurosu and Kaori Kashimura1, claimed just that. They developed two forms of automated teller machines, the ATM machines that allow us to get money and do simple banking tasks any time of the day or night. Both forms were identical in function, the number of buttons, and how they worked, but one had the buttons and screens arranged attractively, the other unattractively. Surprise! The Japanese found that the attractive ones were easier to use.
Noam himself then wanting to test this theory with the Israeli culture so he duplicated the experiment. He thought that aesthetic preferences may be culturally dependent. His observation was that the Israeli culture is more action oriented and they care less about beauty and more about function. However when he duplicated the results with an Israeli group of people the conclusion was the same. In fact in his research the sentiment was stronger with the Israeli sample size. So much so that in his research report he remarked in his paper that beauty and function “were not expected to correlate” — He was so surprised that he put that phrase “were not expected” in italics.
It appears that Apple has been on to something from the beginning. Perhaps Steve Jobs absolute resolve to make technology products beautiful carried with it inherent user experience paradigms that simply made products easier to use and that theme is continued today all throughout Apple. This in my opinion is truly what is setting Apple apart in the market place. They create objects of desire and out of that focus comes a visually and easy to use user experience paradigm that drives emotional responses in consumers of their products.
We know humans are visual beings, especially men, and interestingly enough a great deal of science exists today linking beautiful things to ease of use. There are companies who can design objects of desire and easy to use products and there are those who can’t. Apple’s advantage in this area is that they create the hardware and the software with this technology and software as art philosophy. We see this in their hardware and their software and will eventually see it more in their services.
Noam Tractinsky is right and his book title highlights a profound truth. What is beautiful is usable and this philosophical truth carries over into computing and human interaction with computing.
Right now there is only one company who I think truly understands it.
References:
– Don Norman, Why We Love (or Hate) everyday things, Feb 4th 2003
– Tractinsky, N., Adi, S.-K., & Ikar, D. (2000). What is Beautiful is Usable. Interacting with Computers, 13 (2), 127-145.
– Tractinsky, N. (1997). Aesthetics and Apparent Usability: Empirically Assessing Cultural and Methodological Issues. CHI 97 Electronic Publications: Papers
The recent 2012 WW forecast for tablets from IDC which forecasts sales of 106MM units in 2012 with Apple’s iPad numbers at a little under 60MM has been widely picked up and republished across the internet. The report also predicted that Apple could lose dominant marketshare to the Android platform by 2015. Windows tablets do not figure in the IDC forecasts as currently IDC defines them as PCs.
While I’ve a lot of respect for IDC’s ability to identify key market trends, especially in the Enterprise IT market but I’m not convinced they have their finger on the pulse of the Apple iPad market nor Apple’s iOS strategy.
It appears that IDC has consistently under-estimated the iPad market since its launch and their recent forecasts seem to follow that pattern. Just to verify my suspicions I looked back at the IDC forecasts since the launch of the iPad on April 3rd 2010 when Apple sold 300,000 iPads on the first day and 3 million in the next 80 days.
I recall at the iPad launch IDC analysts noting that the iPad would do remarkably well if they sold 5MM units by the end of 2010. IDC subsequently estimated the total number of all tablets to be sold in 2010 at 7.6MM units. But when the final numbers were reported, Apple alone had sold nearly 15MM units. IDC’s forecast for 2011 was set at 44.6 MM units (the final sales for 2011 came in at nearly 69MM units with Apple selling 40 MM units). IDC first predicted 2012 sales of 70.8 MM units – this forecast was increased to 88 MM units and now stands at the 106 MM number announced by IDC a few days ago.
Based on the historical sales growth and the launch of the new iPad it is hard to believe that Apple will sell less than 60MM units in 2012.
With 40MM sales in 2012 – at least a doubling of that number is to be expected. Unlike the original iPad, which initially launched in the US, the new iPad will be sold in 36 countries by March 23rd. The combination of the price reduction on the iPad 2, the new iPad (third generation) and the highly likely launch of the 7.85′ iPad Mini for $299 should drive Apple iPad sales to well over IDC’s forecast number and I suggest that a number well above 80MM units is achievable for 2012 with an annual run rate of over 100 MM units.
IDC is hardly the only analyst firm underestimating Apple’s potential but is one of the most conservative.
The research company also predicts that Android tablets will have a higher market share than the iPad by 2015. Many have predicted that the growth of Android tablets will follow the success of Android smartphones but the markets are very different. The predicted success of Android tablets has not happened so far. The only tablet to get any traction is Amazon’s Kindle Fire. Amazon’s Kindle Fire is a gateway to Amazon’s retail store – it’s not really a tablet strategy – it’s a commerce strategy. To boost their m-commerce platform, Amazon is likely to drive their hardware sales by aggressive pricing – to near zero (perhaps even bundling the Kindle Fire with the Amazon Prime Free Shipping Service).
However, Amazon, if they could negotiate terms with Apple (which is a tall order) could be better off having a Prime app on the iPad rather that being in the hardware business.
At the low end, Android tablets may see some traction where they will be used low cost mobile web browsers and simple readers – especially in emerging countries where low pricing is essential to drive sales. But will customers want a product that has limited functionality, a sub-optimal experience and does not come with a massive eco-system of applications designed specifically for the device?
When Apple launched the iPad many questioned its role as a “Tweener” devices between the smartphone and the PC. Apple was however able to define the category due to the quality of the product, the user interface and experience but more importantly the totality of their eco-system -hardware, software, an apps development platform and a massive distribution system via iTunes.
No other company gets close – so today, we don’t really have a tablet market – we have an iPad market. Note that Apple never refers to their product as a tablet – as they associate the tablet with Microsoft’s earlier failures.
Apple’s dominance of the tablet market has significant implications for media companies. Most have assumed that some equilibrium will eventually come into the tablet market, so a strategy of delivering content across multiple devices was a safe distribution strategy, even with the challenge of optimizing for many different devices. The publishers’ consortium Next Issue Media (made up of Condé Nast, Meredith, Hearst, News Corp and Time) decided, after negotiating difficulties, to eschew the Apple platform and support Android. A decision they are probably regretting. The success of the iPad platform lured each of the consortium members to find a way to eventually work with Apple so the value of the consortium is unclear if they remain solely focused on Android.. The question media companies now have to answer is whether the competitive platforms to Apple’s iPad can do justice to their digital publications. Can these platforms meet reader expectations or provide a significant large enough digital distribution channel to drive user and advertiser revenues ?
Apple will never compete for the low revenue, low margin low quality “budget” end of the market. Apple will always prefer a lower marketshare position so long as they maintain a high revenue and margin share of the segment. It’s possible that eventually the sheer numbers of very low cost tablets could outsell Apple’s premium products but I doubt it. Customers won’t be satisfied with an underpowered tablet any more than they were satisfied with the concept of the netbook. It’s much more likely that as smartphones increase in capabilities and significantly drop in price that they will be the mobile devices of choice in emerging markets. The functionality of even low cost smartphones will be superior in virtually every case to low cost tablets (other than display size and even then, foldable displays, 3D and projection could step in to solve that issue).
The tablet expected to take share from the PC market, overtaking it in unit sales by the 2015/16 timeframe. There will be a few specific cases where PC will remain superior to tablets in input and processing power, but that gap will narrow over the next few years and customers will flock to the convenience of the “tablet”. However the size of the tablet market , while significant, is never going to get close to the volume of the smartphone market which will be measured in billions.
We’re living in a world of digital mobility – it’s a multi-screen world – currently the dominant displays are smartphones, ultra-portable laptops, tablets and the TV but as the Corning Concept video suggests that will evolve. Apple’s goal is to take significant market share in each of the segments and bind them all other with an iOS platform that attracts the world’s best developers.
I don’t have IDC’s resources, contacts or detailed knowledge of the industry but I’ve been around the Apple marketplace for 25 years. My predictions are based on both gut and industry instincts – but are far from scientific but I’m willing to wager my 2012 estimates of iPad will be closer to the mark than the IDC forecasts. For the record I predict Apple will sell over 1MM units on March 16th. It will sell close to 10MM new iPad units within the first 30 days of launch as it rolls out t in 37 countries and in 2012 the total sales of iPads will be in excess of 90MM. My colleagues at IDC are willing to bet a nice bottle of wine that they will end up being more accurate than I am. Sounds good to me and no matter who wins I look forward to sharing it while we develop our own 2013 predictions for this exciting, emerging market.
Apple’s stock price is currently around $600, valuing the company over $500 billion. Already analysts are upping their target range to $700. If Apple continues to execute as well as it has this may too be conservative. I only wish I had the foresight to hold the Apple stock I purchased back in 1997.
Fights over intellectual property rights have become so much a part of the tech scene that it sometimes seems the industry employs as many patent and copyright lawyers as it does engineers. And if the fights over software patents and music, video, and book copyrights weren’t enough new technologies allowing anyone to become a micro-manufacturer could become the next front in this running battle.
The Makerbot Thing-o-Matic 3D printer.
3D printers costing as little as $1,000 let you turn a computer-generated design into a plastic object almost as easily as a printer turns a Word file into printed pages. 3D scanners can turn physical objects into printable designs. Much more expensive commercial machines can print in a large variety of materials, including aluminum, titanium, stainless steel, glass, and ceramics. Low-cost computer-driven milling machines and laser cutters can do jobs that printers can’t handle. And if you don’t want to do the printing yourself, companies such as Shapeways are becoming the Kinko’s of custom manufacturing; send them a file and they’ll ship you a part.
Some tech-optimists see 3D printing as a solution to many of the world’s problems. In a posting announcing that it would be distributing plans for printable objects it calls “physibles,” The Pirate Bay announced:
“The benefit to society is huge. No more shipping huge amount of products around the world. No more shipping the broken products back. No more child labour. We’ll be able to print food for hungry people. We’ll be able to share not only a recipe, but the full meal. We’ll be able to actually copy that floppy, if we needed one.”
This, of course, is cheerful nonsense. Printing food, for example, would require an edible feedstock, meaning there is no net gain for anyone.
But the technology does make it easy to make copies of a large variety of objects, from toys to replacement parts for your bicycle. But is it legal? After all, the availability of Xerox machines made it possible to copy books and software lets you copy DVDs, both activities that constitute copyright infringement.
It may come as surprise, but in general, physical objects enjoy little or no intellectual property protection. With some specific exceptions, such as sculptural works of art and buildings, physical objects cannot be copyrighted.
Of course, there are other forms of protection. Trademarks, for example. You could copy a Nike sneaker—the technology doesn’t actually exist to do that yet, but it will—but putting a swoosh on it would violate Nike’s trademark. There’s a fuzzier part of trademark called trade dress that can protect the general appearance of an item, but to win it, the product must be very well-known and immediately identifiable, like the classic Coke bottle. Finally, there’s the possibility that your copy will infringe on someone’s patent. Even an object you design from scratch could inadvertently violate a patent though most of the time, replicating part of a patented device does not infringe. (For more detail on the fine points of the law, see the wonderfully titled Public Knowledge white paper “It Will Be Awesome If They Don’t Screw It Up” by Michael Weinberg.
The danger is that industrial incumbents will fight to strangle this baby in the crib. For many industries, the selling of replacement parts is a lucrative business. Until 3D printing came along, though, it was simply too difficult and expensive for anyone to bother making competitive parts. One exception was the auto industry, where the huge market for replacement body parts made it worthwhile for third-party manufacturers to take on the huge cost of tooling to make copies. The auto industry has tried and failed to shut down this “crash parts” business for decades, though it recently has had some success using design patents.
Some companies have tried to sneak physical products under the protection of the digital Millennium Copyright Act. Lexmark, for example, included a chip in toner cartridges that contained computer code. It argued that replacement cartridges made by Static Control Components infringed its copyright by copying the code. But in an important ruling, the 6th Circuit Court of Appeals found that adding computer code for the purpose of extending copyright to something otherwise not protected was unacceptable.
There’s a good chance, though, that as 3D printing becomes easier, cheaper, and more popular, industry will try to legislate new protections. This time, however, I think the tech world and the spirited “maker” community can prevail. First, as the fight over the Stop Internet Privacy Act showed, it is much, much easier in Washington to block legislation that to pass it. The system is heavily biased in favor of inaction.
Second, this time the community is forearmed. The tech industry paid little attention when the DMCA was being debated in the late 1990s and to the extent it got involved, it deferred to big software companies such as Microsoft and Adobe, which wanted strong protections against piracy. The industry was a bit slow to rally to the anti-SOPA cause, but once it did, it proved effective.
The use of information technology to make physical object is an important new frontier. Let’s hope, in Weinberg’s words, that they don’t screw it up.
Not long after the new iPad was announced, story after story was written that this new iPad was evolutionary, not revolutionary. But I am not convinced that is a correct viewpoint. In fact, I believe that this new iPad will actually have a revolutionary impact on the market in some very interesting ways.
Some Historical Perspective
Back in 1981, I wrote the first report on what was to become desktop laser printers. At the time, laser printers were as large as mainframes and took up much of a 9’ X 12’ room. But I had seen Canon’s laser printer engine and wrote in this report that by using this type of technology in potentially desktop sized printers, I could imagine a day when we could publish documents on our desktops. Now, this was three years before postscript laser printers hit the market and before Aldus’s Pagemaker was introduced.
Not long after this desktop sized laser printer engine was shown to Steve Jobs, he made a fortuitous decision to build an Apple laser printer of his own. And after being convinced by John Warnock (co-founder of Adobe) to include Postcript as its software engine, Jobs put in place a key component of technology that would put Apple on the map. Not long after that, Paul Brainerd created a Mac product called Pagemaker and together, these two products launched the desktop publishing revolution. Although Jobs embraced both products, I am pretty sure he and even the team at Apple never really understood the magnitude of these products impact on the world of publishing at first. For Jobs, the decision to back a desktop laser printer was totally out of order given Apple’s PC centric business model and those around him argued loudly with him about doing this product.
But we now know that Steve Jobs’ stubbornness about introducing a laser printer had its roots in his desire to have a digital version of his calligraphic type fonts replicated through this printer. And from that point on, while at Apple until mid 1985 and at NeXT, the issue of high quality graphics took center stage on every product Steve Jobs touched. And when he came back to Apple, this was still top of mind. By the way, I worked on multiple desktop publishing marketing programs for Apple, MacWorld and various hardware and software vendors who were doing DTP like products then and saw up close how Apple single handedly rewrote the rules of electronic publishing, something we now take for granted and use every day when we create our own newsletters, Web pages, etc.
The New iPad
In the column I wrote not long after the new iPad was launched, I pointed out that from the inception of the iPad, Jobs wanted it to have the highest resolution screen possible but that at the time of the release of the first two generations of the iPad, the technology was not there to deliver the real iPad he wanted to give his customers.
But it was always on the roadmap and they had to do some serious engineering between their team and their partners to get us this new iPad to this incredibly high resolution. And with it, I believe Apple is ready to have another revolutionary impact on the market via one of their products.
One good example of this will be in medical applications. Although doctors and hospitals have actually been adopting and using iPads in pretty big numbers, this new iPad will become a must have tool soon. The reason is that with the older iPads, the information they were processing on it was mostly data driven. But as you know, doctors rely on a lot of things like xray’s and digital imaging to help them make key diagnostic decisions. For final analysis they will always defer to industrial strength 10K graphics workstations, but the new iPad with its high resolution screen will now be able to give them on-the-go images that can deliver much more imaging details then they had on their original iPads. This will become an important part of their ability to do immediate analysis and will now become the minimum level of tablet graphics quality they will accept in their medical practices.
Another example will be its impact on catalogs. Apple recently released the new catalog category in the iTunes store but I have talked to some catalog vendors who consider today’s tablets inferior for delivering the graphics quality they demand in their print catalogs. A good example might be Restoration Hardware. They pride themselves in delivering one of the greatest graphics quality catalogs on the market and would have never even considered doing a digital version for the older iPads. But for them and any other vendors for whom high quality images are critical to their catalog sales processes, the new iPad will be revolutionary for them. According to Joaquin Ruiz, CEO of Catalog Spree “With ultra-sharp pictures, text and video, the new iPad is perfect for all forms of publications. March 7, 2012 will be remembered as a landmark for publishers from news, to retail, to education, and to books.
The folks involved in engineering, oil and gas exploration and nuclear energy research will also see a higher resolution iPad as a welcome mobile tool that will become a key part of their on-the-go digital tool-belt. And don’t count out this high resolution iPad’s role in education. This new iPad will deliver a much closer representation of textbooks, especially ones that have a lot of images, graphics and diagrams, and to students it will become the minimum resolution they will accept in a tablet that will soon carry all of their textbooks.
When Steve Jobs introduced the iPhone, he said he would be happy if Apple could get even 1 percent of the cell phone market. An understatement if there ever was one. And even with the iPad, while Jobs used a lot of flowery language to describe it, he was cautious in declaring what type of impact it would have on the market.
At the launch of the new high-resolution iPad, Tim Cook and team–I believe–clearly understated what this new iPad’s market impact will be. All they said was that it was a newer and better version of the iPad and that they were pleased they could deliver a new tablet with a much better screen. But don’t let that fool you.
I believe we will look back relatively soon and realize that with this iPad, Apple started another revolution that has it roots in their desktop publishing heritage and instead of desktop publishing this time around, the revolution will take place in mobile publishing. The result will be to extend Jobs and teams original mantra that was, “What-You-See-is-What-You-get,” but this time it manifest itself on the new iPad. Think of the new iPad as the new representation of Steve Jobs’ laser printer’s paper. And its influence will touch every market. It will drive what I believe will be the minimum standard in tablets as tablets become the vehicles for every form of mobile publishing content, whether it be images, video, games, newspapers, magazines or books as well as the future of the web.
With the Nexus One and their recent purchase of Motorola, Google has more then signaled that they will soon be in the hardware business in a big way. And the recent rumors that they are building a 120,000 square foot consumer experience testing center on their campus suggest that they will test their own hardware along with partners products in order to create and deliver devices that are truly optimized for their Android and Chrome software.
This move is of course controversial since it means that they will be in direct competition with their customers and partners who back Android and Chrome. However, I don’t think Google has any choice but to go in this direction if they have any hope of gaining ground on Apple and try to stave off an imminent threat from Microsoft via their Windows 8 cross-device Metro strategy.
One of the facts that is becoming very clear to the industry at large is that Apple’s lead in hardware, software and services is a mammoth one. They are selling over 5 million Macs per quarter. The iPhone continues to be a hot product and while Android has gained much ground in units shipped against the iPhone, Apple is taking as much as 74% of all the profit in this space. And the iPad holds well over 80% of the tablet market share and this will be the case through this year too. And many of my research colleagues predict that even in 2015, Apple will have at least 60% of the tablet market.
But the key to Apple’s success is no secret. They are where they are because they own the hardware, software and services and combined they give Apple a significant advantage over their competitors. And while that too is no secret, what is not understood well by the outside world is that they architect their devices around their services. The best example of this is with the iPod. While the hardware itself is the profit center for Apple, it was the music service that was the critical component that made the iPod take off. From a hardware perspective, they architected it around the music service, which means they designed the iPod software, user interface and hardware dials so that they were optimized to deliver a great portable music experience.
The same goes for the iPhone and the iPad. It is the services that drive the final UI and hardware designs and since Apple controls the entire eco-system, they can be assured that they deliver to their customers a unified and easy to use experience with their products.
Now consider the plight of the middleware software vendors like Google and Microsoft. What they bring to the party is a critical component of any final product via the OS. But both companies architect from the inside out, or only at the software level and then hand this off to their vendor partners who must now design their hardware around the software and hope the design can be optimized for the OS they have been handed. And from Google and Microsoft’s standpoint, they can only influence and hope so much that their hardware vendors will get it right.
Historically speaking, Microsoft has done the best job of creating strict technical guidelines that hardware vendors can follow, but Google’s approach to Android design is pretty much a moving target. Vendors have told me of all kinds of problems they have had getting strict hardware guidelines from Google for building Android devices.
Microsoft’s model worked for PC’s. But I don’t think this model will continue to work with this new world of mobile devices. What seems to be happening now is that in both the Windows and Android camps, controlling how the hardware vendors use these operating systems is much more difficult as hardware vendors strive to try and differentiate themselves in the market place. In many cases that mean’s hardware and software UI tweaks that go beyond what these companies give them in the way of an OS which then potentially delivers various forms of fragmentation.
At some point, not controlling the entire hardware, software and services delivers diminishing returns to both of them and sooner or later they will find that the old PC model of creating an OS and giving it to vendors to propagate will not work. In fact, I am seeing that understanding starting to become clear to both Google and Microsoft as they stare up at Apple running away with all of the profits. Apple’s model works. Using the old PC model will not work in this new world of mobile devices.
This is why we are seeing so much hardware activity at Google and I expect to see similar branded hardware strategies evolve at Microsoft very soon. While they can hope that their partners can utilize their software to create great hardware and services, at some point they have to realize that putting their trust in their vendor partners to deliver their vision is a crapshoot.
Indeed, they may only have a real chance to catch Apple if they take control of the hardware, software and services and the sooner they realize this, the sooner they can control their individual destiny’s.
One of the things my firm focuses on is spotting trends within the technology industry. As a part of our constant search for trends we employ a concept we call “live the future now.” What this means, is that we as trend analysts, ourselves being early adopters, attempt to look for and implement things into our own work, play, family, life, etc, that we believe consumers may use technology for in the future. We also hunt out and study other people or groups of people, mostly early adopters, who are also using technology today the way we believe the masses will in the future.
So this column is going to be more about the future than the present.
Because I live and breathe this industry I also acquire quite a lot of technological gadgets as a part of this process. For the past six month’s I have been utilizing in different capacities no less than five and upwards of eight tablets at any given time all throughout my house. Not all my tablets are running the same core OS as some are iPads, some run Android and one runs Web OS. This helps me evaluate the strengths and weaknesses of a range of tablet operating systems and device features. Regardless of the OS I basically keep a tablet in every room of my house, except the bathroom, at all times. In basically every room where we spend significant time you will find a tablet of some shape or form. Living with a tablet in every room of my house is a fascinating experience. It is also a very convenient experience.
In the future I believe having access to these “smart connected screens” in every room will be a staple of most consumers’ homes in the developed world. What this enables is a situation where consumers don’t need to carry their tablets with them from room to room. They simply move to each room and as necessary, at their convenience, pick up the closest tablet and begin using it.
In my own experience doing this, I found that quite often I simply wanted to look something up on the Internet. What I looked for was the most convenient screen to access the Internet with. My notebook is rarely near me on the couch or bed and my smart phone suffices but the screen is a little to small for the job most times. This is where tablets come in. They are more mobile than notebooks and sport bigger screens than smart phones. And when you have one in every room you don’t have to think about bringing your tablet with you or where you left it last. Having a tablet in every room ready to be picked up and utilized was not only extremely convenient it was also extremely useful.
Now in this reality we must recognize that we may potentially shift from tablets being mainly personal computing devices to perhaps more communal computing devices–at least in the home environment.
Shift from Personal to Communal Screens
With the role of the personal cloud, I can see a situation where you just pick up the most convenient tablet/screen to your proximity, in whatever room you happen to be, log in to your personal cloud, and instantly the tablet becomes “your tablet.” It would contain all your personal settings, preferences, access to media, etc.
In this environment what is personal is your cloud not the device itself. This is a different take on the concept of personal computing. This of course does not mean that we consumers will not own personal computing devices, like smart phones for example, but that there will also be screens we use in our daily lives that are not personal but more communal. The personal cloud we subscribe to is what turns any screen into our personal computing platform for the amount of time we choose to use that screen as such.
Google’s Chrome OS is very similar in concept to what I am outlaying. Any person who has a Google account and has invested in the Chrome OS, via a ChromeBook, could log into my or any ChromeBook and begin using the device as if it was their own. When this concept makes its way to tablets I believe it will enforce this idea of a screen agnostic tablet, in every room, future that I am outlining.
Now of course for this to happen the cost of tablets will have to come down. That is why I pointed out at the start of this column that I am talking more about the future than the present. However, what if someday we can sell a $99 or less tablet that runs a very light OS, with access to cloud services, and wi-fi? Another way this reality could happen is with a hardware-as-a-service model where as a part of a subscription, perhaps to your cable provider, the devices are provided for free.
The bottom line is that over the next five years the BOM cost of tablets will come down. If these devices rely more on the cloud than native software, some of the costs will move from the device to the service. Making the hardware more affordable as it relies more on a service to become “personal.”
It is with these types of “smart connected screens” that I believe we will see the explosion of devices into consumers homes. Prior to tablets we may have assumed that the dominant computing screen in consumers lives was going to be a notebook PC. In essence we would have said that there would be a notebook in every room, owned by every consumer. I think we are rapidly learning that, that future is going to be given to tablets.
Best Buy has been running a commercial for the past few weeks where they are positioning themselves as THE place to buy a mobile phone. The commercial was very well done.
The commercial included many who invented recognizable aspects of the mobile phone experience. People like Philippe Kahn who created the camera phone. Or Ray Kurzweil touting speech and voice technologies he created. Each person goes on to say what they created in relation to the mobile phone. Then it ends with some Best Buy blue shirts saying the following:
We created a better way to buy a smart phone. Any phone, any carrier, and all of their plans, with lots of unbiased advice.
It is the last few words that I find the most interesting–with lots of unbiased advice. This insinuates that cell phone retailers should be accused of selling phones with biased advice. Perhaps not just bias advice but sales kickbacks from handset vendors as well incentivizing sales people in carrier stores to push one device over another. Not every vendor does this but it does happen. It can lead to overly zealous sales folks pushing devices on consumers they don’t actually want. I have actually witnessed this in action.
Last summer I was in a certain carriers store activating an iPad for their data network. I overheard a sales conversation between a woman in the store and a sales rep. She had mentioned several times that she was interested in the iPhone. During the process of the conversation the sales person talked her out of the iPhone to go with another device. I listened to her explain what her main uses were and they were fairly simple. Talk, text, email, web, and the device she was sold was fully capable. The only observation I made was that she did not seem overly technical. I was leaving the store at the same time as she was and I gave her my business card and asked if she wouldn’t mind emailing me in 30 days if she hadn’t exchanged the device. She emailed me a week later saying she exchanged it for the iPhone.
This is what I am referring to when I speak of the complexities and challenges of selling devices as retail. This is why I expect that over the next several, or more, years that we will see more companies duplicate Apple’s retail strategy and start opening more of their own direct to consumer outlets. Tim articulates in his column today that he expects Amazon, an online only retailer, to start employing their own retail strategy–which would truly signal this fundamental shift.
All of this just goes to demonstrate how the carrier sales channel is fundamentally broken. Best Buy is looking to solve this problem by carrying every device on every network. To some degree I almost wonder if Best Buy’s approach won’t lead to more challenges for consumers as there are faced with an overload of information and options. This is known as the consumer paradox of choice, which I have written about before.
Best Buy’s approach, believe it or not, will make handset vendors lives even more difficult. At least when sold through the carriers channel, these OEMs compete with a limited number of devices. Carriers don’t generally pick up every device an OEM makes but rather picks certain ones to fill gaps in their lineup. Competing in the sea of sameness which is the Android landscape, and will someday be the Windows phone landscape as well, will be even more difficult in an environment where the sea of sameness is multiplied. This is exactly what will happen in Best Buy as they sell every device, from every network.
And lastly is it even possible to be a sales person in retail and not have bias? We will see how this turns out as hopefully our friends at NPD will be able to track specifically what happens with sales of mobile phones and tablets at Best Buy. I, for the time being, will remain skeptical and convinced that the OEMs are better with their own retail presence. I outline that logic in this column by pointing out how similar the personal electronics market is to the automobile market. I remain convinced that the way we buy products is going to be drastically different in the not too distant future.
I recently noticed something about my tablet usage that really intrigued me. Since using the iPad, it has become a constant companion to me and along with my iPhone and Droid, I carry it with me all of the time. Although my smartphones are quite important to me, I have always had a bit of a difficult time reading their small screens and as I get older, I have to admit that the size of the screens I use in my life are becoming an important part of my user profile. And while I would often buy apps on the smart phones for use on them, I very seldom used them for any real eCommerce purchases. For that I mostly deferred to my laptop.
But over the last six months, I began noticing that my preferred screen for buying things started shifting over to the iPad. This particular fact came into even sharper focus for me recently when I read a piece in Wired that pointed out that Amazon’s tablet might actually serve as a powerful vehicle for their overall large store.
In this same article, they recounted a Wired interview with Steve Jobs in 1997 where they asked him what opportunities he saw with the Web. Here is what he said:
Wired: What other opportunities are out there? Steve Jobs: Who do you think will be the main beneficiary of the web? Who wins the most? Wired: People who have something – Jobs: To sell! Wired: To share. Jobs: To sell! Wired: You mean publishing? Jobs: It’s more than publishing. It’s commerce. People are going to stop going to a lot of stores. And they’re going to buy stuff over the Web!
As you can see, even back then, Jobs saw that there would be a major shift in user buying habits and that the Web would become a serious vehicle for eCommerce. And over the last 13 years that has happened in a big way. eBay, Craigslist, Amazon, iTunes, etc have all driven eCommerce into the mainstream and they are now just a normal part of the way most of us buy things, especially things that we cannot find at our local mall. Of course, the irony of this quote from Jobs is that while iTunes has driven his eCommerce vision, he also created stores that have become one of the most successful retail chains in the world.
Now, if you look closely at peoples shopping habits these days, much of how they search for a product through search engines and review sites like PC Mag’s product reviews, and then buy them over the Web, should give you an understand that the Web has literally become the most powerful medium for commerce next to the grocery store. Sure, people will always go to the mall, but the mall and local stores will always have a limited supply of goods. But through the Web, you can buy just about anything. Although people will still use desktops and laptops for eCommerce, if my experience with the iPad is any guide, then the tablet, with its bigger screen then a smart phone and its full access to all Web eCommerce in this highly mobile for factor, could actually drive even more eCommerce purchases in the future. Another way to look at this is that the tablet is Amazon’s Brick and Mortar and a tablet is to Amazon what a physical store is to Wal-Mart.
If you think about Amazon’s business, it started with selling books online and then quickly became a place where consumers can buy just about anything and shop competitively from one single location. It just so happens however that this location is not physical; it resides fully within your browser. Amazon’s location is virtual.
To contrast, a company like Wal-Mart is evolving into the digital age with a strategy that includes their brick and mortar stores. To some degree Barnes and Noble is doing something similar but only in the realm of books. Amazon however has no intentions of creating a physical location where you walk in to experience their service. I believe however that Amazon is very interested in giving you a virtual physical storefront and it started with the Kindle.
Any retailer will tell you how important the overall retail experience is to their success. Some companies do retail poorly and others do retail extremely well. The Kindle for Amazon started completely around discovering, purchasing and reading books. The Kindle is the retail storefront to Amazon’s digital book library.
I believe that the evolution of the Kindle will follow Amazon’s business evolution. It started with books then included everything else. Which is why this next device that will most likely be a fully featured tablet will also come with Amazon’s complete shopping experience built in. This includes not just digital storefronts like books, music and movies but physical items as well. Since Amazon is one of, if not the largest digital storefront, it benefits them to get devices on the market where they control the entire shopping experience.
This is one of the reasons Amazon re-jiggered their iOS app strategy to stay away from Apple’s transaction model and fees. I don’t believe this move was just about avoiding management fees but that Amazon wanted to control the user experience with their storefront instead of Apple.
Reflecting on that point briefly, it becomes clear that Apple’s app store commerce model works for those for whom billing and storefronts are a problem but it does not work for those companies who have spent millions of dollars perfecting their own e-commerce experience. This leads me to believe that if the entire eCommerce experience is baked into the tablet experience then Apple’s new big purchase might be an eCommerce “etailer” that offers a broad range of products that Apple can integrate into the complete user experience of the iPad.
Amazon also has an interesting strategy with their Prime service that could be strategically integrated as well within their tablet offering. Perhaps Amazon gives better deals or promotions to those who own the tablet and are Prime customers thus incentivizing more purchasing from their store directly on the tablet.
This is why I believe a tablet is actually strategic for Amazon. Of course they can and will make sure their services are available on every device imaginable. However if they bring a device to market that is a full blown tablet and also includes the most elegant and seamless experience to research, discover and purchase from, then that device becomes the retail storefront to everything Amazon sells – and more.
Our firm has been doing an extensive amount of tablet analysis over the past year. The more I study the role of the tablet in the industry and in the lives of consumers the more fascinated I become with this form factor. To clarify, we believe and classify the tablet as a PC. We simply view it as a form factor within the PC landscape.
One theme of late that has some of my mind share is around tablets going where traditional PCs can not. I am not just speaking of overall market share, although that factors into my thinking, but rather I am thinking about location. Now to be clear, I am not saying PCs (clamshell notebook PCs specifically) literally can not go to the locations I will talk about. Rather, what I want to point out is that the traditional PC/Notebook PC is the wrong form factor for a growing number of use cases and market pain points.
Prior to tablets, I believe the technology industry at large looked at nearly every consumer use case, as well as every vertical market, as an opportunity for the sale of a traditional PC/Notebook PC. What this led to was the adoption of the traditional PC into scenarios, where although sufficient, was the wrong form factor for the job. If you follow much of what I write you will notice that I am fond of Clayton Christensen’s philosophy in The Innovators Dilemma that consumers “hire” products to get jobs done. Prior to tablets the market “hired” the PC to do jobs that we are now finding tablets are better suited to do.
Last week I looked at the adoption of the iPad by a growing number of enterprises for specific mobile workforces like field force and sales force automation. In many business related scenarios we are seeing the iPad step in and take the place of notebook PCs primarily because it is better suited for the specific task at hand. Enterprises are finding that for their most mobile workers the iPad is a better tool for the job than a clamshell notebook.
Late last year I wrote in my TabTimes column about how small businesses are using iPads for things like point of sale retail and even mounting an iPad for interactive product/ media placement. I even talked about some examples where restaurant owners were going digital and integrating iPads for the uses of taking orders, showing pictures of menu items to customers, and adding other relevant information for customers to make dining decisions. In both those later use cases the job could have never been solved by a traditional clamshell PC because who wants to hang that device to the wall at retail or walk around a restaurant holding a clamshell notebook? This is at its core what I mean when I say that tablets will go where PCs can not. This is what I mean when I say that the tablet is the ultimate mobile PC.
Further to this point, I highlighted yesterday in an article how the iPad makes the perfect learning companion. I have been very vocal about how touch computing removes barriers to computing presented by mouse and keyboards and therefore are better tools for learning for all ages but kids specifically. We have been using PCs in the classroom because they were the only tools available. Now there is a better tool, the iPad, and it will find itself fitting into educational environments better than the PC ever could.
The list goes on from legal firms, to financial management firms, to hospitals and doctors, pilots and airlines, public safety, and more, who are all finding that the iPad is better suited than a clamshell PC for their specific computing needs. Consumers are waking up to this reality as well.
Although, the notebook PC is portable you don’t typically see consumers move around, walk around, or stand up and use their notebook. This is because the form factor lends itself to a desk or a lap where the screen sits at arm’s length away. Tablets are very different. Consumers are comfortable using them while standing, walking, sitting on the couch, laying in bed, in the bathroom, by the pool, at the beach, in the kitchen, etc. The tablet is not designed to be viewed at arm’s length and because of that our relationship with this form factor changes. We can use it in different ways and more importantly take it places we would not or could not take our clamshell PCs.
I would argue the tablet form factor lends itself to more mobile computing use cases than a clamshell notebook. Because when consumers use a clamshell notebook they are not truly mobile–they are stationary. Whereas one can actually use a tablet and truly be mobile. I know I am tweaking slightly the classically held definition of mobile computing. However, due to the nature of tablets impact on the market I believe the traditionally held definition of mobile computing needs to be challenged.
The PC, tablet, smart phone, and perhaps something new down the line, are all tools to get jobs done. Each one has its place and each will remain relevant in some way shape or form. However, when it comes to mobility the tablet is mobile computing in its purest form.
The end of 2011 brought about some interesting market developments. Both Nielsen and NPD shared data that the once so dominant Android actually declined in market share over the holiday quarter of 2011. Both Nielsen and NPD also shared that during the same quarter iOS, mostly due to the iPhone, closed the gap on overall Android market share.
Now, with all of these quarterly market share reports, we have to keep in mind that this data only reflects the current quarters data and not the annual or overall installed base. Still, it is important to note that during the holiday quarter (perhaps the most important quarter) Android market share declined and iOS jumped dramatically. This reality should concern Android partners and Google.
We sensed this trend early on and shared with our clients last fall the fact that Android could be headed for a decline in market share. In my TIME column in October of last year I outlined many of the ways that Google was mis-handling Android and unfortunately further straining their already strained relationship with their partners. If Google does not get a handle on not only the fragmentation issues but also their relationship with their partners (by being more transparent and trusting with them) then I anticipate the decline in Android market share to continue. Not solely based on more consumers choosing iOS but by Android’s partners vesting more resources and upping their commitment to Windows Phone.
I don’t expect any Android vendors to completely dump Android but I could see them shipping fewer Android devices overall as a part of their product mix in favor of Windows Phone, which inevitably would lead to fewer Android devices on shelves at any given time, which would lead to even further Android market share decline. I firmly believe that Android device volume is its strongest competitive advantage. Right now Android currently has the bigger share of OEM resources and overall device mix per OEM. However, that could all change very quickly and in 2013 Microsoft will have a compelling story around Windows Phone and Windows 8 for their partners. If Google does not adjust their strategy with Android quickly they run the risk of OEMs shifting the balance of their resources more toward Windows Phone (or something else) and away from the Android platform.
If you line up all of these underlying trends it could spell real trouble for Android. My biggest concern for Android overall is that the platform itself creates no significant hardware loyalty. That is a dangerous truth for any of Google’s hardware partners. The same can be said of Windows Phone, or any other horizontal platform for that matter. If you are going to be in the hardware game you have to differentiate and more importantly create a partner ecosystem that creates customer stickiness.
Lastly, on my point that Android’s competitive advantage is volume of devices in channel at any given time. NPD shared their data on the top devices sold over the Oct/Nov time period. If you look at the chart you see that the top three are iOS devices. Note these are three different phones. If Apple does continue to diversify their products on the market and leave legacy devices in channel at lower price points, they will themselves be creating their own iPhone army of devices that could further hurt Android’s market share over the long haul.
There used to be a time when I would go to tech industry events, trade shows, internal company meetings, etc. and I was one of the few in the room with a Mac. I took great pride in that fact, but now the Mac is gaining everywhere. It’s in schools, hospitals, labs, construction sites, restaurants, consumers’ homes, coffee shops, and now increasingly in the enterprise.
With this observation in mind it should come as no shock that Apple blew the doors off their latest earnings and recorded all time sales of Macs. My analyst colleague, Frank Gillet at Forester, shared his research which showed that 1 in 5 Global workers now use an Apple product for work.
So what is fueling this trend?
Apple Products Cost Less to Support
When I worked at Cypress Semiconductor, I moon-lighted from time to time and helped our IT department by solving Windows problems. I prided myself on the fact that I could troubleshoot Windows with the best of them. I could navigate my way in and out of all of the different and common Windows conflicts. Then a funny thing happened. I switched to the Mac and all of a sudden troubleshooting became a thing of the past. That reality is now hitting the enterprise IT departments.
A recent survey by the Enterprise Device Alliance which surveyed IT professionals in large enterprise environments that have a mix of Macs and PCs overwhelmingly found agreement with IT managers that Macs cost less than PCs to support. IT managers noted that Macs presented higher up front acquisition costs, but also noted that the long-term benefits were worth the tradeoff.
When it came to Mac adoption in the enterprise, ease of technical support and lower total cost of ownership were among the top reasons for the switch. Number one on their list–employee preference.
Bring Your Own Device To Work
If you follow this industry even a little bit you keep hearing about the “consumer-ization of IT” or the “Bring Your Own Device” trend. Yes, both trends are real and IT managers are diligently working to allow employees to use whatever devices they want at work.
We recently interviewed SAP’s CIO Oliver Bussman. He shared with us that inside SAP they have 14,000 iPads and 8,000 iPhones deployed. That is a total of 22,000 iOS devices compared to the 20,000 Blackberries deployed to his workers. SAP, like many other companies is working to cater to their employees’ device preference. And Mr Bussman shared an interesting perspective with us. He said that he now has to pay closer attention to what is going on in the consumer market because if he doesn’t, he would not be able to stay ahead of the game. His workers use and learn how to make things like the iPad work for them at home. Then they come to him and say they want to use it in the office as well. After his visit to CES, Mr. Bussman recorded a video of his thoughts on the consumer-ization of IT and it is worth watching as he has a very important perspective on the subject.
The Right Product for the Right Job
In the construction industry they say that “every job is easier with the right tools.” Perhaps for too long, due to the Windows monopoly on most businesses, IT managers have been forced to have workers use the same tool to get a multitude of jobs done. But now devices like the iPhone and iPad in particular are proving more effective in many situations like field force and sales force automation.
During our interview Oliver Bussman also shared with us that he was able to deploy 300 iPads to his global sales team in just 4 weeks. In many enterprise solutions, the iPad, and touch computing in general, is just a better tool for the job.
IT managers need to effectively empower their workforce to be productive and equipped with the tools they need to be successful. Apple products are now becoming a critical part of the enterprise tool set.
Apple’s focus has not been the corporate IT accounts. Apple has always been a consumer product company waiting for a pure consumer market to mature. Now that the consumer market for personal electronics has matured, it appears to also be an enterprise strategy. Demand for Apple products is at an all-time high with consumers and their latest earnings prove this. What no one really could have predicted was that to win in enterprise you had to also win in consumer. It seems logical, but hindsight is 20/20. That reality is now fueling growth in Apple’s favor from every corner of the technology sector. The scary thing for Apple competitors is that they are just getting started.
The answer to this is no, and yes. Let me explain.
In 2007, Netbooks took the market by storm. These small low-cost laptops hit the market at the beginning of the recession and were instant hits. Although first versions with Linux were panned once a low-end of Windows was made available they really took off. By 2010, we were selling about 30 million a year.
But in 2011, demand for Netbooks took a major hit. Many attributed this to the intro of Apple’s iPad and other tablets but in truth, the real reason for the decline is that once the vendors realized there was serious demand for low powered, low-cost laptops, they went full-bore in creating full-sized laptops in this price range. Last I checked you could get a 15.6 inch AMD Dual Core E-300 accelerated processor based laptop for around $329. Although Netbook customers liked their small sizes and low weight, they valued even more laptops that had extra power and full keyboards.
But if you try hard, you can actually trace Ultrabooks back to Netbooks. Indeed, at the WSJ D conference a few years back, when Netbooks were all the rage, the late Steve Jobs told Walt Mossberg that nobody really wants a Netbook. While he did not downplay demand for a smallish type laptop, he felt that people wanted a small laptop with a full keyboard and the same power as their mainstream laptops. Three months later, he and Apple introduced their first MacBook Air and of course, this successful product is the reason all the vendors are creating Ultrabooks now.
But Ultrabooks have one big problem. On average, they will be mostly in the $699-$999 price range and well outside of the realm of what we call value PC pricing. That range is from $299-$599. But to say there is still demand for an ultra-thin and low-cost laptop in this value price range would be an understatement.
What you can expect to happen is, in a way, the rebirth of the Netbook in the form of value priced ultra-thin PCs. These will not meet any of Intel’s Ultrabooks specs, but instead, will have low-end mobile processors, perhaps the home version of Windows 7 and a low-density hard drive. But they could be relatively thin and really cool, just with lower end chips and low-cost screens. In many ways, these will speak to the same audience who wanted a Netbook, namely those who desired a really low-cost laptop for basic computer usage.
This low-end category could get an interesting boost later in the year in the way of Windows on ARM. Arm chips are already low-cost, but with long battery life and some pretty good processing power. You can believe they will shoot for use in ultras-lims as well.
So while Netbooks as we know them are mostly dead, expect to see them return in the form of ultra-slims, ultra-thins, or some type of name the vendors will give them that targets this low-end value segment of the market. While I don’t believe it will have a heavy impact on the more full featured laptops in the value end today since these will sport much better processors, higher quality screens, etc. these low end thin laptops will hit the nerve of a part of this value market and could actually become big hits on their own.
I was surprised by a number of conversations I had while at this years CES. More than once the conversation turned to the staleness of innovation shown at the show. It is true there wasn’t too much to get excited about this year, but the remarks I heard seemed to indicate that there is a belief that we may be headed for a period where innovation is stagnant. I have to say that I disagree.
On Monday I wrote in my column about why I believe the PC landscape is about to change. I pointed out that the barrier to entry to create consumer electronics has dropped to an all time low. Making it feasible for any company with enough cash and a market strategy to start creating electronics of all shapes and sizes. My overall point was that consumer electronics is ripe for new entrants. More specifically new entrants with fresh ideas.
That being said we have to look at innovation as pillars. There is hardware innovation, software innovation, and services innovation. One could also throw in experience innovation as a pillar as well but it is intertwined with hardware, software, and services. Each of these pillars feed off each other and spur parallel innovations.
There are countless examples of how this chain of events works. We could look at examples from the first land line phones, to the PC, to the smart phone and more. However I am going to use the iPad as an example.
The iPad was a hardware innovation (not a conceptual innovation) that integrated all the right pieces of hardware into a touch computing package. The iPad then set in motion the opportunity for software innovation and eventually we will see more innovation in services as well. This leads us to what we can expect in this next round of innovation. Namely that it will come more from the software and services pillars.
This is not to say there will be zero hardware innovation. I simply believe we will see more innovation come from software and services which will take advantage of the hardware platforms that gain mass market attraction. Namely around devices like the PC, tablet, smart phone, and TV. All of those devices represent the platforms of the future. So although we will see some hardware advancements in those devices I don’t believe they will be monumental but more incremental. Screens will get better, semiconductors will get faster, devices will be go through design evolution, etc.
All those hardware platform innovations will continue to lead to new software, services, and experience innovation. Take yesterday’s news from Apple about iBooks 2.0 and the new interactive e-book experience. Tim stated that Apple just re-invented the book and he is right. The point that needs to be made, however, is that without the iPad and the platform innovation of tablets, it would never have been possible to even think about re-inventing the book. The hardware innovation created this possibility. Tim also rightly pointed out that if publishers are not careful they could be disrupted quite easily. The hardware platform innovation leads to not just the re-birth of something like a book but the re-birth of the publishing industry. This can also be said of the music industry, motion pictures, network TV, magazine, and perhaps even government or politics? All of these industries have the opportunity to re-invent themselves in light of new and innovative hardware.
The opportunities will be endless, and again, I am not saying that hardware innovation is dead, perhaps only that it is cyclical. The next cycle of innovation will be more focused on software and services rather than ground breaking new hardware. We could discuss new computing hardware like the smart watch, automobile and more, but perhaps those are more extensions of existing platforms rather than platforms themselves. I will leave that topic for another column.
One of my favorite quotes about change is: “Life is a journey, and on a journey the scenery changes.”
The technology industry is also on a journey and on that journey the scenery will change. Whether many industry insiders recognize it or not the scenery is changing and it’s happening quickly.
The line is blurring between what is a PC and what isn’t. Devices like smart phones and tablets are proving to many that computing can take place on a number of different form factors. It is important for those who watch the personal computing industry closely to realize that the landscape as we know it is about to change drastically.
Tablets Take the Computing Challenge
It all began with the iPad. In as many times, in as many years, Apple again released a product that challenged the industry and forced many companies to turn introspective and re-think their product strategy.
The iPad has done quite a bit more than just challenge the industry, it has also challenged consumers to re-consider what exactly a personal computer is and what their needs are with one. What I mean by that is that our research is indicating that many consumers bought an iPad as a partial PC replacement. Meaning they were in the market for a new PC but instead bought an iPad, relegating their old PC as a backup for when they need a mouse and keyboard experience for certain tasks. What is interesting to the last point is that once integrating an iPad consumers realize they need the PC less and less for many tasks, especially when the iPad is paired with a keyboard. There are however, a few tasks like writing long emails or using certain software that these consumer still want a traditional mouse and keyboard experience for, only their observation is that those use cases do not occupy the majority of computing time for them on a regular basis. For that they remark the iPad suffices for their needs the majority of time.
As those in the industry who make PCs are already figuring out, tablets are a viable computing platform and having a tablet strategy is essential for anyone currently competing for PC market share.
We expect quite a bit of innovation in hardware, software, and services in the category over the next few years. Tablet / PC hybrids, which is a tablet with a detachable keyboard, could be one of the most interesting form factors we will see over the next few years. This product, if done right, will give consumers a two-in-one experience where they can have a tablet when they want it and a traditional mouse and keyboard experience when they want it, all in the same product. The big key – if done right.
Anyone Can Make PCs
Tim made the observation last week in his column that a fundamental issue within the technology industry is that the bulk of consumer product companies are simply chasing Apple rather than emerging as leaders themselves.
As companies look to duplicate the iPad and the MacBook Air this point becomes increasingly clear. What this creates is the opportunity for new entrants to create new and disruptive computing products by bringing fresh thinking to the computing landscape.
Perhaps a glimpse at this reality is Vizio’s announcement that they are getting into the personal computer game. With much of the hardware design for electronics moving into the hands of the ODMs, it makes it possible for anyone with a brand, channel, and cash to start making any number of personal electronics.
This is perhaps the biggest evidence about the change we are about to see in the PC landscape. The reality that the traditional companies, who were historically the leaders in this category may get displaced by new and emerging entrants.
Simply put, those who we expected to lead the PC industry may not be those who lead in the future. The truth is innovation does not stand still and if the traditional companies don’t want to do it someone else will.
Back in 1984, one of the major PC companies, who was spectacularly successful with their business PCs, decided that they could be just as successful if they created PCs for consumers. But they wanted them to be different from their business PCs since they knew a consumer model would have to be priced much less than their business models.
So they created a consumer PC that, for all intent and purposes was a “wounded” version of their business models, with a lousy keyboard, very weak processor and the cheapest monitor they could dig up. To say that it was a failure would be an understatement. To make things worse, the only OS they had at the time was MS/DOS so that meant they were giving consumers an OS that was hard to use and difficult to learn from scratch. But they reasoned that since so many business users had their PC with DOS at work, they would gladly buy a similar model for their home and since they knew DOS from the office, it only made sense that they could use it on their home PC.
Interestingly, when it failed, they were dumbfounded. They were certain that they had a winner on their hands and some of the top management kept pushing to re-design it and take a new model back to the consumers the following year. But to their credit, some of the people in the group questioned its potential and turned to outside experts to give a 3rd party opinion on the potential of a PC for consumers at that time.
I was lucky to be one of the few outside persons asked to weigh in on this subject so I went back to their HQ on the east coast two times to give my thoughts on the subject. In my presentation and documentation I gave them, I pointed out the major difference between business and consumer users were that business users had serious motivation to go through the hassle of learning a text-based OS, while the mainstream consumer did not. At the time, PCs pretty much only had software for business use. I argued that for PCs to take off, there would have to be a major reason for consumers to buy them, and emphasized areas like using PCs for educational purposes as well as possibly entertainment as well. I also told them they needed to be cheap.
I drew them a picture of the traditional marketing pyramid and showed that at the top we would find the truly early adopters, which at this time were quite IT driven. I then told them the second layer would possibly come from the worker bees whose IT leaders would push them to learn DOS and harness the PC to make their work more productive. But I told them the third layer would come from what today we call prosumers and, even at that time, I felt it would take at least 3-5 years to get these folks excited about PCs and get the PCs to a price point that they could afford.
And at the bottom layer of the pyramid, which is always the largest audience, I said they would find the mainstream consumer, but pointed out that I felt it would take at least 10 years before this crowd would finally buy into the PC vision.
I never found out how much my outside work on this project impacted their decisions but I do know that a week after I made this presentation, their consumer PC was killed off for good.
But there was another key point that I emphasized in this document. I said that the OS had to be easy to use and the PCs had to be simple enough so that consumers did not need a degree in engineering to run them. And if you know the history of the PC business, you know that consumer interest in PCs for the home did not kick in until Windows 95 hit the market, exactly 10 years after this company killed their consumer PC.
Ironically, even though our PCs have gotten spiffy new user interfaces and are clearly easier to use, to the point that PCs have penetrated pretty much every home in the US in some way or another, the fact remains that they are actually more complicated to use. Consumers not only have to deal with the plethora of desktops and laptops to choose from, they now also have to deal with Internet connections to the home, wireless connectivity, security, identity theft, multiple passwords, personal data in numerous non-connected files, and most recently, this new thing called the cloud.
But in the end, consumers want things simple and some handholding when things go awry. I am convinced that this is really at the heart of Apple’s success. They have one phone–the iPhone. They have one tablet–the iPad. They have two laptops but except for sizes and optical drives in the Pro models, they are actually all the same. And they have one major desktop–the iMac. Even in the iPod line, they have streamlined it to the iPod Touch and the Nano. If a person needs help, they have their Genius Bars and 24-hour hotlines in which the people on the other end actually now how fix your problem.
By comparison, there are now over 80 Android phones to choose from as well as at least 5 versions of an Android OS to deal with. And in the PC space, if something goes wrong, people don’t know who to go to for help. While some of the mainstream PC vendors do have 24 hour hotlines, my experience with them has been only marginally successful. And I have even stumped Best Buys geek squad a few times over the last year with problems with Windows laptops.
While we can point to Apple’s powerful OS, industrial designs and ecosystems of products and services as key to their success, I actually think, that at its heart, the real reason for their amazing success is Jobs’ own mantra to his team, which is to keep things as simple and intuitive as possible. And he was smart enough to know that even with that, given the nature of technology and the fact that things get more powerful and complex over time, provide a place for people to get help that is easy to access and stock it with people who can help when a problem arises.
As I walked the floor of CES recently, I saw over a dozen phones at one vendor, nine new PCs from another vendor and five tablets from another vendor, all with different versions of Android on them. While choice is great, I really think that keeping things simple and easy to understand–and buy–is even more important than choice. While Apple has powerful products in many categories, the real reason for Apple’s success that they just keep things simple.
Five years ago today Apple introduced the iPhone. On this day five years ago, Apple opened our eyes to the reality that the devices we considered “smart” were not really smart at all. They re-invented the smart phone and made the industry re-evaluate what we knew a smart phone to be, changing the landscape entirely.
I remember the day vividly because our team had split up and one person from Creative Strategies (not me) got to attend history in the making at the iPhone launch event, while I was stuck at CES doing my analyst duties.
I have never seen the buzz around CES be so focused on something not present at the show. That year the iPhone completely overshadowed CES in a way I have never seen and may never see again.
The industry leading up the launch of the iPhone was a mess. Handset innovation was at an all time low and purely focused on business users. Carriers controlled nearly every aspect of the device. Developers knew mobile apps were the big opportunity but had to fight for “on deck” promotion through carriers’ walled gardens if they hoped to make any money. To sum it up, there was no unity, no vision, and almost zero innovation as it related to smart phones. Apple changed all that with the iPhone.
So now here we are five years later and how is the iPhone doing? If ChangeWave’s recent data is any indication, the iPhone is not only continuing to thrive five years later, but it is dominating at an unprecedented level.
Today ChangeWave released findings of a survey that intends to gauge smartphone buying intent by consumers. The results of this survey of 4,000 US-based consumers showed that among respondents planning to buy a new smart phone in the next 90 days, better than one-in-two, or 54%, say they’ll get an iPhone. Perhaps a quote in the ChangeWave press release says it best.
“Apple has never dominated smart phone planned buying to this extent more than two months after a major new release.”
I have made this observation time and time again, but the volumes that Apple ships in a single model device is unprecedented in this industry. There is no arguing that Android vendors as a whole are moving volumes. But the point has to be made that it takes an army of Android devices, to compete with one single model of the iPhone. One could argue, quite strongly that, five years later, the competition is just now catching up — or not depending on your perspective.
I’m not sure any of us could have predicted that the iPhone would not only be thriving, but dominating, and expected to continue to dominate, the smart phone landscape. I truly hope the next five years bring even more excitement and innovation to this industry, and it’s probably a safe bet that Apple will continue to lead this charge.
I’ll close with an anecdote that highlights for me my memory of the day the iPhone launched. As I mentioned, I didn’t attend the iPhone launch because I decided to stay back and cover CES for our firm. After the launch a Sr. Executive at Apple along with my father called my cell from a working iPhone. That iPhone then proceeded to be shown on TV and have images taken with my cell phone number clearly displayed on the dial pad. For about the next month I received on average 2,000+ calls a day from strangers asking if I was Steve Jobs or if they could talk to Steve Jobs.
People are strange and no I didn’t change my number. My cell phone number is, however, forever engraved into some of the first media images used the day the device launched.
Over the last few months I have heard and read many comments about the idea that Amazon is the new Apple. In fact, in a very good piece in Forbes, E.D. Cain asks if Amazon is the new Apple directly. He makes some good points to suggest that Amazon is very much following in Apple’s footsteps and even has created some innovations of their own with their price check mobile app and their Kindle book purchasing process.
But I believe the answer to this question is no, Amazon is not the new Apple. The reasons for this are many. Now, don’t get me wrong. I have great respect for Amazon and Jeff Bezos. However, Jeff Bezos’s is not the second coming of Steve Jobs and he would be the first one to tell you that. Amazon’s business is very different from Apple’s and though they have some similar goals, such as creating an ecosystem of products and services for their customers, their approaches differ greatly.
Perhaps the most glaring difference is Apple’s total approach to the market. Most importantly, all of their hardware, software and services originate inside Apple. They write the OS so they can customize hardware to be maximized around their proprietary OS platform. Amazon, as well as all of the other vendors competing with Apple, must rely on Google or Microsoft for their code and are always at a disadvantage to Apple in this area.
Also, Apple has all of their design in-house led by recently Knighted Sir Jonathon Ives. Most of the vendors have to rely on ODMs for their products and this too is a disadvantage when it comes to industrial design and its integration with their software offerings.
While Amazon is the world’s greatest retailer, Apple’s stores are re-writing the rules of technology retailing around the world. You buy from Amazon if you know exactly what you want since you can’t touch or feel the products online. But the reason that Apple is driving millions of people into their stores around the world is that Apple knows full well that the majority of potential users are not tech literate and need help buying exactly what they need.
But one thing that really distinguishes Apple from Amazon and their competitors, is that Apple is a leader and all of the others are followers . This started when Apple introduced the Mac itself and decided to use the 3.5 inch floppy in the Mac and made their competitors kill the 5.5 inch floppies back in 1985-1986. Apple was the first to put a CD Rom drive in Macs in 1989 and ushered in the era of multimedia computing. By 1992, all PCs had CD Roms inside. In 1999 Apple added color to PC cases and created the all-in-one PC. Now all PCs have color and all-in-ones rule the desktop market. Even more recently, Apple created the first real “ultrabook” with the MacBook Air and now everyone is chasing them again.
Apple’s genius is also in re-inventing products, which continues to reinforce their leadership position. They did not invent the MP3 player. They did however re-invent it. They did not invent the Smartphone. They re-invented it. They did not invent the tablet. They re-invented it. And in each of these product categories, they force their competitors to play catch up.
What’s more is that Apple casts a long shadow in this area. A more current example is the hybrid computing. In my 2012 predictions, I stated that we should see many hybrids (laptops with screens that come off and double as tablets) this year. But, many of the vendors I talk to who have hybrids in the works have told me that their biggest fear is that Apple will do a hybrid and do it so well that it will force them back to the drawing boards and put them behind, even though they thought they would be ahead. Now, nobody even knows if Apple is doing a hybrid but just the threat of Apple doing one strikes fear in their competitors.
But in the end, the fact that Apple continues to play a major leadership role in the industry is the real reason Amazon and other companies, who might like to think that they could become the next Apple, are still only followers. It is unclear to me if Apple will ever give up that role given their complete control of their ecosystem and the rich talent they have inside the company. But until another company can create this same dynamic, I suspect that there will not be another company that can lay claim to being the next Apple.
We thought we would recommend some new years resolutions for the tech industry at large for 2012. Some of these are company specific and some are general.
From Patrick Moorhead
Tablet OEMs: Invest what it takes to create and market something dramatically valuable, demonstrable, and most of all, differentiated. The answer to that lies with the usage models. The solution should solve a non obvious problem or open up a new way of having fun. Don’t immediately dismiss ideas just because they didn’t work before or because the resources don’t appear to be there. Take some risks and partner on the gaps you cannot afford. The other option is a money losing price war with the iPad or the Kindle Fire.
Consumer PC OEMs: Start adding incremental value over and above a convertible tablet or docked smartphone or there may be a much smaller PC market in the future. Leverage the larger design (versus tablets) to house better hardware components which when paired with the right software create new experiences. Think effortless and accurate personal video face tagging, 99% accurate speech command, and dictation, the highest possible quality video communications, in-home PC game streaming to phones and tablets, etc. Forget about the past of what new usage models sold and what didn’t sell, because those solutions were half baked.
Social media companies: Two different social models exist, “broadcast” and “personal”. Services like Path, while more intimate, are still, broadcasting somewhat randomly to an audience that may or may not see something or may not even be relevant. In real life, there are an infinite number of “micro-circles” that exist with varying levels of context. Companies need to grasp this concept of “personal” and build tools to leverage it.
From Steve Wildstrom
For RIM: work to salvage your enterprise customers’ investment in BlackBerry Enterprise Server infrastructure even if you can’t save their investment in BlackBerrys.
For PC OEMs: Stop trying to imitate the Mac Book Air. Ultrabooks can’t win that game on price or design. Show some creativity of your own.
For tech bloggers: Stop chasing page views by running uncritically with every Apple rumor, notated how silly, unlikely, or old.
From Ben Bajarin
For PC OEMs: Stop innovating in the rear view mirror. Simply trying to make MacBook Air clones is not a strategy that will yield much fruit. A friend and colleague Rob Enderle once told me that when Toyota was grabbing market share from GM in the late 70s, GM simply tried to reverse engineer Toyota cars. Which meant that GM was making great 1970’s cars in the 1980’s while Toyota was focuses on the future GM was focused on the present. Create value, experiment, try things that are new and most importantly create a vision for your products future.
Create Feature of Value: Focus on finding and creating features that your target customer base find valuable. It is important to know what your customers want or what kind of technology innovations you can create that solve real world problems for consumers or make every day tasks easier and simpler to accomplish using your technology.
From Peter Lewis
Resolved: Stay Hungry, Stay Foolish. And, as Scott McNealy says, Stay Nervous.
Resolved: In 2012, the tech industry must make computer and data security its No. 1 priority. Accelerate the use of biometric log-ins for computers and mobile devices.
Resolved: Vote against any Congressperson who votes for the House’s Stop Online Privacy Act (SOPA) or the Senate’s even-more-evil Protect IP Act (PIPA).
Resolved: We don’t say we’re e-writing someone, or e-calling, or e-reading. So let’s stop calling it e-mail and e-books and e-commerce, et cetera.
Three years ago, in my annual prediction list, I said that Microsoft would buy RIM. However, I also stated that this was a very wild prediction that I doubted would happen.
Last week, All Things D wrote a piece that said Microsoft and Nokia had discussed jointly buying RIM but that the talks did not go anywhere.
But if you think about it, Microsoft owning RIM, especially their customer base, makes a great deal of sense. At the moment, Microsoft’s Windows Phone is basically designed for the consumer market and has little traction in corporate offices. In fact, Apple’s iPhone is eating Windows and RIM’s lunch in smartphone enterprise deployments. And while Google and their partners who have Android smart phones are taking aim at the enterprise, their acceptance in this market has been weak up to now.
But RIM’s assets still carry significant value in the enterprise. From their secure servers to their BBM messaging service, RIM still has serious technology that draws great interest from the corporate set. But, RIM is at a major junction in their history. If they are to have any chance of growing their business, they must move their customer base from its existing Blackberry OS to one that is much more powerful and will meet the needs of their business users as smartphones get smarter. To that end, they bought QNX and are planning to migrate to this smartphone OS by sometime in 2012. But here is the rub for them. Besides being very late to the market and having only a minor ecosystem of apps and services to work with now, the investment needed to get software developers to write apps for QNX will be very steep. And given the fact that developers are already backing iOS, Android and Windows Phone 7, it will be a tough sell as well.
In the mean time, Apple’s iOS and Android’s ecosystem that targets the enterprise is rising fast. And even though most of the apps written for Microsoft’s Windows Phone are consumer based, Microsoft too has their eyes on the corporate market.
In my viewpoint, the chance that RIM can be successful with their strategy, given their lateness in providing a powerful smartphone OS for their business users and what it would take to get software developers to back it is marginal at best. And although their market value has taken a big hit over the last three quarters, I doubt that it will recover given the difficult position they are in considering the current competitive smartphone climate.
Consequently, this is a perfect time for Microsoft to make a serious attempt at buying RIM and use this to jumpstart their enterprise smartphone business. Interestingly, the idea of Microsoft using RIM to counter Apple’s iPhone move into the business market was at the heart of my wild prediction 3 years ago.
While RIM has been trying to move QNX into their business smartphones and getting software developers to support it with minimal success to date, Microsoft could instead move very quickly to marry their Windows Phone 7 architecture to replace RIM’s QNX. Then they tell their current Windows Phone 7 software developers that it is now time to begin writing powerful business apps for this smartphone platform. I say quickly but I realize this would take some serious software engineering to make this happen. However, Microsoft’s smartphone OS is very stable and already has strong developer support and a move like this could make Microsoft a serious player in enterprise smartphones almost overnight.
So, will this happen? Probably not. RIM’s management seems determined to try to save the company with QNX and hoping to get developers to support them. Good luck to them but in my view, that ship has passed.
But it sure would be interesting if Microsoft did buy RIM and tap into their loyal customer base and over time move all of them to Widows Phone 7. In fact, it may be their only hope of gaining any ground on Apple in the enterprise and keeping Android at-bay in business as well. And while it would be risky, the upside of owning RIM’s customer base and transitioning them WW to Windows Phone could be huge. I am sure that is what Microsoft and Nokia were thinking about when they discussed this idea recently.
But given RIM’s managements current position, it seems likely that this will never happen, even though it would be best thing for both of them.
Today HP made a fascinating decision. One that is disruptive, exciting, and could lead to valuable innovation. HP has decided to release webOS to the open source community. This decision could have significant impact on the mobile landscape and may end up being one of the most disruptive moves yet.
A quote from the release:
“HP plans to continue to be active in the development and support of webOS. By combining the innovative webOS platform with the development power of the open source community, there is the opportunity to significantly improve applications and web services for the next generation of devices.”
The move by HP to put webOS into Open Source is a brilliant one. Although it was a disaster for them and forced them to write off the $3 billion they invested in it, it is now a gift from them to consumers and could have a drastic impact on the future of mobile devices. Next to Apple’s iOS, webOS is arguably the best non-Apple mobile OS on the market. And it is easy to develop for since software developers can use mainstream Web tools to create webOS applications. Also as a part of the release to open source HP will also contribute ENYO, the application framework for webOS.
Meg Whitman stated in a quote from the press release:
“webOS is the only platform designed from the ground up to be mobile, cloud-connected and scalable,” said Meg Whitman, HP president and chief executive officer. “By contributing this innovation, HP unleashes the creativity of the open source community to advance a new generation of applications and devices.”
Unlike Google’s Android or Windows 8 for tablets, it will come with no strings attached. As a rich Open Source OS, webOS could finally reach its full potential. It would not surprise me to see many of the big Android backers in tablets move quickly to webOS and some may even use it for some innovative smart phones as well.
We believe Android could be the biggest loser from this move by HP. Google has constantly taken criticism from the OEMs due to their lack of unity in releases and overall short roadmap. We have heard countless times how many vendors desire a better option than Android. To many of them Windows Phone provided an opportunity but now this void may be filled by webOS.
HP said they plan to continue to invest in the webOS open source project and will have dedicated team members involved with the open source community.
The move of webOS to Open Source is great news for vendors, developers and consumers and could quickly become one of the better options for OEMs who want more control of their designs and mobile OS user interface in order to help them differentiate themselves from competitors.
I applaud this move and although it is bold I believe it has the potential to benefit this industry greatly. I am extremely excited to see how the open source community, developers, and OEMs embrace this opportunity. This is perhaps one of the most exciting pieces of news of 2011.
Check out this small forum thread on HP’s website, asking them to release webOS to open source.
There has been quite a bit of interesting media and headlines this last week pointing to data related to Samsung’s latest earnings and smartphone shipments. Many are making the claim that Samsung is now the number one smartphone vendor by volume. However, when we dig deeper into the numbers we find a different story.
First (something that shockingly needs to be continually pointed out), the numbers released in Samsung’s earnings of 27.8 million smart phones shipped is product shipped into the channel not sold to consumers. In reality the carriers stores are Samsung’s customers since their goal is to sell phones to carriers who then try to sell them to consumers. This is called having a channel strategy, something Apple does very differently due to their rather large retail presence. Another differentiating point regarding numbers is that Apple actually releases the number of products sold to consumers where many other companies do not.
Second, the statement that Samsung is the largest “shipper” of smartphones can only apply to Samsung’s Q3 for 2011 not per annum. Apple still sells annually more smartphones than any other manufacturer.
It is tough to say exactly how many smartphones Samsung “shipped” into channel in 2011 to-date since they did not disclose smartphone shipment data in their Q2 earnings. That being said I’ve seen credible attempts to break down estimates and the most logical number I have found for “shipments” into channel from Samsung thus far in 2011 is 50.2 million. In that same period (since January of 2011) Apple SOLD 56.09 iPhones. This is why I am confident Apple is still the number one smartphone vendor. One last point here, we believe Apple will SELL north of 25 million iPhone’s (conservatively) in this upcoming holiday quarter.
We need to be much wiser if we are going to make headlines with market share claims. I understand to many market share is a big deal but I don’t believe it is as big a deal as people make it out to be.
Henry Blodget of Business Insider makes a point that I disagree with. In his column on why Apple should be worried about this Samsung data he states:
As the history of the tech industry has demonstrated again and again, technology platform markets tend to standardize around a single dominant platform. Although several different platforms can co-exist while a market is developing, eventually a clear leader emerges. And as it does, the leader’s power and “network effects” grow, while the leverage of the smaller platforms diminishes.
I don’t disagree that Henry’s observation is true, I simply don’t believe it will be true in the future. The flaw in this observation is that it is only true when a new product, technology or market begins and moves to maturity. As a market matures, it is true that a standard emerges. This standard helps drive the market to maturity. Once the market matures however it becomes saturated with many variations and departures from the standard.
For Henry’s statement to have absolute truth we would need to look farther back than just the technology industry to ALL consumer products. If we do that we find that what I pointed out is always true. Once a market matures it fragments and thus there is no longer a dominant market leader. Study consumer packaged goods, automobiles, consumer appliances and more and you will find this to be true.
This is why I am confident that Apple, Android and most likely Windows Phone will all compete for market mobile share but there will be no dominant leader like there was when Microsoft had 98% Windows share. That future will not happen, as all three platforms will co-exist and each have chunks of the market to themselves.
Smartphones are 5% of global handset shipments world-wide. If we think that this game is anywhere close to being over we would be deceiving ourselves. We have a long journey ahead and one hopefully filled with tremendous competition, because when that happens consumers always win.
