Apple Fitness+ Built to Help You Keep Fit Wherever You Are

This week marked the launch of Apple Fitness+, the workout service that Apple announced back in September, together with the new Apple One subscription bundle. I spent some time checking out the trainers and some of the videos across a range of workouts. While jumping around to check everything out and have a sense of the service, I was glad to see that diversity and inclusion were clearly top of mind for Apple. There’s a good mix of female and male trainers. There are different body types, skin colors, ethnicities, and even accents all represented. The trainers are making an effort to be as inclusive as possible by suggesting modifications to the workout for beginners and using sign language to welcome and encourage users who might be hearing impaired. I also noticed different-limb people are working out in the studio with the trainers.

As expected, the overall number of trainers is still limited, but I do not doubt that it will grow over time as the user base grows. It will certainly be interesting to see if the talent acquisition battle in tech will expand to include trainers, given how much of the experience is directly linked to them.

Apple Fitness+ vs. Peloton

The first class I took was a cycling class as I was curious to compare it to my Peloton experience.

First, let me say that I’m not a hardcore Peloton user. I just started at the end of September, and I am on ride 61! I got to Peloton with a good dose of skepticism. I really wasn’t interested in the whole Peloton Tribe, class and instructor fandom thing that I saw so many users talk about all the time. And yet, in such a short while, I came to change my mind about those instructors and how much they drive the actual engagement. Peloton also offers quite a range of instructors in a similar way to what I explained about Apple Fitness+. I made an effort to try out different instructors gravitating towards US-based and UK-based instructors and ultimately favoring women over men. I then landed on two particular trainers, Tunde Oyeneyin and Ally Love, who I find to offer the right balance of carrot and stick, but most of all, some inspiration and mind release at a time when we all can do with some. I also appreciate the effort by Peloton in creating theme-based classes rooted in celebrations like Black History Month, International Women Month, or LGBTQ or different music, which is used as a way to open people up to something new.

With this as my experience backdrop, the other day, I got on my Peloton, I set it on “just ride” where you see your stats, but there is no instructor, and I started a workout with Apple Fitness+ and Sherica.

You start the workout, and your Apple Watch is in total sync with the device you are using, being the iPad, Apple TV, or the iPhone. You can control your workout from the device or right from your wrist. I used my iPhone set on the side of the bike for this specific workout but I would turn to Apple TV and the larger screen experience it would offer if it were not so early in the morning. I could see my heart rate data, where I ranked on the Burn Bar, and the workout’s elapsed time. The data displayed made up for some of the data I usually see displayed on the Peloton screen. Sherica was an excellent instructor, maybe a bit less polished than those I rely on the most with Peloton but effective nonetheless. One thing that struck me was how much she was panting, which made me feel better about my own panting, of course. This is not something I ever notice with Peloton instructors even when they say they are finding the workout hard. What I missed the most in my workout experience, which shows Apple’s limitations of not being able to tap into the equipment you might be using, was the resistance set up. The instructor could only suggest increasing or decreasing resistance, but there was no base of reference for any adjustment I was making. This made me feel a disconnect between the call out on the RPM and how hard the instructor wanted me to work. In the end, I burned more calories and reached a higher output goal than I usually do when not taking a class, proof that I worked harder than I do on my own even if I did not benefit from an “informed” instructor.

The more I thought about my experience, the more I came to conclude that the narrative around Apple not wanting people to go back to the gym when they reopen is a false one. On the contrary, Apple is clearly thinking about the opportunity that the gym will offer to drive value through the Apple Watch’s connection to the equipment. Remember that Apple already started to drive integration between Apple Watch and gym equipment such as treadmills, ellipticals, indoor bikes, and rowers. Think about going back to the gym and using any equipment, your Apple Watch, and AirPods and do a class without having to pay a personal trainer or pay extra for a class. It seems like a compelling proposition to me.

One Service Can Fit All

The ultimate hook Apple Fitness+ offers that will create real stickiness to the service is flexibility. It ranges from providing a quick workout with no equipment needed while you’re at home or on a business trip, to coming with you to the gym and be that loyal fitness coach who supports you through your effort to stay fit and healthy.

One interesting thing I noticed with Apple Fitness+ is that the workouts seem to end quite abruptly at the end of the allotted time, but this is because the different workouts are intended to be added to one another to create a longer workout session. So while Peloton has a warmup and a cooldown period with the ability to add more if you want to, Apple offers a warmup but no cooldown. Apple also provides specific videos that walk you through equipment setup, posture, and so on, while Peloton reminds you of how the bike works at the start of every workout. As a user, you can skip this part, but I am guessing given that Peloton is responsible for the bike, they are addressing any possible liability by providing the reminder.

I will continue to explore workouts and take more bike classes, but I will not cancel my Peloton subscription just yet. I am curious to see how Apple will grow Apple Fitness+ because it seems to me that this might be the first product that they aimed at the broadest set of users by appealing to first-time users and fitness enthusiasts. One aspect I am particularly interested to see is how Apple intends to facilitate discovery. This is not something you can walk into an Apple Store and try, which makes me think that the tie into gyms makes even more sense if Apple can link the subscription to the gym and users log into equipment through their Apple ID. Time will tell, but considering Apple made Apple Watch the center of the Fitness+ experience, I expect Apple to make a significant and prolonged investment in the service.

Apple’s One More Thing Turned Out to Be Three

Apple announced its transition to Apple Silicon back in June. Since then, industry watchers have been formulating a hypothesis on which Mac will be the first model to sport Apple’s new silicon design. Over the past few events, leakers had left only a few surprises for the official event, but for the “one more thing” event, Apple delivered at least a couple from a device launch perspective as well as its strategy.

A More Aggressive Transition

The MacBook Air was the best bet when guessing where Apple would debut its own silicon. A very popular model in the portfolio, the MacBook Air, would appeal to users who care about mobility, battery life, and a slim design but don’t usually run very intensive workflows. Expectations were met as Apple introduced the MacBook Air as the first home for the new M1 chip.

But Apple did not stop there!

After the MacBook Air, Apple added the M1 chip to a new Mac mini, a model that Apple updated back in 2018. The Mac mini is Apple’s most affordable Mac, and the newly launched model starts at $100 less than its predecessor. This is the only price concession Apple made contrary to what some industry watchers were expecting. Some analysts argued that the in-house design would allow Apple to lower prices without necessarily impacting margins. I was somewhat skeptical of such a move for two reasons. First, Apple is not under any time pressure to get market share. Over the past couple of quarters, sales have been growing due to higher demand driven by Covid-19 and supply issues on the Windows camp. Second, aggressive pricing might have sent the wrong signal on how competitive the new silicon was compared to Intel’s designs. Given the times we are in when people are re-evaluating the tools they are using while working from home, the Mac Mini certainly offers Apple an interesting opportunity.

The big surprise of the event, however, was that the M1 chip made its way into the 13″ MacBook Pro. Most people expected that support for what is considered the most popular Mac model and the model that appeals to more pro users might come in a second wave in 2021 once Apple has some time to put the M1 to a real-world test.

Such a broad portfolio right out of the gate shows the confidence Apple has in its solution overall. The combination of silicon, OS, and apps optimization that Apple claims will deliver unprecedented performance.

The other surprise and sign of confidence on Apple’s part was timing. While we knew a launch would happen before the end of 2020, Tim Cook even confirmed that during the latest earnings call, most expected the first product to ship in 2021.

Macs Get iOS Apps but No Touch

It was fascinating to notice that, at least on Twitter, not many people commented on the lack of touch. It seems as though most have given up even on the idea that Apple might change its mind about adding touch to the Mac.

The M1 ability to support iOS apps without developers having to optimize them would have been the perfect reason to add touch to the Mac. Although they might still not believe in vertical touch, Apple could have explained that they thought users might want that option.

An alternative that could have met users halfway was to add the same cursor solution Apple put on the iPad Pro’s Magic Keyboard, something I hypothesized since the product was released.

Instead, we have neither.

Maybe this is so that developers actually choose to optimize their apps for the Mac so users can have a better experience. It will certainly be interesting to see if Apple can replicate the developer engagement they had on the iPad. You might remember that when the first iPad came to market, Apple had the 2X option that made iPhone apps run on the larger iPad screen out of the box without developers having to do anything. That played a significant role in helping people see the iPad’s potential, but the actual value came when apps were purposely designed for it. With the Mac, Apple was never able to replicate the success of the iOS app ecosystem. The numbers just did not make it worthwhile for mass-market app developers to invest in the Mac. The hope now is that, as volumes grow from the appeal of the consistency between iPhone and Mac experience, developers might feel different about their investment. If this plays out, Apple would be able to achieve even more differentiation against Windows-based PCs, which should be the ultimate game.

The M1 performance and OS optimization might be enough to get Mac users to upgrade, but Apple cannot stop there. We know switching OS is a much bigger decision for people to make, especially in an enterprise environment. iOS apps’ support can really facilitate that move. It would be much easier for an enterprise that is already supporting iOS devices to justify expanding to the Mac than it ever was to think they needed to add Mac support to their Windows support.

No New Designs

Another expectation people had was that together with the new silicon, there would be a new Mac design for whatever product Apple decided to ship first. This did not turn out to be true. Another clue on how Apple is thinking about the transition to its own silicon design.

The shift is not about differentiating within their portfolio, which would have been easier with a new hardware design. The M1 is about perfecting the Mac formula. Changing the design would have distracted from the true value of these new products. It would have diluted the impact of what Apple is building. Some of the benefits the M1 brings could have enabled a change in design, shaving a couple of millimeters here and there or maybe using a different screen technology. Had Apple done that, like for like comparisons with current products might have been harder to make.

At the “one more thing” event, Apple sold one thing only: the power of vertical integration, what they learned, and made them so successful with the iPhone. If you buy into it, Apple will have a much stickier proposition than any hardware design change they would offer.

Made By Google Is More Like Amazon Than Apple

This week was finally Pixel week. Over the past couple of months, we have seen teasers from Made by Google Team as well as leaks and even a Best Buy Canada early release of what the Pixel 4 was meant to be. We also had some details on the Pixel Book Go, the Nest Wi-Fi, and the new Pixel Buds. What was missing, though, was how the Made by Google team was going to frame its story around these products.

I said before that how a company talks and introduces its products are as important as the products themselves when it comes to understanding the vision and the goals of the business. This week’s launch was no different. While some industry watchers criticized the presentation for coming across as choppy, I thought it followed a similar format to the Google i/o main keynote. Product people come on stage to tell their story, talk about their creation, and highlight those aspects they think are a differentiator. I appreciated the attempt to move away from a specs sheet focus and provide more information on the thought process behind the devices and features as well as addressing hot areas such as sustainability and privacy.

Made by Google’s Chief, Rich Osterloh, framed the context around the new devices, but also how the team thinks about the role these devices should play in the users’ life. As he talked about ambient computing and helpful technology, it was impossible not to draw parallels to how Amazon positioned its devices just a few weeks ago.

The devices are not the final product; the technology in them is. From cloud to chipsets to Google Assistant and Soli, the technology that users access is what was on stage in New York.

Helpful Technology and Ambient Computing

Rick Osterloh stressed multiple times how the hardware the team is building focuses on being helpful. The message should sound familiar as the helpful technology tagline was used by Sundar Pichai at Google i/o. If technology is helpful, it will be pervasive in our lives, and privacy will matter more. Of course, if the technology is helpful, we come to rely on it, which creates higher brand loyalty. Helpfulness also drives customer loyalty because the perceived value of the device or service is higher. So far, there has not been any talk about paid services, but I find this emphasis on helpful tech very interesting. I do wonder if framing tech in such a way opens up options for Google to switch some of its services or features to a paid model. This revenue opportunity might also include the prospect of selling their Titan M chip to partners, especially for those who want their products to be Android Enterprise Recommended.

Privacy will also matter when the devices we use disappear and computing powers services and experiences all around us. Google wants the technology to work in such a way that when everything is perfect, the devices disappear. Interestingly this is similar to how Surface’s lead Panos Panay talks about his devices and how they keep you in the flow. It might seem odd that a hardware brand would want its devices to disappear, but if you use any technology, you know you don’t necessarily need to touch or look at a device to get a level of benefit that makes you love it. It is even easier to understand that when the device encapsulates values that are software and services driven and come from the same company.

A Focused Hardware Approach

And so, as much as Pixel 4 might be the iPhone 11 Pro competitor and Pixel Buds 2 might be Made by Google’s take on Air Pods, I cannot help but think that Made by Google’s goals are way more similar to Amazon than Apple. They might play in the same segments as Apple does, and avoiding the comparisons is impossible, but the measure of their success will not be market share but rather the continued adoption of and increased reliance on Google Assistant and the services that are powered by it.

One aspect where Google and Amazon might differ in approach is in the number of devices they decide to bring to market. It is quite apparent, though, why this is the case.

First, investment and leverage. Google has had a somewhat tricky road to hardware. We all remember how much the negative Motorola numbers impacted earnings, so the investment is much more thoughtful now. It is clear Made by Google wants to get to consumers where they get the highest return either on service engagement or cloud. It also means that Made by Google might try and leverage their devices more like they did with the new Nest Wi-Fi and the Google Assistant and smart hub integration. The partner ecosystem can also help Made by Google find those segments where there is value and those where there isn’t. The first smart display product with Google Assistant was brought to market by Lenovo. Following the positive reception of the category, we saw Made by Google launch the Google Home Hub line.

The second factor that makes a difference is, of course, Pixel. The Made by Google phone allows Google Assistant to be with the user all the time. This means, for instance, that no car dedicated device is needed to get to the users while the commute from the office to home. Amazon’s lack of phones means that they need to deliver compelling devices for those situations where users would turn to the phone by default.

No doubt in my mind that being in hardware, software, and services business for Google, Apple, Amazon, and Microsoft makes perfect sense. You just need to stop looking at the hardware as a stand-alone revenue generator and consider the impact it has on driving overall business revenue.

Why is Everybody Getting into Wireless Earbuds?

In just over a week we have heard rumors that both Amazon and Microsoft Surface might be bringing wireless earbuds to the market. This should be no surprise to anyone, but not for the reason that most highlight which is: wanting into some of Apple’s action with AirPods.

There is no question about Apple’s success with AirPods. Apple managed to get AirPods across gender, age, and even income level despite their price point not putting them in the “most affordable” category. The experience is described by many as magical. In a study, we, at Creative Strategies, conducted with Experian when AirPods first came out, customer satisfaction was the highest for a new product from Apple. 98% of AirPods owners said they were very satisfied or satisfied. Remarkably, 82% said they were very satisfied. By comparison, when the iPhone came out in 2007, it held a 92% customer satisfaction level, iPad in 2010 had 92%, and Apple Watch in 2015 had 97%.

Assuming Microsoft and Amazon are just after the revenue that a good set of wireless earbuds could generate is a little shortsighted.

Voice and Ears

Ambient computing and voice-first are certainly big drivers for both Microsoft and Amazon. As computing power is spread out across devices and digital assistants are helping to bridge our experience across them, voice has grown in importance as an interface. Many consumers are, however, less comfortable shouting commands across a room or speaking to technology outside the “safety” of their own home. As voice moves into the office, the need and desire to be able to speak quietly to an assistant and hear it back is even more evident.

Wireless earbuds that can be worn comfortably throughout the day allow us to build a better relationship with our assistants and, even more so, build our reliance. Interestingly, I would argue, this is where AirPods have not been as successful as Apple might have hoped for but certainly, through no fault of their own but more due to some limitations Siri has.

For both Alexa and Cortana, who do not have a smartphone they can call their own home, wireless earbuds are a great way to be with a user in a more direct and personal way rather than being relegated into an app. As I often say, this is not about consumers having only one assistant but making the assistant they use more often more intelligent and therefore creating a vicious circle: the more I use it, the more it gets better, the more I want to use it.

Eyes and Ears

Aside from voice and ambient computing, another trend that will benefit wireless earbuds is augmented reality. Starting with phones, consumers can build on the habit of wearing wireless earbuds while consuming information through their phones. Creating a habit and making wearing wireless earbuds natural rather than bearing the stigma that Bluetooth headsets had when they first came to market.

In a non-distant future, as we see more use cases focusing on displaying information across apps and we will move from phones to glasses, wireless earbuds will play an even more critical role in our augmented reality experience.

No Longer an Accessory

Whether they are critical to our relationship with a digital assistant or they help us immerse in an augmented reality experience, what is clear is that headsets overall are no longer an accessory but a device in their own right that for many vendors will grow into a platform.

Sensors already allowed headsets, whether buds, over the ear or on the ear to become smart to improve user experience, like when detecting if you are wearing them or not to determine if you want to pick up an incoming call from the phone or the headset. Plantronics and Jabra have had these kinds of features for years. Improvements in miniaturization added functionalities that turned some earbuds into wearables, or hearables devices, if you prefer. Devices that can track full workouts like the Bragi Dash. Considering the great work Microsoft had done with Band (not so much on the hardware but capabilities) they could even think beyond Cortana and leverage some of that know-how to deliver a fully-fledged hearable solution increasing stickiness and return on investment.

I would not be surprised if Apple considered the role AirPods or Power Beats Pro could play as a wearable device as an alternative to Apple Watch for those users who do not want to wear a watch but are interested in fitness tracking. I would also expect Samsung to consider a “sport” or “active” version of their Galaxy Buds to cater to a similar market.

AirPods have certainly become the benchmark for wireless earbuds in the same way iPhone has been the benchmark in the smartphone market. The “AirPods killer” is the earbuds’ version of the “iPhone killer” in the smartphone segment. Yet, I find that when it comes to wireless earbuds, there is much more dynamism in what brands can deliver and how they differentiate building on what their core competencies are, including artificial intelligence and machine learning, which will make it harder to compare like for like.

Will My Data Be the Ultimate Ecosystem Lock-in?

Last week I wrote about how it has never been easier to switch from an iPhone to a Samsung Galaxy S10+ and, you can imagine, my positioned generated quite a bit of dialogue from both camps. I had readers pointing out that Samsung has been ahead of Apple in several big tech trends over the years. I also had readers highlight how giving up on the iPhone would mean giving up on the whole Apple ecosystem. Depending on where you sit there are points to be made defending either side of the argument.

As I was reading through those comments, it became apparent to me that we are now at a point in the market where you have users who still see smartphones as their only device and users who view their smartphone play an essential role in a portfolio of devices on which they rely on in different ways throughout their day. The latter kind of user is usually an early adopter who sees the smartphone as the glue that keeps that portfolio of products together without being the most crucial piece of the puzzle at every moment in time. These are users who are happy to go for a run with their wearable or ask their smart speaker about their upcoming appointments without feeling the need to always reach for their smartphone first. Depending which group you belong to you might find it easier or harder to switch your phone.

The Shift from Apps to Services

The market has changed a lot from when smartphones first got in our pockets. After bringing us apps, smartphones took time away from other devices we had been using to become our one-stop shop for all our computing needs, from connecting to the internet, taking pictures, listening to music, watching videos, making payments and the list goes on. Over the past couple of years, although on average, we still spend most of our time on a smartphone we have also come to share more of our computing needs across other devices.

More importantly, many of those apps that made the smartphone the device we came to love more than any other device in our lives became full-fledged services across devices and often across ecosystems. This is what makes moving from one ecosystem to another much easier than it used to be, as most services offer a parity of features and experiences no matter what they run on. At the end of the day users are what they want and they will take them wherever they are. Ecosystem owners are well aware of this, which is why we have seen an increase in the number of “services” that they provide directly through hardware they often brand and control. I put services in quotation marks because what they deliver is not always a service in the sense of something you can subscribe to but more in the sense of offering a helping hand in an area, we, as users, need. Digital Assistants are an excellent example of a service that we do not subscribe to, but that is in effect a service aimed at providing assistance throughout our day. AI infused Microsoft Office, or Google G Suite are another excellent example of a service, in this case, a service, AI, within a service.

The importance of these services has become such that we carefully consider what we give up when we move from one ecosystem to another as some of these, due to the provider’s business model, are not available on other platforms, or they deliver a sub-par experience.

Addressing Pain Points Creates Stickiness

The more we use these services, the more information we give away. This is valuable information for the service provider because, even when they do not directly monetize from it, it helps them improve their services in such a way that draws us in even more creating a vicious circle.

What has been fascinating for me to watch, has been seeing ecosystem owners move beyond services that are directly related to their core business and start offering services that are addressing pain points in areas where technology has yet to play a significant role.

Amazon is doing it with brick and mortar retail, Google with Photos and Apple has been particularly aggressive in doing so in health and banking. When you enter areas that are so personal and sensitive as health and banking, and you can offer a service that puts the user first, you could enter a new level of loyalty that transcends hardware.

It used to be that Apple’s software and services added value to the hardware. You bought the hardware and that software and services added value to it which helped justify the financial investment you were making on a product that others often had on the market for less.

As Apple moves into more life-critical services like banking and health that they can monetize directly or indirectly, the value must be found in the service itself which will raise the bar for what Apple delivers. If we add the fact that these services will use some of the most personal data a user can generate, data they trust Apple to keep both private and secure, it is hard to think that a user will move gingerly away from the hardware that hosts such services.

Are we moving to an offering where iOS users no longer pick Apple hardware because of the hardware, but they subscribe to services despite the hardware not being the best option in the market? One might argue that this would not be the first time, that iTunes and iPods are an example of the priority users put on the service back when we did not have smartphones. What is different now is that we are dealing with much more important data than our music collection. While our experience might be best on Apple hardware, the very nature of the data linked to these services will drive our need always to want access to it no matter the hardware and ecosystem. After all who can control what hardware their doctor or bank is using? If you agree with me that this is a possibility, then it is easy to see how for some services it is not a case of Apple making them available on other platforms to be successful. Instead, Apple must make it possible for users to access the data behind such services anytime anywhere for the user who will become loyal to Apple, not Apple’s hardware.

A Philosophical Take on Post Show-Time Apple

Apple’s Show-Time event on Monday sure was different from the Apple events I have been attending for over ten years. A lot has been written about each service and predictions have been made on whether they will be successful, and, as you can expect, I have my thoughts on that. In this column, however, I want to address three challenges or opportunities I believe these new services bring to Apple.

The Responsibility of Choosing

Most users of Apple products are used to the company deciding for them: whether we are talking about the right time of giving up the headphone jack or when they should get 5G. On Monday, however, Apple brought up the concept of “curated content” several times. This means that Apple is choosing what content to bring to you. With Apple Arcade, Apple is working with developers to bring you exclusive games as part as a subscription service. With Apple TV+, Apple is working with producers and writers to bring you exclusive content. And with Apple News+, Apple is bringing you news and stories they think are either great content or are the kind of articles you want to read.

For gaming and video what Apple decides for me will not have a material impact other than on my decision to subscribe to the service based on the quality and relevance of the content. With news, however, the effect that Apple’s curation might have is pretty significant. I trust Apple to keep my viewing data secure and I trust they will not be malicious about the content they will present to me. This does not mean I necessarily trust I will see everything I want or need to see. Curation does not mean that those articles that Apple highlights for me are the only articles I can read. Chances are, however, that most consumers will start and stop at the articles presented to them, more out of convenience than anything else.

Apple has, therefore, a great responsibility in both hiring editors and training its algorithms. Editors should be able to follow guidelines on what makes for best content based on anything that can be easily measured and assessed leaving no room for subjectivity. Similarly, the data used to train their models should truly reflect the reader’s preferences, habits, interests and other data such as location.

All the good intentions in the world would not get Apple easily off the hook if consumers ever felt they did not get the full story with Apple News+.

The Risk of not Fully Controlling the Experience

Something else that was different at Monday’s event was that Apple did not control all the storytelling on stage. While I am sure everybody spoke from a pre-approved script, it was not Apple’s voice we heard. A long list of celebrities told Apple’s content story. Letting someone else tell their story, somewhat lowered Apple’s level of control.

Apple has different levels of control on the new services as well. Apple does not create every app in its app store, but they make the rules of the game, so in a way, they still control the experience, and this will certainly be the case with Apple Arcade.

With Apple Card, Apple is in control of what the card looks like both digitally and physically and how the AI-driven spending report is shown on your phone. But Apple is not in control of the approval process or any other banking aspect. It will be very interesting to see how smoothly the sign-up experience will be for users who might not have the perfect credit score. Also, is the fact that I can iMessage for support mean I should expect a level of service I get from the genius bar or a banking chatbot? Even if these are trained bank employees, I am sad to say customer service is not necessarily a strength that comes to mind when I think of my interactions with my bank. Even Amazon, which offers a Rewards Card with very favorable terms, must deal with very unsatisfied customers complaining about Chase, the card issuer and not Amazon.

When it comes to the production of their video content, there have been reports about Apple trying to control the process too much rather than letting the talent they hired to do their job. It was clear on Monday that Apple is selective about the topics they want to address with their creations. Ultimately, however, I am subscribing to Apple TV+ because I want to watch Oprah’s content, I want to be able to hear her voice loud and clear not one that is compromised by Cupertino’s interference. So while Apple may decide the type of content they want to air based on what fits with their brand and goal, it should not try to control the overall experience, or it would fail to deliver on the very promise they made of empowering storytelling.

The High-Bar of the Straight and Narrow

Over the past few months, Tim Cook has been very vocal about privacy being a human right and security being a core focus of Apple. On Monday, Apple took on even more of a role as a bastion of humanity by wanting for its users way more than privacy. Quality news, reporting, and writing, content that inspires us to think and learn as well as better financial health was how Apple talked about the new services. Apple is no charity, so of course, there is revenue potential in all these areas. To unlock such potential, Apple could have presented these services calling out ease of use, breadth, fun but they were very deliberate in what they highlighted. What Apple wants to deliver with these services reflects how I believe Tim Cook has earned respect and admiration across the company: morals and ethics, the legacy he wants to leave as a leader.

If you buy into what Apple is selling with these services, you are likely to keep Apple at a very high standard, and you will scrutinize their behavior more than you would that of a company for which you have low expectations, Facebook comes to mind.

The Apple I saw on stage at the Steve Job’s Theater was not a different company. I saw Apple’s core values and beliefs, its focus on elegance, ease of use, quality vs. quantity, and the power of a large installed base of users. I also saw a company that is entering new territory, at times with confidence and at times knowing they do not know it all and they cannot do it alone. And this is a good thing!

Digging a Little Deeper into Apple Revenue Warning

What was supposed to be a slow return to work after the holidays, mostly prepping for CES, got much more exciting thanks to a letter to Investors that Apple’s CEO Tim Cook wrote on January 2 warning investors about the performance in the December ’18 quarter.

You can find the full letter here, but in essence, Tim Cook points to weaker iPhone sales in Greater China due to a more fragile economic environment, longer replacement cycles due to more carriers moving away from subsidies, the battery replacement program and higher prices driven by a weak Dollar.

After reading the letter in its entirety and listening to Cook’s NBC interview, there are a few points that I think are worth highlighting.

Greater China

The data shared on Greater China points to a mixed-bag performance for Apple rather than overall doom and gloom. iPhone sales were so weak in Greater China that they negatively impacted overall revenue. Yet the fact that other products and services performed well would indicate that the concern some expressed of a possible Apple boycott on the back of the US sanctions as yet to materialize. Growth in services revenue also suggests that the current user base in China remains engaged in the ecosystem, a behavior that we know drives loyalty.

What is happening is that a weaker economy now impacted by the sanctions is lowering consumer confidence. Many are jumping to the conclusion that Apple’s loss in China is a win for the Android ecosystem players as consumers churn. There is no question that Huawei, OnePlus, Oppo, Vivo, and Xiaomi have grown in China offering an alternative to non-local brands but this has been true for quite some time, and most of their growth has been coming from within the Android ecosystem. While current economic conditions might drive some iPhone owners to look at switching camps looking for cheaper devices, it is more likely they will delay their purchase especially if they do not “need to upgrade.”

We will know more next quarter when buying behavior during Chinese New Year will bring some clarity on whether the slow down Apple is experiencing in iPhone sales will continue and whether other brands will be impacted by the weaker consumer confidence.

Installed Base Outside of Early-Tech

Many industry commentators are blaming the current iPhone performance on Apple’s decision to increase prices of the new iPhone Xs and Xs Max compared to last year’s iPhone X. I think this might be a little too simplistic an explanation of the current environment Apple is facing.

Apple proved with the iPhone X that a high price did not deter consumers. In markets such as the US where most consumers are on installment plans the difference between the iPhone X and the iPhone Xs is a few Dollars a month. What might have played more of a role is that some iPhone X owners might not have seen the need to upgrade to the iPhone Xs especially if they were not on an annual upgrade program or the bigger size of the iPhone Xs Max was not of interest. While this is not changing the fact that replacement sales are impacted it does paint a different story for the future.

Cook’s specific mention of widening the annual upgrade program to more markets, offering installment plans options with more trade-ins and making it easier for people to transfer their data on new devices are all steps that point to wanting to nudge mainstream users to move to newer models. This is where the problem lies — those more pragmatic buyers who are satisfied with the features their current model offers. From Apple’s comments it seems that this is now a larger group than it used to be in previous years and the part that Apple underestimated. This is likely to be an industry-wide problem and Apple’s retail strength will make tackling it much easier than for any other vendors.

Considering other devices sales remained strong this quarter despite availability constraints on Apple Watch, AirPods and MacBook Air, we should also consider that some of the disposable income that in previous years might have been put towards a new iPhone might instead have been diverted towards another Apple product. Not a bad thing for Apple!

I do also wonder if the current iPhone lineup might have played a role in the lower upgrade sales as mainstream consumers are resisting some of the changes such as larger form factors, Face ID and the lack of a headphone jack. This is the first time Apple has a full portfolio of products that are two years old or less. Uncertainty around these new features coupled with the battery replacement program might have pushed potential buyers to keep their older iPhone with a new battery and renewed life. I see these as deferred sales rather than lost sales. When the time comes, it will be interesting to see if these pragmatic buyers will spend more money upgrading to the latest model and seeing it as a multi-year investment or whether they will choose an older product at a reduced price.

Hardware and Services: An Intertwined Opportunity

Don’t be too quick to criticize Apple on the new portfolio and consider how hardware and services are intertwined in Apple’s future. For Apple, it is paramount to drive users to newer models and not just because of the hardware revenue those sales generate. Newer products with the latest features make sure users can engage in new services and use features that increase stickiness to the ecosystem. This engagement is what Apple must continue to foster to be able to benefit long-term from the user base they have built.

It is very telling that at a time when Apple decided to no longer disclose iPhone sale volumes, they also decided to start sharing services gross margins. Apple made it clear they want investors to focus more on the opportunity services offer to the company long term. If you think about this opportunity, there are no other smartphone vendors other than Google that can say their users are generating revenue for them even when they are not buying new products. So, while lower iPhone sales are certainly something to be concerned about Apple continues to show there is an upside in other product categories and services.

Apple vs. Other Smartphone Vendors

This final point is possibly the most important one to keep in mind when we compare Apple to other smartphone vendors. Apple’s revenue while highly dependent on iPhone over the years does not end with the iPhone. While it is true that no other single product has done for Apple as much as the iPhone, the product offering as an aggregate still puts Apple ahead of all other vendors who might be selling higher volumes but have no direct way to monetize from their users once the sale has occurred. The only exception being Xiaomi, but with the caveat that its monetization helps recuperate the initial loss on hardware. All other Android vendors are mostly working to drive value to Google rather than themselves.

Even Samsung, a brand that offers a much broader range of products, even broader than Apple, is still struggling to benefit from the user base to drive not just services revenue but also cross-device stickiness.

Apple’s strong reliance on iPhone revenue makes it hard to not see Apple as a smartphone vendor but measuring its future opportunity only on iPhone sales is shortsighted.

The “So What” in Apple’s Earnings

On Tuesday, July 31st, Apple announced its 3Q18 financial results, an event that drove even more attention than usual given the headwind that some companies faced during this earnings cycle. In particular, analysts were trying to measure the health level of the whole smartphone industry based on what Apple reported for the iPhone.

The Core

Apple sold 41.3 million iPhones, slightly lower than expected but certainly a strong performance considering this is usually a softer quarter for Apple given the expected September launch cycle. The numbers look even better when one takes into account that Apple decreased inventory by 3.5 million units which means that sales to end users ended up at 44.8 million units. The iPhone X remained the most popular model driving ASP to $724. As markets saturate ASP growth is a much more positive signal than sales not only for the immediate impact on revenue but most importantly as a driver for further revenue growth coming from the latest technologies integrated into the hardware and the services they enable.

iPad had almost a reverse trend to the iPhone with stronger sales and weaker revenue. This reflects the state of the portfolio quite well, as the most recent iPad model has a lower price tag and the iPad Pro, which drives higher ASP is due for an update in the next couple of months. The expected update on the iPad Pro line is certainly stalling prospective buyers who would rather wait for the new models or see if they can take advantage of a price drop on the current ones. This point might also be true of enterprises as we did not hear Apple talk specifically about iPad uptake in this segment as they have done many times in the past.

It is also interesting to note the different installed base story for the iPhone and the iPad. The iPhone user base is more defined in number, but it is improving in capability as users in the base are upgrading to newer devices. With iPad, however, we are still in a growing phase of the installed base as Apple pointed out that 50% of iPad buyers in the quarter were new to the product.

On the Mac side, this is the first time in a very long time that Macs underperformed compared to the overall PC market. Cook linked the year over year decline to the different launch cycle, and it will be interesting to see the impact of the upgraded MacBook Pro next quarter. While rumor points to more Macs to come the back to school window is gone, and all will rest on the holiday quarter.

The Shining Stars: Wearables and Services

Wearables (Apple Watch, AirPods and Beats) had a great quarter, with revenue up over 60% year-over-year and growth accelerating quarter-over-quarter. Wearables produced over $10 billion in revenue over the past four quarters. While Apple Watch sales were reported to have grown by 40%, it is AirPods that in my view have been the clear dark horse of the category. Tim Cook compared AirPods to the iPod, and I could not agree more when you consider the appeal the product has. Like the iPod. AirPods transcend gender, income, age and tech savviness to deliver a clear value-add by doing what they are meant to do most straightforwardly.

The long-term opportunity that wearables offer is that they pave the way for whatever Apple is planning around AR and glasses. A loyal base of Watch + AirPods users will offer a great addressable market for glasses.

Paid subscriptions across Apple Services have now passed 300 million, an increase of more than 60% in the past year alone. For Apple Music specifically, paid subscriptions have now passed 43 million. There were two areas that Apple highlighted either directly or when prompted. One was the mention of the doubling in news articles read during the quarter. This datapoint bodes well for an upcoming paid news service as it proves that engagement is growing.

When asked about the deal Apple signed with Oprah, Tim Cook did not hold back his excitement about the collaboration and referred to original content being developed. With the limited ability that Apple TV has had to convince people they needed it for its apps and as a single sign-on portal for all our content, Apple is left with no choice than to differentiate through content. If you are skeptical about why Apple would enter this space consider the low level of penetration of Apple TV, you forget the many screens this content will be viewed on when you consider iPhones and iPads. I struggle to see Apple embarking on the very expensive endeavor of creating original content to limit viewing to Apple TV.

There was not much mention of the HomePod during the call other than an implication by an analyst that Apple is losing the home. Cook’s answer, reflected not only why Apple might not be worried but also why Apple has not been as aggressive in the home as some might want. The bottom line for Cook is that owning the home is not enough but owing the pocket (with the iPhone) is key, and of course Apple has done that, which grants them access to the home and beyond.

One data point during the call referred to Siri, and that was the number of requests put forward to the Apple’s digital assistant. An impressive number but one that does not really give us much visibility in the growing level of engagement and, most of all, satisfaction.

The Bigger Picture

Apple Pay has been growing steadily over the past few quarters but for Apple to be able to say that transactions were higher than PayPal Mobile and Square was certainly good this time around. Even more rewarding, I am sure, is being able to announce that CVS and 7-Eleven will add Apple Pay. CVS, in particular, must feel like a victory as CVS had originally opposed Apple Pay in favor of its own payment method called CVS Pay.

While politics was not an explicit topic on the call, Tim Cook did address a question about tariffs by wishing for calmer heads as tariffs always impact consumers. While calmer heads are certainly welcome, I find it useful to point out that in the past the impact of new tariffs on phones, in particular, has been shortlived. My proof points are South Korea and their increase in tax of a few years ago and Russia where there was a crackdown on import duties earlier in the 2010-2012 time frame. In both occasions, prices grew, and the market slowed down for a few quarters before picking back up.

Absent on the call were references to AI and Cloud, key areas for Apple’s big ecosystem competitors: Google, Microsoft, and Amazon. While these two are not key business drivers for Apple, not in the way where there is a direct revenue target associated with them, they are crucial ingredients of products and services, and I believe Apple should start to mention them more often in the role they play in empowering successful services and experiences.

As Tech in Education Matures, it calls for more than Hardware

Our kids might not remember what schools were like before so many started focusing on STEM, and coding. Most schools had a computer room but technology, or computer science, was very much a subject rather than a tool to use throughout the school day. We can argue whether or not technology made things better or worse but that deserves a totally separate discussion. Like it did in the enterprise market, since its launch in 2010, the iPad started making its way into education bringing technology into classrooms. It did not take long for the first one to one iPad school to get established.

The first Chromebooks hit the market in 2011 but it was not until 2013 that they started to make a considerable impact in K-12 education and they have been growing ever since across American schools and mostly at the expense of Apple.

When the iPad was first brought into the classroom it was done in schools where, by and large, budget was not an issue and teachers were empowered to invest time in finding the best way to use technology to reinvent and energize teaching. It was really about rethinking how to teach and connect with students. As technology became more pervasive, schools discovered that it was not just about teaching but it was also about managing the classroom. This is what Google was able to capitalize on. Yes, schools turn to Chromebooks because the hardware is cheaper but also because the total cost of ownership when it comes to deployment, management, and teacher’s involvement is much lower.

A very Different Approach

When analyzing a go to market strategy I always point to how the “why” of the approach rests on the core strength of the brand in question. In this case, Apple’s strength is in the ecosystem and its weakness is in the cloud. For Google the opposite is true. So it makes sense that Apple built its education strategy around the ecosystem of developers that jumped at the opportunity to sell into the education market. Google, in the meantime, built on its cloud strength to enable a device that could be easily shared and managed as well as strong collaborative tools in their G Suite for Education.

I am focusing on Apple and Google as Microsoft’s efforts into K-12 are more recent at least outside of the administration and into the classroom. Yet, even with Microsoft, the approach fits their strength which is Office first and then cloud.

There is no right or wrong in the approach but there is more or less scalable and that is linked to total cost of ownership and it starts with hardware. While it would be belittling to Google’s effort to say they are winning in education because Chromebooks are cheap it is fair to say that they get in the door because of that and from there the conversation is certainly easier.

Three Areas that Would Help Apple Grow Share in Education

Apple just announced an education event in Chicago for March 27 and, as you know, I am wiser than trying to predict what they will and will not do. That said, there are three areas that I would like Apple to address when it comes to their education offering: hardware pricing, an improved productivity and collaboration suite and a bigger focus on managing the classroom.

Hardware Pricing

Apple already cut the price of the 9.7” iPad to $329 in March last year but even with education discounts, there is still a considerable gap with Chromebooks. Of course, I do not expect Apple to ever reach the below $200 that we see with some Chromebooks but I do think the prices still need to be lowered considering most schools also have to consider the cost of rugged cases, storage carts, and styluses on top of the iPad itself.

Considering the design of the invite, I do wonder if there might be some bundling of Pencil as, of course, this will be a great tool across the board from writing to arts. This would, in turn, imply that Pencil support would be expanded outside the Pro family, which is something that makes perfect sense given its popularity.

For higher education, I would also expect an updated MacBook Air at a very competitive price. A sub $900 MacBook would certainly put pressure on Windows manufacturers as well as make it harder to justify a PixelBook, Google’s second attempt to show Chromebooks don’t all have to be lower end hardware.

Improved Productivity and Collaboration Suite

Apple giving up on iWork in favor of Microsoft Office 365 might be ok with people like me (AKA older users!) who have grown up using Office for the most part of their career. But Gen Z and Millennials live and breathe G Suite. While Google has been platform agnostic when it comes to consumer tools, I very much doubt they will support education skews on other devices as deeply as they do on Chromebooks.

This opens up an opportunity for Apple to create a productivity suite that competes with G Suite. Of course, this will require a bigger investment in iCloud as Apple will need to push collaboration to the next level. iMessage is such a powerful workflow tool for many that I am surprised that Apple has yet to integrate it into the Classroom tools.

iWork, which could do with a different name altogether, should be the toolset the next generation wants to work with no more so than the Mac has been the computer students wanted to have when they went off to college and then to work.

Lastly, given the recent focus on families, I would like to see how Apple can better address parents who are often left out of the classroom physically and digitally. G Suite is great for kids to log in and do their homework or projects from any device they have at home, but parents are not necessarily included in that loop. Thinking about how better serve parents will certainly help Apple to be more top of mind in family choices.

Classroom Management Tools

In 2016, Apple released Classroom which allows for automatic connectivity across iPads and helps to manage iPads in schools that are not 1 to 1 by allowing the teacher to log students into the most recent iPad they used. Classroom also allows teachers to launch apps, websites or books and push such content to students locking their device on a specific view.

With the release of iOS 11.3 it also seems that Apple has developed a framework called ClassKit that aims to help developers of educational apps to create student evaluation features like questionnaires that they can fill in and then automatically send to their teacher. It also seems that there will be a “kiosk mode” so that the students will not be able to access anything else on the device while they are undergoing the test. These are features that Chromebooks already make available which I am sure will be welcomed by educators using iPads.

It appears that with the addition to ClassKit, Apple will check many boxes in a feature by feature showdown with Google.

Aside from not talking about their education offer as much as they should, I fear that Apple comes across more as a DIY solution. While this allows for flexibility for every teacher and allows them to pick best of breed apps for their specific classroom needs it can feel as quite a daunting task compared to Google. Of course, now that Chromebooks support Android there is a choice of apps there as well but the core of what Google brings to schools is nicely wrapped up into their G Suite for education and most teachers do not even look past that.

I am sure if you ask any school, aside from budget, time is the one other thing they will tell you they do not have enough of. As Chromebooks get more and more established in education the biggest issue Apple will face is having schools consider a change. The advantage Google had here was cost. For Apple to have schools make a switch convenience and ease of use should be the key. Freeing up teachers time from administrative tasks and empowering them to teach is a great selling point.

Apple’s Future Is Ear

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

Part 1: Looking Back

Angst

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

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

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

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

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

Wow. Strong words.

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

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

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

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

Or is it we who are doing Apple a disservice?

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

Looking Back

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

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

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

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

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

Smaller, Ever Smaller

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

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

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

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

The Windows Mobile Mistake

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

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

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

Unique User Interface

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

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

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

Macintosh

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

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

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

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

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

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

iPhone

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

Some thought the iPhone was an embarrassment to Apple:

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

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

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

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

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

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

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

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

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

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

Lessons

The lesson here is fourfold:

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

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

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

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

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

Why Bother?

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

Well, yes and no.

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

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

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

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

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

Part 2: The Next User Interface

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

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

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

Google Glass

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

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

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

So what went wrong?

Well…other than that picture, what went wrong?

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

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

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

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

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

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

Enter The Voice User Interface

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

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

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

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

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

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

The User Interface Company

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

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

Some past examples:

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

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

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

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

Introducing The AirPod

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

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

— Painless Pairing;

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

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

— Sharing between two people.

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

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

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

Good Design

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

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

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

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

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

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

The Invisible Hand

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

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

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

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

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

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

We all will.

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

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

Today And Tomorrow

The possibilities for Voice activated computing are endless.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

————–

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

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

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

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

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

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

Untethered

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

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

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

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

Not One Device, But Many

So, am I saying the Smartphone is going away?

Hell no.

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

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

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

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

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

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

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

Part 3: Critiques

Fantasizing Fanboys

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

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

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

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

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

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

Echo Chamber

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

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

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

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

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

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

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

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

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

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

Job To Be Done

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Socially Awkward

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

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

This kind of thinking is already passé in China.

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

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

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

Apparently, this is considered ‘normal’ looking:

…but this in considered abnormal and abhorrent.

Who knew?

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

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

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

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

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

And pretty dorky looking, too.

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

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

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

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

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

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

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

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

————–

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

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

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

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

(emphasis added)

Remember the day-glow colors of the first iMacs?

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

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

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

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

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

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

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

Siri Sucks

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

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

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

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

Part 4: The Apple Way

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

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

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

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

Apple has always been willing to take chances.

Success is the child of audacity. ~ Benjamin Disraeli

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

And they’ve always been mocked for doing so.

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

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

Clear thinking requires courage rather than intelligence. ~ Thomas Szasz

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

So they’re moving toward that future today.

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

Why is that so hard to understand?

The Real Threat to Apple: The Invisible Device

This article is exclusively for subscribers to the Think.Tank.

The PC Decline: Four Key Points to Note

This article is exclusively for subscribers to the Think.Tank.

Explaining Away Apple’s Success

On May 31, 2015, John Naughton, penned a story for The Guardian, entitled: If Steve Jobs’s death didn’t ruin Apple, the iCar surely will. I don’t know Mr. Naughton well, but after reading this article, I don’t want to know him well.

The Cult Of Apple

When Steve Jobs was alive it was tempting to draw analogies between Apple and a religious cult.

No. It wasn’t. At least it wasn’t for those of us who who want to understand Apple, rather than to assign Apple’s success to some unknowable mystical agency. Apparently, the occult is the only way that some critics can explain away Apple’s success.

What the mind doesn’t understand, it worships or fears. ~ Alice Walker

Saying that Apple — one of the most successful companies in the world — is like a cult is cognitive dissonance at its worst. The formula goes like this:

— I think Apple’s products are stupid.
— People are buying Apple’s products.
— I’m not stupid so…
— People who are buying Apple’s products must be stupid!

“‘Fashion, bauble, cult, marketing, toy’= ‘I do not understand what this product tries to achieve'” ~ Benedict Evans on Twitter

The moment we label that which we don’t comprehend as “irrational”, is the moment when we end the learning process. Here’s a clue for us all: Just because we don’t understand something does not mean that it can’t be understood. When others are doing something that we don’t understand, we should be striving to lessen our ignorance, not striving mock their ignorance.

Who dares to teach must never cease to learn. ~ John Cotton Dana

No man really becomes a fool until he stops asking questions. ~ Charles Steinmetz

Why do people like Apple’s products? Is it because Apple is a Cult? Or is the answer much simpler and much easier to comprehend?

My philosophy is that everything starts with a great product. ~ Steve Jobs

(Jony Ive) craved products that didn’t force adjustments of behavior, that gave what Powell Jobs called a “feeling of gratitude that someone else actually thought this through in a way that makes your life easier. ~ Jonathan Ive and the Future of Apple – The New Yorker

The author of this article could do with a close shave from Occam’s razor. People aren’t buying from Apple because Apple has created a cult. People are buying what Apple’s culture has created.

You Say That Like It’s A Bad Thing

Product launches in the Moscone centre in San Francisco seemed more like evangelist congregations than capitalist rituals. And in the days before the revered new products actually appeared in the cult’s retail outlets, excited worshippers could be seen camping out in surrounding streets.

The Author says that like it’s a bad thing.

The last time I looked at my marketing books, having “evangelist” customers who “revered” one’s products and were so “excited” about the release or those products that they literally camped outside of one’s stores in order to buy those products — was a good thing. In fact, saying it’s a good thing is damning with faint praise. It’s a great thing!

There isn’t a company in the world that wouldn’t sell their metaphorical soul to have customers as enthusiastic, as devoted, and as loyal as those that Apple has. If Apple is a Cult, isn’t that an admirable quality and shouldn’t your company, and every other company, be doing everything in its power to become a cult too?

But, of course, Apple is not a cult. Apple has had failures — which disproves the lazy and tedious claim that Apple’s customers are undiscriminating. When and if the quality of Apple’s products starts to disappear, watch how quickly their “cult-like” followers start to disappear too.

So if Apple is not a Cult — and it’s not — and if Apple attracts customers like no other, then maybe reasonable companies should be asking themselves smarter questions. Questions like:

— What is Apple doing that we are not?
— And why aren’t we doing that too?

The Customer Is King

I remember once being in a British shopping arcade on the day that the local Apple Store opened for the first time. Long queues had formed from the moment the arcade gates had been unlocked that morning. Then came the magic moment: the glass doors opened, a hush fell on the assembled crowd, a group of T-shirted staff walked out, formed a human avenue leading into the store and then clapped rhythmically as the mob surged in.

It was a truly extraordinary moment in which the conventional marketing mantra about the customer being king was turned on its head. In the case of Apple, it seemed, the customers felt privileged to be allowed to enter the store.

(Emphasis added.)

How could the author of this article be more wrong? Let’s review:

— World class retail store;
— Filled with premium products; and
— greeted by a corridor of Apple employees, clapping enthusiastically as one enters the store.

That’s the author’s idea of “the customer being king…turned on its head”? What more does Apple have to do in order to demonstrate that they DO treat their customers like kings — literally put a Tiara on every customer’s head as they enter the store?

The Cult Of Personality

…I concluded that much of this Apple worship could be put down to the astonishingly charismatic personality of Jobs. He was, after all, the only chief executive in the history of the world to be accorded the kind of adulation normally granted to rock stars and messiahs. Apple was obviously a one-man band and he was the Man. It seemed reasonable to conclude when he died, therefore, that the cult of Apple would diminish or at any rate that its share price would have peaked.

How wrong can you be?

Pretty damn wrong, I’d say.

The author has — as so many have before him — reversed cause and effect. People didn’t buy Apple products because they revered Steve Jobs. They revered Steve Jobs became he created products that people wanted to buy. Similarly, people don’t buy Apple products because they like Apple. They buy Apple products because Apple makes products they like.

Dumb And Dumber

Jobs has been succeeded by Tim Cook, a nice man for whom the phrase “charisma deficit” might have been invented. But the cult of Apple is still going strong….

The author admits he was wrong about the cult of Steve Jobs personality, but far be it from him to learn from his mistake. Oh no, he’s doubling down instead. Apple is a cult. That’s his story and he’s sticking to it.

At this point in Apple’s success story, one has to work awfully hard to still believe that Apple is being powered by cult-like loyalty from an ever larger and larger base of unthinking and uncritical fanboys. One might even say that with their unwavering belief in the unbelievable, it is the critics, not Apple, that are acting like they are part of a cult.

A great deal of intelligence can be invested in ignorance when the need for illusion is deep. ~ Saul Bellow

Reality Distortion Field

When Jobs was in his pomp, we used to say that he was surrounded by a “reality distortion field” that made it impossible to have an objective view of him.

Did you now? And what exactly was our “distorted” view of Steve Jobs?

— That he created some of the best loved products on the planet?
— The he created one of the greatest companies of our generation?
— That he engineered one of the greatest business comebacks of this generation — or any generation?

Not much reality distortion going on there. All pretty objectively true.

Apparently Steve Jobs had a lifelong battle with reality, and won ~ Scott Adams

The iCar

All kinds of portents – from straws in the wind to chicken entrails and recent corporate hirings – are leading people to conclude that Apple must be working on a car.

Yeah, I’m guessing it’s mostly that last thing — the recent corporate hirings — and not so much the mystical nonsense that you pulled our of your derrière, that has the industry all abuzz.

Why this obsession with cars?

The…possible motivation is at least rational, based on a strategic view that the information technology industry will eventually peak and that it makes sense to have a beach-head in industries such as healthcare and transportation, for which there will always be stable consumer demand.

Say what?

The information technology will eventually peak? Really?

Or, has the author, once again, gotten it all backasswards? Information technology isn’t peaking. On the contrary, software is leaking into every aspect of our lives, including — unsurprisingly — cars.

As Jony Ive’s friend and colleague, Marc Newson, puts it:

There is certainly vast opportunity (for cars) to be more intelligent.

I would add that there is certainly vast opportunity for many of Apple’s critics to be more intelligent, too.

Driving Us Mad

(M)aybe it’s time to consider whether those Apple shares of yours might be approaching their peak. As the ancient Greeks knew, those whom the gods wish to destroy, they first make mad.

Well, the author of this article is no Greek god, but he’s sure as Hades made me mad. I think he has a lot of gall giving investment advice. Why should we trust the advice of a man who predicts Apple’s fall when it’s pretty darn obvious that he hasn’t a clue as to what caused Apple’s rise?

Conclusion

For almost forty years Apple has proven they can have success doing things in their own unique way. And for most all of those same forty years, critics have derided Apple as a cult. Apple is one of the great success stories of our times. Pretending that Apple’s success is irrational is not only irrational, it does us all a great disservice.

Not to know is bad not to wish to know is worse. ~ African Proverb

We shouldn’t be trying to explain away Apple’s success. We should be trying to explain it.

The Macalopes’s Take

For another take on this article, check out: “Assumption junction: Calling Apple a religion has no function” by the Macalope.

Premature Predictions About The Apple Watch

On February 27, 2015, Brian X. Chen penned an article entitled: “Apple’s New Job: Selling a Smartwatch to an Uninterested Public”, and on March 2, 2015, Mark Wilson published “You Guys Realize The Apple Watch Is Going To Flop, Right?” Let’s take a look at their critiques of the yet to be released Apple Watch.

There is going to be an unprecedented level of incomprehension and trolling around Apple Watch. ~ Benedict Evans (@BenedictEvans) 9/30/14

But by all means, write articles that Apple is going to lose. Makes my job easier. ~ Ben Thompson (@monkbent) 10/27/14

Consumers Not Excited About Category

For Apple, the hard part — making a smartwatch — is nearly over.

Soon it will be time for the harder part: selling the long-anticipated Apple Watch to consumers who, so far, are not very excited about the idea of wearing computers on their bodies. ~ Brian X. Chen

Saying consumers are not excited about the idea of wearing computers on their bodies is like saying horse owners, prior to the introduction of the Ford Model-T, were not very excited about being seen in horseless carriages. Mister Chen has it backwards. People are not excited about wearables because today’s wearables are not exciting. Trust me, when wearables become useful — similar to when cars became useful — customers will be plenty excited about the category.

Abandoned Features

Nearly two years ago, the company experimented with advanced health monitoring sensors that tracked blood pressure and stress, among other variables. Many of those experiments were abandoned more than 18 months ago after the sensors proved unreliable and cumbersome, these people said. ~ Brian X. Chen

First, features from prototypes often don’t make it into the final product.

A good design finds an elegant way to put all the features you need in in. A great design leaves half those features out. ~ Inspired by Mike Monteiro (@Mike_FTW)

Second, have we learned nothing from Apple’s history of making products? Apple is famous for creating products that contain fewer features and a better user experience. For example, if you wanted a mobile phone with more features than the iPhone, you could have purchased a Droid.

iDon’t have a real keyboard.
iDon’t run simultaneous apps.
iDon’t take night shots.
iDon’t allow open development.
iDon’t customize.
iDon’t run widgets.
iDon’t have interchangeable batteries.
Everything iDon’t…Droid does.

Verizon Advertisement, 18 October 2009

Valuing features over the user experience is the second biggest mistake in consumer market analysis. ((Valuing price over user experience is the first most consistent mistake.))

Flooded Market

Still, when Apple releases its watch in April, it will enter a market already flooded with smartwatches running Android Wear, a version of Google’s Android software system tailored for wearable computers.

Flooded market? That’s just not so. In relative terms, the number of smartwatches on the market is minuscule and their impact on consumers has been negligible.

Further, although the Apple Watch may share the same category as current smartwatches, that does not mean that they are in the same class. The Apple Watch is as different from the current crop of smartwatches as the iPod, iPhone and iPad were different from the MP3 players, mobile phones and tablets that preceded them.

Measuring the existing market is a mistake because the existing products are hired for different jobs.

For example, were tactile keyboard Smartphones from 2006, below, ever a real threat to the touch-based iPhone? No. They may have been in the same category, but they were most definitely not in the same class and they were most definitely not competing for same customer base.

Andy Rubin on seeing the obvious, non-novel iPhone: “Holy crap.” ~ Benedict Evans (@BenedictEvans)

The Apple Watch may or may not succeed, but it is facing virtually no competition for the customers that it is targeting.

Five years from now, we will look back on round shaped smartwatches and view them the same way that we currently view physical keyboards on touchscreen smartphones.

Unlikely To Be Game Changer

But it is unlikely to be a game-changer for Apple, at least anytime soon. Toni Sacconaghi, a financial analyst for Sanford C. Bernstein research, thinks the watch will make only a modest contribution to Apple’s bottom line this year. He predicts that Apple will ship 7.5 million watches in the second half of the year.

That is peanuts compared with the tens of millions of iPhones that fly off the shelves every quarter. ~ Brian X. Chen

With all due respect to Mister Chen, this analysis of what constitutes a “game changer” is wrong on many levels.

First, contending that a product has to outsell the iPhone in order to be considered a “game changer” is setting the bar at an impossibly high level. After all, the iPhone, by itself, brings in more revenue than such tech luminaries as Microsoft or Google. Suggesting that a product has to be bigger than Microsoft, or bigger than Google, in order to be considered a “game changer” is unrealistic.

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

Second, the term “game changer” and “money maker” are not one and the same. The Macintosh was surely a “game changer”, yet Apple is only the fifth largest maker of PCs in the world today, and it took them thirty years to rise to that level.

We’re not focused on the numbers, we’re focused on the things that produce the numbers. ~ Tim Cook

Third, aren’t we employing a double-standard here? Google Glass, for example, was widely considered to be a “game changer” — right up until the moment when it was discontinued. And is it going to outsell the iPhone? Not hardly.

What’s the over-under on how long it will take Apple Watch to outsell Google Glass? A minute? No, seriously… a minute? Less? ~ Frank Boosman (@fboosman) 11/18/14

Jonathan Ive’s New Newton

The Apple Watch is Jonathan Ive’s new Newton. It’s a potentially promising form that’s being built about 10 years before Apple has the technology or infrastructure to pull it off in a meaningful way.

As a result, the novel interactions that could have made the Apple watch a must-have device aren’t in the company’s launch product, nor are they on the immediate horizon. ~ Mark Wilson

The next Newton? Hmm. Why does that sound so familiar?

I’m more convinced than ever that, after an initial frenzy of publicity and sales to early adopters, iPhone sales will be unspectacular… iPhone may well become Apple’s next Newton. ~ David Haskin, Computerworld, 26 February 2007

A product ahead of its time. Hmm. Why does that sound so familiar?

I added it up and … like 800 people are going to buy the iPad. . . . It’s not that the iPad is a failure. It’s just a product ahead of its time. No one should actually buy this iPad — between its inevitable first-generation bugs, fulfillment problems, and buyer’s remorse over added features and price drops, it’s heartbreak waiting to happen. ~ Molly Wood, CNet, 31 January 2010

How is the Apple Watch ahead of its time anymore than the iPhone was ahead of its time? The iPhone had WAY less support than the Apple Watch does. The iPhone didn’t even have native applications during its first year of existence and even after they were added in 2008, Apple didn’t have the base of developers that it does today.

Even if it is opened up to third parties, it is difficult to see how the installed base of iPhones can reach the level where it becomes a truly attractive service platform for operator and developer investment. ~ Tony Cripps, Ovum Service Manager for Mobile User Experience, 14 March 2007

I owned the original iPhone. Compared to today’s phones, and even compared to the second and third generation iPhones, it couldn’t compete. But compared to what came before it, it blew the competition away. I suspect that the same will be true of the Apple Watch.

You want to wait? Go ahead. But I, for one, still don’t regret having owned the original iPhone and I doubt whether those who buy an Apple Watch in April will look back and regret their purchases either.

Just Another Fitness Band

(R)eports suggest that Apple has pulled a lot of the power-draining specialty hardware from the watch—namely sensors to measure “blood pressure, heart activity, and stress levels, among other things.” That’s deep health mining stuff—much deeper than the heart rate and accelerometer-based movements the Apple Watch that ships will offer. In this sense, the Apple Watch will no longer stand out from any other fitness band on the market. ~ Mark Wilson

With all due respect, I have to vehemently disagree. The communication tools alone — including smart replies, emoji, dictation, voice messaging, walkie-talkie, glances, digital touch, sketch and doodles, Siri, taptic engine, and heartbeat — will be more than enough to distinguish the Apple Watch from all other fitness bands.

Besides, the Apple Watch isn’t about being a fitness band, it’s about being a platform.

We never saw ourselves in a platform war with Microsoft, and maybe that’s why we lost. ~ Steve Jobs

[pullquote]It is platform, more than anything else, that will matter most.[/pullquote]

I would contend that Apple — both with the iPhone, and now with the Apple Watch — very much see themselves in a platform war. And it’s a war they intend to win.

Will the Apple Watch have more sensors in future models? You betcha. But that will not be what makes or breaks it. The Apple Watch is a platform and the foundation for that platform is being laid now. Focusing on missing sensors is like focusing on the missing cut and paste feature in the original iPhone. It is platform, more than anything else, that will matter most.

Not For The Masses

When I look at the Apple Watch, I’m not seeing an empathetic creation for the masses. I’m seeing what the New Yorker’s more than 16,000-word story on Jonathan Ive would only hint at—that Apple may have built out the watch to satisfy the urges of a designer who has become more obsessed with Bentleys and Rolexes than making attractive, functional technology that will actually make life better for the 99%. ~ Mark Wilson

What? When the heck did Apple become the company that made products “for the masses”?

The iPhone is nothing more than a luxury bauble that will appeal to a few gadget freaks. ~ Matthew Lynn, Bloomberg, 15 January 2007

Hasn’t the knock on Apple always been that they make high-priced products for those who have too much money and too little sense?

(O)n some level, (Apple is) failing consumers when only 18% of the global smartphone population has an iPhone. ~ Jay Yarow, Business Insider, 24 May 2013

No Jay, you’re wrong. In fact, you’ve gotten it exactly backwards. Apple is the integrated solution that creates markets, not the modular solution that expands markets.

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

Apple created new product categories with the Mac, the iPod, the iPhone and the iPad. They are the cutting edge that clears the path for others to follow. If you question that statement, simply take a look at the operating system you are using on your desktop and notebook computers, the operating system on your touch devices, and the physical design of your notebook computers, your smartphones and your tablets. They were all inspired by Apple designs.

You know its driven Apple from the beginning… This compulsion to take incredibly powerful technology and make it accessible. ~ Jony Ive

Conclusion

As it happens, I think the Apple Watch will be a thing. Others do not. But we don’t know. Let’s come back in six months and see. ~ Benedict Evans

Yeah, I too think the Apple Watch is going to do all right — actually much more than just “all right”. I think, with Apple’s track record, they deserve the benefit of the doubt. But that doesn’t mean that I KNOW the Apple Watch is going to do well. Because I just don’t know. And I’m willing to wait and see how it plays out before jumping to any premature conclusions. But the one thing I am not willing to do is to sit here and listen to a lot of nonsensical guff as to why it won’t work out.

You’ve got a good theory as to how it will all turn out? Bring it on. But if all you’ve got is the weak sauce people like Brian Chen and Mark Wilson have been serving up, then shut up, get some popcorn, sit down, and wait in silence for the curtain to go up, like the rest of us. It promises to be one hell of a show.

BONUS CLAIM CHOWDER: Why Apple’s Upcoming Presentation Will Be A Failure

Steve Jobs’ blockbuster keynote address at last week’s Macworld was brilliantly and powerfully delivered — one of his best ever. It was also a colossal mistake. I think Jobs blew it. Here are my six reasons why:

1. Jobs raised buyer expectations too high.
 2. Jobs raised Wall Street expectations too high. 
3. Jobs gave competitors a head start. 
4. Jobs undermined Apple TV hype
 5. Jobs put iPod sales at risk.
 6. Jobs wrecked Cisco talks.

Mike Elgan, Computerworld, 18 January 2007

Thanks for your insight, Mike. I can’t wait ((Actually, I can wait. I can wait forever.)) to hear the many reasons why the upcoming Apple Watch presentation “blew it” too.

Thoughts On Apple’s E-book Appeal

On Monday, December 15, 2014, Apple’s appeal of the e-book anti-trust case was heard. Here are some of my thoughts on the matter.

Drug Dealer Analogy

Deputy Solicitor General Malcolm Stewart…called in to defend the antitrust ruling…tried several times Monday to compare Apple to a driver who carries a narcotics dealer to a drug pick up.

The point of his analogy…was that, if Apple knew book publishers were engaged in an unlawful conspiracy to fix the price of e-books and was prepared to facilitate that conspiracy, it was as guilty as they were.

Judge Dennis Jacobs would have none it. Narcotics trafficking, he pointed out, was one of the very few “industries in which the law does not look with favor on new entrants.”

The packed courtroom erupted in laughter. ((All quotes — unless otherwise indicated — are taken from the article entitled: “They laughed at the DOJ’s e-book antitrust case against Apple” by Philip Elmer-DeWitt @philiped DECEMBER 15, 2014))

The “Drug Dealer” analogy illustrates how differently the two opposing sides see this case. The Department of Justice sees Apple as the ringleader who galvanized the Book Publishers into performing an illegal act. Apple sees itself not as the driver of a getaway car filled with drug dealers but, as a bus driver who should not be held accountable for the subsequent illicit actions of that buses’ passengers.

But Apple’s protestations of innocence go much further than this since they don’t believe that either they or the Book Publishers were committing a crime. Apple contends that, in challenging Amazon’s book selling monopoly, they were performing a public good. Going back to the Department of Justice’s analogy, Apple doesn’t think they were driving a getaway car or a bus. Apple thinks they were driving a fire truck on its way to put out the monopoly fire caused by Amazon. In Apple’s view, their actions should have been applauded by the Department of Justice, not condemned.

Per Se

The appeal is likely to turn on an obscure legal point: Did the district court judge commit a reversible error when she found Apple guilty “per se” of a horizontal price fixing conspiracy?

From the admittedly skewed perspective of this recovering attorney, “per se” is anything but obscure.

A quick example might be helpful. If you were driving down the road and the truck in the next lane exploded, you would need to prove negligence in order to collect damages. But if the truck were carrying dynamite, the truck would be considered inherently dangerous. No proof of negligence would be required by a plaintiff. The truck would be considered — by virtue of carrying a dangerous cargo like dynamite — negligent per se.

In the Apple e-book anti-trust case, Judge Cote treated Apple like a truck filled with dynamite. The Department of Justice was not required to prove Apple was in violation of anti-trust law. Illegality was assumed.

The key legal question was whether the Apple’s conduct as a new entrant in the e-book market should have been viewed as “per se illegal”—in which case it could be simply presumed to be anticompetitive—or whether it should have been judged under a more demanding “rule of reason” analysis, in which case the fact finder (which here was Judge Cote) had to undertake a much more searching investigation of all the circumstances in order to decide whether the conduct was pro-competitive (i.e., benefitted consumers) or anticompetitive.

I know about one one-thousandth as much anti-trust law as does Judge Cote but, even so, I could never shake the feeling that it was a mistake for her to apply the “per se” standard to Apple. And I’m not the only one who felt that way. Apple obviously disagreed with the Judge’s stance and they had relevant case law from the Supreme Court to back up their position.

Apple argues that vertical price-fixing agreements — for example, between an e-book distributor and e-book publishers — are not per se unlawful. At trial and in its appellate brief it invoked the Supreme Court’s ruling in Leegin Creative Leather Prods v. PSKS that vertical price restraints must be weighed by the more forgiving “rule of reason. ((”Why Apple’s e-book appeal is a big deal by Philip Elmer-DeWitt @philiped DECEMBER 14, 2014))

Why Not Amazon?

When the Department of Justice charged Apple with conspiring to fix the price of e-books, the case was widely seen in both Silicon Valley and New York publishing circles as an error of enforcement.

Why was Apple, a giant in its own right but a new entrant in the e-book market, being prosecuted and not that other giant, Amazon?

Amazon, after all, had an 80% to 90% share of the e-book market — a monopoly by almost anybody’s standard — and was selling the publishers’ most important titles below cost. ((Book News: Apple Enters A New Round In E-Book Price-Fixing Fight DECEMBER 15, 2014))

This case has always been confounding to the majority of those who study anti-trust law. Instead of pursuing Amazon, the monopolist, the Department of Justice pursued Apple, the new entrant. Some of the members of the Appeals Court also viewed this as odd.

At times Judge Jacobs came close to suggesting that the government had prosecuted the wrong company. At the very least, he said, a horizontal initiative “used to break the hold of a monopolist” ought not be found to be illegal per se. He likened any collusive conduct on the publishers’ part to “mice getting together to go put a bell on the cat.”

Prices

This case has always been about prices. The Department of Justice views high prices as anti-consumer — and therefore in violation of anti-trust laws — and low prices as a public good. The problem with this approach is that it is both bad economics and bad policy.

Bad Economics

Economists know there is no such thing as a “fair” price but non-economists don’t see it that way at all. Most consumers view high prices are always bad and low prices are always good.

Take, for example, the price of oil. When prices go up, people are outraged, oil companies are castigated in the popular press and governments hold hearings. When prices go up, it’s viewed as an evil conspiracy led by evil conspirators and it’s darn well got to be stopped.

And when prices go down? Nary a whisper is heard from consumers, conspiracy theorists or government regulators. When prices go down, it’s due to supply and demand — just economics doing its thing. Economic theory seemingly never works when prices go up but always works perfectly when prices go down.

The government’s anti-trust enforcers seem to view the economics in the Apple e-book case in the very same simplistic way as most consumers view oil prices. High prices are bad. Low prices are good. End of story. After Apple entered the e-book market, book prices went up. To the Department Of Justice’s way of thinking, what more did one need in order to prove that Apple and the Book Publishers were anti-competitive co-conspirators?

Turns out, one needs to know more. A lot more.

The judges appeared to give weight to this suggestion, and to accept (Apple’s) contention that a brief price spike, which damned Apple and the publishers before Judge Cote, should not result in an automatic finding of illegal price-fixing. Instead, (Apple) said the price spike was limited only to the five publishers, and that the overall effect of Apple’s entry to the ebook market dramatically benefited consumers since many more players were willing to enter the market.

Bad Policy

In addition to being bad economics, the government’s position on pricing was also bad policy. The Department of Justice saw itself as the protector of consumers. If consumers were hurt by Apple’s actions then, in their view, Apple was in violation of anti-trust law.

But the purpose of anti-trust law is to provide more competition, not lower prices, and that’s exactly what Apple was doing. By focusing on prices instead of competition, the Department of Justice completely lost sight of its mission.

Of Course Prices Went Up

I have always viewed the Department Of Justice’s stance on pricing to be non-sensical. OF COURSE PRICES WENT UP. Amazon was selling some books below cost and AT A LOSS. This is a classic way to monopolize a market and is often characterized as predatory pricing. When Apple entered the market, Book Publishers added contractual clauses that caused Amazon to lose its ability to sell books at a loss. Rising prices were not an indication that Apple was gaining an anti-competitive advantage, they were an indication that Amazon was losing an anti-competitive advantage.

When Apple tried to point this out to Judge Cote she would have none of it. She quite clearly stated the wrongdoing of Amazon did not exonerate Apple. And in a sense, she was quite right. For example, If the guy in the car next to you is driving 30 miles per hour over the speed limit, that does not excuse you from getting a ticket if you are driving a mere 15 miles per hour over the speed limit. The wrongdoing of others does not excuse your own wrongdoing.

What Judge Cote stoutly ignored was context. Apple’s actions were not occurring in a vacuum — they were occurring in response to Amazon’s actions. Using my speeding analogy, Apple may well have been speeding but, in their view, they did not deserve a ticket because they were acting like a fire truck, rushing to put out the monopoly fire initiated by Amazon.

Judges Jacobs and Lohier seemed quite concerned that Judge Cote had used the wrong standard, but Jacobs’s qualms clearly went much further—seeming to question the government’s judgment in ever having brought the case. His problem was that Apple was a new entrant that was bringing competition to a market that had been, until then, dominated by a “monopolist,” Amazon. Judge Jacobs also repeatedly referred to Amazon’s $9.99 pricing policy, whereby it sold books at below the wholesale acquisition cost, as “predatory pricing,” and seemed to suggest that Amazon was obviously using it as a means of maintaining its monopoly dominance.”

Conclusion

If Apple loses at the Appellate level, there is no doubt in my mind that they will appeal the case to the Supreme Court. If the Supreme Court accepts the matter, the case will live on.

And if Apple wins? I very much doubt if the Appellate court will dismiss the case outright. It is far more likely that they will remand the case to a lower court in order to have a portion of it re-litigated. Once again, the case will live on (and on and one and on…).

If Apple wins its appeal, the most interesting question to me will be whether the Appellate Court remands the case to Judge Cote or to a different Judge altogether. Common sense would tell you that it’s a bad idea for an Appellate Court to chastise a Judge and then ask that Judge to be objective when re-trying that same case again. But we in the legal profession do not see ourselves as subject to those emotions so readily exhibited by ordinary people. In fact, we sometimes do not see ourselves as people at all.

There is no shortage of lawyers in Washington, DC. In fact, there may be more lawyers than people. ~ Supreme Court Justice Sandra Day O’Connor ((Excerpt From: Robert Byrne. “The 2,548 Wittiest Things Anybody Ever Said.” iBooks. https://itun.es/us/h_yeB.l))

If the Appellate Court were to remand the case Judge Cote, they would be saying that she made a mistake in law. If they remand the case to a different Judge, that would be highly unusual. And highly suggestive, as well.

A Deeper Dive on Android and iPhone in China

This article is exclusively for subscribers to the Think.Tank.

Time For Entirely New Myths At Apple

This article is exclusively for subscribers to the Think.Tank.

Mobile Is Eating The Car

This article is exclusively for subscribers to the Think.Tank.

Apple Sits Atop The Stack

This article is exclusively for subscribers to the Think.Tank.

Apple’s Very Human Interface Guidelines

This article is exclusively for subscribers to the Think.Tank.

Apple’s Design: The Gift That Keeps Giving (2 of 2)

This is part 2 of a 2-part article. Part 1 can be found here.

Recap

Market Research gives the customer what they ask for. It’s like giving a gift from a list. Great design is like great gift giving. Rather than giving the recipient what they ask for, great Design gives them an un-asked for gift that both surprises and delights.

The Up Side Of Design

Market research is great at iteration.
Design is great at creation.

Market Research gives us the products and services that we ask for.
Design gives us products and services that surprise and delight.

Market Research meets our expectations.
Design exceeds our expectations.

Market Research listens to us.
Design understands us.

Market Research gives us what we want.
Design gives us what we love.

The Hard Side Of Design

If Design is so great, why doesn’t everyone do it?

Everyone doesn’t do Design for the same reason that everyone doesn’t give unasked for gifts:

1) It’s a lot harder; and
2) It’s a lot riskier.

Giving a gift from a list is easy.

Giving a gift that it truly meaningful requires intimate knowledge of the gift-receiver and often requires not only a great deal of thought, but a great deal of effort, as well. Further, it requires a degree of empathy that, frankly, many of us simply do not have. If we oft-times don’t understand what we want for ourselves, how ever are we going to get it right when we try to understand the unstated wants of others?

Think how hard it is for you to anticipate the needs of your family and loved ones. Now think how much harder it must be for Apple to anticipate the needs of their customers.

(O)bserving the way people really live, developing a deep understanding of the real problems they have, and gaining an appreciation of the “hacks” they devise to overcome them can deliver an understanding of prospective customers’ needs that is more accurate than what any of those prospective customers could ever articulate on their own. ~ Ben Thompson, Stretechery

And the reward for taking all that extra time, giving all that extra thought, and making all that extra effort is often abject failure. Great Design — like great gift giving — surprises us in all the right ways, but great Design, like all un-asked for gifts, also risks surprising us in all the wrong ways too.

Once we leave the safety of the gift giver’s list, we risk greatness…but we also court disaster. Gifts don’t go “good, better, best.” They go “good, dreadful, best.” The same is true of Design. We can’t risk giving or designing the best without the risk of the giving the truly dreadful. The moment you move from Market Research to Design is the moment you untether yourself from the wishes of your customers and move into the oh-so-nebulous realm of fulfilling the unforeseen desires of your customers.

Source: “Christmas Gifts And The Meaning Of Design” by Ben Thompson of Stratechery.

Du sublime au ridicule il n’y a qu’un pas. (From the sublime to the ridiculous there is but a step.) ~ Napoleon

Think about it. How many times have you received unasked for gifts that were just AWFUL. They were in poor taste. Or they tasted poor (the infamous Christmas fruitcake comes to mind). They were a waste. Or they didn’t fit your waist. They made no sense. Or they cost only cents. The white elephant that was soon hidden away in a trunk.

When the unasked for Design is done right, it resonates and touches us emotionally. When the unasked for Design is done wrong, it also touches us emotionally — but with all the wrong emotions. Poor attempts at Design evoke emotions such as revulsion, disgust, scorn, condescension and contempt. Good Design is loved. Bad design is derided and mocked.

To create good Design, you need more than an ability to anticipate the unstated needs of your customers. You need the courage of your convictions too. (See video interview of Steve Jobs, below, from the 11:50 to the 13:10 mark.)

Often the difference between a successful person and a failure is not that one has better abilities or ideas, but the courage that one has to bet on one’s ideas, to take a calculated risk — and to act. ~ Andre Malraux

The Risky Side Of Design

Bad decisions make good stories. ~ Unknown

The Microsoft Kin

Microsoft invested two years and about US$1 billion developing the Kin platform. The Kin ONE and TWO went on the market in May 2010. Within two months, Verizon stopped selling the phones because of poor sales. Microsoft scrapped its planned European release, stopped promoting the devices, ceased production, and reassigned the Kin development team to other projects. ~ Wikipedia

Bad design — like a bad gift — often just makes no sense whatsoever. You’re left shaking your head and wondering what the Designer could possibly have been thinking. Most of the time, they were thinking about themselves.

The HP TouchPad

The HP TouchPad is a tablet computer was developed and designed by Hewlett-Packard. The HP TouchPad was launched on July 1, 2011. On August 18, 2011, 49 days after the TouchPad was launched in the United States, Hewlett-Packard announced that it would discontinue all current hardware devices running webOS. Remaining TouchPad stock received substantial price reductions. ~ Wikipedia

I included the HP TouchPad in this list so I could trot out this quote from then HP CEO, Leo Apotheker:

I hope one day people will say ‘this is as cool as HP’, not ‘as cool as Apple’. ~ Leo Apotheker, Hewlett Packard, 27 January 2011

First, doesn’t Leo’s quote remind you of the weird Uncle who tries, but fails, to be cool and gives you those bizarrely off-pitch gifts that you’ll never be able to use or wear?

Second, cool people never say that their goal is to be cool. They just are cool. Clue #1: If you’re trying to be cool…you’re not.

Third, and finally, cool people don’t try to be cool people. They try to be themselves. Good design shops don’t try to imitate or emulate other design shops. They’re opinionated and they try to be themselves. Clue #2: If you’re trying to be Apple, give it up. It’s a sure sign that you don’t have what it takes.

One should want to learn from Apple. But no company should be striving to learn how to be like Apple. That’s a recipe for disaster.

The Google Nexus Q

The Nexus Q was given away at no cost to attendees of Google I/O 2012, but the product’s launch was postponed after user feedback indicated that the device had too few features for its price. Google eventually shelved the product and gave the Nexus Q away at no cost to customers who had preordered it. ~ Wikipedia

I remember when the Nexus Q was introduced — with great fanfare — at Google I/O 2012. Critics weren’t so much critical of it as stunned by it. It had really cool technology, but what it did was so limited and the way it did what it did was so weird that it was hard to see a market for the device. It was a complete head-scratcher. I don’t remember anyone thinking it was a good idea, although the criticism seemed muted because no one could quite figure it out.

In gift giving terms, the Google Nexus Q reminded me of something someone would buy for another if they had way too much money, and way too much time, and way too little common sense and no feedback at all. I can only guess that the Nexus Q was some higher-up’s pet project, and that there was no one at Google who was powerful enough — or brave enough — to say “no” and pull the plug.

There is no doubt that the Google Nexus Q was innovative, but it wasn’t Design. Design looks to meet the unanticipated needs of the customer. The Google Nexus Q was all about the cool technology.

The Amazon Fire Phone

The disaster that is the Amazon Fire Phone is still unfolding. There are reports that Amazon ordered a million of these dogs and have only been able to pawn 35,000 of them off on their unsuspecting customers.

According to a recent CIRP survey of 500 Amazon Prime customers, literally none of them owned a Fire Phone. ~ Charles Arthur (@charlesarthur) 10/23/14

Jeff Bezos is one of the smartest men on the planet, but this appears to be an example of unbridled hubris. Amazon thought they could substitute a gimmick in lieu of substantive features. If you want to see how truly gimmicky these devices are, take a gander at the following short Amazon pre-release promotional video.

https://www.youtube.com/watch?v=erUZQ9GK0sE

I’ve included a longer promotional video showing more supposed features (which are really still more gimmicks), here.

In gift giving terms, this is an example of the gift giver thinking that some cool gimmick made the gift fabulous, when, if fact, all it did was make the gift gimmicky. It’s an especially sad gift because other than the gimmick, the gift had few other redeeming virtues to speak of.

Bonus

Here’s a bonus design gaffe. What’s wrong with this picture?

Action with without vision is a nightmare. ~ Japanese proverb

A learning experience is one of those things that say, “You know that thing you just did? Don’t do that.” ~ Douglas Adams

The Focus Of Design

The common thread in all of the above Design disasters is that the Designer — the gift-giver — was thinking of something or someone other than the customer. Microsoft thought of their product. HP thought of themselves. Google thought of the technology. Amazon thought they could pull one over on their customers.

[pullquote]The most fundamental part of design is truly understanding your customers at a deeper level than they even understand themselves.[/pullquote]

It is this lack of understanding and appreciation for the very hard work and deep thinking required to surprise and delight that leads to countless companies and Steve-Jobs-wannabes crashing-and-burning, even as they declare their fealty to design. … The most fundamental part of design is truly understanding your customers at a deeper level than they even understand themselves. ~ Ben Thompson, Stratechery

When it comes to Design, technology alone is not enough. In fact, it’s not even the place where Design begins.

You’ve got to start with the customer experience and work back toward the technology, not the other way around. ~ Steve Jobs

It’s in Apple’s DNA that technology alone is not enough. We believe that it’s technology married with the humanities that yields us the results that makes our heart sing. ~ Steve Jobs

The technology isn’t the hard part. The hard part is, what’s the product? Or, who’s the customer? ~ Steve Jobs

The be all and end all in Design is understanding the unmet — and unasked for — needs of the customer.

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

There are a lot of people innovating, and that’s not the main distinction of my career. The reason Apple resonates with people is that there’s a deep current of humanity in our innovation. ~ Steve Jobs

It’s really great when you show somebody something and you don’t have to convince them they have a problem this solves. They know they have a problem, you can show them something, they go, “oh, my God, I need this.” ~ Steve Jobs

Apple has always been, and I hope it will always be, one of the premiere bridges between mere mortals and this very difficult technology. ~ Steve Jobs

Listen to how Steve Jobs described the Macintosh, below, paying particular attention to the text that I’ve bolded:

…In 1979, when I saw an Alto [that had been developed] at Xerox PARC [Palo Alto Research Center]. It was as if, all of a sudden, the veil had been lifted from my eyes. It had the mouse and the multiple-font text on the screen, and you realized in an instant that this would appeal to exponentially more people than the Apple II. I’m talking about people who didn’t want to learn how to use a computer — they just wanted to use one. You could eliminate a whole layer of what someone had to know in order to take advantage of this tool. ~ Steve Jobs

The whole idea of the Macintosh was a computer for people who want to use a computer rather than learn how to use a computer. ~ Steve Jobs

Most people have no concept of how an automatic transmission works, yet they know how to drive a car. You don’t have to study physics to understand the laws of motion to drive a car. You don’t have to understand any of this stuff to use Macintosh. ~ Steve Jobs

[pullquote] The only way to make a product that your customer understands from the start is to understand your customer before you start to make the product.[/pullquote]

The only way to make a product that your customer understands from the start is to understand your customer before you start to make the product.

The Distrust Of Design

All business success rests on something labeled a sale, which at least momentarily weds company and customer. ~ Tom Peters

Design seeks to wed the company to the customer by making a commitment to understanding the customer first. However, most companies treat a sale less like a wedding and more like a one-night stand. They don’t care about what they make, they care about what they sell.

Design, in their eyes, is just an extremely clever marketing trick and Apple, in their eyes, is just an extremely successful Lothario who uses Design to seduce their naive and gullible customers. These companies believe that the secret of Apple’s success is sincerity…

……and if you can fake that, you’ve got it made. ((“In the early days of television, a young producer told news correspondent Daniel Schorr that the secret of making the transition from print to TV reporting was sincerity. “If you can fake that,” said the producer, “you’ve got it made.” This gag floats around show business (the word “honesty” sometimes substituting for “sincerity”), attributed to a wide range of prominent personalities: Mark Twain, Groucho Marx, George Burns, French dramatist Jean Giradoux, and rocker David Lee Roth.” Excerpt From: Ralph Keyes. “The Quote Verifier.” iBooks. https://itun.es/us/nvDax.l))

With lies you may go ahead in the world, but you can never go back. ~ Russian proverb

Since they believe that design is a gimmick, they spend their time trying to learn more about Apple when they should be spending their time trying to learn more about their customers. Good Design looks to meet the unanticipated needs of the customer. Bad Design looks like marketing. Which reminds me of a joke:

BOYFRIEND: Why do you never scream my name when you climax? 

GIRLFRIEND: Because you are never there.

Many of Apple’s competitor’s share the same fate as the boyfriend, above. Their customers aren’t excited by the presence of their products because their products aren’t presents that surprise and delight.

The Rewards Of Design

Design — like the un-asked for gift — is hard and it’s risky. But the rewards are great.

Profits

Apple is a company that provides easy solutions wrapped in a desirable experience. People pay extra for that. ~ Lou Miranda (@TheNewLou)

Good Design is profitable. In the second quarter of 2014, Apple made 68% of all the profits in mobile devices. ((In Q2, Apple made 68% of mobile device OEMs’ profits (65% in q1, 53% in Q2 13). Samsung – 40% (41% q1, 49% q2 13) Source: Canaccord Genuity ~ Daisuke Wakabayashi (@daiwaka) 8/5/14)) In the third quarter of 2014, Apple made 86% of all the profits in handsets.

Estimated share of Q3 handset industry profits: Microsoft: -4%, Motorola: -2%, HTC, BB: 0%, LG: 2%, Samsung: 18%, Apple: 86%. ~ Kontra (@counternotions) 11/4/14

The iPhone 6 and 6 plus went on sale in late September and the new iPads went on sale in mid-October. One can confidently predict that Apple’s take of the mobile profit pie is likely to grow even larger in the fourth quarter of 2014.

Apple now generates almost 15x more profit per iPhone sold compared to what Samsung makes selling per Galaxy. ~ Neil Shah (@neiltwitz) 10/29/14

Competitor-Proof

Good Design differentiates. There just isn’t enough good Design in the world. Master it and you immunize yourself from commoditization.

It’s not about doing what you can, it’s about doing what others can’t. ((Excerpt From: C. Michel. “Life Quotes.” C. Michel, 2012. iBooks. https://itun.es/us/AyIDI.l))

Emotion

Profitability and sustainability are only the beginning of the rewards garnered from Design. The true reward is the emotional response one receives from one’s customers. Good Design — like the unasked for gift — touches the heart. You don’t just have a business relationship with your clients, you have an emotional relationship, as well. You took the time and effort to understand what they wanted, and they, in turn, respond with gratitude and loyalty.

I get asked a lot why Apple’s customers are so loyal. It’s not because they belong to the Church of Mac! That’s ridiculous. It’s because when you buy our products, and three months later you get stuck on something, you quickly figure out [how to get past it]. And you think, “Wow, someone over there at Apple actually thought of this!” And then three months later you try to do something you hadn’t tried before, and it works, and you think, “Hey, they thought of that, too.” And then six months later it happens again. There’s almost no product in the world that you have that experience with, but you have it with a Mac. ~ Steve Jobs

The average Apple customer loves Apple’s Designs. But even more, they appreciate the love behind the designs, which is why they, in turn, love to get behind Apple and support them.

People don’t buy what you do, they buy why you do it. ~ Simon Sinkek ((via Abdel Ibrahim (@abdophoto))

Conclusion

Design is not for everyone. There are other ways — honorable ways, profitable ways — to compete. But for those who are gifted at Design, Design is the gift that keeps on giving.

AUTHOR’S NOTE: This series of articles were inspired by an analogy used by Ben Thompson in his great Stratechery article entitled “Christmas Gifts And The Meaning Of Design.” His article can be found here.

Understanding the Global Mobile Web

In the latest mobile focused podcast with Benedict Evans and myself, we touched on a theme that needs more fleshing out. That of a future only possible because of mobile computers/smartphones. When I detail the mobile first world in articles, presentations, and reports, what I highlight is not only the impact but the necessity of mobile to move computing forward. The PC in the shape of a notebook or desktop took computers as far as those shapes would allow. There are very few new users for PCs of that design. The PC in the shape of a tablet can take computing even farther, particularly in business environments, and that form factor gets a PC into the hands of more people. The PC in the shape of the smartphone, however, brings computing to everyone. Perhaps more importantly, the smartphone can bring the internet to everyone. More revolution will come from the PC in the shape of a smartphone than from any previous computing product in history. It is because of this, we will see countless opportunities emerge and it is a future only possible because of mobile.

The smartphone opens the door to new possibilities because it is the first time the technology industry is accessible to everyone. In fact, over the next decade or so, we will watch smartphones become a commodity. Estimates are, by 2020, quality, powerful smartphones could cost $10. The mobile web is already bigger than the desktop web and, in a few years, the mobile web will dwarf the desktop web. It is a cold hard fact, the future of the Internet is mobile. This reality brings out some interesting implications.

Global Mobile Web Browsing

There was a debate last year around the disparity between iOS web browsing and Android web browsing. It seemed a conundrum — Android had 2x the user base but much less of the global browsing share. As you see from this chart from NetMarketShare, only recently has Android overtaken iOS in global web browsing share, and it is still very close.

When we include Android AOSP and Google’s Android, there are well more than double the active devices compared to iOS. But why did it take so long? There are many theories but there is one in particular I find insightful and adds a bit of needed clarity to the global mobile web discussion.

The bulk of Android’s growth and market share is in the lower tiers of smartphone price bands. My estimates put premium Android price tiers at roughly 15% of the global Android installed base. Meaning much of Android’s installed base globally consists of non-premium/lower price tier smartphone users. This explained quite a bit of the global web browsing paradox. Apple has a significant installed base of premium users, larger than Google’s premium users, and those customers spend more time browsing the web and consuming internet data. As I started researching the mobile web in emerging markets, it became clear one of the factors for this disparity was, because of Apple’s premium customer base, this audience could afford to liberally browse the web. Where much of Android’s installed base, having to deal with pricey and slow internet connection times, and no wi-fi at home, could not.

This insight becomes even more clear when we look at this chart from Jana.com showing the number of hours of minimum wage work required to pay for the average data plan.

Due to the infrastructure challenges in many of these markets, consumers are very aware of not only how much data they are using, but also the size of the application they are downloading. This is a fascinating quote from a post from LightSpeed Venture Partners, an investment firm focused on India.

So, what is an ideal app size, especially in markets like India with challenged infrastructure?

The ideal size is 10-15MB globally. Idea size for an app for tier 2/3 countries (like India) is below 5MB. 500MB+ is a non-starter. At 50MB+ the conversion rates fall off dramatically. On Android and iOS, conversion rates dip by 50% in tier 1 nations for non-game apps above 50MB. In tier 2 and tier 3 nations, conversion rates dip by 50% for games above 15MB.

It is becoming clear the high cost of data plans in many emerging markets are influencing how they use the mobile web and the apps they use and download.

The Light Web

Understanding this leads me to consider the role web apps may play in these markets. There is a web app called Zomato, which is sort of like Yelp for India. Zomato is a great example of a light application that is useful via a web app in those regions where light applications are necessary. It is true native apps are still dominant in these markets, however, we are still dealing with only the top 30-40% of the global mobile audience that has a smartphone and a data plan. As we extend that reach into the broader 60-70%, a healthy portion of those customers will be even more sensitive to the costs of data and size of applications they consume.

This is why the “light web” is a reality for the next billion users. Whether by lighter/more efficient native apps or, as I believe, web apps, the light web is better positioned for the next billion. Interestingly, even Uber has a robust web app. It is possible the powerful cloud and light, thin client computing paradigm is destined for emerging markets.

It is clear, thanks to PCs in the shape of a smartphone and the inevitable inclusion of robust sensors in these devices even at low prices, that we are heading to a fascinating future not only made possible because of mobile devices but empowered by them. This future will pose great challenges to many incumbents but even greater opportunities for the innovators.

Apple’s Design: The Gift That Keeps Giving (1 of 2)

AUTHOR’S NOTE: This article was inspired by an analogy used by Ben Thompson in his wonderful article entitled “Christmas Gifts And The Meaning Of Design.” His article can be found here.

Part 2 of this article can be found, here.

Introduction

Imagine you’re about to celebrate your birthday or a gift giving holiday, like Christmas. You greedily make up a list of the things you’d like to receive and distribute it to family and friends alike. The big day arrives and, of course, you are happy to receive some of the gifts that you had asked for.

Then, a very strange thing happens. Someone — someone who knows you very well — gives you a gift that you HAD NOT asked for. (For example, in Ben Thompson’s article, his wife gave him a hat that perfectly fit his history and personality.) You’re not just happy to receive this gift, you’re surprised. You’re delighted. You’re touched. This one gift — the one you hadn’t expected — the one you hadn’t asked for — may mean more to you than all the other gifts put together. Why?

Because it was personal. It was intimate. It was meaningful. Because it surprised you. Because it delighted you. Because you knew it required more thought from, and more time of, the gift-giver than merely picking an item from your list.

The things we truly love to receive are often the things we never thought to ask for. Perhaps we never thought to ask for them because we didn’t even know that we wanted them ourselves — until we received them. The gift giver understood us better than we understood ourselves and filled a need we didn’t know we had. What better gift is there than that?

Giving from a list — and giving from the heart — is a good metaphor for the difference between Market Research and Design. Good Market Research offers something of value that was on our wish list. Good Design gives us something of inestimable value we never knew we wanted but now can’t live without.

The Up Side Market Research

Market Research consists of surveys, customer interviews, focus groups, etc. It works on the very natural assumption that the best way to give the customer what they want is to — ‘duh’ — ask them what they want.

Who decides what’s in Windows? The customers who buy it. ~ Bill Gates

Market Research is safe. It is sound. When it is done well, it gives us what we want and — like receiving a gift from our wish list — we are both pleased and satisfied.

Market research is great for existing products. It is great for incremental changes and for upgrades. It is great for smoothing over a product’s rough edges and polishing it until it shines.

Your most unhappy customers are your greatest source of learning. ~ Bill Gates

Absolutely right. When it comes to an existing product, Market Research — asking your customer what they like and dislike — is exactly the way to go.

Apple And Market Research

We do no market research. ~ Steve Jobs

This quote has been much misunderstood. Of course Apple does market research. They’ve admitted as much of several occasions. They would be fools not to do so.

Market research can tell you what your customers think of something you show them. Or it can tell you what your customers want as an incremental improvement on what you have, but very rarely can your customers predict something that they don’t even quite know they want yet. ~ Steve Jobs

Steve Jobs’ quote about Market Research has to be kept in context. What he meant was Apple didn’t, and doesn’t, use Market Research to assist them in creating new products or new product categories.

Customers can’t tell you about the next breakthrough that’s going to happen next year that’s going to change the whole industry. ~ Steve Jobs

The Down Side Of Market Research

There’s nothing wrong — and there’s a lot right — with Market Research. However, Market Research should be reserved for improving existing products. It should never, ever be used when one is trying to create new products. As good as Market Research is at improving the old, that is how bad it is at creating the new. Here’s why.

We’re Reactionary

I don’t know if you’ve ever noticed this, but first impressions are often entirely wrong. ~ Lemony Snicket

Our initial reaction to the new — before we’ve even seen or evaluated it — is to reject it. The new frightens and disturbs us.

It is only afterward that a new idea seems reasonable. To begin with, it usually seems unreasonable. ~ Isaac Asimov

We not only view the new with suspicion, we view it with outright hostility. That which is not old and familiar is not just wrong — its unnatural.

People’s reaction to ideas: Bad ideas: “That’ll never work.” Good ideas: “That could work.” Great ideas: “That’ll never work.”

We’re Short-Sighted

Customers are not visionaries. Nor should they be expected to be visionaries.

We cannot wish for that we know not. ~ Voltaire

Market research can only extend as far as the customer’s imagination will take it and that’s not very far, because we are notoriously short-sighted. Surveys, polls, etc., are useful for existing products but they are actually counter-productive and often dangerously misleading when it comes to predicting the new.

A cookie store is a bad idea. Besides, the market research reports say America likes crispy cookies, not soft and chewy cookies like you make. ~ unidentified response to Debbi Fields’s plan to start Mrs. Fields Cookies

We Don’t Even Know What We Want

Have you ever wanted something, gotten exactly what you wanted…and then not liked it? We all have.

Be careful what you wish for; you may get it. ~ Proverbial wisdom

The paradoxical truth is, we oft-times do not know what we want.

Protect me from what I want. ~ Jenny Holzer

Market Research can be very misleading because customers often get it wrong — sometimes very wrong — even when they’re very sure they’re very right. They know what they want…right up to the moment when they get it.

It’s really hard to design products by focus groups. A lot of times, people don’t know what they want until you show it to them… That doesn’t mean we don’t listen to customers, but it’s hard for them to tell you what they want when they’ve never seen anything remotely like it. ~ Steve Jobs

Some people say, “Give the customers what they want.” But that’s not my approach. Our job is to figure out what they’re going to want before they do. I think Henry Ford once said, “If I’d asked customers what they wanted, they would have told me, ‘A faster horse!’” People don’t know what they want until you show it to them. That’s why I never rely on market research. Our task is to read things that are not yet on the page. ~ Steve Jobs

The Less We Know, The More Certain We Become

As bad as we are at knowing what we want, we are much, much worse at comparing the known to the unknown. We simply cannot imagine and comprehend the unknown, so it almost always compares unfavorably to the known.

We’re very, very good at explaining why things won’t work. We’re not nearly as good at imagining creative new ways things might work.

Days before the iPhone debuted, the market research company Universal McCann came out with a blockbuster report proving that practically nobody in the United States would buy the iPhone.

“The simple truth,” said Tom Smith, the author of the iPhone-damning report, is that “convergence [an all-in-one device] is a compromise driven by financial limitations, not aspiration. In the markets where multiple devices are affordable, the vast majority would prefer that to one device fits all.”

Solid survey research suggested not only that the iPhone would fail, but also that it would fail particularly hard in the United States because our phones and cameras are good enough, already. ~

Derek Thompson, The Atlantic

Now compare the above survey on the then-unreleased iPhone, to the following survey on the yet-to-be released Apple Watch:

Just 11 percent of respondees to a survey about new Apple products plan to buy an Apple Watch, according to 6,000 people quizzed by Canadian investment bank, RBC Capital Markets. A further 24 percent said they were uncertain. ~

Cult Of Mac

I honestly have to ask: Why in the wide, wide world of tech, would we give a hoot about what people in a survey say about a product they have never seen, touched or experienced? How could they possibly have an informed opinion? It’s like asking Nuns to rank sexual positions.

But wait! It gets worse. Since we have no basis of comparison for the new, we create comparisons that simply do not exist.

The best-case scenario for the Apple Watch is that the product we saw announced today will eventually iterate into something really great. Because anybody who’s ever worn a watch will tell you: this thing has serious problems. ~ Felix Salmon

“…anybody who’s worn a watch will tell you…” Say what? Owning a watch no more qualifies one to evaluate an Apple smartwatch than owning a horse would have qualified one to evaluate Henry Ford’s Model T.

It’s generally a bad idea to have a strong opinion of a consumer product you have no experience of. ~ Benedict Evans (@BenedictEvans)

You can’t judge what you don’t use. ~ Benedict Evans (@BenedictEvans)

Oh, but we can. And oh, but we do.

Hardest thing about consumer data research is that everyone has an opinion they think is representative, even if they don’t have any data. ~ Carl Howe (@cdhowe)

Further, the less we know, the more certain we become.

Ignorance more frequently begets confidence than does knowledge. ~ Charles Darwin

When people are least sure, they are often most dogmatic. ~ John Kenneth Galbraith

The Designer’s Job

Designers don’t rely upon Market Research for their designs because they know it’s not the customer’s job to design the next breakthrough product — it’s the designer’s job.

What companies are really doing is rationalizing their refusal to take on the burden of simplifying the product. They’d rather have the customer do the work than themselves. ~ Aaron Levie (@levie)

Asking your clients to create the next big thing is unfair and unwise because customers don’t have the knowledge or the experience to know how to create the new in your field. They’re not in the industry. They don’t know the latest techniques or trends. They have neither the expertise nor the vision.

It’s not the consumers’ job to know what they want. ~ Steve Jobs

We don’t do focus groups—that is the job of the designer. ~ Jony Ive

You don’t want a product designed by your customers; you want a product inspired by your customers. ~ Scott Sehlhorst

Did Alexander Graham Bell do any market research before he invented the telephone? [reacting to a reporter’s question about market research for the Macintosh] ~ Steve Jobs

Customers can’t tell you about the next breakthrough that’s going to happen next year that’s going to change the whole industry. ~ Steve Jobs

Customers can’t anticipate what the technology can do. They won’t ask for things that they think are impossible. But the technology may be ahead of them. If you happen to mention something, they’ll say, ‘Of course, I’ll take that. Do you mean I can have that, too?’ It sounds logical to ask customers what they want and then give it to them. But they rarely wind up getting what they really want that way. ~ Steve Jobs

Experts Are Expert At Making Bad Predictions

Perhaps you’re thinking the problem has less to do with Market Research and more to do with the source of said Market Research. “Of course,” you think, “the ordinary person doesn’t have the expertise or the vision to peer into the future. The people we really need to ask are the experts.”

Well, if that’s what you think, then think again.

Professional critics of new things sound smart, but the logical conclusion of their thinking is a poorer world. ~ Benedict Evans

The more expertise we have, the more certain we become. And studies have shown the more certain we are, the less likely we are able to predict the future.

Certitude is not the test of certainty. ~ Oliver Wendell Holmes Jr.

I am certain there is too much certainty in the world. ~ Michael Crichton

Some historical (and hysterical) examples:

RAIL

What can be more palpably absurd than [the idea] of locomotives traveling twice as fast as stagecoaches? ~ Quarterly Review, 1825
…that any general systems of conveying passengers would answer, to go at a velocity exceeding 10 miles an hour, or thereabouts, is extremely improbable. ~ Thomas Tredgold, 1835
Rail travel at high speed is not possible because passengers, unable to breathe, would die of asphyxia. ~ Dr. Dionysius Lardner, Irish scientific writer, 1845

TELEPHONE

Well-informed people know it is impossible to transmit the voice over wires as may be done with dots and dashes and signals of the Morse code, and that were it possible to do so, the thing would be of no practical value. ~ Editorial in the Boston Post, 1865
It’s only a toy. ~ Gardiner Greene Hubbard, future father-in-law of Alexander Graham Bell, on seeing Bell’s telephone, 1876
Although it is…an interesting novelty, the telephone has no commercial application. ~ J. P. Morgan, to Alexander Graham Bell

AIRPLANES

Heavier-than-air flying machines are impossible. ~ Lord Kelvin, president, Royal Society, 1895
Airplanes are interesting toys but of no military value. ~ Marechal Ferdinand Foch, Professor of Strategy, Ecole Superieure de Guerre , France , 1911

RADIO

Radio has no future. ~ Lord Kelvin, British mathematician and physicist, 1897
The wireless music box has no imaginable commercial value. Who would pay for a message sent to nobody in particular? ~ associates of RCA chairman David Sarnoff, in response to his suggestion that the corporation invest in radio technology, circa 1920

MOVIES

I have determined that there is no market for talking pictures. ~ Thomas A. Edison, 1926
Who the hell wants to hear actors talk? ~ Harry Warner of Warner Brothers movie studio, when asked about sound in films, 1927

TELEVISION

While theoretically and technically television may be feasible, commercially and financially, I consider it an impossibility, a development of which we need waste little time dreaming. ~ Lee De Forest, inventor, 1926
TV won’t last because people will soon get tired of staring at a plywood box every night. ~ Darryl Zanuck, 20th Century Fox movie studio head, 1946

XEROX

I don’t know what use any one could find for a machine that would make copies of documents. It certainly couldn’t be a feasible business by itself. ~ the head of IBM, refusing to back the idea, forcing the inventor to found Xerox

There are some ideas so wrong that only a very intelligent person could believe in them. ~ George Orwell

Next Week

In part 2 of “Apple’s Design: The Gift That Keeps Giving,” I’ll focus on:

— The Up Side Of Design
— The Down Side Of Design
— The Hard Side Of Design
— The Risky Side Of Design
— The Distrust Of Design; And
— The Rewards Of Good Design.

You can find part 2, here.

Microsoft Is Doomed. Doomed!

I have to believe Microsoft’s latest earnings has finally obliterated all the silly “Microsoft is doomed!” discussion that’s been so bien pensant across the blogosphere these many years. This is a company that generated $23 billion in revenues and is clearly poised for growth. Most surprisingly, it’s poised for growth in the consumer and hardware markets, mobile and the cloud.

What’s that? Why, yes. I do hear Steve Ballmer laughing from the comfort of his LA Clippers courtside seat.

Billions Billions Billions Billions

Last week, Microsoft announced FYQ1 revenues of $23.2 billion. That’s up 25% year over year, despite the many proclamations of doom repeated over the years. Profits were a very healthy $4.5 billion, even after a $1.1 billion restructuring charge related to the Nokia acquisition.

Cloud services, which includes Office 365 and Azure, grew a whopping 128%, to $1.18 billion.
Office 365 grew to 7 million subscribers. Remember: unlike Apple’s iWork, people actually pay for Office.
Surface revenue was a surprising $908 million for the quarter — again, despite the persistent declarations it was a dead product.
Lumia sales were a robust 9.3 million devices.

According to CEO Satya Nadella:

“We are innovating faster, engaging more deeply across the industry, and putting our customers at the center of everything we do, all of which positions Microsoft for future growth.”

CEO speak. Yada yada. That said, to view Microsoft as a one trick pony, stuck in the past, as so many analysts still do, is to utterly misunderstand Microsoft and the industry. Simply check the numbers. Microsoft has one division with about $10 billion in quarterly revenue, and another five with quarterly revenues of about $2 billion or more. For comparison, Yahoo — all of it — just reported quarterly earnings of $1.15 billion.

Claim Chowder

The facts are clear:

Microsoft is still printing money.
The death of the PC (and Windows) (and Office) (and Surface) (and Xbox) has been greatly exaggerated.
Yes, Microsoft can do hardware: Xbox, Lumia, Surface all had strong y-o-y growth. As Jan Dawson noted, “Lumia sales and Surface revenue were both the highest they’ve ever been.” Xbox was the highest outside of a holiday quarter.

Microsoft is welcome to serve up a bowl of tasty claim chowder. You know why.

Again and again, we were told Microsoft was dead or would be by now. You’ve heard this more times than you can count: The PC is dead — not merely dying. Bing? Dead. Skype? Irrelevant. Windows? Free or dead are its only options. Office? iWork and Google Apps will force it to be offered for free — and then kill it off.

Repeatedly, the analysts trotted out “jobs to be done” and “the innovators dilemma” and “the smartphone is the computer” to explain why Microsoft was so obviously doomed.

How could they all have been so utterly wrong?

No, it wasn’t a herd mentality that brought them all to the same, erroneous conclusion. It’s worse than that: They were not paying attention. What the analysts and blogosphere were doing — what led them to be so utterly wrong — is they were comparing single, often minor aspects of giant Microsoft against the primary driver of another tech giant’s entire operations.

Google search is far bigger than Bing, therefore Bing dead. Therefore Microsoft dead.

Windows Phone sells far less than iPhone, therefore Windows Phone dead. Therefore Microsoft dead.

It gets worse. By comparing one aspect of yesterday’s Microsoft to all of today’s Apple, for example, these seers of doom missed out on what Microsoft was actually doing in the cloud, and with social in the enterprise, with hardware, software, and on meeting the mission critical requirements of governments and Fortune 1000 companies.

Oh, and worst of all, Apple supporters in particular, so vigorous in their defense of Apple hardware prices and margins — because people will pay for quality — repeatedly failed to acknowledge these same “people” will pay for the quality and benefits they receive from Windows and Office and Azure, among other Microsoft products and platforms.

Long Slow Decline Except Not

You’ve seen the posts, many, many times: Microsoft must focus on the consumer. Microsoft must abandon hardware. Microsoft must give away Windows. Windows is doomed. Xbox is doomed. PCs are doomed. Over the past few years, Microsoft Is Doomed is the gift that kept on giving.

I will unfairly single out John Gruber because he is typically so understated and sparing with his criticism. That said, his “Microsoft’s Long Slow Decline” post from July 2009, which he proudly linked to less than three months ago, is one he no doubt would love to have back.

A few other favorites:

“These Two Photos Show What a Disaster Microsoft Is Today”
“The irrelevance of Microsoft” (with charts)
“How Microsoft Lost Its Way, as Understood Through The Wire” (a personal favorite)
“The PC Industry Is Digging Its Own Grave”

When Vanity Fair opens its long post on Microsoft with “over the last decade, as the biggest force in tech history hurtled toward irrelevance (albeit lucratively),” you know the meme — despite being 100% false — is simply being parroted by writers who are willfully not paying attention. The utterly nonsensical pairing of “irrelevance” and “lucratively” stood in place of thoughtful analysis.

If billions of dollars are wrong, I don’t wanna be right.

Pundits have for years now insisted Microsoft was dead or dying, brandishing the “dying” PC ecosystem as the doomed company’s massive blind spot. In fact, these analysts revealed a rather shocking blind spot in their own understanding of this highly iterative, multi-faceted industry.

Despite the many billions in profits repeatedly generated by Microsoft, drive by bloggers continued to insist:

Microsoft = packaged PC software
Packaged PC software is dying
Therefore, Microsoft is dying

Viewing 2014 Microsoft as being just like 2004 Microsoft is as wrong as viewing today’s Apple as no different then pre-iPhone Apple. Again, Microsoft has six lines of business all generating billions — and all likely to continue growing, and continue delivering actual profits.

Stop the Microsoft is doomed nonsense. It was always wrong. It is wrong still.

That sound you hear now? That’s Satya Nadella, laughing from his CEO chair in Redmond.

The Consumer Tablet Growth Opportunity

A great deal of my tablet market analysis has been spent exploring opportunities for a PC in the form of a tablet. Opportunities not fulfilled by a PC in the form of a desktop or laptop. As I explained here, the enterprise or commercial tablet market’s upside is still quite large. But the question about the tablet opportunity for the consumer market looms.

Tablets grew faster and were more widely adopted than any previous electronics device in history. Continued triple digit growth was simply not sustainable. The tablet market slowdown was never a question of if but always of when. As you can see by the following chart, that time is now. ((I’m keeping iPads and the overall tablet market separate due to the extremely high sales of white box, low cost Android tablets sold that are used for nothing more than portable TVs and game players.))

The tablet market, like all markets before it, is normalizing. Growth rates have slowed and now we can wrestle with the question of how much more growth is to be had.

Replacement Market vs. First Time Buyers

I find it helpful to focus on the question of whether the tablet market for consumers is a replacement market or if there is still a market for first time buyers. If the tablet is only a replacement, then it has peaked. However, I don’t believe that has happened. Apple keeps informing us 50% of iPad sales are to first time buyers. Which gives us an indication there are still new owners to be had. So how may that growth in first time buyers be had? I see two possibilities.

The first could be price. My friend Stephen Baker at NPD gave us some insights and holiday outlook for the tablet market. As Stephen points out for the US market, price could be a driver. I think it should be safe to assume that price war offerings for iPads and other tablets will be fierce in Western markets this holiday. Retailers use this pricing to get customers in stores where they hope they buy a plethora of other items. I’m guessing retailers will hope to leverage Apple’s new lineup with this strategy in mind. I believe Apple has a strong lineup from the original iPad mini to the newest iPad Air 2 covering many price points and giving retailers pricing flexibility with their offerings. In general, other branded tablet vendors have been seeing decreasing sales and Samsung in particular. It’s reasonable to assume Samsung tablets will see steep discounts this holiday at retail.

The second growth area is replacements and additions. It is very hard to predict when consumers will replace their tablets and more specifically their iPads. ((I point out the iPad specifically because it is the tablet brand that has the largest installed base by a healthy margin.)) As often is the case with Apple products, iPads are often handed down to other members of the family or to friends. In this scenario, the new iPad replaces the current owner’s device but another person gets their first iPad. Ultimately this is good because it builds the iPad owner base, who we would assume will be added to the future replacement opportunity. Continuing to build a large installed base will yield rewards. Whether the new lineup drives this upgrade and hand-me-down cycle we literally have no idea. But should it hit this quarter, it could be huge. While the iPad 2 is still a perfectly fine device, it has the highest installed base of all iPads. My firm’s estimates for active iPad 2s in use is over 60 million. We believe this base will upgrade at some point in time — we just don’t know when. It could be this quarter or it may not. But, given the price aggressiveness we assume we will see this holiday season, I’m guessing many iPad 2 owners may be enticed. Realistically, there is no better quarter to find deals than a holiday quarter. So this large installed base of iPad 2 owners would be smart to upgrade this quarter or risk waiting another full year. Given the channels I track, I should have a decent sense of what is happening before the quarter ends.

Stealing PC Owners: I still believe the traditional notebook and desktop form factor is overkill for most mainstream consumers. The decent sales numbers of PCs we are seeing are largely coming from enterprise and commercial markets such as education/students. The consumer market has yet to move in mass to upgrade their PCs. We believe at some point in time those consumers will make the move. And the wonderful unpredictability of many consumers leaves us guessing at what they will buy and when. Will they buy another PC? Or will they move to a tablet? This is the tension we will have to live with until we see a market indication of what is happening. The tablet will still have the price advantage this quarter and I suspect Windows 8 is still a hinderance. I do expect Macs to have a very strong holiday as well and, with the new iPhones in the mix, there is a lot competing for consumers’ wallets this holiday.

These are a few of the scenarios I think about when I look at the upside for consumer tablets. This quarter seems very hard to predict right now for nearly everything but for the smartphone market. For the first time in a long time it’s hard to say with any accuracy how the consumer market for PCs and tablets is going to play out.