apple

My Phablet Skepticism Thesis

I have been publicly doubting the existence of the 5.5 inch iPhone for some time. I promised many on Twitter I would share my overall thesis on the category so here it is.

Starting from the data points, we know several things. In the USA, phablet sales are quite small. Our estimates have the active installed base of all Galaxy Notes in the US at under 10m units. Phablets, or smartphones with screen sizes above 5.3″, have tended to not sell well at any price point in the US market. However, the US market is not the only one that matters.

Phablets are successful in some parts of Europe but much more so in Asia, so we will focus there. You could argue Apple needs to make a 5.5″ phone primarily to serve the Asian market and you may be right. But let’s focus on the data at hand.

Here is a chart Guardian journalist Charles Arthur made of active screen size of Android device according to Google’s data.

As you can see, the vast majority of Android devices in use are not phablets. Now, it is entirely possible Google is not tracking or including China’s AOSP Android ecosystem in this chart. If they did, it could certainly bump the active use of phablets a bit higher but it would not be by much.

Another data point is IDC’s own projection of the phablet market which is, somewhat conveniently for my thesis, hot off the presses. This statement can be found in their latest press release.

The other widely discussed trend has been the shift towards large screen smartphones. IDC expects “phablets” (smartphones with 5.5″—7″ screens) to grow from 14.0% of the market in 2014 to 32.2% of the market in 2018. With the expected entry of Apple into this market segment, and the pent-up demand for a larger screen iPhone, Apple has the ability to drive replacement cycles in mature markets despite the slower growth seen in recent quarters.

IDC is stating 14% of smartphone shipments this year will be phablets, growing to 32% in 2018. In raw numbers, based on consensus of smartphone forecasts, that equates to approximately 165m phablets in 2014 and approximately 576m in 2018. In neither case are those small volumes. However, of the vast majority of phablets being sold in Asia, more than 80% cost less than $350. An interesting question is, where do premium phablets, like the Galaxy Note series, sell in volume in high prices points? The answer is South Korea. Good estimates of the Galaxy Note installed base in total is around 60 million. Nearly half of those can be found in South Korea. ((This estimate comes from network data I have on the region as well as some publicly stated numbers of Notes by Samsung. Notes appear to have the greatest concentration in South Korea. However, since Samsung uses shipment numbers not sell through numbers, it is entirely possible millions of Notes are sitting in a warehouse somewhere collecting dust. Perhaps if this is true it helps my thesis even more.))

What we know today is:

Phablets are not the majority of form factor sales.
The price points they do move at in volume are not price points Apple seemingly would want to play at with an iPhone.
Where phablets do sell at high price points, and where Apple would seemingly play, are in Samsung and LG’s home country of South Korea. A market Apple has very little share in today.

When I share my skepticism, it is due to the nature of what we see regarding phablets today. However, there are always other ways to look at this data.

Firstly, perhaps the large screen phones have not sold well in the US because Apple does not offer one? Possibly yes. However, if I had to place a bet on which of the two larger screen models Apple offered would do better in the US, I would bet the 4.7″ would be the better seller.

The real question to dig into around the necessity of an Apple 5.5″ iPhone is to address a market that may be choosing Android instead of the iPhone specifically due to that sized phone. Apple will address many people’s desire for a larger phone with the 4.7″ and, in many markets, particularly the US market, it will likely bring users back to the iPhone who may have left and bought a Samsung Galaxy S series because it had a larger screen. But ultimately, Apple already dominates the US market and has an extremely loyal customer base. I don’t believe the argument for a 5.5″ has anything to do with the US.

So — back to Asia. The affluent audience who purchases iPhones in that market due so because of the status that accompanies buying an iPhone. It is entirely possible there are more iPhones in active use in Asia than in the US thanks largely to the secondary market. A 4.7″ iPhone alone will be a huge hit in Asia and break sales records at whatever price. So why offer a 5.5″ also? Is there evidence that those in Asia who can afford a $650 iPhone (not the majority) are choosing to buy an Android phablet for $350 just because Apple doesn’t offer one in that screen size? I see no evidence of this and it is the primary source of my skepticism. The decision to release two new flagship models, at the same time, and possibly causing some difficulty deciding between the two by Apple’s core customers, has to be to appeal to new customers who don’t just want a bigger iPhone (the 4.7″ will do this already) but want one specifically at the increased size of 5.5.”

Bottom line, phablets move in volume at lower ASPs than iPhones in Asia. Those who can afford iPhones in Asia will buy whatever Apple makes due to status. I’m not convinced Apple is or would lose customers in Asia if they did not make a phablet. That being said, and looking at the data I have, there are always times to forget data and go with your gut. It will be exciting to see what Apple’s gut has told them to do.

Why Apple Will Switch to ARM-Based Macs

This post originally appeared at MattRichman.net and was re-posted at Tech.pinions with Matt’s permission.

When Steve Jobs announced the transition from PowerPC to Intel processors in 2005, he revealed something that, in hindsight, seemed obvious to everyone who didn’t anticipate the switch:

There are two major challenges in this transition. The first one is making Mac OS X sing on Intel processors. Now, I have something to tell you today: Mac OS X has been leading a secret double life for the past five years.

[…]

We’ve had teams doing the “just in case” scenario. And our rules have been that our designs for OS X must be processor independent, and that every project must be built for both the PowerPC and Intel processors. And so today, for the first time, I can confirm the rumors that every release of Mac OS X has been compiled for both PowerPC and Intel. This has been going on for the last five years.

There’s not a doubt in my mind that if you substitute Intel for PowerPC and ARM for Intel, what Steve Jobs said then holds 100 percent true today, word for word. Mac OS X designs must be processor independent, every project must be built for both Intel and ARM processors, and each Mac OS X release in the last five years has been compiled for both Intel and ARM.

Somewhere on Apple’s campus, ARM-based Macs are already running OS X.

User Experience Would Improve

In his iPhone 5S review, Anand Shimpi compared the Apple-designed A7 processor with Intel’s fastest tablet chip at the time. He wrote:

For our cross-platform CPU performance tests we turn to the usual collection of Javascript and HTML5 based browser tests. Most of our comparison targets here are smartphones with two exceptions: Intel’s Bay Trail FFRD and Qualcomm’s MSM8974 Snapdragon 800 MDP/T. Both of those platforms are test tablets, leveraging higher TDP silicon in a tablet form factor. The gap between the TDP of Apple’s A7 and those two SoCs isn’t huge, but there is a gap. I only include those platforms as a reference point. As you’re about to see, the work that Apple has put into the A7 makes the iPhone 5S performance competitive with both. In many cases the A7 delivers better performance than one or both of them.

In September of 2013, the world’s preeminent independent processor expert compared Apple’s latest iPhone chip with Intel’s fastest tablet chip and concluded that the two perform similarly — even though the Intel chip draws more power, contains four cores versus the A7’s two, and is produced with a more advanced manufacturing technique. If Apple’s chip design team can create a phone processor that performs on par with Intel’s fastest tablet chip, the company’s “highest priority”, then there’s no reason to believe that the same team at Apple can’t design chips powerful enough for any Mac in the company’s lineup.

Apple has already released a line of A-series chips tailored specifically for iOS devices, and the company is most definitely working on a line of B-series chips tailored specifically for Macs. When that B-series chip — or set of B-series chips that runs in parallel — is ready, Apple will be able to switch to ARM-based Macs without sacrificing user experience. On the contrary, because the company is no doubt designing its line of B-series chips in tandem with Mac OS X, there would be iPhone-like hardware-software optimization, improving user experience.

Apple Would Make More Money Per Mac And Sell More Macs

Going from chip concept to manufactured product can be broken down into two separate and distinct steps. The first is chip design — figuring out what features the processor will have and how it will work. The second is manufacturing — turning a file that exists on a screen into a physical product you can hold in your hand.

Today, Intel designs the chips in Macs and manufactures them, profiting on both of those steps. But if Apple swapped out Intel’s chips for its own ARM-based designs, an external company would profit on only one step of the chip creation process, not both, leading to a decrease in the cost of building a Mac. By my conservative estimate, Apple would be able to drop the price of the base model 11- and 13″ MacBook Airs by $50 and still make more profit per unit on each than it currently does.

This cost savings would apply to the entire Mac lineup. Apple would be able to drop prices across the board and make more money per Mac than it does today — and with lower prices, the company would sell more of them, too.

Apple Would Be Able To Create Better Macs

When Apple announced the iPhone 5S, it explained that all of the fingerprint data associated with Touch ID “is encrypted and stored inside the secure enclave in our new A7 chip” where it’s “locked away from everything else”.

Apple wouldn’t have been able to create Touch ID if the iPhone were powered by an Intel chip instead of an Apple-designed one. There wouldn’t have been a “secure enclave” on the iPhone’s processor to store the fingerprint data, nor would there have been perfect hardware-software integration. Apple was able to implement Touch ID because it designed the A7 chip in tandem with the iPhone 5S’s software and the rest of its hardware.

I’d bet that there are features Apple envisions for the Mac that simply can’t be built while Intel designs the chips inside of them. To implement those ideas, Apple would need to switch the Mac to ARM-based processors, because only then would the company have the ability to design chips customized for specific features. If Apple moved the Mac to ARM-based chips, the company would literally be able to create better products than it can today.

This brings me to something else Steve Jobs said when he announced the transition from PowerPC to Intel. Ultimately, he explained, Apple switched for one simple reason: “We can envision some amazing products we want to build for you, and we don’t know how to build them with the future PowerPC roadmap.”

The same logic applies today. It’s not a stretch to imagine Tim Cook walking out on stage and saying, “We can envision some amazing products we want to build for you, and we don’t know how to build them with Intel’s chips.”

As I first said more than three years ago: ARM-based Macs are definitely coming.

Who Apple, Google and Microsoft Should Acquire Next

On Tuesday night, TechCrunch’s Alex Wilhelm asked on Twitter:

If you were Microsoft/Google/Apple what company would you buy?

— Alex Wilhelm (@alex) August 27, 2014

It was late and I fired off a quick response but I thought it was a question interesting enough to be worth thinking and writing about here in more depth. So, for today’s column, I’m going to spend some time asking which companies Apple, Google and Microsoft should consider acquiring. As a bonus, I’m also going to include Amazon, which of course has just announced a major acquisition. I’ve deliberately been mutually exclusive in my recommendations, but the fact is a number of these companies would be a reasonable fit for several of the potential acquirers, since they’re all to some extent targeting the same opportunities, albeit in different ways.

Until the Beats purchase, Apple’s acquisition strategy was so predictable, you already knew the official comment the company would put out as a result: “Apple buys smaller technology companies from time to time, and we generally do not discuss our purpose or plans.” Apple has focused almost entirely on acquiring smaller technology companies and typically shuts down the products while building some of the functionality into future Apple products. But the Beats acquisition either changed all that or was a one-off anomaly. I suspect most of Apple’s acquisitions going forward will be more along the lines of its past acquisition than the Beats acquisition, but it might still make sense for Apple to buy something bigger “from time to time” as the company might put it.

Bose

This is a bit of a cheat because it’s so similar to Beats, but it’s also different in important ways. Bose is the headphone brand many people thought Apple should have bought because it’s a much better fit with Apple’s core product values: a premium, high end, high quality product that’s well respected and has a brand cachet among the same sort of people likely to buy Apple products. I think it’s possible Apple may use Beats and the technology it licenses to build premium headphones under its own brand and, as such, it may not be necessary to buy Bose to achieve this. But with Bose, it would acquire an existing known brand which would nicely complement the Beats brand.

Broadcom’s baseband business

This is also a bit of a cheat, because it’s not apparently for sale anymore, as the company is planning to wind it down. But it seemed an obvious fit at the time when it was for sale, because it’s well aligned with Apple’s strategy of steadily owning more and more of the components in its devices, and it would provide useful leverage against existing suppliers. It appears Apple is investing in this area organically already, and acquiring this business would have given that effort a big boost. For now, though, it appears as though Apple will continue to pursue this strategy internally rather than through an acquisition.

Yelp

Apple Maps has come a very long way since the early awful reviews. I use it regularly to get from point A to point B and it’s absolutely fine for navigation purposes. But where Apple Maps falls short is its point of information (PoI) database – i.e. the set of information it has about stores, restaurants, and other businesses in any given area. I regularly find Apple Maps is unable to find the nearest location for a particular franchise or company when Google Maps finds it without any problems. This is Apple Maps’ single biggest weakness today, at least in the US, and it should invest in fixing it. Apple currently buys this data from third parties like Yelp, but it has little control over the quality of that data as a mere licensee. Acquiring Yelp would allow Apple to control the data and use it as the foundation for a more aggressive effort to build an extensive, up-to-date PoI database to help power Apple Maps.

Google

Google’s acquisitions have been much less predictable than Apple’s, both in their scale and scope. It’s acquired companies as diverse as YouTube, Picasa, Dodgeball, Keyhole, Android, DoubleClick, GrandCentral, Motorola Mobility, Nest, Skybox and Zync Render. There is almost nothing all these companies have in common and some of its acquisitions have been pretty sizable. But given its current focus areas and the domains Google is likely to invest in next, it’s still possible to identify some possible opportunities.

Spotify

This was the one company I listed in my response to Alex Wilhelm’s tweet, and it’s an obvious one. To the extent Google is serious about getting into the music subscription business, it could acquire a lot of market share and a strong existing brand in the form of Spotify. Some people questioned why Apple pursued Beats instead of Spotify, but I think the reality is Apple didn’t want the baggage of millions of users across iOS, Android, Windows Phone and the web to support, and it was partly attracted by Beats’ relatively small base. Google, on the other hand, works on a massive scale, and already operates one of the other most popular music streaming services in the form of YouTube. While Google Play Music has been somewhat successful, it’s limited in terms of the countries where it’s available and is far from a leading brand. Spotify would quickly leapfrog it into a top two position in digital music.

Jawbone, Fitbit or Withings

Google has already shown that it’s willing to acquire to establish a position in one of the three key new domains in consumer technology: home automation. But in the other two (the connected car and wearables) its efforts have largely focused, so far, on extending Android. However, there are a number of companies which have established a strong position in wearables from a fitness and health tracking perspective and which Google could potentially snap up. Jawbone, Fitbit and Withings are three obvious examples (and Withings in particular is doing interesting things in the smartwatch space). Any of these companies could give Google the sort of jump start in wearables Nest has given it in the smart home market and could be a core to wrap around other acquisitions, as Nest has become a vehicle for purchases such as Dropcam.

As Google and Amazon increasingly square off against each other across a number of areas, Google has been investing in various retail and commerce-related initiatives. But almost all of these so far have been organic and tied to existing Google properties. Pinterest would fill an interesting gap in two different parts of Google’s business: a channel for commerce and a social network. Google+ has largely failed as a social network on a grand scale (though it’s arguably succeeded in various niches), but Pinterest has massive appeal among a segment of the population. It sits quite a long way down on ComScore’s list of top mobile apps by unique visitors (number 20, just above eBay and below Snapchat and Netflix), but comes in the top 10 by time spent among users over 24. Pinterest also has enormous potential to drive commerce activity, which could help reinforce some of Google’s other commerce-related activities.

Square

Square is, depending on who you believe, either expanding rapidly or struggling mightily. But it’s establishing itself as one of only two or three players that’s starting to build a presence in the local retail space. Amazon’s now entered that space organically with Local Register, but Google’s various efforts in mobile payments have so far failed, largely due to lack of carrier support. Acquiring Square would tackle the market from a different perspective but also potentially give Google a local footprint which could be used to re-launch Google Wallet in future.

Microsoft

Microsoft has made one big acquisition recently, in the form of Nokia’s devices business, but it’s clear Satya Nadella thinks less of that business than Steve Ballmer did (and may well have opposed the acquisition at the time). Other larger acquisitions in the past have included Danger, aQuantive, Skype and Visio. But Microsoft is in transition, both culturally and strategically, and it’s not yet clear what the new focus areas for acquisitions might be. However, there are a few areas where Microsoft could use some help.

Here

I’m not going to focus on the wisdom or otherwise of acquiring Nokia’s devices business, but where I think the board made its biggest mistake was not acquiring the Here location and mapping business from Nokia when it bought the mobile phone arm. There are only three meaningful mapping businesses in the world today, and they’re owned by Google, Apple and Nokia. Only two of these companies own major computing platforms, and the third major computing platform company is conspicuous by its absence. Having licensed maps content from Here for several years for use in Windows Phone, and since Nokia devices have used it for much longer, it was perfectly logical for Microsoft to acquire this business. But the board balked at the time and so Microsoft is left licensing one of the core elements of its platforms instead of owning it outright. It could still fix this.

Foursquare

Along similar lines, Foursquare has begun providing PoI data to Microsoft for use in Bing Maps and Cortana but, as with Apple’s relationship with Yelp, there’s a lack of control and ownership. Unfortunately, Here’s mapping data suffers from the same PoI weakness as Apple’s Maps product, especially in the US, and Foursquare would be helpful both in filling gaps and as a foundation for building a much better, more comprehensive database. Given Microsoft’s existing relationship with Foursquare both as a licensee and an investor, an acquisition would be straightforward and a good fit.

Everpix assets or Picturelife

One of the main selling points on Microsoft’s Lumia devices is the cameras, and yet neither Nokia nor Microsoft has ever provided a great way to store, manage and share these pictures. OneDrive is a storage option which should be increasingly integrated into the process of capturing and storing photos, but it suffers from the same fundamental limitations as other storage services: once you put pictures in, it’s almost impossible to find, manage and organize the pictures afterwards without heavy manual intervention. Everpix, before its demise, was one of a handful of services which promised to help with this task, and I always thought Nokia should have snapped it up. Picturelife is a similar service, though not as good, and there are others out there with similar capabilities. Such an acquisition could help set Microsoft’s photo management capabilities apart and would be a great strategic fit with the Lumia devices’ emphasis on photography.

Amazon

Amazon has obviously just announced a major acquisition in the form of Twitch, and perhaps its appetite for other big purchases might be limited at present. But as I’ve written elsewhere, there are several possible motivations for the Twitch acquisition, among them an extension into new categories within Media and a pursuit of the broader advertising opportunity. There are a number of other acquisitions which might fit into this strategy, as well as Amazon’s broader e-commerce ambitions.

Hulu

Hulu has been on the block and then off again, and at present is theoretically not for sale. But it would be a great complement to Amazon’s existing position in digital video, which is mostly focused on catalog content rather than new shows. Hulu is the only service that brings fresh content from several of the biggest US broadcasters on both an ad-funded and subscription basis, and both models are a good fit with Amazon’s new approach to media. Video advertising is an important area of expansion for Amazon and subscription content services are a business model Amazon appears to be pursuing too. It would also make Amazon a stronger competitor to Netflix, which currently dominates the US video streaming business.

Pandora

Pandora is by far the top online music service by usage in the US, second only to Facebook’s apps among all age groups in the ComScore data by usage, and in the top five by unique users, with only Facebook and Google products ahead of it. And yet it’s perennially unprofitable, because of the high content costs. With revenues and costs under a billion dollars a year, Pandora is the kind of business Amazon could swallow relatively easily, while turning it into an important part of its growing digital media offerings. And it would do for Amazon what a Spotify acquisition would do for Google: immediately vault it from an also-ran proposition to a market leader in digital music, at least in the US, which is still by far Amazon’s most important market.

Etsy or Shopify

Amazon dominates the traditional e-commerce space in the US and certain other markets, but there’s a lot more to online buying than traditional retail. Etsy and Shopify are two companies which target adjacent spaces in a way that would be a good complement to Amazon’s current business. The obvious risk here is these companies have sprung up in part as an alternative to Amazon, and their users may not be all that happy about an Amazon acquisition. But either would help Amazon to expand into new areas within e-commerce (and m-commerce).

Mac vs. PC All Over Again

The latest round of company quarterly financial results illuminate three trends in the device market:

Apple continues to generate record profits largely due to growing iPhone sales (iPad sales are slowly declining, Macs are growing, iPod sales are mostly gone, and Apple’s services revenues are growing)
Samsung’s profits are steadily declining (though from such a high level they remain quite high)
Nobody else is making money at all ((Not consistently, or in the case of some Chinese companies who don’t break out device profitability, not verifiably))

Jan Dawson from JackDaw Research has a terrific chart illustrating the difference in margins that has made its way around Twitter (and here on Tech.pinions) a few times. To my eye, this looks like the PC market, all over again.

I’m certainly not the first to point out the mobile market looks a lot like the PC market of 30 years ago; some financial analysts have been using this as part of an argument predicting Apple’s imminent collapse. Just as Apple lost the PC wars to a horizontal solution, Apple will lose the smartphone wars the same way. Apple apologists have responded the phone market is different: there are carrier subsidies, lock-in effects, or what have you.

Financial analysts aren’t dumb. The parallels are real. The phone market is turning into the PC market, only with Google taking Microsoft’s place as the OS provider. The similarities are striking. Apple redefined the market with a proprietary OS, innovative UI, and vertically integrated hardware. While it took a few years to catch up, the competition responded with a similar UI on an OS widely licensed to OEMs. In both PCs and phones, Apple targeted a narrow high end customer and lost the market share battle, while the competition aims wider and controls significantly higher market share. Apple monetizes its software by selling high margin hardware; OEM competitors fight each other to provide low margin commodities.

There are also two interesting differences in the PC and smartphone eras: due to the way the smartphone market evolved, Google chose not to monetize the OS the way Microsoft did, instead monetizing services through advertising. The phone market is also different in size – it’s a lot larger than the PC market ever was.

The problem with analysts using these comparisons to predict Apple’s decline is they ignore the fact Apple won the PC wars. During the 1980s, Apple grew both revenues and profits. After a near death experience in the 1990s – more on this later – Apple reemerged as the most profitable PC vendor. If you count iPads along with Macs, it is now the largest PC vendor by unit sales, too. That is not to say there were no other winners in the PC market. Steve Jobs was correct when he said, “For Apple to win, Microsoft does not have to lose”. Microsoft also won the PC wars. As did Intel. At various points, IBM, Compaq, Dell, HP, and Lenovo have won battles, too (though some of them clearly lost the war).

What We Can Learn From History

The most crucial lessons from the parallels between the PC and smartphone markets are how 1) Apple should behave to successfully compete with Google, 2) the lessons Apple needs to learn from its near death experience during the PC era, and 3) the lessons today’s hardware OEMs – including Samsung – should take from PC OEMs.

1. Apple vs. Google
This one is really simple:

Google does not have to lose for Apple to win. Steve Jobs’ anger towards Google was counterproductive. For that matter, Samsung does not have to lose for Apple to win. ((I think we’re seeing the application of this principle in Tim Cook’s détente with Samsung. Ironically, Jobs was able to get past his feud with Microsoft, but Samsung’s IP infringement was personal. For its part, Samsung is finally willing to compromise because it is realizing it cannot maintain its margins, and an expensive legal fight it can’t win is not worth pursuing.))

2. Lessons for Apple from the 1990’s
Apple lost its way in the 1990s when Microsoft caught up in user interface and Apple stopped innovating in both software and design. That impacted the Mac’s software ecosystem, ruined its premium value proposition, and forced Apple down market (which it tried to attack with a licensing strategy). Once Apple invested in a narrow range of high-design, premium products with regular software updates, sales and profits returned.

To win the smartphone market, Apple must continually refresh its software so its overall value proposition remains differentiated at the high end. However, software for smartphones goes well beyond the device capabilities and UI. It encompasses services and apps.

Google excels in services; if Apple is to succeed long term, it will need to continually meet the “good enough” threshold on services. Given that requirement, the half-baked launch of Maps was a potentially franchise-destroying disaster. Apple has recovered from the worst of the Maps debacle, but it still has work to do on the services front. Apple next big challenge is creating a response to Google Now.

Apple does not need to beat Google on services as long as Google extends most of its services to iOS. Google monetizes users, not Android. As long as Apple maintains a significant share of premium customers its advertisers want to reach, Google has to work with Apple.

Apple excels in the app ecosystem, but Google is catching up. It is too early to predict whether this will keep Apple ahead, but the need to maintain an edge in the app ecosystem explains why Apple is opening up iOS 8 and giving developers more flexibility. It is also why Apple is investing in a new development language.

Apple must continue to set the standard for design so consumers are willing to pay a premium for its hardware. Larger screen sizes and bezel-free designs are the only real holes in Apple’s approach; otherwise it’s doing a pretty good job.

Even if Apple pulls off this balancing act, it does not guarantee explosive growth, which is what Wall Street is looking for. However, if Apple does follow this path, it will maintain a stable, growing base of customers, apps, and assets it can use to attack new areas. The iPod and iTunes led to the iPhone which led to the iPad.

Lessons for OEMs competing with Apple and each other

There should be a market for premium Android phones, but with lots of OEMs targeting it, even vendors who can differentiate on design and hardware components will have lower margins than Apple. Margins don’t have to decline to zero, provided there is still enough value in differentiated component technologies or design. This is why Samsung’s insistence on sticking with durable, easy to manufacture, cheap plastic construction is so maddening. As the unique value of Samsung’s components has declined over time, Samsung should have been putting more emphasis on premium design and construction.

It may be possible to differentiate on software above Android, but few provide enough positive differentiation that consumers recognize and are willing to pay a premium for. Motorola, Meizu, and Xiaomi are the only ones who come close; LG is adding value by stripping out much of the excess it once had. It is worth noting carrier meddling can mess up even the best laid software plans; it requires a direct-to-consumer channel or extremely strong brand clout to build a singular software experience and get it on carrier shelves.

Below the premium tier, margins trend towards zero. Lenovo makes money in PCs in this environment by managing the supply chain and manufacturing. PC vendors were making money by preloading crapware; some smartphone vendors (and some carriers) are following suit. Another approach is to sell hardware at cost, and make money on ancillary products or services. Digital stickers work for messaging vendors, advertising supports television, and in-app purchases drive mobile game developers. Watch for variants on these approaches from hardware manufacturers. Amazon is trying to do this with its tablets, but not its phones where it tries to have its profits and sell you some cake, too. Xiaomi’s business model seems to be predicated on giving you a phone at cost, then selling you a stuffed animal.

Apple and mobile payments

In last week’s column, I talked about the current state of smartwatches. I described weak demand met by weak supply, and the resulting poor sales of the offerings in the market today. I also talked about what it might take for a new product in this category to stimulate demand. One of the potential use cases for a smartwatch or other wearable is payments, and I’ve been asked by several reporters over the last few weeks whether the iPhone 6 will have an NFC chip, potentially for payments. Today I want to explore that particular opportunity a little more.

The current state of mobile payments in mature markets in the West

It’s important to be clear what we’re talking about. Firstly, I’m not talking about m-commerce – i.e. buying things from e-commerce providers through a web browser or even an app. What I am talking about is using a mobile phone to buy real world items in a retail location. It’s also important to note the current state and uptake of mobile payments is radically different between certain emerging markets (e.g. Kenya) and different mature markets, such as the US and Europe, which behave fairly similarly, and Asian markets such as Japan, where mobile payments are more established. I’m going to focus mostly on mature markets such as Europe and the US, where mobile payments have still not taken off to any great extent.

Let’s quantify current uptake for mobile payments in these markets. Here’s some data from a recent survey among US adults I conducted as part of my smartwatch report:

As you can see, take-up is very limited so far, with around two thirds of US adults never having used any form of mobile payments. Even if you exclude those and focus on those who’ve tried mobile payments at least once, only about a quarter use it regularly, half use it occasionally and another quarter gave up after their first experience.

The mobile payments vicious circle

So why is this? The reasons are fairly obvious:

Current offerings typically depend on NFC chips in phones combined with an app or service that can make use of it. Only around half of smartphones in the US have NFC embedded (the iPhone, notably, doesn’t have NFC)
Google Wallet, the pioneer in this space, has become harder and harder to use on smartphones, as certain carriers have blocked it and Google has restricted use to phones running relatively new versions of Android (about 21% of Android devices globally)
Isis, the effort from several of the big US carriers (soon to be rebranded), has only been in trials in certain markets for much of its history, and is only now beginning to roll out more broadly.

But the biggest reason of all is there is a chicken-and-egg problem with terminals and devices, as shown in the diagram below:

As long as few people have devices capable of making payments, there will be little reason for store owners to install terminals to work with them. And as long as there are few places where mobile payments can be made, users will see little reason to either buy devices that can make them or set up an account to make use of them. Whether the underlying technology is NFC, a barcode scanner, Bluetooth LE or something else, store terminals need to be able to communicate with the smartphone to create a secure transaction. I live in one of the test markets for Isis, but even here there are relatively few locations where Isis payments are accepted, and the availability in much of the rest of the country is far lower.

Breaking the vicious circle

There are two possible ways to break this vicious circle, as shown in this diagram:

You have to break the cycle either on the terminal side or the end user side. Breaking it on the terminal side would mean subsidizing the terminals on behalf of retailers, which wouldn’t be cheap. As Tim Bajarin wrote in his great piece on the Disney MagicBand, Disney spent $1 billion just to install the MagicBand infrastructure in its theme parks. Now extrapolate that cost to all the retail locations in the United States and you have a good sense of the size of the investment needed. Any player willing to subsidize that would have to have very deep pockets indeed.

The other way to break the cycle is to create massive end user demand, something the mobile payments products in the market today haven’t been able to do. For Google Wallet, the challenge has been the split between three parties that need to come together to make it work but haven’t: Google, Android OEMs and carriers. For Isis, the problem is somewhat different: consumers don’t necessarily look to the carriers as payment providers, and Isis has been poorly marketed, leading to low awareness and demand. What would happen if Apple were to enter the market by introducing some kind of payments technology as a built-in feature of the next iPhone or a wearable device? Millions of consumers in the US would suddenly have a tightly-integrated solution built into their devices. One that carriers couldn’t block and which would no doubt receive heavy promotion from Apple and the tech press.

Were Apple to introduce such a device or devices though, it would still suffer – at least at first – from the same problem of a lack of terminals which could accept payments. Wide availability of a mass market payments solution could potentially boost sales, but it would take time. As such, this would arguably be the first time Apple would introduce a major feature which wasn’t that useful at launch. Poor initial experiences for would-be users of its payments products could sour them on the product, which would be bad for ongoing interest. Yet this is the sort of thing which would be impossible for Apple to solve ahead of a launch announcement without a massive risk of leaks. I’ve written separately about how Apple might break its usual launch pattern for wearables, but this is one factor working in the opposite direction: Apple might need to give retailers, not developers, a head start.

Technology choices – to NFC or not to NFC?

I think it’s far from guaranteed Apple will launch a payments service, even though it has many of the pieces in place to do so at this point, and it could be an interesting new angle on the wearables space. But if it does, the question remains how it might be implemented from a technology perspective. The path trodden by the two major existing US providers is NFC, a technology Apple has stubbornly resisted adopting so far. It’s an established technology and, as such, would be relatively straightforward for Apple to add to its devices. So it’s a good option in some respects.

But even as Apple has resisted embracing NFC, it has more wholeheartedly adopted other technologies which could form the basis of a payments service, notably Bluetooth LE. Where other services have used NFC for pairing, Apple has used Bluetooth LE. Where other services have used NFC for quick data exchange between devices, Apple has used Bluetooth and WiFi. With the launch of iBeacon functionality, Apple has also sparked extensive interest among retailers in installing Bluetooth LE hardware in stores to track users and push promotions. So Bluetooth LE, which is also capable of very accurate proximity sensing, could become the technological basis for a payments service, especially given the existing investment by retailers in iBeacons.

For these reasons, and despite the obvious appeal of NFC, I’m still not convinced Apple will use it in any payments service it offers. At the same time, I think it’s interesting to think about the role of Touch ID on either an iPhone or a wearable device as a form of authentication, which would dramatically reduce the friction compared with opening an app and keying in a PIN. That could potentially work with either Bluetooth LE or NFC.

Huge barriers remain

For all the potential associated with an Apple entry into the payments space, the vicious circle described in this post remains a formidable obstacle to any player in the mobile payments market, including Apple. Unless Apple is willing to make a major investment in subsidizing terminals, it risks launching a payments product which will have limited appeal at first. The one solution is to give retailers a head start by pre-announcing a product which won’t be available for several months, to provide the infrastructure ahead of time. But even that might have a limited impact before devices are in consumers’ hands. In this arena, as with smartwatches, there is potential for Apple to come in with a disruptive offering, but so much will come down to the execution.

Deeper Dive on Android vs iOS Web Usage

I gave a brief overview of my thoughts on global web usage in the Tech.pinions Insider weekly newsletter that goes out each weekend. But I wanted to dive into a few more points I think are interesting.

When it comes to the business model of so many companies in the smartphone, tablet, and PC market, usage is an essential metric. For online companies like Google, Facebook, Amazon, app vendors, and more, web usage or the extent to which one gets on and uses the Internet is even more essential. What we are seeing is the early signs of the problems connecting the next billion customers for many companies. For a long time, iOS dominated Android as a whole in terms of web usage. Interestingly, an online metrics service I track points out this specifically in their FAQ on their site.

Android ships in larger quantities, but iOS dominates usage. Point number two is perhaps the most insightful. Not only are iPhones typically supplied with generous data plans but they are purchased by people who can afford to liberally use the web. Someone who can afford a $500 or higher phone in non-subsidesd markets can also afford a premium tier data plan. I’ve started using the term “data budget” to describe this. iPhone users have a higher data budget than the average Android user. Another point is broadband is not equal in many parts of the world. Many emerging markets have spotty and slow broadband. It makes the web challenging at times due to the lack of speed. These are part of the complexities I feel led to Android taking so long to pass iOS in terms of web usage, despite having more than double the usage base for quite a while.

While I recognize the disparity in methodologies of StatCounter and NetMarket Share, I still find them both useful. StatCounter, measures total usage of a user and will count the same user as a page view every time that person views a website they track. That is why StatCounter has Android ahead of iOS in web usage and says it has been for some time.

StatCounter’s data will favor the heavier of web users, thus their data will give us a broader picture of how active on the web each platform may be. But it is also skewed toward the top percentage of users who more liberally use the web. It leads us to the conclusion that the Android data collected by StatCounter is likely heavily influenced by those Android users who are more like iPhone users in terms of disposable income, data budget, quality of connectivity, etc. That point is well understood when we look at the device vendor breakdown of StatCounters data. We see Samsung users have been driving the bulk of Android’s global web browsing in their network of sites. Samsung’s premium and mid-tier devices would have similar users where usage would be impacted.

NetMarketShare presents a different picture and for different reasons. NetMarketShare only counts each user once per day on their network of sites, so we get a bit more holistic view of platform usage which is not skewed by the power users of either platform.

One thing to point out on this chart is it is measuring absolute share. iOS’ line is not going down because iOS is being used less, only because Android is growing as a percentage of overall web traffic on their network.

It was inevitable Android would pass iOS in terms of overall usage. What this brings up though is the striking point that usage is not equal between the two platforms per users. Meaning the average iOS consumer will still use dramatically more Internet services than your average Android user. Given the many points I’ve made before that Google’s Android already has the heaviest web users and the most profitable customers to their ecosystem as they are ever going to get, the longer term trend is problematic to their growth if it remains solely tied to usage of Internet services. The same is true of Facebook. In both cases the next billion will have a lower data budget, less reliable and likely slower connectivity and will have to prioritize that data budget accordingly. In short, this next billion will prioritize survival over entertainment. They will likely use a messaging service like WhatsApp because that is how their commerce or trade gets done. That is a worthwhile spend of data budget. Those needs will trump entertainment for the foreseeable future.

While looking at iOS vs Android web usage is helpful, it is really still only part of the story. I track a range of developer toolsets that show web usage by particular devices as well. Often many of these include app usage as well since most of these analytics services are for app developers. Here are a few select countries of interest because they are big but also because they qualify as those I consider with a stringent data budget.

All this does is emphasize in countries where the iPhone has a presence, even if only small, those users dominate the usage the landscape and often by a healthy margin.

Take Aways

What is becoming increasingly clear to me is at a platform level, the opportunity within iOS and Android for app developers, providers of web services or services in general, are simply different on each platform. You could make the argument the opportunity within iOS is very different than the opportunity within the Android ecosystem. Thus, each ecosystem may have an entirely different set of developers, services providers, and more.

For a more detailed view of this angle, listen to the latest podcast with myself and Andreessen Horowitz partner and analyst Benedict Evans on our latest mobile focused Tech.pinions Podcast.

Mobile Focused Podcast: Less Expensive iPhones, and the Globalization of Tech

I’m happy to announce that I am rolling up my podcast with Andreessen Horowitz partner Benedict Evans into the Tech.pinions podcast as well. We will shoot to release these discussions between us every few weeks, midweek.

Ben Bajarin and Benedict Evans discuss what a low-cost iPhone could mean for Apple and explore the global and regional differences of iOS an Android.

Click here to subscribe in iTunes.

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

Posts Mentioned:

Benedict Evans – Note on Cheap iPhones

Ben Bajarin – The Regionalization of the Smartphone Market

Jan Chipchase – Connectivity is not binary, the network is never neutral

A Bird’s Eye View: The Humbled Steve Jobs

This new series A Bird’s Eye View will feature short stories by Tim Bajarin, a 33 year industry veteran of the technology industry. These stories and anecdotes are ones Tim has collected through his 30-plus years as an analyst and will provide a behind the scenes look at many of the industries historical moments.

In 1981, when I joined Creative Strategies as an analyst, I was asked to cover Apple in my spare time. In those days, mini-computers were the rage and as one of only a few mini-computer analysts, I was asked to start looking at the Apple II since it had the term “computer” in it. The Apple II had started getting attention because a piece of software named Visicalc, the first spreadsheet, starting showing up on the Apple II and for the first time some people saw it as an actually useful tool for business. By that time, Apple was an established company but still very small and was thought of as a company that just created a computer for hobbyists.

In 1981, Steve Jobs had already become a legend in the Valley. He and Woz were heroes to the geeks of that era and often attended the Homebrew Computer Club meetings were they were treated as royals. However, they were mainly lauded for providing the group an affordable PC for them to tinker on. Jobs was not looked at as the business tycoon he would become years later. Although I had seen Jobs around various computer events, I did not meet him in my official capacity as a PC analyst until later that year. It was at this time I encountered the rude and egotistical Steve Jobs who, even back then had no use for the media, let alone us fledgling analysts.

Over the next two years I bumped into him at various events and heard him speak a few times. He even graced us with his presence once or twice to tell us about some new product or idea he had. However, I got to see the highly temperamental and explosive Steve Jobs right after Jobs and Apple’s board had hired John Sculley to become its new CEO. Sculley had been on the job two months and I was invited to come to Apple and meet with Steve and Sculley to discuss some new changes to Apple’s business focus and to get my feedback on a product idea they were thinking about. About half way through the meeting, a guy knocked on the door and interrupted us to tell Steve about a problem the guy deemed urgent. After this person explains the problem, Jobs goes ballistic. Calls him an idiot, says he does not know what he is talking about and just undercuts him in nasty ways. John and I both put our heads down in embarrassment and the look on Sculley’s face suggested he was possibly thinking, “What have I got myself into?”

It was because of these types of outbursts and lack of managing skills that Apple’s board and John Sculley decided to fire Jobs at the end of that year. As you know, Jobs was very angry with this and decided to start NeXT, which in his mind was the next major evolution in PCs. He became determined to show Sculley and the world he was the only one who could deliver the future of personal computing. Of course, that venture pretty much failed and this period of Steve’s life proved to be kind of a wilderness experience for him. While he was at NeXT he had no contact with analysts and had minimal contact with the media. So most of us did not have a real sense of what Jobs was thinking during that time, although we did know he had bought Pixar and was looking at being the next Cecil B. DeMille.

Steve Jobs 2.0

But the next time I met Steve Jobs professionally was the second day he was on the job after he rejoined Apple in 1997. To my surprise, this Steve Jobs was relatively humble, seemed chastened from some of his past incidents and I thought he had actually matured quite a bit thanks to his experiences at NeXT. The fact he had married during this time and had two kids probably had an influence on his demeanour too. This meeting came about because Apple’s PR team at the time thought it would be good for him to meet with some hand picked analysts and media to share his thoughts about Apple and what he was going to do to help them. At the time he took over, Apple was $1 billion in the red and we know they were six weeks from filing for bankruptcy. When I asked him how he would save Apple, he gave me one response I expected and another I did not see coming at all. The first thing he told me was Apple seemed to have lost its way over the years and he was going to go back and focus on the needs of his core customers. He explained it was the graphics professionals, engineers, desktop publishing and creative professionals that put the Mac on the map and Apple had dropped the ball on meeting their needs. He said he would first focus on delivering to them the best Mac possible to meet their needs and use this as a starting point to stabilize the company.

But the second thing he said he was going to do was to pay more attention to industrial design. He had been furious that a past CEO, Michael Spindler, had made the Mac look like a standard PC and was determined to set the Mac apart from PC competitors as soon as possible. I remember at the time thinking he was crazy. Here Apple was in serious financial hot water and he thought making the Mac look more unique would save Apple? Apparently he was already thinking of the original iMac’s design at the time and sure enough, when the candy colored iMacs hit the market 18 months later, these new Mac’s reignited interest in Apple products and helped give Apple a more solid financial footing for him to start rebuilding Apple.

As I look back at that meeting, I realize now his comments on industrial design were really at the heart of his ultimate vision for the company and reemphasized to me the amazing attention to detail he would bring back to Apple this second time around. While he was cautious about which markets he would enter with new products in the future, his goal seems to have been to see what products got serious potential from the market and then reinvent them with an eye on industrial design. While he did not invent the MP3 player, he reinvented it and made design a key element of the iPod’s success. The same goes for the iPhone. While he did not invent smartphones, his powerful industrial design eye when applied to the iPhone revolutionized the market for these products. Tablets have been around since 1989, yet it took Jobs’ sleek, rich design of the iPad to legitimize this market and make it the major disruptor to the PC business it has become.

At that meeting with Steve Jobs the second day he came back to Apple, I had no idea a simple statement about industrial design would become one of the most powerful reasons why Apple is the Apple of today. Not content with “me too” products, from the beginning of his second tenure as Apple’s CEO, Steve Jobs clearly knew what he was doing and as he has said in public many times, “I create products I want to use”. For Steve, that meant sleek and beautifully designed technology that makes Apple stand out amongst the sea of sameness that permeates the tech world today.

Steve Jobs Reveals The Only Way Forward For Windows Phone

The only way forward for Windows Phone — that is not death — is work. Real work. In the 21st century, real work is inherently collaborative.

Collaboration is the Achilles Heel of all things iPhone, iOS, and Apple.

Steve Jobs, for all his greatness, for all he achieved, did not play well with others. Evidence is legion. Jobs forced the future upon us, refusing to budge to present day concerns. His iconoclast’s vision is reflected in every Apple product and has been since the beginning.

Jobs exalted the individual, from the singular 1984 rebel through to the lone, joyful iPod listener to now, where budding creatives obsessively focus their gaze upon the shimmering, inviting iPhone screen and not upon the people, life and physical flotsam whirring about.

Apple marketing dutifully reflects both Apple products and Apple culture, a culture which reveres solitary pursuits and nourishes individual genius.

This leaves a strategic opening for Microsoft and Windows Phone. Not by creating a disingenuous demarcation between “work” (Microsoft) and “play” (Apple), but by optimizing its platform, its cloud, its tools, its services — and especially its mobile devices — for collaboration.

Steve Jobs empowered us, liberated us, heightened our creative abilities. He transformed us into digital cowboys, technological gunslingers, mad genius loners. Not collaborators. His heroes do not need others nor do they require consensus.

To quote Jobs:

Here’s to the crazy ones, the misfits, the rebels, the troublemakers, the round pegs in the square holes… the ones who see things differently — they’re not fond of rules…

Such people are the opposite of collaborative. Yet, for all but a few crazy ones, greatness may only be accomplished via continuous collaboration and teamwork, not by being that round peg in the square hole.

Out Of Many One

Make no mistake. This is not about an Apple failure. Apple products, spanning the iPhone, the iPad and the Mac, are exemplary. But, their design and intent, empowering the individual, offers a clearing for whichever company develops computing and communication hardware and services which exalt the group.

Enabling new forms of work and new forms of creativity, facilitating time-shifting, globe-spanning, multi-modal collaboration from men and women, girls and boys whose full potential is untapped when pursuing their visions in isolation is the only way forward for Windows Phone.

The pieces to make this happen may already exist:

multi-screen function (desktop, mobile)
cloud support
Yammer
Skype
Exchange
Office 365
Office Lens
OneDrive
OneNote

Each of these are capable of providing highly functioning services, synchronized sharing, and any time, any place collaboration. The problem, of course, is none of these are yet fully optimized for mobile in general, or for Windows Phone in particular.

Jobs Informs Nadella

The recent revisionist history (such as here, here and here) proclaiming Steve Jobs as a world class “collaborator” is simply unfounded. Recall the single biggest change at Apple since the passing of Jobs: Tim Cook’s executive management shakeup, which the company itself positioned thusly:

Apple Announces Changes to Increase Collaboration Across Hardware, Software & Services (emphasis added)

Apple’s pro-individual, non-collaborative, go-it-alone DNA runs deep. This has created an opening for giant Microsoft’s tiny Windows Phone: collaborative creativity, collaborative work.

It bears repeating: by “work” I do not mean those activities presently optimized for PCs inside the enterprise. Microsoft’s fading retort that Windows is the platform for “work” badly underestimates how capable, valued and productive users of Apple devices are. But Apple hardware and supporting services are purposefully created for the individual. The future demands devices — hardware — for the group, not the one.

It also bears repeating: time is quickly running out for Windows Phone.

In his “bold ambition” statement, Nadella mentioned Microsoft’s commitment to “first party hardware” four times. Yet, within his 3,500-word manifesto, he mentioned “Windows Phone” only twice, and even then withholding clear affirmation:

(1) Today the Cortana app on my Windows Phone merges data from highway sensors and my own calendar and simply reminds me to leave work to make it to my daughter’s recital on time.

(2) We will responsibly make the market for Windows Phone.

This and other Nadella statements led me to state several weeks ago that:

Prediction: Microsoft will focus its mobile hardware efforts not on Windows Phone but on Surface, on new mobile gaming devices, and new mobile “productivity” devices; anything and everything that might help them uncover that next great mobile computing inflection point. Smartphones are lost to them.

I now wish to amend that prediction. Microsoft lost the smartphone wars — that much is clear. But smartphones are lost to Microsoft only in how we define such devices at the present. An entirely new or repurposed mobile device which advances creative and productive collaboration as easily as iPhone advances personalized empowerment is still within Microsoft’s reach.

Margins: Apple, Samsung, and Consumer Electronics

Some recent media has come out stating we need to acknowledge Apple knows what it’s doing as a company and with their strategy. I don’t know any analysts worth their reputation, either on the financial or industry side, who ever doubted Apple knew what it was doing. Part of the quibble with Apple from said media is the belief Apple was leaving money on the table by not changing their established and successful business model of focusing on the high end, more profitable segment of the market. Many called for Apple to make a lower cost iPhone in order to capture more “hardware” sales. But what many of us knew is just selling a lower cost phone doesn’t necessarily mean more money. And, in fact, it could have consequences on the higher margin products. Luckily, Benedict Evans shared a post recently that broke down exactly what I and many others have been saying around the implications of a lower cost iPhone.

What Benedict wrote is something he and I have spoken about on past episodes of our podcast. The thesis was always that a lower cost iPhone would certainly help raise sales of iPhones but would not raise revenues. Selling a lower cost and lower margin product means you need to sell substantially more product to equal similar revenues to selling less of a higher margin good. But as Benedict points out, this does not necessarily mean Apple should not release a lower cost phone — only that it would not necessarily be for the hardware revenue but for the potential value to the ecosystem, in terms of revenue capture beyond hardware, like apps, subscription services, etc. Benedict rightly points out Apple has more options than ever and I would add few companies are in full control of their destiny than Apple.

Back to Apple knowing what it’s doing. This relates entirely to a margins discussion. Several days ago Jan Dawson posted on his blog some thoughts on Samsung. I asked Jan to add Apple and Samsung to a particular chart on margins and it is below.

If any chart shows Apple knows exactly what it is doing, it should be the chart above. Apple remains the anomaly of all consumer electronics companies when it comes to operating margins. Apple has not and does not have to chase the lower margin commodity products thanks to their vertically integrated advantage. Granted, no one is arguing Apple chase the uber-low end. That’s unwise for any branded OEM. But rather, there is a healthy and growing middle of the market. What we are discovering in many markets like China and even pockets of India and Brazil, are more mature customers who started off buying lower cost entry level smartphones are moving upstream and being willing to spend more on their next smartphone. I believe this trend will continue as a large percentage of smartphone users move off basic devices and become willing to spend more on devices in mid-range price tiers.

Whatever strategy Apple decides, given their approach, they have a limit on their total potential customer base. We simply have no idea what the size of that number is. Employing this strategy means Apple will need to foster opportunities for their customer base to spend more in their ecosystem thus incrusting their average revenue per customer beyond the hardware. The point remains — Apple is in control of their destiny.

Samsung, on the other hand, is a giant question mark. What does Samsung do? They have built a business that requires scale. Their strategy has been to fast follow companies and products which have scale then leverage their vertical components businesses to sell products to each other as they scale. Each group benefits, revenues rise, and they are able to slightly buck the low margin fate that faces so many companies. Samsung has always been Samsung’s best customer in components. But the main point is their business requires scale. So what does Samsung do to maintain scale? They are losing in premium to Apple, and they are losing in the lower and mid-tiers regional players in the regionalization of the smartphone market.

What is even more interesting about Samsung’s struggles is they are actually price competitive with some products in many of these markets with the same vendors they are losing out to. So the question is why? Why not Samsung in these markets where they are price competitive? I do believe it has something to do with the fact they are a foreign brand in markets increasingly favoring brands from their home country. Therefore, to assume Samsung should just compete on the low end to get scale back does not necessarily solve the problem. Nor does doing so help their margins, or the inter-departmental sales approach their components business sell within the country. Samsung, like Jan’s chart shows, is stuck in the middle. Their margin line is unlikely to go up toward Apple’s and unfortunately if it is to go down toward the others, it’s a huge, company wide issue for a vertical component company who requires scale.

What I keep landing on is increasingly hardware, for all vendors including Apple and Samsung, is going to have to play a role as a mechanism to other revenue. Xiaomi is a great example of this, using hardware as an entry point to increased revenue of proprietary services. Amazon also, to a degree, employs this model. However, it is foolish for many to believe Apple can’t do this and that their future depends only on hardware sales. The challenge for others, like Samsung, will be to differentiate on more than hardware. The role of the OEM is changing, and will continue to change.

iPads At The Border

I believe (nearly) every child that comes to America seeking refuge should be welcome. I fully understand if you disagree. It is a complex issue after all.

We are told tens of thousands of children are showing up at America’s southern border hoping to be allowed permanent entry. The President has requested many billions of dollars to help address this pressing entanglement. The opposition party has similarly offered up many billions, albeit far fewer than the President says are necessary.

What then?

Assuming some, most, or all of these children are allowed permanent entry into the United States, what then?

I have no answer for this. I do have a suggestion, however: I think we should give every single one of these children – every child in America, in fact – a tablet, preferably an iPad.

Readme

What would my proposal cost?

Estimates, which vary wildly, suggest 100,000 children will seek refuge in America this year, and another 100,000 next year. An iPad mini with Retina display retails for $400. Sold in bulk, and for goodwill, Apple may be ready to part with these for $200. Certainly, other tablet vendors would be so willing.

$200 x 200,000 children = $40 million

But let’s not give tablets only to new entrants, but to all children in America, at least those of school age. There are approximately 45 million children, ages 6-17, in the United States. Thus:

45,000,000 x $200 = $9 billion

Yes, that’s a staggering sum. Except, Americans already spend over $650 billion every single year on public K-12 education and another $350 billion every year on higher education, at minimum. An iPad mini is reasonably future-proof, and likely to last at least three years, for example. Even if we factor my potential tablet spend against only one year of K-12 expenditures, that’s:

$9,000,000,000 / $650,000,000,000 = 0.014

That’s less than 1.5% of one year’s K-12 spend. With this, 45 million children have a tablet — a tablet that can come preloaded with literally thousands of free books; books which reveal America’s history, greatness and failures. Books that teach, warn, inspire.

That’s just the start. There are thousands of free apps that promote creativity and collaboration. We can preload twenty or so on every device. Already, Apple includes iMovie, GarageBand, Pages and Numbers, among others, with every iPad.

Should the child be fortunate enough to have access to WiFi, YouTube offers amazing resources for self-directed learning. All free. iTunes U similarly offers a wealth of free courses for those with access.

Perhaps Fox will donate the entire Cosmos series toward this effort, helping us to inspire a generation to embrace science, discovery and their innate smartness.

A front facing camera will enable every child to take a picture of themselves and their surroundings, offering a document of their life and their world unmatched in scale.

The Diamond Age

Why do this?

Two reasons:

This is very likely the first and only time in human history where a nation can afford to provide every single child with a fully accessible, easily manipulated tool that contains or can retrieve nearly the entirety of that nation’s history, culture, great works of fiction, film, television, lectures, puzzles and knowledge.

Let’s seize this amazing opportunity!

In his Hugo-winning work, The Diamond Age, author Neal Stephenson posited a future where a young girl, poor, living on the margins, came into possession of a interactive book — what we now call a tablet — that educates and empowers her, leading her to achieve what was once assumed unattainable.

There are only two such ‘books’ in Stephenson’s future world. What a much better world we have now. In fact, in our present day reality, there are already hundreds of millions of such tablets. Even better: almost every one of them can be used, misused, manipulated and managed by nearly any child of any background without any prompting or guidance.

This is profoundly revolutionary.

The System Of The World

The second reason is self-directed learning has many lasting benefits.

Google founders Sergey Brin and Larry Page have famously credited Montessori schooling for spurring their entrepreneurial success. Montessori adheres to a self-directed learning model. Children follow their interests and avail themselves to information and knowledge in their own way and on their own time. Per Larry Page:

“I think (founding Google) was part of that training of not following rules and orders, and being self motivated, questioning what’s going on in the world and doing things a little bit differently.”

Will Wright, video game pioneer and creator of The Sims, stated this of his self-directed Montessori education:

“Montessori taught me the joy of discovery. It showed you can become interested in pretty complex theories, like Pythagorean theory, say, by playing with blocks. SimCity comes right out of Montessori.”

Amazon CEO Jeff Bezos also attended Montessori school as a child.

Correlation is not causation. What leads a child toward success is no doubt a multi-variant process. But tablets can expose children to untold learning resources, creative opportunities, collaborative play and work. This seems like an opportunity the country should not pass up.

Recently, two villages in Ethiopia were provided with (Motorola Xoom) tablets preloaded with various apps, ebooks, movies, drawing programs and alphabet games. The First Grade children who received the tablets were illiterate, had never used paper and pencil, yet within a few months had taught themselves to read.

“Within five days, they were using 47 apps per child, per day. Within two weeks, they were singing ABC songs in the village, and within five months, they had hacked Android.”

It almost seems unjust to not provide every child with a tablet.

I know there are questions. Who will pay for this? What about theft? What about illicit online activities? Who decides which books to embed? Will the children spend too much time with their tablet?

These are all answerable. Yes, really.

The larger question: Will it work? Haven’t laptops, PCs and other technologies in the schools failed to incite a learning revolution?

Perhaps. But at no point before now has there existed reasonably affordable, highly interactive tools that are personal, mobile, configurable, pose almost no barriers to operation, and which can store truly stunning amounts of knowledge and learning resources — all of it accessible with the swipe of a finger.

The children are here. The opportunity exists. Let’s be willing to fail with this.

Thoughts On iPhone Inc

The iPhone is bigger than McDonald’s. That seems a useful demarcation for how we should view the iPhone in particular and Apple in general.

The iPhone is that once-in-a-generation product that alters daily reality for at least a century. The Model T production line, overnight shipping, indoor plumbing and the credit card are other such examples. I fully expect the iPhone will enable Apple to become the world’s first trillion dollar company.

There is a cost however, at least for we users. Almost certainly, iPhone will diminish Apple’s ability to create new game changing products.

Why? Because being irrational is hard, really hard. It’s rational to do everything in your power to maximize a product that has the legitimate potential to help you become a trillion dollar company. To do anything — anything at all — that might alter that path is irrational. Steve Jobs could be irrational at times. Tim Cook cannot. At least, I have witnessed no evidence of this. Apple is now iPhone. iPhone is now Apple. Just like Windows is Microsoft.

The Long March

No one ever got fired for buying Apple computers from IBM.

An iOS-based, touchscreen-enabled laptop, priced around $799, and sold by IBM to the enterprise seems an obvious product Apple should offer. It also seems like the kind of product that could destroy numerous existing giants.

For too long, iPhone users have not had their much desired iPhone “phablet.” A reason for this is because an iPhone phablet would gut iPad sales. Considering the iPad sales numbers for the past year, this is a fear Apple no longer possesses.

You will not give up your iPhone. You will not give up your Mac. You may give up your iPad. At this juncture, iPads are simply not must-have devices for nearly anyone. That’s the primary reason for the diminishing sales gains.

Easy prediction: We will almost certainly get an iPhone phablet this year and, likely by next year, a larger iPad.

I am regularly surprised at how bad Apple is at app discovery. That Facebook app ads are my current best source for app recommendations is a clear market failure. I hope the purchase of Beats, Swell and BookLamp signal that Apple is finally willing to get serious about content curation and recommendation.

I have no idea if Swift is a superior language. I am not a developer. I do know however, Apple is big enough to demand its use.

Despite the iPhone’s incredible array of features and functions, we mere mortals no doubt spend far too much time obsessing over which apps belong on the home screen.

Bugs And Features

The smartphone is the computer. Your app is your business model. Every business is impacted by iPhone. Know this or perish.

That Touch ID can’t read my thumbprint if there’s just a tiny bit of water on it seems more bug than feature.

It’s 2014, fourteen years since Y2K. Still, iPhone users can’t have their preferred calendar app list the date on the app icon. This is the equivalent of how the DOOR CLOSE button on any elevator never seems to work.

Samsung ads mocking iPhone users have been brutal and highly effective. Yes, I have had Android users (justly) mock me for having to scour an airport in search of an available outlet. The iPhone battery deserves its poor reputation. However, Samsung’s latest ad where they mock Apple users for not yet having a large display iPhone strikes me as desperation. Almost certainly, there will be a large display iPhone. What then, Samsung?

Amazing iPhone games are available for $5.99 yet millions refuse to pay such ‘outrageously high’ prices. There is much to celebrate and decry with this.

Using the same OS for the iPhone as for the iPad has some obvious limitations. On the small smartphone screen, getting into an app, grabbing the data, then exiting, a singular app occupying the entire screen makes obvious sense. Not so with the iPad. I want at least two windows open on my iPad almost always. Kindle and Twitter are the most common examples. Email and web browser are another. Even while gaming, I prefer two windows open. I can’t imagine buying an iPad until Apple offers this feature.

The Sincerest Forms Of Flattery

The almost laughable copying by Xiaomi of the iPhone and iOS 7 is all the evidence you need as to why Tim Cook must expend significant resources on building the luxury appeal and premium status of the iPhone; all those hard-to-define elements beyond actual quality, reliability and usability.

There are few people better at this, if any, than Angela Ahrendts.

Confession: it’s hard for me to watch the original Willy Wonka and the Chocolate Factory movie and not think of Steve Jobs and Apple.

Rumors Jony Ive was in a Flock of Seagulls cover band are completely unfounded.

Input method is now a more important consideration than processor, OS and software. No one seems to understand this more than Apple.

More Is Less

Lost in the bubbly talk of an Apple iWatch is the fact everything about it seems wrong. We do not need yet another thing. I want my iPhone — or any smartphone — to serve as my ID, car keys, credit cards, TV remote, glucose reader, everything. Apple should focus its genius on making the iPhone devour more of those things, not create new ones.

The newest version of PayPal appears to equal, possibly usurp, Apple’s Passbook vision: Payments, money transfers, loyalty cards, information on nearby shops, it’s all there. Apple certainly wants the iPhone to be used for payments, though maybe they have finally decided enabling payments and not powering them is the way forward. This may also explain the company’s recent decision to once again allow Bitcoin apps in the App Store.

I actually read app update notes. This recent update from Yelp made me laugh.

Jan Dawson made a strong case for why Apple should stagger launches of its major products. Commenters offered additional insights as to why Apple does not (or should not) heed his advice. Not stated, however, but which I think is at least worth considering, are the possible impacts of corruption. Nearly all assembly of nearly all Apple products takes place in China, where there is a less-than-transparent relationship between the government and business. It seems the implications of this should at least be examined.

I am surprised by how few iPhone users seem to ever use AirDrop to transfer files or data to one another. Perhaps personal iPhone-to-Mac AirDrop sharing is the superior use case.

I am unaware of the age, gender, race or LGBQT numbers at Apple Inc., Apple in Cupertino, or of those who work solely on the iPhone. But together, these people have created something positively impacting lives. And they keep making it better. I tip my hat to them all and hope in some way, my words can ever do the same.

Hitting for the cycle: why Apple should move its product launches

Apple’s earnings for their last financial quarter came out on Tuesday. I reviewed them here (and talked about the iPad specifically here) but wanted to address something more long term in my column on Tech.pinions this week. The issue I’d like to talk about is the cyclical nature of Apple’s operating and financial performance and the massive focus on the fourth quarter of the calendar year (Apple’s first quarter) as the driver of the year. (Note: throughout this piece I’m going to refer to calendar quarters rather than Apple’s fiscal quarters, as I find this requires much less mental gymnastics for readers).

Apple’s results are heavily affected by the sales of its hardware products, which in turn have a huge spike in the fourth and to a lesser extent third quarter of each calendar year – as shown in this chart of historical revenues.

As you can see, ever since about 2003, the fourth quarter has been significantly bigger than any other quarter. The second biggest quarter however, has varied between the third (for much of the 2000s) and the first (for the last three years). The second quarter (which Apple reported this week) is now regularly the smallest. In the past, the spike in the fourth quarter was always driven by “holiday sales” – i.e. Christmas in much of the world and to a lesser extent the Thanksgiving holiday and associated “Black Friday” sales day in the US. This is true for all consumer electronics companies and Apple is no exception.

However, what’s changed in the last few years is Apple’s timing for its major product launches for the iPhone and iPad. The chart below shows how the dates have moved steadily to the right on the calendar, with the iPhone starting in June and July and shifting to October and then September, and the iPad starting in March and April and shifting to November.

Although product launches for the iPhone are technically in the third quarter, they’re so close to the fourth quarter the vast majority of early sales are pushed into that quarter. It means the fourth quarter becomes even bigger than it already is.

So why is that a problem? Well, there are several issues with it.

Firstly, it exacerbates the problem of supply constraints. Because Apple insists on absolute secrecy, and because it now announces new devices just 10-20 days before they launch, it has to ramp up manufacturing extremely quickly and it can’t meet demand. In late 2012, it was unable to meet demand for the iPhone and iPad until the first quarter of the following year. In 2013, it took almost the whole quarter to get demand and supply in balance. This means Apple is leaving money on the table for much of these quarters and, in some cases, customers may go elsewhere if they’re unable to buy the product they want, especially in the holiday season.

Secondly, it creates this huge spike in fourth quarter sales, followed by a steady drop in sales for the rest of the year. There is what I call a trained Osborne effect here, as Apple has trained devotees of its products to expect a fall launch and then an annual revision. If you care at all about having the latest and greatest device, you won’t buy an iPhone or iPad in the second quarter because you know a new one is just around the corner. That’s why sales don’t just fall from the fourth quarter to the first, but also fall from the first to the second. Apple is unwittingly creating an Osborne effect without even announcing anything, just because the pattern has become so clear. Apple therefore doesn’t just create a huge spike in the fourth quarter, it actually depresses sales in the rest of the year.

What Apple should do – stagger launches

There are short term and long term solutions to this problem. Start with the short term, some of which Apple is already doing:

Create a product that appeals to those who don’t care about having the latest and greatest device, and sell it in the lull quarters. Apple has done this with the iPhone 5C, which was heavily marketed at least in Europe and North America in Q2, and which likely drove high sales, driving down ASPs in the process. The 5C was launched at the same time as the 5S, but its most useful effect has been to fill some of the gap in 5S sales later in the year. For this reason, it might well make sense for Apple to keep the 5C concept around.
Continue to hold launches late in the quarter. Every iPhone launch but one (the 3G) has taken place in the last two weeks of a quarter (originally the second, and now the third). This spreads the spike effect a little by putting the massive launch weekend in the previous quarter. If Apple was holding iPhone launch events two weeks later, the third quarter would likely be the smallest by far, so this helps to mitigate that effect. But it isn’t yet doing this for the iPad, and it might make sense to do so.

However, the longer term solution is to move at least some product launches to other quarters, preferably in the first half of the year. This would create two annual spikes – one around the holiday season and one around the product launch. By staggering iPhone and iPad launches so they no longer spike around the same time of year, Apple could spread the effects even further throughout the calendar.

But all that is far easier said than done. Apple has moved product windows twice — once when the iPhone 4s arrived later than expected in 2011, and once when it accelerated the iPad development cycle to release the iPad 4 just eight months after the iPad 3. Those are the only two ways to move the product launch windows: produce one faster than the usual twelve month cycle, or leave a longer pause between launches. Neither is easy to do. Pre-empting or delaying the iPhone launch cycle, so tied to two year handset upgrade programs in many markets, would cause significant disruption and break the cycle for many users, possibly damaging sales. It’s arguably easier for Apple to disrupt the iPad launch schedule, since that’s less tied to a particular upgrade cycle, and it has done it once before. It’s also a category that evolves less dramatically from one iteration to the next and which has just seen big upgrades in both sizes. However, the new device upgrade plans available from US carriers and some others around the world may allow Apple more latitude than it has had in the past because customers are less tied to a two year cycle.

Another possibility is Apple staggers the launches for different versions of a product, e.g. launching several iPhones at different times during the year. The iPhone 5S might get an update on schedule in September of this year, perhaps with one larger screen size, while a device with an even larger screen or even the 5C successor might come in the spring. The iPad Air and iPad mini launches could also be split throughout the year, with one coming in the spring and one in the fall. Moving an iPhone launch to the spring would also upset Samsung’s rhythm, which currently pitches its flagship Galaxy S launches as far away in the calendar as possible, with the smaller Note launch much closer to the launch of new iPhones.

A change of this magnitude would be difficult and perhaps even painful in the short term, as it might either delay sales or create a smaller upgrade cycle for one year. But at the moment, Apple is both leaving money on the table by under-supplying demand in the fourth quarter and creating a massive lull in sales in the spring and summer. Both could be solved by moving at least some product launches back to other times of the year, and ideally late in the first quarter. Both overall sales and the stock market would be well served by a move away from fall product launches.

Apple Earnings: iPad Struggles and iTunes Revenue Importance

There were several interesting narratives out of Apple’s earnings report yesterday. The most glaring, and most confusing to many, was the struggles of the iPad. I’ll return to that in a moment. The Mac surprised many, but should not have surprised our readers. I wrote this in December of last year, and I explained the PCs upside in 2014. The PC will remain steady but we are still nowhere near the eventual bottom of annual cycles. We are seeing a refresh, mostly by corporations and education, and Apple, like many vendors, is positioned to capitalize on the upside. In an upcoming Insider post, I’ll layout why I think the Mac is actually a strong growth story for Apple.

But the iPad remains an important narrative. The tablet market is functioning exactly like the typical PC market. Therefore, our deep knowledge of PC cycles helps us understand the tablet market. There is one difference though and it is a significant one which has led to many to misunderstand the tablet market.

The tablet is still the fastest adopted technology in our industry history. Take a look at my install base estimates broken down by device.

Despite what you conclude about tablets, for a category which began in 2010, garnering 22% of the estimated current installed base is impressive. What gets lost is the speed in which this category grew.

It could be argued the iPad hit the perfect storm of lagging PC cycles, the mainstream’s desire for simplified computing paradigms vs complicated ones (the PC), and the Windows 8 debacle, all of which accelerated the adoption of the category. This burst led many to conclude the size of the tablet market was much larger than it actually is — potentially billions in annual unit shipments. Our forecasts were never that aggressive. While we believe the tablet market will remain a healthy segment, it will also be segmented. Segmentation will be what influences the total size of the tablet market.

With regard to iPad sales slowing, several things need to be mentioned. The first is the iPad had been experiencing solid growth in education and, to a degree, still is. However, new competition in the Chromebook has arisen for Apple in the education market. Every Chromebook manufacturer we speak with highlights to us they can not make enough to meet demand. Google announced they had sold one million Chromebooks to education in the second quarter, and the Chromebook segment is on pace to sell more than 5m units in 2014. While the iPad does more than double that number per quarter, the rising challenge of the Chromebook could be a factor in Apple’s education sector for iPads.

The enterprise is the other significant opportunity for iPad growth. I’ve spoken with a number of job market analysts and have heard numbers in the 300m-500m range for workers who don’t use a PC in their day job today but could benefit from a tablet computer. Things like construction, health, oil/gas/electic, factory workers, etc. Apple’s deal with IBM could help this, if for no other reason than it makes Apple in the enterprise more credible. Being viewed as credible to IT departments means they have more confidence to fully commit to iOS. This lack of credibility regarding Apple in the enterprise has been one of the things we hear from IT on why they hesitate to commit fully to iOS in their enterprise.

Lastly, replacement cycles are central to understand the tablet market. Fellow analyst colleague and Tech.pinions columnist Jan Dawson created a tremendous chart which we must dig into.

Jan has created a chart very similar in philosophy to ones used by all the PC vendors. It estimates the age of devices as a part of the active installed base. When I wrote earlier in the year about why I felt the PC would have a good 2014, it was based on a similar philosophy of estimates that there were around 300m PCs in active use five years or older. Knowing the replacement cycle for PCs to be in the 5-6 yr range, it was easy to conclude a large number would be upgraded soon. Using that same philosophy Jan has created this chart.

What we don’t know is the refresh cycles of tablets and, specifically, the iPad. Apple is somewhat cursed by the fact their products last so long without breaking. Consumers, on the other hand, are blessed by that reality. But if we simply look at the number of iPad’s still in use that are in the three yearr old range we can estimate the number to be around 50m units that should be eligible for upgrade in the near future.

Another key point to iPads we realized is the device is often handed down as new ones are purchased. Again, the value of the long life of the product allows this to happen. The impact of this will add to the overall installed base, but also could lead to a larger and difficult to predict refresh cycle at some point in time.

Adding new customers is the key metric to watch in this analysis. Apple reports frequently that 50% of iPad’s quarterly sales are to people who are first time iPad owners. Maintaining that statistic in our model is key as we track the installed base, growth cycle, and attempt to understand refresh patterns.

All of this brings us back to an important point about Apple’s business model. As I pointed out in my article on why Apple is immune to disruption, I specifically mention Apple has not and does not need to change their business model. What they do have to do, however, is capture more value per user. This is why watching iTunes services and revenue grow is a key statistic in the overall Apple narrative.

More Than One Jony Ive At Apple Now

Does Jonathan Ive really want an iPhone “phablet”? I have doubts. Ive resisted increasing the size of the original iPhone, yet today’s larger iPhones (5/c/s) seems far too small for much of the world. Ive’s iconic design will doubtless change yet again, soon, driven not by design principals but by market demand.

This is to be expected. The market never sleeps.

What I had not expected, however, yet which appears now almost certain to happen, is that Jony Ive likely won’t be involved in several major Apple hardware designs. Apple has simply become too big.

In yesterday’s earnings call, Tim Cook said he “can’t wait” to introduce several new products and services to the market. Ive may have overseen the design of all of these, but that’s not likely to remain true. What does this mean for Apple products going forward?

Mostly good things, I believe, with an explosion of not only new products, but new looks and new identities.

Cook Brings In Ringers

Does anyone really expect Dr. Dre and Jimmy Iovine to have their (Beats) headphones, speakers and related audio accessories conform to any Jony Ive preferences?

Yes, Ive is Senior Vice President, Design, in charge of software and hardware design. He has certainly earned his reputation as a peerless product designer. But I think Cook is right to bring in ‘ringers’ as the company steadily moves into new markets, new products and new regions, propelled by the world’s insatiable appetite for the high margin iPhone.

As Jan Dawson‘s latest chart reveals, iPhone revenues simply dwarf everything else at Apple — practically everything else everywhere.

Tim Cook has no intention of allowing this trend line to falter on his watch. More iPhones are to be sold to more people, with iPhone sales and margins protected by a range of hardware accessories. Beats, wearables, watches; these will be the start. Not all new hardware design will be overseen by Jony Ive.

Consider these Beats headphones. What will be Ive’s input into future Beats designs? Will he have any input?

It’s not just headphones and speakers, of course. Angela Ahrendts, the new Senior Vice President, Retail and Online Stores, has brought to life numerous fashions and accessories for Burberry, a company she almost singlehandedly rescued.

Ahrendts proved her deft touch in determining what products would sell to discerning customers, particularly in China — factors extremely important to Tim Cook’s grand plans. It seems silly to believe the future Dame Ahrendts will only be involved in the look and feel of Apple Stores given her uncanny ability to understand fashion, luxury, design and desire.

In fact, there may be no one at Apple with a stronger intellectual and emotional connection to Steve Jobs than this newest member of Apple’s executive team. Consider these quotes from a Vogue interview with Ahrendts:

Upon her arrival in London, she discovered that there weren’t many high-level Burberry executives who shared her enthusiasm for the label. Within a year, she sacked the entire Hong Kong design team and closed factories.

The label was in need of a dramatic overhaul, its famous plaid having become diluted by wide-spread, cheap copies.

Ahrendts and Christopher Bailey have taken (Burberry) back to its pure heritage.”

Ahrendts bought back 23 licenses that Burberry had sold to another companies, which had meant other firms could use its signature check on products such as disposable nappies for dogs. “I feel like I spent my first few years here buying back the company – not the most pleasant or creative task,” she said. “But we had to do it. If you can’t control everything, you can’t control anything, not really.”

Just like Cook didn’t acquire Beats solely for its margins on headphones, he did not bring in Ahrendts simply because she understands how to optimize profits per square foot.

A New Apple Design Template

I believe we are on the cusp of a product explosion at Apple. Given the new hires and acquisitions, I think a design explosion is also percolating inside Apple.

Just look at the talent.

This is a new Apple and one person, not even one team, can design every product for every market segment. Is Ive really best for each of these — or all of them?

Tablets and laptops
iWatch and wearables
iPhone cases and accessories
The look and feel of CarPlay — including built-in hardware — in vehicles ranging from a Mercedes AMG to a Chevrolet
iBeacons. iPods. Beats.
iPhone (all versions)

Putting Ive in charge of all of this is like putting Elvis in movies. Suboptimal results all around. Cook knows this. Therefore, he brought in significant talent from the outside. Ahrendts, Iovine, Dre, men and women with design experience in watches, fitness bands and wearables. Men and women with a keen, proven ability to attract Chinese consumers. Those with a keen ability to attract urban youth. Those who desire fashion and those who demand function.

Prediction: The iconic look and feel of Apple products will likely no longer be the single, driving element behind the company’s hardware. Rather, the depth of its integration to the iPhone. The days of ‘universal’ Apple products designed to satisfy everyone are coming to an end.

The future Apple will release some duds, no doubt, but I think there will mostly be an incredible range of beautiful, functional products.

Microsoft Removed Chesterton’s Fence

On Saturday, I explained why The Smartphone Is Not Merging With the PC. Apple and Google are moving in almost opposite directions from one another. But Microsoft? Their personal computing design philosophy is taking them nowhere fast. And one of the reasons for this failure in design is Microsoft is guilty of removing Chesterton’s Fence.

Chesterton’s fence is the principle that you should never take a fence down until you know the reason why it was put up.

The paraphrased quotation, was ascribed to Gilbert Keith Chesterton by John F. Kennedy in a 1945 notebook. The correct quotation is from Chesterton’s 1929 book, The Thing, in the chapter entitled, “The Drift from Domesticity”

In the matter of reforming things, as distinct from deforming them, there is one plain and simple principle; a principle which will probably be called a paradox. There exists in such a case a certain institution or law; let us say, for the sake of simplicity, a fence or gate erected across a road. The more modern type of reformer goes gaily up to it and says, “I don’t see the use of this; let us clear it away.” To which the more intelligent type of reformer will do well to answer: “If you don’t see the use of it, I certainly won’t let you clear it away. Go away and think. Then, when you can come back and tell me that you do see the use of it, I may allow you to destroy it. ~

Wikipedia

For a decade, Microsoft tried, and failed, to master the tablet form factor. In April 2010, Apple introduced the iPad. In less than six months, Apple had sold more tablets than Microsoft had sold in the previous ten years. How could this be?

Apple built a Chesterton’s fence between the desktop and the tablet. The desktop used a mouse to enter pixel specific input. The tablet used a finger to enter touch input. Each form of input was separate, one from the other.

Remember, the iPad — especially in comparison to the Windows’ tablets that had preceded it — was wildly successful. However, Microsoft treated that success with utter disdain. They gaily came upon Apple’s method of using separate inputs for separate form factors and said: “I don’t see the use of this; let us clear it away.” They did not “go away and think”, they simply took the fence down without knowing the reason why it was put up in the first place.

Bill Gates’ Interview

The truth is actually a little more ominous than this. Listen to what Bill Gates had to say in this 2007 AllThingsD interview conducted by Walt Mossberg:

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 you’ll have the device that fits in your pocket…

…and then we’ll have the evolution of the portable machine. And the evolution of the phone will both be extremely high volume, complementary–that is, if you own one, you’re more likely to own the other.

Sounds a lot like the iPad and the iPhone, right? And it doesn’t sound at all like the 2-in-1 Frankenstein’s monster Microsoft is trying to foist upon its unsuspecting customers.

Conclusion

The truth is, Microsoft didn’t take down Chesterton’s fence because they didn’t know any better. They took it down DESPITE knowing better. They took it down because they had to — because Apple’s separation of desktop and tablet inputs conflicted with Microsoft’s Windows business model. And having now removed the fence, Microsoft is seeing why it was put there in the first place. And so, in closing, the principle of Chesterton’s fence remains:

Never take a fence down until you know the reason why it was put up.

Deconstructing Satya. Episode II. The Empire Strikes Back.

Last week before the news broke, I warned Microsoft employees, all of them, to “get to work on your resume.” Change was coming, major change, and that always always always begins with a bloodletting.

Indeed, as others were decrying the word count of Satya Nadella’s “bold ambition” manifesto — signifying nothing, given it took Steve Jobs 1700 words to tell us he wasn’t going to use Flash on the iPhone — I read each word, every sentence. Nadella’s near-term intentions were obvious.

What was not clear, however, not until now, is how deeply divisive the Nokia purchase remains within the corridors of Microsoft’s ruling elite.

This Deal Is Getting Worse All The Time

Despite the corporate-speak, despite the strategic shift toward “productivity and platforms,” Nadella’s manifesto message last week was undeniable. Job cuts. Thus, I wrote:

“Big layoffs by Christmas.”

But Nadella kept hinting, so I followed that with…

“Big layoffs by Thanksgiving.”

But Nadella hinted further, so I followed that with…

“Big layoffs by Labor Day.”

In fact, the big cuts came only a few days later. Points for swift action, I suppose.

Nadella’s willingness to act fast, to re-make Microsoft, hack away at the extraneous and transform the company into “the productivity and platform company for the mobile-first and cloud-first world” appears to be exactly what the company needs.

But when you gut a $7.2 billion acquisition, which the company only closed on this past April, and fire 18,000 people, then you haven’t leapt from a burning platform, you’ve set the platform ablaze. There is no going back, no do-overs for Mr. Nadella. He is about to set the company on a ten year course, possibly longer, and though Microsoft possesses a rather stunning array of assets, what’s most stunning is the company still has virtually zero response to the iPhone, the iPad and Android. In 2014.

Competing in a mobile-first, cloud-first world — with no mobile device the world actually wants — seems less like corporate bumbling at this point and more like French royalty certain the barbarians will forever remain outside the gate.

Sadly, more than 18,000 will soon join those barbarians.

That Was Never A Condition Of Our Agreement

Nadella’s follow-up email to staff announcing major cuts is mercifully shorter than his bold ambition manifesto, though similarly riddled with the kind of corporate-speak analysts with expense accounts use on marketing managers with a too large budget.

My thoughts on Nadella’s latest message are below, in bold italic.

From: Satya Nadella
To: All Employees
Date: July 17, 2014 at 5:00 a.m. PT

5am! Leading is hard.

Subject: Starting to Evolve Our Organization and Culture

“Starting to Evolve.” Catch that? This is just the start.

Last week in my email to you I synthesized our strategic direction as a productivity and platform company.

And now I’m gonna need those TPS reports.

Having a clear focus is the start of the journey, not the end. The more difficult steps are creating the organization and culture to bring our ambitions to life. Today I’ll share more on how we’re moving forward. On July 22, during our public earnings call, I’ll share further specifics on where we are focusing our innovation investments.

This reads like a draft memo from the assistant to the regional manager. No excuses here.

The first step to building the right organization for our ambitions is to realign our workforce. With this in mind, we will begin to reduce the size of our overall workforce by up to 18,000 jobs in the next year.

Nokia is dead. Godspeed all you Nokians.

Of that total, our work toward synergies and strategic alignment on Nokia Devices and Services is expected to account for about 12,500 jobs, comprising both professional and factory workers.

12,500

In his “bold ambition” email to employees, only days before this, Nadella stated “first party hardware” would form part of the core Microsoft vision. He said this four times!

Our cloud OS infrastructure, device OS and first-party hardware will all build around this core focus and enable broad ecosystems.
Our Windows device OS and first-party hardware will set the bar for productivity experiences.
Our first-party devices will light up digital work and life.
We will build first-party hardware to stimulate more demand for the entire Windows ecosystem.

[emphasis added]

Now, days later, he guts Nokia, kills off the very popular Asha hybrid phone line and halts development of the AOSP-led Nokia X.

I suspect Mr. Nadella believes the smartphone wars are lost, despite whatever else the company may tell us. They are no longer worth fighting for.

We are moving now to start reducing the first 13,000 positions, and the vast majority of employees whose jobs will be eliminated will be notified over the next six months.

13,000 from the 18,000? 12,500 from Nokia plus 500 from elsewhere? Where does this number come from?

Nadella needs to be straightforward here. So far, he’s failed.

It’s important to note that while we are eliminating roles in some areas, we are adding roles in certain other strategic areas.

Nowhere near 18,000, however. Thus, it would be best if not said at all.

My promise to you is that we will go through this process in the most thoughtful and transparent way possible.

Your own email appears poorly thought out and lacking transparency!

We will offer severance to all employees impacted by these changes, as well as job transition help in many locations, and everyone can expect to be treated with the respect they deserve for their contributions to this company.

Forget them. Move forward.

Later today your Senior Leadership Team member will share more on what to expect in your organization.

How bureaucratic is this company?

Our workforce reductions are mainly driven by two outcomes: work simplification as well as Nokia Devices and Services integration synergies and strategic alignment.

That’s three, maybe four outcomes, not two. Can Nadella really not trust anyone to review and edit his emails?

Fact: Nearly every single Nokia device over the next several years will be replaced by an Android, perhaps a few by iPhones, not Windows Phone (in any form).

My prediction that the remaining “Nokia” employees will focus mostly on new mobile productivity devices and new mobile gaming devices, not smartphones, stands. Nadella just isn’t ready to tell us this, not yet. Perhaps, he’s not come to terms with it himself.

First, we will simplify the way we work to drive greater accountability, become more agile and move faster.

Perhaps given your size, strengths and history, being inflexible and moving slower, and with less accountability (e.g. investor input), would be the best strategy?

Yes, I am serious. Agility and speed are never the strengths of behemoths.

Perhaps You Think You Are Being Treated Unfairly

As part of modernizing our engineering processes the expectations we have from each of our disciplines will change. In addition, we plan to have fewer layers of management, both top down and sideways, to accelerate the flow of information and decision making. This includes flattening organizations and increasing the span of control of people managers.

Sideways layers of management? Sideways layers!

In addition, our business processes and support models will be more lean and efficient with greater trust between teams. The overall result of these changes will be more productive, impactful teams across Microsoft.

Question: How dysfunctional is this company?

These changes will affect both the Microsoft workforce and our vendor staff. Each organization is starting at different points and moving at different paces.

Answer: Appreciably dysfunctional.

Second, we are working to integrate the Nokia Devices and Services teams into Microsoft. We will realize the synergies to which we committed when we announced the acquisition last September. The first-party phone portfolio will align to Microsoft’s strategic direction. To win in the higher price tiers, we will focus on breakthrough innovation that expresses and enlivens Microsoft’s digital work and digital life experiences. In addition, we plan to shift select Nokia X product designs to become Lumia products running Windows. This builds on our success in the affordable smartphone space and aligns with our focus on Windows Universal Apps.

Integrate Nokia into Microsoft? Realize the synergies committed to last September? Align the first party phone portfolio to Microsoft’s strategic direction? To win the higher price tiers? Which builds on Microsoft’s success in the affordable smartphone space?

We can’t possibly divine what these words mean because Nadella does not know the way forward in mobile. That’s a problem.

Making these decisions to change are difficult, but necessary. I want to invite you to my monthly Q&A event tomorrow. I hope you can join, and I hope you will ask any question that’s on your mind. Thank you for your support as we start to take steps forward in evolving our organization and culture.

Satya

It Is Your Destiny

Last week, I praised Nadella for his bold, borderline revolutionary statements. A few days later he morphs into a parody of his predecessor.

I give him a pass. This time.

When it comes to massive corporate downsizing, we always say there’s a right way to do these things but there’s never a right way to do these things. That said, it seems clear Nadella hasn’t yet figured out exactly what Microsoft should do in mobile and that’s a problem for which no one will give him a pass.

The Smartphone Is Not Merging With the PC

Behold the pot, bathtub and swimming pool. They all contain water. They are the same. ~ Horace Dediu (@asymco)

On July 9, 2014, Walt Mossberg published an article entitled: “How the PC Is Merging With the Smartphone.”

(I)n the past month, it has become clear that a serious effort has begun to merge the smartphone and the PC. ~ Walt Mossberg

To “merge” means:

merge |mərj| verb “combine or cause to combine to form a single entity”

[pullquote]Writing is easy. All you have to do is cross out the wrong words. ~ Mark Twain[/pullquote]

I respectfully, but vehemently, disagree with Mr. Mossberg’s observation that the smartphone and the PC are merging. Not only aren’t they merging but they — and their underlying design philosophies — are diverging.

Starting Far Apart

Apple, Google and Microsoft are three of the largest players in personal computing. However, their design philosophies start from very different places.

Apple, Google, and Microsoft each offer all three things: devices, services, and platforms. But each has a different starting point. With Apple it’s the device. With Microsoft it’s the platform. With Google it’s the services. ~ John Gruber

Apple, Google and Microsoft not only start from different places, they are also headed in three very different directions.

Moving Further Apart

Google wants you signed into Google services on all your devices, from phones to tablets to PCs. ~ John Gruber

Google may well be offering one experience at the services layer, but that is not the same as merging the smartphone and the PC and it is not at all the same as what Apple and Microsoft are doing.

Microsoft wants you to run Windows on all your devices, from phones to tablets to PCs. ~ John Gruber

Microsoft may well WANT to run a single Windows operating system on all of your devices, but so far their efforts to create one operating system that runs on phones, tablets, and desktops has actually caused Windows to splinter into three operating systems: one for the phone (Windows Phone 8); one for the tablet (Metro) and one for the desktop (Windows 8). Calling them all by one name does not make them all one thing.

[pullquote]There is nothing so useless as doing efficiently that which should not be done at all. ~ Peter Drucker[/pullquote]

Further, while Microsoft may well be attempting to merge the tablet and the PC at the hardware layer 1) that is not the same as merging the smartphone and the PC; 2) the paltry sales numbers for their 2-in-1 devices weigh against, not for, the proposition that merging is the way of the future; and 3) Microsoft’s efforts are not at all the same as what Apple and Google are doing.

Apple wants you to buy iPhones, iPads, and Macs. ~ John Gruber

Apple is not merging anywhere — not at the services layer, not at the operating system layer, and most especially not at the hardware layer.

(Apple chief of design, Jony) Ive demands that the hardware be true to itself—its purpose, its materials, the way it looks, and the way it feels. ~ John Siracusa

Not only aren’t iPhones and Macs merging, but Apple’s continuity features allow Apple to draw bright lines between their phone, their tablet and and their desktop offerings.

Apple’s vision is about harnessing the uniqueness of each device rather than converging them ~ Ben Bajarin (@BenBajarin)

Further, what Apple is doing is not at all the same as what Google and Microsoft are doing.

Whatever This Is, It’s Not Merging

A gardener uses a trowel when he gardens and a shovel when he digs. He doesn’t think, “Hey, the trowel and the shovel are merging because they both dig holes!”
A homeowner uses a watering can to water the flowers in her home and a hose to water the flowers on her porch. She doesn’t think, “Hey, the watering can and the hose are merging because they both water flowers!”
A restaurant employee washes the floor with water from a bucket and washes dishes with water in a sink. He doesn’t think, “Hey, the bucket and the sink are merging because they both do washing!”

Semantics

The beginning of wisdom is a definition of terms. ~ Socrates

Is this just a question of semantics? Well, even if it was, semantics matters. Semantics is: “The branch of linguistics and logic concerned with meaning.”

A definition is the enclosing a wilderness of idea within a wall of words. ~ Samuel Butler

However, this isn’t just semantics. This is a distinction with a difference.

The difference between the right word and the almost right word is the difference between lightning and a lightning bug. ~ Mark Twain

Nothing Is Merging

[pullquote]You cannot step into the same river twice. ~ Heraclitus[/pullquote]

Apple is improving the workflow between its devices. Workflow is, by definition, a flow. Saying that workflow is “merging” is like saying that a river is a lake. The improved workflow between Apple’s devices allows those devices to be true to themselves and to grow ever more distinct, one from the other. At Apple, the smartphone and the PC are not merging.

Google is improving its services. It wants you to think of phones, tablets and PCs as portals used to peer into the Cloud — the Google Cloud that is — where all your content and apps, reside. Google may not care which portal you use, but they have no interest in merging those portals. At Google, the smartphone and the PC are not merging.

[pullquote]Facts do not cease to exist because they are ignored. ~ Aldous Huxley[/pullquote]

Microsoft is improving nothing. They are forcing the merger of the tablet and the PC because their Windows’ business model demands it. They have not learned — or more likely, they refuse to acknowledge — that the mouse driven user input suitable for the desktop is unsuitable for, and incompatible with, the touch driven user input of the tablet. At Microsoft, the smartphone and the PC are not merging.

Caption: Leaked image of the Microsoft Windows 8.1 Pro Surface Axe/Razor 2-in-1 Hybrid Shaving Combo Device.

Diverging

Microsoft’s muddled personal computing design is going nowhere, but the design philosophies of Google and Apple are unique and they are rapidly diverging, rather than merging.

Normally, in mature markets, products grow closer and closer to one another as each competitor borrows the best ideas of the other and incorporates them into their own product or service. That has happened with Mac and Windows over the past thirty years and with iOS, Android and Windows Phone over the past seven years. However, Apple and Google are now rapidly moving in opposite directions.

Apple is pushing all of the value down into their devices. Google is pushing all the value up into their services. This is going to have dramatic, long-term, consequences.

Google will almost certainly excel wherever machine learning matters most: maps, voice translation, predictive services and who knows what else.

Apple will almost certainly excel at any task that requires rich applications and with any entity or institution (education, business, government) that inhabits the “long tail” of app creation (i.e., specialized or proprietary apps) and demands robust security and privacy.

Suggesting that the smartphone is merging with the PC obscures this reality. It implies that the overall approaches of Apple, Google and Microsoft are drawing closer together when, in fact, they are not.

Henry Ford said:

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.

I get the feeling that both Google AND Apple fit into this category of business. Each feels that they know best and each is moving on without much regard for the what the other is doing. Focusing on merging is a distraction. What we need to be focusing on is what is emerging from these two great titans of tech.

Woof

A dog goes into a newspaper to place an advertisement.

“What do you want your ad to say?” asks the newspaper clerk.

“Woof Woof Woof. Woof Woof Woof. Woof Woof Woof,” says the dog.

The newspaper clerk adds up the words and says, “Okay, that’s nine words. We charge the same for up to ten words. You could add another ‘woof’ for no extra money.”

The dog says, “But that wouldn’t make any sense.”

Walt Mossberg is not just a good tech writer, he’s one of the very best there is. However, on this one occasion, I believe he added one “woof” too many.

Divining Apple’s Wearable Design

Most of the wearables on the market today are an experiment in artificial stupidity. Rather than solve problems, they create them. Using a wearable today is like using a screwdriver to cut roast beef.

A good design introduces enough unfamiliarity to be interesting, but not so much as to be annoying. ~ John Maeda (@johnmaeda)

Don’t get me wrong. Today’s wearables should not be tossed aside lightly. They should instead be thrown with great force. ((With apologies to the great Dorothy Parker)) In fact, that reminds me of a riddle:

QUESTION: If you throw the Samsung Galaxy Gear off the Eiffel Tower and you throw the Moto 360 off the tower of Pisa, which one would hit the ground first?

ANSWER: Who cares?

CAPTION: Today’s Wearable Marketplace

How do I know Android wearables are a terrible idea? China doesn’t even steal them and make knockoffs. ~ The grugq (@thegrugq) 7/10/14

What’s Missing?

Most companies are full of processes designed to solve problems from a long time ago. ~ John Maeda (@johnmaeda)

Today’s smartwatches are going nowhere because they’re using tomorrow’s technology to provide yesterday’s solutions to problems that no one has today. But what about tomorrows’ wearables? Apple is rumored to be bringing out a line of their own wearables this Fall and Apple is well-known for their design prowess.

Will Apple use design to differentiate their product?

“I think a lot of people see design primarily as a means to differentiate their product competitively,” Ive said. “I really detest that.”

Hmm. Maybe not.

Perhaps Apple’s wearables will be better because they will have better technology.

We don’t buy things because they have better technology; we buy them because they’re better designed. ~ johnmaeda (@johnmaeda)

Hmm. Maybe not that either.

Or perhaps Apple’s wearables will be better by design.

Design is so critical it should be on the agenda of every meeting in every single department. ~ Tom Peters

I love it when you can bring really great design and simple capability to something that doesn’t cost much. It was the original vision for Apple. That’s what we tried to do with the first Mac. That’s what we did with the iPod. ~ Steve Jobs

Ah, design. That’s what’s missing in today’s wearables and that’s where Apple shines.

We’re the only company that owns the whole widget — the hardware, the software, and the operating system. We can take full responsibility for the user experience. We can do things that the other guy can’t do. ~ Steve Jobs

Dieter Rams’s Design Principles

Steve Jobs and Jony Ive were admirers of Dieter Rams, a famous designer for Braun, who had a number of mottos and aphorisms about design. Let’s look at seven of his design principles and see how they apply to current and potential wearable devices.

1) GOOD DESIGN MAKES A PRODUCT USEFUL

A product is bought to be used. It has to satisfy certain criteria, not only functional, but also psychological and aesthetic. Good design emphasizes the usefulness of a product whilst disregarding anything that could possibly detract from it. ~ Dieter Rams

Today’s wearables are not very useful. In fact, they’re more work than they’re worth. Surveys show most of today’s wearables end up in a drawer after about three months of use.

If notifications are to be useful on your wrist then they can’t just be a mirror of the ones on your phone. ~ Ben Bajarin (@BenBajarin)

At best, today’s wearables duplicate the functionality of a smartphone on a form factor not well suited for performing smartphone functions. Now what does that remind me of? Oh yeah, trying to cram a desktop operating system into a tablet form factor. How’d that work out?

CAPTION: The first public prototype of a Tablet PC (2001). It ran the Windows XP Tablet PC Edition ((You’ve gotta love Microsoft’s naming conventions.)) operating system ((Bill Gates of Microsoft showed the first public prototype of a Tablet PC (defined by Microsoft as a pen-computer allows hardware in accordance with the specifications made by Microsoft and running a licensed copy of the operating system “Windows XP Tablet PC Edition”) at COMDEX.))

Good design isn’t about being pretty, it’s about solving a tangible problem. Today’s wearables are answers searching for a question. If wearables are to have any tomorrows, it will be because they provide a startlingly good answer to the unidentified, undefined, unmet needs of today.

If we want to forecast what Apple is going to introduce in wearables, we need to stop thinking about what is on the market today. In 2007, what we wanted was an iPod and a phone. What we got was an iPod and a phone and an internet communicator and (a year later) an app store. What we got was a computer in our pocket. The iPhone didn’t give us what we wanted, it gave us what we needed. The same will be true of wearables.

2) GOOD DESIGN MAKES A PRODUCT UNDERSTANDABLE

It clarifies the product’s structure. Better still, it can make the product talk. At best, it is self-explanatory. ~ Dieter Rams

Below is the remote control that came with the Sony Google TV.

— Not understandable.
— Not self-explanatory.
— Not good design.

A well designed product doesn’t merely do your work, it also works the way you do.

There was a debate [on the Lisa] team about the mouse. Was it going to have a mouse, and how many buttons should it have? Steve and I wanted one button, because if there’s one button, you never have to think about it. One of the former Xerox guys argued for six buttons. He said, “Look, bartenders have six buttons on those drink dispensers, and they can handle it.” But that was a failure to understand what Steve was trying to do with user experience. ~ Trip Hawkins, excerpt From: Max Chafkin. “Design Crazy.”

If you’re designing a product and your customer has to think about how to use it, then you’re not done designing.

Design makes what is complex feel simpler, and makes what is simpler feel richer. ~ johnmaeda (@johnmaeda)

If we want to forecast what Apple is going to introduce in wearables, we need to stop thinking smartphone interface on a watch form factor. Think monitor on a computer (Apple II), a mouse on your desk and GUI interface on your screen (Macintosh), a shuttle wheel in your hand (iPod), and a touch interface on glass (iPhone and iPad). If wearables deserve to be a separate category, then they deserve a form of input uniquely suited to their size and form factor.

3) 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

Good design gets design out of the way. If it’s done right, it seems inevitable. The best designs feel almost as if they were undesigned because they’re just the way you would expect them to be.

The word that comes up over and over again when describing good design is “disappears”. Here are some quotes, to illustrate:

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

I like things that do the job and kind of disappear into my life. ~ Steve Jobs

If it disappears, we know we’ve done it. ~ Craig Federighi

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

Herein lies another clue for us all. If we want to forecast what Apple is going to introduce in wearables, we need to stop thinking in terms of what the device can do and start thinking in terms of what the device will allow us to do. A well designed wearable will not make us do more. Instead, it will allow us to accomplish more while we do less. It will not impose its way of doing things upon us. Rather, it will allow us to impose our way of doing, upon those things, that we need done.

4) GOOD DESIGN IS HONEST

It does not make a product more innovative, powerful or valuable than it really is. It does not attempt to manipulate the consumer with promises that cannot be kept. ~ Dieter Rams

Here is Steve Jobs, describing the iMac in 2002:

(Why not) let each element be true to itself? If the screen is flat, let it be flat. If the computer wants to be horizontal, let it be horizontal.

Now compare that sentiment to the Samsung Galaxy Note 3, in one-handed operation mode. Ironically, in the image below, the one-handed mode is being demoed with the use of two hands.

— Not honest.
— Not true to itself.
— Not good design.

Abraham Maslow said: “A musician must make music, an artist must paint, a poet must write, if he is to be ultimately at peace with himself. What a man can be, he must be.” The same is true of devices. Good design doesn’t make a device better than it is. It doesn’t even make a device better. Good design fulfills a device’s destiny. It makes it what is and what it was always meant to be.

If we want to forecast what Apple is going to introduce in wearables, we need to think about allowing a wearable to be true to itself. A wearable will be small. A wearable may be in contact with our body. A wearable will be persistent. A wearable will be proximate. Does a monitor — which is large and battery draining — work within the constraints of small and persistent? I doubt it.

We need to stop thinking “watch” and start thinking sensors (which are small and in contact with our body) ID (which is persistent) information, payments and security (which is proximate). In fact, we need to stop thinking about what a wearable can DO and start thinking about the WHERE of wearables. Wearables may not need to DO anything at all. They may just need to be in the same place and space that we are. That may be their true calling. And that may be more than enough to make them invaluable.

5) GOOD DESIGN IS LONG-LASTING

It avoids being fashionable and therefore never appears antiquated. Unlike fashionable design, it lasts many years – even in today’s throwaway society. ~ Dieter Rams

There has been much talk in the tech press of Apple becoming more of a fashion shop.

Might Apple have a future as a fashion conglomerate? – CNET

Apple Has Gone Full-Fashion With Its Newest Executive Hire – Refinery29

Apple Looks to Fashion as it Preps for iWatch – Esquire

I think this talk is misguided.

The following epitomizes fashion:

Fashion is something that goes in one year and out the other. ~ Denise Klahn

Fashion is a form of ugliness so intolerable that we have to alter it every six months. ~ Oscar Wilde

Fashion is made to become unfashionable. ~ Coco Chanel

Apple is a Design Shop. Design is about style. Design is about aesthetics. Design is about long lasting.

Fashions change, but style is forever. ~ Anonymous

Fashion changes, style remains. ~ Gabrielle “Coco” Chanel

Good design doesn’t date. ~ Harry Seidler

Design IS beautiful, not because it tries to be, but because it MUST be:

When I am working on a problem, I never think about beauty … but when I have finished, if the solution is not beautiful, I know it is wrong. ~ R. Buckminster Fuller

CAPTION: If it looks well, it flies well — aesthetics and performance relate.

I think this may provide us with the biggest clue as to what Apple is NOT going to do in wearables. If we want to forecast what Apple is going to introduce in wearables, we need to stop thinking “watch” and we need to stop thinking “fashion.” Apple will not create a device that is decorative and a slave to fashion. Fashion changes far too quickly. Apple will seek, instead, to make something that is long lasting and enduring. That most probably means an Apple wearable will be restrained, unobtrusive, barely noticeable, virtually invisible.

6) GOOD DESIGN IS AS LITTLE DESIGN AS POSSIBLE

Less, but better – because it concentrates on the essential aspects, and the products are not burdened with non-essentials. Back to purity, back to simplicity. ~ Dieter Rams

Robert Browning said, “less is more” ((Popularized by the German-born American architect Ludwig Mies van der Rohe)) and there is a lot of truth contained in that pithy paradoxical platitude. However, when it comes to design, I much prefer Dieter Rams’ “less, but better”. It encapsulates — in three words — the concept of good design being as little design as possible.

Almost all quality improvement comes via simplification of design, manufacturing… layout, processes, and procedures. ~ Tom Peters

What is left out … is as important as, if not more important than, what is put in. ~ Katherine Paterson

See it big, and keep it simple. ~ Wilferd A. Peterson

‘Think simple’ as my old master used to say – meaning reduce the whole of its parts into the simplest terms…. ~ Frank Lloyd Wright

[pullquote] Good design subtracts features yet increases functionality[/pullquote]

Features add complexity. Complexity adds functionality. Good design is paradoxical. It subtracts features while simultaneously increasing functionality. A good design finds an elegant way to put all the features you need in. A great design leaves half those features out. ((Inspired by Mike Monteiro (@Mike_FTW)))

A work is perfectly finished only when nothing can be added to it and nothing taken away. ~ Joseph Joubert

Perfection is finally attained not when there is no longer anything to add but when there is no longer anything to take away… ~ Antoine De Saint-exupery

The philosophy (at Apple) was never stated, but it was this: Get rid of all the junk you didn’t need. ~ Tom Suiter, director of Apple creative services ((Excerpt From: Max Chafkin. “Design Crazy.”))

If we want to forecast what Apple is going to introduce in wearables, we need to stop thinking “features”, need to start thinking essentials and need to focus on minimalism — doing the most with the least. That’s why I think an Apple wearable will be more like a band than a watch. But no matter what form the Apple wearable takes, look for it to be less than you expect, yet do more than you might initially anticipate.

Conclusion

There are three responses to a piece of design – yes, no, and WOW! Wow is the one to aim for. – Milton Glaser

There are no “wow” wearable devices on the market today. In fact, I’d venture to say our initial reaction to today’s wearables has been closer to “Yikes!”

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

Let me repeat that, because I love it so much. The future lies in designing and selling computers that people don’t realize are computers at all.

That about says it all, so I’ll say little more. We won’t have to guess when wearabables get it right. We’ll simply know, because we’ll stop thinking about how much better wearables have become and start thinking, instead, about how much better our lives have become.

Post Script

Thoughts on my thoughts? Leave a comment, below, or contact me on Twitter @johnkirk.

The Smartphone Is The Computer

I have spent the past three weeks in Detroit, a city possessing a rich history and an unremitting present. The vagaries of Silicon Valley count for little here. When I heard a young man ask — for real — if the Samsung Galaxy S5 was an iPhone or an Android, I knew there was much to glean if I simply put my smartphone down and listened.

Here then are my thoughts, insights and observations from the past one score and one day…

There are no smartphone wars. Rather, just amazing, affordable and truly expansive opportunity. Android versus iPhone means nothing to nearly everyone I speak with.

It is hard to overstate just how much television will be disrupted by the combination of children, tablets and YouTube. Free, always accessible content uniquely tailored to their own self-driven interests, available from any location is now possible — and the young will accept nothing less.

Facebook, not smartphones, not telcos, not automobiles, not Disney or ESPN, is connecting the world. Facebook is the new oil. If there is any ‘next Steve Jobs,’ it is Mark Zuckerberg. For whatever confluence of reasons, Zuckerberg divined the power of social media from the start, just as Jobs did with computing. No matter how rich, no matter how many struggles, I expect Zuckerberg to devote the remainder of his life to Facebook and all it represents.

There is middling outrage over the Facebook ‘user emotion’ study. As for me, this represents little more than A/B testing. In fact, I’m more angry over the iPhone keyboard. It’s so terrible. Is this some sort of secret Apple study? I mean, what other possible reason could there be?

I am in the place where cars and mass production altered the course of humanity. Now, it is smartphones, social media, mapping, and code; these are re-making the planet as much as the automobile did in the 20th century. We are at the start of a new future. That’s just awesome.

I was often asked the best way to become a professional writer. It’s such an easy question to answer.

Marry well.

Oh, and should you be so fortunate to have an opportunity to write about what you love, for an organization with no concern for page views and provocation, as I am at Tech.pinions, then do not fritter away such a blessing.

I first learned about the SCiO from Techpinions. Point this device at a piece of fruit for example, and it will tell you what it is and even provide data on its composition, such as how much fat and carbs the item contains. Every single time I read more about this device, I think it is absolute magic. I told so many people about it that I now desperately hope it works as advertised.

I have nothing but good things to say about the Amazon Fire Phone. Yet, I can’t possibly recommend it to anyone. Why would I? In the US, at least, there is almost no reason to recommend any smartphone other than the iPhone or the Samsung Galaxy.

Microsoft’s Windows Phone faces a similar fate as Amazon’s Fire. Fair or not, can you imagine any outcome for Windows Phone other than failure? How does Microsoft start over? What amazing technologies, hardware and combination of services can they possibly deliver to make the world care about a device that is not iPhone or Android? I do not have the answers.

If I were in charge of Microsoft I would simply continue to make quality devices, offering great Nokia design, great Nokia imaging, incorporating Skype, OneDrive, HERE, Office and other Microsoft-owned products and services. Plodding along, hoping more and more Android vendors exit the business, picking up the scraps, all while leveraging my enterprise install base and security, identity and productivity tools, hoping users discover my superior value.

It won’t help. The smartphone market is lost to Microsoft.

The screen market, however, is barely in its infancy. Microsoft should forget smartphones and focus instead on screens. Screens will become like power outlets, we only notice them when they cannot be found.

Perhaps no company — not Apple, not even Google — possesses the breadth of services Microsoft offers. The problem, of course, is these services are not exposed for all the world to use. They are locked inside unwanted PCs, shoved inside tablet abominations, buried beneath the content we actually seek from our Xbox systems, sold mostly to IT directors, attached to products and platforms we do not need, and hidden behind an incomprehensible UI. Microsoft has built an anti-moat around its services, not locking us in but keeping everyone out.

The World Cup has introduced to millions the joys of live sports streamed to our smartphones and tablets. This is so in Detroit and around the country. It has never been more clear we all want to watch what we want to watch when we want to watch it where we want to watch it and on the device we want to watch it on. This is simple, obvious and unstoppable. It’s only a matter of time before we have a difficult time explaining to our progeny how it ever could have been anything else.

Last week, Apple CEO Tim Cook very happily took part in the San Francisco Pride Parade. Also, Hobby Lobby successfully won the right to provide only certain forms of contraception for its employees. What do these have in common?

Values equal profits.

Companies are publicly declaring their values, even going to court to defend and promote their values. This is only start. The technologies of Silicon Valley are breaking down barriers, bringing corporations to their knees and empowering individuals and groups around the world. With smartphones in hand, with continuous, real time, location-aware connectivity always available, we become our own corporations — with Uber, AirBnB and others merely pointing the way. We will work for ourselves and we will live by our values.

This is good. But it will be messy. Very messy.

Hype aside, can you envision a situation where you use Bitcoin over, say, your iPhone ‘wallet’ linked to your secure iTunes payment data? iPhone offers ease of use and peace of mind. That’s a powerful combination. Still worse for Bitcoin, is that it is essentially digital cash in a world addicted to easy credit. Learn about the blockchain. Bitcoin itself is merely a bystander.

Given Android’s headstart in wearables, it’s hard to see Apple winning any wearable app wars. Given the limitations of its market reach, it’s similarly difficult to see Apple winning the “smart home” market without buying its way in. Sonos would be a good start.

Smartphones are borderline magical. That said, the iPhone 5s battery and the HTC One (M8) camera are embarrassingly bad.

In the past week, I’ve rented two movies from iTunes. I failed to finish both in the first sitting and was not able to watch either until after 24 hours later. iTunes refused, insisting the rental period had expired. This was true, though did not mitigate my anger. I may abandon iTunes rentals altogether. The lure of non-legal downloading is strong.

How much of Yahoo’s Alibaba riches is Marissa Mayer prepared to spend to get us to visit Yahoo? I suspect all of it. Nowhere I go does Yahoo seem to matter.

Idle prediction: Apple will not kill off the iPhone 5/c/s form factor this year, nor will Apple offer three simultaneous iPhone form factors. Yes, that means I am predicting only one large-display iPhone.

Not a prediction, just a thought experiment: In 2024, when a chid is born, they will be assigned either an Android or an iPhone. This will control everything.

There will be over 1 billion (American) Android activations this year, and several hundred million (Chinese) Android (AOSP) activations. Android is a stunning success story. All those involved in Android have long since earned our respect. That said, some analysts, bloggers and even industry insiders still have not grasped the obvious: Smartphones are the first screen. Smartphones are the primary computer.

The CEO of Yahoo is female. The CEO of HP is female. The #2 at Facebook is female. A man runs Android, the world’s most popular OS. He is from India. The CEO of Microsoft is from India. The tech sector points the way forward not only with its products.

Be smart. Work hard. That’s true everywhere.

Our Wearable Future: Lessons Unlearned

On June 27th, Tim Bajarin wrote an excellent article on wearables entitled “Understanding Apple’s Wearable Strategy“. If you haven’t read it, I highly encourage you to take the time to read it, or re-read it, now.

Tim’s article got me thinking. We’ve been down the “new categories” road before but we always seem to get it wrong. I wondered why. So I took a step back and drew up an ad hoc list of lessons unlearned from the past in the hope that — as we peer into the future of the wearables category — we might avoid falling into the same traps as we have before.

Pundits

Let’s start our examination of wearables with a joke:

Three tech pundits walk into a forest and soon find a pair of tracks.

— The first pundit says, ‘I think they’re deer tracks.’
— The second pundit says, ‘No, I think they’re bear tracks.’
— The third pundit says, You’re both wrong! They’re bird tracks!’

Then they got hit by a train.

Despite all of their bravado, most pundits haven’t got a clue as to what’s coming in wearables and they won’t know what’s coming until it figuratively hits them. I mean, did they get the iPod right? The iPhone? The iPad? No, no and no. I rest my case.

Lesson #1: Don’t Get Distracted By Pundit Predictions

Linear

We think the future will be a linear extension of the present. It won’t be.

Which reminds me of another joke.

No! Not that joke. This joke.

Q: What do you call a dog with no legs?

A: It doesn’t matter, it’s not going to come anyway.

Follow-up question:

Q: What do you call the current crop of smart-watches?
A: It doesn’t matter, they’ve got no “legs” either.

I’ve heard people say some really nice things about the recently released Android smart watches. Shame! Shame on them! Those smartwatches are not magic, they’re tragic! Today’s smartwatches will have as much in common with tomorrow’s smart solutions as Cro-Magnon man has in common with today’s Homo Sapiens. Today’s smartwatches are the tablets of 2001; the smartphones of 2006 — doomed to extinction the moment we’re shown how it’s properly done.

Lesson #2: The Future Will Look Nothing Like The Present

Less

So how about yet another joke?

Give me golf clubs, fresh air and a beautiful partner, and you can keep the clubs and the fresh air. ~ Jack Benny

Sometimes less is more. Jack Benny was wise enough to know what was important and he discarded the rest. The same is true in wearables. Wearables will become essential when designers focus on the important and discard the rest.

Today’s wearables are trying to be everything to everyone. They’re a watch and a notification center and a camera and a voice communicator and a health monitor and a payment center, etc, etc, etc. I may not know what the future of wearables will be, but I know what it won’t be, and that is all things to all people. Further, wearables will not be both a floor wax and a dessert topping.

Today’s smartwatches are like yesterday’s failed netbooks. Just as PC manufacturers tried to cram the functionality of a full sized PC into a smaller, cheaper netbook, today’s smartphone manufacturers are trying to cram a full sized smartphone into a smaller, cheaper watch. They’re not creating new features, they’re duplicating the old features (notifications, picture taking, etc.) and implementing those features on a smaller and harder to use device. What’s the sense in that?

The key to the iPad wasn’t that it duplicated the functionality of the PC. It was that it did some things much, much better than the PC and it did other things well that the PC did poorly or did not do at all. What do today’s smartwatches do much, much better than a phone? And what do today’s smartwatches do that you couldn’t do just as well and just as easily on a phone? Absolutely nothing.

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

Exactly. The technology in today’s smartwatches is intrusive. The technology in the iPad disappeared. With a smartwatch, we have to learn how to use it. With an iPad, we already knew how to use it. A smartwatch seems more like a burden than a boon. An iPad feels more like a delight than a device.

Re-read Tim Bajarin’s article and look at the manner in which the Disney smart bracelet was used. It didn’t have to be learned. And it wasn’t intrusive. It was just there, present, almost invisible — patiently waiting to be utilized at exactly the moment when its utility was most useful. And then — like magic — it seemingly faded into the background and disappeared — until it was needed once again.

Deciding what not to do is as important as deciding what to do. That’s true for companies, and it’s true for products. ~ Steve Jobs

The smart-watch — like the iPad — will do much less than we imagined. And it will, therefore, do much more than we could ever have imagined. As world-famous designer Braun Dieter put it:

Less, but better – because it concentrates on the essential aspects, and the products are not burdened with non-essentials.

Lesson #3: Good design is as little design as possible

Problems

Which reminds me of one last joke:

A MAN WALKS INTO A BAR in Cork, Ireland, and asks the barman, ‘What’s the quickest way to get to Dublin?’

‘Are you walking or driving?’ asks the barman.

‘Driving,’ says the man.

‘That’s the quickest way,’ says the barman.

As Bertrand Russell put it:

The greatest challenge to any thinker is stating the problem in a way that will allow a solution.

Most smartwatch companies are doing it backwards. They’re preserving the problems to which they are the solution. What they’re SUPPOSED to be doing is starting with the customer and working their way backwards. And even then, they have to be careful not to become so focused on the solution they overlook opportunities to reconsider the problem.

We’ll know they’ve cracked it when they come up with something we don’t need, but can’t live without.

Lesson #4: The Smartwatch Will Not Solve Today’s Problems, It Will, Instead, Present Tomorrow’s Solutions.

Tim Cook Has The Know-How But Steve Jobs Had The Know-Why

On June 13, 2014, John Gruber posted his epic, “Only Apple.” In part of his article, Gruber focused specifically on the changes occurring at Apple under new CEO, Tim Cook.

Jobs was a great CEO for leading Apple to become big. But Cook is a great CEO for leading Apple now that it is big, to allow the company to take advantage of its size and success. Matt Drance said it, and so will I: What we saw last week at WWDC 2014 would not have happened under Steve Jobs.

New Apple didn’t need a reset. New Apple needed to grow up. To stop behaving like an insular underdog on the margins and start acting like the industry leader and cultural force it so clearly has become. ~ John Gruber

These words were received with near unanimous approval by the Apple community. But is Gruber’s sentiment accurate? Does Apple really need to “grow up” and become more mature? Whatever happened to Steve Jobs’s famous admonition that one should:

“Stay hungry, stay foolish”? ((Stewart [Brand] and his team put out several issues of the Whole Earth Catalog, and then when it had run its course, they put out a final issue. . . . On the back cover of their final issue was a photograph of an early morning country road, the kind you might find yourself hitchhiking on if you were so adventurous. Beneath were the words, “Stay hungry, stay foolish.” It was their farewell message as they signed off. “Stay hungry, stay foolish.” ~ Steve Jobs))

Is Tim Cook The Better CEO?

When Cook succeeded Jobs, the question we all asked was more or less binary: Would Apple decline without Steve Jobs? What seems to have gone largely unconsidered is whether Apple would thrive with Cook at the helm, achieving things the company wasn’t able to do under the leadership of the autocratic and mercurial Jobs.” ~ John Gruber

There’s not a doubt in my mind that Tim Cook is a better CEO than Steve Jobs ever was. I thought so from day one. But is that the right question? Shouldn’t we be asking ourselves instead whether or not Tim Cook is a leader and whether he can lead Apple forward without Apple losing that rare mixture of genius and madness that made Apple so very unique?

The Price Of Efficiency

It has long been axiomatic that Apple is not the sort of company that could walk and chew gum at the same time. In 2007, they issued a (very Steve Jobs-sounding) press release that stated Mac OS X Leopard would be delayed five months because the iPhone consumed too many resources:

However, iPhone contains the most sophisticated software ever shipped on a mobile device, and finishing it on time has not come without a price — we had to borrow some key software engineering and QA resources from our Mac OS X team, and as a result we will not be able to release Leopard at our Worldwide Developers Conference in early June as planned.

Or consider the October 2010 “Back to the Mac” event, the entire point of which was to announce features and apps for the Mac that had started life on iOS years earlier. ~ John Gruber

Apple has always generated stories like this. It’s long been a given that Apple is understaffed — that Apple had only one guy doing project X and when he got pulled to work on project Y, project X foundered and ground to a halt. Such delays drove us all crazy as understaffed Apple let things — important things — linger, sometimes near death.

But did you ever ask yourself why this was? It’s not like Apple was under resourced. They’ve got more money than god. And it’s not like Steve Jobs was a head-in-the-clouds CEO who didn’t recognize the need to acquire additional talent. So why? Why?

Throughout the years in business, I found something. I always ask why you do things. The answers you invariably get is, “That’s just the way it’s done.” Nobody knows why they do what they do. Nobody thinks about things very deeply in business, that’s what I found. ~ Steve Jobs

Being inefficient was one of the many prices Apple paid for having Steve Jobs as its CEO. Jobs notoriously didn’t tolerate “B” players on his team. He felt they infected the company and soon led to the proliferation of “C” players as well. Jobs wanted only “A” players and he was willing to have Apple be understaffed rather than to fill vacancies with anything less that what he deemed to be the best.

[pullquote]Some enjoy comforting the the afflicted. Steve Jobs enjoyed afflicting the comfortable.[/pullquote]

So you put the B team on this one, did you? ~ Steve Jobs

The result? Superb products that were always running on the edge, always running late; always in danger of not coming out in a timely fashion or in any fashion at all.

This is a very uncomfortable way to run a company. It’s a very inefficient way to run a company. But it also proved to be a very effective way to run a company.

Is Apple running smoother now? Undoubtably. But is that necessarily the good thing everyone seems to think it is? Perhaps not.

Apple Wants To Be The Developer’s Friend

John Gruber writes:

(Apple has) begun to act more magnanimously. They’ve given third-party developers more of what we have been asking for than ever before, including things we never thought they’d do. Panic’s Cabel Sasser tweeted:

My 2¢: for the past few years it’s felt like Apple’s only goal was to put us in our place. Now it feels like they might want to be friends.

It’s ironic (to me, at least) that John Gruber used the above tweet as an example of how well Apple is doing when, in my article entitled “Whither Apple or Wither Apple?“, I used that very same tweet as a cautionary tale. My take from that article:

You know who needs a friend, Cabel? End users, that’s who. Because when developers become more important than end users you get — Microsoft. Putting developers “in their place” — which is, to say, placed behind end users — is exactly what Apple should be doing.

Does the above mean that I want Apple to not have a good relationship with their developers? Not at all. I just don’t want that increased friendliness come at the cost of losing focus on the end user. Because if that focus is lost, Apple is lost as well.

Efficiency vs. Effectiveness

Undoubtably, Tim Cook is making the machine that is Apple run more efficiently. But efficiency is getting the trains to run on time. Effectiveness is getting the trains to the right stations. It doesn’t matter how fast you’re going, unless you’re going in the right direction.

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

Sure, what we do has to make commercial sense, but it’s never the starting point. We start with the product and the user experience. ~ Steve Jobs

Steve Jobs’s “North Star” was making a great product that provided the end user with a great experience. But what is Tim Cook’s guiding principle?

What is Apple’s mission? To make the very best products in the world that really deeply enrich people’s lives. ~ Tim Cook

Identical in word. That’s good. But identical in deed? That’s the hard part.

Creativity Is Fragile

I’ve found that the most creative people are confident about one thing: their doubts in themselves. ~ johnmaeda (@johnmaeda)

At the memorial service given on the Apple campus following Steve Jobs’ death, Jony Ive had this to say:

[pullquote]Creativity comes from spontaneous meetings, from random discussions. You run into someone, you ask what they’re doing, you say “wow,” and soon you’re cooking up all sorts of ideas. ~ Steve Jobs[/pullquote]

Steve used to say to me (and he used to say this a lot), “Hey Jony, here’s a dopey idea.” And sometimes they were — really dopey. Sometimes they were truly dreadful.

But sometimes they took the air from the room, and they left us both completely silent. Bold, crazy, magnificent ideas. Or quiet, simple ones which, in their subtlety, their detail, they were utterly profound.

As I re-watched the video and re-read the transcript of Ive’s speech, I was re-reminded of the fact that creativity lives on the edge.

[pullquote]This is the thing about creativity that is rarely acknowledged: Most people don’t actually like it. ~ @jessicaolien[/pullquote]

Creativity is the power to connect the seemingly unconnected. ~ William Plomer

Creativity is dopey thinking — right up until the moment when it suddenly becomes brilliant. It’s unimaginable thinking — right up until the moment that it suddenly becomes the only solution imaginable. It’s uncomfortable thinking, it’s dangerous thinking, it’s lonely, isolated thinking — right up until the moment when it’s embraced by all.

Artists often work within the uncomfortable space that precedes “Aha!” or “Oh, I get it!” ~ johnmaeda (@johnmaeda)

People listened to to the crazy, creative ideas of Steve Jobs because Steve Jobs was Steve Jobs and Steve Jobs was the CEO. And sometimes even that wasn’t enough. Sometimes, they STILL didn’t listen to Steve Jobs and they fired Steve Jobs, even from the company he had helped to found.

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

Genius is more often found in a cracked pot than in a whole one. ~ E. B. White

Now that Steve Jobs is gone, who is there at Apple to promulgate, and to promote and — most of all — to protect fragile new ideas?

The best CEOs try to make their companies a safe place for those with wild ideas, and a wild place for those with safe ideas. ~ Dr. Mardy

Conclusion

Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally. ~ John Maynard Keynes

The thing that bound us together at Apple was the ability to make things that were going to change the world. ~ Steve Jobs

[pullquote]The art of progress is to preserve order amid change and to preserve change amid order. ~ Alfred North Whitehead[/pullquote]

Despite all my questioning and kvetching, I do believe that Tim Cook is — as Steve Jobs was — bound to Apple by his desire to make things that are going to change the world. And I believe that Tim Cook is just crazy enough to give the crazy people the run of the company. ((Updated language courtesy of Michael Glotzer @Mglo))

But I don’t know that for sure. It’s far, far too early to make that call.

Now don’t get me wrong. Based on all the available evidence, the verdict is clear — Cook and Apple are on the right track.

But that’s exactly the problem. There’s mounds of evidence in existence that we are not privy to. And there will be mountains more evidence produced over the next couple of years. So any verdict reached today will be terribly, terribly premature.

[pullquote]Do not seek to follow in the footsteps of the wise. Seek what they sought. ~ Matsuo Basho[/pullquote]

You can’t connect the dots looking forward you can only connect them looking backwards. So you have to trust that the dots will somehow connect in your future. You have to trust in something: your gut, destiny, life, karma, whatever. Because believing that the dots will connect down the road will give you the confidence to follow your heart, even when it leads you off the well-worn path. ~ Steve Jobs

It’s as if Steve Jobs was speaking to us — and particularly to Tim Cook — from beyond the grave. Tim Cook has to be his own man and do his own thing. We know he’s got the know-how to do the job. We’ll have to wait and see if he, and Apple, still retain the know-why.

Disrupting Apple’s Tao

Clay Christensen’s Disruption Theory has been subjected to severe criticism this past week. If one’s aim is to criticize the predictive power of disruption theory, one of the best ways to do it is to point out Clay Christensen has consistently been wrong about Apple.

Christensen’s Apple Predictions

— In a January 2006 interview with Businessweek, Christensen predicted the imminent demise of the iPod. ((“During the early stages of an industry, when the functionality and reliability of a product isn’t yet adequate to meet customer’s needs, a proprietary solution is almost always the right solution — because it allows you to knit all the pieces together in an optimized way.”
—
“But once the technology matures and becomes good enough, industry standards emerge. That leads to the standardization of interfaces, which lets companies specialize on pieces of the overall system, and the product becomes modular. At that point, the competitive advantage of the early leader dissipates, and the ability to make money migrates to whoever controls the performance-defining subsystem.” ~ What Clayton Christensen Got Wrong)) Didn’t happen.

— In a June 2007 interview, again with Businessweek, Christensen reiterated the iPod was doomed and further predicted the iPhone would not be successful. ((The iPhone is a sustaining technology relative to Nokia. In other words, Apple is leaping ahead on the sustaining curve [by building a better phone]. But the prediction of the theory would be Apple won’t succeed with the iPhone. They’ve launched an innovation that the existing players in the industry are heavily motivated to beat: It’s not [truly] disruptive. History speaks pretty loudly on that, that the probability of success is going to be limited. ~ What Clayton Christensen Got Wrong)) REALLY didn’t happen.

— In a May 2012 episode of the Critical Path with Horace Dediu, Christensen again announced his pessimism about the iPhone. ((Christensen’s second concern is that although integrated approaches in technology can be quite successful for a period, in the end modular approaches to technology always defeat integrated approaches. Christensen said:
—
“The transition from proprietary architecture to open modular architecture just happens over and over again. It happened in the personal computer. Although it didn’t kill Apple’s computer business, it relegated Apple to the status of a minor player. The iPod is a proprietary integrated product, although that is becoming quite modular. You can download your music from Amazon as easily as you can from iTunes. You also see modularity organized around the Android operating system that is growing much faster than the iPhone. So I worry that modularity will do its work on Apple.” ~ What Clayton Christensen Got Wrong)) Really, really, really didn’t happen.

So, Is Disruption Theory Wrong Or Is Apple The Exception That Proves The Rule?

Well kinda sorta both. As I discussed yesterday in Disruption Corruption: What Disruption Theory Is And What It Isn’t, when Christensen created Low-End Disruption Theory (as opposed to his other theory: New Market Disruption) he may have focused a bit too much on business buyers and not enough on consumers. Business buyers tend to make cold, hard, rational decisions that over value cost cutting and devalue the end user experience. Consumers tend to make warm, soft, emotional decisions that under value long term costs and over value experience. As I put it yesterday:

We never desire strongly, what we desire rationally. ~ Francois De La Rochefoucauld’s

The PC Was Made For Businesses. The iPhone And iPad Were Made To Be Loved

The old, pre-Nadella Microsoft wouldn’t have know a warm fuzzy emotion if it had smacked them in the face. And when IT departments were the primary consumers of PCs, this served Microsoft well. As Microsoft’s near 95% market share attested, Microsoft was the near ideal company to make a product that appealed to the sensibilities of IT departments. Nearly everything about the PC played to Microsoft’s strengths.

However, as PCs became smaller with the introduction of notebooks and then became WAY smaller with the introduction of phones, Apple’s design strengths became more and more important. First, consumers purchased iPods from Apple, then they purchased iPhones from Apple, and then they started to insist the computer equipment they used at work be as good as the computer equipment they owned at home. IT departments — Microsoft’s unassailable bastion — were blindsided and the Bring-Your-Own-Device (BYOD) movement wrested power away from IT and put it in the hands of the less rational, less penny-pinching, more emotional, end user.

If Microsoft was the ideal company to sell PCs to IT departments, then Apple may have been the ideal company to appeal to the sensibilities of consumers. Why? Because Apple prioritized the end user experience above all else.

The Innovator’s Dilemma

If you’ve heard this story before, don’t stop me, because I’d like to hear it again. ~ Groucho Marx

Let’s recap. Disruption theory eloquently explained why great companies that worked hard to serve their best customers ended up over serving — and over charging — the vast majority of the remainder of their customer base, thus making it possible for challengers to steal those customers away with products that seemed to be only “good enough” but which were, in reality, great in some way that really mattered.

The incumbent is faced with a dilemma – an unsolvable problem, as it were. If they maximize product benefits for their best customers and maximize product profits — which after all, is their job — they lose in the long run as hungry startups steal their low-level customers and, eventually, their mid-level customers with disruptive “good enough” products.

(A) strategy that seeks to maximize revenue and profits – i.e. the sort of strategy at which Ballmer excelled – necessarily precludes the creation of significant new products. ~ Ben Thompson

The Innovator’s Impossible Solution

There is always an easy solution to every human problem—-neat, plausible, and wrong. ~ H. L. Mencken

The innovator’s solution is unbelievably simple and simply unbelievable:

1) Invent the future…before your existing competitors — and the competitors that don’t yet exist — do; and

2) Prioritize future profits over current profits.

Even if it were possible to predict the unpredictable and create a disruptive product within one’s own company, it’s tantamount to committing suicide to do so. I mean, what’s the point? Who wants to create a disruptive product that destroys the profits of an existing cash cow and replaces it with a seemingly inferior product that doesn’t generate nearly as much profit as the old, highly respected and highly valued product did? That’s just crazy talk.

The Innovator’s Dilemma, Redux

And that’s why it’s a dilemma — there are simply no good solutions, only choices between equally bad alternatives.

Steve Jobs’ Attempt To Resolve The Innovator’s Dilemma

Do not go where the path may lead, go instead where there is no path and leave a trail. ~ Ralph Waldo Emerson

In order to overcome the Innovator’s Dilemma, Steve Jobs created a radically new way to run a company, structuring it entirely differently than any large company of the 20th century. Apple put the customer at the center of their business. Profit is viewed as necessary, but not sufficient.

We believe that we’re on the face of the Earth to make great products, and that’s not changing. ~ Tim Cook

Apple’s primary objective is to make a great product, to build the best, to delight the customer and provide a great experience. Apple reinvents existing markets by making the user experience easier, richer, and more pleasant. Each time, they begin at the beginning and start with the user’s experience first, then drive back through their infrastructure to make that a reality.

You know, we want to really enrich people’s lives ~ Tim Cook

Apple absorbs the complexity and presents the simplicity. They’re obsessed with details and sweat the small stuff so the customer doesn’t have to.

We try to make tools for people that enable them to do things that they couldn’t without the tool. But we want them to not have to be preoccupied with the tool. – Jony Ive

If it disappears, we know we’ve done it. ~ Craig Federighi

The Expected Result: Fanatical Customer Loyalty

If user experience is Apple’s number one priority, it should come as no surprise Apple generates fanatical customer loyalty.

Innovation

Design is where Apple products start,” writes Lashinsky. “Competitors marvel at the point of prominence Apple’s industrial designers have. ‘Most companies make all their plans, all their marketing, all their positioning, and then they kind of hand it down to a designer,’ said Yves Behar, CEO of the design consultancy Fuseproject. The process is reversed at Apple, where everyone else in the organization needs to conform to the designer’s vision. ‘If the designers say the material has to have integrity, the whole organization says okay,’ said Behar. In other words, a designer typically would be told what to do and say by the folks in manufacturing. At Apple it works the other way around.”

Fanatical Customer Loyalty

A satisfied customer is the best business strategy of all. ~ Michael LeBoeuf

Apple’s customers love Apple. For some reason this baffles Apple’s critics. Apple’s critics are always referring to the ‘cult’ of Apple, or to Steve Jobs’ ‘reality distortion field’ or to Apple’s marketing prowess as if Apple has some mystical, Svengali-like power over their customers.

Why fall back upon supernatural explanations when the natural explanation so obviously explains the phenomenon?

If Apple’s first priority is the user experience, then OF COURSE Apple’s customers are going to be loyal to Apple. It’s not an enigma or some great mystery. Just the opposite. Apple’s high customer loyalty numbers are the logical and all-too-obvious result of Apple’s policies and priorities. Apple puts the customer first. Customers respond in kind. It’s that simple.

Appreciation is a wonderful thing: It makes what is excellent in others belong to us as well. ~ Voltaire

So What Does All This Have To Do With Disruption Theory Anyway?

Let’s re-review how Low-End Disruption is supposed to work.

(A)n integrated approach wins at the beginning of a new market, because it produces a superior product that customers are willing to pay for. However, as a product category matures, even modular products become “good enough” – customers may know that the integrated product has superior features or specs, but they aren’t willing to pay more, and thus the low-priced providers, who build a product from parts with prices ground down by competition, come to own the market. ~ Ben Thompson

Here’s why low-end disruption doesn’t seem to apply to Apple. Christensen was right when he said people aren’t willing to pay more for superior features or specs they don’t need. But consumers ALWAYS want and need a superior experience. And many of them are willing to pay top dollar to get it.

Conclusion

One of Clay Christensen’s great insights was that a business can OVER SERVE the vast majority of their customer base without even knowing they’re doing it. While over serving sounds like a great idea in theory, in practice it leads to massive disaffection as customers are made to pay for products and services they simply don’t want or need.

But here’s the thing — and this is the crux of the matter — while it is all too easy for a company to provide their customers with too many frivolous and unnecessary features and specs, it is impossible to over provide a great experience.

[pullquote]A company can not over serve their customers by providing them with too superior a customer experience[/pullquote]

Let me say that again. A company can not over serve their customers by providing them with too superior a customer experience. Too much is simply not enough. And since Apple is laser focused on providing the customer with a superior experience, the customer is not over served and Apple can not fall prey to Low-End Disruption.

Think of it as a game of Rock, Paper, Scissors. New integrated solutions beat old modular solutions. New modular solutions beat old integrated solutions. But superior customer experience beats new modular solutions. The theory is easy. It’s the execution of the theory that’s hard.

Excellence is never an accident. It is always the result of high intention, sincere effort, and intelligent execution; it represents the wise choice of many alternatives – choice, not chance, determines your destiny. ~ Aristotle

Apple’s New Strategy Is Their Old Strategy, Only More So

An Apple Strategy Failure

Let’s start with a little history. In the 1980’s…

Apple had agreed to license certain parts of its GUI to Microsoft for use in Windows 1.0, but when Microsoft made changes in Windows 2.0 adding overlapping windows and other features found in the Macintosh GUI, Apple filed suit. (The courts decided against Apple.)

Much of the court’s ruling was based on the original licensing agreement between Apple and Microsoft for Windows 1.0, and this fact made the case more of a contractual matter than of copyright law, to the chagrin of Apple. ~ Wikipedia, Apple Computer, Inc. v. Microsoft Corp.

I believe the lesson Steve Jobs learned from the above was all new Apple technology had to be patented to the max. Here is Jobs famously saying, “and boy have we patented it” at the 2007 introduction of the iPhone:

Unfortunately for Apple, Jobs got it wrong. What Apple has learned in the seven years since the introduction of the iPhone is that patent enforcement is entrusted to a worldwide court systems that is expensive, maddeningly slow and wildly inconsistent. Further, courts are justifibly reluctant to issue injunctions in patent disputes and it is injunctions — not money damages — that best serve Apple’s strategic purposes. In other words, Apple — an organization fanatical about owning its key technology — delegated the enforcement of its key technology to a court system totally out of their control.

I believe Tim Cook is now employing a very different grand strategy.

Out With The Old, In With The New

I think it’s clear Tim Cook long ago abandoned Apple’s failed patent strategy and replaced it with a strategy fully within Apple’s control. In essence, Apple decided to do what only Apple could, and only Apple would want to, do: out-integrate their competitiors.

Let’s recap. In only a few short years, Google was able to pivot and turn Android into an operating system that rivaled, and many would contend surpassed, the iPhone’s operating system. In only a few short years, Samsung was able to take the hardware they were making with Apple and use it to compete against Apple and surpass Apple in hardware sales. Apple’s “boy-did-we-patent-it” strategy failed and failed miserably to deter either Google or Samsung from competing with Apple.

Now look at the integrated services introduced by Apple at WWDC 2014. Services like continuity, Apple Family Accounts, Healthkit and Homekit make it clear that where Apple is going, no one can follow.

It’s not because Apple’s rivals aren’t world class. They are. It’s because Apple’s rivals don’t make both the hardware and the software. They literally can’t create a closely integrated product because they don’t make one.

Now you could argue Microsoft makes both the hardware and the software, but Microsoft is very late to the hardware/software game and when it comes to hardware like the A7 (soon to be A8), 64-bit processing and Touch ID, Microsoft is not on the same playing field as Apple.

Further, even if Microsft COULD follow Apple’s strategy, they wouldn’t have the economic incentives to want to do so. Apple is devoting endless amounts of time, energy and effort into integrating their hardware with their software becasue they want you to live exclusively within Apple’s ecosystem. Microsoft wants its cloud services to run on all devices. Microsoft wants its operating software to run on all devices. Microsoft wants its hardware…uh…frankly, I have no idea what Microsoft is trying to do with their hardware. And I don’t think they do either.

Apple’s strategy involves ever tighter hardware, software and services integration on such a scale no other company could do it (because it requires the simultaneous creation of both the hardware and software). Apple’s strategy is tied to a business model so unique that no one else would be incentivized to do it.

Conclusion

Does all of this mean Apple is going to dominate the iPhone and the tablet markets? Just the opposite. All of this integration comes at a cost. This is premium, a vertical, a walled garden strategy. Apple wants you to want to own at least two and perhaps all three of their devices (iPhone, iPad and Mac). Many will gladly do so. Most will glady do with out. And others will will sadly do with out. Apple will dominate only the premium market. That will be more than enough.

Is this a growth strategy for Apple? Maybe no and maybe yes. Premium is premium and there’s only so many people who want and can afford a premium product. This is true of all markets. But those who can afford an iPhone or an iPad or a Mac will also be those who can afford to buy all three. Apple is providing them with stronger and stronger incentives to do just that.

Apple Announces Nothing (New)

“Apple announces NOTHING at developer conference”.

No, seriously, I read it on the internets, so it must be true. You can read it for yourself, here:

Apple Announces Nothing at Developer Conference ~ By Paul “Comic Book Guy” Ausick

Admittedly, that is just one man’s opinion, and an extremely harsh assessment at that. The consensus seems to be a little more moderate. What most Apple critics seem to have concluded is not that Apple announced NOTHING at their developer conference but that Apple announced NOTHING NEW.

No, seriously. That’s what they’re saying. You can read it here.

Great artists steal: The iOS 8 features inspired by Android ~ by Ron Amadeo

“(M)any of Apple’s announced upgrades were things the Android OS has boasted for years.”

Typing suggestions
Third party keyboards
Inter-app communication
Hotwords, music recognition, and streaming voice recognition
Notification Actions
Videos in the App Store
Beta testing
Widgets
Photo backup and storage
CloudKit

Fetish For First

What is it with our fetish for first? Where did we ever get the notion being first was all that mattered and — perversely — that nothing that comes after “first” matters at all?

Tech is not a race. It’s not some Olympic event, where you run 100 meters, cross the finish line, everybody jogs to a stop, and then you get awarded a medal. No. In real life, the tech race goes on and on forever.

If anything, tech is more like catching a train than running a race. You have to stand on the platform and wait for tech to arrive before you can get on board. Try to get on board too soon and you’ll fall flat on your face. Try to get on board too late and you’ll be left at the station. At least, that’s what it’s like for the consumers of technology.

If you’re a company that’s CREATING the technology — like Apple or Google or Microsoft or Amazon — you still have to wait for the technology train to pull into the station. But if you want to control that technology, you might have to actually anticipate where technology is headed and BUILD the platform first. And you’d darn well better hope you guessed right and built your platform at the right place and at the right time. Otherwise you’re going to be as lonely as a developer at a Microsoft Kin convention.

Maybe an even better metaphor is a wave. Tech is like many waves coming together to form one massive wave. To ride that wave, you have to time it perfectly. Too soon and it crashes on top of you. Too late and you are left behind. But catch the tech wave — catch it just right — and you can ride it all the way to wealth and fame.

Take, for example, the iPod:

People think of the iPod as just the iPod. But what people call the iPod was really three things: iPod, iTunes, and the iTunes Store. ~ Tony Fadell ((Excerpt From: Max Chafkin. “Design Crazy.”))

The iPod was introduced in 2001, but it didn’t take off until the hardware (iPod), the software (iTunes Store) and services (iTunes internet services) all came together to create a groundswell that flooded the market and washed the competition away.

First To Fail

QR Codes. NFC. JOYN. MMS. Infrared. Haptics. Projectors. So many dead ends in mobile. ~ Benedict Evans (@BenedictEvans)

The tech graveyard is full of failed “firsts,” right?

— Apple’s Newton;
— Microsoft’s Windows Tablets;
— Samsung’s Smartwatches.

Here are some more examples:

The First Wheel:

The First Convertible Automobile:

The First Electric Automobile:

The First Highway Hi-Fi (1956):

The First Pedal Skates:

The First Motorized Roller Skates:

The First Vending Machine With Pre-Lit Cigarettes:

The First Automated Hot Dog Machine:

The First Picturephone:

The First Notebook Computer:

Let’s face it, being first ain’t always a good thing. Sometimes, when you get too far ahead on the road you’re traveling, you find you’re no longer on solid footing.

How Are We Not Getting This?

How are we not getting this? I mean, it’s not like this is new or anything. It has always been true, since the dawn of man.

The Greeks invented the Phalanx, but the Macedonians perfected it. They didn’t call him Alexander The “Late”, they called him Alexander The Great — and with good reason. ~ John R. Kirk ((That’s right. I cited myself. So sue me.))

And it’s not only geeks like Comic Book Guy who are getting this wrong. A lot of people — people who should know better — are getting this wrong too. Take, for example, a look at this March, 2014 interview with a Steve Ballmer:

Ballmer also took shots at Microsoft’s rivals, waving off Apple as a company that was “quote, cool, unquote” that has “had a good run lately,” and in tablets, (Apple) only commercialized the idea that others, including Microsoft, had originated. ((Emphasis added.))

What.
The.
Heck.

I don’t stinking believe Steve Ballmer even thought those thoughts, more less said those words out loud, more less said them out loud to a reporter.

Apple ONLY commercialized the ideas? ONLY?

EXCUSE ME. Isn’t being a commercial success the frizzing POINT? Isn’t that Apple’s job? And Microsoft’s job too, for that matter? Tech pedants are so obsessed with “first” they’ve completely taken their eyes off the prize. They’ve forgotten the goal is not to be the first, but to be the FIRST TO GET IT RIGHT.

You don’t want to be the first one to sail the high seas.
You want to be the first one to sail the high seas and RETURN TO PORT SAFELY.
You don’t want to be the first one to fly an airplane.
You want to be the first one to fly an airplane and LAND IT SAFELY.
To use a D-Day analogy, you don’t want to be the first one ON the beach.
You want to be the first one OFF the beach…ALIVE.

There’s “First” And Then There’s “First”

There are many kind of firsts, my friend, and first in time is not always first in value to either the producer or the consumer of technology.

You say Android is the first to offer third party keyboards? iOS is the first to do it without allowing all of your keystrokes to be read by those self-same third-party developers.

You say Android is the first to offer inter-app communications? iOS is the first to do it without exposing your mobile device to a “toxic hellstew” of computer viruses.

You say Android is the first to allow Widgets? iOS is the first to make them a seamless experience.

You say Android is the first to allow photo backup and storage? iOS is the first to let you do it effortlessly.

You say Android is the first with a slew of other features? iOS is the first to do those same features without bringing your operating system to its knees.

It means much more to us to get it right then to get it first. ~ Tim Cook

Customer, services, support, care, help, trust, advice, guidance — these are assigned ZERO value by Apple’s critics. Apple announces NOTHING, they say, and Apple announces NOTHING NEW, they say, despite the flood of new services and developer tools announced at Apple’s World Wide Developer Conference (WWDC). Why the discrepancy?

You can’t teach a color blind man to appreciate a Monet and you can’t teach a person who discounts the importance of privacy, security etc, to appreciate what Apple does either.

First To Market Or First Priority?

Apple employs a whole different definition of “first” than Apple’s critics do. It’s not about shipping first; it’s not about getting to market first; it’s about getting it right BEFORE it ships and BEFORE it gets into the hands of Apple’s valued customers.

It is key to understand that Apple puts the experience first. Everything else flows from that priority. ~ ßen ßajarin (@BenBajarin)

Security First

Privacy First

Android Police

— TouchID is being used by 85% of iPhone 5S owners

iOS 8 now requiring apps reconfirm authenticity of background location periodically. Steve Cheney (@stevecheney)

Reliability First

— Steve had been absolutely against opening the App Store early on, because he didn’t want the phone to crash. You have to be able to call 911 on the phone anytime, so we couldn’t trust our operating system to a bunch of crazy stupid developers without putting them in a huge sandbox first. ~ Andy Grignon ((Excerpt From: Max Chafkin. “Design Crazy.”))

User Experience First

Ease Of Use And “Invisibility” First

In iOS 8, you’ll be able to AirPlay to Apple TV with zero configuration. Don’t even have to be on the same network! ~ Chris Marriott (@chrismarriott)

— If your customer has to think about it, you’re not done designing the user interface.

Mail attachments up to 5GB in size are not a problem anymore. ~ Horace Dediu (@asymco)

— There was a debate [on the Lisa] team about the mouse. Was it going to have a mouse, and how many buttons should it have? Steve and I wanted one button, because if there’s one button, you never have to think about it. One of the former Xerox guys argued for six buttons. He said, “Look, bartenders have six buttons on those drink dispensers, and they can handle it.” But that was a failure to understand what Steve was trying to do with user experience. ~ Trip Hawkins ((Excerpt From: Max Chafkin. “Design Crazy.”))

— There is a huge difference between a learning curve, a low learning curve and NO learning curve. When you get to NO learning curve, everybody uses the feature, no matter how complex it is technically or how geeky it used to seem.

“That is a wonderful technology moment. We don’t have to mess with it. We just say here’s what we want,” he said. “When technology reaches that level of invisibility in our lives, that’s our ultimate goal. It vanishes into our lives. It says: ‘you don’t have to do the work, It’ll do the work.’”

Design First

— “Jobs unveiled the so-called Bondi Blue iMac—named for a beach in Sydney, Australia—at a special event in May 1998. “It looks like it’s from another planet,” Jobs said. “A planet with better designers.” ((Excerpt From: Max Chafkin. “Design Crazy.”))

Integration First

— Google loves to characterize Android as open, and iOS and iPhone as closed. We find this a bit disingenuous and clouding the real difference between our two approaches. […] In reality, we think the open versus closed argument is just a smokescreen to try and hide the real issue, which is, “what’s best for the customer?” Fragmented versus integrated. ~ Steve Jobs

(T)oday’s additions are pieces in a larger puzzle, not the whole puzzle by themselves. ~ @BenBajarin

Benefits (not features) First

— The competitors, like Commodore and Kaypro, were all doing speeds and feeds, whereas Steve always wanted things like “What is the significance in the world? How might this change things?” ~ Steve Hayden ((Excerpt From: Max Chafkin. “Design Crazy.”))

But how, precisely, does the faster CPU make a phone better? Bravo for being the first to get the latest Snapdragon processor in a handset, but after people like me file our reviews and move on, who notices or even cares?

Here’s why I love Apple: speed actually matters. To Apple, there’s no point in putting in a faster CPU unless it makes the phone better. And “it’ll do things faster” isn’t necessarily a good enough reason. ~ Andy Ihnatko

Performance First

Battery Life First

Apple is opening up iOS to extension in the same way it added multi-tasking: controlled and sandboxed, retaining security & battery life. ~ Benedict Evans (@BenedictEvans)

Conclusion

So, am I saying iOS is superior to Android? No, I am not. “Superior” is a subjective term. Each consumer gets to decide for themselves what product best suits their needs. That’s the beauty of the free market.

What I AM saying is it’s time to stop contending Android is copying iOS and iOS is copying Android because it’s a damn lie. The WAY both operating systems create their features and the WAY those features are implemented makes their respective experiences totally unalike.

An original artist is unable to copy. So he has only to copy in order to be original. ~ Jean Cocteau

I can order chicken nuggets from McDonalds or chicken cordon bleu from a five-star restaurant. Both meals are made of chicken but that’s where the similarities end. HOW something is prepared is often as important — and often more important — than WHAT that something is.

It’s the same in mobile technology today. Even if the ingredients were the same — and they’re not — the way Apple and Google “bake” their products is as different in style and substance as would be the same meal prepared by Chef Ramsey and Chef Boyardee.

Tomorrow

Tomorrow, in my Insider’s article (subscription required), I’ll focus on how Apple is making use of different “ingredients” to make their phones, tablets, notebooks, and desktops and how those different “ingredients” both differentiate their products, and make them competitor-proof.

Join me then.