Microsoft’s rise in the 90’s under Gates was unbelievably rapid as investors poured money into the company. Since Ballmer took over in 2000, the company has lost more then half of its market value.
Apple, for its part, began righting the ship with the return of Steve Jobs, but only in the last 5 years has its growth curve approached (in terms of % gain) approached that of Microsoft in the late 90’s.
(image via AppleInsider)
It’s not often that I offer praise upon Redmond’s strategic efforts, but this one is indeed praise-worthy. For some time, Microsoft has been decidedly absent from the smart phone conversation. Yes, Steve Balmer will contest that they ship their WinMo OS’s on a gazillion handsets each year, but the perception is that Microsoft has missed this wave, and much of that perception stems from the minimal innovation coming out of Redmond in the smartphone OS category. Hopefully that is about to change, and if the tipster quoted in this article is to be believed, this is one of the ballsiest moves by Microsoft in some time.
Such a move is not without recent precedent for Microsoft. For years, they got their hat handed to them in search by Google. It was only when they took some risks and started thinking and acting more like a startup did the market take notice. By all accounts Bing is a solid entry in the search category and is the first real compeition Google has faced in some time. That’s a good thing. I love Google, but competition will always be a win for consumers.
As for SmartPhones, Microsoft has avoided risk for many years, being content with releasing new mobile operating systems that were at best a marginal improvement over the previous version. Apparently, that’s about to change and I for one am a fan. I love my iPhone, but I don’t love it because Apple makes it. I love it because Apple is a company that never seems content with anything they’ve built, and is constantly pushing the envelope of what’s possible. If Microsoft could rediscover that element of their own DNA, we’d all be a lot better off and competition between Mac and PC would be even more interesting.
Microsoft’s Sync got a lot better with a new GUI. I’ve been thinking and saying for a while that we need more innovation in the car, but not in the form of engine speed and performance (we’ve already got enough of that) but in information and entertainment systems. These “infotainment” systems have been thoroughly underdeveloped in the past. Finally, it looks like we’re going to start seeing this stuff in new cars…
Interesting article on the future of the connected car.
The issue of liability and the legality of using devices in cars is one that needs to be reviewed and addressed soon. Currently, manufacturers steer clear of developing too much functionality in the car because increased functionality leads to increased distraction and the potential for accidents.
The reality however is that people are already distracted, it’s just that their phones are what’s causing the distraction, not the car’s systems. People are dialing, texting, emailing and twittering in the car… even while driving!!
The means of combating this distraction has come in the form of increased laws against using devices while driving. Yet these laws are rarely enforced and fly in the face of progress we’ve made in communications. Moreover, I think a better direction to go is to acknowledge that people want to (and need to) communicate from the car and make the car safer through other advancements.
In the near term, Ford, BMW and others should shift their focus away from making these telematic systems (let the tech companies do that) and instead focus on how they can supplement the safety systems of the car and add new ones. Just as airplanes have gotten safer due to increased technology systems that aid pilots, so too must car manufacturers embrace the same approach.
Why Apple succeeds, and always will
By Joe Wilcox | Published December 9, 2009, 9:45 AM
Simply put: Apple doesn’t play by the rules. It reinvents them. Apple applies what I call “David Thinking” to its broader business, product development and marketing. Apple is David to Microsoft Goliath — and other ones, too. Goliath plays by one set of rules. David choses to change the rules, which favor his strengths rather than those of Goliath.
David Thinking is most provocative and surprising when Goliath acts like David. After all, David sometimes becomes Goliath; Apple is a giant in music with iPod and iTunes Music Store. But David turned Goliath also risks making mistakes that would allow another upstart advantage. Today, Apple is both David and Goliath, depending on market.
March 11, 2009, The New Yorker magazine story “How David Beats Goliath” is what got me to looking at David Thinking and making the realization this is how Apple operates its business. Writer Malcolm Gladwell could easily have written about Apple, but his examples are 12-year-old girls basketball and T.E. Lawrence.
Gladwell tells how obvious losers are winners more often than might be expected: “David’s victory over Goliath, in the Biblical account, is held to be an anomaly. It was not. Davids win all the time.” Gladwell explains why: “The political scientist Ivan Arreguín-Toft recently looked at every war fought in the past two hundred years between strong and weak combatants. The Goliaths, he found, won in 71.5 per cent of the cases. That is a remarkable fact.”
David wins almost 30 percent of the time when playing by his opponent’s rules. But the percentage dramatically increases when David changes them. Gladwell explains:In the Biblical story of David and Goliath, David initially put on a coat of mail and a brass helmet and girded himself with a sword: he prepared to wage a conventional battle of swords against Goliath. But then he stopped…and picked up those five smooth stones. What happened, Arreguín-Toft wondered, when the underdogs likewise acknowledged their weakness and chose an unconventional strategy? He went back and re-analyzed his data. In those cases, David’s winning percentage went from 28.5 to 63.6. When underdogs choose not to play by Goliath’s rules, they win, Arreguín-Toft concluded, ‘even when everything we think we know about power says they shouldn’t.’
Nearly two-thirds of the time is a remarkable figure. The approach defines almost every line of Apple’s business.
Steve Jobs as David
Apple isn’t a team player, particularly under the two chief executive tenures of cofounder Steve Jobs. The examples of Apple’s rule-changing behavior are simply too numerous to recount. So I’ll start with a few around the 1984 launch of Macintosh:
- While Compaq and other clone upstarts sought to imitate the IBM PC, Apple defied it. Macintosh’s graphical user interface, mouse and other features defied convention.
- The “1984” commercial launching Macintosh aired only once, bucking traditional marketing approach of repeated airings to build brand and product awareness.
- Apple bought out every single ad space in the Newsweek 1984 election issue — 39 pages.
- Macintosh came bundled with Apple applications MacPaint and MacWrite.
Apple’s business was at its worst — closest to expiration — during the early 1990s, when the company played more by rules Microsoft established. Apple had put on Goliath’s mail and brandished his sword. For example, Apple embraced clones, allowing third parties to release their own hardware running Mac OS. The seemingly sensible strategy was anything but. Apple’s attempts to play by DOS/Windows PC rules put the company at grave competitive disadvantage. Steve Jobs’ late-1996 return to Apple and ascension to interim CEO in 1997 set forth dramatic changes in the company’s business strategy. Among Job’s first actions: The end of Mac cloning. Only Apple would make and sell Macs.
Since Jobs’ return to Apple, there are so many examples of Apple changing the rules, it’s hard to find ways the company played by Microsoft’s — or other Goliaths’ — rules. Some examples:
- Streamlined product SKUs, from 1997 to present: Following Jobs’ second coming, Apple reduced the number of products in each family. Example: Today there are three Mac notebook families — one MacBook model, five MacBook Pro models (at different screen sizes) and two for MacBook Air. Popular convention is to offer more product families and SKUs. The counter-culture approach lets Apple streamline manufacturing and distribution while maximizing margins.
- Bondi Blue iMac, released 1998: Some Windows PC OEMs offered all-in-one designs, but none like Apple, which dumped all the legacy ports for USB and FireWire. Hundreds of translucent products followed the design trend established by iMac.
- Apple Store, first opened in 2001: Apple moved into retail during a recession and while Gateway prepared to shutter, and later closed, hundreds of stores. Everything about Apple Store, from design to retail staff training and more, defied computer retail convention. Genius Bar was a genius concept for servicing customers and endearing good feelings about Apple products. Goliaths Circuit City and CompUSA later liquidated, while Apple Store is a vibrant retailer.
- iPod, launched in 2001: Apple redefined the nascent MP3 player market with the click wheel and hard-disk storage. Then Apple reinvented the device with iPod nano and again with iPod touch. Companies more typically seek to preserve the status quo they create. Apple has chosen to instead repeatedly reinvent iPod.
- iPhone, launched in 2007: Like David, Apple played to its strengths, such as software and industrial design, rather than play by rules established by handset carrier and manufacturing Goliaths. Examples include use of capacitive instead of resistive touchscreen, multitouch user interface, synchronization and control of software, software updates and services (rather than letting the wireless carrier control them).
- Recessionary pricing, now: Apple pricing has long defied convention. The company prices high, choosing not to compete with Windows PCs in the sub $500 market. The approach preserves the brand’s value and margins. No time has Apple’s higher pricing been more obvious than during the current economic crisis. So far, Apple’s rule-changing approach defies low-pricing logic.
Microsoft was once David
At one time Microsoft changed the rules, too, when David to the IBM Goliath. For example:
- Microsoft cofounder Bill Gates admonished early developers in 1976 “An Open Letter to Software Hobbyists. The convention had been to share code, which he called stealing.
- Gates and cofounder Paul Allen licensed what would later be called MS-DOS to IBM in 1981, rather than selling the software. The approach broke the end-to-end hardware/software model and later flourished a robust IBM PC-clone market.
- Microsoft’s approach to partnering, particularly software developers and resellers, put more money in others’ pockets. In the IBM model, money flowed up. By contrast, Microsoft shared the wealth.
There are many other examples how Microsoft defied convention over the years, how the company changed the rules. No longer. Microsoft seeks to preserve the status quo it established through success and becoming Goliath. For example, top perennial design principle for Windows is backward compatibility. It’s the preservation of the past way of doing things.
Status quo thinking prevents Microsoft from being competitive and disruptive like Apple. Goliath thinking is so pervasive, Microsoft fails where it shouldn’t. Microsoft will not beat Google in search as long as it plays by the information giant’s rules. Microsoft must change the rules of the engagement, leveraging its strengths against Goliath Google. Gladwell writes in The New Yorker:David, let’s not forget, was a shepherd. He came at Goliath with a slingshot and staff because those were the tools of his trade. He didn’t know that duels with Philistines were supposed to proceed formally, with the crossing of swords…He brought a shepherd’s rules to the battlefield.
Microsoft must leverage its strengths, by battling Google in an unexpected way. Perhaps Microsoft should apply Apple’s David Thinking to search. Apple’s sales priority is profit share rather than market share. Maybe Microsoft should seek to make more money off lower search share, as Apple does today in the personal computer market.
Yesterday, at the Loop, Jim Dalrymple asked: “Apple can be copied, but can it be beat?” Apple can be beat if its David Thinking approach can be copied, I assert. But competitors let Apple set the rules in markets where it competes.
So far, Apple has resisted Goliath thinking, consistently competing, at least under Steve Jobs’ leadership, in ways that emphasize its strengths rather than complying with rules set by others. Even as Goliath, Apple has consistently changed the rules to its advantage. The challenge ahead: Resisting the temptation to protect the status quo — to truly be Goliath.
[Editor’s Note: A different version of this post appeared on Joe Wilcox’s personal Website in May 2009. That version is no longer available— only its revised replacement here exclusive to Betanews.]
Best synopsis on Apple’s strategy to date… very interesting!
The talk of convergence between the TV and the computer has existed for decades. Currently, there are two problems preventing this blending of technology: the TV does not have a native PC operating system AND most people use cable (or satellite) boxes to connect to content. The latter come with their own operating systems (which are pretty bad), eliminating much of the need for a native system within the TV. Even for consumers who hook up their TV’s to nettop computers, the user experience leaves a lot to be desired because you can only use one input (nettop OR cable box, but not both) at a time. Finally, the business case for convergence fails because of the requisite cost of including Microsoft’s operating system within a TV.
But Google’s Chrome OS may be about to change that. For one thing, Chrome OS is open source and does not require another operating system like Windows to run on top of (which Boxee, Jaman, and countless other TV applications do). To be clear, including Chrome OS within a TV would involve additional costs of manufacturing to include the necessary hardware to support full PC uses, but given Chrome OS’s substantial dependence on the cloud and targeting of netbook computers which represent the lower end of PC hardware, these cost increases are likely to be manageable.
As such, it will be economical for manufacturers to bundle Chrome OS within their TV’s (think of it as building a very large tablet PC), especially as doing so opens up the opportunity for additional monetization.
The digital TV space has become a low-margin commodity business. Efforts at charging premium prices have largely been tied to increased resolution, contrast ratios and other aspects of technical superiority. Yet consumers are largely ignorant of the marginal benefits offered by such technology and unwilling to pay premium prices for these technologies when lower-priced products without them appear to be “good enough.” By including the PC operating system within the TV, the manufacturers would be able to market the internet connectedness of their products (which they currently do not because they do not control enough of the value chain) and to charge a premium price for such products. Whereas most consumers have been unwilling to pay for resolution and higher contrast ratios, most consumers would be willing to pay extra to get the internet on their TV.
Better User Experience
Even though it’s technically possible to get the internet on your television, this capability is far from a mass market idea because the user experience is terrible. It requires a decent level of technical know-how and troubleshooting (particularly in display settings) to get everything set up and make it work. The inclusion of a PC operating system within the TV by the manufacturer would likely eliminate much of this leading to a dramatically better user experience. A good analogy here is using the internet on a mobile device prior to the iPhone: yes you could do it, but the experience was so bad that many people did not. Once the user experience improved, the numbers of people accessing the internet from smartphones dramatically increased.
The Tablet Market
Google rightly points out that for most people internet use is the leading activity on a computer, and this fact serves as the basis for the company’s development of Chrome OS. Much of the use-case for the tablet PC (including the CrunchPad and the iTablet) surrounds using the device in a living room setting when consumers are not in front of their computer and want something larger to interact with other then their phone. If consumers can use Chrome OS on their TV’s to connect to the internet, a leading use-case for the tablet will be effectively addressed by a different device that already exists in most living rooms, dramatically reducing the overall potential of the tablet segment. At the end of the day, most consumers would rather have a TV than a Tablet.
A Cheaper TV
Google already sells TV advertising but the product has always been the red-headed step-child to the much more expansive web advertising program AdWords. With Chrome OS on the TV, Google will have a huge opportunity to leverage its substantial advertising platform in the exact environment that people are most familar with consuming advertising: while watching television. In order to force the issue and compel purchase of these new TV’s, Google could work with TV manufacturers to subsidize the cost of the TV making them cheaper for consumers. The strategy is that by enabling the internet on the TV, more people would be performing Google searches, thereby bringing additional revenue to the company. It fits with the company’s stated strategy of “the more internet connected devices, the better.”
The need for a UI suitable for the TV
The one glaring omission in a TV strategy is Chrome OS’s GUI. As demoed, it appears optimized to run on netbook and laptop size screens. Obviously, Google or someone else would need to develop a better UI for people to use while watching TV. The challenge here is that Chrome OS is merely intended to connect to the internet, and does not allow installation of any native applications preventing applications like Boxee, Jaman from filling this void. Thus, whatever UI is developed will need to run as a web app OR Google will have to choose to allow native apps on Chrome OS.
Chrome OS is initially intended for the netbook segment, and while that may be the entry point into the market, I would wager that the TV segment will end up being a more lucrative one for Google and Chrome OS in the long run. People are already familiar with using a computer to connect to the internet, so users of Chrome OS will largely be engaging in activity that they likely would have done on a different device anyway. However, there is little precedent for using the internet while watching TV due to the difficulties already discussed. With Chrome OS running on your TV, Google will be able to convert TV watching into an internet-enabled activity where people are searching for content and consuming advertising as they do so, all of which generates revenue for Google.
For a while now, I’ve been waiting patiently for some technology company to make a splash in the automotive sector by improving the car’s information technology, communication and entertainment capabilities (“infotainment”). Yes, we have satellite radio and a GPS navigation has become a standard feature, but otherwise cars are way behind relative to what personal computers and cell phones can do.
The reality is that in the future we will think of cars not so much as mechanical machines but as computers that move. With each new model year, more and more sensors, microchips and software are added to the car to improve everything from safety to entertainment. Yet, progress has been hampered in this market because each automaker builds these so-called “infotainment” systems on their own. As a result, they end up duplicating R&D costs, thus limiting the amount of progress we can make.
So far, Microsoft the only large software company that has really made a dent in this market, has been interested in this space for some time and has a partnership with Ford that allows customers to have Microsoft Sync preinstalled. I haven’t used Sync, but I see a few glaring problems right off the bat:
It doesn’t seem like Microsoft is even doing all that much to promote Sync, instead relying (as it always does) on its hardware manufacturers to market the software for them. That seems to have worked well in the computer world where the operating system is nearly inseparable from the physical computer, because most customers can’t use the latter without the former. But people have been driving cars for a long time before computers and chips began being included. Plus, does anyone really believe GM or Chrysler to be capable of explaining (let alone building) a quality infotainment system? No really…
Here’s where I see a huge opportunity for Apple to shake up yet another industry desperately in need of leadership. Apple’s iPhone has been a colossal success (obviously) and people do use them a lot in cars, however, the small screen size makes it difficult to perform a number of tasks safely. Enter the rumored tablet…
Try this idea on for size: what if Apple made a kick ass tablet computer that could be easily mounted in the car? Let’s just say that this tablet has a larger screen, a larger virtual keyboard, runs a similar version of the iPhone OS, has wifi and 3G through a wireless carrier, can download the same apps as the iPhone, and can essentially do everything else the iPhone can albeit in a bigger form factor.
Better still, what if Apple struck deals with the automakers whereby they built cars in the same way that Bose builds the sound dock—it’s useless unless you have an iPhone/iPod to plug into it—and then Apple builds the infotainment system that plugs into it?
Were the automakers to do this, they would substantially decrease their R&D spend because they wouldn’t have to worry about an entire component of the car. Instead they would focus on their core competency: mechanical systems necessary to drive and steer the vehicle. This strategy would also compel the automakers to adopt a modular design, allowing for rapid replacement of infotainment systems as the technology evolves (which it does at a far greater speed then that of people upgrading their cars), and allowing consumers to upgrade their infotainment systems without buying a whole new car.
Cool as this would be, practical as it sounds, we likely won’t see it anytime soon. The automakers have entrenched unions that cripple management’s ability to innovate and an aversion to anything “not invented here” that will make change difficult. If any of them has the guts to pursue such a strategy, I think it’d be a great step in the right direction. Otherwise, we’ll likely see such a strategy adopted by a company like Tesla or Fisker which has an Ethos if innovation and is free of the burdens native to the Big Three automakers.