counternotions

There are two mainstream operating systems in the world and they don’t quite care for each other. While Microsoft can copy Apple and afford to ignore it when strategically advantageous, Apple’s problem is of a different sort.

Apple is on a different trajectory of innovation. Having a fraction of Microsoft’s userbase, Apple must out-innovate to survive. Its product pipeline depends on ‘blockbuster’ hits, like the iPod and the iPhone. Being as good as or just incrementally better than the competition is just not enough.

Collection vs. integration

The superior user experience of Apple’s products is the result of tight integration of hardware, software and services. To a casual user the iPod is a cute and useful gadget. To Apple, it’s a careful orchestration of many intertwined factors:

If we were to take away a few of these interlocking factors, the 110-million strong iPod would no longer be an iPod, it would be just another moribund “iPod killer.”

Apple is the only major company that’s both horizontally and vertically integrated: Microsoft doesn’t do much hardware; Motorola, Nokia, Sony or Samsung don’t own operating systems. A typical not-the-iPod media player, for example, depends on critical licensing from many other companies:

Rate of innovation

Unfortunately, each one of these varied companies has a different rate of innovation and likely a different business model. For example, Microsoft first thought that it could lick the iPod/iTunes threat by getting an army of partners to license its PlaysForSure DRM so that others could build the hardware around Microsoft’s software foundation. What worked in the PC business didn’t against Apple’s tightly integrated, single-company platform capable of pursuing a very aggressive innovation path.

Within three years, Microsoft had to change course completely, abandon PlaysForSure and compete against its former ‘partners’ by introducing its own hardware, incompatible DRM and download service. Those MP3 player manufacturers beholden to Microsoft’s rate of innovation saw, in turn, their market growth potential collapse. This is a classic build-or-buy dilemma faced by all enterprises when they have to make strategic product decisions: can you let other companies control the rate of innovation of your own products?

For Apple the iPhone is the product, perhaps more than any other, that brings this question into focus. The iPhone is cross-platform from its inception. Like the iPod, its principal conduit to the rest of the computing and communications universe is iTunes.

While many media players and phones have their management smarts and content creation tools built in, the iPhone needs iTunes like an umbilical cord. From a design point of view this makes the device easier to use, simpler to manage and cheaper to produce. It also gives Apple a great deal of control over software/firmware updates, security, monetization and interfacing with other applications on users’ desktop machines. And therein lies the problem: the majority of iPhone users are on Windows.

A lot of innovative integration Apple could create between the iPhone and its desktop universe can’t be implemented on the iPhone simply because of what’s not available to Windows users. While QuickTime, iTunes and Safari are cross-platform, many applications that could provide exciting opportunities for iPhone integration like iChat, Keynote, Mail or iPhoto are not.

The Sound of One Hand Clapping

We saw a small example of this limitation this week at the introduction of Leopard. Some people assumed that the iPhone Notes application would directly ’synchronize’ with the Notes capability of the new Mail app. Unfortunately, as there’s no Mail app on Windows, that one-way integration is done through platform-neutral IMAP emails, as John Gruber explains. Otherwise, Apple would have to rely on Microsoft’s Outlook for notes synchronization, but cannot mitigate the discrepancy of user experience between iPhone, Outlook and Mail presentations of notes. That is the beginning of a slippery slope, especially for a company that didn’t want to rely on Musicmatch Jukebox app to manage iPods on Windows not too long ago.

The dilemma for Apple here is: should it index iPhone’s rate of innovation to what’s available on Windows or port currently Mac-only technologies to Windows as it has to provide an equal measure of user experience to all iPhone users?

From my conversations with Apple folk, I think there was a lot of trepidation with cross-platform migration starting with QuickTime in 1994, continuing through the decision to introduce iTunes on Windows in 2003, and finally to current discussions on iSync and Core Animation.

Where do you draw the line?

If Apple migrates too many critical apps and frameworks to Windows to make its cross-platform devices platform-neutral, will it be able to maintain sufficient differentiating advantage over Windows for the rest of its desktop business? And if it keeps some of its innovations Mac-only will that hold back its ability to out-innovate its numerous and well-funded competitors for cross-platform devices?

Do you see any Mac technologies going on a Windows expedition anytime soon?

Creando conciencia en las calles

Outstanding blending of digital and hand-drawn typography for a thoughtful second-take effect. (More at the site.)

» Via NFG.

Oversized screw as a table by FinnishDesignShop

For when you need to send a signal to your advertising agency or application development shop; nice furniture for close-quarters negotiations.

» Via Sensory Impact.

Walking on exhibit walls

While designing the space for the 2007 collection of 100% Products, Nendo decided to lock the entire exhibit – furniture and all on to the wall surface. The spatial hack was intended to create attention by allowing the viewer to see the exhibit from a floor above. In addition, any visitor the booth would end being part of the exhibit by appearing to be walking on the wall of the room.

» Via Sensory Impact.

Referring to Nokia’s upcoming answer to the iPhone in Remember who said, ‘Great artists steal’? Russell Beattie says:

Actually, let me say this definitively: Not only does Nokia have the more advanced device now, but it will take Apple several *years* to come up with a competing product that has anywhere near these level of features. Apple just doesn’t have the mobile hardware chops to do it themselves. Until you easily can get things like GPS, 5 megapixel sensors and HSDPA 3G on the commodity market, Apple won’t be launching a device with those features. They don’t have the experience, know how or partnerships to get it done and still be profitable.

Not understanding just what Apple products (perhaps iPhone more than any other) mean to users seems to be a professional punditry handicap. Is a mobile device a simple collection of its hardware components, as Beattie clearly lists above? More pixels and more speed equal utility and delight? If that were so, how did the iPhone ever become AT&T’s top selling phone, the fourth top selling handset in the US market? AT&T spokesman Mark Siegel:

In its first weekend we sold more iPhones than in the first month of any other wireless phone AT&T ever offered. That’s how good it’s been.

Clearly, Apple knows something Nokia does not. (Actually, it turns out Nokia knows more than Beattie as well: CEO Olli Pekka Kallasvuo has said he is “paranoid” about Apple’s entry into the cell phone market.) Beattie is not alone in his inability to appreciate that a consumer device is more than the sum of its metal and plastic parts or whether it’s ‘open’ or not. Morten Hjerde:

But Apple has created a closed walled garden product and who wants to live in a walled garden? Tying the device to a particular operator, not letting anyone install as much as a small Java game or a ringtone on the device without Apples consent?? Please! Do you think we live in Albania or the US or something?

So how innovative is the iPhone then? How does it advance the mobile devices industry? Let’s skip the obvious industrial design, the multi-touch interface and the overall integration of hw/sw components that make it a delight to use. Let’s instead focus on how the iPhone is already changing the industry, just after a few weeks on the market.

Nobody knows this better than the largest U.S. carrier AT&T. Company CEO Randall Stephenson outlined at the Forbes MEET II forum yesterday two distinct ways the iPhone is changing the industry, as reported by electronista:

Safari

While most users have typically been sparing with Internet use on their phones, the frequency of access “jumps by multiples” when existing subscribers switch to an iPhone, the carrier head noted.

Video

The executive also observed that the Apple handset’s ability to play video had changed his and the company’s approach to video playback, as he and many at the company had never thought it likely that customers would watch video on a cellphone until the iPhone became public.

This sudden discovery of the usefulness of video plays significantly into the motivation behind buying 700MHz spectrum from Aloha Partners, Stephenson said…Large amounts of built-in storage on the iPhone and similar devices are helpful for now, the AT&T chief added, but will be less essential when subscribers can stream the content instantly regardless of their location.

How can AT&T (which Walt Mossberg recently likened to “Soviet Ministries”) be moved by a mere device? And agree to hand over to Apple $400+ per iPhone contract in revenue sharing? Similar deals have been done with European carriers as well.

Has Nokia ever done that? Has Nokia ever really taken any bet-the-company type of risk to alter the balance of power in the cellphone industry? It’s been expedient for the Nokias and Motorolas of the cellphone industry for over a decade to let carriers dictate pretty much everything customers can do with their phones. They are now riding on the coattails of Apple, hoping to leverage iPhone’s acceptance by the market into getting concessions from the carriers.

Reminds one of another market altering move by Apple just half a decade ago: the iTunes/iPod revolution in the music industry. The recent tantrums by Universal and NBC in their quest to dethrone Apple shows just how much success Apple has had in that endeavor.

All the critics of the iPhone are betting on is that history won’t repeat itself. Will it?

Martin Varsavsky is the founder of FON, a wireless company based in Spain, whose backers include Google, Skype, Index Ventures and Sequoia Capital. FON claims to have established the world’s largest WiFi community, the “Foneros,” who share their WiFi and in turn get free access at FON Spots around the globe. Varsavsky is also an early-stage investor in companies like Joost, Netvibes and Technorati.

Recently, Varsavsky met for an hour and a half (5-min video) with CEO Steve Jobs at Apple’s Cupertino headquarters to discuss FON. Varsavsky describes Jobs as “one of the brightest people in the world” but “not the nicest guy,” “curious but not simpatico.” He found him to be “trim and thin” with a gray beard and holes in his jeans. Apparently, Jobs was “very interested in FON.”

Inquiring minds would naturally wonder, why? Feel free to speculate.

Speaking at the CTIA Wireless I.T. and Entertainment show in San Francisco, David Ulmer, senior director of entertainment products at Motorola, says he’s convinced Apple won’t open up the iPhone anytime soon:

“I guarantee you that you will not see a Napster music service on the iPhone…The iPhone may offer some sort of open web. But music sales? Device sales? Accessory sales? Anything you pay is probably going to come from Apple.”

Utterances of a direct competitor?

A recent ChangeWave survey reviewed at SeekingAlpha shows Motorola losing marketshare, as the manufacturer hurt most by the introduction of the iPhone.

Once heralded for its market-changing Razr phones, Motorola has been steadily losing market share and has been close to getting knocked off its No.2 position to Samsung. So we can forgive Ulmer for trying to shift attention from his own beleaguered company’s troubles to Apple’s unwillingness to share the wealth.

But what exactly is he complaining about? If we are to assume that the upcoming SDK next February won’t open up the iPhone completely, does that mean that Apple’s customers will be hurt? The iPhone is completely closed right now and its customers are far away the most satisfied in the industry, nearly three times more satisfied than Motorola’s. It’s hard to imagine when the iPhone gets third-party apps next year, customers will be less satisfied.

This mantra of ‘openness’ is everywhere nowadays. Facebook gets $15 billion valuation after it ‘opens up’ its platform to outside developers. Never mind the fact that Facebook is a one-way data roach motel where users’ metadata remains behind the company’s walled garden.

Those without short memories may remember that a decade ago Macintosh was wide open but a few came to the party. Indeed companies like Adobe, Macromedia, Microsoft and a host of smaller ones either eliminated their Mac offerings, failed to upgrade them or never introduced Mac versions of new products. This was one of the critical reasons that brought Apple to the brink of extinction.

Steve Jobs is determined not to repeat that mistake ever again. Over the last decade, wherever Apple felt a significant Mac market was under-served by third parties, it has introduced its own applications, quickly besting competitors and creating market-leading, signature products: iPhoto, iTunes, GarageBand, Aperture, FinalCut, Motion, Safari, and so on.

We already know that Apple is capable of selling 110 million iPods and breaking historical records in consumer electronics without opening up the device. And it isn’t as if its customers are leaving in droves.

So, indeed, ‘opening up’ a device or a platform is no guarantee of success, otherwise phone manufactures on whose cheap products customers can load a bewildering number of applications wouldn’t be so paranoid of the iPhone. Being ‘closed’ is not a precursor of failure either, as the phenomenal success of iPod shows.

At the end of the day, the success of a product is contingent not upon its ‘openness’ but the degree to which it provides utility and delight to its customers. On that score, as the chart above shows, nobody comes close to Apple’s record.