Saturday, July 21, 2012

Microsoft/Google/Apple, Which One Of These Doesn't Belong Part 2

English: iPod classic front view

OK, so where was I going with all that stuff in part one? The answer to the question posited in the title of this and my previous entry is obviously Apple. Unlike Microsoft and Google Apple provides end to end experiences that terminate in consumer electronics devices but those devices are only the top of a pyramid of value creation that they own or exert significant influence over. That ownership and control means they extract a lot more profit than their competitors.


Apples approach isn't without risk as companies that have taken this route sometimes find themselves fragmented as keeping everybody in step is very challenging. This is where Job's crystal clear vision and iron will served Apple well but operational excellence isn't Apple's only secret.

Why did the original iPod do so well? MP3 players were nothing new. They had been around for several years and while they had done OK they had never taken off the way they did when Apple entered the market. Apple's success was the result of understanding what the biggest pain point was for consumers and addressing it. What was that pain point? Acquiring media. Apples answer was the iTunes store. Yes, pirated copies of music were widely available at the time but the quality was variable and you needed to be somewhat tech savvy to acquire and manage that music. It didn't hurt Apples cause that the RIAA was busy locating and prosecuting people who partook of this illicit activity.

While Apple was solving a customer pain they were also a brand new business model where they made
money on the hardware AND "software" in the form of media sales. Sure, some people didn't partake of the iTunes store but most did and the revenue generated by those later media sales looks very nice on Apple's bottom line.
The primary reason I was interested in Google and Microsoft announcing their own tablets is that it appeaed to be a move by these companies towards emulating what Apple has been doing so successfully over the past decade or so.


The problem with Ballmer's recent claim that Microsoft is going to compete with Apple in all markets is that they can only do that credibly by taking one of two approaches given their current lack of success.

   o They can create a new business model that creates superior cash flow OR
   o They can emulate what Apple is already doing

Neither scenario is likely to work for a number of reasons but choice number two is much more likely to bring success since there is already a very successful example to follow. Given Microsoft's first ever quarterly loss it seems obvious they are not heading in a good direction. Radical change is probably their best bet and they seemed to be moving in that direction with the announcement of the Surface tablet. Recent back peddling by Ballmer does not bode well though.


Google is doing great compared to Microsoft and has a much better prognosis. There is reason to worry however for several reasons. Arguably the biggest one is the fact that the Apple/Google divorce has continued to progress with Google Maps soon to be removed as the default map app on iOS devices and no sign of a decline in the ongoing patent litigation between the two companies.

So if Microsoft continues to fade and Apple continues its ascension platform wise Google could be in trouble a few years down the road. This likely explains Google's introduction of ChromeOS and Android. Ad revenues are driven by search and if Google search isn't available the ad revenues are going to dry up quickly. Microsoft has been trying to dethrone the Google search juggernaut for years now with little success but Apple has a significant advantage since they control the entire value chain in the case of Apple products.

The introduction of the Nexus 7 is likely just another step towards Google following suit. As I said in the Microsoft section there are two ways to compete with Apple. You could argue that Google has in fact created a new business model with their search business but that business model is increasingly dependent on the good will of Apple. Carving out some space for themselves has to look awfully tempting and the Nexus 7 is likely an experiment in ascertaining how feasible that is. Google's earlier introduction of a phone was a disaster but they appear to have learned from that mistake and chose a better product for their distribution model this time.


Apple is a very scary company right now if you are anywhere near a stack of money that they want to claim as their own. The landscape of history is littered with highly successful tech companies that went from giants to liquidation or acquisition bait over very short periods of time. Microsoft is starting to look like Nokia circa 2008 right now and while Google is likely better off they may only be a couple of years behind Microsoft if they don't figure out how to deal with Apple soon. Imitation may not be a bad choice for either company and its certainly worth a try.

Hopefully some of the stuff in this and my previous entry make sense. Things have been insanely busy the past several weeks and I don't see that changing for awhile so I'm kind of shoving this stuff out there a bit half baked. It isn't helping that Google's blogger software is mangling the expletive out of my formatting either. I've had to save and edit this thing twenty times as I write this trying to get the formatting to come out the way I want it.

English: iPod classic front view (Photo credit: Wikipedia)
Enhanced by Zemanta

Sunday, July 15, 2012

Microsoft/Google/Apple, Which One Of These Doesn't Belong?

The recent announcements of the Google Nexus 7 tablet and the Microsoft Surface tablet may signal a more significant and broad change in the world of consumer electronics than most people seem to realize though Balmer's statement that the Surface is essentially just a reference design argues against that theory. Frankly I think Ballmer is either under playing Microsoft's plans the Surface to appease their partners or he's decided to flip flop because of pressure from both inside and outside the company. The second scenario would be particularly unfortunate. I'm going to mostly pretend Ballmer didn't essentially reduce the Surface to irrelevancy for the rest of this post.

It's clear that Apple is the king of the heap these days when it comes to the consumer space. They make tons of money and people line up days in advance of their new products going on sale. When is the last time that happened for a Microsoft product? OK, the Kinect did fairly well but as a general rule people don't get very excited when a Microsoft product is released. The same can be said for Google.

Apple is fundamentally different from both Google and Microsoft in that they are heavily involved with every aspect of their products. In business terms this means they have an opportunity to create, and capture value along almost the entire value chain. That is a very powerful position to be in if you handle it well and Apple clearly does. This ability to create and capture value across the value chain is why Apple is so insanely successful.

The Peril of Not Being Apple

All of which is wonderful for Apple but not so good for the companies that are trying to compete with them. Google is in a better position than Microsoft because the majority of Google's revenues are from advertising revenues generated primarily by their very successful search engine. Google knows however that this revenue stream can be choked off up stream of them which is why they created Android and continue to try new things to keep peoples eyeballs focused in their direction. Apple's ability to control so much of a users experience puts them in an excellent position to influence where people's attention is focused. The recent announcement that iOS 6 will jettison Google's map software in favor of an Apple created alternative is a case in point.

Microsoft is in an even worse situation. Sure, they are probably selling a few more copies of their office suite on the Mac these days but those sales are being cannibalized from the Windows PC side of things where sales are dropping so there is essentially no upside there either.

Apple gains other advantages from their current approach to hardware and software. Microsoft has to support an near infinite number of hardware platforms with each new Windows release. There is no way they can test every possible combination which is why performance and stability under Windows has always tended to lag behind Apple who only have to test on a very small number of platforms that they have all the inside information on. This contributes to the quality of the overall experience when using Apple products and also lowers Apple's R&D costs which tend to be much lower than anyone else in the technology industry.

How Do You Compete With Apple?

I'll be honest. I don't really know the answer to this question and so far it's not clear anyone else does either but you didn't read this far in the hopes of seeing me cop out so here goes...

If you're Google you're worried about Apple and if you're Microsoft you are probably more than a little terrified though you would never admit that in public, at least not in so many words but some of Ballmer's recent actions certainly seem to be telegraphing fairly clearly that he's not feeling all that confident.

One possible approach to dealing with Apple is to look for niches that they have chosen not to compete in. Many Android device makers have managed to make a modest chunk of change by following this approach. Apple offers one screen size for phones and one screen size for tablets. Most people seem happy with these choices but as the old saying goes, you can't please all of the people all of the time.

The problem with that approach is that Apple can watch and wait for lucrative market segments to emerge before introducing their own product. This means that their competition is essentially doing their market research and establishing a beach head all at no cost or risk to Apple and they've shown themselves to be particularly competent at entering markets others have already spent years in and taking over in short order. MP3 players being one example.

I still think this is a reasonable strategy as Apple isn't particularly quick to move. They like to be methodical and thorough and while they generally deliver great products when they finally enter a market there is still time to make money and maybe, just maybe establish a beachhead that they can't overcome.

This post is getting a bit long and I haven't even gotten to my main point. I'm going to leave off here though and save that for the future.
Enhanced by Zemanta

Thursday, July 5, 2012

What I Mean When I Say "The Cloud"

English: Kingston DataTraveler 110 8GB USB fla...

The technology industry loves to create new words and combine old ones in new ways. One recent example of this is "The cloud". You pretty much can't go wrong if you use it in any sentence that is technology related these days but what does it mean?

I'm going to briefly explain what it means to me. With a bit of luck I'll manage to do this in a way that actually makes sense to those of you who don't live inside my head.

The cloud to me is a way of providing instant access to my data along with on the fly backup. This BLOG is an example. I can edit a post from anywhere, stop in the middle of a sentence and pickup my editing right where I left off regardless of what device I'm using and possibly weeks or months later. I don't have to remember to copy stuff to a thumb drive, email a copy to myself or do anything else. I know that there is one golden copy and it lives on Google's huge server farm some place. Ignorance is bliss so far as the details are concerned. I deal with IT related issues every day at my day job, I don't want to at home.

I think that is a fairly typical "man on the street" attitude when it comes to "the cloud". What most of us care about is how technology makes our lives easier and/or more productive.

Where things get messy is when we're out of touch with "the cloud". Google messed the initial version of the Chrome book up by not taking that scenario into account. Yes, I love having all my data available at any time but as wonderful as that world is, Internet connectivity isn't pervasive yet and it may never be. There are simply too many places where linking to the "connected world" may never be cost effective.

My key point is I like having access to my data and having the experience of managing and editing it be as seamless as possible. Any solution that doesn't include some form of offline functionality is going to fall short of the mark. Distributed data models such as the one built into Dropbox have downsides but on balance I like them because they cache my data and make it available locally even if some complexity is introduced by this caching of data.

So really, its less about the cloud and more about having ready access to my data. How that access is managed doesn't matter to me so long as the system handles situations where I'm not connected to the Internet in a way that allows me to see and manipulate my data. The same goes for the processing side of the cloud equation. I don't find the concept of computing devices that are essentially display only very exciting. They work great in certain situations but are not always a good fit.

 (Photo credit: Wikipedia)
Enhanced by Zemanta