Apple’s Next Challenge: Finesse of Power

| Hidden Dimensions

“Patience is power. Patience is not an absence of action; rather it is ‘timing’ — it waits on the right time to act, for the right principles and in the right way.” — Fulton J. Sheen

As corporations become successful and grow, they find that the partnerships they had before, necessary to prosper, must be handled differently. Size and power mean influence, but how that power is finessed to change the game in its favor is the next big challenge for Apple.

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Apple has gone through several, storied stages of evolution. The founding, the departure of Steve Jobs, the near death experience. What I want to focus on here is the evolution of Apple power in the era after Steve Jobs returned. There was a rebirth, and Apple basically became reborn, young again. Young and powerful.

Perils of Partners

Apple KingdomYoung, prosperous companies more often than not depend on other companies. They form partnerships in order to deliver what neither company could have delivered alone. Apple has had to partner (or at least work agreeably with) the entertainment industry to deliver products like iTunes and the Apple TV.

The same goes for carriers like Comcast, Time Warner, Dish and DIRECTV. These carriers couldn’t exist without agreements to deliver content.

As we know, from time to time, the practicalities of those partnerships result in compromises that don’t serve the customer 100 percent of the time. For example, my old ReplayTV had a 30-second skip button. A decade ago, the sensible thing to do was to digitally skip 30 seconds of content. Poof. Instantaneous. Today, concessions to advertisers result in a DIRECTV 30 second skip that, instead, fast forwards through 30 seconds. The idea is that you just might catch a glimpse of something that appeals to you and then backtrack to the ad. This is power corrupted.

Another concession to advertisers is the Pause button on the DIRECTV DVR. The pause button should always freeze currently playing content, right? Not in DIRECTV-speak. Recently a software update changes the rules. When you’re in the library, perusing content, and the current video stream is in a small PIP, pressing the Pause button plays the currently selected library item. Why? It seems the goal here is to keep you from freezing distracting content, potentially ads, while you inspect the saved library. But the net result is that the Pause button becomes a wickedly distorted instrument of DIRECTVs agenda rather than adhering to great UI principles and customer satisfaction. Pause means pause.

Contrast that to Apple’s Mountain Lion AirPlay Mirroring. In this case, the former agenda of some content providers is utterly disrupted. But with grace. Heretofore, content providers set their own rules. You could watch this kind of content on the big HDTV, but you could only watch that kind of content on iPads or your Mac. With Mountain Lion’s AirPlay Mirroring plus an Apple TV, you can put anything you can watch on your Mac on the big HDTV in the living room.

This has all kinds of disruptive effects. It makes cord-cutting trivial. And it forces content providers to change their policies about what content goes where. In fact, one theory is that AirPlay Mirroring is what forced Hulu’s hand, and that’s why it’s now found on Apple TV. Ah, the finesse.

Here’s another example. Dish recently introduced something originally called Auto Hop, rebranded as “The Hopper.” The Hopper, during payback, detects ads and automatically skips them. You don’t even have to press the 30-second skip button. It may have a cute kangaroo logo, but it has the networks outraged, and they are suing.

The distinction here is that Apple is a large and powerful company. It has the technical talent and acumen to develop disruptive technologies that surprise and delight the customer. Partners can’t reasonably demand concessions that interfere with Apple’s vision. Dish, however, in trying to satisfy its own customers, seems to have misjudged its delicate position: it exists at the mercy of the content providers. Those providers know that they have plenty of other outlets for their content.

Perils of Power

When a company becomes too big and too powerful, it finds that it can depend less and less on partnerships. It finds that it can call its own shots, and it doesn’t have to make compromises and concessions that work against its own agenda. Apple has always been this way. Partnering is just another name for losing control of the customer experience. Regretably, former partners become, if left to the weaknesses of the human psyche, irritants to be crushed.

This has happened recently and notably with Facebook and Twitter. What happens is that smaller companies try to prosper by insinuating themselves into the prosperous ecosystem of a larger company. However, the larger company doesn’t want or need their existence. So they figure out new and ingenious ways to make life difficult for the bottom feeders — or even the sizable competitors.

This leaves a sour taste in everyone’s mouth, journalists pick up on it, and before you know it, the big company becomes the bad guy. In previous times, IBM did this to (the former) DEC and Microsoft, in turn, did it to IBM. The American spirit says that you can be big and powerful and a winner, but you must carry it with grace. Or we’ll turn against you.

In an ill-considered use of power, taken too far, the smaller guys eventually cry foul, the government takes notice and intervenes. We know how that went with Microsoft.

Apple Opportunities

The discussion above contrasts several different companies to Apple and how treacherous it can be as a company tries to either divest itself from partnerships or succumbs to partner pressures that outrage the customers. So far, Apple has mostly avoided that.

I think the reason many technical columnists are so enthusiastic about a possible Apple HDTV is that it is hoped that Apple can, by virtue of its talented executive team, navigate through these partner discussions better than other companies can.

My suspicion is that Steve Jobs tried to panic entertainment industry executives by suggesting that his way would ultimately prove to be the better future. That is, only Apple saw the best way forward, and those execs would risk being left behind. Trying to inflict fear and panic almost never works with seasoned CEOs.

Tom Cook

Tim Cook, it seems to me, is a different kind of man. He can sit down with other CEOs, reason things out, and develop a plan that moves both companies forward. But from a well conceived position of influence. In essence, Apple’s success in delivering an HDTV, if that’s the plan, boils down to the proper exploitation of power, a very delicate thing for a company that was once beleaguered.

Can Apple, with its huge technical talent, do a better job of delivering entertainment to customers than the competition? And make it a winning proposition? Without government scrutiny? Without appearing heavy handed? In the spirit of a graceful winner?

The Apple TV is a hobby, I think, because Apple is working out all these issues. The idea is to keep developing the technology until, perhaps, serendipity reveals the best path. Tim Cook so much as said that at the last earnings report, and that’s a very sensible, patient use of power. Lesser companies might be tempted to bulldoze their way forward.

Any company can make an HDTV. But it takes a delicately finessed use of great power to completely change the game.

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2 Comments

Peter

Partners can?t reasonably demand concessions that interfere with Apple?s vision.

The music industry does this all the time.

Examples?

Let’s go back to the Airport Express.  It had a really cute feature which allowed you to connect it to your stereo and it would stream music from your computer to your stereo.  Note that it didn’t stream audio—it streamed music.  From iTunes.  Only.  Via an encrypted channel.  Was there a way for third-party developers to use this.  No.  Why?  Because the music companies were afraid that people would somehow use it to steal music.  I asked about this at WWDC, where it was introduced, and that’s what I was told.

Here’s another example:  Ringtones.  The music industry wants to get paid when you use a snippet of a song as a ringtone.  Of course, it’s completely ridiculous.  Fair use and all that.  Of course, Apple won’t go along with that.  You have to buy ringtones for $1.98 (99 cents for the song, 99 cents to make it into a ringtone).  And you can’t do this with music that you didn’t buy from the iTunes Music Store.

Yet another example:  Apple charges you $25 a year to stream music that you already bought and paid for to your cellphone.  Now let’s think about this—Apple is charging you to listen to your own music.  Why?  Because the music industry wants these sorts of providers to pay.  Fortunately, smarter heads prevailed, but Apple still has to go along with the music companies.

And, finally, our most recent example in iOS 6:  After five long years, Apple has finally come up with an amazing innovation in the Alarm clock app:  You can now wake up to music!  Why did it take so long?  Because the music industry doesn’t want you to wake up to music unless they get paid.

What’s entertaining about all this is that way back when, Apple was one of the first big companies to publicize the whole idea of ripping CDs (one of my favorite ads).  Of course, the music industry accused Apple of promoting theft.  But as soon as the iTunes Music Store came about, Apple basically became their “Yes” man.

wab95

Excellent thoughts, John.

Transitions are always fraught with difficulty, and the one from subordinate to superior power is one of the most challenging, for either person or company.

Apple have had two valuable life lessons to assist with this transition: 1) a near death experience in the 1990s; 2) Observation of the plight of its contemporaries, notably MS, including being on the receiving end of some of these displays of power (Apple’s court battle with MS over copyright), who have run afoul both of legal courts and the court of public opinion. 

Having veterans at the helm of key divisions within the company who either intimately know this history, or better - survived it, and who are committed to preserving the company’s culture, puts modern day Apple in a position that earlier versions of their competition never were.

Nonetheless, this transition remains a threat to the company and its relationship to its client base and the public.

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