Particle Debris (wk. ending 7/30) Taking Stock

| Particle Debris

Opinions vary on the technical quality of the reporting by Consumer Reports magazine. Some people believe that they have done a competent job, especially with automobiles. Others point out that the publication has consistently hosed up its coverage of the Mac. The fact that Consumer Reports has declined to endorse the Mac over Windows causes some people to suspect the mental competence of CR. Others believe it’s a sign of balance, fairness, and a recognition that all OSes have their faire share of problems. In any case, Gene Steinberg of the TechNightOwl has weighed in on some of the issues regarding CR’s handling of the iP4’s antenna problems - if that’s the right word. I didn’t agree with everything Gene said, but that didn’t keep me from finding his essay thought provoking.

For those of you who dabble in Apple’s stock (AAPL), a Romanian mathematician has conducted a historical analysis of that stock and sent it to Philip Elmer-DeWitt at Fortune. Nicolae Mihalache Ciurdea’s analysis suggests that Apple stock, based on the last 12 quarters, is a bargain at US$260.00. Mr. DeWitt continues the analysis, which gets fairly technical, and comes up with interesting results. Warning: you’ll need to be experienced with technical terms used by investors.

Last week, ZDNET (amongst others) advised users to be aware of upgrading a 2008 iPhone 3G to iOS 4. Apparently, there were some real issues with slow downs, and, eventually Apple started to look into the matter.

This is a little off the beaten path, but I know you’ll appreciate my reference. We all know about the lunatics who believe the Apollo moon landings were faked. Here’s an interesting comedy skit that “proves” the landings couldn’t have been faked, in typical British understated humor.

My former boss’s boss at Apple, David Sobotta is still writing about his tenure and departure from Apple. In this blog entry, he writes a poignant and revealing essay in which he reminisces about those days. Lots of people think that Apple is and always was Camelot, so reading the reflections by a former Apple executive who was poorly treated is always enlightening.

How do you know when the iPhone has truly arrived for the masses? It’s simple. When your wife wants one. Here’s a nice article on the iPhone’s technology critical mass point: “The Jill Hotchkiss Inflection Point.” Mr. Hotchkiss writes: “There’s something important to note here in attitudes towards technology that we digerati, gathered together on the leading edge of the bell curve, often forget. Technology only becomes important to most people when it lets them do something they care about.” Good stuff here.

At TMO, I and other often write about how the iPad opens up new possibilities for publishers of magazines and newspapers. However, it’s a been a rocky road for Time, Inc. who can’t seem to navigate the Apple quagmire of publishing rules. Here’s the story at All Things Digital: “Time Inc.’s iPad Problem Is Trouble for Every Magazine Publisher,” by Peter Kafka. You might even say Time’s experience has been Kafkaesque.

SAI says, “Here’s a fun thought experiment. Let’s say all the major tech companies decide to reward their employees by divvying up cash on hand and giving it to the staff. Which employees would get the biggest payday?” You’ll be mildly surprised by the result in the SAI Chart of the day from Jul 28.

There was a time, last week, when it may have been possible for Apple to buy Infineon — if Infineon really wanted to sell. It may well be, now, that Intel has the inside track, but never mind. TechCrunch made a semi-convincing argument for Apple to do that, aside from antitrust issues. Besides, making a hurried purchase with dubious legal ramifications in order to screw a partner is seldom a good idea. Even so, TechCrunch makes a few good arguments. Decide for yourself in “Why Apple Should Buy Infineon: To Own Mobile And Screw Intel.”

Now.Stop.Salivating.Evil.You.

I’ll finish with a thoughtful essay that pertains to the Apple world, but the tech world on general. See if you can spot yourself in this article, “The Audacity of Free: The Products and Services Edition.” My thinking is that when readers go overboard with their comments, write volumes, and write often, they tend to think of themselves as semi-famous. Of course, if you’re famous, but without responsibility or constraints, you can justify a sense of self-entitlement. It’s a dangerous game.

In this case, do me a favor and don’t kill the messenger.

Comments

Bosco (Brad Hutchings)

I feel like the Apple customer/developer equivalent of David Sobotta, but way less important. Here’s the valuable service he provides: social proof that it’s ok to leave the reservation. Apple is coasting on “cool”. More than ever, they are offering their vision of what products should be rather than asking customers what they want. It’s a great strategy when people trust your vision and ignore competitive options. It’s not so great a strategy when your vision comes into widespread question. The Motley Fool is also on the leading edge of this observation.

Make Apple earn your business. Make an effort to keep up with what competing products are doing. That includes Windows 7 and Android. And when it comes time to buy an Apple product, hold them to the standard of being competitive, not just worshipped or loved. Ask your Apple rep is such and such Apple product will work with other products you like. Most people I know who have opened themselves up to exploring off the reservation don’t make a full time return.

John Martellaro

Bosco: That is very good advice.

Nemo

Jony Ive, Apple’s SR VP of Design, explained why Apple doesn’t use focus groups to determine the features of its products.  As explained by Mr. Ive, focus groups can only tell you what they know and what they want, based on what they know.  But that is only useful for making conventional products.  It is not useful for making the innovative product that no one has yet conceived of and that has unimagined uses that will delight users and which they will find indispensable, once they experience them.  Jobs once said Apple’s goal with it products is to do what Wayne Gretzky said that he did on the ice:  Skate to where the puck will be, rather than where it is.  Apple is always trying to skate to where the puck will be.  Focus groups can’t help with that.

Microsoft uses focus groups to give people what they say that they want, from which emerged the Windows tablets and Windows Mobile.  Apple uses its desire, talent, and resources to fully imagine the possible to solve existing problems in innovative ways, from which emerged the iPad and iPhone.

Bosco (Brad Hutchings)

Nemo, It’s truly hilarious to me how you can write that feeling that it is the highest endorsement of Apple’s design and products, and I can read that feeling that it is the strongest indictment against them.

Focus groups are a particular tool for assessing market needs. Microsoft may or may not use them, but their products are not determined 100% by focus group. Other considerations come into play. With Vista, Microsoft learned that it had to have its ear to the market—what they wanted, what they liked, what they didn’t like. And nobody who knows anything about Windows will tell you that Windows 7 wasn’t a drastic improvement over Vista and a no-brainer upgrade to XP on the desktop and 2000/2003 on the server side if cost isn’t a consideration, and still compelling if cost is. With both Vista and 7, Microsoft listened to licensing concerns—think virtualization and netbooks—and adjusted their policies to meet market needs.


Can you think of any instance in the last five years where Apple observed its failure, acknowledged the problem, listened, and fixed the problem? If not, is that part of Apple’s mystique or a serious bug in its DNA?

Nemo

I begin by observing that the proof is in the pudding.  Apple, using its way of doing things, has been without questions the most innovative company in tech and has produced repeatedly far products and services that are at least innovative in useful ways and is unparalleled in its industry in providing serial paradigm shifting revolutions: iPhone, iPad, iTunes, multitouch interface, FireWire, WebKit, popular UNIX-based OSs:  OS X and iOS; ground breaking industrial design in all of its products and services; the App Store; serial innovations in materials; revolutionized the relationship between smartphone OEMs and the carriers, which Google has been trying to counter with Android; and on and on.

But Apple has made mistakes and has quickly responded to them.  It quickly took the Cube of the market, but the lessons of the Cube emerged in later iMacs.  Gee, this is hard, because Apple, since Jobs’ return, really has made many mistakes.  The titanium skin its Power Mac notebooks didn’t work, so Apple then went with aluminum.  But you’re right Bosco, there really has been too many mistakes, and the one that have happened are fairly minor.

Microsoft, on the other hand, has made some critical errors that now jeopardize its future:  Use of fragmented multiple OSs, which is vastly expensive, makes cross development and co-development very difficult; a fundamentally flawed security model in XP, Windows Vista; Windows Mobile; initially decision to build Windows on a kernel that is not easily adapted to smaller and less powerful devices; decision to develop a crappy version of IE for the Mac and then the decision to stop developing any browser for the Mac; decision to ship second rate version of Office for the Mac; multiple errors in violation of antitrust law here and in Europe; using the data from focus groups to restrain innovation in its products and services, and on and on.  Most of these problems arise from one of two reasons:  Product design by focus group and/or using vendor network-lockins to try to lock-in customers rather than compete on the merits.  That is quite a list of strategic errors and focus groups have played a significant part in them.

skipaq

You’d have to go back more than five years. Apple hasn’t really had any failures over the last five years. Problems they have had and addressed. But if you go back far enough you will find failures before Jobs came back and after that have been addressed. Think Newton and Cube for failures addressed in hardware. Think licensing and OS legacy before moving to OS X in business and software.

Apple is primarily a consumer oriented company. The measure of their success is the reception their products have among consumers. They don’t operate like the Dells and Microsofts as a general rule. It is a good thing that Apple does things their way. You will never see them turning to focus groups; but you will see those very same people buying Apple products.

As you should know Apple is secretive about the products they develop. How can that possibly continue if they start using focus groups. You may think it is a great idea; but I don’t. Apple’s opinion on the matter is plain - no way!

Bosco (Brad Hutchings)

This looks like a complete failure to me. 0% to 34% in 9 months? How’d that happen?

And no, I’m not focus group guy. But I’m pretty sure you can learn more about what your customers want, need, and will buy from actually watching them and asking them than from drawing innovative designs for the CNC machine.

Lee Dronick

No doubt that Apple is doing some intel work and I don’t mean Intel. I would think that they are lurking on blogs reading posts and reading between the lines, that’s their focus group. This would be in addition to Steve Jobs and visionaries he may have on his hip.

skinnybear

From MacRumors at http://tinyurl.com/2ukbv66:

“...Today’s survey from Nielsen also reveals that Research in Motion’s lead may not hold up for long, however, as more than half of current BlackBerry owners surveyed are planning to defect from the platform with their next smartphone purchase, with 29% planning to move to the iPhone while 21% plan to pick up an Android-based handset. In contrast, 89% of iPhone owners plan to stick with the iPhone, while 71% of Android owners plan to stay on that platform.” 

Does Nielsen count as a focus group?  No editorial comment - just the survey.

wab95

Great picks this week in Particles, but the show-stealer for me is the Moon-landing skit. Brilliant satire of non-critical thinking.

Nemo

The makers of Android phones and Google have the habit of releasing their latest product in the quarter before Apple releases its latest iPhone so that they can make a big deal of their sales numbers, as folks delay their purchases of iPhone, until Apple releases its latest iPhone.  The numbers from Bosco, supra, reflect that.  See http://techcrunch.com/2010/08/02/android-iphone-share/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+Techcrunch+(TechCrunch).  However, the newly released iPhone 4 and the iOS are gaining ground quickly.  See http://news.cnet.com/8301-13579_3-20012409-37.html?part=rss&subj=news&tag=2547-1_3-0-20.

Google and the Android OEMs know that Apple releases new iPhones on an annual cycle, and they make the most of it by usually releasing a bunch of new phones that lead to a surge in sales, as people delay purchases of the iPhone, until Apple releases the new iPhone.  It’s an old trick that distorts sales figures to provide a misleading picture of Android’s success relative to the iPhone.  So what?

Bosco (Brad Hutchings)

The makers of Android phones and Google have the habit of releasing their latest product in the quarter before Apple releases its latest iPhone so that they can make a big deal of their sales numbers, as folks delay their purchases of iPhone, until Apple releases its latest iPhone.

And judging by this morning, I have a habit of walking around with my fly unzipped. “Once” does not make a “habit”. Your comment also fails to recognize the severe competitive disadvantage Apple finds itself in. It’s not just last quarter. It’s this quarter, next quarter, and the one after that. Long before Christmas, the top end Android phones will beat iPhone 4 on every spec except automatic call dropping. It will simply cost Apple too much to keep exclusive premium features. With just 1 model and 1 company making it, Apple cannot help but to fall into a small niche, probably within the next year.

To me, Apple is like Charlie Brown to the marketplace’s Lucy holding the football. Yes, Apple innovates and blazes new trails. But then Apple refuses to let go. Meanwhile, the rest of the market comes up with a good enough solution and pushes Apple to a small niche. The network effects of the widely adopted, good enough solution exceed the aesthetic premium and even the value of innovation. In what seems to be an ironic twist if you don’t understand the dynamic, the good enough products overtake the Apple products on every measurable axis and eventually on the unmeasurable ones too.

skipaq

Just as the good enough music players overtook the iPod in every measurable axis and eventually on the unmeasurable ones too. You know every iPod killer really did do that. Really.

Apple doesn’t need to be number one in smartphone sales. It hasn’t been yet and it wasn’t even a goal. They will simply be satisfied with out-innovating the competition. Apple is too fast or to use a better analogy—Apple is Ali versus the competition’s Sonny Liston.

mhikl

I begin by observing that the proof is in the pudding

Nemo,
I was going to go with one of:
“Knockout!”
or
“We’re Unworthy!”

What the hey - both.
Play on, pal.

Chandra Coomar

Bosco Hunnneeeee! Mommy’s home.
Now don’t you go playing with your self again. I have to use biologicals to get that stuff out.
And don’t go playing with those stats again, you know you don’t really understand em now. You can’t compare 1 phone against an OS hunnneee.  Just like you can’t compare a boy with a girl, you do remember what a girl is, right? Mommeeee’s explained that to you sooooo many times son. Girls are like Mommmeeee. Boys are like Daddeeee. And iOS is like Android, not the iPhone.
Now, let’s practice again, like yesterday.
1 x 1 =1
1 x 2 =2
1 x 3 =3
and 1 x fun = Mommeee!
My clever Bossie

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