The Network Garden - Mark Sigal's Blog

Apple Q3, 2014 Earnings Call: It's About Continuity and Gratification

"Friends say he has a gift for delaying gratification."

Facebook CEO Mark Zuckerberg once attributed a chunk of his success to delaying gratification. Where he could have monetized Facebook sooner - at the cost of building a bigger audience - he resisted the temptation.

Where he could have sold the company, and cashed out, he kept pursuing the "BHAG" (big, hairy audacious goal) of building the next Google, Apple or Microsoft.

Such was the narrative playing in my head, listening to the Apple's Third Quarter Earnings Call.

While others may see a company that can't possibly keep selling more devices, quarter after quarter after quarter, I see a company that has continually avoided the gratification of going for market share and sales at all costs (i.e., at the price of margins, profits and cashflow).

This is no small task when one considers that investors, the media and virtually every pundit in the blogosphere is not so adept at delaying gratification.

Give them a beautiful suit, and they'll see only a loose thread. 

Failure to seize a market - margins be damned - and the company gets dinged.

Unwillingness to be all things to all people - Amazon, Google and Facebook all rolled into one - and the company gets dinged.

Apple CEO Tim Cook is simultaneously unwilling to be his own man, and guilty of doing things that Steve would never do ("This would have never happened if Steve Jobs was still around).

But Apple in the iOS Era has always been about playing the long game. How else do you create a massive ecosystem of 800M devices that fit the lifestyle, daily flows and physical spaces of people at home, work, school and on the go? 

How else to catalyze an explosion of Apps, Accessories and Services, that are not only immense in scale, not only deliver a superior user experience, not only drive unparalled loyalty, but unfathomable sales margins.

How many multi-billion dollar lines of business can one company create before they inevitably, unquestionably go out of business?

But, there must be an end-game, right?

Ultimately, all of this delaying of gratification, of withholding the child-like joy of chasing every market, usurping every partner, and competing with any and all who enter its universe - read: Amazon, Google, Facebook - has to come at a price, right?

Isn't it written in the Torah somewhere that Apple ALWAYS loses because they fail to be a commodity, as God, Jesus and Mohammed demand?

Well, the end is near, and it's called Continuity.

Continuity is the idea that from Mac to Mobile to Tablet to Home to Health to Car to the Enterprise, there is a unity of experience, that is contiguous; it flows. 

Driving in your car? CarPlay kicks in. Walk into your living room, and HomeKit kicks in. Going for a jog, or visiting the doctor, and HealthKit kicks in. Walk into a Costco, and WalletKit kicks in (or whatever eWallet strategy Apple will set loose soon).

My point is this. UIltimately, the payoff of Post PC is that the devices get embedded to the point of invisibility...wait for it...because they just WORK. All the time.

Some believe that that renders the device moot, so Apple must lose.

I hold to the belief that the devices must be terrific, and the edge must be smart, specifically so we don't have to blindly trust a cloud to watch over us; to surveil us; and separate us from our data when things go haywire.

That's not to say that the Cloud doesn't matter, or that there aren't multitudes of problems that can't be solved when you intelligently bridge smart devices with a smarter cloud.

That's the big idea behind Continuity after all. 

But, it's the not so subtle distinction between the notion - captured in every Apple Ad and Apple Store experience - that the INDIVIDUAL is at the center of the universe, that the consumer is the centerpiece; and an alternate vision that we are destined to all be PAWNS in some sentient, faceless borg that calculates, decides and dictates on our behalf.

It's no coincidence then that along with a runaway successful device business, that the App Store (and the iTunes Software and Services business line that underlies it), is the fastest growing segment of Apple's business, and the linchpin of a Continuity play that has been baking for seven years, since iOS was announced.

It's the notion that Ecosystems matter, that the Consumer, the Developer, the Accessory Partner, the Corporate Customer, the Book Publisher, the Car Maker and the Enterprise are all motivated by their own need to not only survive, but to individuate.

And that's a good thing.

Related

1. iPhone: The first 'personal' computer
2. Apple's segmentation strategy, and the folly of conventional wisdom
3. No good deed goes unpunished at the iPhone company

Two Thoughts on 'The Hardware Revolution Is Upon Us And Why It Matters'

Jon Callaghan of True Ventures has written an excellent article where he argues that a new hardware revolution is upon us, and that it is destined to be a game-changer. It's a great piece, and well worth a read. 

Here is an excerpt:

Almost exactly six years ago, Apple launched the first iPhone. It was a small device that many dismissed as a toy. In reality Steve put a supercomputer in our pocket — we just didn’t know it. And like super computers before, it came with immense capabilities and brought about an opportunity to rethink, reimagine and reinvent how we live, work, create and consume. Today, smartphones (and tablet devices) sell by the hundreds of millions.

Cheap processors, cheaper memory, and even cheaper sensors means it’s a great time for people who like to tinker with hardware to tinker. Platforms like Kickstarter and Quirky de-risk production, identify features and customers, and do so before the first tool is made. Wireless broadband is ubiquitous, and military grade technology is available at RadioShack. The manufacture and design of products and devices has changed forever. Building factories is no longer a prerequisite for building products. Add to the mix emergent technologies such as 3D printing and inexpensive laser cutters that put prototyping capabilities onto a kitchen table, and we suddenly are facing an extraordinary revolution in hardware-based innovation.

I wholeheartedly agree with his assertions, but I do want to put a bow around one of Jon's most salient points; namely, that building hardware is hard. Make that HARD with capital letters.

Specifically, there are two key 'gotchas' about the hardware business that most aspiring entrepreneurs get blindsided by.

Before I get into them, let me establish my "hardware chops." In my career, I have:

• Hand-built my own hardware systems (CafeNet: Internet access terminals)
• Worked in the network hardware business (Tribe Communications: Internet infrastructure)
• Invested in hardware startups (Whistle Communications: Internet appliances)
• Advised hardware startups (Square Connect: Universal remote control gateways)
• Founded a hardware device management software company (Rapid Logic: unified device management tools)
• Built a cross-platform system for creating native mobile apps (Unicorn Labs) 

In other words, my take is based upon a 360-degree perspective on the hardware business, and it's lifecycle from a make, bake and take to market perspective. 

So why hardware is so...HARD?

One is the simple truth that hardware guys speak a different language and come from a different planet than software guys, and vice versa.

This generally translates into each party trying to abstract out the other, which often leads to lowest common denominator solutions, or worse, products where the target user credulously wonders, "Were these things designed to work TOGETHER, or just to irritate the user?"

The next wave implies developers having a sense of there being one composite whole (hardware, software, service, tools, manageability), and the team, culture and ecosystem being oriented accordingly. One can see this dynamic at work in Apple's iOS vs. Google's Android.

Two is that specifically because you are dealing with physical devices (as opposed to the wholly digital 1s and 0s of software), the question of channels for discovery, selling, distribution and support are inordinately more complex, with many more points of failure, than with software alone.

This underscores an indelible truth about indirect channels (like retail, amazon, etc.) that many fail to grok; namely, that the channel can NOT solve your selling and support challenges until YOU figure them out first. It's like trying to tell the blind how to see when you can't see yourself.

Food for thought.

Related:

1. Three Takeaways from the WWDC Keynote: How Apple Got its Groove Back
2. Six Takeaways from the Google IO Keynote
3. Ruminations on The Mobile Native Cloud: An Extensible Computing Model for Post - PC
4. Innovation, Inevitability and Why R&D is So Hard

 

Meta-Thesis: How Google vs. Apple is like a great NBA playoff battle (GigaOM)

"Talent wins games, but teamwork and intelligence wins championships." - Michael Jordan

Watching Google announce Chromecast (their assault on Apple TV), Nexus 7, gen 2 (their assault on iPad) and Android 4.3 (their assault on iOS) literally the day after Apple announced their quarterly earnings, I was left with a sense of wonder.

What is the right metaphor for understanding the game that Google and Apple are playing to emerge as the kings of the Post PC era? Is it the “Shock and Awe” of war? Is it “Microsoft vs. Apple”? Is it “The Moat”? Is it “Vertical Integration”?

Sure, it’s all of these things, but after ruminating on this a bit, I have a meta-thesis on the game that Google and Apple are playing.

It's professional sports, specifically the NBA Playoffs. 

In the NBA Playoffs, each team has a style that they want to play, that leverages their unfair advantages, and exploits the competition's weaknesses, and there are a multitude of 'games within the game,' and adjustments over the course of the series.

So much of winning vs. losing is enforcing your desired style of play on the competition, thereby forcing them to forsake their competitive advantage.

We can argue whether "Open" is better than "Integrated Experience," or whether "Subsidized Pricing" (via Ads or Adjunct Business Models) is Preferred to "Direct Pricing" (i.e., Pricing is a Direct Reflection of the Product).

But, what is absolutely fascinating to watch is one team (Google) trying to **force** the other team (Apple) to abandon or water down their strategy, so as to play Google's game. 

Read the rest of the piece HERE.

Related:

1. Five reasons iPhone vs Android isn't Mac vs Windows
2. Apple vs. Google: Lessons from Bill Gates’ playbook
3. You say you want a revolution? It's called post-PC computing

6 Takeaways from the Google IO Keynote

"I was frightened...I was excited."
- Bono (on the vibe in England + Dublin in the '70s)

We are at the end of a cycle, and approaching the beginning of a new one.

It's post-global, post-digital, and post-commoditization.

The new cycle is about making the inefficient more efficient, and creating differentiation where commodization exists. 

That we can stare at the rot that consumes so many industries, and simultaneously cheer a record stock market and wonder, "What replaces all of those jobs?" is BOTH terrifying and exciting (READ: 'The Jobs Engine' for thoughts on this topic).

Keep these dual truths in mind in reading this assessment of today's keynote. (Btw, a good capture of the transcript from the keynote is HERE.)

Six key truths stuck in my craw:

1. The Single Biggest 'Tell' of the Keynote: To date, there has been exactly one company that could stop the world when they held an event, and that company is Apple. While Jeff Bezos and Amazon has been pretty close in this regard, when it comes to Google, these events have been easy for the non-Google acolyte to skip. That has now changed, based upon the sheer number of NEW folks who followed the keynote today -- including a significant legion of Apple devotees...myself included.
2. Google is Stealing Apple's PR Mojo: One of the more interesting questions I take from the above is this. If you are Apple, how much do you care that Google is stealing your PR Mojo? What is that worth? Google is grabbing key PR inspiring narratives, be they Glass as the potential game-changing device, Android adoption numbers, self-driving cars, Google fiber, etc. It's translating into an inflated Google stock price, a deflated Apple stock price, and a fundamental shift in the number of stories being written about Google (relative to Apple). In terms of real business, these things are optics, but in the equation of 'perception has a way of becoming reality,' it's also not just pure noise to be ignored. Illustrative of this point is the fact that on StockTwits, the one-month change in message volume for Google is up 55%. For Apple, it's down 25%. It's a not-too-subtle reminder that the battle for all things post-pc is being played on a multi-dimensional chess board, and PR touches the perception domain. A side thought: Google's next thrust on the PR war front should be doing Brand Advertising around Google Maps, as it's illustrative of how Google thinks about and executes services that are great at web, great at mobile, deliver truly native experiences in either environment, and an exercise in composited logic, big data, the cloud, and great workflows. Plus it's the app everyone uses, and the best single example of what Apple does NOT do well. Food for thought.
3. Developer Mindshare: A primary focus of the keynote was on increasing the love and attention that Google is able to secure from software developers. While there was nothing earth shattering announced (although plenty of holes filled, to be sure), it is reflective of Google grokking the seminal truth that developers make or break a platform play. As one twitter commenter noted, "Google is basically shipping everything iOS devs have been asking for since the beginning." That stated, the event was also completely devoid of developer demos (save for Google's own demos), making this feel a bit like Google's passion is reserved for Google services alone. This truth is perhaps why Google really doesn't care what Amazon or Facebook is doing with Android. Nonetheless, it raises the question of how Apple will respond at WWDC? Same question when Amazon announces whatever they are up to next with Kindle Fire.
4. Get in My Belly: On twitter, I quipped, "Should we be concerned that Google's new slogan is, 'Come on, get in my belly!' or that this is the new spokesman?" I am only being slightly tongue-in-cheek, for the simple truth is that for all the platitudes about Google being so open, sometimes it seems that open is just another way of saying, 'onboarding.' After all, Google's openness is generally focused on the areas that they want to compete with and commoditize, whereas where they want to differentiate remains proprietary and protected. Where is the open sourcing of Google Search, Maps or AdWords, anyway? One observation here is that it feels like the big potential loser of all of these initiatives in Music, Play, Maps, Offers, Photos, and Conversations is...wait for it...Facebook! Why? Simply put, Google is getting better at the things Facebook does well quicker than Facebook is getting good at the things that Google does well. Similarly, for Google, social is just one job that you'll hire G+ for, whereas for Facebook, it's job one. Hence, the more Facebook feels compelled to fill your feed with suggested content (ads) or flood it with unrequested crap every time you 'like' something, the worse that Facebook's user experience becomes. Netting it out: Google is getting better at context, design, and compositing of user experience quicker than Facebook is figuring out discovery, dollars, and search. In the big picture, the bottom line is that if your product CAN be enhanced via an algorithm, Google will complete with you eventually. Daring Fireball's John Gruber deliciously picks apart this reality in assessing Larry Page's comment on the 'negativity' of everyone focusing on who Google is competing with.
5. A Unified Theory of Google: While there is a tendency to look at G+ as Google's lame attempt to compete with Facebook, I tend to view it differently. My take is that G+ is ground zero in Google's end-game to figure out: A) How its various services composite together; B) What those integration points look like on the inbound, outbound and metadata side; C) What the user wants to DO within those service containers; and D) How such services run natively in different user environments (iOS, Android, Chrome, Web, or Glass). Similarly, efforts like Play, Offers and Music are best seen as the company finally being ready to make a frontal assault on a billing relationship with consumers (ala Apple and Amazon). It's logical, and it speaks to the company's unlimited ambition, but for Google partners, it should be a clear reminder that the company aims to consume all. Having recently written my assessment of the prospects for Google Glass, it's also worth noting the symmetry between what I heard today and what I saw baked into the Glass user experience. Specifically, I am referring to three things. One, the company's growing arsenal of Knowledge Graphs on the backend. Two, how such graphs feed user Experiences in the form of Answering queries with richer context; Conversing with users via natural language (it's like Siri, but it's useful and it works really well); and Anticipating intent. Three, the use of a dynamic cards model in Google Now for things like reminders, public transit, music, TV, movies, books and recommendations. Everything with Google at this point is about context, meaning and flow.
6. Larry Page is Intense: Google CEO Larry Page closed out the keynote with a meandering sermon that encompassed a vision that was simultaneously frightening and exciting. The man is destined to either win a Nobel Peace Prize, or end up as the 'villain' in a future James Bond film -- maybe both in the same year. While it was a bit too Atlas Shrugged for my taste (it took on 'Who is John Galt?' proportions), I liked the spirit of what amounts to: A) Sensors, Sensors Everywhere; B) Want to run away and join my country? C) Optimism over Negativity and D) A killer quote: "I encourage more companies to do things that are outside their comfort zone. It gives you more scalability." Larry Page rocks, in a mondo, mega-billionaire sort of way, and I mean that as the highest compliment, I think.

Related:

1. Google Glass will soon be invisible – and the new normal (GigaOM)
2. The Jobs Engine: On Indivisibility and Integrated Systems (GigaOM)
3. Mobile Native Publishing: The Rise of Dynamic Content Services (O'Reilly)

 

Google Glass will soon be invisible – and the new normal (New Post @GigaOM)

“There are three sides to every story: Your side, my side, and the truth. And no one is lying.” 
– Robert Evans (“The Kid Stays in the Picture”)

I recently met up with my friend and one-time business partner, Steve Lee, who is product director on the Google Glass project, and before that, ran product management on Google Maps for Mobile.

Other than a quick tour of the device, Steve basically let me dive in, so as to experience Glass with a beginner’s mind. I won’t bother reviewing the basic capabilities and specs, which have been covered exhaustively already.

Instead I want to focus on some of the points that are in debate, and whether I believe that Glass is destined to succeed.

Glass is translucent; designed to be invisible

In “Waves of Power,” David Moschella shows how new disruptive industries begin as verticals, since the complete product solution requires one provider to deliver the whole enchilada.

The new industry continues on this path until the solutions finally reach the “good enough” stage, when the larger trend becomes horizontal orientation, so as to achieve ubiquity, commoditization and the broadest possible ecosystem. (In passing, one can see the battle between Apple’s iOS and Google’s Android in this light.) The endgame, so to speak, is that the technology becomes persistent, embedded and ever-present to the point of being “invisible.”

It’s a paradoxical concept to be sure. On the one hand, the technology is everywhere; how can it be invisible? On the other, it’s because it’s everywhere that we no longer think about it as exceptional – and, equally, grand solutions can anticipate and incorporate its ever-presence.

Read the full post HERE.

UPDATE: This piece has obviously struck a chord with the rank and file at GigaOM, based upon the storm of comments. Check it out.

UPDATE 2: Google just announced a bunch of third-party apps coming to the platform, including Facebook, Twitter, Tumblr, CNN, Elle and Evernote. 

Related:

1. You say you want a revolution? It's called post-PC computing
2. Apple's segmentation strategy, and the folly of conventional wisdom
3. Horizontal, Vertical and the Google Path to Riches

 

OMG, WTF is going on with Apple Stock?

Apple stock is down 25% since late September, and the pundits, naysayers and Apple haters are all saying that if there is this much antipathy for Apple stock, maybe the smart money knows something.

The narrative reasoning behind this is straightforward, and it goes like this. One year after Steve Jobs' death, Apple's magic is gone. Siri sucks. Maps suck. iOS 6 is buggy. There is no more iPod, iPhone or iPad like 'breakthrough device' in the offing. Tim Cook isn't Steve Jobs-like in keeping his management team moving in lock-step. The Apple Retail hire was an obvious cultural miss-fit from day one.

Finally, the competitive offerings are getting 'good enough,' meaning: A) Margins are destined to be under pressure; and B) The flow of devices into customers hands, and cash into Apple's coffers, are poised for disruption.

First off, let me say that in early September I predicted this EXACT backlash to play out following the iPhone 5 announcement (see: 'Get ready for the Apple + iPhone backlash').

You can read the piece to gauge the many reasons why market indigestion was a given, but that doesn't address the larger question of whether Apple has really lost its mojo, or not.

I have three thoughts on this one:

1. Stock Value: Apple is trading at a trailing price-to-earnings (PE) ratio of <12, and a forward PE of 9. By contrast, Google, which missed its latest earnings, is trading at a trailing PE of 20, and a forward PE of 14. Unless you believe that Apple is worth 60% of Google, it doesn't take a rocket scientist to conclude that something is amiss. In fact, the always-excellent Andy Zaky at Bullish Cross has done detailed analysis showing why at no point in recent history has Google been a better investment than Apple (see: 'Buy Google or Apple? The Answer is Simple'). Similarly, I wrote a piece some time back arguing that Apple is a "Gold Standard" investment, reserved for category leaders that consistently out-execute the competition; the point being that Apple's peers are not HP and Microsoft, but rather, Amazon, Google, Disney, Nike, McDonald's, Southwest Airlines, Berkshire Hathaway, Proctor & Gamble and Coca Cola. So what are those guys trading at? Factoring out Amazon, which trades at a wacky PE of 2,679, the averaged PE of those companies is 17.32. Again, Apple is trading at a PE that is 68% of the value of the Gold Standard companies (see: 'What is Apple Worth? The 'Gold Standard' Thesis'). The key point here is that whether you believe, as Andy Zaky argues, that Apple is a $1,000 stock in the next year or not, you should have conviction that Apple's stock values are out of whack.
2. This Time is Different: Uh, no. Actually as Horace Dediu at Asymco shows, Apple has had multiple of these types of valuation contractions over the years, as the market is fairly simplistic, dumb and reactive when it comes to the Apple narrative. Also, know that Q4 is routinely their weakest quarter since it's the wedge between back to school and holiday, and typically the new iPhone launches late in the quarter, meaning that revenue does not pop until Q1, the holiday quarter. Analysts always miss this, and in fact, last year the stock dropped 13% based on the same narrative. Just as last year, the miss was analyst numbers, not Apple's, something that I noted then. In fact, following last year's Q4 disappointment + end of year tax selling through to their Q1 earnings call (end of February), the stock went up 44%. If it did something comparable, the stock would trade at $750.
3. Apple and its Ecosystem: The other big picture is whether there are systemic issues fundamentally breaking Apple. Corporate culture is certainly a risk, and I am NOT betting that the company has another breakout iPad or iPhone type of device in 2013 (color me dubious on a game-changing Apple TV, which I blogged about HERE). Then again, they don't have to, as they are not priced richly, and there are a lot of legs left in iPhone and iPad in my opinion. Margins? Well, the margin story never ends, and yes, iPad mini tightens margins a bit, but then again, Apple's stock price assumes a margin collapse. What happens when margins tighten, but it's minimal? Is Apple losing business? Are they losing profits? Are they failing to generate cash? The answer is obvious - NO - so it really comes down to your intestinal fortitude and cash urgency as an investor. 

Obviously, I know no secrets, but if I were you, I would embrace the Warren Buffett-ism: Be greedy when others are fearful, and fearful when others are greedy.

The market is acting fearful. Be greedy.

UPDATE: I thought that Tim Cook's comments on the relationship between integration and collaboration (in BusinessWeek interview), and how the translates to uniquely Apple execution was instructive. There are a small handful of companies on the plan that have the DNA to do this.

Related Posts:

1. What is Apple Worth: The 'Gold Standard' Thesis
2. Get ready for the Apple + iPhone backlash
3. Why the Rumors About Apple Building a Television are Wrong (O'Reilly)

 

HP, Dell and the Paradox of the Disrupted (Guest Post @GigaOM)

If a picture is worth a thousand words, what story does the above picture tell? It tells the story of one of the most dominant coalitions of our time — Wintel — coming apart at the seams.

In quantitative and qualitative terms, it suggests that if this is the best that the four horsemen of the PC industry have to offer going forward, this tale won’t be ending too well. And things are looking particularly grim for Hewlett Packard and Dell, the two best-known faces of the personal computing industry (see also, “HP: The Garage is Closed”).

As much as anything, it’s a stark reminder that disruption doesn’t give a crap about legacies. This is something that I have seen again and again in my twenty years as an entrepreneur in network infrastructure, Web-based services and mobile applications.

Read the full post HERE.

Related:

1. Pattern Recogntion: Differentiate or Die
2. HP: The Garage is Closed
3. Pattern Recognition: OEM Roadkill Ahead

Pattern Recognition: Mobile Web v. Mobile Native; TV's Blind Spot; 'Invisible' Designs

My goal is to write one 'Pattern Recognition' a week. Just the top 3-4 stories that stayed under my skin. Here's what stuck this week:

1. Mobile Web > Mobile Native > Bifurcated Native: In the continuing 'banjo duel' between Mobile Native and Mobile Web, three threads got into my bones. One, is the idea that whereas Apple has the best combined story in terms of providing BOTH a superior mobile web environment and the best mobile native platform, the reality is that their unfair, defensible advantage lies in iOS. Hence, it makes sense that Apple would boot Google from Maps, a native app, but keep them in Search, a mobile web environment, a decision that Danny Sullivan of Search Engine Land called 'Containment' (in lieu of Thermonuclear). After all, Apple is not at war with mobile web, but definitely wants to WIN mobile native. Two is the fact that whereas all of the banter is that HTML5 is the great disrupter to be of all things Native, the hard truth is that those who forget the past are doomed to repeat it. In abandoning their HTML5 gaming ambitions, featured Facebook Platform developer Wooga cited insurmountable challenges with discovery, performance and connectivity. I guess the contender is still a pretender, but then again, I have been waiting since 1994 for Web apps to offer a caveat free application model, as opposed to merely a (quasi) universal one. Finally, the meme of what it means to be mobile NATIVE, has been buzzing in my brain since reading Fred Wilson's excellent post on the topic. I think that I have a thesis around the evolution of native apps. If the first generation of native apps were knocked as being little more than native wrapers on web functionality, and the second gen were mostly parallel to the web, what we are going to increasingly see are what I call 'Bifurcated' Native Apps. These are apps, like Instagram and Path, where the optimal creation, consumption and service-ready environment (e.g., social share + discovery) is within the native app itself, BUT one of the output methods is in a web-friendly format suitable for blogs, tweets, Facebook, G+, LinkedIn pages and the like. In other words Native first, with a 'best-practical' gateway to the web. I can see a great many application scenarios for such apps.
2. TV's Blind Spot: Peter Kakfka of AllThingsD argues that the TV business is vulnerable, but it's not with highly pirated premium shows like 'Game of Thrones,' but rather, cheap to produce, cookie-cutter reality shows. I have two takes on this one. One, "must-see" programming and live sports are the straws that stir the drink, and everything else is bundles and fillers. That's why ESPN drives Disney profits, and HBO cares not one whit that GOT is most pirated. It's the same reason that Bravo, the den of reality programming, has cultivated the hell out of their few franchises, including continuous advertising, which cost serious coin.In other words, cost reduction is not the silver bullet in itself, even if it has real prospects as a low-end disrupter. What will be a silver bullet is when the next wave of web "tv" programmers start creating media units that are native to the web/app medium, and deeply integrated from the first storyboard. Whether that means integrating community into the programming, designing in locality handles, reinvigoration of live to create a new shared experience, game-ification, or something else, that's the bucket, and it's a different animal, in the same way that TV was not simply radio with pictures. So far, what we've seen are loosely-coupled approaches that I view similarly to the dog that walks on its hind legs. Interesting, but nothing that anyone would conclude was designed from the ground up to be that way. As an analog, think of the distinction between our concept of the smart phone pre-iPhone (see Blackberry) and post (see iPhone, iPad and beyond). TV has a long way to go in that regards.
3. Integrated to the Point of Invisibility: One of the books that has deeply influenced my thinking about industry, economy and technology models is the book 'Waves of Power' by David Moschella. In WOP, the author shows how technology evolves in waves, such that in the initial wave, the technology is so new, complex and brittle that the only way to deliver a real solution is to be verticalized. As the technology matures and becomes understood, the trend is towards commoditization. Here, the best model is to be horizontal, so as the leverage the broadest swath of innovation, and to be able to focus on the narrowest slice of differentiation, where your margins will come from. One can see how the mainframe and mini was the first wave of computing, and the PC era was the second wave. What's interesting is that Moschella, who wrote the book way back in 1997, goes on to show how the wave after horizontal is the embedded wave where the technology becomes so pervasive and the best practices are so well-formed that computing becomes both ubiquitous and invisible. Apple's dominance is best understood in this light. In an industry organized around 'speeds and feeds' and loose-coupling, they correctly realized that once everyone understood what technology could do, they would want it to work well. To do so, it would need to be an extension of their aspirations, their vanity and their daily outcomes, not the other way around. I thought about this in comparing my iPad 1 to my new iPad; namely, marveling at the many elements where the 'magic' lies not in some cool new feature, but rather in the tiny bits of integration 'finesse' that turned functionality that I formally noted, 'Wow, I can do that,' to instead, 'Wow, I no longer even think about the steps to doing it.' The source of delight is in the fact that it's simply invisible, an extension to what I am doing in the moment. I thought this an interesting contrast to Microsoft's announcement of Surface earlier in the week (which I like, even though it's vapor at this point), where they were touting the hinges on the kickstand of the device's case as being 'designed to feel and sound like a high end car door.' It's the opposite of designing invisbility, IMHO.

Apple WWDC Keynote: On Capitulations, Steak, Sizzle and WOW!

 

“A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be.” – Wayne Gretzky

Here’s hoping that after today's WWDC Keynote, the Google troika of Page, Brin and Schmidt have finally capitulated (at least internally) AWAY from their 'loosely-coupled' mantra and TOWARDS the more craftsman-like goodness of Apple-style integration.

After all, while Android is absolutely ‘killing it’ in terms of 900K daily activations, at what point can we acknowledge that this is a pyrrhic victory, and that Android is a paper tiger?

I mean, who exactly is winning? Consumers? Uh, actually Android consumers tend to utilize the mobile web less than iOS users, and swear that they don’t need apps, which might have something to do with the fact that most Android devices are running the Windows 3.1 equivalent of Android.

Are developers winning? Hardly (see recent Flurry report). They have to support dozens of form-factors, not to mention, a wavy-gravy medley of Android OS variants, and all this for the prize of making less money on Android than on iOS. Is it any wonder that none of us can name a single game-changing app that originated on Android that wasn't specifically built by Google?

But surely, the hardware OEMs are loving it, cuz…Uh, the vibrant ecosystem where a thousand flowers bloom actually killed Motorola, then HTC, and left only Apple-impersonator, Samsung, standing. How is that a win?

Even for Google, I don’t believe that they still see this so blithely as a redux of Windows vs. Mac in terms of monetization, mindshare or momentum. Increasingly, they just look defensive, reactive...and conflicted.

Google, you are better than this. You are! And don’t start pulling out more empty numbers about Google Plus. No one cares. Aggregated is not integrated. Fragmented, me-too, and bolted together is not innovating. It just isn’t.

Okay, that point made, let me tell you why I believe that Apple’s WWDC Keynote today was stunning in its effectiveness, substance, shock and awe. 

The “We bring good things to life” Company

When I was a kid, GE built an enviable brand position around the core message that GE brings good things to life.

Well, is there any question that Apple is the post pc era torch-bearer of bringing good things to life?

I mean these guys have reinvented music, freed the mobile phone from the hegemony of carriers, brought innovation back to the PC, increasingly freed us from the PC, made design matter again, re-thought software, marketplaces and the cloud, embraced accessibility for the handicapped, brought an ethos to building products at scale in an environmental-friendly fashion, and shown a willingness to boldly lead in segment after segment.

A bit off topic, but isn’t the problem in America right now (and much of the world, for that matter) a lack of bold willingness, a lack of vision, an intellectual dishonesty about taking shortcuts and a tolerance for poor execution?

Ya know, we could do worse than emulating Apple.

Keynote Highlights: Steak, Sizzle and WOW!

Let’s get the Steak out of the way, as it provides context for the Sizzle and the WOW.

By steak, I mean those items that show that Apple knows what they are building, who their customer is and what their business is. Specifically:

• iOS Ecosystem: There are now 400M accounts in the app store (365M of which are iOS devices), all backed by credit cards, and a one-touch workflow for buying, installing and enjoying. No less, the model has proven to work grandly across both media (songs, movies, tv shows, books) and apps (30 billion downloads). Further, the platform has yielded 650K apps (225K for iPad), several of which are considered standard-bearers for the power of post-pc, in the process generating over $5B for developers. Oh, and it’s a global success, operating in 120 countries, with 32 more on the way.
• The Un-Fragmented Platform: iOS vs. Android is a study in wince-inducing contrasts. Consider this excerpt from the keynote: "Almost all of our users are running iOS 5. Now if you compare that to the competition, they released a dairy product, 4.0, about the same time as we released iOS 5. Yet, only about 7% of their users are running it." 
• The Integrated Platform: iCloud is currently on 125M devices, and with iCloud integration deeply within Macs when Mountain Lion ships next month that means a unified + synchronized flow across Macs, iPads, iPhones and iPod touches in the following services (to name a few): Mail, Browsing, Note Taking, Messages, Reminders, Notifications and even Documents. In restaurant terms, this is the distinction between delivering ingredients, and crafting recipes that are fully conceived with a tightly orchestrated ‘dining’ experience in mind. Even sharing has been thought through across both Macs and iOS devices, so you can take advantage of multiple services, including Twitter and Facebook, without having to jump between apps or through hoops to make these workflows happen.
• Cross-Pollination: To Apple’s credit, they have continually shown a willingness to leverage best practices from Macs and feed them into iOS devices, and more commonly, feed iOS innovations back into the Mac. Case in point, Tabs in Mobile Safari has fed a new Tabview in Safari for Mac. AirPlay Mirroring from iOS is now part of OSX, and Game Center  (used by over 130M users) is now part of OSX, opening up cool scenarios like Mac vs. iPad gameplay. Cross-pollination is something that I have blogged about extensively (See Holy Sh-t! Apple's Halo Effect: HERE).
• New MacBooks: The main takeaways here are that Apple pushed down the cost of MacBook Air about $100, and introduced a new MacBook Pro that brings their vaunted Retina display to notebook computers. Hence, unless you are specifically a Windows devotee; or have a business or application-specific reason for not going with a Mac, just know that you are sacrificing R&D, integration with your mobile/tablet devices and of course, well-trained human support for when questions pop up Apple has retail, after all). 

Netting it out: the above simply underscores the deft skill by which Apple navigates the PC legacy market (Mac sales will do even better now that they better fit under the iOS Halo), tightens its domination of post PC, and bottom line, delights customers (over 75% of iOS users called themselves very satisfied vs. <50% for Android).

Heck, they even added Chinese specific features in recognition of China's position as the largest ‘green field’ market opportunity on the planet, one where they are, unsurprisingly, already incredibly well-positioned.

Put another way, if I am an Apple shareholder, I am very bullish that the company has kept its eye not only on the ball, but the whole field of play.

So Hot, It Sizzles

Put me in the camp of those who have looked at Siri, Apple’s voice-activated assistant, as a great foundation that is still more gimmicky than game-changer.

Putting aside the fact that Siri is hard to demo in noisy Apple stores, the larger truth is that the system is imprecise; a solution to a problem that may or may not exist.

Recognizing this, Apple focused in iOS 6 on giving Siri more contextually specific tasks that generate richer outcomes for users.

The demo showcased things like Sports related questions, yielding baseball card style media units to questions like, “What was the score of the last Giants game?” Or, “What is Buster Posey's batting average?”

There were similar examples of movie reviews, restaurant recommendations and dinner reservations vis-à-vis partner integrations with Yelp, OpenTable and Rotten Tomatoes (you can ask about directors and their movies, for example).

Further, Apple is working with auto manufacturers to integrate Siri into new cars and trucks via a service they call Eyes Free. Inasmuch as Apple has already built a wedge into such vehicles with the music and phone side of iPhone, the efficacy of burrowing deeper into automobiles via Siri makes a lot of sense.

In fact, seeing how Apple is cultivating Siri, it is not too far of a leap to imagine them creating a paid search product where questions and answers are bid up by vendors that want to be part of the Siri directory.

In this regard, Siri just **feels** like a domain destined to make Google less relevant in the mobile universe. A sidebar is that such a bid placement model would be a retro return to the old model that dominated during the age of the portals and AOL. 

Mind you, this is in addition to Siri’s growing support for international languages, including Chinese, integration with Facebook, Twitter, voice-based launching of apps, notifications, and its new Map service (see below).

Speaking of Facebook, while some might see this as more steak than sizzle, I can tell you how wonderful having twitter integrated at the system level is in turning inspiration into tweets.

With Facebook, it has the potential to go deeper since this is really where my true social relationships live. Ironically, this linkage to may photos, music, apps, maps and notifications is the exact opposite of the walled garden experience that Apple naysayers wrongly ding the company for. Plus, all of this is baked into the Mac as well.

Two other iOS feature adds that stood out for me are:

1. Smart app banners, a feature in Mobile Safari that makes it easy for Safari users to jump into an app (or download it) directly from the mobile web, further blurring the line between mobile web and mobile native.
2. Shared Photo Streams:  This is a feature that evolves the current “one silo” approach with Photo Streams into multiple shareable Photo Streams, where a user can choose the photos they want to share and the friends they want to share it with. 

WOW! A Map and a Passbook

It was the worst kept secret that Apple was going to abandon Google Maps in lieu of a solution that they could fully control, but WOW, Apple’s forthcoming Maps look terrific.

It works with Siri, it features turn-by-turn navigation, incorporates over 100M business listings (via Yelp integration) and has a nice “info card” style listing interface.

Moreover, the system supports anonymous real-time incident reports, just-in-time re-routing options and even a flyover feature that is derived from rich 3D models of the major cities around the world. 

Now, I LOVE Google Maps so while this is a definite WOW, in truth, Maps is all about utility so the real story on this one won’t be clear until we see what we’ve lost for all of these bells and whistles.

In closing, I save my biggest WOW for a new feature that Apple presented called Passbook.

While Apple presented it as a consolidated place to organize things like gift cards, flight itineraries, movie tickets and the like, I believe that Passbook is the true beginning of Apple’s foray into being the defacto eWallet.

Think of it this way, Passbook will materialize just in time for the holiday season, a time when loads of (historically) boring gift cards are handed out.

Via Passbook, these cards and tickets become something cool, dynamic and even geo aware (Starbucks is nearby, you have $18.25 on your eCard).

Plus, these cards are alive, so if your gate changes at the airport, your boarding pass will be updated and you will be notified.

Given that type of service-aware handle, how far of a leap is it for vendors to be able to present cardholders a flash sale or other special offer based on time of day or locality?

My point is that Apple can segment their approach here to be to be anything from the organizer (think: iBooks, Newstand) to the facilitator (i.e., the platform building blocks) to the curator to the market maker.

And that’s the point, as Tim Cook flagged is closing his keynote.

"Only Apple could make such amazing hardware, software, and services…They are perfect examples of what Apple does best. Ultimately, it's why people come to work at Apple, and with Apple. To create products that empower people. To make a difference. The products we make, combined with the apps that you create, can fundamentally change the world."

Not only does Apple have the skill and the footing, but equally, they have the will; and that leaves them incredibly well positioned.

Related Posts:

1. Understanding Apple's Earnings: It’s about Value & Integration, and it’s Global
2. DIS-Integrated Systems: A Parable
3. It’s Time to ‘Think Different’ because Conventional Wisdom is Dead: Apple’s Q1 Earnings Call
4. Five reasons iPhone vs Android isn't Mac vs Windows

Understanding Apple's Earnings: It’s about Value & Integration, and it’s Global

We live in a world of extreme noise. So many stories, and so many competing narratives vie for our attention that what rises above the noise is perhaps the closest proxy to actual truth.

With that backdrop, and without restating ad nauseam the numbers behind another blowout Apple quarter, let me state the truth about Apple’s March Quarter Earnings as I see it:

1. It’s About Value: Every quarter, the prognosticators wait for the mythical other shoe to drop, be it the ‘inevitable,’ ‘unstoppable’ onslaught of Android, the depletion of fanbois, the resolve of carriers or the exhaustion of those who’ve yet to purchase an iPhone or iPad. But, on this topic, I would turn to the one quote that has swirled in my head continuously since I first heard it, and it’s from Ron Johnson, JC Penney’s new CEO, and Apple’s former head of Apple Retail, who says quite cogently that, “Customers will not pay literally a penny more than the true value of the product.” You can parse this any number of ways, but what it means to me is that when a consumer looks at an iPhone vs. an Android Phone, they see something real, that is supported, that is readily understandable and for which their investment will be rewarded. By contrast, with Android increasingly they grok that they are buying ‘Not Exactly.’ The efficacy of this truth is never more evident in the Tablet segment where, despite Android’s success in smartphones, and in spite of Apple’s clear proof that there is indeed a massive tablet market, Android Tablets are utterly stillborn. It’s about value, which simply can’t be smoke-screened. This truth is especially clear in the case of Carriers, who would no doubt love to reduce subsidies on iPhones (and other smartphones for that matter). But as Apple CEO Tim Cook sagely noted: A) The Subsidy is 'not that large' relative to the 24 months of revenue that the carrier is securing via subsidy; B) The Delta of the iPhone subsidy relative to other smartphones’ subsidy is not material; C) The Churn of iPhone buyers to other carriers is the lowest of any phone that the carriers sell; D) iPhone is the number one trigger for carriers upselling feature phone customers into smartphones – i.e., their largest untapped market; and E) Carriers want to sell what customers want to buy, and that’s iPhone. In other words for all of the puffery and noise about competition, commoditization, pricing pressure, etc., it’s fairly simple. Apple wins because its value is tangibly real, and for no other reason.
2. It’s About Integration: I blogged on this point yesterday, so read that post, but suffice it to say Apple’s success is best understood by looking at how an iPhone or iPad integrates beautifully designed hardware with iOS, iTunes, App Store, iCloud, Apple Retail and App Developers into one unified set of outcomes and experiences. Then, contrast that with how Android doesn’t (or even the sluggish rate of innovation on the slightly more integrated Amazon Kindle Fire). Integration vs. DIS-Integration. It’s the distinction between the restaurant where the food, service and dining experience is orchestrated into a synchronous whole vs. the Mongolian barbecue, where the whole never quite adds up to the sum of the individual parts. I'll leave the digestive visuals to you.
3. It’s Global: I think that the most YOWZA takeaway from the call was when Tim Cook talked about how Greater China has grown 3X year-over-year to $7.9 Billion on the most recent quarter (i.e., 20% of Apple’s total sales). Here Cook noted that there’s a massive, emerging middle class in China that (un) surprisingly aspires to the same products and experiences that consumers do in the US. For all of the easy quips about China being the land of knockoff imitation products, they want the same real products, and are willing to pay the real value for it. Apple has only brushed the tiny surface of this market, not just in China, and not just across the globe, but across industry segments (enterprise, education) and product categories as well (i.e., iOS is a scale-able platform for other types of devices, accessories and price points). In other words, the Apple 'halo' is global, and just getting started.

Mind you, that for all of the Apple accolades, the same company that grew earnings by 94%, that generated 77% of its revenue from iOS devices, which generated gross margins of 47.1% and which dropped another $14 billion into its coffers still trades at a mighty 20% discount to its gold-standard peers. Govern yourself accordingly.

Related Posts:

1. DIS-Integrated Systems: A parable for acolytes of Apple, Google and Amazon
2. It’s Time to ‘Think Different’ because Conventional Wisdom is Dead: Apple’s Q1 Earnings Call
3. What is Apple Worth? The Gold Standard Thesis
4. Is Google doubling-down on a losing hand with Android in Tablets?

 

Dis-Integrated Systems: A Parable

Once upon a time, there was a market segment called Embedded Systems, which was all about creating real-time operating systems for the 'headless,' often invisible, computers resident in networking equipment, industrial controls, set-top boxes, printers, automobiles, rocket ships and medical devices.

It was a fiercely competitive market with two aspiring market leaders, Integrated Systems (ISI), and Wind River (now part of Intel). 

For a time, ISI was the market leader, until Wind River started touting their more deeply integrated, solutions-oriented approach -- relative to ISI.

So focused was Wind River's positioning and messaging, that Wind River employees would pointedly and repeatedly call their competition ‘DIS-Integrated Systems,’ any time ISI's name came up in customer meetings, media events, analyst calls and industry tradeshows. Wind River even created 'DIS-Integrated Systems' t-shirts to belittle their competitor.

Long story, short, the message stuck, and from this point forward, Wind River began to whip ISI in the market.

Just a few years later, it was game-over for ISI when they were swallowed up by...wait for it...Wind River!

The moral of the story is that customers don't want to buy a bag of components (if they know better). They want real, integrated solutions where the piece parts work together in a mostly caveat free fashion.

Next time you wonder why Apple is winning, and why Google's Android, despire impressive unit counts, feels wobbly (platform fragmentation, no success in tablets, no real economic model, few developer success stories, Android OEM financial struggles), think about the story of DIS-Integrated Systems.

Related Posts:

1. Apple vs. Google: Lessons from Bill Gates' Playbook
2. Holy Shit! Apple's Halo Effect
3. Google Android: Inevitability, the Rise of Mobile, and the Missing Leg

 

Apple vs. Google: Lessons from Bill Gates’ playbook (GigaOM)

“There are three sides to every story: Your side, my side, and the truth.” —Robert Evans, 'The Kid Stays in the Picture'

I’ve been ruminating on how Apple and Google could have come up with such divergent takeaways from studying the incredible, terrifyingly dominant run of Microsoft under Bill Gates.

For those too young to remember, Microsoft had a run like no other. Through a combination of strategic brilliance, relentless focus and sheer determination, Microsoft leveraged its initial DOS beachhead into a PC industry-crushing market share and massive profits vis-a-vis Windows, Office, Internet Explorer and BackOffice, a position cemented by a unified foundation of developer tools and legions of dedicated Microsoft developers.

When Microsoft set its sights on a market, it would squeeze the life out of the market leader like an anconda wrapping itself around its prey. Before it was done, the company struck numerous segments, including personal computing (Apple and IBM), word processing (WordPerfect), spreadsheets (Lotus), databases (Borland and Sybase), networking (Novell) and Internet browsers (Netscape).

It’s not hyperbole to say that Apple’s phoenix-like rise and Google’s ascent are directly and positively correlated with Gates’ decision to step away from running his company as CEO in 2000

Read the full piece HERE.

Related:

1. Retail needs a 'reboot' (to survive)

Four thoughts on Google's Project Glass (Augmented Reality Glasses)

Google has officially taken the wraps off its Augmented Reality Glasses effort, dubbed 'Project Glass.'

If you haven't watched the concept video, you should, as it is well done, and provides a clear set of narratives that are both plausible and value-add to one's daily life. Nick Bilton of New York Times has an excellent write-up on it HERE.

When I think about a Google effort like this, four thoughts come to mind. One is kudos to Google for thinking outside of the box.

Even better, as opposed to (metaphorically speaking) assembling a bunch of disparate 'chicken parts,' and assuming that consumers can crystallize what the living, breathing chicken looks like, how it breathes and and how it manifests as a life form, they are actually SHOWING you. Good job!

I want these guys to succeed, and am in no small part motivated by a personal liking and professional respect for Steve Lee, one of the co-creators of the effort, and a good friend and former business partner.

Two, I can see lots of logical applications for this type of device that are non-obtrusive and value-add (SEE '3D Glasses:Virtual Reality, Meet the iPhone').

For example, imagine socially-powered or professionally curated walking tours? Wouldn't Yelp, Time Out, Foursquare or Fodors want to be all over that?

Heck, it even passes my 'Porn and Parody' litmus test.

What is that? Simply, if a new technology is easily and memorably mocked AND has logical use cases that the adult industry would be interested in, then it has a chance of succeeding in the market.

Well, in about two seconds of watching the video, I could come up with multiple NSFW-related applications. The porn industry, after all, is the cockroach of innovation. Every industry that has succeeded in tech (DVDs, Internet, Mobile, Cable TV) has seen the porn industry finds its niche within it. They are the consummate early adopters.

Similarly, watching the video, I was instantly imagining the parody video where we find out just how disturbed the A/R glass wearer is, as he calls upon deeply disturbing contexts that only he can see, or worse, hackers take over his overlay feed, and disrupt his day with snarky comments or offensive data.

Is a Project, a Product, or a Platform?

Three, though, is that with all things Google, I ask first if this is a Project, a Product, or a Platform (SEE: Lessons learned from Google Buzz). 

Projects are like concept cars. Cool, but the likelihood of yielding real products is unknown, and as a consumer, I am done caring until Google is committed.

After all, we have seen many such projects be launched, then abandoned by Google. Buzz, Wave and App Inventor are a few recent ones that come to mind.

(You can reach your own conclusions from the fact that they are calling this ''Project' Glass, although I am hopeful that this time is different).

Products, by contrast, take precision, execution, distribution channels, sales training, end-to-endness, and generally speaking, are outside the ken of what Google has done well to date.

That stated, I believe that this is exactly the category where Google should take the lead in committing to and delivering a best of breed product. They are the only ones that can cultivate it and sell it successfully, as it is a wholly new concept.

Platforms imply courting and cultivating software developers, and while this project is built on Android, what this means in terms of depth of focused support remains to be seen. As a developer, I would wait and see big-time how the uptick is with this as a product -- before committing to it as a platform.

In the real world, how does it work?

Four is the question of how all of this works in practice, in the real world, given the need of such a device to be lightweight and have reasonable battery power, but not sacrifice on functionality.  

Here, I am guessing that such a device is actually a peripheral that communicates via bluetooth to your Android powered phone; using it as a 'middle-tier' between your eye-line and the cloud, thus elevating the smart phone to personal hub.

That, in itself, would be a very Apple-like embrace of the totality of the solution domain, over the loosely, and often poorly, coupled that one associates with Google offerings.

Related:

1. 3D Glasses: Virtual Reality, Meet the iPhone (O'Reilly)
2. Google Buzz: Project, Product or Platform? (O'Reilly)
3. Don't Confuse a bunch of Chicken Parts for a Chicken 

 

Quick Take: Five Takeaways from Apple's new iPad Launch

1. If you STILL think iOS vs. Android is Mac vs. Windows, then you weren't there: You remember the axiom about the '60s, that if you could remember it, then you weren't there? Well, if you still believe that iOS vs. Android is destined to be Mac vs. Windows, then you weren't there at the rise of the PC...when Apple got outflanked and out-executed by Microsoft. Apple remembers all of the lessons about over-promising and under-delivering, relying on lazy sales channels, failing to court developers, leaving pricing overhang, and failing to maintain clear differentiation and clear positioning. In this regard, the new iPad is like a walking bullet point list of, "We remember, and we'll never forget."
2. Outflanking the PC and the Xbox: There were two disparate comments that I found noteworthy and telling about how well-positioned Apple is with iPad. One, was by Apple CEO Tim Cook, when he noted that the iPad, which he calls, "the Poster Child for Post-PC" sold 15.4M iPads in Q4, which was more than any PC maker sold of PCs in the same quarter. This is stunning and uparalleled for a product that is less than two years old. Two was a comment by the Epic Games exec demoing their new game on iPad, where he noted that the new iPad has more memory and higher screen resolution than an Xbox 360 or PS3. While memory and screen resolution alone do not equate to what makes an Xbox an Xbox, it certainly foreshadows Apple's expansion path into the living room. Along those lines, given the decision to simultaneously announce the new Apple TV at the same time as the new iPad, it left me wondering if there was some anticipated tie-in between the two that failed to come together at the 11th hour. Otherwise, the dual announcements felt orthogonal and bolted on to one another.
3. Apple has grabbed the mantle of being the Post-PC company, and it's unclear what Google can do with Android to change the narrative. This narrative from Tim Cook during the event is particularly telling about Apple positioning: "We're talking about a world where the PC is no longer the center of your digital world. A world where the devices you use the most need to be more personal and more portable than any PC has ever been. We have 3 Post-PC products. The iPod...the iPhone, and the iPad. Now any company would be thrilled to have just one of these devices. At Apple we're fortunate to have all three...Our Post-PC devices made up 76% of our revenues...We have our feet firmly planted in the Post-PC future." The net takeaway is that through product leverage and integration, through a multi-service focus, through a device, app, media and cloud focus, and through intelligent channels, Apple has defined the 'IT' that makes a Post-PC worth aspiring for, and they keep coming back to all of the various ways that they live and breath that IT. It's the reason that when they tout 315M iOS devices (and 62M in the last quarter), it REALLY means something. By contrast, the next time you watch a commercial for an Android device, note how dis-integrated the story is; it's about speeds and feeds, and the want for more speeds and feeds, as opposed to any specific outcome. Part of me believes that Google knows this, and understands that their success on phones is fools gold. But, a bigger part of me wonders if the ramifications of how disparate their core strengths are to what it takes to succeed in Post-PC relegate them to also-ran status at a time when Apple has every incentive to neutralize Google's footprint on those same 315M iOS devices.
4. Apple Segmentation speaks volumes: I thought that it was telling that just as Apple didn't retire iPhone 4 when they launched 4S, they didn't retire iPad 2. This sends three primary messages to market. One, is that if you don't need this year's model, you can get last year's model at a superior price point (i.e., no pricing overhang). Two is that we are so confident that last year's model is BETTER than anything the competion is offering even with their latest and greatest that we know it will sell like hotcakes. Three is that we know this year's model represents such an improvement over last year's model that we're unafraid to put them side-by-side in the market.
5. We're Just Getting Started: As impressive as the new iPad is (Retina Display, Faster Processor + Graphics, Better Camera, HD Video, Voice Dictation), what stuck with me was Tim Cook's closing summation: "Across the year you’re going to see a lot more of this kind of innovation, we are just getting started. Only Apple could deliver this kind of innovation in such a beautiful, integrated way. It's what we love to do. It's what we stand for." Does that sound like a company that is content to rest on its laurels to you?

Related:

1. You say you want a Revolution? It's called Post-PC Computing (O'Reilly)
2. Apple's segmentation strategy, and the folly of conventional wisdom (O'Reilly)
3. Five reasons iPhone vs Android isn't Mac vs Windows (O'Reilly)
4. Retail needs a Reboot to Survive (GigaOM)

Three simple reasons that the Office for iPad rumors are probably true

The Daily is reporting that Microsoft is putting the finishing touches on an iPad version of its eponymous Office Suite.

Meanwhile, Microsoft has countered with a non-denial denial by saying that the outed images are a fake, but tellingly, not denying that such an app suite is in the works.

All of this begs the more basic question of whether such a rumor makes sense given what we know about Microsoft.

To me, the answer is an an obvious and emphatic yes. There are three reasons:

1. Why do you rob banks? Because that's where the money is: There are now 55M iPads out in the wild, and that number could easily be double by the end of the year. Microsoft isn't stupid. At this point, they make more money from Office than they do from Windows, and iPad is the single largest relevant platform play remaining for Office to tackle. Meanwhile, Apple's not shown the hunger or aptitude to upgrade their productivity products on either the Desktop or iOS, leaving Microsoft a golden opportunity if they can credibly execute. And to be clear, Office is a domain where Microsoft still can execute, and notably, one where they are comfortably cross-platform in terms of their operational DNA. 
2. The enemy of my enemy, is my friend: It's no secret that Microsoft and Apple share a mutual disdain for Google, and equally so, the two companies have a history of amicable reciprocity, while still competing in the wild. Remember, Microsoft's validation of Apple's 'relevance' by continuing to make Office for the Mac helped save Apple back in 1997 (in tandem with a much-needed cash infusion of $150M). In recent times, the companies jointly acquired Nortel patent portfolio last year, ostensibly to attack Google.
3. Office is Microsoft's most durable platform: Beyond dollars and cents, there is common sense, and the common sense is this. Microsoft's dominance with its Windows platform is slowly, but surely, sunsetting as the PC gets relegated to just another device in the Post-PC era. However, looking forward, the greatest and most defensible leverage point that Microsoft has going for it is 'The Document' -- Word Docs, PowerPoint presentations, Excel Spreadsheets. There are billions, and billions and billions of them. And tellingly, there STILL is no single app that has obviated the goodness of Office. If you are Microsoft, getting the next generation of users trained on Office apps, and providing them useful ways to leverage, reuse, extend and distribute these same documents is the best way for Microsoft to get locked into the future. 

Netting it Out: The first question that any user asks when contemplating a move to another word processor, spreadsheet or presentation app is this, "Will it work with my existing Office docs?"

That's the 'defensibility of the document' that Microsoft has to protect, and should look to extend as a core part of their platform play moving forward (e.g., let me create Web and Mobile services using Office as a front-end environment).

Looked at this way, delivering Office for the iPad is a no-brainer.

Related:

1. Microsoft, Metro and the Next Wave in Computing (4 thoughts on Windows 8)
2. You say you want a revolution? It's called Post-PC computing (O'Reilly Radar)
3. Comparing Microsoft to the Collapse of Communism