Fascinating notes were taken at a talk Tim Cook gave earlier today, in which he explicitly laid out the fact that Apple benefited from its narrow product focus, a $40B company whose entire product portfolio could fit on a single table.

So given that focus, why invest in custom silicon?

“We felt that we had the best knowledge of what we wanted the silicon to do,” he said.

By designing its own silicon, he said, Apple can create chips that are best-suited for the company’s products, allowing them to run cooler and more power efficient.

“Apple has, for years, been in the silicon design business,” he said. “When we were on the PowerPC architecture, Apple always personally crafted the northbridge and southbridge chipset, and so it’s not new to us.”

In other words, even when it appears that they are straying from their focus, Apple’s management team has identified an opportunity to use their laser-focus to their advantage, upstream and downstream of the core product the consumer is buying.  (In my way of thinking, silicon is downstream, and retail would be “upstream” of the product itself)

Coincident to this talk, there was new data out showing that the iPhone’s unit shipments *and* market share grew more than any of its rivals in the smart phone space (and honestly, the research firms are being generous when they apply the “smart” label to some of the phones included).

And meanwhile, they’re getting some good news from their major US partner: AT&T.  A recent report from PCWorld shows that AT&T has dramatically improved the reliability and speed of its network.  Not that I can feel these improvements from a particular square block in downtown San Francisco (and the AT&T network gets its lowest scores in San Francisco!), but I’ll take the study at its word that on the whole these improvements are real.

Oh, and, happy birthday, Steve.

Interesting developments in the land of “tablets” and “netbooks”.

It isn’t really my area of primary interest but because I like following Apple’s product direction I follow the news.

First, there’s this article from the day after the keynote, in which Andy Ihnatko goes into great detail with his iPad experience.  I like that he took the time to actually use the device rather than rushing to get a story out and cutting short his time to experience the device.  I’ll note that most of the journalists who stayed and laid hands on it actually had a more positive impression than those that didn’t.  That’s surprising (usually expectations meeting reality is a set up for disappointment).  And it says something about Apple’s attention to detail.

Some of the comments that jumped out from Andy’s review were that it “felt right”.  The “rightness” of products is something Apple has really been excelling at in the last few years.  Another was his commentary on its speed – that it actually feels like you are moving something – not just gesturing and waiting for the phone to move it – a much more complete experience, if you will.

The implications for the iPhone are that Apple may be able to squeeze its A4 (or similar) design into an iPhone and offer this kind of speed in the smaller form factor.  I think there’s limited runway for SPEED to differentiate with phones – and we’ll hit those diminishing returns faster than the 20 years or so it took with PCs -  but right now there’s a lot of room for improvement over my iPhone 3G, and it sounds like Apple has a chance to do that – and still preserve battery life.  That’s impressive.

The truly impressive thing Apple did was leverage the App Store to make the iPad instantly relevant instead of making it a platform in search of applications and utility.  The Kindle and other single-purposes devices suddenly pale in comparison.

Also, regarding the most oft-reported shortcoming (no Flash support):

Months ago, I installed a browser plugin for Safari called “ClickToFlash.” It blocks all Flash content. You’ll see a placeholder image in the webpage and if you want to view the content, give it a click and it’ll load in. I have not noticed any drop in my ability to enjoy the Web. What I have noticed is that my browser is faster and more responsive, and that I can leave a couple of dozen tabs and windows up for weeks without having to force-restart my Mac.

Interestingly, I do this as well, and it doesn’t diminish my experience one bit – in fact it enhances it.  Granted, I do like the option of turning on flash for, say, streaming stock quotes.  But HTML5 can handle that level of animation and is “more standard” than Flash… I think Apple has done the smart thing here by protecting their platform and brand image, and putting pressure on Adobe to step up and make Flash a better product, or get out of the way and make way for HTML 5.

Next, the North Temple blog has an interesting post: On iPads, Grandmas and GameChanging, but I would have called it, so a Grandma, a Technophobe, and a Luddite meet in a bar… The short point here: people he never expected to be interested in a computing device are interested in the iPad.  I had a similar experience when my parents told me they were “buying each other iPhones for Christmas.” And then they asked me if they should get the 3G or 3GS… seriously?  I was tempted to tell them 3G just so they wouldn’t leap frog me technologically.  Then, I find out they’re Netflix subscribers.  When my parents start buying something technical – it is going to be big – because they are NOT early adopters anymore by any stretch.  But they are influencers.  My dad proudly tells of all the guys at the golf club who now have gone out and gotten iPhones to keep up.  And hey, they like the big numbers on the phone.

On a surprising, but I think intelligent response to the advent of the iPad, Acer says it will not release a competing device per se.  I think it is refreshing that Acer is sticking to what it does best.  Honestly, I think this is what RIM should do – make the keyboard experience better and better, rather than try to be a touchscreen phone company.  Acer understands that if they make a tablet it will lack the advantages of Apple’s iPad, but it will have all the same disadvantages.  So they’re punting (for now). Smart move, in my opinion.

Many pundits surmise that Apple won’t have a 2 year lead this time… but I think they will have at least 1 year before a competing system (an Android tablet?) will come along that can leverage apps (android apps?) that even come close to putting it in the same league.  And Apple is also adding pressure by having what looks to be better performance that will be tricky to match in the short-term. The key points from Lin of Acer:

Lin pointed out that designing an iPad-like device would not pose any technical challenges for Acer, but said such a product does not fit into Acer’s business model.

Apple is able to support the iPad through its iTunes ecosystem, while few other makers, including Acer, have comparable experience in operating an online store, Lin noted.

Astute analysis.

Now, StevenF argues that the iPad is a signal of the New World, versus the Old World.  Gen X being smack in the middle of old world computing, and the New World being targeted at those both older and younger than Gen X.  I’m not a big fan of generational themes like Gen X, but he has a point.  If computers in the future will “just work” and reduce the expertise required to use them, they become accessible to more people, and become more important to our society.  I’m constantly trying to get people (rather, the people who ask me IT questions) to switch to Macs because the number of IT-related issues is so much less (as judged by how often they ask me for help).  But an iPhone? I never get questions about how to get some driver installed or printer to work with it… !

I especially enjoyed reading how stevenf railed against the iPhone’s closed system at first -but a month later came back and used it full time.  Because it is just a better phone / smartphone experience, and the open/closed argument doesn’t really matter outside of technophiles like me.  And even I can see that it shouldn’t matter to 99% of the world’s population.  When it is your phone, or your car, you just want it to work. Period. No BSOD. No crashing.  To that end, foursquare can you please fix your app? It crashes more than any other 3 apps I use combined.

So how are things going elsewhere in smartphone land?  Jay Yarrow of the Insider says that the Google Android app store is a joke… You don’t often hear Google described as “sloppy”.  The fact that Android developers feel they can make more money on the Apple App Store is not a good sign for Google/Android. And it is an indication that doing this stuff right is harder than many of us assumed.  From Skyhook Wireless:

In December, wireless firm Skyhook Wireless produced a report about developer frustration with Android. Skyhook interviewed 30 mobile application developers and concluded, “developers are not generating real revenue via Android apps.” As a result “developers are becoming hesitant to invest more time and effort into apps that do not pay off.”

Ouch.

Finally, some would argue that the iPad is a sign of the third revolution…

I’m looking forward to laying hands on the iPad. But more than that, I’m looking forward to iPhone 4.0 – I want to see if it is worth upgrading!

It looks like Nexus One may not be the iPhone killer after all (despite all the Google ads running on TechCrunch these days)…

The first quote:

Flurry is estimating the Nexus One only sold 20,000 handsets in its first week. That means the Droid, with an estimated 250,000 units sold in its opening week, outsold the Nexus One by more than 12 times. The myTouch 3G, with 60,000 units outsold it by 3 times.

Ouch. And people were non-plussed with Droid and myTouch numbers… But it gets worse.

The iPhone 3GS sold 1.6 million units in its opening week, according to Flurry, which means it outsold the Nexus One by a “staggering” 80 times.

So, even if these estimates are off by 2x or even 10x, these aren’t stellar out-of-the-blocks numbers… I think it was too much to expect their first couple of efforts to out-do the iPhone. Story embedded below, courtesy of Business Insider.

I’ve been reading the latest flurry of iPhone / NexusOne articles and blog posts making the rounds, and I just can’t resist commenting.  Walt Mossberg gives both products a thumbs up, and Michael Arrington says the Nexus One is better than the iPhone (um. okay).  But, once again, all too many analysts and pundits are trying to compare what’s happening now to what happened with the Mac and the PC back in the 80’s/90’s… essentially comparing Apple to, well, Apple.  And comparing Google to Microsoft.  There are some valid similarities.

But they’re missing a few key things that make this round different.  In particular, those who want Google to come out on top cite Bill Gurley’s article on the subject. Gurley, first of all, paints Apple as dependent on receiving a share of the subscription revenue of the Telecom partners – but this was, to my knowledge, only true of the exclusive partners – e.g. AT&T.  Second, I believe when Apple renewed its contract with AT&T and revised the pricing to the consumer downward dramatically, that it gave up that subscription revenue in exchange for a lower consumer price.

Gurley goes on to make much of the difference in price point.  But, as Arrington states:

The Nexus One is available “in large quantities” starting today at Google.com/phone. An unlocked GSM version of the phone that will work in most countries is $529.

Google is also offering a subsidized version of the phone – also unlocked – through T-Mobile for $179. The service plan offered by Google is 500 minutes/unlimited SMS/unlimited data for $80/month. T-Mobile’s termination fee is $200, and some users might be tempted to buy the T-Mobile version and terminate immediately, paying just $379 for the unlocked phone. Google says that users terminating too soon will be charged the full price of the phone, however. But even the T-Mobile version of the phone can be used overseas on trips by slipping in a different SIM.

So… how was that cheaper than an iPhone exactly?  Oh. It wasn’t.  You can pick up a 3G iPhone for $99, with 8Gb of memory, rather than the anemic 190MB or so of app memory standard for the Nexus One.  After all, the whole point of these things is to run Apps right?

Gurley pushes the point that cheaper to carriers will matter!  But doesn’t explain how, exactly, that ends up being the case (except, possibly, with respect to Verizon):

The Android strategy results in phones at much lower prices with much more diversity which will hit a broader set of demographics. Apple can and will quintuple its current market share and still have a small portion of the overall cell phone market.

But unless the carriers start paying me to take phones, I’m not sure that the prices don’t get appreciably close to zero and therefore not matter to me or anyone else.  The real cost will end up being in the telecom services.

Mr. Gurley is also overlooking a more obvious analogy to the phone market: the mp3 player market.  And the reason to look at it?  Volume.  Apple is the biggest or one of the biggest buyers of the memory that goes into these devices, in the form factors required.  Apple’s sheer volume of orders allows it to pull off a rare double-whammy against the competition:

1. Buy vast quantities of memory at guaranteed prices, often much lower than competitors can get, and with supply guaranteed or prioritized over other buyers.
2. Actually drive UP the cost of these same components for competitors by buying so much capacity that the spot market is left with too little supply – causing painful price spikes for other buyers (Apple’s competitors).

The memory purchasing advantage is significant.  And Apple gets to consolidate its purchasing power across iPod, iPod Touch, and all three iPhone versions.  Certain economies of scale are not about software cost, and this time around Apple is the one with the economies of scale in hardware – and this advantage is one that even phone manufacturers with much larger marketshare (e.g. Nokia) don’t share – because they don’t buy such massive quantities of flash memory.

Also, like the mp3 market before iPod, the mobile phone business is a big, existing business with high unit volumes.  Many industry analysts assume that Apple cannot win a majority of share in a market because someone (Microsoft or Google) will offer an OS that will take away the mass market by being cheaper.  But what Apple understands is that below a certain price, cheaper just means “less good”, not “better”.  Apple’s profit share of the PC business far outstrips its unit share.  Its profit share of the mobile business even more dramatically outstrips its unit share.

While I think part of Gurley’s analysis is dead on:

Users won’t switch in mass from the iPhone to the Android. It’s the other 3.95 billion cell phone users that are highly likely to consider Android a step up from their current feature phone.

However, his assumption that android customers will be price sensitive and Apple customers price insensitive, seems off-base to me.  Can Apple drop the price from $99 to $10?  Sure it can. Because that is just the subsidized price from the wireless provider.  If Apple asks for less money from the carrier, that can be passed on in the form of a lower up front payment. Gurley states: “Some will argue that the best product will win the market and that Apple will still dominate the smartphone market. The history of the personal computer market is no omen for this thesis. “  Well true enough, but then again the mp3 market is an omen in support of this thesis.  I’m not sure why the mp3 market isn’t relevant to Gurley’s analysis.

Time will tell – and if Google’s Android produces better phones (and ecosystem) than Apple’s iPhone and Appstore ecosystem, then everyone will clearly be better off for it – and if they don’t achieve this high bar, they’ll still have raised the bar for anyone who doesn’t want to buy an iPhone but still wants a smart phone (as Mossberg states, the Blackberry UI is looking more and more antiquated by the day).  I just think the pundits and analysts are underestimating the benefits of scale that Apple currently has – much larger benefits than you would think with only “one phone” on the market…

After writing this, I found a few other posts that are more aligned with my way of thinking.  One, by none other than Henry Blodget which makes the point (quite rightly) that actually Google is not now in the phone business.  This is the HTC Nexus One, on the T-mobile network.  Google actually just set up a storefront.  And wrote Android.  And probably provided technical advice (much as it did for Droid). Its a pretty compelling argument.  However, the new Android-based phones *are* increased competition for the smartphone category (including the iPhone).  I just think it really puts more pressure on the Blackberries and feature-phones than it does on the iPhone.  I also think everyone is underestimating the lock-in value of having an iPhone – if I switch phones I have to buy new apps… different apps maybe… and maybe I’m happy with the App ecosystem I’ve got!

And then Dan Frommer argues that the customers service for the Google Phone won’t be what we’re used to if you buy from their online store, because you’ll have HTC, Tmobile, and Google to deal with, depending on your issue.  Google doesn’t own the customer relationship… Nothing insurmountable, but it may lead to bad press down the road as people run into inevitable service problems.  These problems happen in the Apple/iPhone world too -but Apple is in a better position to fix them and protect the brand.

Finally, Pogue of the NYT hits on a few sour notes, starting with the smaller selection of apps (about 1/10 of what is available on the iPhone – this is such a strange mirror image of the old Windows vs. Mac debate… ):

Worse, even if you find a lot of good ones, you might not have anywhere to install them… the Nexus allots only [190 megabytes of storage space] for downloaded apps.

The Nexus also does not come with any iTunes-style companion software…

There’s no physical ringer on-off switch…

Sadly, the Nexus One also lacks a multi-touch screen like the iPhone’s….

Finally, the Nexus just doesn’t attain the iPhone’s fit and finish.

Note the storage space (my emphasis) – my nearly 2 year old iPhone 3G has 8Gb of storage space for apps… about 40x as much… Of course, as the Insider points out, his take on the business model is even more scathing. Read the Insider article or the NY Times original for more…

Of course, for the “drank the Google Phone” kool-aide crowd there is this piece by Brian Sheehan arguing that Google will own mobile.  It isn’t a bad piece of writing – I just don’t agree that Google and Apple will forgo giving the iPhone most of the same integration advantages.  I do think that Google is enough of a “swing for the fences” company to do audacious things like buying fiber optic cable (oh wait, they’ve already done that)… So maybe they really will get into telecom.  We’ll see.

On the other end of the spectrum, Stewart Alsop crushes the Droid in his review.  It isn’t Nexus One but one could assume that Nexus One would have to be a big software improvement to make Stewart happy…

Andrew Chen asks this question in his blog.  Its a good read from several perspectives, but I’ll just pull out the couple of bits that people developing processes should be thinking over well and good (I like to read the work of thought leaders outside the BPM space to see how their ideas might apply to BPM):

Back to Steve Jobs – what does he really do?
Long story short, my hypothesis is that Steve Jobs is one of the rare CEOs who is very focused on product desirability. In battles with the business and technology goals, desirability will almost always win out.

And what is “product desirability”?  It sounds like understanding the “voice of the customer” to me (but broader than typical six sigma definition of that term).  Having an understanding of what will matter to your customers is a key driver for success for your processes.  The definition of customers is a bit vague :  users, primarily, but also people impacted by the process (often, your end-customers)…

• What makes your process desirable to your customers?
• What makes your process desirable to your internal users?
• Who is responsible for representing desirability of the process?

Andrew goes on to define what he surmises are Steve Jobs’ duties:

So his role isn’t that of a designer, but rather Chief Design Advocate. This means:

• he makes it clear that products should be “insanely great”
• he recruits a top design team, and protects them from competing goals
• he is willing to spend money, adjust technology processes, all for the goal of highly desirable products
• he convinces financial analysts, industry pundits, etc. that product design is very important

As Andrew says – is there any reason that any company can’t be doing this?  Or that you can’t be doing this for your processes?  Making sure the processes are great, that you have recruited a top BPM team that is focused on making the processes valuable to your customers?  Spending money, adjusting technology, to support highly desirable products?  Convince the folks that hold the purse strings that processes and process design are important…

Very few companies do this… It could be the differentiator for yours.  And there’s no reason you can’t do it.

The top 11 iPhone apps for Business (according to the business insider).  They actually have a pretty good list, but I’ll add my own thoughts since I’m traveling this week…

1. Spots – for finding Wifi Hotspots.  Look, unless you live in a hinterland that does not have its share of Starbucks, you are really not that far from a wifi hotspot.  I don’t find this app a necessity but it sure beats having the iPhone pop up a list of wireless networks you could connect to every 30 seconds (and yes, you can turn off that popup in the preferences – I recommend it).
2. Kayak – for searching flights/hotels.  I might have to add this one.
3. FlightTrack Pro.  This is a good app -but might I recommend Weatherbug elite -which gives you more comprehensive weather information than what the airlines or FTA will report.  As a result, when they tell you its a 15 minute delay but the radar shows massive storms heading your way, you can make a more informed decision. Also, the itinerary-style features are better captured by TripIt in my view.
4. Subway Guide – well, this isn’t too useful in Austin, TX. But the fact that you can access maps that work when you’re NOT connected to the internet is pretty useful.  Otherwise Google has you covered on Google Maps…
5. Taxi Magic.  Much more useful in places that don’t have mass transit to speak of.
6. Spotasaurus.  Looks handy, but honestly I’ve never had a need for it.  I travel all the time.  I still know good places to duck in for parking in Austin, and I’ve found you figure it out pretty quick when you’re on the road too.  Usually if it is hard to find parking, it isn’t cheap anyway.  What’s $2 off of a $35 rate?  Its not like you’re going to find one lot for $2 and one for $25 nearby.
7. Convert.  hm. I mean, I don’t doubt that it works. but top 11? really?  I can’t remember the last time I had to do unit conversions, other than km to miles and back (is it really that hard to multiply by .6 or 1.6? no, it isn’t. )
8. Right Signature.  Hey, this looks like a find.
9. World Factbook.  hm. Yawwwwwwwwwn.
10. Virtual Receptionist.  Well, kind of interesting. But I haven’t needed it yet.
11. Print to Phone.  This looks pretty cool too.  I like the idea, and I’ll have to try it out…

My list of adds:

1. TripIt.  No more itinerary printouts.  It downloads local so you don’t have to be connected.
2. Hello.  Google Apps.  The voice search alone can be a lifesaver when you want to find a restaurant near your current location without much trouble.  And with this, you may not even need to use the starbucks locator and various other branded apps.
3. Tweetdeck (or the like).  How else are you supposed to keep annoying your followers if you don’t have this on your iPhone?
4. <insert financial institution here> – you never know when you’re going to need to check a balance or make sure a check was deposited, or make a trade.  Most major institutions have these now.
5. Yelp/UrbanSpoon – you need to find a place to eat when you’re on the road right?  These are good ways to find a place to eat.
6. OpenTable.  Don’t feel like searching review sites?  OpenTable tends to have higher end restaurants on its service because of the fees it charges.  Consider it automatically filtering out the corner tacqueria or pizza or burger joint, and focusing you on places that take reservations.  Make a reservation straight from the app.
7. Evernote.  Keep your notes / photos of notes synchronized.  Access from your phone.  Its pretty good and comprehensive.
8. I used to have Wall Street Journal on my list, but they put most of their content behind a paywall.  Not worth the trouble anymore, I just need to find something to take its place for good business news.

Apple’s net profit from iPhone’s exceeded Nokia’s by approximately 50% ($1.6B in net for Apple, $1.1B in net for Nokia). Its the first time Apple’s net profit in phones exceeded Nokia’s, and it is a dramatic reversal. Just 7.4 million phones generated this profit for Apple. Nokia sold 108 million phones to generate its $1.1B.

The way things are headed, Nokia and others may have more volume, but Apple and RIM will have substantially all the profit.  This is similar to what’s happening in the PC world, where Apple has a stunning 90% share of computers that cost over $1000, according to NPD reports.  Meanwhile the profit is getting sucked out of the rest of the PC business by netbooks and lower cost laptops.

Meanwhile, the AppleInsider has a really interesting comparison of the business models of Apple’s iPhone and Google’s Android phone.  It points out that while Google’s model has some advantages, there are also some disadvantages – no control over the Android brand, for one, and lack of clear accountability to fix customer issues once they have an Android phone.  AppleInsider points out that one bad Android phone can tarnish the brand – which is true of the iPhone as well, but the difference is that Apple has control over what gets released with the iPhone brand, but Google can’t exercise the same kind of control over Android derivatives.  I can’t help but think that the fragmented market of Android phones will only be an advantage if collectively the phones can evolve faster and take advantage of new technology faster than Apple’s iPhones… but so far technology adoption hasn’t been the problem – user experience has been the problem.  And it seems like Apple still has the edge there.

I just read an article in Fortune Magazine (my favorite offline read for flights or other times when I can’t be online), in which Michael Copeland argues that we need a revamping of the computing of autos.  As he points out, GPS and voice-recognition and even bluetooth phone integration are so last decade already (hey, we’re only two months from 2010!).

He makes the case that autos need to be providing much more robust application capabilities, along with an app store for buying applications for your car.  He refers to cars as one of the most popular mobile devices (well, mobile and motive, actually).  As such, “automakers need to start acting more like consumer electronics companies if they don’t want to cede one of their last great opportunities to Apple, Research in Motion, or Google.” And then… “More screens are showing up in automobiles.  Wouldn’t it be great if those screens became home to a flood of car-appropriate applications?”

The short answer is, no.  At least, not if these applications are delivered the way in-dash navigation computers were delivered to autos over the last decade.  I recall when I bought my last car.  During a stop at the Acura dealership to check out the TSX and TL, the salesperson gave me a long pitch regarding the resale value of a car with navigation.  As I recall him saying then: “These days, people just expect a navigation system in their car.  If you’re trying to sell a used car without that navigation system in 2 years, the resale value just won’t be there as much.”  Well.  I have a different opinion.  Find a friend with a 5 year old car with a built-in navigation system.  Those systems look comical today compared to a modern Garmin or TomTom or Magellan handheld system, and they make the car look dated and unsophisticated.  Moreover, the cost even just 3 years ago was approximately $2000 for that navigation system option package.  An off-the-shelf portable GPS navigation system was barely $250 even then, and much better devices are available for similar prices now…

I think the auto computer is like the old car phones.  They were vastly overpriced, and antiquated long before the car stopped being drivable, because the pace of technology changes for cellular phones was so much faster than the pace of change for cars.  Fast forward to the 2000’s.  The pace of change in navigation systems has dramatically outpaced the change in cars.  The pace of change in phones has outpaced both the rate of change in cars *and* the rate of change of navigation systems – to the extent that if you buy an iPhone or Android phone today, it can be your navigation system.  That in-dash navigation system is already a dinosaur if you bought it yesterday, and it will only look worse as time goes on.

No, give me a car where the technology is completely transparent to me as a driver.  Bluetooth integration and voice recognition is a good example.  If it goes out of vogue, I can shut it off, and there will be no visible sign of its antiquity.  Technology to improve my driving experience is transparent to me.  A better radio (satellite or otherwise) is largely transparent as long as the interface can still be a relatively basic digital or analog display.  I once drove a BMW z4 that had this aesthetic just right – knobs instead of buttons where ever possible, and a very subtle “computer” on the instrument panel whose sole purpose was to tell me stats about mileage and maintenance.  That car’s dash will look good 20 years from now.  Had I bought that Acura TL or TSX 3 years ago, I’d no doubt be kicking myself now, because my phone does all that.  And because the GPS would soon look like Atari Pong.

I think the right answer for Autos is technology enablement.  To the extent possible, expose APIs for interesting diagnostic information that could be displayed by third party devices or applications.  Provide a standard space on the dash that could hold a third-party or after-market device for displaying such stats. Build an upgradeable platform into your vehicles so that the parts that have a high rate of change can be inexpensively swapped out as technology improves – with the dealership network and car companies taking a slice of the revenues every time customers go through the upgrade cycles.  If you want to provide technology baked into the driving or passenger experience, make it transparent, and make it trend-friendly by doing a little future-proofing. Auto manufacturers have to remember the upgrade cycle for cars is a lot longer than for computers (9-11 years versus 2-3 years for computers and similar devices), and the designs of technology in automobiles just have to take this into account in order to preserve style and resale value down the road.

Unfortunately, if the car phones and navigation systems are any guide – when (if) we do get an App store for automobiles, it will cost $2000 for the option to make it available, and about $500 per application.  Let’s hope this time the car guys get it right! (And let’s hope the tech is transparent… otherwise we’ll see more texting-style car accidents)

A new article from TBIResearch concludes that employees are driving iPhone adoption in the enterprise.  This fits the anecdotal observations I’ve made about my own friends – that those who can choose, are largely choosing iPhones, and those who can’t, are largely using Blackberries.  Very few of my colleagues don’t have “smart phones” at this point.

TBI Research points out that this trend is important for Apple because the enterprise market is, so far, lightly penetrated by Apple and represents a huge market for their phones.  Often the “employees” driving the trend are executives that can force IT’s hand in supporting the phones.

TBI points out that the largest remaining barrier is Security.  Trumping that, in my opinion, is the utility of the iPhone and the many applications available.  If I were an industry analyst, I would tell you that there will be BPM apps available on the iPhone in 2010 (0.9 probability).

To further support that perspective, there are now reports that Apple will ship a CDMA compatible phone in late 2010.  The article makes some great arguments why Apple should be pursuing CDMA compatibility – primarily, its cheap, and it would enable them to compete for Verizon’s large customer base.

Five years ago I attended my college reunion at Stanford and I was surprised by how many of my peers were using Palm Treo phones.  At the time, the Palm Treo dominated the smartphone market in the US, but very few people really had smart phones.  Of course this was a fairly tech-savvy crowd, and it was no surprise that they were jumping on the newest productivity tools.

Fast forward five years, to the next reunion.  I didn’t see any phones in evidence that weren’t BlackBerries or iPhones.  Again, this crowd showed a specific phone preference though:  for the iPhone.  At dinner one night I noticed that 4 of the 5 of us had iPhones.  One of our party had a BlackBerry.  His was issued by a big firm’s IT department.  The rest of us work at or own small businesses – we could choose, and we chose iPhones.

You might think that these four iPhone owners were Apple fanatics.  But when I pointed out the iPhone to BlackBerry ratio, two of the iPhone owners expressed disbelief that anyone using an iPhone would be convinced to buy a Mac.  Clearly some of Microsoft’s positioning around pricing is hitting home as they felt that Macs were “$400 or more” more expensive than equivalent PCs (the gap is closer if you pick the same chipsets, memory speeds, graphics chips, etc. – and I think most people would argue the balance of the difference gets you the Mac OSX and the alumnimum unibody… fair trade).

So if pretty die-hard Windows/PC users are going iPhone, I think it is safe to say that the iPhone has a lot of runway.  I asked if any of them were looking at Android phones – no takers.  I think there is a hidden element of lock-in – which is not the *availability* of applications, but the money and time invested in owning existing applications on your iPhone.  When you “buy the app” you’re really only buying the app for one platform…

It wasn’t just me.  Check out the chart from Business Insider, adapted from Changewave survey results:

Or, the coverage from Fortune here. Clearly a lot of momentum working in iPhone’s favor at the moment. I’ll be interested to see what kind of smart phones we’re using at the next reunion. Or will we still be calling them phones?

I was struck by a series of articles I’ve read recently regarding Outsourcing and how it is really hurting American businesses.  Robert Hayes raises the specter of the US possibly killing its Innovation Machine, and compares outsourcing of High Tech to the Subprime-Mortgage fiasco. He makes a few powerful points, for which it isn’t hard to look for data points to support.

The same forces can lead a number of manufacturing companies — each independently making apparently rational decisions to outsource certain segments of their operations — to ravage their industrial commons: the valuable infrastructure of suppliers and skills that underpins them. The supposed savings they expect to generate from such activities are based on costs that often do not properly reflect the damage they are causing.

As I read this, I think of Dell, once the pinnacle of the PC industry’s drive toward efficiency… But under the hood of Dell’s efficiency engine we discovered that a lot of their benefits had to do with financial engineering – taking ownership of inventory as late in the process as possible, owning the warehouses (and charging rent) that their vendors used to store their equipment prior to final assembly, and paying creditors as late as possible.  Reading on in Mr. Hayes report:

A company’s competitive advantage is rooted in things it can do (e.g. design, make, distribute, or market) that its competitors cannot do as well, if at all. As the number of these core capabilities decreases, the company’s competitive vulnerability to those that are able to master the same capabilities goes up.

This sounds like what Dell did – outsourcing the manufacture of increasing parts of the value chain, until you reach the logical conclusion, where Dell no longer does even final assembly of much of its inventory, it is simply the design, marketing, and distribution vehicle for other companies’ computers.  They reduced the number of areas in which they could differentiate from the competition.  And the competition (HP, Lenovo, Acer) have adopted very similar business models, and now enjoy similar (and in some cases, better) margins.  As Mr. Hayes writes: “[...] teaching an armada of hungry potential competitors first how to master, then how to surpass their capabilities.” Meanwhile, it is difficult to unwind this change in the food chain because the necessary infrastructure and skills to support manufacturing and assembly in the US has now been outsourced overseas (largely to Taiwan and China). Restarting that infrastructure in the US is a daunting task in dollars, time, and leadership.

Mr. Hayes makes a persuasive argument that these companies have not, in fact, been improving profitability – that they have instead been cashing out their intellectual property and assets in exchange for a temporary improvement in margins… Which is now evaporating.

Now that the field has been reduced to competing largely on: Design, Marketing, Distribution… Branding becomes more important.  And this probably explains in large part why Apple has been so successful of late -they can outsource the production efficiencies that Dell (and others) have produced in overseas outsourcing shops, and they can exceed these other manufacturers with differentiated software and hardware design and branding (The aluminum unibody Macbooks with Mac OS X are the envy of the industry), better marketing (Apple ads), and distribution innovation (Apple Stores).

What Mr. Hayes is arguing isn’t entirely new, but our titans of industry have been unwilling to listen.  In an issue of CIO magazine in 2005, the then-CIO of Aflac, Jim Lester, said that he wouldn’t consider outsourcing his IT because he couldn’t replace the organizational learning, the knowledge of the business, and the alignment with the business that he had in his current IT organization (some people call this caring about your company).  But he was a minority voice at the time.  The fact that his organization out-performed the insurance industry as a whole for the next few years might be unrelated, but I wouldn’t bet on it.  Of course if particular IT services trail the industry averages then it may make sense to switch to commodotized service offerings as a way to play “catch-up” with the industry – a firm will sacrifice its ability to excel in that area, but will eliminate the possibility of self-inflicted wounds in that area, while it can then focus on the areas it knows best.  One could argue that this is what Apple did with its back-end fulfillment – which trailed the industry in efficiencies – so that it could focus on its strengths in design without the drag of inefficient manufacturing operations.

I worry that over the last 10 years, the US been on a similar course with regard to software development. Increasingly attempting to jam down the costs of software developers, and going anywhere in the world in order to achieve it, without regard to the specific qualities of the firms they are outsourcing to.  If this goes too far, we’ll lose the critical ecosystem here in the US that supports software developers (and many software-related professions and the businesses that are based on them).  I see signs of this in startups who don’t do any software development in the United States and assume that this financial engineering will give an edge to their “ideas”.  But what software has often proven is that ideas are cheap.  Execution is differentiating.   These startups are betting the farm on unproven execution resources, which then puts them in competition with hordes of competitors with fewer ways to differentiate.  Counter to this trend, I also see a number of firms now with hybrid software development models that include doing development on- and off-shore to gain some cost advantage but without losing the ability to try to differentiate on execution.

In a very cogent piece on the subject of Indian outsourcing in particular,  Jaisundar argues that IT can sharpen competitive advantages, rather than diminish them.  That India based service providers need to migrate from being order takers to a deeper relationship that can address business process problems proactively and cooperatively.  This is likely true, but it runs counter to much of the order-taking culture at these firms – it will take time to push the mindset in the right direction and to find and train the right people to lead them in that direction.

Meanwhile, there’s quite a bit of abuse of foreign workers going on in the US.  An expose in Business Week on this practice goes into excruciating detail of some of the worst cases.  However, BusinessWeek makes the claim that most employers are unaware that these abuses are being perpetrated by the staffing firms that they employ.  I don’t buy that argument.  I think companies bear a responsibility to know that the people they staff are legitimately employed, and brought to the US under appropriate Visas (for all the attention on H1-B visas, no one is talking about the vast abuses of L1 visas going on right now). Companies bear a responsibility to work with reputable firms – if they don’t, then it is with the intent of getting workers at below-market conditions, which normally can only happen when you have a captive or disadvantaged workforce.  This is a bit like buying a Cartier watch for $10 and pretending that you don’t know it either (a) isn’t a Cartier, or (b) wasn’t acquired in a legitimate fashion. The buyer has a responsibility to buy legitimate goods and services.

In another article, Charles Green blames the money-first-above-all-else culture of Wall Street (and, increasingly, the executive suites of large firms) on Harvard Business School.  Charles Green, himself an alumna of Harvard Business School, argues that HBS has failed to imbue our “Best and Brightest” with a well rounded perspective of business:

Harvard Business School led the charge away from an approach to business centered in relationships and commerce, and toward one rooted in markets and competition. They promised us competitive advantage and efficiency. They delivered.

Unfortunately, the cost of this change is that American business is not prepared for a world that is increasingly interconnected, and increasingly relationship-driven.  Its a great, thought-provoking read.  As a long-time professional services guy, hearing someone say that business is relationship-driven is a bit like hearing that the sky is blue.  Of course it is relationship-driven, trust driven, commitment-driven.  And when organizations ignore this or trample on these aspects of their business, the chickens will come home to roost.  But apparently this was hasn’t been part of the culture of Wall Street for some time.

These articles only scratch the surface of what I’ve seen lately in the press and in blogs, but I think each one captures a specific issue perfectly.  If you can’t differentiate part of your business, it may make sense to outsource it, but be careful.  There are serious landmines in outsourcing, and it isn’t clear that American businesses have correctly assessed those trade-offs for the long run.

An article in the NY Times recently caught my attention because … well it was about Tablet PCs.  Interestingly, much of the coverage comments on the buzz behind Tablet PCs lately, without fully realizing that it really isn’t buzz about a new category of product…

It really sounds like buzz about Apple’s possible offering of a Tablet PC.  All mention of other products and vendors inevitably turns to what Apple might release, or compares the product to the existing tablet computer – the iPhone.  And while there are some Kindle fans (and I’ve seen a few on flights lately), the volume is small so far, and the product is downright ugly.  The same goes for virtually every other pretender to the Tablet PC throne.  What everyone is waiting for is for Apple to redefine the category with something eye-catchingly beautiful.  It is going to be hard for Apple to live up to the expectations at this point… but equally, it is pretty well impossible for anyone else to live up to the expectations.

Similarly, there was an announcement that Apple purchased Placebase in July – with most articles wondering if this reflected tension with Google.  But I tend to agree with this article by Michael Hicks – that Apple is after the layering know-how to create “Augmented Reality” applications and features for the iPhone.  And my guess is that they’ll release an AR API for the iPhone to make it easier to write such apps as well (just as they have good APIs for animation and touch-gestures).  This line of thinking is similar to why Apple bought PA Semi previously – not to build its own chips, but to design chipsets and collaborate with chip manufacturers on low-power, high-performance designs (we’ll have to wait and see if that is correct, however).  It seems likely to me that some combination of AR features or apps will change our lives in the near-future much as the smartphone has changed our lives in the present (picture that green fidelity line actually painted in your vision in front of you).

Not sure that any of this will impact BPM, but I’ve covered enough Apple topics I hope any regular readers will forgive my indulging in yet another post on the subject.

Sometimes its good to review “how we saw the world” at a given point in time.  Back in 2007, 2.5 years ago, Jerry Useem wrote an article tagging Apple as “America’s Best Retailer“.

Its still a great read to see how Apple approached retail.  And if you go look at the stats, they are dominating:

And not just the architecture. Saks, whose flagship is down the street, generates sales of $362 per square foot a year. Best Buy (Charts) stores turn $930 – tops for electronics retailers – while Tiffany & Co. (Charts) takes in $2,666. Audrey Hepburn liked Tiffany’s for breakfast. But at $4,032, Apple is eating everyone’s lunch.

I’m pretty sure if you look them up today, they are still dominating this statistics.  That Saks store is their flagship… The Apple figure is their store average…  I still remember when I read that Apple was rolling out a retail strategy that it sounded like a disaster to me.  After all, other computer retailers (Gateway?!) had tried and failed miserably.  It seemed antiquated to buy a computer in a retail outlet when you could order online, especially with rapidly deteriorating component prices at the time.

But obviously Apple had something different in mind, and it has worked beautifully (for one – for the most part- they’ve separated the value of their devices from the underlying components that are used to build them).   If you read the article – don’t focus on the end-product – focus on the process they used to arrive at a good store and a good customer experience – it didn’t happen by accident.

Having said that, I think they need to review their service approach now that the service volumes have increased along with their increased unit sales and number of customers across the iPod, iPhone, and Mac lineups.  The extra service volume is driving increasing complaints about access, wait-time, etc.  And you really don’t want your service reputation to be that of the local car mechanic (unless that car mechanic is BMW, which gets you in and out quickly, gives you a gratis loaner car, includes the first 4 years free maintenance in the price of the car, and charges you an arm and a leg after that!).  The other option is to encourage the proliferation of service shops that can provide similar services but without needing to support the same volume of foot traffic.

Best Retailer?  The numbers say yes.  Best “after-sale-service experience?”  I’m not convinced on that one (and admittedly, the author of the article in 2007 wasn’t making that claim).

In previous posts I pointed out how Apple made the right call in putting off all the me-too features in favor of the platform-  and then a followup post on the actual execution of that strategy once the iPhone 3GS was released.  The day after the latest Apple presentation seems like a good time to revisit the topic.

First, its apparent that the standalone iPod line is a little less interesting than it was, now that the iPhone and iPod Touch are here.  The incremental improvements are still there, but a little less exciting when you’re so many iterations into a product cycle that gets new offerings literally every 12 months.

But let’s take a look at how the iPhone is doing, shall we?  Oh, we could look at unit sales.  Or revenue.  Or profit margin.  But I just read a blog post that makes the point from the application developer’s perspective. Matt Hall writes in “Android Market Sales, Are Those Tears or is it Raining in Here?” that Android sales are dramatically lower than sales on the iPhone – more so than just the difference in units shipped would suggest.

Let’s take a look at the two charts that are pretty brutal:

Larva Labs Android Market Sales

Followed by a comparison of how their apps are doing on Android Market versus iPhone’s Appstore:

Larva Labs Sales Android vs. iPhone

Ouch.  Matt goes on to give a good critique (and advice) to the Google Android Market for improving their site from a developer’s perspective. But my thought is the key thing the Android Market is missing is that it doesn’t appear to be as focused on making buying decisions easy.  The iPhone/Apple App Store didn’t get everything right with their App Store, but they sure made buying apps easy.  Those customer-facing or customer-touching processes are really important…Matt remains optimistic about Android in the medium- to long-term and I think that’s valid – because the OS is good and it is free – it is likely to be adopted by a lot of phone makers and be in the hands of a lot of users.  But it also may get fragmented like Unix (see China Mobile’s plans for its oPhone and its own application market, powered by Android but not exactly “in” the original marketplace). There are also a lot of complaints in the comment feed about piracy (something Apple’s ecosystem makes harder).  There’s a lot of platform risk in the Android market… and not much (anymore) in the iPhone App Store platform.

And the strategy of building the network-effect marketplace behind a new software platform on the iPhone appears to be a big winner for Apple at this point.  No one else is even close to challenging its ecosystem in this respect.

Still not convinced?  Take a look at the Chart of the Day from the Business Insider:

Apple's iPhone Games vs. Nintendo DS and Sony PSP

We previously addressed the newest generation of iPhones in the iPhone 3.0 (now, iPhone 3G S … however, the iPhone OS is going to version 3.0, so perhaps the title is still ok).  Now that Apples’ WWDC has come and gone, and the dust has settled (for the most part), the press coverage makes it pretty clear that Apple has been able to pretty effectively execute on its differentiation strategy:

First, the major complaints leveled against the iPhone have been addressed (a series of fairly commoditized features such as cut-n-paste, MMS, opening .ics files, etc.)

Second, if we revisit the product revision options open to Apple pointed out in a previous post on Apple and BPM, it looks like they fired on multiple cylinders:

• Lower the price on the existing units – the iPhone 3G’s price has been reduced from $199 to $99.
• Release a new, improved unit with the old (high) price – the iPhone 3G S has more memory, faster processing, better graphics, a better camera, somewhat improved battery life, tethering, MMS, etc.
• Release more varied looks with approximately current technical specs (e.g. the colored iPod Nanos, for example) – Nothing done on this front, this time around.
• Create new pricepoints with low-cost components – e.g. RAM.  The new, improved iPhone carries higher pricepoints for a 16Gb and 32Gb version, which represent profitable upgrades for Apple, along with a fairly inexpensive camera upgrade (they are trailing the state of the art for phone cameras by enough that they aren’t paying much for innovation in that particular area).
• Improve the platform by adding new services or functions – the new iPhone offers the “find my phone” feature, video recording and editing, voice activation, etc.
• Change the pricing of services on the platform – Not too many changes on this front.
• Any combination of the above.  Check.

In particular, by lowering the pricepoint of the 3G, it appears that they’ve taken the oxygen out of the room for the competition (Palm Pre, for example).  So Apple retains the high end of the market with the new iPhone 3GS, while robbing profitability of the also rans by deploying the iPhone 3G at $99 (which itself is being upgraded by most of the improvements present in the iPhone OS 3.0).  And due to reduced component prices and volume negotiating, likely all of these phones are reasonably profitable for Apple when you include the carrier subsidies.  They’ve had time to recoup the R&D costs that went into the iPhone in previous years and are likely finding it increasingly easy to invest in future R&D against a growing revenue and profit stream.

Moreover, they’ve managed to really build consensus and focus on their key differentiating points – the platform (Appstore and OS), and applications (50,000 and counting).  While there was some coverage of specifications which indicate that the new iPhone is an even better gaming platform, Apple steered clear of focusing on easily commoditized hardware components.  One article on TechCrunch bemoans the fact that upgrading from the iPhone 3G doesn’t qualify for the subsidized prices (yet), but it definitely appears to be the minority view in the press.  Another TechCrunch article paints a bleak picture for the rest of the smartphone market.

In the immediate aftermath of the iPhone 3GS announcement, many wondered if Apple would sell as many as they had in previous summers.  Early signs are that all the pre-orders are sold out-  so while there may not be long lines on release day, there will be waits for the channel to fill.

Apple has executed the differentiation strategy brilliantly – as they should – they’ve had a lot of practice with the iPod releases over the last several years, and it looks like a well-understood process.

(I’m still looking for the rainbow color options next year… )

No, this isn’t really an article about the 3.0 release of iPhone software.  Not really.But there is a good article about it right here (its a good read).

Its really about what we can learn from it.  In version 3.0, Apple added 100 or so features to the iPhone OS, and 1000 developer APIs.  What were these features you ask?  Here’s a few of the ones that will likely draw snickers:

• cut and paste
• MMS messages with more than one picture
• Landscape view for basic apps (mail, notes, calendar, etc.)
• Opening .ics files
• Supporting calendar.dav protocol (calendar sharing)
• Push notification
• etc…

Why the snickers? or yawns?  Because these are largely features that other smart phones have supported for the last 2 years (since iPhone 1.0 came out).

Why would Apple put off these seemingly critical, unavoidable features?

Why is Apple adding them now?

What can we learn from this, that we can apply to our BPM (or indeed any) projects?

First, consider that Apple could have included all of these features in the first release – and either delayed the iPhone by presumably 6 months to a year, or Apple could have included these features in the first release, and perhaps sacrificed the features that really made the iPhone different and desireable.  Consider had Apple released iPhone 1.0 without multi-touch, without coverflow, without the touchscreen interface for virtual keyboards… would the iPhone have been a big hit?  What if, in iPhone 2.0 software Apple had released these features *instead of* the App Store for the iPhone.  Would we have 25,000 applications we can install?  Would there be 50,000 developers registered for the iPhone?  Would the iPhone seem so relevant, so useful?

Ok.  hopefully you’re with me on my line of reasoning.  Apple made the calculation that creating something significantly different and BETTER in some respects, would outweight the shortcomings on some of the basics in other respects.  Based on rate of adoption of the phone, I’d have to say they made the right call.  In the old days, Microsoft used to do this, and in the industry jargon we called it “super subsetting” – meaning, I have provided a subset of the spec or the de-facto spec (no copy paste!), but I am providing a “super-set” set of features that no one else provides (in MSFT world that might be tight integration with Microsoft Office applications – in the iPhone world, it is multi-touch and the App Store).  Without the super-set features, you can’t generate the demand for your product.  Once you have demand, you have revenue.  Revenue makes it easier to invest in your product.  In all aspects of your product.

Thus, to the second question.  Why add these features now?  Because the differentiating features have proven out.  Its now time to capitalize on the wide adoption by adding convenience and removing objections that existing and potential customers cite.  Take away some of the competitive ammunition now that you actually have a measurable share of the market.  Soon the iPhone will look like a strict super-set of the other phones in terms of capability, with the other vendors scrambling to get their own application stores together, but lacking critical mass behind these stores to make them vibrant (with possible exception of Android’s application store).  Keep in mind there is significant development cost to build these features and make sure they are quite robust.  And yet, with 30 million iPhone OS devices on the market, the development costs now probably look quite modest relative to the revenue streams.  Whereas, up front, these costs would have looked quite large relative to zero revenue so far.

To the third question:  What can we learn?

When building a BPM solution, we are often integrating with and replacing parts of legacy systems.  Often one of the first requirements from the business will be that the new system does everything the old system did in order to be accepted.  This is generally a bad false start to a project.

However, one of the best tactics is to figure out what the 2-3 key NEW capabilities your solution will bring to the business that are so compelling that some minor discomfort over less important details will not derail the project.  You can call this marketing, but it is truly understanding where the real value opportunities are in your project.  Sometimes these capabilities are things the users will clamor for, sometimes things that the management team will clamor for, and rarely, things that IT will clamor for.  Make sure that at least one of your major stakeholder groups is squarely behind a few of the wow features of your BPM project.  If you don’t have that excitement in one area, my experience is that you’ll find uncomfortable scrutiny on an exact comparison of the new solution versus the old solution.

Moreover, before you invest in “trueing up” your solution with all the old solution’s bells and whistles – you’d like to know that the big rocks – the major goals you are attempting to tackle with BPM – are getting addressed!  Once you *know* that those goals are being addressed, then you can go back and invest in the more mundane, but expensive, build out.

This could all fall under the heading of focusing on the highest value parts first.  But in reading about Apple’s 3.0 release, I couldn’t help but put it into a BPM context…

As readers of this blog have no-doubt noticed, I’m a fan of Apple products and their approach to the markets they compete in.  In late 2007 I switched to a MacBook Pro fulltime.  In the early 90’s I used NeXT machines, and loved them.  I also had an Apple back then, which was fun. But in the intervening years my life has been mostly on Windows with the occasional Unix/Linux thrown in for good measure (but only for development, not for my daily machine).

My first product glitch was when my daughter “helped me” by pulling a few keys off my keyboard!  I took it to the Apple store, and they fixed it for me (new keyboard) even though it was obviously *not* a warranty issue.  They also said this kind of thing would be covered by Apple care.  I thought about that, and then bought the warranty package.  Good service, rewarded by a customer pulling the trigger on a purchase…

This time, my nvidia video card kicked the bucket.  I went to the Applestore and they wanted to schedule me for a “Genius Bar” appointment.  I came back that night for my appointment, to be told that they have a 40-machine backlog, and that they’d have to ship the machine off to Apple, a 7-10 day delay.  Maybe some people can do without their hardware for a week or two, but I’m not one of them.  I don’t know anyone in business who would put up with that kind of delay.  I asked, but Apple Stores don’t do loaners, nor rentals, nor hard-drive swaps so that, at least, I could hang onto my hard drive and not have a risk of losing my data (the Genius Bar rep was careful to warn me that they don’t guarantee the data… ). I went home a bit steamed.  But I kept my laptop.  I couldn’t help but think if the normal backload is 10 repair jobs, and they currently have 40 – does that mean that Apple sold a lot more machines, or that they have a quality problem, or that they’re under-staffed?  Or all of the above?

If under-staffed, memo to Apple:  there are a LOT of people looking for work right now.  You could do a little Apple stimulus plan and improve customer service at the same time…

Steve once compared Apple to BMW or Mercedes.  But when you take your BMW (or luxury car of choice) into the shop, they give you a loaner vehicle for your trouble so you can be on your way.  I felt a bit embarrassed for the Genius at the Genius Bar that he couldn’t offer this kind of real service.  There is nothing worse than having to tell a customer that they are SOL.

But, I didn’t give up.  I knew at least one storefront in Austin that sounded promising – “Austin Mac Works” and figured there might be other options as well.  Turns out the store is certified to do warranty repairs and ship back to Apple for warranty repairs that they can’t handle.  I dropped off my MacBook Pro at lunch, and on my way home from work picked up a loaner machine – into which they had swapped my hard drive – so I am now back up and running “good-as-new” while I wait for my repairs.  My warranty repair is still “on the house” but my rental laptop is going to cost me a few dollars over the next week.

Apple:  you’re leaving a huge opportunity (in my opinion) on the table to provide better service and even further differentiate your brand.  I’d pay $100 for a loaner.  Or put down a sizable refundable deposit.  At least refer people to third party shops that may have less backlog.  Asking people to part with their computer, is like asking them to turn off their TV.  And as a recent Hulu ad posited: what are you going to do, turn off your tv AND your computer at the SAME TIME?!   Who are we kidding.

Apple execs – take your car to a Penske-owned BMW dealership, and then think again about your equipment-servicing approach.  There’s a queuing problem, a triage problem, a critical failure (no laptop for a week?), etc.  A good analysis of these issues could yield some great results.

PS: Hulu ad included for amusement- just go to about :38 into it and you’ll see the line I’m referring to.  Followed by maniacal laughter…

In the BPM world, not much is said about Apple, and people in our business don’t associate Apple with BPM.  I’d say the association is more like Apple to Innovation.  Yes, there are people who are rabid fans (or equally enthusiastic detractors), but BPM doesn’t come to mind when one thinks about Apple at any rate.

However, as I was reading a blog entry titled “How Apple could sell 77 million iPhones in 2013″ by Philip Elmer-DeWitt on his “Apple 2.0″ blog, I think there is a bit of method to Apple’s innovation madness.  One might even call it process.  At least, when I look at the iPod and iPhone entries into the respective MP3 player and Mobile Phone / Smart Phone markets, it appears to the outsider that there is a process being implemented.

• Step 1:  Identify adjacent market where “more features” on the device will not necessarily yield more sales.  Early entrants in the space have innovated on features, but are approaching the point where the complications of the features are making the device less palatable to mass consumption.  In early phases, an extra few features would yield more sales, but like Microsoft Word in software, the device has reached the point where it cannot create more demand by adding another feature to the hardware. Ideally, general consumer satisfaction with these devices should be middling to poor.  Ironically, its actually okay if the market is saturated with the “crappy” devices identified in this market.
• Step 2:  Conceptually, determine whether a new device could be designed that is dramatically simpler and captures the most important features discovered and pioneered by the vendors in this space.
• Step 3:  Identify whether a vertical platform (for purposes of our discussion, think web application or cloud application platform for either buying, storing, trading, etc.)  can provide a compelling, competitive advantage.  Do any of the existing vendors offer a decent platform?  Is the integrated experience a good one?  Does it create long-term lock-in?  Does it allow for easily migrating hardware devices while retaining your relationship to the vertical platform?
• Step 4:  In the labs, design prototype devices that emphasize simplicity and elegance (as currently defined), and evoke the Apple brand.  In all but the most basic functions, trade-off simplicity of look and use over additional functionality.  Make this an IT lust item, a fashion accessory, such that the exact number of MB and knobs and twiddles are less important than how it feels in your hand or looks while you use it in public.  Do not recreate the original brick cell phone!
• Step 5:  Release product and platform at the same time.
• Step 6:  Revise product, release again, every 6-18 months depending on the product cycle, cost, etc.  New releases generally should encompass a bit more technical horsepower, but additional benefit of each release is an improved fit-and-finish, look, fashion, etc. This is approximately what BMW does with its cars – each version has a technologically superior engine, but the difference between new and old is still minor – but each new model year also has design cues to draw the buyer in.

So, why doesn’t it matter if the market is currently saturated?  Because if the current products aren’t that good, then Apple’s “good” products will displace their demand.  Also, Apple can start with a premium price point for a few reasons:

First, a high initial price protects them against ramping production too quickly and overshooting demand (which is then followed by discounting, etc).  At the very least, it reduces this risk.

Second, Apple displaces low-profit sales of the competition with high-profit sales for itself.

Third, as demand curves become more predictable, Apple ramps production, and can afford to lower prices with volume discounting on parts, pre-pays, etc.

The existing vendors can produce a new device, a better mousetrap. They can even release devices with more RAM, CPU speed, technical specs of all kinds. They could at some point release a device that *looks better* than Apple’s devices.  However, for the most part the competition does not have a vertical platform to begin with.  Their new devices end up looking like pretty baubles or paper weights because they aren’t tied in with the network effects of a platform.  When it is time for Apple to goose its revenues, it has quite a few options in front of it:

• Lower the price on the existing units
• Release a new, improved unit with the old (high) price
• Release more varied looks with approximately current technical specs (e.g. the colored iPod Nanos, for example)
• Create new pricepoints with low-cost components – e.g. RAM.
• Improve the platform by adding new services or functions
• Change the pricing of services on the platform
• Any combination of the above.

Apple’s strategy gives it a lot of leverage on the markets it enters.  And it implements a version of the fast-follower that is quite compelling – the follow-better strategy rather than the follow-cheaper strategy employed by so many vendors in the software and hardware markets of IT.

So what’s the point?  Well, for one thing, I believe Apple’s process allows it to chase goals like 70-80 Million iPhone sales in a year, though Apple likely doesn’t set its goals quite that way.  But, more importantly, there is a science behind the art of building great products, and that “science” is a process that allows for capturing important inputs and putting together a winning model.

At a minimum, Apple is likely using some components of DFSS (could be DMADV or could be DCCI or DMEDI, or some other variant).  QFD, and VOC (Voice Of Customer) seem like candidates to be part of the product design lifecyle.  While I don’t have direct evidence of that, there is some indirect evidence (e.g. the client list here). Because Apple keeps such a good lid on how they go about their business, the product design process is considered a bit of a black box.  But the outward, measurable view of Apple indicates, to me, that they are implementing a repeatable process.  So why assume that what happens inside the box isn’t a repeatable process as well?

That’s not to say that there isn’t some art involved.  Look at Pixar.  They run a very repeatable blockbuster-movie-making machine.  However, failures can happen – judgments about character and art have to be made and if they’re too far off instead of a blockbuster you get a dud.  But the track record of Pixar is too consistent to be random chance.  And the movies weren’t all inspired/written/executed by the same creative mind.  Again, my external view tells me this must be a well-formulated process – one that is less likely to fail than the traditional “make a movie on gut alone” approach…

So, there are a few key design tools used for products and processes. Tools such as Quality Function Deployment, Transfer Functions for tracing requirements, TRIZ for problem solving, Kano Analysis for Voice of Customer, etc. Many of these are coupled together and employed based on the breadth of the design consideration as well as the need for a certain confidence level before baselining and taking a design to production/implementation/fabrication. These are all aspects of a solid BPM program which has a portion of its focus on innovation versus basic remediation of problem areas. We can’t say for sure what Apple may be applying to their design process and product strategy.  And although we can help you apply these techniques to your business, we unfortunately can’t promise to turn you into the next Apple!

But we can help you begin the journey by improving on what you do now, and by turning improvement and management of processes into a core part of your team’s character.