Apple: Turning The Industry
Look back ten years and you see a computer market dominated by Microsoft and Intel. The PC manufacturers themselves were a side show; fat, dumb and happy, but with no control at all over their product. Apple was pretty much an irrelevancy with a set of die-hard customers in the home market and an apparently declining grip on marketing departments through the graphics workstation market. Indeed, Apple was a busted flush. The future belonged to the Wintel alliance, which was already burrowing its way into the server market – giving fright to IBM, Sun and Hewlett-Packard. Steve Jobs had returned to Apple, but there was no evidence that much was going on, as a consequence.
In 10 years it all changed. Linux rose up in the server market, Apple came back from the dead, IBM kissed the PC market goodbye, Microsoft suddenly started to stagnate and the Wintel alliance cooled off. 10 years is a long time in IT. Go back a further 10 years and Digital is the coming company, Microsoft isn’t yet a major force, IBM is utterly dominant and nobody even knows what a Search engine is or might be.
Apple has been dramatically successful in the past ten years, first regaining its confidence and then striding out to dominate the consumer computer market. It shouldn’t have happened that way. It was Microsoft’s to lose and, even though media and telecomms were two of Microsoft’s primary focuses, Apple has snatched the media market and the mobile phone market from under Microsoft’s nose. With 20/20 hindsight it’s easy to explain how it happened, but it wasn’t so easy to foresee.
I’ve been adding many of my older postings to this blog (I used to write a Blog on IT-Director.com) and I recently sifted through those I’d written since 2003. I started to take notice of Apple when the iPod emerged and gained traction. I noticed that the share price just kept on rising. I became convinced that Apple was going to become a significant player when the iMac G5 emerged with its 20 inch screen which was the computer, motherboard, DVD reader and disk drive. That was 2004 and I bought a G5 soon after.
Apple spent the subsequent 4 years becoming the dominant force in consumer computing. It doesn’t yet register as such in market share (except at the top end of the market in the US where Apple has greater than 50 percent.) But it is clear that Apple dominates mindshare and market share is falling in line with this. Apple is outgrowing the market by a factor that is somewhere between 3 and 5.
The Turning Point
The industry has, in my opinion arrived at a turning point. You could say that the first turning point for the PC industry occurred when the PC became an integrated networked device. It went from being a truly personal computer to a network access point with a great deal of local capability and a graphical interface. Then it proceeded by momentum offering better graphics and litttle other improvement for over a decade. It was great business for the manufacturers because each generation of PC was guaranteed to become obsolescent very quickly – and as the Internet took off, the need for access points grew, naturally growing the market.
We live in a universe where there isn’t much that moves in a straight line for long. The obsolescence creating gift of Moor’es Law stopped giving in 2004 (after an incredible run) and since then the market’s been kept bubbling by mutlicore cpus. This is now resulting in a merger between the cpu and the gpu, and it is Apple that will decide the direction that the industry now takes. Here’s why:
- Microsoft is not an enthusiastic innovator. It has a long and successful record of being a second mover – waiting for first movers to test and prove a market, before dashing in to take their share of it. This was how Microsoft defeated Apple in the GUI contest, by being the imitator rather than the innovator – but in those days, Microsoft had a monopoly power that has since been undermined. Microsoft is now watching in dismay as the game has switched in the favor of the first mover. Apple adds eye candy to OS X. Eventually Microsoft adds some eye candy
to Windows. Apple invents the iPod, Microsoft eventually responds with
a clone. Apple does iTunes. Microsoft start buying up media assets on
the web as it prepares to compete. Apple brings out a touch interface
on the iPhone, Microsoft “Surface” emerges about a year later. - Microsoft has never rewarded innovation. It’s management has at times behaved like the Samurai, who were given the authority by the Shogun to kill anyone who did anything unexpected. Innovators haven’t fared well within the walls of Redmond. It isn’t that innovation doesn’t occur, it’s simply that it has a hard time making the journey from the research lab to the product.
- Apple is the only PC company that can claim to have an understanding of the consumer market and is able to respond to that market. In fact it is the only computer company that has a thriving retail operation and it is the only computer company with the power to change its products in order to meet perceived customer need. Hewlett-Packard, Dell, Acer, Sony and the rest might know what their product needs to be or do but they have no say in the OS, so their ideas can never be reliably realized.
- Apple is no longer a PC company. It’s iPhone has moved it well out of the range of its competitors, to an extent that I don’t think is yet realized. Which companies are competitors for the iPhone? RIM, Nokia, Motorola, Samsung, LG and Sony. How many have a PC business? Only Sony. How many of them have an OS? Only Nokia. How many of them have an end-to-end model which unites the phone with the PC and blends the two together as complementary products. None of them. How many of these have a retail operation? None of them.
- Steve Jobs is an early adopter, and so Apple is an early adopter. His technology choices haven’t always been perfect. His NeXT computer turned out to be a technology “bridge too far”, when he decided that the floppy disk wasn’t required. But he learned a lesson with that, and he seems to understand the impact that introducing better technology can make at every level of the computer business. It never understood exactly what the iPhone needed to be, but it got it 80% right at the first attempt, while Microsoft had been struggling for years with Windows Mobile, forever getting it 80% wrong. Apple is way out ahead in this. It understood that media need to be designed into the basic computer before anyone else did. It understood that screen size mattered before any other vendor. It understood that a music and video revolution was coming and was there with the hardware and the software and the service when it was required.
Beyond the Turning Point
There is a generational change coming in consumer and corporate computing and Apple is the company that will introduce it. Technologically, the changes are happening now, so it wouldn’t be surprising to see the next models of the Apple range exploiting more advanced chips than the current set of Intel multicore chips, although it isn’t even certain which direction Apple will take and who its chip partner(s) will be.
Apple’s OS X is streets ahead of Windows now – it’s a common platform that runs on IBM’s Power chip, the ARM chip (on the iPhone) and the Intel chip on more recent Macs. It’s pretty portable, but there again it does have a microkernel and the OS is nicely split between kernel, base OS (BSD Unix) and GUI. It’s likely that Apple will be better able to leverage changing hardware capabilities with this vehicle while its competitors struggle – along with Microsoft – to keep up.
From where I’m sitting, it looks very much like the future belongs to Apple….
Hi Robin. You have always told me to look for the analogue. I would be interested in which one applies here. Your post is largely about technology innovation. From where I am sitting, there is another issue that has yet to shake out. Apple at the moment is one of the most prominent examples of walled garden thinking we have seen for a long time. History tells us that this approach is great for getting markets going, but there comes a point when the walled garden starts to look a bit like a prison. I am picking up such a sentiment emerging already in association with Apple. Most of the loyal fan base is to busy looking at the pretty flowers in the garden at the moment to even think of peeking over the wall, but some have started to suss the situation they are in. More will do so over time, and if Apple’s business practices don’t change to open up the garden then even mainstream users will get restless.
Just as people outgrew the walled gardens of Compuserve, AOL and mobile operators, my feeling is that they will outgrow the nanny/jailer like behaviour of Apple. My own feeling is therefore that Apple needs to make a turn itself at some point and truly surround itself with an open win/win/win ecosystem that benefits partners and users as well as itself. There is evidence of it moving in this direction, and I hope this continues.
Meanwhile, as a recent Apple adopter myself (iPod, then Mac, then iPhone), I am already feeling very constrained by the company. The initial attraction of the innovation and simplicity eventually wears off when you find you cannot do something that is important to you – often because of Apple’s greediness, so the sooner we see a change in approach, the better.
I agree in the main. But there is a significant difference with Apple that may affect the situation. First of all, Apple is at the beginning of the curve. I think of it being like Microsoft at the point that it defeated OS/2 – which is the early 1990s. Technology quality and innovation may be more in Apple’s favor, but the arrogance that alienates customers is clearly in evidence already.
But here are the distinctions:
a) Apple is a consumer products company. Neither Microsoft nor IBM ever were. From that perspective Google makes a better analog to Microsoft than Apple.
b) Apple is a retail company, which means it has to talk to the customer. This may work in its favor (but no guarantees)
c) Consumers don’t mind being locked in anything like as much as technologist like you and me do. We’re trying to do business computing and the vendor is getting in our way, hobbling us rather than enabling us.
The consumer watches videos and plays music and surfs and does email, mainly. They don’t consider themselves locked-in any more than the TV watchers in the UK considered themselves locked in when there were only 2 channels BBC and ITV.
d) Web capabilities (Google and Zoho, etc.) combined with Linux may help to keep Apple honest. Microsoft had no real competition, but OS X is Free BSD and works much like Linux under the covers. The microkernel is an advantage for Apple, but only when the computer gets busy. I expect the hardware vendors to wake up and use Linux to compete with Apple. That may keep Apple honest. If Apple doesn’t find a competitor at some point there will be a really big problem.
Here’s what Gorbachev said to Reagan: “I have a secret weapon; I will deprive you of an enemy.”
We’ve spent the last 8 years watching the US flounder for the lack of a real enemy. It’s caused huge damage.
All good points.
Regarding content availability, though, the consumer point of reference at the moment is the software/media they access via their PC, the channels they get to through satellite/cable, and the games they can buy for their Sony, Nintendo or Microsoft gaming console/handhed entertainment device, etc. Choice is out there as a result of vibrant ecosystems working across multiple markeplaces.
Against this background, the reality is that Apple makes makes it VERY easy to access a limited range of stuff, but any investment in apple equipment or services immediately restricts the consumer’s choice, and quite severely at that. Windows PC users have massively more choice than Mac users, users of virtually any other mobile device have massively more choice than iPhone users, and with most of my music now encoded via iTunes, I have massively less choice in the hardware and software I can conveniently use to play my music.
I can’t think of any other way of enabling choice than to be more open, respectful and ecosystem-oriented. This is why I say Apple’s behaviour has to change for it to move to the next level.
I would also be careful not to over-state Apple’s position. The mobile industry is very fad driven, and when the exclusive deals Apple has benefited from play out and the playing field is levelled between carriers, they will be very wary of letting Apple gain too much power. They have been bitten before with Nokia in the consumer space and RIM in the business sector, and with their control of the channel and collectively a lot to spend on marketing, there could be some interesting battles ahead.
And in the PC market, which is defined by mid-range and lower-end machines, Apple is still a very small player. The higher end that it resportedly owns 50% of now in terms of new shipments really is quite a small niche.
Don’t get me wrong, I am certainly not dismissing Apple and while I detest the way it behaves, I still have a lot of respect for the way it has innovatively solved problems that have in some cases been hanging about for years. That said, we need to keep things in proportion and not under-estimate Apples’s competition. The one thing you and I have differed on consistently over the years is that I firmly believe in second mover rather than first mover advantage, particularly when the second movers are established incuments in other areas.
However it pans out, though, I think the shaking up that Apple is giving three separate industries at the moment (media, telco and IT) is fantastic, and will catalyse the advancement of both technology and business models across the board.
There’s so much in this comment to discuss (and much of it is moot) that I’m tempted to take it offline – which I’m sure we’ll do over time.
As regards first mover/second mover this is very much contextual. The competitors of Amazon and eBay never had a prayer. And both IBM and Microsoft happily crushed healthy opposition from a second mover position. Oracle with first mover advantage in the database market was (surprisingly) never caught – but it very nearly went broke at one point, so it very nearly blew out. Now it’s giving SAP serious grief from with a second mover strategy.
I could go deeper into this. Apple is fundamentally a first mover and a good number of its first moves have failed. It has had a great run recently.
However as regards market share, Bloor’s Law (if I have one) is that market momentum beats market share. You may remember that at one point in time the motorcar had less than 1 percent of the transport market and the horse industry was galloping along quite nicely.
The question I prefer ask is what are the industry influencers buying? They’re buying Macs.
My inclination is to expect Apple to proceed at quite a pace for a few years, after which it is hard to predict because there are other disruptive forces in play.
How long before Apple becomes a games company too? Not long I think.
I guess the thought of Apple ending up ruling the IT, media and telecoms markets scares the hell out of me, and with a lot of direct experience of Apple technology myself now, I have come to realise that the differentiators are actually not as great as the advocates make out, and that there are at least as many downsides associated with falling in behind Jobs. This is why I am pushing back a little here – just trying to keep things grounded.
Anyway, I look forward to the next of our wine bar debates – nothing like the flow of alcohol to fuel a creative discussion
With mucho respect and best regards,
Dale