if connected

Apple’s product announcements today are a tale of two iPhones: the iPhone 4States and the Immortal 3GS.

Today at Apple’s annual event, new CEO Tim Cook unveiled evolved iPods, a new dual core iPhone 4S, and the voice-controlled virtual assistant based on Apple’s acquisition of Siri. He also recapped on iOS5 and iCloud which were announced back in June. Although Apple sell two thirds of their iPhones outside the US, I fear that the most innovative new parts of the iPhone 4S product design will appeal most to a US audience. Apple will still do well globally, but it could do even better with some tweaked product thinking.

Much more significantly, Apple now is moving to a three iPhone model portfolio: Apple will continue to sell both last years’ iPhone 4 and the previous years’ iPhone 3GS at cheaper price points. This will dramatically boost Apple’s phone sales volumes and enable Apple to compete head on with more Android smartphones.

The Immortal iPhone 3GS

The decision to keep on the 3GS as well as the old iPhone 4 is a massive move for Apple. It will extend the iPhone competitive threat to rivals into the mid tier of the mobile market. Apple’s competitors have often sidestepped the full force of the iPhone threat by positioning their models as cheaper phones. That strategy is now being squeezed and may become untenable in the US market.

Apple is positioning to counter Android with the new pricing and continued use of the iPhone 3GS.

Apple is motivated by great margins and not premium end user prices. If Apple can deliver keen prices to grab a market without sacrificing margins they will. The growth of the iPod product portfolio over the years as Apple’s economies of scales have enabled them to maintain margins yet lower prices demonstrates Apple’s aspirations:  the new 2011 iPod Nano is the cheapest Nano Apple has ever launched. As the iPhone 3GS is so old, component prices will have fallen and Apple will have steadily improved manufacturing to minimize defects.

Those that are disappointed by the iPhone 4S’s identical appearance to its predecessor forget the success that its forerunner model enjoyed and in fact still enjoys. Back in 2009 there were similar comments to those being made today: Then, the new iPhone 3GS looked just the same as the older iPhone 3G. Those people were wrong then and so are they now:

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Next week Apple will announce new iPhones. There will be a backlash. There will be praise. Much of significance will be lost in the noise.

Instead, Apple’s metrics should focus rivals’ attention on the importance of multi-year strategies.

Competitors are forever seeking to emulate Apple. But too many deploy me-too tactics, rather than following a consistent and sustained long term strategy:

• HP fired its CEO under a year after appointment. There’s only time to kill things, not build them, in such a short period.
• Nokia dithered on MeeGo. In 2009, Nokia partnered with Intel on MeeGo, then killed MeeGo just a year later, to focus on Microsoft Windows Phone instead.
• Samsung’s Galaxy S of 2010 resembles the Apple’s old iPhone 3GS of 2009, not the designed-from-scratch iPhone 4 that the S actually competed against at the time the S arrived in the market.

Part of the problem is that Apple keeps its strategy to itself: New products seem to appear out of Apple’s magic hat fully-formed at high profile launch events as if they’ve been born an adult, with no incubation or nurturing period. There are rarely betas or pre-announcements months ahead of availability, unlike the perpetually beta services of others. But we know Apple takes years to create these products. The iPad’s origins pre-date the iPhone and go back to around 2004 — six years before it launched — while serious development began in 2007, again years before competitors had anything publicly available that they could copy.

By mistaking tactics for strategy Apple’s many competitors are doomed to poor results. The time needed to build products as deeply and well designed as Apple’s can’t be completed overnight. Software design takes years to do. The supplier relationships that Apple is securing are long term. The investment that Apple is placing in key component design — moving into chip design with the A4 and A5 — is not something that any company could achieve without clear multi-year strategy.

Despite the Android evangelists and Apple naysayers, Apple’s metrics are nothing short of outstanding:

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[Updated after the Kindle Fire launch event: I've noted what happened in italics. I've not made any other edits.]

Tomorrow Amazon holds a major launch event and will likely unveil its first tablet, according to Techcrunch named the Kindle Fire.

To date, everyone bar Apple has failed with tablet launches. If Amazon mimics Apple then its tablet will fail too. Apple has too many economies of scale, industrial design expertise and supplier relationships for a retail-centric company like Amazon to emulate. Especially, if the Amazon tablet has taken a fast route to market by using the same ODM hardware manufacturer as RIM .

To succeed, Amazon must, and I’m sure will, take a different approach. The success of the Kindle shows Amazon is prepared to think differently from others and to disrupt its own products — in the Kindle’s case to disrupt the cash cow of print book sales — in order to be innovative and seize early advantage in digital markets. If Amazon’s hardware is undifferentiated and virtually the same as RIM’s PlayBook then Amazon has to differentiate elsewhere with content, experience and business models. Otherwise it will suffer the same fate as RIM’s PlayBook.

Amazon cares little about the post-PC world, unlike Apple and Microsoft who are playing that different game. Instead, Amazon is driven by a post disc and post print world where all media will be digital.

Amazon will build a true media tablet. The first true media tablet. The Kindle tablet will focus on the future of all media — TV, movies, music, books, magazines — to enable Amazon to become the dominant digital media retailer. That is Amazon’s ambition.

On that basis, here are the areas to watch for in Amazon’s tablet product launch and what impact each item will have  on the market:

• The extent to which the Kindle tablet’s business model is content-subsidized. Few devices enjoy a lower up front price because of content subsidy. It’s hard to do. Games consoles are the obvious exception but even in that market history is awash with console failures. Nintendo’s 3DS is the most recent struggler. Outside of games almost all devices are priced without a content subsidy. Even Apple sees content revenues as icing rather than a key profit centre that would warrant a lower up front price for iPads or iPhones. Carriers too subsidise iPhones based on communication revenues, not media. Arguably, only Amazon’s own Kindle eReader has extended a content-led device sales model outside of the games market. If Amazon offers its tablet for a very low price, based on expectations of future content sales, then Amazon will successfully disrupt the market and enjoy very significant sales. If the price is tied to hardware costs, then the price will be less aggressive and Amazon’s tablet will compete at a similar price to rivals and consumers will judge it based on the overall product package.
  Update post Fire launch event: Price is just $199 which given the component quality (IPS color screen; dual core processor; same broad hardware as the much more expensive PlayBook etc.) looks to have been set based on expectation of future Amazon content sales.  Read the rest of this entry »

While the new Apple iOS5 beta lacks Facebook integration (it only has Twitter) everyone else is building Facebook into their mobile phones. So far, INQ’s Cloud Touch has the most impressive interface: Facebook replaces the main screen with a completely Facebook-centric experience.

But HTC is creating phones with more visible Facebook branding, that makes advertising easier, they’ve included  a ‘post to Facebook button’ on the front of the phone.

Here’s a launch advert in the UK, and, like so many other recent UK smartphone campaigns I saw this on the side of a phone box. I love this combination of smartphone advertising and last century’s pre-mobile phone boxes:

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This video is a reminder that Apple is not the only company with a controversial business model and practices. Here’s the Onion’s absolutely wonderful take on Google’s ecosystem. It’s not new but this is a must watch for anyone interested in smartphones.

Apple focuses on delivering the best customer experience but with tight central control, while Google offers much for free — Chrome browser, Android, Gmail, search, Picasa, docs — in return for supporting an advertising-based business model.

New Google Phone Service Whispers Targeted Ads Directly Into Users’ Ears

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Today we heard about the latest additions to Apple’s product empire. Today, we saw the latest extensions of the ecosystem that Nokia CEO Stephen Elop referred to in his eloquent burning platform memo:-

“Apple disrupted the market by redefining the smartphone and attracting developers to a closed, but very powerful ecosystem.”

He was right that this is more than a fight between individual products like mobile handsets.

“The battle of devices has now become a war of ecosystems, where ecosystems include not only the hardware and software of the device, but developers, applications, ecommerce, advertising, search, social applications, location-based services, unified communications and many other things. Our competitors aren’t taking our market share with devices; they are taking our market share with an entire ecosystem. This means we’re going to have to decide how we either build, catalyse or join an ecosystem.”

But ecosystem is far too weak a word. It implies that all a company like Apple, Microsoft or Google must do is to find a fertile field with favourable weather and let their product seeds grow. If that were enough, Google would not be struggling to foster more than a handful of Android tablet apps, and Apple wouldn’t be sitting on over 90,000 iPad-optimised apps. The difference in app quantity and quality would be much narrower.

Today at WWDC we see how the Apple ecosystem is run. It has a leader, a philosophy, a business model, a model of customer identity. All of these things are critical for success. Switching back to the fertile field metaphor: Apple adds a lot more to the ecosystem than simply choosing suitable environmental conditions for software and hardware to prosper. And, those extra ingredients are why Elop is wrong, or at least not sufficiently visionary in his memo. This is a far greater clash than one between ecosystems. More later when the fuss over WWDC has died down a little.

At the 2011 Hay book festival I didn’t see a single eReader or tablet in the hands of a visitor. Yet main festival sponsor The Telegraph — a UK quality newspaper — devoted most of their stand to marketing their tablet app, and both Amazon and Apple advertised their eBook initiatives. The person giving away the free books for Apple’s iBookstore — see the lanyards below — was adamant that Apple would be offering iBooks on the PC/Mac soon as a part of iTunes. We’ll see, probably tomorrow.

While eReaders may seem to call book festivals and their featured author signings into question, I suspect the opposite will be book festival’s future: live performance by authors will become even more important.

Already, live music is critical for most artists, more so than recorded music deals. Already, book festivals are a forum for general debate on moral, political and other intellectual issues by panelists that have not just published a new book. eBooks will accelerate this trend. Authors’ role as pundits and live performers will re-kindle the oral tradition alongside digital print.

Also, eBooks will make it easier for festival attendees to choose a talk to attend on the morning of an event, download that author’s book immediately, read part of it, and come to the talk later the same day better able to enjoy the discussion and ask insightful questions.

For their Hay advert, Amazon amended their normal Kindle slogan to, “Telegraph Hay Festival finds in 60 seconds.” Smart. See below. (*)

* But they’re going to have to fix the mobile coverage first: UK Kindles had no reception! I only managed to download a book by using an Android smartphone to create a portable WiFi hotspot on a different mobile network.