Saturday, October 8, 2011

Apple without Jobs

When the summer brought the official resignation of Apple leader Steve Jobs, the prediction of the future of Apple Inc. was a common leading topic on tech blogs. I have thought a lot about this topic in the last few months and with the sad news this week of Mr. Jobs passing, it has come to the surface again for me.

I am of the mind that a great leader is greatest when they are able to leave a company and have it flourish in his or her absence. I believe that true leadership is about defining a company’s mission and goals, and building a foundation for ongoing success. Now yes, it is true that a bad leader taking over after a good leader may in fact succeed in tearing the company down in a short span of time, but this is usually, again in my mind, not accidental.

This idea however, is challenged for me in the case of Steve Jobs and Apple Inc., and the short of it is that I am not convinced of Apple’s future without Jobs. I hope I am wrong – I REALLY hope I am wrong, and this statement is not an opinion of his leadership style. In fact, I admit not to be completely aware of his true leadership style –the fictional portrayal in Pirates of Silicon Valley is really the only view I’ve had at all and did I stress – the fictional portrayal.

My concern for Apple Inc. is due to the extraordinary voice Jobs had in the design of Apple products. Bill Gates, in his over two decades at Microsoft, only had his name attached to nine patents. The co-founders of Google, Larry Page and Sergey Brin, just over a dozen. Contrast that with Steve Jobs and 313 Apple patents, most all of which are directly linked with design. Now, to make sure this is clear, Apple could not have just placed his name on these patents – if they had, the patents would have been canceled. His name on the patents means he had a part in the development and invention. Out of the 313, his name is listed first on 33 of them, signaling that he was most likely the lead inventor.

I ask you all this: With Jobs having such a concrete say in the design and function of Apple products, who will take his place in that arena and if there is nobody – what really will be Apple Inc.’s future?

[Source for patent numbers: Miguel Helft and Shan Carter, "A Chief Executive's Attention to Detail, Noted in 313 Patents,", August 25, 2011.]

The Impact of Microsoft and Apple on Digital Media

Rated as the top most valuable global brands, both Apple and Microsoft have greatly influenced the world as it is today and reaped the benefits of network effects. Although it seems Apple TV may not pose a serious threat yet, both Apple TV and the second entrant, Google TV, can quickly become major competitors of the traditional media companies. Apple seems to continue its business strategy, of “providing products with superior ease-of-use, seamless integration, and innovative industrial design,” through Apple TV. This strategy of a one-stop shop is evident in not only Apple TV but also Google TV. Furthermore, Microsoft’s strategy of “writing the software with partners building the software” has been adopted by Google with Google TV. But are Google’s hardware partners, such as Sony or Logitech, disappointed by the less than anticipated sales of Google TV because Google moved too quickly without properly building the ecosystem[e1] ? Or will both Google TV and Apple TV be faced with a bigger challenge (of accessing content), as digital media content producers have seen the music industry suffer from the razor-and-blades model created by Apple with the iPod?

In addition to the channel and hardware layers, the content layer still remains very important. But how much value will continue to be generated and kept here? For example, with streaming from companies such as ABC, NBC or CBS, there is less of a need to purchase content from iTunes. And despite Netflix having a superior high-speed connection, the older content may not be preferred to the latest content available online from ABC, NBC or CBS. With Google TV entering, with the Microsoft strategy, allowing for various devices, experiences, operations, and even content, more of the value can be stripped from the content layer, where ad revenues make up a significant portion of total revenues.

It will be interesting to see how Microsoft’s “3 screens and a cloud” concept plays out: mobile, computing, and… the Xbox? Microsoft intentionally decided to go with an untraditional strategy of building its own Xbox, mainly due it being a niche device, unlike with other large volume devices, such as phones. As Microsoft CEO, Steve Ballmer, said not to expect a Microsoft branded phone[e2] because “we don’t want to cross the chasm in the short run and lose the war in the long run and that’s why we think the software play is the right play for us for high volume, even though some of the guys in the market today with vertically oriented solutions may do just fine.” So despite the increasing capabilities of the Xbox, will Microsoft choose not to open it as a one-stop shop digital media device? And will Balmer’s leader influence the strategies of digital media players, by encouraging them to stay within their niche markets or areas of expertise?

Friday, October 7, 2011

Physical distributors of new video games are beginning to feel some major heat

The gaming industry is truly changing, and we are in the midst of a major transformation. Revenues from last quarter from digital distribution (the combination of digital purchases, subscriptions, downloadable content, social network and mobile games) surpassed those of physical distributors for the first time, to the tune of $1.74bn vs. $1.44bn. And this is only the tip of the iceberg. Digital distribution, serving information goods, all have less variable costs and thus higher margins.

Gaming might be the second canary in the brick & mortar coal mine -- after music. Soon we will see digital distribution overtaking retail in many other areas as well: movies, books, and online shopping in general seem ripe to have their digital distributions overtake the analog counterparts.


The impact of Microsoft Office

Some key lessons that could be derived from Microsoft are about the impact of the Office suite of products. Microsoft didn’t invent the business software industry, but they became the leading player by bundling their products and creating lock-in with their customers. Today, Office remains the dominant choice for word processing, spreadsheets, presentations, and other applications. As the products are updated every few years, all companies feel pressured by the market to keep up with the updates or risk feeling left behind. If any of us were to join a company now and see that they were using Office 2003, we would probably see that as a serious red flag. Even Macbooks, for all their usability advantages, are still dependent on a product from Microsoft, their great rival, to compete in business and academia.

Aside from being a good moneymaker for Microsoft, Office has transformed what it means to be an office worker. It is almost mandatory that all employees, at least at the managerial level, be skilled in Word, Excel, and Powerpoint. And the fact that Office is so ubiquitous in the business world means that those skills seamlessly transfer from company to the next. A company that spends less time training their employees on new business software applications has more time to devote to developing its primary capabilities.

So I believe there are a couple lessons here. The first is the “IS710” lesson about creating a standard and bundling products. The second lesson is about a dynamic set of tools that represent a kind of jumping-off point for companies and employees. When it’s easy to create documents, spreadsheet, and presentations, the bar is raised as far as what value a company can bring to the market.

Gaming Industry lessons and insights from Microsoft & Apple

Of all the industries we are studying in the class, Gaming is the one where Apple and Microsoft are currently in the space. We might learn more from looking at their different strategies as they entered the space. Microsoft entered originally with the Windows platform, and the launch of PC gaming. Their role was supporting developers through API documentation and they extracted value with additional units of Windows that shipped. We as a group also chose to ignore the bundled games that shipped with Windows (Minesweeper anyone?), and we focused largely on the emergence of the Xbox and Xbox 360 years later. The launch of the Xbox required Microsoft too add some fundamental capabilities, namely, big title development. Looking outside the firm, Microsoft found Bungie Studios, of Myth and Marathon success. Microsoft snatched up the small company and put them to work on Halo: Combat Evolved, the first in a long list of successful titles. More than the success of the individual titles, Microsoft had bolstered the chances success of the the Xbox (Hardware layer), Xbox Live (Social Layer), and Halo (Content Layer).

Thursday, October 6, 2011

Marketing as a Core Capability at Apple

With the death of Steve Jobs, it is hard not to reflect on Apple today. Public comments from President Obama, Bill Gates and Mark Zuckerberg indicate respect and admiration for the successful innovator. But what has made him and his products so successful?

I believe that the success of Apple under Steve Jobs is largely because of his understanding of the market and customer desires. Marketing, in addition to technological development, is clearly a key competency at Apple. For example:
  • They prioritize attractive design features. Remember the first iMac with the candied colors?
  • They run catchy commercials that people are likely to watch even with DVR technologies that make TV ads less effective.
  • They build incredible excitement around product announcements.

While the technological advancements give the company and products credibility, it is this core marketing capability that contributes to the amount of "mind share" that Apple is able to capture in the market.

BetterLesson receives $1.6 Million Investment

Hey Education Sector team members!

This startup is Boston based and backed by Highland Capital Parters, General Catalyst, New Markets Ventures, and NewSchools Venture Fund.

Do they offer digital capabilities that are relevant to the companies you are studying?
Could they play a part in industry disruption or transformation?

Wednesday, October 5, 2011

Healthcare Industry lessons and insights from Microsoft & Apple

Today, in 2011 Microsoft and Apple do not compete in the Personal Computer business. From 1985-2000 the two companies competed in personal computing, and Microsoft was the clear winner because of the positive network effects resulting from Microsoft's opening up at the software and hardware layers, while keeping the operating system closed.

A key learning for the players in the Healthcare Digital Technology space is that innovation and control at only one layer is not enough to disrupt the industry. Just as Microsoft needed to collaborate across layers to develop and deploy the Wintel architecture, which became the standard, emerging Electronic Medical Record providers will need to collaborate across the digital capabilities landscape, cloud providers, software providers, device and hardware providers, in order to establish their own standard.

Hospitals and health providers want the ease of interoperability of a single standard without giving up the negogiating power afforded by options. That a standard will emerge for the Healthcare industry presents a paradox. One the one hand, simplicity and ease of interoperability should result from the commoditization of a single digital standard across capability layers. On the other hand, the companies developing the capabilities seek extraordinary profits as their incentive to create the standard. Regulation is sure to be important in the Healthcare industry as it is in the Digital Technology industry.

In the last 10 years, Apple has exploded in growth and has maintained its brand. One could argue this is due to its decision to tightly control not only the operating system but also the hardware, software, and peripherals. This brand strategy was crucial to Apple's development and launch of its iPhone and iPad, which now account for more value than from its computer business. Apple's success came from it seeing itself as a technology company with digital capabilities within a network, not just a computer company.

Thus, the healthcare players that will emerge and disrupt the industry are not likely to be the encumbents, but recent entrants that add new sources of value. In the future, one Electronic Medical Record provider could control access to heath delivery if it acheives critical mass and generates positive network effects by attracting both the medical professionals and the patients. One could imagine a future where you choose your doctor based upon what system they use.This is why US consumers bought iPods instead of Zunes; because Apple tied the access to content through the iTunes platform. It is also analogous to professionals' choice of computer and OS based upon the software and devices they intended to use. (Cubicle employees were assigned IBM-Wintel machines, while artists purchased Macs)

To conclude, there needs to be strong interaction between and across multiple layers of digital capabilities to enable transformation of the Healthcare industry. Innovation at a single layer is insufficient for disruption. Ownership and control across layers is not necessary, partnership may be sufficient for disruption, but it can also lead to commoditizing your capability, making your competence irrelevant.

Microsoft Considering Buying Yahoo!!

According to Reuters reports; Microsoft is considering buying Yahoo. But the question is whether that acquisition is a meaningfull one from a network perspective.

At one end Microsoft realizes that "MSN is a critical component of helping Bing win." While on the other hand, its portal space is being currently challenged. Facebook is just absorbing more and more minutes of usage. The time shifting toward mobile is another factor weighing on portals like MSN.

So Should Microsoft buy Yahoo?

Education Sector

The education sector is experiencing rapid transformation, and digital media and technology play a large part in this evolution. Our team is focusing on the transition from K-12 school system to college:
  • What is the roles of public school in preparing students for college?
  • How does the changing U.S. economy and distribution of wealth affect education rates and types of college-level education that are offered?
  • How is educational content delivered to students?
  • How do students collaborate? How does crowd-sourcing affect education?
  • How is student performance measured?
  • What products enable content delivery and distribution?
  • What are the differences technologically between the high school classroom and the college classroom?  How is this transition managed?
Hythem Abdelaziz - Inc.
Uri Feld - U.S. Department of Education
Josh Hildebrand - Houghton Mifflin Harcourt
Tchad Rogers - University of Phoenix (Wholly owned by the Apollo Group; UoP represents 91% of consolidated revenues of APOL)
Jon Stone - Blackboard
Eric Whitney - Pearson PLC

Tuesday, October 4, 2011

Gaming Sector

According to Gartner, video game spending is expected to eclipse $115 billion by 2015, up from $67 billion in 2010. This sector is currently undergoing a radical transformation as mobile and web application gaming are becoming greater forces while the traditional console manufacturers are trying to fight this new threat. Developer costs for creating new games for consoles are skyrocketing to meet the performance expectations of players and many of these developers cannot break-even with games they publish. Furthermore, Gamestop and other retail stores are cashing in on used game sales while the console game developers and manufacturers and not receiving a dime from the secondary market. This is the current situation in the sector and should make for exciting times in the next 5 years. Our group is excited to analyze how this sector will play out in the next five years!

Here is our first analysis of the stack network in the gaming sector:

Publisher/Content/R&D: EA, Activision/Blizzard, Ubisoft, Zynga, Nintendo, Microsoft, Valve, Take Two

Hardware: Microsoft, Nintendo, Sony, Apple, HTC, LG, PC

Distributor: Apple (App Store), GameStop, EA, Brick & Mortar (Best Buy, etc.), Valve, OnLive, Qwikster, Gamefly

OS/Platform: Facebook, Apple (iOS), Google (Android), Microsoft (Xbox), Adobe (Flash), Sony (PS3), Nintendo (Wii/Wii U/3DS)

Social: Facebook, Microsoft (Xbox Live), Sony (Playstation Network)

Here are the companies we selected to research:







Monday, October 3, 2011

How Adobe Flash lost its way

InfoWorld, September 29, 2011

This is an interesting article about the decline of Adobe Flash as a standard web platform for creating and viewing material on the web. The author mentions that Adobe only makes money by selling the developer tools. But with Apple, Google and Microsoft giving away their developer tools and instead making money from their app-stores, Adobe has missed the boat. They failed to adjust their strategy as consumers turned toward apps that run on mobile devices without using web browsers. Adobe will soon release AIR 3, which will allow developers to create richer applications with advanced graphics and 3D capability. However, this doesn’t address their main problem, which is that they’re still missing out on any money made from developers creating AIR apps and selling them. Adobe needs to re-think where they fit in the consumer electronics network of 2011 and beyond.

Sunday, October 2, 2011

The Predictive Power of Twitter

Great article on the use of Twitter data as a predictive tool for financial markets, consumer product research, and politics by incorporating data analytics techniques (my apologies if Dellarocas has covered this in his class already).

While the Twitter user base is still relatively small in comparison to Facebook (200 million users, with only about 100 million active), the general predictive power is there, and could only improve if the service ever goes mainstream (the article reminds us that only a small cross-section of society actually uses Twitter).

I've always wondered what the business model for Twitter actually is (maybe I still do), but this article at least gives some insight into how it could be utilized in the future. How long do you think until Facebook and Google go down this path as well (if they haven't already)?