Editor’s Note: Welcome to our weekly Reality Check column. We’ve gathered a group of visionaries and veterans in the mobile industry to give their insights into the marketplace.
In less than 200 words, CEO Steve Jobs rocked the tech world with a sudden yet not surprising resignation. Immediately, people began eulogies. I, like several among you, echoed the phrase from “Monty Python’s Quest For the Holy Grail”: “But I’m not dead yet!” Our thoughts are also with Steve and his family as they battle pancreatic cancer together.
As the tributes for Jobs poured in last week (I listened to several of you on various programs opine about Jobs’ legacy), I began to think about the attributes of Jobs’ (and ultimately Apple Inc.’s) success. Whole books will be written about this, but this week’s Reality Check views these changes through the lens of future activity.
First, Steve Jobs was a turnaround artist. Largely missed in last week’s commentary was a tribute to the five years between the end of 1996 (when Jobs returned to Apple through the acquisition of NeXt) and the end of 2001 (when the iPod was introduced). Apple became a substantially different company during that period – they moved from leading-edge inventors to innovation leaders. I remember the pain felt through the Apple community when they took the $150 million from Microsoft Corp. To many of the Apple devoted, it was a gut punch; a surrender to Redmond.
It was anything but that. Apple was entering a phase of compatibility and interoperability that was required to stay alive. If this move were made in telecom today, it would be akin to Research In Motion Ltd. running Android operating systems on its newer phone models. The stock was down 50% from their highs in 1996 ($6.60 in today’s prices), and Apple was facing a question of survival.
Steve Jobs returned to Apple with both pride of founder but also with the perspective of an operating systems software CEO. He had just spent ten years developing more efficient interactions between silicon and software. People focus on the marketing genius of Apple, but without the foundation of computer processor efficiency and detailed understanding of computing, Apple likely would not have survived as a separate company.
Steve Jobs saw the solving of computing problems as a community effort, not Apple’s. It was key to the turnaround, and provides the kernel for Apple’s ultimate success in telephony. What if RIM adopted Apple’s 1997 strategy? Could RIM be the next Apple?
Second, Steve Jobs never lost his interest in the vertical integration that started Apple in the first place. This was borne out of a series of very simple problems such as “My computer takes forever to boot” and “My portable CD player/laptop/smartphone is too bulky.” It did not begin with cost, but Apple, because of survival and scale disadvantages, was (is) obsessed with component costs. Vertical integration is borne out of the consumer problems.
Applying that to telecom/cable, we have long lived under “That’s just the way it is” statements. We lived under the Blockbuster/Hollywood Video/pay-per-view assumption set until Netflix Inc. reinvented how we watch previously recorded programs. (Ditto for music until Pandora reinvented how we listen to our favorite artists). We thought chat/text was as far as on-line community interaction would go, until Facebook brought us pictures. And we never would have thought about a phone that did not prominently feature a dialer until the iPhone. All of these problem statements came from user frustration. None of these problems can be solved through new bundles – reengineering, reconfiguring, moving stuff around is required.
Who will solve (or has already solved) the problem of “Why do I pay $20 per month for unlimited texting when I have a data plan?” or “Why do you charge me for data twice – once through the smartphone for on-phone usage, and again as a hotspot for other computers?” or “Why can’t I port my iPhone apps to Android (and vice versa)?” or “Why do I have to maintain a contact list in the first place?” (that’s the problem we are solving at Mobile Symmetry). There are so many lessons here for Sprint Nextel Corp., MetroPCS Communications Inc. and other challengers that I would not live up to my commitment to be brief if I posited them all. The wireless service industry is like the lemmings in the early Apple ads, and the cliff is near.
That’s just the way it is. It’s the mantra of the elite, and the battle cry of the revolutionaries. Jobs never lost focus on the customer problem, and when the problem was not readily apparent, he was prone to the obvious considerations such as “Would you rather lug a 9-pound laptop or pay a little more and carry a 3-pound MacAir?”
Third, Steve Jobs refused to play the CIO game. Here’s his famous quote from D3, an annual presentation put on by the Wall Street Journal (full transcript here):
“The problem with the phone is, as you know, apple’s great successes have not been in the fortune 500. … We’re not very good going through orifices to get to the end users … we’ve never been real good at that. Apple’s DNA is not great at going through orifices to reach end users. … The carriers now have gained the upper hand in terms of the power of the relationships with the handset manufacturers, and they’re telling the handset manufacturers what to build. … The handset manufacturers are getting these big thick books saying what you’re phone is gonna be.”
Going through orifices. Jobs makes this quote in 2005, a little more than two years prior to the launch of the iPhone. He’s a technology leader now, and that’s a very brash comment for a leader to make (this is also a reflection of how politically correct our media culture has become – imagine a corporate CEO making that comment today).
Apple was not successful in its advertising and marketing out of idealism. Demand-pull marketing was the only option. Without corporate America backing Apple as a standard, they had to take their message directly to the masses. Advertising was a necessity, and cost-effective advertising (meaning no Catherine Zeta-Jones) was critical. Combine this with the passion for vertical integration, and the Apple Store concept was hatched. Outside of the Amazon Kindle formation, the Apple Store is the most important development in technology distribution in the past ten years. When others went on-line, Apple went in-store. When others focused on breadth of product, Apple focused on hands-on. When others focused on offshore customer support, Apple perfected the Genius Bar concept.
Apple banked on the fact that the phone would be an inherently personal device, much more personal than the PC (and as personal as a Mac). Personality was not welcome in the CIO office, and Apple would rarely win the price vs. functionality battle. So they moved on to more personal markets, and, as a result, the iPod begat the iPhone begat the iPad. All without the CIO’s blessing. Sheer genius.
In the minds of the applications providers, the carrier is Jobs’ orifice. Read the transcript that is linked above and then apply to AT&T Mobility or Sprint Nextel or Verizon Wireless (e.g., the removal of 1,000 text plan at AT&T Mobility this week as a clear attempt to raise ARPU by limiting choice). As 4G becomes more prevalent (and as Apple or others fund LightSquared simply to avoid a repeat of the 2005 scenario described above), the need for a separate voice or text plan goes away. Will it happen overnight? No, but I’m betting that hundreds of thousands of applications developers around the globe would be willing to try.
Out of JobsR
17; tenure comes the seeds of sustainable growt
h: a) a maniacal focus on processing efficiency but also inter-operability; b) vertical integration that ensures consistency and solves explicit and implicit customer problems; and c) demand-pull marketing that challenges the status quo. With the succession plan he has put in place (learning from the John Sculley mistakes), the seeds of greatness have been planted.
Where will the next bushel of Apples come from? Why will they be successful? Steve Jobs has given us all a pattern for technological greatness.
Jim Patterson is CEO and co-founder of Mobile Symmetry, a start-up created for carriers to solve the problems of an increasingly mobile-only society. Patterson was most recently President – Wholesale Services for Sprint and has a career that spans over eighteen years in telecom and technology. Patterson welcomes your comments at:[email protected].
