Posts Tagged ‘Apple’

Well, this is fun.  You might recall I wrote a short piece on how difficult it is to upgrade Apple’s operating system to the newest release, Mountain Lion.  I ran into trouble and quit after I’d discovered other people with issues.  I wrote a post, “First Mammal to Lay an Egg: Mountain Lion by Apple.”  I love Apple products but took issue with this upgrade.

It seems that Apple has not produced an installation disk for Mountain Lion.  You can buy the upgrade on line and download it.  Unfortunately, it’s a big download and it takes time.  Worse, some people reported that the download quit and had to be restarted and that there were other issues like the speed of their particular internet connection, that affected total time to do the download and upgrade.

So, the post drew some comment, which is not unusual but what is interesting is the differing customer orientation philosophies expressed by me and my reader.  I share the exchange with you below because 1) it’s public and 2) it neatly summarizes a lot that we’ve been debating in CRM circles for many years.  FYI, the debate is happening at  the Enterprise Irregulars site where the piece was cross posted.  You can also read the post at that link and you should and also pay attention to the references I included.

What do you think?  Here it is in full (so far).

First response (to the post)

“so, shipping a CD or DVD would be faster? The download happens in the background and doesn’t interrupt whatever you’re doing at the moment. It recovers from disconnects and failures gracefully. This is such a non-issue to any normal mortal. Not to mention downloading is more green, less wasted plastic and paper and shipping charges.

My reply

the download has issues as the referenced materials show. Also, I don’t have the time to babysit the process. Many people are having problems with this approach. It might have green and other benefits but it should not be the only way to a solution. Normal mortal?

Second response

I don’t know, more people upgraded to mountain lion, on a percentage basis, than people who upgrade windows in any similar timeframe. Must work for most people. Sorry it didn’t float your boat. But I think the analysis on this one is pretty poor.

My reply

You have no concept of the individual user and you sound like you are blaming the customer, not a great idea. This is not about how most people fare, the company has a responsibility to all of its customers and in the examples I found, it failed them.

Third response

Denis, I am the individual user. And There are 20 mac users in this office (and a few windows users as well) who all updated with nary a complaint. We don’t have a single “IT” employee to help them do installs.

I believe the data you found does not paint the picture of “most people” but of a few people from a forum. Check the status on mountain lion downloads and you have your # of successful downloads… far outnumbering the number of problem downloads. And of course Apple has a responsibility to those customers – and has better customer service than anyone will get if they’re upgrading Linux or Windows, from their respective hardware providers, I might add. I’d say you need some perspective, sir.

My reply

That’s right, discount my findings. You still don’t get it. It’s not the number of successes or failures that count but the way the customer is treated. For Apple to say take it or leave it, given the various skill levels of users and the variety of download speeds they have, is insensitive to the customer.  I really don’t care how many were successful, I care about how the company treats those least able to do the job and the policy Apple put in place is insufficient to give people an alternative. THAT is the ONLY perspective you need if you are in a customer service business.  You don’t get to declare victory and abandon your customers who can’t keep up.

I’ll be happy to provide more as it becomes available.  I just love this internet thingie.

October 2, 2012

But wait, there’s more.

Elvis writes:

Denis, you really don’t get it. Maybe you missed this news last year:
In other words, Mountain Lion is the second release to not come on a DVD. Not the first. Apple customers are perfectly competent to install it. It works just as well as any other OS update for Mac or Windows (except that it is much bigger than the average update). Not to mention, many macs no longer ship with a DVD drive (obsolete technology for many)…

And the Apple store turns out to be a fine place to get help for those needing reference in the customer service business. Apple didn’t abandon their customers at all. They still have internet connections, no? It just seems like you’re not very informed about the Apple ecosystem at all. (and your other cross-linked blog post was pretty humorous. recapping the “debate” between you and me on another site? ) (and fwiw, i’m not blaming the customer, i’m blaming you for this terrible bit of research and writeup).

BTW, don’t know if you noticed… but iTunes downloads don’t come on DVD either… neither do app updates for your iPhone… (heck you can even get app updates via the Mac Appstore as well… ) This internet thing is pretty cool.

My response

Oh, Elvis.

This reminds me of the old joke about the poet, the engineer and the economist stranded on a desert island and down to their last and only can of beans.  They decide to eat it but don’t have a can opener so they begin a feverish discussion about how to open the can without the right tool.

The poet speaks first.  “Let’s get a rock and bash the can until it opens!” He says.  The others consider it but disagree.  It will damage the can to the point where it’s caved in and they won’t be able to get the contents out.

“I know!” says the engineer, “We’ll heat the can until it bursts and we’ll collect the beans when they fall.”  He goes off to calculate the scatter pattern and build a fire.  The others demur, won’t that lose a lot of beans?  Won’t it get sand in them?

Finally, in desperation, the economist speaks.  “Looks, assume you have a can opener…” he says and the other two walk away.

The economist is the furthest from an answer because he assumes his conclusion.  Actually he assumes the conclusion as part of the solution.  You can do this in economics and even in blogging but when you get to the real world, you have to realize that your assumptions have to be applicable to a concrete solution.

I am afraid this is what Elvis has done.  In suggesting that you can make an installation disk or thumb drive, he glosses over the fact that you need to do the download first.  So this isn’t much of a solution.

True enough, the Apple Store is a fountain of information and first class assistance, if you live near one.  That might not be the case if you live in Vermont or Idaho.  Also, curiously, why would Apple want to clog up its stores with less than happy customers trying to get twenty bucks worth of operating system when the help should be attending to people who want to buy iPhones and MacBooks?

You see, all the permutations and assumptions quickly bring us back to the can of beans and the lack of a proper tool.  The trio marooned on the island probably ate everything else they had, things that could easily be opened and consumed without tools, saving the can of beans for last because it was the hardest thing to open.  It’s admittedly an outlier situation.  That’s the situation that Apple is in and that Elvis refuses to acknowledge.  But Apple can’t do that, it enters the marketplace offering to sell a product and it has an obligation to make the offering fit for a purpose, in this case installation and use of the OS.

Elvis likes to talk about how many other successful downloads and installs have occurred for Mountain Lion but that’s like saying our trio on the island ate yesterday or last week.  It doesn’t matter.

Elvis distorts the discussion to his own ends but this was never about how many other releases didn’t come with a DVD.  They were smaller and could easily be done that way, or perhaps the current download really has the problems that some people have reported.  Why would they make this up?  Other notes:

“Apple customers are perfectly competent to install it.”

I beg to differ.  My 80 year old mother in law is a ninja user but doesn’t have a clue about downloads.

“Not to mention, many macs no longer ship with a DVD drive (obsolete technology for many)…”

This isn’t about that.  It’s about going to market with a one size fits all solution for a problem with a great deal of variability.  The solution doesn’t address all contingencies as I have noted.  The MacBook Air that I am writing on doesn’t come with a superdrive but I bought one for just this kind of exigency.  See?

Elvis, I think we both like our Apple gear a lot and most of the time it’s excellent.  I am a fan.  As a pure operational issue though, going to market with this single approach to an upgrade this big is foolish of Apple and I am calling bullpucky on it.  The difference between you and me is that I can see the failing and a better way to get to the goal and I am not afraid to point it out.  You are so dogmatic and wedded to the mistaken belief that Apple is perfect that you can’t see the shortcoming and so attack the messenger.

By the Way, my writing is published on lots of sites, sometimes without my knowledge or approval.  I have a relationship with the Enterprise Irregulars to cross post.

Are you kidding me?  Apple has outsourced operating system product delivery to third parties of dubious expertise, though with good intentions, I am sure.  Apple recently released Mountain Lion the latest version of their operating system for the Macintosh family.  That’s the good news.  I tried installing it and didn’t like what I found out.  Consider this:

  1. They don’t sell a disk of any kind that you can install in a conventional manner; you have to download the OS install file from the App Store and do the installation yourself.
  2. It takes FOREVER to do the download.  People are saying the download takes hours.  Seriously?!
  3. People are complaining about their computers’ performance afterward.

I understand the value of SaaS and of downloading things from the Web and I endorse the idea (read my blog), but this is one of those things best not done over the Web.  The net has become a forest of solutions for slow downloads.  There are actually do-it-yourself instructions from third parties describing the process of making your own DVD or flash drive for easier installation.  Again, are you kidding me?  I gotta tell you, I did not sign up for this!  If you, Apple, want me to use your stuff, you need to make a reasonable effort to sell and deliver it to me.  As a vendor, that’s your responsibility.  A nice DVD would be a good place to start.  This nonsense is unbelievable and unacceptable.

I am indebted to my friends at the Enterprise Irregulars, for the links in this piece.  The IE’s, if you didn’t know, are a rag tag group of certified smarties who know all kinds of stuff about the greater tech industry and I am flattered that they let me hang out with them.

The aftermath of the verdict from the patent infringement lawsuit between Apple and Samsung initially generated more heat than light.  But the last few days have made up for the light that failed to emanate from the weekend’s id fest and Armageddon prediction Internet confab.

Reuters is running an interesting story  about Apple CEO Tim Cook and Larry Page of Google keeping the hotline open — you really need to be a child of the 1960’s to fully appreciate this metaphor.  Suffice it to say that it is the origin of the little red phone.  But also, there was this really interesting post at ZDNet by Jason Perlow about Samsung and Google’s collective need for a new dress.

I particularly recommend Perlow’s article because, while the idea of product dress might seem weird to some people — especially those who take issue with the look and feel aspects of the Apple suit — it might interest you to know that product dress is a legal term.

Without giving away Perlow’s point, let’s just make the observation that the classic Coke Bottle, which has nothing to do with how the stuff tastes, is part of Coke’s dress and its IP, as much as its secret recipe.  Only Coke has Coke Bottles, for a good reason.  So go read that article.

My point here, other than giving a shout out to the IE’s and trying to enlighten others, is that Apple might have, at least momentarily, hit on the only look and feel for mobile devices that will ever be widely accepted.  Tapping, swiping, pinching — things that come natural not only to the members of our Genus but also our Family and, who knows, maybe even our Order — might be so hardwired into our beings that coming up with an alternative might be a waste of time.  Holy $%^& Batman that might mean that Apple could end up owning the mobile UI and someday soon be in a position to make a few pennies on every Samsung or HTC device running Andriod for ever.

Believe it or not, such an outcome would not be unique in the annals of business or manufacturing.  It might have something to do with cross licensing (I know, but don’t confuse it with dressing mentioned above).  That’s when more than one company asserts ownership rights to an invention that each came up with the old fashioned way (you know, R&D?).  But rather than fighting about it for years, the two (or more) companies come to terms, some money and possibly other patents are traded and then it’s back to business.

The best example of this is the car industry.  Car radios, V-8 engines, automatic transmissions, how heating and air conditioning systems work, how the controls are set up and lots more, all have patents and if all cars look more or less alike in some basic features and functions, it might be because their makers went to the same patent swap meet.  Yes, patents expire so don’t go looking to fund the fifth generation grand kids college even if you have lot of patents.

So this brings us back to Larry and Tim and the hotline.  May we be informal for a moment and simply refer to each other using first names like they do in the music biz (Elvis, John, Paul, George, and especially Ringo; but also Bono, Sting, Eric and many others)?  So, Larry bought Motorola (early car radio patents, BTW) at least in part for its stable of patents to ward off just the kind of suit that Tim’s company is making famous in the mobile industry (Tim should file a patent! hahaha!).  And Larry, Tim and their minions are keeping the lines of communication open as they say.

What are the odds that the verdict put the discussions into high gear and that there’s an informal-formal patent swap meet happening out in the Valley between these principals?  Nothing would surprise me but I think that if both sides remain reasonable and use their inside voices and big words, that there will be an announcement in the not too distant future that they’ve struck a deal.

If so, the deal would create the stack of the decade.  Just as Wintel described a stack of Windows OS and Intel chips that made the personal computer; or as LAMP stands for Linux, Apache, MySQL and PHP for cloud application servers, some standard that combines Mobile/Google/Android/Motorola/Apple might emerge from all this chaos for mobile devices.

Let’s see, MOGAM? MOGA? GAAMMO? AGAMO? AAM? AA?  Who knows, naming might be the stickiest part of the negotiations that aren’t happening on the hot line at the moment.

The headline in the New York Times brought what I had thought would be unambiguous good news or at the very least non-news to most people.  A San Jose jury had found in favor of Apple in a patent infringement case against Samsung and awarded Apple one billion dollars in compensation.  The suit involved infringement on patents for the iPhone and iPad.

But of course there was diverse opinion over the verdict.  Much of the commentary in the Times was of this variety:

“This is an overreach of the patent law. If the first carmaker (Daimler) would have patented this new type of vehicle, there might never have been an American (sic) car industry. Apple ends up looking bad in the end, since it’s obvious that they are trying to stifle a competitor that is starting to get better at doing something Apple did first.

But I disagree.  In that vein, did you know that the Wright Brothers patented the airplane?  It’s U.S. patent No. 821,393 in case you are curious.  You can look it up.  That patent didn’t seem to slow down the evolution of the aviation industry.

I don’t usually comment on stuff like this but I feel compelled to because what passes for logic in this case is terrible.  Much of the commentary is a misguided attempt the re-examine the patent process.  The commentators disagree about whether this or that feature should be patented or patentable but that train left Dodge a long time before trial.  They also engage in retrograde thinking, by essentially saying that the patent is obvious today so why was it needed in the first place?  But the ideas that go into patents are rarely obvious at the time of invention and patents are awarded to protect an innovation by giving its authors time to profit from their invention.  Without patents would we still bother to invest billions in R&D not to mention the time and effort to invent things?

The patents were awarded fair and square regardless of what anyone thinks now. The only question before the court was whether or not Samsung illegally copied a feature or function for which Apple had won a patent. The answer was a resounding yes. Yes, Samsung deliberately and knowingly broke the law by using someone else’s property without paying for it.

The issue was never about how deserving Apple or anyone else is or was of receiving a patent.  It wasn’t even about Apple using its great wealth to prosecute an even wealthier corporation.

When did we as a people become so illogical?

What’s the world coming to?  Microsoft lost money in the software business last quarter, the first loss in a decades long string of positive earnings from the world’s biggest software company.  Sheesh!  Yes, there were extenuating circumstances that you can read about here, but the loss signals the breadth and depth of the impact that the tablet is having on the hardware market.  The iPad tablet to be precise and its economy size, iOS sharing little brother, the iPhone.  For a quick slide show on iPad’s penetration and adoption check out this presentation from Business Insider.

Last time I asked if hardware was becoming sexy again and why.  The answers seem to be “Yes” and “Because tablets have reached a new price point that opens up more emerging global markets to computing.” Tablets and their near kin, smartphones, are defining a global computing platformfor the next decade and beyond promising first world information access to many people formerly left in the dust.

The writing was already on the wall when analyst firms IDC and Gartner recently documented a stall in the PC/laptop forward momentum.  Lower PC sales means fewer operating system sales and all that goes with it.  To be sure, tens of millions of units are still being sold this year along with operating systems and productivity software often bundled in.  But growth has stalled as new customers in emerging markets are voting to type on Gorilla Glass over keyboards.

Every paradigm goes through a predictable lifecycle and the computer operating system dependent on hardware sales is another example, not an exception.  Microsoft, Intel and others invested heavily in thin, ultra-light laptop machines as the next thing that would protect the franchise and compete with tablets, but they were still too expensive and ultimately not cool enough.  If Microsoft expects to get its OS mojo back it will need to cajole its hardware partners into really being competitive with tablets.

Right now, everything is going the way of the tablet and Apple can almost do no wrong.  Even when a European judge made a finding in favor of Samsung in a patent dispute with Apple recently, he declared the Samsung gear “not as cool” as Apple’s and therefore not infringing on Apple patents.  That’s just amazing.

Windows 8 comes out later this year and Microsoft has introduced a tablet of its own, the Surface.  The game is far form over but the latest brush with reality suggests Microsoft might have been prescient in going “all in” as Steve Ballmer said of the company’s approach to cloud computing some time ago.  Microsoft is at some intermediate point in its journey from vendor of licensed software to ringmaster of a giant subscription economy.  Like many companies in similar transitions, the going isn’t always smooth but if anyone can pull this off it ought to be the guys in Redmond.

When I’ve spent time with the Redmond gang over the last couple of years I’ve been impressed with how much they get it, not just at a high level but throughout the organization.  All in, Azure, and retail stores suggest a company thinking its way through the changes.  And analytics and social networks suggest they really get it.  Maybe all in should be replaced by we get it or better, we get you, but not quite yet.

But on a cautionary note getting to the cloud or to tablets won’t be enough; this is a business model change that every company has to deal with and Microsoft has done more than many already.  Now, Microsoft’s partners have to pick up the gauntlet and evangelize more than ever.

This week (on July 25) Zuora will release a Fireside Chat video discussion that I am participating in.  It will be all about the cloud and subscriptions and I expect an important theme will be the attention that subscription companies need to pay not to selling but to service and ensuring customer happiness.  And, oh, heck, while I am talking about myself I might as well mention that my new book is coming out around the same time — “The Subscription Economy — How Subscriptions Improve Business.”

While the changes in the industry might be painful for some, they also represent innovation and creative destruction which is the hallmark of a vibrant economy.  The issue for us is not how to slow down change but how to embrace and leverage it.  Once the election clears out I think Q4 could be an important turning point as winners and losers get back to the work of inventing the future and making money.


There is a very good article in the current issue of Vanity Fair (with Alec Baldwin on the cover) about Microsoft.  In “How Microsoft Lost Its Mojo” Kurt Eichenwald recounts the failures and bad decisions of the company’s “lost decade” a time overseen by current CEO Steve Ballmer.

If you are in this business you can probably recall at least some of the major inflection points related to missed opportunities and in-fighting that cost the company its market leading position.  I thought it was just me, but Eichenwald even compared Microsoft to Detroit auto makers and their past glory.  For good measure he ends with a long quote from Steve Jobs’ biography about the difference between having a sales or ops guy running the show and having a product guy in charge.  Sad.  Worth reading.

According to the article, Microsoft’s stock has barely budged over the last ten years while other tech companies flew by — Google, Facebook and of course Apple.  In one recent quarter iPhone alone made more money than all of Microsoft.

The article quotes Ballmer saying he wants to remain at Microsoft till 2018 but I don’t think the company can wait that long.  The article also implies that Ballmer might be a smart pick to break the company up and to take the legacy products into the sunset while more product oriented people try to salvage the core of innovation, if it still exists.

Fun fact:  According to Wikipedia, “Ballmer was the second person after Roberto Goizueta to become a billionaire in U.S. dollars based on stock options received as an employee of a corporation in which he was neither a founder nor a relative of a founder.”

Ten years of stagnation can’t be sitting well with Wall Street.  What will it take to orchestrate a palace coup?

This is not about CRM.  It is the last in a series on globalization and labor arbitrage.

There’s been a predictable response to the revelations about Apple’s labor relations in China.  Pundits have trotted out that old chestnut that it’s not Apple’s fault but the free market—you and me—who crave cheap and insanely great products etc., etc.  But really it has nothing to do with consumer demands and everything to do with mercantilism and globalization.

Capitalism routinely attempts to source the lowest cost materials and labor for two reasons.  First low costs make it possible to have high margins.  Second, the inevitable commoditization that is also part of capitalism erodes high margins on the journey from branded product to commodity.

Apple’s latest earnings show the company made more than a billion dollars in profit per week during the most recent quarter.  That’s profit not revenue.  But those profits come mostly from the newer iProducts not the computers that the company built its reputation on.  To be clear, profit is good, good, good but only if it is gained fairly and not by taking advantage of the powerless.

Today you can buy a computer with the latest Windows operating system and get most if not all of the features that made the Mac special a few years ago—at a lower cost.  That’s commoditization in action.  Commoditization is a good thing because it forces us all to continuously innovate to develop new products and services that can demand top dollar.  We all know this.

The working conditions-related labor problems we see between Apple and Foxconn are both historic and unique to globalization.  In previous eras of globalization, notably the eighteenth and nineteenth centuries, globalization and labor arbitrage were mostly, but not exclusively limited to raw materials and agricultural products.

Sugar, cotton, rubber and spices production were all centralized in tropical or sub-tropical regions where national sovereignty was extended at the point of a bayonet and slavery was common.  Where slavery was impossible such as in the cotton-processing regions of New England or the British Midlands, starvation wages, child labor, poor sanitation and high infant mortality were the norm.  By comparison today’s Chinese sweat shops with their dormitories, cafeterias and company-supplied healthcare are paradise.  Just ignore the forced overtime, unsafe conditions, low wages, and dictatorial management.

Factories and the significant investments required to situate one were once a barrier to entry for cutthroat competition from low cost labor countries.  Every factory needs supplies of water, energy and a shipping infrastructure to facilitate the supply chain.  But once the host country covers these significant costs the ability to situate and take advantage of low labor costs becomes practical and even an imperative.

But the argument that consumers demand the low prices that drive low wages is something of a canard.  First, we were all leading our lives before the introduction of iProducts and other gadgets and while these gizmos have added to productivity and enjoyment, few people were walking around saying “If I only had a device that.…” If they had more of them would either have filed patents or begun careers writing science-fiction.  No.  The devices are in demand because they are both novel and because they satisfy an economic need.  But neither of those conditions sets price or wages or anything else.

In an economy where for the vast majority real earning power has not expanded in decades (and has actually declined) low prices are what maintains purchasing power.  So we have the condition where even a new device enters the market well down the price commoditization curve.

Low purchasing power has driven the low price points for these manufactured products.  But in order to satisfy the low cost/low purchasing power conundrum, you need to produce in an even lower price culture and that’s mercantilism.  And actually as we saw in the last decade, even low prices were not enough to satisfy demand as millions of people took money out of their homes (negative savings) to support lifestyles centered around demand for cheap goods.

This is the beginning of a deflationary spiral, which is unsustainable.  Labor conditions and wages will improve in China and in some areas this is already happening.  But once that happens producers will go shopping for new low cost places to manufacture.  One of the issues revealed but not addressed in the current flap over Chinese manufacturing is that, in part to maintain low costs, even primary manufacturers are beginning to outsource to other manufacturers further inland.

But the contracts that an Apple or an HP has with, say, a Foxconn are not transitive, they don’t necessarily affect Foxconn’s suppliers who are then free to ignore any agreements regarding labor and environmental conditions made with Foxconn.  That goes for quality control too.

Away from national laws governing labor and other relevant concerns, companies are free to do whatever they can get away with in the host country, which turns out to be a lot.  The purchasing country suffers from this arrangement also through job elimination and with it a decline in the quality of middle class life.

As in the eighteenth and nineteenth centuries the real winners were not the masses who got cheap sugar, nutmeg or cotton garments and they certainly were not the subjugated people who worked in conditions of slavery.  Today we get cheap iProducts but grand fortunes are being made by the tiny fraction of those who take advantage of globalization.

The solution is better government and better regulation to ensure fair competition but the globalists have us convinced that all regulation is bad and no government can do anything right.  Not everyone believes this of course.  Zuccotti Park was no accident.

Gates, Jobs and Tinkering

Posted: November 21, 2011 in Current Affairs, Economics
Tags: ,

Malcolm Gladwell published an illuminating article on the late Steve Jobs in this week’s New Yorker and I recommend it highly.  If you are looking for something that delves into the dirty laundry of Job’s tempestuous personality there’s some of that but it’s hardly the focus of the piece.  Nevertheless, Gladwell, with a knack for drilling into a subject and finding something other than the usual stuff, comes out with observations that explain Jobs and help to position him in the pantheon of technology giants.

Much has been made of Job’s second act and of how he seemingly rose from defeat after being booted out of Apple—his triumphant return and the string of “i” devices that turned Apple into a consumer electronics giant and the second most valuable company on the stock ticker (after Exxon).  But what’s behind this is, you could say, regular market dynamics.  The same dynamics that elevated Jobs in the new century were the ones that contributed to his undoing earlier.

We’ve all been exposed to ideas about market dynamics by Geoffrey Moore, Clay Christensen and others.  Early markets are bare bones affairs and capturing market share is paramount for young companies making the market.  Later the survivors can go back to flesh out their creations with subsequent versions and vendors who think they can do the fleshing out early rarely survive to do so.

In the computer industry the flesh came in the form of the GUI, networking, databases and such things that added value to the basic invention.  The analogy might be summarized as first we feed everyone then we can invent cuisine.  Gladwell asserts that Jobs’ genius was in tinkering with original inventions and making them better and he gives many examples.  But he does not stop there; Gladwell compares Jobs to other tinkerers from other ages, notably the people who perfected the steam engine making it a useful tool for the industrial age.

In that comparison, Gladwell effectively makes the point that Steve Jobs was simply too early to the cuisine aspect of the high-tech revolution.  He sought to make stylish boots when too many were still shoeless.  If true, and this explanation feels right to me at least, it explains much of Jobs’ success in his second coming to Apple.  By the very late 1990s the industry had filled out and customers were in need of the finer points of technology that would do more than the mundane record keeping and making the devices actually fun to use was finally the order of the day.

Ironically, Apple had spent much of the prior decade trying to make itself relevant to masses that only wanted utility and through a series of bad business moves had brought itself to the brink of extinction.  It was a turning point for the industry and perhaps by pure luck, or the luck of Steve Jobs, it maneuvered itself through a keyhole coming out the other side as the industry icon.

This analysis takes nothing away from Jobs, the guy in the hot seat and the one who needed to make hundreds of right calls to ensure that today we have stylish, elegant and highly functional tablets, phones, personal music players and more.

Jobs has often been compared to Bill Gates and Walter Isaacson chronicles the long relationship between the two men in his biography of Jobs.  But they are not exactly opposites.  Not even Gates can be seen as an original inventor of technology and sometimes both men can be seen tinkering with and improving someone else’s ideas.  For example, Gates actually bought the DOS operating system from someone else and Windows was the stepchild of the Macintosh operating system which we all know was inspired by Xerox’s GUI.  Office is the amalgamation through tinkering of applications from Lotus, Word Perfect (and before that Wang) and Harvard Graphics.

But of the two men, Gates and the company he started are creatures of the last century while Jobs is really of this one.  I recently watched Jobs’ commencement speech at Stanford from 2005 on YouTube in which he quipped that Windows stole everything from the Macintosh.  But the difference between Microsoft emulating and tinkering with an idea and Apple doing the same is that the Apple version improves while the Microsoft version is more of a copy.

Last week I was in Microsoft’s flagship store in Belleview, Washington.  It was not hard to see the Apple inspirations in every element of the store from the layout to the products and services offered though the Microsoft employees I met all seemed to believe that their company had practically invented the store concept, no matter I guess.  The store is a good idea as were Windows, music players, application ecosystems, marketplaces, handheld devices with big screens and tablets and much more.  Knowing something of the relationship between Gates and Jobs and thinking of Job’s place in history as a tinkerer, perhaps it is fitting to recall that imitation is the sincerest form of flattery.

I am an Apple enthusiast but once in a while I need to hit them about the head and shoulders with an old tire tool.  You know?

I was in the Apple Store last weekend paying the Apple tax, buying my wife an iPhone.  It was time.  The phone she was using had a battery that wouldn’t hold a charge.  Still it was an effort to get her into the store.  But once there…What to do?  Buy a battery or upgrade?

Think, think, think pooh bear.

We bought an iPhone.  While she was spending the better part of a half hour picking out a case I messed with the iPads.

Now the iPad is a nice, nice, nice piece of gear and everyone can and ought to covet one.  But in a practical mood you have to look at the thing and ask why.

It doesn’t have a gosh darn USB port.  Not one!

It also lacks a true keyboard, which I reluctantly understand, more or less.

But it’s also a 3G device, which simply doesn’t cut it these days.

Does it even have a microphone?  I dunno.

The 3G bit is probably the most severe limitation in my humble….I can live with some of the other constraints, I think in my most charitable moments, but then the analyst in me gets busy.

Look, iPad is a content consumption device and that might be fine for most of the people on the planet who can plunk down the hundreds of bucks it takes to bring one home.  I can’t.  I am a content creator and I like that about me and I need a device that ***understands*** that.  You know?

iPad strikes me as the next form factor, and maybe the right form factor, in personal digital assistants but for it to work in my life I need output AND input.  Steve are you listening?

Meanwhile the MacBook Air series is here and that’s more my speed, I guess.  Still there is the appeal of the form factor.

Recently I wrote a couple of posts about Apple’s plan to charge vendors 30% of the transaction price for anything sold through the Apple Store (aka App Store).  For many things like software and songs I think this makes a lot of sense.  If you consider that the SG&A line of a company’s balance sheet is typically forty to fifty percent and that many of the companies that sell through the App Store have little or no marketing or sales functions, thirty percent sounds very good indeed.  In fact, with a price of a few bucks, most of the applications on the App Store would not see the light of day if their developers had to market and sell through more conventional channels.  The same is true with songs selling for ninety-nine cents.

But the post was about what happens if content providers like newspapers have to work under the same rules.  Unlike a song or software, a newspaper gets rewritten daily — you only sell so many before you need to reload and the overhead associated with active development of a daily product is high.  But also, a newspaper brings with it a recognized brand and a readership.

In that situation, it’s not clear that a service like the App Store delivers much more than a different kind of distribution infrastructure and the post questioned the fairness of a one size fits all pricing model.  You might argue that a paper with digital distribution loses its printing and transportation overhead so Apple’s offer is a good deal.  But no publisher is going to simply flip a switch to the digital world and those legacy costs will be with publishers for a long time.  Essentially, the publishers can’t afford to do both.  It’s a classic “innovator’s dilemma.”

The post concluded that Apple’s billing system might have something to do with this apparent rigidity.  A transaction-based system that works for songs and software appears ill-suited to a relationship like a subscription because it does not have to deal with the rigors of a relationship.  For instance, a billing system for subscription services needs to be very flexible and capable of making all sorts of changes to the purchased service, daily if needed.

The post got several comments including the one below, which was surprising.

“How do you know Apple’s current billing system won’t do exactly what you describe?  Perhaps Apple doesn’t want to do this.

Why should they?  They are a powerhouse in this market, and if companies don’t want to distribute through iTunes, they can hit the road.

70% of something is better than 100% of nothing.

The surprise was the “hit the road” attitude of the writer.  Today, competition is so fierce that a hit-the-road attitude seems not only wrong but like an antique from the robber baron era.  With a solution (and an attitude) like that it’s just a matter of time before other solutions, with more generous terms or, perhaps, one specialized for publishers, hit the market.

Our simple question is, what could make a company like Apple behave in such an apparently self-destructive way?  The post said that the billing system’s inadequacies might be the problem but, on second thought, that seems like giving too much “benefit of the doubt” given the number of emerging companies with billing solutions out in the market.  A company like Apple could always buy one of those companies.  It’s more likely this is a form of un-strategic overreach stemming from not knowing or understanding the customer.

Knowing the customer, or customer intimacy, has become a strategic necessity as one sector after another reverts to the mean after many years of rapid growth driven by high demand for new products and product categories.  Instead of pioneering completely new product categories, many companies today are innovating around established products and bringing out the next version.  Typically, they do this by adding features and functionality to existing products, replacing an expensive component with a less expensive one or fusing several components into one at lower cost, and by providing an experiential element to their offerings.

But I must stress that those approaches work for PRODUCTS.  Subscriptions are different.  If product differentiation thrives on features and functions, subscriptions thrive on experiences.  In this example, Apple is set up to provide low cost products, much like the brick and mortar retail giant Walmart.  But Apple is poorly suited to mediate third party experiences — notice I said third party experiences.

Apple is a master of orchestrating your experience with an iPhone or iPad or the shopping experience in its stores.  But it hasn’t learned the fine art of making itself invisible in transactions where it is only supplying basic infrastructure.  Its third party billing policies — encoded in a billing system — don’t help matters.

Beyond the billing issue is a more substantial economic issue as basic as supply and demand.  The Apple approach looks like a supply side, build it and they will come model but we’ve crossed over into a demand side era.  If you’ve noticed over the last couple of years with credit tight and the consumer tapped out, demand isn’t what it used to be.

The highly leveraged balance sheets of individuals, corporations and governments mean that, absent a return of John Maynard Keynes from the grave, demand will remain slack for a prolonged period.  Increasing or maintaining supply without doing something about price is like pushing on a proverbial string in this situation.

If you look at the newspaper industry today you will notice that readership is declining for two fundamental reasons.  Younger people don’t read papers as much as older people do and there are many more older people.  As Baby boomers give up the daily habit or (yikes!) begin to give up the ghost, there are fewer people demanding papers.

Most papers have already cut their coverage, laid off newsroom staff and wrangled pay cuts from their unions.  These actions have not been enough as advertising sales have declined and many have cheapened their products by printing fewer pages and covering less news.

Back to Apple.

Charging a high price for using its infrastructure for a third party subscription transaction is not going to excite publishers or make lots of money for Apple.  Publishers (and SaaS software companies) will go elsewhere.  There is a fundamental difference between selling products and selling subscriptions.  For all of Apple’s hip twenty-first century marketing and customer service prowess, its approach to subscriptions says loud and clear that it is still a twentieth century manufacturer and supply side fan.