Ries' Pieces

The Secret of Steve Jobs

    Steve Jobs was a rebel who didn’t go about life or work in the normal way. He dropped out of college, was a fruitarian for a time and was often called an arrogant, obnoxious, weirdo.

    Being a rebel, however, wasn’t the secret of Steve Jobs. In our youth-obsessed culture, rebels are a dime a dozen.

    Steve Jobs was a technology genius. From an early age, he was fascinated by electronics. He tinkered at his father’s workbench and joined his high-school electronics club. Jobs was so gifted that Atari's chief technology engineer gave him a job as a game designer even though he had no formal technical training.

    But being a technology nerd wasn’t Job’s secret either. Silicon Valley is filled with brilliant technology nerds.

    Steve Jobs was a design genius.  He was obsessed with creating tools that were not just good but beautiful. And his aesthetic sense didn’t just apply to the outside of things; even the inside of things had to be beautiful. On the Apple II, for example, Jobs insisted that the circuits be redone to make the lines straighter.

    But being a design genius wasn’t the secret of Steve Jobs either. Check out your local Ikea; it is filled with wonderful designs.

    The world has many great rebels, great technology geeks and great designers. What made Steve Jobs so unique was his supremely-gifted marketing ability.

    Here are some examples of the marketing decisions made by Steve Jobs. Decisions that put Apple on the path to becoming  the world’s most valuable company.

 

The power of a simple brand name.

    In the 1970s and 1980s, there were hundreds of brands of personal computers on the market. Many of these brands were line extensions of existing brands: AT&T, Burroughs, Dictaphone, Digital, ITT, Memorex, Motorola, NCR, Radio Shack, Smith Corona, Siemens, Xerox and many others.

     Many of these brands were new brands with strange names: Osborne, Commodore, Micro Pro and dozens of others.

    The difference between Apple and the other brands wasn’t in the hardware. It was in the name. Apple was a simple name consumers could instantly associate with the home market. The name also allowed a simple "apple" visual which hammered the name into prospects' minds. (How would you visualize Micro Pro?)

    Furthermore, Jobs resisted the path that many entrepreneurs take. That is, giving the brand his own name. Would Jobs Corporation have become the world's most-valuable company? Or even worse, how about Jobs & Wozniak Corporation?

 

The power of a second brand.

    During a 1979 visit to Xerox’s Palo Alto Research Center, Jobs saw a prototype of a computer with a graphical user interface. Rather than typing commands, users rolled a mouse and clicked on menus. This technology fit with Jobs' philosophy of making computers that were dead simple to use. He immediately started working on replicating the technology.

    On January 24, 1984, Apple released the Macintosh. Previously, the product line included such names as Apple I, Apple II and Apple IIe. But this new computer got its own name and thereby created its own new category. Most companies would have called it the Apple III, but not Steve Jobs.

 

The power of an enemy.

    Sometimes the best way to position a brand is by figuring out who your enemy is and then being the opposite. Apple's obvious enemy was IBM which had about 50 percent of the PC market.

    That is exactly what Jobs did with the famous 1984 Super Bowl commercial announcing the launch of the Macintosh. What made the commercial so powerful was that almost everybody instantly recognized Big Brother, who represented "conformity," as a stand-in for IBM. He repeated the same strategy later with the Mac vs. PC guy ads.

 

The power of being first.

    In his career at Apple, Steve Jobs did this over and over again. Launching a new product that was the first brand in a new category.

    Pixar's Toy Story. The first feature-length animated movie done entirely on computers.

    Apple's iPod – the first hard-drive music player.

    Apple's iPhone – the first touchscreen smartphone.

    Apple's iPad – the first tablet computer.

 

The power of a diverging category.

    Initially we were skeptical of the iPhone. Jobs had described his new brand as a combination iPod, cellphone,  email-and-internet device, all rolled into one. A red flag went up in our head since convergence devices are typically flawed.

    The Nokia Communicator had been on the market for a number of years, it was a combination personal digital assistant and cellphone and it was a total loser. But in reality, the iPhone was not a convergence device. Jobs may not have explained it correctly initially, but no matter. The iPhone exploited the divergence phenomenon by becoming the first “touchscreen” phone.

    But it wasn’t just the touchscreen that would be the iPhone's greatest achievement. It was the way the iPhone handled the many hundreds of thousands of apps created for the new device.  What email did for BlackBerry, Apps did for iPhone. Apps made the iPhone more than a cellphone, more than a music player, more than an email device, more than a web device. iPhone was a totally new touchscreen App device.

 

The power of the verbal.

    When you are the first brand in a new category, consumers need extra help in understanding what you are selling. Steve Jobs had an amazing ability to simplify not just his products but his product messages as well.

    With two words, “Think Different,” Jobs communicated the essential difference between the Macintosh and every other PC.

    With five words, “1,000 songs in your pocket,” Jobs communicated the essential difference between the iPod and the other MP3 players that could only hold 30 songs.

 

The power of the visual.

    Words can communicate a message, but visuals can reach consumers emotionally in a way that words cannot. Jobs understood the power of visuals like no other CEO on the planet and effectively used simple visuals to build his brands.

    The rainbow apple for Apple.

    The white ear buds for iPod.

    The even better white apple for Apple Inc.

    Job's presentations were also powerful visually. First was his consistency of dress. From 1998 to 2011 (the era of his return to Apple), he always wore a black turtleneck and jeans for his presentations. Even more impressive were the slides he used during his famed presentations. No text-filled PowerPoints for Steve. Nothing but a huge screen with just a single image and a few words on each slide.

    A picture is worth a thousand words.

 

The power of multiple brands.

    Apple didn't get to be the most valuable company in the world by expanding one brand into multiple businesses.  Apple launched multiple brands.

    In the beginning, Apple Inc. made the Apple computer. But no longer. The Apple computer died along with the home-computer category.

    Today, Apple is a company name, not a brand name. And a good one at that. Apple Inc. owns the brands: Macintosh, iPod, iPhone and iPad.

 

    No CEOs make decisions and follow the principles of branding the way Steve Jobs did. He has left us an amazing legacy.

    Future leaders should study Steve Jobs and his accomplishments so that they too can build brands the way Jobs did. If you build brands like Jobs, you can build the next most valuable company in the world.

 

Can 17 million iPhone users be crazy?

Can 17 million iPhone users be crazy? Probably not. Was I wrong? Probably so.

The iPhone has developed a loyal, vocal and proselytizing fan base. But 17 iPhone users are not jumping for joy over convergence. Because as it turns out, convergence is not what the iPhone is really about.

Initially, convergence is what Apple touted as the main benefit of the device. Convergence is what drives me crazy. And if the iPhone was selling convergence then I had serious doubts about its universal appeal. That was the argument I had during the launch.

The much-hyped convergence of the tv/pc, car/plane, and many other convergence pipe dreams have all been dismal failures. Apple's might have been cooler, but convergence in the end still means a device that is a jack of all trades but master of none.

And in the end, consumers want a huge television, a small laptop computer, an iPod, a Wii, a cellphone, a BlackBerry, a Nintendo DS, a Garmin GPS, a Sirius XM radio, a TiVo, a digital SLR camera etc. Not one device that can do it all because no device can ever be the best at everything.

The iPhone initially took off because of Steve Job and his brilliant ability to drum up hype. After his success with the iPod, the world was waiting for Steve's next masterpiece. (Luckily few remember his follow up to the Mac, the NeXT computer.)

But here is what really changed the game for iPhone and moved it from convergence to something else. Apple, which initially refused to allow users to install 3rd-party software on the device, changed its mind.

Then Apple launched the 3G iPhone which took better advantage of the internet with faster speeds and included GPS. This was the spark that ignited App mania.



Today, iPhone users are hooked on applications not convergence. Apps are where all the excitement is. There are over 40,000 applications available with thousands of new ones flooding into the store each month. iPhone owners have downloaded over 1 billion applications. An impressive and staggering number.

What the iPhone represents is a whole new interactive mobile Internet experience. The experience is fueled by mobile applications built for this new medium called the mobile web.

As a result, the iPhone has become a device which is desired not so much for its inherent traits of phone+camera+music+email but for its ability to download and run these little programs which give the phone magical powers.

The rise of the mobile internet has created a great new opportunity to build new brands.

Of course, most companies are just trying to expand their brands on to the mobile net, they way they did with the Internet. And as a result, few will be successful.

But for smart marketers now is the time to launch new focused brands and make a fortune. It wasn't old brands like Microsoft, Time Warner or Barnes & Noble that succeeded on the Internet, it was new brands like Google, Yahoo and Amazon.

I still have doubts about the iPhone taking over the world and crushing everything in its path. They are as follows:

1. Apple hasn't taken over the world yet.
While Apple experienced amazing growth last year of 248 percent, they are still third place in world-wide smart phone sales, according to Gartner. Apple has a 9 percent market share while BlackBerry has a 17 percent share and Nokia a 44 percent share. And let's not forget that while cool and trending upwards, smart phones still only represent 14 percent of cellphone sales. Regular cellphones outsell smartphones by more than seven to one.

2. BlackBerry is still strong.
There is never going to be one device for everybody. And corporate and heavy email users are sticking to the brand that focuses on mobile email. BlackBerry still is selling strong and growing. In 2008, BlackBerry grew 97 percent worldwide and sold 23 million phones. They may not talk as much about their phone, but CrackBerry addicts like Obama can't be without them.

3. The Netbooks are coming.
The real threat to the future of the iPhone is the netbook. Because the real excitement of the iPhone is that it is a mobile PC always connected to the internet. And netbooks are just that, but in a slightly larger form but with many more benefits like a larger screen and keyboard.

If consumers get a netbook will they also need an iPhone? And if they get the iPhone will they be willing to pay the Internet access fees for both devices? Maybe yes, maybe no.

4. Apple needs to stick to simple.
The next generation iPhone is rumored to have 3.2 megapixel auto-focus camera, FM radio, digital compass and more. What the iPhone needs to do is narrow the focus to just a few things that it does best. Focus on these and keep making them better. Forever adding additional functions could complicate and weight down the device. It is what Sony did to the PlayStation 3. Doing too much even of a cool thing is not good. Sticking to simple is best and it is how the Nintendo Wii killed the PlayStation.

5.  Applications are not the next new advertising medium.
In spite of the excitement, applications are not going to be a new advertising medium. Consumers don't like advertising.

Sure an application for a virtual Zippo lighter has been downloaded 3 million times. But gimmicks like this have a short shelf life. Gimmicks don't represent the future of applications.

When anything is new, whether a new mass medium or boyfriend, everything is exciting. But as time goes on the excitement and novelty wears off.

Hearing "You Got Mail" used to be the highlight of the day for people. Now email represents the drudgery of the day for most.

We now filter and delete as much of the email advertising as quickly as possible. Email advertising is not the future. If it was we would all have sent our money to Nigeria, met lots of new "friends" who are lonely and taken a lot of pills we shouldn't.

Applications will follow the same pattern. Initially people will download and try almost anything. But eventually what will be left standing are the real brands and the real applications with value. The brands that are first in the mind with a new idea, in a new category and generate PR and word-of-mouth.

Of course, it will make sense for many existing brands to jump on the mobile applications bandwagon, especially when it adds value not novelty.

Like Nationwide insurance offering an application to help you if you get into a car wreck. What a brilliant idea. The first companies to launch these applications will benefit from breaking new ground. But eventually all the major companies will have applications and it won't be a game changer. (Eventually all companies launched a website for example.)


Nobody knows exactly what the future will be. Not you and not me. But what I do know for sure is that the future will always bring new categories and new opportunities to launch new brands.

iPhone 3G: Totally new

It has been over a year since the launch of the much ballyhooed iPhone. Much has been said. Many have been bought. Let’s take a look back and a look ahead.

 

First there is a difference between a brand having loyal enthusiastic following and becoming a blockbuster mass market success. Second there is a difference between making a better product and winning in marketplace.

 

Being better isn’t enough

 

In fact, the reality is the better product often doesn’t win. Just look at Macintosh. There is little dispute that Mac is better than Windows. Yet Microsoft has a worldwide market share of 94 percent and Apple has 4 percent. Apple is cool but Microsoft makes a LOT more money.

 

Most taste test show Pepsi tastes better than Coca-Cola. But Coke has a brand sales index of 100, while Pepsi is at 65.

 

I am not here to argue whether or not the iPhone is cool and fun. I am here is analyze the strategy of the iPhone and Apple’s expansion into the cellphone market.

 

My fear is that by expanding into phones Apple runs the risk of spreading itself too thin. My fear is that by expanding the number of functions for the iPhone (phone, email, music player, internet, camera, video, etc) Apple runs the risk of its phone falling into the convergence trap of becoming a jack of all trades but a master of none.

 

If you love your iPhone, that is great. I know a lot of people that do. But is it for everyone? Will it be profitable (they keep dropping the price)? Will it survive intense and focused competition coming from all sides? Or will Apple undermine its own coolness once again and eventually lag behind in technology by taking on too much? We will see.

 

The first iPhone was all about convergence, putting lots of existing functions together in one device. In contrast, the iPhone’s second generation is a story more about divergence.

 

Remember that convergence was basically the main benefit touted for the original iPhone. Phone. Music. Camera. Web. Video. And it is Apple’s focus on convergence that I have the biggest problem with.

 

Convergence is what killed the Newton, the PlayStation 3, the TV/PC, the media center PC, the flying car and more. Convergence means compromise and most consumers aren’t willing to do that. Some consumers will accept some compromises for convenience sake but most will not.

 

Shampoo plus conditioner might be easier, faster and cheaper but most people use separate shampoos and conditioners because they believe they are better and worth the time.

 

The first iPhone was a cool gadget that combined a lot of functions in a beautiful device. With Steve Job’s unbelievable showmanship it received massive PR and word of mouth. But the future for a Swiss-Army-knife cellphone is limited, as is the market for the real Swiss-Army knife.

 

Steve Jobs obviously felt the same because we have an almost totally-different device in the second generation iPhone. The second generation is not just better and faster; it is different. It incorporates two incredibly important elements missing from the original iPhone: GPS and 3G. This allows faster Internet access and precise location information. Combining the web with GPS opens up a whole new world of applications that can be of incredible value and which make this phone a totally new kind of device. Recently we have seen applications for the new iPhone explode.

 

A mobi-phone is one that takes advantage of being a phone, GPS and web device. It does not simply replace an existing device making the new iPhone about divergence. Just like the BlackBerry is about divergence in being the first wireless email device.

 

(Of course, only the latest iPhone has GPS. This is why the first iPhone was so problematic.)

 

Of course, Apple is still promoting surfing the “real” Internet on an iPhone when the real advantage is using the dotMobi Internet or sites designed for small screens. I would forget the real Internet and promote the mobi-Internet.

 

Divergence of the Internet

 

Divergence happening even on the Internet itself. The .com Internet is getting grander as consumers buy faster computers with larger monitors using ever higher access speeds. Even with 3G, the small screen on an iPhone makes Internet surfing a far from ideal experience.

 

There is a whole new species of the Internet emerging. Like AM/FM/Satellite. We have the Internet and the dotMobi net. A new class of sites and brands that are being built just to be used on mobile devices. These sites would also incorporate GPS information making it a killer combination.

 

The iPhone is one of the first devices in a new class of cellphones we call mobi-phones.

 

While the iPhone has gotten enormous PR about being a must have gadget for the with-it crowd, it has not established a clear position and message in the mind.

 

That wasn’t the case for the iPod. The iPod the best and most important new brand of the 21st century.  iPod established it’s brand with the message “1,000 songs in your pocket” and “.99 cents a song.” It was a simple device with a singular function and a solid message. And it has brought Apple back from the brink.

 

The cellphone market

 

In a market with weak competition, even a flawed strategy can succeed. The success we have seen with the iPhone speaks more to the mess in cellphone market than the pure brilliance of Apple’s strategy.

 

All the cellphone brands are a mess. Everybody makes everything. Everybody has the same features. Everybody looks the same. No brand stands for anything. And most don’t even focus on phones. Motorola, LG, Samsung, Erickson all make a wide range of electronics.

 

BlackBerry is one exception. And as a result, BlackBerry has built a very strong and powerful brand by dominating the business market and wireless email. Nobody loves their phone like the CrackBerry addicts do.

 

Nokia is the other exception. As a company from Finland, Nokia once made everything from rubber boots & tires to television sets to cellphones. But by getting out of every other business and focusing on exclusively on cellphones, Nokia has become the worldwide market leader. Of course Nokia has chased the convergence dream too with products like the Communicator, a brick-sized all-in-one phone that went nowhere and the N-Gage a cellphone/game player combo. These distractions have meant that Nokia hasn’t launched a killer high-end consumer phone model in years.

 

The last really successful cellphone brand was Motorola’s RAZR. It became a bestseller in 2005 by being small and sleek. But Motorola has since killed that brand with ridiculous line-extensions like ROKR, KRZR, RIZR, RAZR2, SLVR. etc.

 

To predict the future, one only has to look at the past. There was a time that everybody thought Apple, Sony and Motorola could do no wrong. Apple had the Mac, Sony the PlayStation and Motorola the RAZR.

 

But in the late 1990’s, Apple was a mess and nearly sold for scrap. Today, Sony is a mess. And Motorola is spinning-off its ailing handset division. Why? Because they went after too many markets, because they focused on convergence not divergence and they put their name on everything.

 

My fear for Apple is that they take for granted and neglect their very valuable iPod market. All this time, money and development cost on the iPhone has shifted the company’s attention and focus away from the iPod. Remember the iPod market is way bigger than the iPhone market, look at the recent sales figures:

 

In the last six months, (October 2007—March 2008)

Apple sold:

iPod …………………  32,765,000

iPhone ………………  4,018,000

 

While the sales numbers for iPhone may still seem impressive, they still pale in comparison to the big cellphone makers. On an average day Nokia sells 1.28 million phones. Of course, each individual iPhone is more profitable that the average Nokia phone. But Apple has already drastically cut the price to increase its sales numbers and will likely have to do so again to keep pace.

 

The new iPhone took 5 days to sell 1 million phones. Not bad, but they aren’t likely to start selling a million a day anytime soon. The hype guaranteed big upfront numbers.

 

There are some other interesting facts from a recent iPhone launch survey:

      66% buy the higher capacity model.

(I would only sell the high capacity model. Keep the price higher and brand more exclusive.)

 

      51% will use an iPod in addition to the iPhone.

(Convergence is not the main driver for getting the iPhone.)

 

      38% were upgrading from the original iPhone.

(They were very avid and devoted consumer segment willing to spend and not a very broad mass market appeal.)

 

      85% bought the new iPhone because of the new features 3G & GPS.

(These features are key. I think Apple should have delayed the launch of the original iPhone until these features were standard.)     

 

Over time hardware tends to be commoditized. The big companies will copy the technology and make mobi-phones faster and cheaper. That is exactly what happened to Macintosh in the 1980’s and 1990’s. With its the expansion into cellphones Apple needs to be careful. It means they are now competing with Nokia and Dell. Each would is a formidable and focused competitor on its own. Taking on both will be tough. Just ask Sony.

 

Technology moves very fast. A hot device today can become very cold if a better brand comes around tomorrow. For now there is no consumer phone brand worth a mention and iPhone has been able to generate a lot of excitement especially around its latest GPS/3G device.

 

The ultimate future for iPhone is still up in the air. The die-hard Mac lovers will follow the brand anywhere like Phish fans driving in van cross country selling grilled cheese sandwiches. Steve Job knows cool. But he doesn’t always get it right. (Remember the Cube, Apple TV, NeXT) (And Phish is no longer together or touring)

 

There is a difference between being a successful narrow play at the high-end versus a successful mass market brand. I think iPhone could have a very nice future with a small segment of the population at the high end. Just like there are avid Audi fans, there are avid Apple fans. But that doesn’t that mean either brand will dominate the overall market.

 

What hurt Macintosh was that Apple kept trying to broaden its market, when they should have done just the opposite. Narrow the focus to graphic arts. That is basically what the brand has become anyway. They never succeeded in getting big business to use Apple products.

 

The future for the mobi-Internet and mobi-phone applications is undeniably bright. The opportunity to build new brands is as endless as your imagination. Take upstart Urbanspoon. Using an iPhone with GPS and G3, Urbanspoon recommends nearby restaurants as you walk down the street.

 

The mobi-phone market is much larger than just the iPhone market. This is a huge opportunity for the brave few who can see how divergence is creating an enormous opportunity to build a new brand for the dotMobi world.

 

It was not established companies that made it big on the Internet, it was new brands focused on the new medium like Amazon, eBay, Facebook, Google and YouTube. The same is likely to happen on the mobi-Internet.

 

Nobody is 100% right, 100% percent of the time. Even me. Marketing is not a science but an art. You have to be able to study the past then analyze the present in order to paint a picture of what the future may bring.

 

Early iPhone sales have been brisker than I predicted mainly because I underestimated the complete void in the consumer phone market. Consumers were desperately craving a new phone brand and when given the chance they leaped headfirst onto the iPhone bandwagon.

 

Today iPhone is a niche product. But will the iPhone be the next iPod? Will the iPhone dominate the cellphone market like iPod does the music market? Can Apple chase Dell in hardware, Microsoft in software, Nokia in cellphones and lead with iPod all without exhausting the company in the process? If the key to success is focus that is not what today’s Apple is about. Will a strategy of expansion work? Time will tell.

 

Some of my comments from previous posts:

 

March 28, 2007

 

“But shortly after the launch the initial hype will wear off and Steve will move on to the next project at Apple. Then the iPhone will end up in the convergence scrap heap along with the ROKR, N-Gage, WebTv and many others.

 

Initially convergence products, like line extensions get attention and generate early sales. But long term they usually fail and always undermine the brand.”

 

Steve Jobs did quickly move on to his next project, luckily it was the iPhone 3G. For now we have a modest success of the iPhone 3G because they face almost no decent competition. But what happens when the category becomes commoditized?

 

Will Apple be able to innovate and stay far enough ahead of the competition to survive? The way to succeed in business is to focus.  The more markets Apple goes after the more difficult staying profitable will become.

 

Sony is a classic example. They have a great brand, but they make everything, stand for nothing, appeal to everybody and they make less than 1% in profits because of it.

 

April 30, 2007

 

“Early iPhone sales are likely to be brisk. Apple's amazing ability to generate PR will no doubt attract many Apple fans and early adopters to purchase an iPhone. Just like they bought a Newton back in the day.

 

But I stand by my prediction that the iPhone will not be a long-term success. What we will see instead is further divergence not convergence. Remember Apple's brilliant iPod is a divergence device.”

 

We will see a future filled with divergence devices. BlackBerry for one. iPod for another. The new GPS/3G phone for another. The new iPhone is in fact divergence. The first iPhone was pure convergence.

 

While phones have had cameras and many have music players, they have not become the most important assets of the phone. And in many cases I think people buy them because there isn’t a phone without them on the market.

 

June 27, 2007

 

“Sure, a few people will buy iPhones for the sake of convenience. Sure, a few people will buy iPhones because they are so in love with Apple that they would buy a bridge if Steve Jobs tried to sell it to them.

 

But the in long run, the vast majority of people will prefer their "better" individual devices. Especially companies wised up and created more divergence products.

 

Don't be fooled: Despite the hype, the deals and the massive advertising smart phones still only have around 10 percent of the market.

 

Opportunity comes from pulling things apart not putting them together. The devices of the future might plug together or network together, but they will all be individual “better” products.”

 

Men in particular as concerned with not carrying too many gadgets on their belts. Women, on the other hand, are cursed with the purse so we need carry all our stuff plus everybody else’s stuff.

 

The new iPhone delivers on not just being convenience but containing a new type of function. The GPS and mobile Internet that can give you real time, real location information at high-speeds. There is nothing else like it out there.

 

September 23, 2007

 

“The launch of the iPod Touch has been mostly overlooked and usurped by iPhone mania. After the over-the-top iPhone hype and its dramatic price cut, the media were just not interested in giving much ink to another Apple product.

 

Furthermore, without any exciting new functions that weren’t already included in the iPhone, the iPod Touch has little news value. It is basically just a smaller iPhone without the phone or email access. Big whoop.

 

This disregard of the iPod Touch is tragic. The iPhone took the wind out of the iPod Touch’s sails before it got the chance to set sail.”

 

In fact, this is even more true today. I think Apple would have been wiser to launch the iPod Touch last year and waited to launch the iPhone with added GPS/3G this year. That way they could have had a better one two punch with two separate and distinctive devices.

 

“The iPod is the goose that lays the golden eggs at Apple. Overlooking it and not giving it its proper attention is foolish. The iPod resurrected Apple from the ashes. The iPod is the leader in the growing MP3-player market. The iPod is the dominant brand in the U.S. with over 60% of the MP3-player market. Taking your golden goose for granted is unwise in the competitive and fast paced world we live in. Just ask Dell.

 

Apple has some serious work to do globally where its iPod is less than dominate and more than vulnerable. In Europe the iPod has only a 20% market share which includes a 40% share in Britain.

 

Distractions are not what Apple needs. A focus is what they need. The way to build a monster brand is to attain global dominance. Which is what Nokia did in cellphones, Red Bull did in energy drinks and Google did in search.

 

Clearly the time for Apple to launch massive iPod marketing programs in both the U.S. and the rest of the world is now, while the brand is riding high with ground-breaking technology and a heap of iPod killers lying in wait. But the distractions and confusion created by the iPhone are likely to slow the iPod’s momentum and keep it out of the fast lane where it rightly belongs.”

 

I still worry about Apple spreading itself too thin. iPod is a strong and profitable market but they still need to grow it globally and keep it up to date. No market moves as fast and as furious as the technology market. Cool today, gone tomorrow. Look at Palm and RAZR.

 

Apple's Golden Goose

Jobs makes surprise cuts

Less than 3 months after the most hyped product introduction of our time, Steve Jobs shocked the world when he abruptly discontinued the 4-gig iPhone model and chopped $200 off the price of the 8-gig model.

“That’s what happens in technology” was Job’s initial response to the outrage expressed by owners and critics alike. That’s what happens when a product is in trouble is my response.

Apple loyalists, who in some cases camped outside stores for days to be the first to get their hands on the all-in-one iPhone, now look foolish for being so quick on the trigger. The gall of Apple to cut the price so quickly was seen as a thumbing of its nose at its most devoted followers. Not a wise move. Even Apple legend Steve Wozniak personally blasted Apple in a recent article.

Not surprisingly, a negative PR firestorm erupted and public outcry was heard from the blogosphere to the media to the water cooler and beyond.

Jobs gives lame $100 credits

In a lame attempt to neutralize the negativity, Jobs then announced he was giving iPhone buyers $100 Apple store credits. Wow! Attempting to placate the 8-gig $600 suckers with a $100 Apple store credit is just adding insult to injury.

No cash refund, only store credit? In my experience, this never works out in my favor. Store credits usually make me buy something I don’t really want or need for more than the dollar amount of the credit. If it had happened to me, it would piss me off even more than the price cut.

How many things can one possibly buy for $100 in an Apple store anyway? Not too many. The only real product would be the iPod Shuffle at $79. But come on, the reason people are supposedly buying an iPhone the first place is the desire to have only one device that does it all. Ergo, you don’t need a Shuffle.

All this is not good news for Apple’s iPhone. Yes, they have told us the have sold 1 million phones. But that is wholesale not retail. For all we know, 500,000 phones could be sitting on the shelves at Apple and AT&T stores. And by most accounts the phones are readily in stock, as AT&T ads point out on almost a daily basis.

Also, I have never heard of a product, even a high-tech product, having its price cut so fast. Usually companies cut prices only when a next-generation model comes out that is faster, lighter and has double the memory. That didn’t happen with the iPhone nor did stiff competition arise. The only thing stopping the iPhone seems to the iPhone itself and its homage to the false idol of convergence.

If the iPhone were truly living up to anything near its hype, then Jobs is the dumbest person alive. Lesson number one in business school: You don’t drop the price on winners.

iPod Touch gets ignored.

The really interesting angle to this saga is the recent introduction of the latest iPod, the iPod Touch. Its launch has been mostly overlooked and usurped by iPhone mania. After the over-the-top iPhone hype and its dramatic price cut, the media were just not interested in giving much ink to another Apple product.

Furthermore, without any exciting new functions that weren’t already included in the iPhone, the iPod Touch has little news value. It is basically just a smaller iPhone without the phone or email access. Big whoop.

This disregard of the iPod Touch is tragic. The iPhone took the wind out of the iPod Touch’s sails before it got the chance to set sail.

iPhone - Convergence = Touch

The iPod Touch is brilliant. The iPod Touch is revolutionary. The iPod touch is everything the iPhone is not.

It you take all the convergence stuff out of the iPhone and leave in all the cool features, you end up with an iPod Touch. Not a all-in-one, but a great music player.

The iPod Touch is a high-capacity media player with a touch screen that connects to the internet and Apple’s new mobile store to buy music and watch videos.

The reason the iPod Touch is so great and the iPhone so problematic is that the two main functions of iPhone, the phone and music player, are at odds with each other.

Both a phone and music device are considered essential tools that people can’t live without for even brief periods. Both use a lot of battery power. Both are used for long periods of time during the day.

The disaster of sucking the battery dry while out for the day is easy to imagine. Out of the office and your cellphone battery dies? Disaster. Two miles out on a 4-mile run and your music player dies? Disaster.

Jobs loves to create cool things. And Jobs is a great salesman. Initially the media, the market and consumers eat his stuff up. But eventually you come crashing back to reality.

iPhone is distracting Apple

The iPhone is a distraction not an opportunity for Apple. A novelty product built on the technology whims of Jobs and another in a long line of convergence chasers.

In theory, everyone would like to carry one device, have one card in our wallet, shop at one store for everything and drive a flying car to work. But the reality is that none of these is ever likely to come true. It is not the way the world works.

Size, price, memory, and battery life always end up bursting the convergence balloon. From flying cars to media center PCs to N’Gage, Newton and the iPhone.

What Apple should have done is to put its marketing and PR muscle behind the new iPod Touch.

The golden goose.

The iPod is the goose that lays the golden eggs at Apple. Overlooking it and not giving it its proper attention is foolish. The iPod resurrected Apple from the ashes. The iPod is the leader in the growing MP3-player market. The iPod is the dominant brand in the U.S. with over 60% of the MP3-player market. Taking your golden goose for granted is unwise in the competitive and fast paced world we live in. Just ask Dell.

Apple has some serious work to do globally where its iPod is less than dominate and more than vulnerable. In Europe the iPod has only a 20% market share which includes a 40% share in Britain.

Distractions are not what Apple needs. A focus is what they need. The way to build a monster brand is to attain global dominance. Which is what Nokia did in cellphones, Red Bull did in energy drinks and Google did in search.

Clearly the time for Apple to launch massive iPod marketing programs in both the U.S. and the rest of the world is now, while the brand is riding high with ground-breaking technology and a heap of iPod killers lying in wait. But the distractions and confusion created by the iPhone are likely to slow the iPod’s momentum and keep it out of the fast lane where it rightly belongs.

Instead Apple is cooking the goose that has laid the golden eggs.

Hello, can you hear me now?

The only other PR event that even compares to the iPhone circus was Harry Potter. But unlike iPhone, Potter delivered on its hype, selling 8.3 million books on the first day.

In terms of Apple's numbers which were released yesterday afternoon. Apple said that it had "shipped" 270,000 iPhones by the end of the quarter.

Yet only 146,000 were activated by AT&T. Assuming that some 10 or 15 percent of the iPhones sold weren’t activated (for some reason or another), that would make actual sales under 175,000 for the two day period.

Look at the situation from Apple’s point of view. After six months of incredible publicity (more than for any other product in history), what would Apple like to see happen when the product finally went on sale?

I think they would like to have seen 90 percent or more of the Apple and AT&T stores sold out of iPhones. To make that happen, they would have had to ship fewer iPhones than they expected to sell.

Since Apple shipped 270,000 iPhones, they obviously expected to sell well over 300,000 units. (Pundits predicted 400,000, 500,000, even 800,000 units in the two-day period.)

Why restrict deliveries in the first place? Apple wouldn’t have wanted to offend its loyal fans. After all, if a store doesn’t sell out on the first day, all those people who waited in line for hours are going to feel cheated.

In fact, anyone that waited in line for days must feel a little silly today. There was obviously no rush and no shortage of the devices.

Is the iPhone off to a great start? I don’t think so. Furthermore, I expect to see a gradual weakening of iPhone sales in the months ahead. The bad PR surrounding these early sales figures is obviously damaging.

Convergence captures the imagination and generates hype, there is no doubt about that. But divergence brings home the bacon. That is the message I hope to get out loud and clear.

iPhone sales disappoint, despite hype

For a product dubbed the Jesus-phone, which received more pre-launch hype than any other product in history, it looks like a major miracle might be in order. Today has not been good for Apple’s iPhone, as underwhelming sales numbers hit the street with a thud and sent Apple’s stock price down sharply.

Many analysts had predicted 500,000 or more iPhones would be sold in the first few days. Yet AT&T said they activated only 146,000 iPhones in the first two days. To make matters worse, CIBC World Markets said demand for the iPhone has had a significant decline in the past 10 days and that stores are stocked with the devices.

One interesting side note to this story is that the iPhone publicity could turn out to be great news for BlackBerry. A CIBC analyst noted that the iPhone has "significantly increased awareness for email devices. And that is a positive mainly for RIM, the brand of choice for email devices."

When more consumers realize how great it is to have mobile email they will more often than not go to BlackBerry, the leader and originator of wireless email.

One of the biggest downsides for heavy email users is the lack of a real keyboard. It is the same problem for all multi-use devices; you have to sacrifice something to get everything.

The heavy email user wants a keyboard and a decent sized screen; the heavy phone user wants a much smaller device with a numerical keypad; the music user wants an ultra-small device, the internet/video user wants a large screen. And they all want ultra-long battery life. Even God can’t produce that.

There’s still a long way to go before the true fate of the iPhone is decided. But it’s fair to say, today was not a good start.

iPhone news items today: Bloomberg, CNN

Some of my previous iPhone posts: just good enough, what is driving the hype, crappy device, convergence questioned.

And let's not forget this classic Ries Report with Al's iPhone predictions filmed back in February for The Ries Report and now posted on our You Tube channel as well. The report is long so it is divided into 2 parts.

Ries Report: iPhone predictions part 1

Ries Report: iPhone predictions part 2

iPhone, just good enough

It is not really the Jesus phone, the iPhone is just another smartphone. It is not even the first smartphone (the way the iPod was the first high-capacity music player.) It is not different, just dressed up a bit.

The bottom line is that smartphones are compromised. The phone, email, music and internet functions are very different from one another. One small device doing all of them cannot be better than individual devices doing each of them. It is a fact of life.

With the iPhone, Apple has definitely produced the best, most fantastic smartphone ever. It is a beautiful and elegant piece of hardware with simple well designed software. But it is still a smartphone, a multifunction convergence device.

The question is: Will smartphones or multiple devices be the future? Only time will tell.

Short term, Apple addicts will gobble up every last iPhone that goes on sale this Friday at 6 pm. But will the iPhone dominate the telecom market the way the iPod has dominated the music market?

I doubt it. Why?

Because I believe consumers prefer "better." A convergence product like the iPhone can only offer up “good enough.”

RAZR is a "better" phone. BlackBerry is a "better" email device. Nintendo DS is a "better" game player. Garmin is a "better" mapping device. iPod is a "better" music device.

Some of these products even be could better if manufactures would stop trying to add more functions to the babies and just try to make them better, smaller and cooler. That is exactly the strategy that gave us the iPod.

My iPod shuffle needs to be tiny so I can run with it. My BlackBerry needs to be big enough so I can type comfortably. A little of one combined with a little of the other and you get a device that performs poorly at both functions. In other words, it gets trapped in the mushy middle.

The question is, will consumers be willing to compromise on battery life, size, price and easy of use in order to get an all-in-one device that doesn't perform better than the sum of its parts?

Sure, a few people will buy iPhones for the sake of convenience. Sure, a few people will buy iPhones because they are so in love with Apple that they would buy a bridge if Steve Jobs tried to sell it to them.

But the in long run, the vast majority of people will prefer their "better" individual devices. Especially companies wised up and created more divergence products.

Don't be fooled: Despite the hype, the deals and the massive advertising smart phones still only have around 10 percent of the market.

Opportunity comes from pulling things apart not putting them together. The devices of the future might plug together or network together, but they will all be individual “better” products.

What is driving the iPhone hype?

Click here to read the follow-up to my iPhone predictions written on July 24, 2008.

At this point, I don’t think anybody could live up to the incredible hype the iPhone has received, even Jesus. But the more interesting question is:

What is driving this unprecedented hype?

Steve Jobs is a master salesman. But what has really fueled the iPhone hype is the success of the iPod.

iPod is the most revolutionary product of the 21st century; it built the digital music category and dominates it with 70% of the market. 100 million iPods have been sold and iTunes has sold over 2.5 billion songs.

The hype and intense media, consumer and Wall Street excitement comes from the impression that the iPhone will become another iPod (it even has a similar name.) And that Jobs will do in phones (a market 4 times the size of music players) what he did in music. In other words, he came, he saw, he conquered.

Nothing could be further from the truth. If the iPod is the biggest success of the 21st century then iPhone is likely to be the biggest flop of the 21st century.

The problem stems from the fact that the iPod and the iPhone are drastically different products despite the similar name.

The iPod is a divergence product. It does one thing extremely well: plays music.

iPod was the first hard-drive music player in the mind. It could hold thousands of songs versus all the other MP3 players that could only a couple of CDs. iPod was different, unique and brilliant. It also took off slowly. Initial reaction was lukewarm at best.

But truly revolutionary ideas always take off slowly. People don’t change overnight. It has taken years for photography to go digital, or for people to fuel up with Red Bull or Starbucks.

Smaller companies are actually more successful at building new categories because they have the determination and patience to focus and use PR instead of advertising. On the other hand, big companies usually ignore these small markets until it is too late to get in.

Red Bull was on the market for 13 years before Coca-Cola introduced its own energy drink, a me-too product called KMX which fizzled quickly. It took Red Bull over ten years to reach $100 million but last year it was a $3.4 billion dollar business.

The iPhone is the opposite of the iPod. The iPhone is a convergence product. It tires to combine multiple functions into one device. It is also nothing new. There have been many convergence devices in the past and all have been failures. Including: ROKR, N-Gage and the Nokia Communicator.

Convergence means compromise

Convergence products capture the imagination of the media and public but the devices can never deliver on their promise of nirvana because all convergence devices are doomed by compromise.

In order to produce an all-in-one device, the device has to make compromises: battery life is short, the device is difficult to use, it is too large and it is too expensive.

The iPhone will likely have problems with all these things. If you are watching movies, surfing the internet, checking email, listening to music and making phone calls, how long do you think even the best battery could last?

The most troubling aspect of the iPhone is the touch screen keyboard. The touch screen is a compromise in order to have the screen as large as possible. In general, people like to feel a keyboard and the technology is complex. Even Jobs admits it will take people time to get used to it.

It is also worrisome that no one has really been able to try it yet (could there be problems?) Talk is that the product was rushed to market and announced at MacWorld before it was actually debugged and ready.

The touch screen is not like the click-wheel on the iPod. The click-wheel made using the iPod easier and simpler. The touch screen will make using the iPhone more difficult.

Remember the Newton?

The iPhone reminds me of another over-hyped Apple convergence product: The Newton from 1993. The product was launched after the success of the Macintosh and received enormous hype.

John Sculley called it a complete reinvention of personal computing. The key function being its handwriting recognition technology.

But the handwriting recognition had major problems from the start. News story after story told of the funny and mistaken translations the device made.

I think the iPhone could face the same problem, as consumers have difficulty with the touch-screen keyboard. Hitting one key to play a song is one thing, typing out multiple emails on a touch-screen is another. I have enough trouble getting money out of the ATM with a touch screen. I don’t think consumers will necessarily welcome this technology for a keyboard.

The iPhone ad campaign

At this point massive advertising for the iPhone is not only unnecessary but looks desperate. Why does Apple have to advertise a product that is not available yet and already has widespread recognition? Perhaps Apple is nervous?

The ads themselves are not simple or elegant. They look like a desperate attempt to try and justify the hype and explain the product. All the product demonstration in the ad does is to show how truly complex the iPhone is. Not a good thing. Simplicity sells. Complexity scares.

The iPod advertising is perhaps one of the greatest ad campaigns of all time. The simplicity of showing the white ear buds and the “iPod” name is pure brilliance. It does what great advertising should do: Reinforces the brand in the mind.

Apple has brought us many revolutionary products over the years from the Apple II to the Macintosh to the iPod. Unfortunately, I don’t think the iPhone will be one of them.

iPhone, a crappy device?

Will it or won't it succeed? That is the burning questions for almost everyone these days when it comes to the iPhone. You can easily find passionate predictions on both sides of the fence. My prediction is failure for the iPhone, which you know from reading this blog.

In the last few days there have been more press reports questioning convergence which raises my hopes that the convergence craze will finally come crashing down.

In the Sunday’s Atlanta Journal-Constitution, Bob Keefe asked “If you believe the hype” when it comes to the phone. He quoted Al who compared the craziness of the iPhone publicity to another classic brand disaster the Ford Edsel. Here is an excerpt from the article:

“Whether the iPhone lives up to its hype, of course, remains to be seen.

But Ries, the Atlanta marketing consultant, said he thinks the iPhone will be "a disappointment" because consumers generally don't want all-in-one "converged" devices.
Ries said overhyped products usually face an uphill climb.

"The more advanced the hype, the more publicity a product gets [before launch], the more likely it is to fall," he said.

"And let's face it," Ries said. "The last product that got this much hype was the Ford Edsel."”

And last night on The Daily Show with Jon Stewart, Jon delivered a classic comment on the fruitlessness of combination convergence devices.

During a discussion about Ultimate Fighting, which is a mixed Martial arts sport, Jon says that by combining all the fighting disciplines you lose the form and artistry of each. (Indeed Ultimate Fights usually just ends up with two guys rolling around on top of each other on the ground.)

John Hodgman refutes Jon’s statement with “So why combine a cellphone and a camera then?”

Jon comes back with “Why? That’s my question. You just end up with a crappy phone and a crappy camera.” It receives big cheers from the audience and at this point Hodgman concedes that Jon wins the round.

This is the bottom line on all convergence products, when you combine functions you don’t get the best of breeds, you just end up with a fruitless mutant. Or has Jon Stewart described a crappy device.

The iPhone will do a lot of things but it will do nothing well. And that is why it is destined for failure.

The Ries Report

The Ries Report is live! Our exciting new project, The Ries Report, a weekly marketing news report delivered by Al and Laura Ries, is now playing live on the Internet. Watch us today at www.TheRiesReport.com.

Currently Al and I are in China for a seminar and media tour. Later this week I'll be commenting on the biggest branding problem facing China, how to best position the city of Beijing and what Lenovo should have done with the IBM brand.