Tuesday, April 13, 2010

Rethinking Gospel of the Web
NYT, April 11, 2010

I believe this is a very important article that highlights many key features of Apple’s success and lessons on creating the ultimate in competitive separation:
• The incredible power associated with creating a true “industry standard” where others create new offerings for your platform
• The importance of leveraging powerful platforms –like iTunes—to the success of any new product
• A reversal of success for a strategy of “control”—Apple failed with their initial Apple computers in controlling all aspects of programming to the benefit of Microsoft. In that case, the ubiquitous of PC’s gave Microsoft the standard since their operating system dominated this segment; Apple was never able to create the standard for their early computers. This situation is now reversed where now they ARE the standard. See our earlier posting on Apple’s Innovation Radar analysis. http://marketdrivengrowth.blogspot.com/2010/03/tutorialinnovation-radar-on-apple-we.html
• Customer experience is a key attribute in today’s world for creating competitive separation. No one is better at it than Apple!

"….a general consensus has solidified among the otherwise fractious population of People Who Think Big Thoughts About the Internet……
That unifying creed is this: Open platforms promote innovation and diversity more effectively than proprietary ones…….
Over the last two years, however, that story has grown far more complicated, thanks to the runaway success of the iPhone (and now iPad ) developers platform — known as the App Store to consumers.
….The App Store must rank among the most carefully policed software platforms in history. Every single application has to be approved by Apple before it can be offered to consumers, and all software purchases are routed through Apple’s cash register. Most of the development tools are created inside Apple, in conditions of C.I.A. -level secrecy. Next to the iPhone platform, Microsoft’s Windows platform looks like a Berkeley commune from the late 60s…..
And yet, by just about any measure, the iPhone software platform has been, out of the gate, the most innovative in the history of computing. More than 150,000 applications have been created for it in less than two years……
Perhaps more impressively, the iPhone has been a boon for small developers. As of now, more than half the top-grossing iPad apps were created by small shops…..
The decision to route all purchases through a single payment mechanism makes great sense for Apple, which takes 30 percent of all sales, but it has also helped nurture the ecosystem by making it easier for consumers to buy small apps impulsively with one-click ordering. People don’t want to thumb-type credit card information into their phones each time they download a game to distract the kids during a long drive in the car. One-click purchase also supports lightweight, inexpensive apps, the revenue from which can support small software teams…..
Consumers are also willing to experiment with new apps because they know that they have been screened for viruses, malware and other stability problems as part of the App Store’s approval….
Apple took a lot of heat waiting a year after the introduction of the first-generation iPhone to open the App Store. At the time, it contended that it wanted to ensure that the development tools it shipped met its standards. The success of the App Store suggests that this patience was well worth it….
Of course, innovation and democratization are not the only reasons to champion open platforms. Given the current size of the iPhone’s installed base, as well as the projections for the iPad’s adoption, it is troubling that one company can single-handedly veto any new application on a whim…..
Apple could certainly quiet a lot of its critics by creating some kind of side door that enables developers to bypass the App Store if they wish. An overwhelming majority of developers and consumers would continue to use the store, retaining all the benefits of that closed system, but a secondary market could develop where more experimental ideas could flourish."

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