Tuesday, July 31, 2012

First principles

Wired.co.uk has a brief interview with Jonathan Ive, in which he reiterates a point first made by Steve Jobs:
"We are really pleased with our revenues but our goal isn't to make money. It sounds a little flippant, but it's the truth. Our goal and what makes us excited is to make great products. If we are successful people will like them and if we are operationally competent, we will make money."
I suspect that there will be two reactions to this statement. Those who are inclined to hate Apple will think, "What a bunch of self-serving bull$%&^." Those who are sympathetic to Apple will think, "Yes, exactly -- and that's what makes all the difference."

My own orientation is that Ive is on the level, and for one reason: it explains something that is otherwise inexplicable. The puzzle with Apple isn't how it managed to get so big -- other companies have been big before, and others will become big in the future. The puzzle with Apple is how it manages to overcome the famous innovator's dilemma. Companies are not supposed to be able to disrupt themselves, as Apple did by naming the iPhone the best music player it ever built at a time when the iPod was critical to its bottom line, and by releasing the iPad in the full knowledge that it would cannibalize sales of the highly profitable Apple laptops. The principles of sound business management are supposed to make it impossible to choose an uncertain market over a certain one. And yet Apple has done this repeatedly.

The key, I believe, is in Ive's statement. The innovator's dilemma describes a manager's inability to abandon a profitable position in order to develop a market that might become profitable later. A manager whose professional well-being depends first and foremost on profits will experience this problem. But take the same manager and focus him instead on making the best product, tell him not to worry about profits, and that changes everything. Then the company disrupts itself as a matter of course. With that one change in perspective, the innovator's dilemma becomes almost irrelevant.

If this orientation accurately describes what it's like to work at Apple, building that culture within the organization was Steve Jobs' greatest achievement, and the biggest test of his successors at Apple will be how long they can maintain that focus on product over profits. It's the key to everything.

Friday, July 27, 2012

Razor thin

There are some headlines this morning on Amazon's quarterly earnings, in which their razor-thin margins got even more so. MG Siegler opines thusly:
Yes, I realize Amazon is viewed as a growth business (forgoing short-term profits for long-term gains). But these numbers keep going the wrong way. At some point, they have to start going the right way, right?
I suspect that the answer to that question is "wrong" -- at least for the foreseeable future. Jeff Bezos plays one card consistently, and that's the "trade profits for market share" card. If you look at Amazon's historical earnings, they have a remarkable ability to stay just above (or below) the break-even line. Bezos is in it for the long term, and his long-term play is to keep prices as low as possible until his competitors either go out of business or leave the market in search of profits.

Lately I've heard Amazon compared to Apple, but that is a fundamental error. Amazon is not the new Apple, and has no intention of becoming so. Amazon is the new Dell.

Sunday, July 1, 2012

Antisocial

On Gizmodo, Sam Biddle asks the provocative question: "Does Google Have Any Social Skills At All?" Biddle questions whether, despite all the money that Google has poured into social media lately, the company really understands social at all.
We've had privacy concerns before, but could it be more? Could it be that Google just doesn't get real people?
Of course there's an unsavory normative quality to that question: Biddle presumes that his vision of "real people" is more valid than Google's. But at depth the article exposes a real quandary that Google must address as it attempts to make its products more sccial: not everyone shares the company's values.

It's a problem for any tech company. When you design, if you want to design well, you must design for yourself first. Begin by trying to make something that you want to use, and then maybe you'll design something that lots of other people want, too. Steve Jobs famously scoffed at the need for focus groups; when Apple designed the iPhone, he said, they were merely building the phone that they themselves wanted to use.

That may well have been true, but it would be a mistake to think that the iPhone was a design that began and ended with the sensibilities of engineers. Anyone who's spent time around developers knows that they love power and functionality. An engineer-designed product tends to have 20 buttons on the front, dials on the side, and an easy-access hatch on the back that allows you to swap out the motherboard and install custom cooling systems. It may be ugly as hell, but it does a lot of cool things (at least when it's working properly, which is sometimes) and it's fun to tinker with.

That is not the iPhone. The iPhone is a device that may have begun on an engineer's screen, but along the way it was filtered through the values and desires of Jobs and Jonathan Ive and what resulted was an embodiment of that image Jobs liked: a product at the intersection of technology and the humanities. It's the combination of those two qualities that makes the iPhone and iPad so distinct, and so controversial within the technology community. Many engineers hate exactly those things that consumers love about both devices. So what are the odds that engineers, left to their own devices, can develop anything with such broad appeal?

This is Google's quandary: it's a company of engineers run by other engineers. There are no significant clashes of culture internal to the building, so those clashes occur on the outside, when product (or product vision) encounters the marketplace filled with people like Biddle who do not share Google's values. Maybe Google's ahead of the game and everyone else just needs to catch up, or maybe they're blinded by an excess of engineers.