Product Study: iPhone

One of a handful of product case studies I wrote last year to help understand successful product launches.

Apple’s iPhone was announced December 9, 2007 and released June 29, 2007. It was $499 for the 4GB version, $599 for 8GB. After 8 years it had captured 50% of U.S. smartphone market and >66% of sales, with 100 million users.

(1) Value created — Simply describe the innovation. How did it create value?

The iPhone is a pocket computer. It has typical phone capabilities including phone calls and text messaging, along with cellular internet connectivity. Differences between other smartphones at the time were:

Large multi-touch screen with no tactile keyboard, no need for stylus — this allowed full use of screen when not using keyboard
Ability to browse normal, non WAP, websites (can zoom easily using multi-touch)
Ability to run desktop-class applications
Multiple sensor inputs — proximity, light, accelerometer

(2) Value captured — Competitive advantages, barriers to entry. Why didn’t incumbents have a reason to fight them?

Distribution:
- Extension from existing Apple network — iTunes, Mac OS, iPod.
- Brand attachment to Apple.
- Economies of scale exist with integration and complexity of engineering.
Switching costs once owning an iPhone.
Strong habit attached to usage many times / day — strong attachment to UX.
Phone makers saw it as toy for rich people at first. Computer makers didn’t see it as a computer (low-end disruption).

Continue reading “Product Study: iPhone” →

The dawn of immersive storytelling

From a previous #tweetstorm:

Immersive storytelling will be a big industry in the near future: movies viewed on Oculus Rift, dome-like cinemas, or interactive games. We have co’s like Jaunt, Condition One & Giroptic (consumer) making 360 cameras that will be used for filming.

A new visual “grammar” will have to be discovered by filmmakers through trial and error (i.e. no fast cuts, super close-ups, etc.). Parts of the legacy film industry will rebel at first, as they have over the last 100 years since storytelling evolved from live performances to filmed, pre-recorded stories.

Just like audiences were frightened at the sight of a train barreling towards them in early theaters, there will be a learning curve for immersive experiences. Early players of demo games for the Oculus Rift have been scared to the point of ripping their headsets off. Dome cinemas could be the social alternative to VR headsets. (If you ever been on Disney’s Soarin’ Over California ride that’s an example.)

Technology-wise, I feel a complete 360 field-of-view (FOV) like this Jaunt setup won’t be the way to go. There has to be some direction to the audience’s attention. A complete FOV is too immersive and incompatible with users’ prior experiences. Maybe at some point down the road. Something like a 180-220 degree FOV + 180 up and down to allow some freedom of motion (immersion) but still directed view with surround sound.

There is lots of experimentation ahead in the near future in both technology and storytelling grammar. I look forward to both observing and participating.

The Progression of Innovation

It’s good for any investor or business person to know where their company fits when it comes to the progression of innovation. Even if a certain company or product isn’t new, at some point in time the business it’s in was. Throughout history, innovations (whether they be technological inventions or innovations in business model) came about that performed a certain “job” better than the status quo. Most of these innovations didn’t arrive spontaneously — they were built upon or evolved from their predecessors.

The following is a simplified chart/timeline of innovations in the computer industry:

Consumers purchase computer systems, with new innovations or shifts in one component (processors or operating systems) driving innovation in computer design and vice versa. Other components like storage and display also drove innovation but were less important in this context. Most of the above innovations are technical, with the exception of the commodity PC makers (Dell, Compaq, etc.) which were an innovation in business model.

After money was transferred from consumers to computer makers, it went primarily to chip makers and OS developers. Because suppliers like Intel and Microsoft had strong competitive advantages, they had strong bargaining power, and therefore received and kept most of the value.

Retail Industry

The progression of innovation doesn’t just apply to industries as technical and complex as computers. Below is another timeline (dates are approximate) of the progression of the retail industry: Continue reading “The Progression of Innovation” →

Why Google Continues to be the Best

Google As many have already seen, Google just posted some great third quarter figures. Both revenue and operating income were each up 23%, and Traffic Acquisition Costs (the revenue paid to AdSense partners) were at an all-time low of 25.7% of ad revenue. They also broke out some never-before-released sales figures: $2.5 billion a year for non-text display ads, and $1 billion for Google’s mobile search (driven mostly by use of their Android OS). But one part of the conference call caught my attention:

This is why we’re incredibly proud of Google Instant. Many of you guys speculated that we launched Instant to make more money. Well, let me tell you, that’s simply not the case. We launched Instant because it’s so much better for the user. In fact, from a revenue standpoint, its impact has been very minimal. And from a resource standpoint, it’s actually pretty expensive. So why did we do it? Well, we believe from a user standpoint, Instant is outstanding—and the data that we’re seeing actually bears this out.

The above was from Jonathan Rosenberg, Google’s SVP of Product Management. So, Google Instant was an expensive, non-revenue-producing upgrade to their lucrative search product. They did it, said Rosenberg, because it’s a huge improvement to the user experience. But how can that be measured? This got me thinking about what kind of metrics are truly important to Google in a broader economic sense. In Google’s financial reports they tout improvement in metrics like Traffic Acquisition Costs, Cost-Per-Click, and total number of Paid Clicks. All important to their business, but none that really capture Google’s overall business model. The most important metric to Google, I believe, is Revenue per Unit of User’s Time (or RUUT, for short).

Translating Time into Profit

Time is the ultimate scarce resource. Most businesses capture a portion of their customer’s wallets in exchange for a good or service. But businesses like Google (and TV networks, and most new media/web-based companies) capture a portion of customer’s time first, then translate that time into revenue.

Because time is scarce, when consumers choose to devote their time to a product or service, they are doing it at the exclusion of something else. So that company is literally capturing their customer’s time. Before Google and other search engines, when people wanted to “find” something, they went about it a multitude of ways: white & yellow pages, classifieds, a library or bookstore, or just plain leaving your house and searching (hard to believe, I know). These things took up a lot of people’s time. Continue reading “Why Google Continues to be the Best” →

Is the Internet Ruining Media? Hardly.

In Saturday’s Wall Street Journal, Elizabeth Wurtzel wrote an opinion piece titled “The Internet Is Ruining America’s Movies and Music.” She talks about how both businesses aren’t like they used to be, because of—you guessed it—the internet.

It’s easy to understand why many people in both the music and movie industries long for the good old days. They used to exist in government-sanctioned oligopolies where consumers had little choice in where their entertainment came from. Whether it was the three network TV stations, limited spectrum for radio, or your local theater being the only option for a movie. Here’s a passage from Wurtzel’s article:

In the era of the online music store — even if you buy from iTunes rather than stealing from LimeWire, the problem is the same — no one knows how to listen to a complete album anymore. Everything is slanted toward the hit single. This means that the music industry is oriented toward one-hit wonders rather than consummate musicians, and talent development is just not worth the trouble.

In reality, the opposite is true. One-hit wonders have always dominated sales in the music industry. This won’t change anytime soon—there will always be the megahits in the “head” of the long-tail. Places like iTunes or Netflix allow the obscure musicians and moviemakers to find some kind of an audience. Also, in the past, if I liked only one song from an artist, I may not purchase their album at all. Now, I can at least get the song I like.

In fact, 47% of our gross domestic product involves intellectual property (IP) transactions, and about 6% of our national worth — $626.6 billion annually — is from our copyright businesses. These are the segments of our economy that are suffering, or stand to do so, as a result of the Internet. The Internet, glorious as it is, should be thought of as the plague of postmodernity.

Because the internet (and computers in general) makes it easier to copy things, people like to blame it for destroying intellectual property rights. Yes, the internet has changed the dynamic for the media companies. But technology radically affecting an industry is nothing new. There are many reasons why the internet has changed media for the better. Continue reading “Is the Internet Ruining Media? Hardly.” →