Can Apple Out-Innovate Microsoft and Google? (by Daniel Lyons)

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Newsweek’s Daniel Lyons‘ nice piece on IT industry….

http://www.newsweek.com/2009/11/10/back-to-the-future.html

Back to the Future

Apple is innovating like its old self once again. But can the company avoid repeating the mistakes that forced it to play catch-up in the ’90s?

By Daniel Lyons, November 10th 2009

One of the great things about covering technology is that if you hang around long enough, you get to write the same stories all over again. In 1987, when I first started on the tech beat, desktop PCs were a big deal. Today the excitement has moved to mobile devices, also known as smartphones. Watching this new market unfold is a bit like seeing one of those movies where they’ve taken an old classic and remade it with new stars but the same script. (Click here to follow Dan Lyons).

Now, as then, a smaller device is displacing a bigger one. Now, as then, the platform remains somewhat primitive but is evolving rapidly. Hardware makers are trying to figure out which user interface works best. Software makers are dreaming up new ways to use machines that even their creators could not have imagined. Now, as then, a new ecosystem is arising, with disruptive technology creating new powerhouses and threatening the survival of market leaders.

The most striking Groundhog Day moment for me involves Apple. Back in 1984, Apple leapt way ahead in the PC market when it released the original Macintosh, the first popular computer to employ a graphical user interface. It took Microsoft six years to come up with something that could compare to the Mac, in the form of Windows 3.0. Six years! For all that time, Apple had the market to itself. Nevertheless, Windows took over the world and now holds more than 90 percent market share, while Apple squeaks by with less than 5 percent worldwide.

Cut to the mobile phone market, today. In June 2007, Apple introduced the iPhone, a device that was so far beyond everything else in the market that even now, two and a half years later, nothing can beat it. To be sure, Nokia and Research in Motion still hold a greater share of the smartphone market than Apple does, but their aging software platforms look obsolete next to Apple’s.

The question is, will Apple do with the iPhone what it did with the Mac? Will it leap out to a technological lead and then find a way to clutch defeat from the jaws of victory? Or has Apple learned from its previous experience and figured out a way to turn its superior design and wonderful technology into market domination?

Probably Apple’s biggest blunder with the Mac was refusing to let other companies license its software. (There was a time when Apple did license its software, but by then it had already lost out to Microsoft.) The thing is, Apple CEO Steve Jobs is a control freak who believes in keeping the software tightly coupled to the hardware. In his mind, this is the only way to guarantee that you’ll give customers a terrific experience.

Microsoft took the opposite approach, letting any PC maker license the Windows operating system. There’s a tradeoff here. Microsoft couldn’t control the user’s experience. But its decision led to greater diversity of machines, and lower prices. For most of the world, cheap machines that were “good enough” trumped Apple’s pricier, perfectionist, control-freak approach.

Microsoft also encouraged developers of software applications to create programs for Windows, and gave them a huge audience they could sell to. The more apps the software guys created, the more appealing Windows became, so it was a self-reinforcing phenomenon, a virtuous circle.

With Apple and the iPhone, in some ways it’s 1984 all over again. Just as with the Mac, Apple keeps the iPhone’s hardware and software tightly coupled. Meanwhile, other companies are taking the old Microsoft approach, most notably Google, which has developed a smartphone operating system called Android that any phonemaker can use at no cost and customize any way they like. Android can do things that the iPhone can’t, like run multiple applications at the same time.

Again, as with Windows PCs, with Android we’re going to see a tradeoff: more diversity, lower prices (eventually), but perhaps a less predictable experience. No two Android–based devices will be completely alike. Also, it’s still in the early days for Android, so your experience might be rockier than on the iPhone. One new device that has lots of technogeeks buzzing is the Droid, from Motorola, which just started shipping this month. The Droid has a touchscreen, like the iPhone, but it also has a real keyboard. And the Droid runs on the Verizon network, while the iPhone runs on the AT&T network, which isn’t as good. And the Droid costs the same as the iPhone.

But here’s where Apple has learned something from Microsoft, namely the power of having a huge ecosystem of software developers making programs for your platform. Apple has wisely encouraged people to create applications, or “apps,” for the iPhone. There are now 100,000 apps available for the iPhone, 10 times more than for Android. So even if you think that the Droid is better than the iPhone, if you go for the Droid, you’re giving up that wonderful ecosystem of iPhone apps.

But over time, a lot of iPhone apps will become available on Android, too. So Apple’s advantage will diminish. Market research company Gartner predicts that by 2012, Android will have slightly more market share than the iPhone, thanks to a tidal wave of Android-based devices that are expected to flood the market over the next few years. Rumor has it that Apple will expand its presence in the mobile-device market by introducing a tablet computer next year. But by going it alone, Apple will never keep up with the Android army. In smartphones, as in personal computers, Apple may ultimately become a niche player once again, content to do a great job for a smaller audience. In tech, as in baseball, it’s déjà vu all over again.

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