Why Gruber may be wrong re: “Smartphone Mojo”

John Gruber wrote a rebuttal of sorts to a piece in The Nation about the iPhone “losing its Mojo” against the ever-growing wave of Android devices.

Gruber did point out (correctly, in my view) that the iPhone does attract the more valuable segment of customers, and so they can still do well with a smaller share of the market because they have the customers that matter.

One comparison I found a bit less convincing was when he talked about how iPhone “was never the smartphone market share leader” being behind Symbian and BlackBerry (while still having a superior ecosystem to the companies with larger shares of the pie).

I don’t think that is relevant to Apple’s situation vis-a-vis Android. See, BlackBerry and Symbian were not at all into the whole “ecosystem” thing. Symbian (pre-Qt) and BlackBerry (pre-BB10) developer platforms were technically rough and a headache to develop for. The powers that be behind Symbian and BlackBerry OS weren’t working furiously to match their market size to a developer platform from a technical or business perspective. The difference between Apple building a superior ecosystem with smaller market share then (vs Symbian and BlackBerry OS) and now (vs Android) is that Google has done (and continues to do) spectacular work in recognizing the importance of a developer ecosystem and building the technical and business supports for that ecosystem.

Apple has never been in a situation in which a competitor held considerably larger market share and put just as much effort into its developer platform/ecosystem as Apple did.

Well, that’s not entirely true. Apple did face a competitor like that before. It was called Windows.

image credit: FTD.de

Apple didn’t do so well when a competitor combined a real ecosystem effort with bigger market share. Nearly killed ‘em, actually…

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Moving on to The Next Billion

I have made the decision to move to Nokia, effective December 19.

While I fully support Meg’s announcement to make webOS an open source project, and am tremendously excited for the future of webOS, I was given an opportunity at Nokia that I couldn’t turn down where I think I can have a significant impact.

Nokia sells more phones to more people than any company on Earth, and their corporate mission of connecting the Next Billion resonates with me personally. When I spent 2 years working in India I witnessed firsthand the power of mobile technology to transform how people from all parts of the socioeconomic spectrum worked, played, and lived–on Nokia devices more than any other. This is what gave my professional life direction, what inspired me to move to Silicon Valley and dedicate myself to mobile technology in the first place, and the opportunity to be a part of the company that started it all for me is simply too exciting to pass up. I am honored and excited that Nokia has invited me to join in their journey of connecting the world’s billions.

2011 was a year of challenges for those of us at HP, and I worked with some that taught me a lot about overcoming adversity and working under pressure. I want to thank all of them for taking me under their wing and teaching me and making my time there so memorable. The webOS community of developers, hackers, and superfans is truly like nothing else. Even though I am trading my Pre3 for a Lumia 800, webOS will always have a special place in my heart.

Now if you’ll excuse me, I have a billion people to connect…

HTC slowly finding out: The only winning move is not to play

image courtesy of unwiredview.com

HTC has brilliantly ridden the Android freight train up from being an obscure ODM to one of the largest and most prominent handset makers in the world. However, there are warnings that the business seems to have peaked–warnings coming not from sensationalist analyst firms looking to make headlines, but from HTC itself. As GigaOm’s Kevin C. Tofel put it in a post titled “HTC’s star continues to fall; outlook slashed again” (emphases mine):

In what sounds like a repeat newsbit from three weeks ago, HTC lowered its outlook for the fourth quarter Wednesday, reports Forbes. On Oct. 31, when the company released third quarter earnings data, it already said the fourth quarter would be flat at best. But now, the near future looks much worse with lowered expectations from the already lowered expectations.

What’s going wrong for HTC? Again, I find it hard to improve upon Kevin’s succinct analysis:

HTC is essentially just another Android phone maker in a growing sea of other Android phone makers…while HTC reaped the rewards of jumping on the Android bandwagon early, Samsung, ZTE, Huawei, LG, Motorola and others are now riding along too. It’s harder to stand out from the growing crowd…

Congratulations HTC, you have transformed yourself from an ODM commodity maker to…an OEM commodity maker. Oops. Your margins have no where to go but down–and heaven help you when the Chinese ODMs start making the same move you Taiwanese ones did.

Having a huge commodity business can be a great strategic tool–if you are wielding it strategically. In deciding to retain the Personal Systems Group (PSG), HP cited among its justifications the fact that having the world’s largest PC manufacturing business means HP gets the best volume prices on hardware components that are also used to build its higher-margin enterprise products, and having the world’s largest PC distribution channels give HP ink-cartridge receptacles printers a tremendous advantage over their competitors in getting noticed by consumers.

But what is HTC doing to leverage the position in mindshare and shelf-space that its success in pumping out commodity handsets gives it, other than attempt to pump out more commodity handsets? What can it do? Hint: spending $300 million on Beats Audio probably isn’t the best move.

In the long term, the only companies that make any money in this business are the ones who own the whole widget.* Apple is the shining example of this as it captures the lion’s share of profits in both the PC and smartphone industries by refusing to play the commodity game, but even struggling RIM still makes money on its whole-widget sales. HTC doesn’t own the widget, and has no privileges with the Android code unless it is the one selected to make the next flagship devices (which, once Google completes its acquisition of Motorola, becomes significantly less likely).

If I were HTC (which, judging by the lack of billions of dollars in my bank account, I am not), I’d see the only path out of here to be getting itself a widget of its own. I’d follow Samsung’s move and develop an indigenous OS (or, you know, buy one), and find a way to leverage my strength in the commodity Android business to get my OS spread far and wide. Dual-boot? A new version of HTC Sense that is much more an OS in its own right (perhaps some sort of “web-OS”)?

$300 million could have bought HTC something a lot more strategic than some EQ presets…

In Android Commodity Wars, the only winning move is not to play. (or get bought by Google)

With apologies to the producers of "War Games"

*OR, at least have exclusive privileges with the part of the widget they don’t own. I think Nokia is onto something with its Windows Phone relationship, but it will take at least a year to tell.

Where Apple’s iPhone Pricing Strategy (and the iPhone) Falls Apart

With the latest change to the iPhone lineup, Apple’s current iPhone segmentation strategy has come into focus:

The 2011 iPhone lineup

Rather than design a new phone specifically target the middle and lower segment, Apple simply keeps manufacturing and supporting previous years’ iPhones, which can be made at a lower cost as Apple squeezes down their component and assembly costs over time. To wit, Apple now sells the 2010-vintage iPhone 4 and the 2009-vintage 3GS alongside its brand new iPhone 4S.

There are many advantages to this strategy. Apple saves itself from the considerable engineering cost and effort of designing dozens of phones (and issuing specific software updates for them), and greatly simplifies its logistics with a smaller number of SKUs (Samsung has an astonishing 136 phones currently for sale, and that’s just in the United States).

If price were the only factor in making a phone suitable for the proverbial “next billion” or “bottom of the pyramid,” or whatever you want to call the vast majority of people who don’t live in the developed world, Apple’s strategy would be fantastically clever. Unfortunately, reality intervenes: Apple’s iPhones simply aren’t developing-world-friendly.

This isn’t mere conjecture; I spent 2 years working in India. The heat, humidity, dirt and dust, shocks and jostles, and the occasional monsoon make quick work of iPhones, whether you have them in a case or not. Of my class of half a dozen recruits, 3 of us arrived in India with iPhones, and all 3 of us had them break somewhere along the way. When my 3G bought the farm, I replaced it with a 3GS, which still managed to have its headphone jack fail, its dock connector warp, and its volume rocker mysteriously fall off in my remaining months in India–to say nothing of the white plastic housing that developed cracks and began to separate from the phone’s front. And even before it broke, my iPhone’s speaker was simply too small to really be heard in India’s crowded streets.

The developing world is where Apple’s iPhone pricing strategy–and the iPhone itself–falls apart.

Normally when one is looking to counter criticism of a particular Apple product or strategy, we can point to a chart of Apple’s gangbusters sales growth and profits as a rather effective counterpoint (“you may think not having flash in iOS is a dealbreaker, but evidently a hundred million iPhone customers disagree”). Alas, the naysayers have the upper hand when it comes to Apple’s strategy in India, where Apple sold a whopping 62,000 iPhones–fewer than it sold in such demographic giants as Belgium, Norway, and Israel.

The phone itself needs to be designed for the developing world with improved resistance to dust and moisture, louder speakers, and other features more appropriate to the wants and needs of the market beyond merely having the right price. Selling last year’s phone at a lower price is only addressing half the problem, which is why Apple continues to lose out to Android, Nokia, and RIM (RIM!!!) in India.

I have no doubt that Apple knows this. They are smart and forward-thinking. They know what they’re doing, and I’m sure they have a lower-cost, more durable iPhone in their labs. But I wish they would pull the trigger before India and the developing world–the hotbed of future mobile tech innovations–throw their weight behind Android and Nokia

The Real Mobile Tech Revolution…

While the small sliver of people lucky enough to live in the developed world (perhaps 1 billion of the 7 billion souls now in this world) currently deal with omnipotent smartphones with screens that blur the distinction between smartphones and coffee tables, and ponder just how revolutionary our and social picture sharing apps (with badges!) and this week’s group messaging app are, there is a real revolution taking place in the developing countries that are home to the great majority of humankind.

Shafique Khan, right, demonstrates to Ghisi Lal Varma, center, a 61-year old farmer, a new grievance reporting service to use for sending complaints via text message to the government about problems in the village. (Caption & Image credits: Rama Lakshmi/Washington Post)

A recent article in the Washington Post titled “Indians use cellphones to plug holes in governance” gives a glimpse of the sort of wondrous changes that mobile technology is bringing to those who until now had never known the power of connectivity.

“The ubiquitous cellphone, with about 750 million users in India, and open-source Internet platforms are being deployed to ensure that trash is picked up on time, to track bribes and to help people learn English, find jobs and report incidents of sexual harassment on the streets.”

I spent 2 years in India working for one of India’s big companies, and witnessed dozens, if not hundreds of ways large and small that the mobile phone is transforming Indian society. It’s what inspired me to move to Silicon Valley and take part in the revolution.

What’s all the more remarkable is that they’re doing all this with phones like this:

The Nokia 1100. The best-selling single model phone (and possibly any single electronic device ever) in the world

No gyroscopes, no game monetization frameworks, and no $500 iPhones in this revolution–all it takes is the incredibly simple and deceptively powerful tools of voice (remember that?) and SMS. Gradually, as the capabilities of ultra-basic phones grow, these revolutionary services are expanding to encompass GPS and cameras, as is the case in Hyderabad:

…The local government uses Global Positioning System technology and cellphone cameras to manage the mounting problem of uncollected garbage. Sanitation supervisors take photos of overflowing trash cans, and the images are uploaded in real time. Officials say this helps hold sanitation workers accountable.

The phones may not be smart (yet…), but the people devising new ways to use them sure are.

The Real Mobile Tech Revolution will not be televised…

It will be texted.

webOS TouchPad beats Android Honeycomb to 1000 tablet apps

It’s simply remarkable. The HP TouchPad has been on the market for 3 months–the last 1.5 of which have been spent being “dead”–and it STILL beat Android Honeycomb (on the market since February) to 1000 tablet apps.

Take a minute and think how amazing that is when you consider the respective market positions of webOS and Android.

This is testament to the tenacity, creativity, and sheer scrappy determination of the webOS Developer Relations team–and the amazing and equally tenacious webOS community that has been tirelessly advocating on our behalf, spreading the gospel of webOS to convert developers and users alike.

I am honored to be part of such an amazing team and community.

Great work, people. I can’t wait to see what miracles we pull off next!

Setting a Straw-man Argument on Fire

Now that HP is “exploring options” for webOS, speculation has run rampant about the future of webOS. Some ideas are thoughtful, others well-meaning but boneheaded, and then some are oddly malicious posts that seem to be actively hoping for webOS’s death (I’m guessing these people also hate adorable puppies, sunshine, and their father, but I digress).

There’s one argument against the desirability of webOS for future partners that I want to address in particular because, as with many wrong ideas, it seems quite reasonable on first glance. It has appeared in a handful of places, and I won’t quote any directly, but the argument is along the lines of:

Why should any company be confident making hardware for HP’s webOS when HP itself isn’t confident enough in webOS to make hardware for it?

Seems pretty reasonable, right? Well, no.

The problem with this argument is that it presumes if something is not optimal for one company to do, it’s not optimal for any company to do. If HP contracts with an external catering company to run the employee cafeteria, does that mean catering isn’t a viable business? Of course not. It just means that HP knows where it can best focus its limited amount of time, money, and corporate focus, and running the kitchen and cash register is not among them. It is far better to leave it to a company that lives and breaths catering, which will always be able to deliver a better product at a lower price. Or there is the fact that the most popular OS in the world (Windows) comes from a company that doesn’t make its hardware. Does that mean Microsoft never had any confidence in Windows? No, it means they knew their strength was software (clearly) and they should leave making the boxes to companies that live and breathe sourcing operations and sales.

It’s the same deal for mobile hardware. While there are always exceptions, new state-of-the-art hardware comes at a fast and furious pace from a variety of world-class manufacturers in Asia. They live and breathe hardware, going from conceptual design to manufacturing and shipping at incredible speeds, and every part of those companies staff structure and corporate culture drive them to do it even better the next day. It would require an enormous investment of time and money to try and match the Asian giants in hardware manufacturing prowess, and with no certainty of success

(it’s also worth noting that the corollary of this is also true–the hardware giants all suck at software)

HP just realized it can do a better job with webOS if the webOS team laser-focuses on just that–webOS–and leaves other people to live and breathe the hardware on which it will run.