Platform vs. Cool? My take on Apple's business strategy...

Technorati Tags: Strategy , Apple , innovation , business , software + services , S+S

Interesting article about the iPhone here.  Although entertaining to read, I disagree with the premise.  It did get me thinking about the Apple business strategy, though, so I thought I'd post.  A bit of speculation on my part below, but here's my take on the Apple strategy and the risks of it.  Appreciate the feedback, pro or con, if you have it.     First, let me set the stage with a quote from the article (referring to Steve Jobs' "fear" that an app on the iPhone could bring down AT&T's whole network on the west coast):

I thought the device runs Mac OS X. If you believe Apple's marketing, the operating system is rock solid, hard to break, easy as pie to use, and so on. One bad application can do all that damage? The iPhone itself isn't just a phone or an iPod. It's really a mobile computer. Apparently one so powerful that software developers are forbidden to do anything for it, short of cute little Web-based applications, yet so sensitive that it's easy to screw up

After this bit of sarcasm, the author goes on to explain some more likely, commercial, reasons for not opening up the iPhone itself as a true platform.  The author's main premise is that Apple has made a huge mistake by not allowing developers to write software for the iPhone, and perhaps more importantly, not allowing consumers to load independently created software on the iPhone.  By ignoring the users' needs, the argument goes, they are taking a device targeted at creative people and then not allowing them to be creative, and contrasts this to the open-ness of the Mac platform. 

So here are some reasons why think this thinking in the article is a bit off base:

• The Mac is a platform, but beyond the creative and educational markets, it's never been successful.  The success in those markets has been great, of course.  But the platform does not really have a broad ecosystem (at least relative to competitive ecosystems). 
• The growth of Apple in recent years is not due to the success of their ecosystem but due to their UX innovations, and nice design.  This has been most visibly driven by the iPod -- which is also locked down. 

To the extent Apple is seeing volume growth in it's Mac line, I would guess it's due to people buying into Apple's corporate marketing machine: "Apple is cool, and if you own Apple products, you'll be cool, too."  You can think of iPod is the physical carrier of that messaging (and now joined by the iPhone in that task). 

By creating a halo of coolness around the Apple, they may be able to increase the penetration of their Mac OS.  And if they do, then they will be in a better position to try to expand their Mac ecosystem over time. 

This is probably a two-part strategy from Apple -- and the Mac may not be the most important part of it.

If you asked Apple about the iPhone as a platform, I think what they might say is that the web itself is the real platform, and they are doing a better job opening that up on a mobile device than anyone.  Despite the fact that Apple is heavily invested in a proprietary fight for the Mac platform, they've struggled for years to grow this business line by imitating Microsoft's platform business model and just haven't been able to do it -- their products were innovative, but not enough; the business was agile, but not enough; the business was savvy, but not enough....  I think they are actually on far stronger strategic footing now. 

By positioning the web as the real platform, they could possibly do some collateral damage to Mac ecosystem, but frankly, those segments are pretty loyal so I think the risk is low.  But if they are successful in convincing folks that the web is the real platform, they get to "reset" the competition with Microsoft a bit because it neutralizes the strength of Microsoft's existing platform business model.  Ironically, this can open up opportunities for the Macs, too, because consumers can buy the "cool" with a perception of a "reduced penalty" for the somewhat limited ecosystem built out around the Mac. 

Bottom line: I'm sure that Apple would love to sell more Macs, but they probably see their best chance to do that is to try to neutralize the traditional advantages of Microsoft's platform-based business model with the twin strategies of driving a halo of coolness around all of their products to improve their own platform base, and simultaneously marketing the idea that the web is the "real" platform to make their own ecosystem weaknesses look less relevant. 

There are at least two major risks to this strategy.  The first is that consumers are not really stupid.  That may sound harsh, but Apple really needs people to believe that since the web is becoming a platform -- which is true -- it is therefore the only platform that matters -- which is definitely false.  If people don't buy into this flaw of logic, then the impact of their strategy is significantly reduced.  This is probably the most important reason why Apple is not opening up the iPhone -- if they did, the implicit message would be that more than one platform is important -- which is, of course, true, but it would make it harder to sell more Apple devices.    

The second major risk in this strategy is that the world, and competitive landscape, are changing pretty quickly, and the pace of change is still accelerating.  For example, Microsoft has recognized that the web is, in fact, a platform, and has been building out a rich web platform ecosystem for a while now.  Even more important, Microsoft has recognized for almost 10 years that both the traditional software and web platforms are important, and that the most valuable thing for consumers is to help them tap into the power of all platforms in a cohesive, seamless way.  In fact, that's why Microsoft created Outlook Web Access in the late 1990's, and invented AJAX in the process.  While we started on this path close to a decade ago, Microsoft is now beginning to release a lot more stuff now that puts ideas into action.  We tend to call it S+S -- that is, Software + Services.  This is a Microsoft strategy, but it's also an industry trend. 

Even Apple recognizes this, and I think would agree that part of the success of the iPod is the iTunes software -- which is a great example of S+S.  Substituting the iTunes local software for a completely web-based experience doesn't look like it's on the radar for Apple, and it would probably not be as enjoyable a consumer experience. 

[Note: I realize that S+S could seem a bit nebulous, so look for more posts in the future that help illuminate this topic.]

In one respect, the communication challenge for Microsoft is slightly harder because the message is more nuanced -- we want people to understand not just that the web is a new platform, but also that the best UX comes when the traditional platforms and the web platform can work together.    In another respect, I think it's easier because I think the idea that everything should work well together across and between platforms will resonate with people. 

So why do I think this represents a risk to Apple's strategy?  Because Apple's strategy may not have accounted for Microsoft's strategy.  With Microsoft spinning up its own marketing machine on S+S (which in a way I'm a part of, but I hope you also always find me honest -- and definitely my opinions are my own on this blog!), Apple's powerful corporate marketing machine has some competition.  This competition presents alternative viewpoints that offer consumers a choice of philosophies: Apple's representation that the web is the real platform vs. Microsoft's view that the web and all other platforms should work together well.  I think consumers will mostly likely choose the S+S vision, because it does the most to empower them, it's completely genuine, and it's problematic for Apple to argue against it when they're greatest success has come from implementing it themselves (e.g., iTunes). 

So there it is -- my take on Apple's strategy and why Apple declined to open the iPhone as a platform, though they certainly could've done so.  I don't have any inside information at all -- this is just my theory about what Apple is thinking, and trying to do. 

What do YOU think?