Top Bananas | Monthly Archives: October 2015

Vertical Integration Isn’t Always the Answer

Posted on October 31, 2015 by admin Posted in Hardware, Software Leave a comment

What it is: Vertical integration is when a company controls the entire product as opposed to working with multiple partners.

Back in the early days, the battle between the PC and Macintosh was resolved fairly early. The PC won with MS-DOS and later with Windows. Back then, everyone thought that Microsoft had the most successful business model of licensing the operating system and allowing multiple partners to make money selling PCs. The logic behind this business model was that both Microsoft and PC manufacturers were making tons of money as long as people kept buying PCs.

During this time, everyone thought that Apple had the wrong idea of trying to control both the hardware and software. As proof, they pointed to the far fewer number of third-party hardware and software that worked on the Macintosh. This created a vicious cycle as fewer people wanted a Macintosh if it had less software and accessory support, so fewer companies bothered supporting the Macintosh if it had so few people using it.

Then something happened. Apple created the iMac and started selling Macintosh computers again. Windows PCs still far outnumbered Macintosh sales, but Macintosh sales were slowly climbing for the first time in a long time.

Then Apple started selling the iPod and followed that up with their iTunes store. Now you could buy Apple hardware to listen to music purchased from iTunes. The iPod was perfectly designed to work with iTunes, and with iTunes becoming the largest music retailer on the Internet, sales of digital music downloads boosted sales of iPods.

When the iPhone came out, it was a closed system. Then Apple opened up their app store and created a new source of revenue while giving others a chance to make money from the growing iPhone market. When Apple introduced the iPad, the app store continued growing in popularity, making developers rich. This attracted more developers, which indirectly attracted more users because they wanted to use devices that could access the App Store.

Apple’s control over the hardware and software is something Microsoft is finally starting to mimic. With their Surface Pro tablet hybrid and their Surface Book laptop, Microsoft is starting to sell hardware and software, essentially competing with their own partners. However, this vertical integration of hardware and software means optimized hardware and software.

Now everyone thinks that Apple’s business model is the one to mimic, but only because it’s currently working. Yet the real problem isn’t which model works (they both work) but which product offers the best customer experience.

In the old days, PCs offered the best customer experience because they were far cheaper than Macintosh computers and offered much greater support. Today, Macintosh and other Apple products offer the best customer experience because the operating system isn’t clogged with bloatware and Apple Stores provide free technical support instead of forcing you to call a support line and turn yourself into your own computer technician.

People don’t care about the business model of a company. They care about themselves and who offers them the best customer experience. Ultimately it boils down to customer experience and that’s where the PC world has fallen apart.

PC manufacturers start out by sabotaging their PCs with bloatware that slows the computer down right from the start and inconveniencing the customer. Then if you need help, you’re forced to call a technical support line that’s outsourced to keep costs down for the PC manufacturer with little regard for how the customer experience might be. So with bloatware and outsourced technical support, PC manufacturers are giving customers the work customer experience possible.

The real secret of success isn’t copying Apple or Microsoft, but in providing the best customer experience possible. It’s expensive and time-consuming to do it all yourself, but that’s what makes competing against Apple so difficult. Most companies can make similar products to Apple, but they can’t duplicate the customer experience that Apple provides.

Microsoft’s latest attempts to make and sell Surface Pro tablets and Surface Book laptops is an attempt to sell premium PCs that avoid bloatware and provide technical support through Microsoft Stores. It’s definitely a step in the right direction for the PC world since it’s far better than relying on third-party companies like Dell or Hewlett-Packard that install bloatware and outsource technical support.

Still Microsoft has a long way to go to catch up to Apple, but at least they’re trying. The same can’t be said for others like Dell, Hewlett-Packard, Samsung, and others who copy the look of Apple products but lack the customer experience to go along with it. Until another company decides to focus on the customer first and their own profits second, Apple likely won’t have any serious competition for a long time to come.

Enchanting the Customer

Posted on October 30, 2015 by admin Posted in Business, Marketing Leave a comment

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What it is: Making the customer feel like they got their money’s worth and more is a way to retain customer loyalty.

Guy Kawasaki worked as an evangelist for Apple so he has first-hand knowledge and experience at how Apple works to enchant its customers. The main goal is to under promise and over deliver. If you can do that consistently, you’ll always delight and surprise your customers, and that generates positive word of mouth. There’s a reason why Apple has so many loyal fans. It’s not because of slick marketing or fancy products, but because Apple makes an effort to surprise and delight the customer.

Think of the PC world where manufacturers focus only on themselves. To make more money, most companies fill their PCs with bloatware, which is trial software and additional utilities from third-party companies who hope to entice users to pay for a subscription (such as an antivirus subscription) or upgrade to a newer version of the software. Such bloatware takes up space and often slows down the computer. So before the consumer can even use a PC, it’s already crippled for the manufacturer’s benefit, not for the consumer’s benefit. In fact, the consumer is actually hurt and inconvenienced by bloatware.

Now if you use a Windows PC and run into problems, you have to call a technical support line that often makes you wait a long time. when you finally reach a support person, that support person must give you verbal instructions to help turn you into a computer technician over the phone. Imagine having car problems and calling a mechanic who then tells you how to fix the problem by crawling underneath your vehicle and changing brake pads and oil filters yourself.

When you need technical support for a PC, manufacturers make you do most of the work, which wastes your time and frustrates you since most people don’t know understand computers in the first place. Trying to turn ordinary people into computer technicians through verbal instructions alone is an exercise in frustration and confusion that virtually guarantees a poor customer experience.

On the other hand, every Macintosh Apple sells is optimized with software ready to run. There’s no bloatware to slow your Macintosh down, and removing software you don’t want is easy by just dragging it to the Trash icon.

If you need help, you can take your Macintosh to an Apple Store and get free technical support from a live person who does most of the work for you while you wait. That’s a huge contrast to calling a technical support hotline and trying to turn yourself into a computer technician with verbal instructions over the phone.

In Guy Kawasaki’s book “Enchantment,” he talks about how anyone, not just companies, can enchant other people. Basically it involves looking out for their interests as well as your own. Taking advantage of people is definitely not a way to enchant or delight others, yet that’s exactly what PC manufacturers do with bloatware (that inconveniences the user) and technical support hotlines that turn the user into a computer technician through verbal instructions, guaranteeing a frustrating experience.

Enchanting people involves doing what you say you’re going to do, doing it on time or ahead of schedule, and completing your work to the satisfaction of the other person. Even better is if you can do more than you were asked to do.

In the job market, who will a company fire first? Someone who grumbles and barely does any work, or someone who works quickly, efficiently, and productively while making people around him or her happy to have them around?

Enchanting people isn’t just for marketing but for individuals as well. Everyone can improve their productivity in whatever field they’re in. All you have to do is look at any working relationship from the other person’s eyes and think of how to make that other person happier. It’s really that simple, and that’s the formula for success that Apple uses that competitors like Samsung and Dell Computers consistently fails to copy. If you’re going to copy Apple, copy what really works rather than just creating cheap clones of Apple products. It doesn’t take an MBA to figure that out, but apparently this message hasn’t reached Apple’s competitors yet after all these years.

The New World of TV with Apple TV

Posted on October 29, 2015 by admin Posted in Hardware Leave a comment

What it is: Apple TV is an accessory that connects to an ordinary TV set and provides content through the Internet.

The Apple TV has been a deceptively simple product that’s slipped under the notice of most people. Basically the Apple TV acts as a link between the Internet and your TV set, allowing you to view Internet content on a larger TV screen.

This might seem kind of useless until you realize that many people watch movies and TV shows over the Internet using a computer, tablet, or smartphone. Allowing Internet content on a larger screen TV just gives people another way to watch Internet content.

However the real advantage of Apple TV isn’t just turning your TV into a larger screen, but in helping break up the obsolete structure of TV watching itself. Back in the old days, TV signals came through the air for free and you just needed a TV antenna to catch those signals. Some TV sets had their own antennas (known as rabbit ears) while others connected to a cable that linked to a much larger antenna strapped to a chimney of a house. This larger antenna captured signals better to allow cleaner viewing of TV shows.

Of course back then, there were only three networks to watch anyway: ABC, NBC, and CBS along with maybe a local station or two. If you wanted to watch a show, you had to rearrange your schedule to coincide with the TV network’s schedule. Get home too late and you missed your favorite show until next week.

With the introduction of VHS tapes and later DVR recorders, you could record your favorite show and watch it any time you wanted at your convenience. Now the network’s schedule made no difference since you could watch TV on your schedule.

Instead of relying on TV signals and antennas, the next evolutionary step came from cable TV. Now you had to pay for service with varying options to buy additional channels. Although cable TV gave you more channels to watch, your different options meant you often had to purchase more channels than you really wanted to see all the channels you actually wanted. Because of this inconvenience and rising cost, many people are simply cutting the cable altogether as clueless cable TV companies keep jacking up prices while offering worse customer service in return.

People can cut their cable TV subscriptions because of the Internet and that’s the future of Apple TV. You may need to subscribe to multiple services like Netflix or Hulu, but Apple is betting on content providers directly reaching consumers through their own apps or through iTunes that allows purchasing of individual TV show episodes. Ultimately the future of TV watching is a la carte consumption where you pay for just the TV shows you want to watch.

Right now this is inconvenient since you may need a Hulu subscription to watch TV shows and a Netflix subscription to watch movies with iTunes offering a little bit of both. The real future will come with all you can eat pricing.

If you remember back in the old days of Internet access, you had to pay per minute, which made accessing online services like America Online or CompuServe expensive. When America Online switched to a flat fee pricing, their subscribers could use AOL all they wanted, and that soon became the norm. That’s the future of TV watching.

Initially every content provider will try to market their content towards consumers so you can watch individual shows, but bundles should start appearing soon, allowing you to watch more shows at a reduced price. The difference will be that this new way of watching TV will still be cheaper and more flexible than today’s cable TV bundles that charge too much for channels most people never want to watch, which forces them to buy multiple bundles to see the channels they do want to watch.

A la carte TV watching is the future. How we pay for it can be cumbersome or convenient, and whoever figures out how to make it convenient will grab the bulk of subscribers and money as well, and that’s the future that Apple TV is aiming for.

Declining Tablet Sales

Posted on October 28, 2015 by admin Posted in Hardware Leave a comment

What it is: iPad sales keep dropping every quarter until it hit a four year low.

When Apple introduced the iPad back in 2010, sales kept skyrocketing every quarter while PC sales started dropping. Now in the past few years, sales of iPads keep dropping every quarter. While no one knows the real reason, it’s most likely a combination of reasons.

First, tablets last a long time. Many people are still happily using the original iPad five years later with no need to upgrade to a newer version. Unlike smartphones that are on a two year cycle with most carriers, iPads are under no such artificial upgrade cycle.

Second, smartphone screens started getting bigger to the point where they’re like miniature tablets of their own. Since more people carry smartphone with them, a larger screen smartphone duplicates most of the functions of a tablet.

Third, notice that Macintosh sales keep steadily climbing every quarter? In the past quarter, Apple sold 5.7 million Macintosh computes, a new record, and the trend only seems to keep rising. Most of those Macintosh sales were macBook laptop models.

Now if you look at the MacBook line of laptops, you’ll see that they emphasize lightness and thinness, which is precisely the advantage of carrying a tablet instead of a traditional, bulky laptop. So it appears one major reason why tablet sales are slowing is that laptops are getting smaller and lighter to the point of being small, light, and thin enough to use instead of a tablet. Laptops also offer more powerful software such as Xcode for programming, Quark XPress for desktop publishing, and AutoCAD for designing. Not many people need these powerful programs, but the available software for OS X is still larger than the software library for iOS, which consists mostly of entertainment apps like games. If you want to be productive with little hassle of sharing files, a thin, light laptop like a MacBook is the better option than a tablet.

So it appears the tablet market is being cannibalized from two ends. First the larger smartphones. Second, the smaller, thinner, lighter laptops. To survive, tablets need to get more powerful so their smaller size can simpler user interface can make them more useful in tasks that require mobility but less interactivity such working as cash registers and credit card processors in restaurants, or as sketch pads for drawing up plays in sports.

Tablets still have their uses but they’re being squeezed between smartphones and laptops. Sales of iPads likely will never reach the high sales rates of the past, but they’ll likely stabilize at a decent level. In the meantime, people will likely upgrade their tablets every five or so years, their smartphones every two years, and their laptops every five or so years as well. The tablet market is a niche market. It fills that niche well, but it likely will never be a major growth area ever again.

Apple’s Fiscal Results

Posted on October 27, 2015 by admin Posted in Business Leave a comment

What it is: Apple keeps making products that people keep buying, yet Wall Street can see nothing but pessimism and doom for Apple’s future.

Here are the facts. For the third calendar quarter and fourth fiscal quarter of 2015, Apple posted revenue of $51.5 billion and net quarterly profit of $11.1 billion, compared to revenue of $42.1 billion and net quarterly profit of $8.5 billion in the year-ago quarter.

For that quarter, Apple sold 48 million iPhones, up from 39.2 million in the year-ago quarter. iPad sales were down to 9.9 million from 12.3 million in the fourth quarter of 2014, but Macintosh sales rose to 5.7 million from 5.5 million.

Take note of that fact. While the entire PC market continues its steady decline, Macintosh sales keep climbing. Most likely many Macintosh users currently use a Windows PC or had used a Windows PC. For Macintosh sales to keep steadily rising means that many former Windows PC users are switching to the Macintosh.

Now notice the pessimistic fact that iPad sales keep slipping. Part of the reason is that larger iPhones are serviceable as tiny tablets, another part of the reason is that tablets last a long time and don’t need a yearly replacement like smartphones do. After all, there’s little difference between an iPad Air 2 and an iPad Air. People want a new smartphone because they use it all the time. People don’t use tablets as often and if they do, their current tablet is likely sufficient for years to come.

Of course, this trend of declining iPad sales should at least temporarily reverse itself when Apple introduces the iPad Pro this November. The introduction of this new product category will likely give iPad sales a bump upwards, but whether a larger iPad can maintain increasing sales is another question altogether.

The real news is that Apple keeps selling more iPads than any other tablet manufacturer in the world. Microsoft, Samsung, and any other manufacturer would kill to have tablet sales of 9.9 million a quarter so this number is only troubling compared to previous sales that were higher.

What would be interesting is how many Macintosh computers are laptops and how many are desktops (iMac, Mac Pro, and Mac mini). If more Macintosh computers are laptops, then that indicates mobility is more important, and thinner, lighter MacBook laptops are also hurting iPad sales. For many people, an iPad is nice, but a MacBook laptop is far more crucial. The iPad Pro likely won’t reverse that trend, but it can reverse that trend among artists who prefer drawing with the Apple Pencil on the iPad Pro.

In short, iPhone sales keep rising, Macintosh sales keep rising, and iPad sales keep sinking. In comparison, Samsung keeps seeing declining smartphone sales along with weak tablet sales, and Microsoft and other companies involved in PCs also see steady declines in the PC market. Out of all the technology companies, Apple is doing the best and remains the strongest while others cling to the sinking world of PCs.

One other note is that apple announced a 0.52 cent dividend. That means if you have 2,000 shares of Apple stock, you’d earn $1,040, which would be enough to help you buy a new Macintosh, iPad, or iPhone. The chances of Apple abandoning their dividend soon is unlikely, so if you want a steady source of income, buy Apple stock and keep cashing those dividend checks every quarter.

The Lack of Vision

Posted on October 26, 2015 by admin Posted in Software Leave a comment

What it is: Windows Phone is Microsoft’s phone operating system that tried to challenge Android and iOS. Despite any technical advantages, it seems doomed to failure through Microsoft’s lack of vision.

A long time ago before Apple introduced the iPhone, Microsoft has roughly 20 percent of the smartphone market with their Windows Mobile operating system. In fact Windows Mobile was so popular at one time that Palm Computing licensed Windows Mobile for their own Palm smartphones after PalmOS started to fade in popularity.

Between BlackberryOS, Windows Mobile, and Nokia’s Symbian operating system, the smartphone market looked locked up between Research in Motion, Nokia, and Microsoft. Then Apple introduced the iPhone and changed everything.

To compete, Microsoft realized that Windows Mobile wouldn’t work. Instead, Microsoft created a brand new operating system dubbed Windows Phone 7, which introduced the tile user interface that Microsoft later used for Windows 8.

With the introduction of Windows Phone 7, Microsoft made developers dump their old Windows Mobile apps and rewrite them completely for Windows Phone 7. Then Microsoft inexplicably introduced Windows Phone 8, which was incompatible with Windows 7 apps. That meant developers had to rewrite their Windows Phone 7 apps for Windows Phone 8. When Windows Phone 8 failed to excite the smartphone market, Microsoft decided to scale Windows 10 down for mobile devices. That meant developers had to rewrite Windows Phone 8 apps to run on Windows 10.

By constantly forcing developers to keep rewriting their apps from scratch, Microsoft insured that their smartphone operating system would never have as many apps as Android or iOS. They also insured that developers wouldn’t make money on Windows Phone, so they had a better chance of making money developing for Android or iOS instead.

Microsoft’s lack of vision also created another problem. When Microsoft created Windows Phone 7, they designed it solely for smartphones. Then Apple introduced the iPad, running iOS. Suddenly Microsoft realized that Windows Phone 7 couldn’t scale up to tablets, so they created a new tablet operating system called Windows RT.

Unlike iOS that allowed apps to run on either the iPhone or iPad, Microsoft chose to focus on Windows Phone 7 for smartphones and Windows RT for tablets. That meant Windows Phone 7 apps couldn’t run on Windows RT tablets and vice versa. This insured that neither Windows Phone 7 or Windows RT would be able to support each other by sharing common apps.

Once both Windows Phone 7 (later Windows Phone 8) and Windows RT failed, Microsoft dumped both and redesigned Windows 10 for both smartphones and tablets. Once again, Windows 10 is starting from scratch again by forcing developers to rewrite their apps for Windows 10.

By failing to plan ahead, Microsoft has wasted time and money redesigning operating systems that they abandon shortly afterwards. Now with Windows 10, Microsoft finally has a plan, but they’ve wasted so much time they’re still behind and likely never to catch up in the smartphone or tablet market.

Windows Phone 7/8 is proof that technical specifications mean nothing without a long term vision to go along with it. Windows Phone 7/8 was technically a decent operating system, but technical specifications are only useful if they provide a useful feature for the user. Companies that forget this are doomed to make expensive and wasteful mistakes all the time. Just ask Microsoft.