My Swipe keynote presentation is available as a free Perspective download.
Swipe Conference 2012 Keynote.
[Originally presented September 5th, 2012 in Sydney Australia.]
In it I present the history of personal computing and the shift to new platforms that foreshadows the dawn of a new era.
It takes money to make money. That’s a cliché. But it’s also true. The interesting question is how much can be gained from how little.
In previous articles I explained how Apple’s expenditures of capital for equipment used in manufacturing affects their output of products. The relationship between capital in and product out should stand to reason.
The more surprising aspect of that analysis is that we get to know in advance how much Apple spends (since they tell us their budget a year before it’s spent.) and therefore it becomes possible to get a rough idea of how much they will produce. And since demand has generally been higher than supply we can get an estimate of how much Apple will sell.
The only missing piece to this logic chain is to estimate how much will shareholders benefit from the capital expenditure. I’ll try to establish the relationship through a build-out of graphs.
The first graph shows Apple’s share price at weekly resolution.
The time frame stretches back six fiscal years. The time span includes some dramatic periods including the financial crisis and the launch of the iPhone and iPad.
To illustrate the effect of the iPhone and iPad on this share price appreciation, I’ve overlaid a quarterly resolution graph showing revenues over the same time period with each product line shown separately.
Note that I’ve indexed the vertical scale to match approximately the highest peaks of both graphs. The two axes scales are shown separately on the left.
Continue reading “Using Capital Expenditures to predict Apple’s share price”
A conversation with Philip Elmer-DeWitt on Apple’s relationship with the media. How did the relationship evolve, is it changing and how is Apple addressing different media channels. Philip brings 30 years of experience to Apple journalism and provides some poignant anecdotes about Steve Jobs, the folklore of Apple and the disruption of journalism itself.
via 5by5 | The Critical Path #57: There Were Too Many Newspapers in New York.
[The following was originally published on LinkedIn.]
The US is in the forefront of smartphone usage. This has not always been the case. Five years ago only 3 percent of US phone users were using a smartphone, lower than the global average. At the time Palm and BlackBerry were the prominent devices in the US while in Europe Nokia’s push with Symbian and Microsoft’s licensing of Windows Mobile led to a smartphone adoption rate of about 7%.
All that changed with the iPhone. After 2007 the US began to rapidly catch up and eventually overtook all other regions in terms of smartphone adoption. The latest data from comScore Mobilens shows that the US is now effectively 50% penetrated. The following chart shows just how quickly this happened.
In December 2009 only 17% of Americans used a smartphone as their primary phone. As of August the total reached 49.8%. By today the US is effectively a majority smartphone usage country and it looks like there is no slowing. We might very well see the US reach saturation with 80% smartphone usage in another two years.
This is a quick note to mention that I’ll be speaking at the Tools of Change (TOC) Frankfurt Conference this October on the eve of the Frankfurt Book Fair. Conference details:
You can get a 20% discount if you use the following code when registering:
TOCPartner20TSpeaker
I’ll be speaking about the jobs publishers are hired to do. Without giving too much away, here is my synopsis of the talk:
We’re inclined to “categorize” or “segment” media according to its attributes. We think of visual, auditory or written forms as distinct. Within each of these definitions of media we further sub-segment according to the way they are packaged. As in books, periodicals, or TV vs. film and albums and singles. These definitions are convenient because they describe the product and the product has evolved into a distribution chain and a therefore a market. It becomes therefore analogous to think of a book market and a TV market and a periodicals market as if these are what people actually desire.
But what people desire are more basic things. They desire to feel good or to be comfortable or to escape into fantasy or to be aroused. They have thirsts for knowledge or flights of fancy or needs for belonging. Authors and story tellers have sought to serve these needs for as long as we’ve been humans, regardless of the medium. When you step back and ask what the real “markets” are you realize that we’ve categorized according to technical and business means of delivering these needs.
Business theorists have a word to describe this categorization: segmentation according to product attributes. It’s a common practice to define markets according to products rather than what these products are hired to do. The great Harvard marketing professor Theodore Levitt used to tell his students, “People don’t want to buy a quarter-inch drill. They want a quarter-inch hole!” The idea that you can categorize by what consumers want to get done rather than what you are selling them is not new but it’s still a very hard thing to get your head around. It’s become known as “Job to be done” segmentation and has changed product planning for many firms. If you apply this method to your industry you realize that the products you sell are in competition not with other products like them but with completely new products. A newspaper may be in competition with Angry Birds and a TV show with FaceBook and a Movie with a cinematic themed video game.
If you take the history of story telling and job to be done analysis into consideration you realize that technology has always played a part in how stories are told and re-told. This technological progress is accelerating and we are now in an era where apps are the new medium which can encompass much of any of the previous story telling mediums. Apps are so flexible and so easily distributed and consumed that they threaten to converge multiple media types. I’ll explain how app economics are affecting not just games, but all forms of publishing.
This is a talk I gave today at Aalto University. It’s a wide ranging talk and Q&A session lasting about 2 hours.
You can listen and see the visuals using the Perspective app on your iPad. Download the app (free from the App Store if you don’t already have it) and open the link below using the iPad.
On October 5th, 2011 I asked Why is there no iPhone 5? The question was prompted by the pervasive media surprise that the 2011 iPhone launch was the “4S” and not a completely new design.
I answered this question with the conclusion that an iPhone “5” in 2011 would over-serve the market by offering more than most buyers would be looking for. That was because there could only be three groups of users the iPhone 4S would need to target: existing iPhone users, smartphone non-consumers and non-iPhone smartphone users. The majority of iPhone users in late 2011 who would be willing to upgrade were iPhone 3 or 3GS users and for them the 4S would be a huge improvement. Non-consumers would find the 4S attractive, as they would any iPhone; and existing smartphone users (mainly Android) would still be in their first contract and not likely to be looking to upgrade. Given the conditions at the time, the 4S was an adequate fit with customer expectations.
I wrote “The question will be very different a year from now when most early Android buyers will be looking for a new phone and when most iPhone 4 users (all 70 million of them) will be looking for a new iPhone. That would seem like a good time to introduce a new iPhone ‘5’.”
It is now a year hence and we can consider how these same three targeted user groups see the new iPhone:
Read the rest of the post here: Why iPhone 5? | LinkedIn.
(Note: you can also follow me on LinkedIn now).
Quarterly financial data is often a lagging indicator of strategic success. RIM’s vital signs were exceptionally strong up until early 2011. Consider the following graph showing RIM’s device growth.
Using language commonly heard among analysts, one would say that the company was “reverting to the mean” and growing nearly in-line with the market. In other words, exceptional growth was over but continuing growth was likely. The company was returning to something “normal.”
However, keen observers of the market would have been hard pressed to find any reason for justifying that performance. Seen through a disruptive lens, it was evident as early as 2008 that RIM’s strategy was not sustainable. The company had a very weak smartphone product relative to emergent iOS and Android ecosystems. And yet, the company continued to prosper for nearly three years, through 2008, 2009 and 2010. Those shorting the stock during this period would have been unrewarded.
But then in early 2011 it fell off a cliff. Continue reading “Reverting to the mean”
James Allworth, Harvard Business School Forum for Growth and Innovation fellow and co-author of How Will You Measure Your Life joins Horace for an in-depth discussion of the vulnerability of Apple to low-end disruption. Specifically, assuming the iPhone reaches a point of over-service, did Apple arm its suppliers with the means to create its replacement? We dip into case studies of Dell, HP, HTC and Microsoft and touch on how iPod escaped this fate.
via 5by5 | The Critical Path #56: Strategic Disadvantages: A discussion with James Allworth.
Tim Cook is quoted as having said the inventory is not only evil but that it’s fundamentally evil.
With just-in-time production inventory can be reduced, at least work-in-progress inventory. Unfortunately inventory cannot be completely eliminated. The fact remains that you sometimes need to stockpile product for launch and need to have some on hand depending which way it’s sold. There is also substantial channel inventory (which is off Apple’s books but still evil) that needs to be in the hands of distributors.
Tight inventory management has become a characteristic of Apple and that contributes to getting ranked number one in Supply Chain Management. So we can expect that Apple runs a tight ship. In fact we have evidence of this through the ability to track our purchases from when they ship out of a factory in China all the way to our homes.
This tracking in itself shows that when product is in high demand production is initiated on direct consumer orders not just in response to maintaining a level of inventory. So with that in mind, we can revisit the question of how many iPhones 5 the company has produced.
First, we need to step back and recall the method for analyzing production. I built a model which attempts to show what a typical production run for an iPhone model would look like. I first published the process in early 2011. It used the historic data from iPhone 1, 3G and 3GS to try to predict iPhone 4 production. I’ve updated the model to show what that would look like today.
The assumptions driving the model are: Continue reading “On how not to be evil”
Asymmetric Competition