One of the types of reports I used to love to write back when I was a competitive analyst was “what if” reports. This was when you started at a future point, five or 10 years out, and with a set result, you discussed the things that must happen to achieve that result as if they were historical events. The idea behind this concept was the saying that hindsight is 20/20. Often, we get so involved in what is going on day to day that we miss the bigger trends and opportunities. Even if folks provide reports about risks, they can get lost in the noise, because the resulting impact isn’t clear.
Creating a “what if” scenario doesn’t mean the suggested result will happen or that the particular path to get there will be taken even if it does. It is a form of the Delphi method, which typically involves a number of highly placed people creating the potentially predictive document. (The more people you involve in the creation, the harder it is to do this; the more people involved, the more buy-in you typically have in the result.)
Now I could do this on how Google beats Apple or Apple beating Google or any one of hundreds if not thousands of permutations, but since we are ramping to the July 29th launch of Windows 10, and Windows 10 is designed to take the fight back to Apple, I thought this would be the most interesting and timely scenario.
The iPod as Apple’s Recovery
After Steve Jobs was initially forced from Apple in the 1980s, Apple really wasn’t a threat to Microsoft until he came back in 1997 and the company successfully released the iPod. This product and its related success allowed Apple to pivot from a firm on life support to one that dominated in a very key and visible industry.
At that time, Microsoft’s licensing model failed, not because it wasn’t viable, but because the company under-resourced it after having switched its focus from users and developers—which is what grew the company—to the IT organizations that were IBM’s power base. By abandoning its own power base, the company left a vacuum, which Apple gleefully filled. By 2005, Microsoft had largely moved into IBM’s enterprise space successfully, but had given its more powerful consumer/developer base to Apple.
Apple first saw an emerging vulnerability in smartphones that could successfully displace the iPod. While Microsoft tried unsuccessfully to attack the iPod base, Apple made the first pivot to smartphones by successfully moving and expanding its power base in MP3 players to the vastly larger smartphone market. The model was set.
However, when it came to the iPad, Apple broke the model, because the tablet market wasn’t larger than the smartphone market; it was smaller. And not only a little smaller—it was vastly smaller. In addition, in moving to the iPad, iPhone users didn’t jump to that platform because it didn’t include telephony. In effect, with the iPad, Apple stepped back and created a large iPod with a different name. So unlike the way massive growth in the iPod translated to rapid growth in the iPhone, the iPad grew and then stalled—along with the entire tablet segment.
The Apple watch added to this in that it was basically a mini iPod with an updated design and built-in wrist strap. It didn’t build on the iPod/iPhone cycle—it went at an even smaller existing market to the tablet, the smart watch. This segment was similar to the MP3 player market when Apple entered, but while Apple made the iPod cross platform, the Apple watch was tied only to iPhones, thus sharply limiting its available market. In effect, Apple forgot its model, which significantly weakened the iPad and Apple Watch’s ability to assure Apple’s continued profit dominance.
Apple, therefore, left a major vulnerability. It broke its market expansion model with the iPad and Apple Watch by not moving to another large powerful market that would consume the current market it dominated, which would have allowed Apple to remain as a market leader (at least from the perspective of profit) like it did with the iPhone.
In the meantime, with Windows 10, Microsoft saw this opportunity and took the iPod/iPhone/iPad concept, added PCs and created Windows 10.
Why Windows Won
Apple looked at Windows 10 like any other Microsoft OS, which means the company saw a once successful (but now failed) model based on the Windows 8 experience, which had been ill conceived to begin with. (Microsoft, having not learned its lesson from Windows Vista, effectively repeated that mistake.) Apple didn’t pick up that smartphones running Windows 10 could—particularly when connected to cloud services like Azure or Office’s cloud offerings and with the simple addition of a keyboard, larger screen and a pointing device—become a full PC.
While the PC market wasn’t larger than the smartphone market, it was far larger than even the combination of tablets and smart watches. By growing the platform to encompass smartphones, PCs and tablets, Microsoft created a platform where a user could carry one device and, with accessories, gain all three experiences. Both Apple and Google were caught flat footed. Google could have responded but it had split its opportunity between Chrome OS and Android. Apple was unwilling to combine iOS and MacOS, so neither could respond to this threat in a timely manner—even when success became self-evident in the 2018-2020 timeframe, when a variety of hardware technologies came to market to address what was initially an ugly mess of hardware.
Of the hardware that came to market in that later timeframe, HoloLens was the most compelling, because it could virtually scale the display to any size. Speech-to-text and vocal-command technologies, coupled with the ability to render usable keyboards and instrument the users’ hands more successfully, finally moved in and began to displace the remainder of more slowly advancing smartphones, tablets and smart watches along with most signage, instrument displays and even TVs.
It is interesting to note that Microsoft took the market from Apple initially in the 1990s by focusing more tightly on users. Apple took that fight right back to Microsoft by doing the same thing in the 2000s, and in the 2010s, Microsoft took it back again, largely by focusing on users/developers and not Apple or IBM. The other lesson to walk away with from this is that the Steve Jobs strategy of expanding the available market remains viable as well; it was just better implemented by Microsoft after Windows 10 was launched.
I hope you found this as much fun to read as it was to write. Typically, if someone wrote this focusing on Apple (and it could be written toward Apple or Microsoft), someone else would then detail a strategy that would assure that this result didn’t happen. And Microsoft would create a similar effort to assure that it did. In both cases, the poor sap who wrote it would have to defend against attacks from far more powerful executives who felt threatened by the report and didn’t like what it implied needed to happen with their organizations.
I expect this is why “what ifs” are rarely written anymore; it simply pisses off too many people. Though had this been done in the Zune timeframe by Microsoft, it likely would have pointed toward an iPhone-like device that grew more rapidly in size than an iPod-like device, which failed at market. Just something to think about this week.
Rob Enderle is President and Principal Analyst of the Enderle Group, a forward-looking emerging technology advisory firm. With over 30 years’ experience in emerging technologies, he has provided regional and global companies with guidance in how to better target customer needs; create new business opportunities; anticipate technology changes; select vendors and products; and present their products in the best possible light. Rob covers the technology industry broadly. Before founding the Enderle Group, Rob was the Senior Research Fellow for Forrester Research and the Giga Information Group, and held senior positions at IBM and ROLM. Follow Rob on Twitter @enderle, on Facebook and on Google+.