The Carpadium Blog is now hosted at the Carpadium.com site. Please follow the link to find all of the old entries, as well as all of the new entries.
M@
We have moved!
9 years ago
Thursday, September 11, 2008
Tuesday, September 9, 2008
Can anyone spell "mission critical"?
If you can, then please give the London Stock Exchange a call. They need your help. Seven hours is a whole lot of downtime for the world's 3rd largest market. I suspect it's a long way back from there to meet this year's SLAs.
M@
M@
Monday, September 8, 2008
It's all about the platform
I've been following the blogosphere closely over the last couple of weeks and I'm kicking myself that I didn't get this post out a little earlier! When I read articles like this it just confirms everything I believe about the essential elements of a good product and good product strategy.
That's because a successful, long-term product strategy involves a platform, not just a product. A platform has three essential components: an endpoint, some content and a distribution mechanism. Content and distribution are pretty much self explanatory. By endpoint, I mean a place for consumption to occur. In different markets and different products, the endpoint can be quite different, but its essential property is that it facilitates consumption by the end user.
For example, with cola-flavoured beverages, the content is the drink itself, the distribution mechanism is the fleet of vans and supporting warehouse infrastructure that get the soft drinks into stores, and the endpoint is the can or bottle. In the traditional (ie non-digital) music business, content is obvious - its the music itself - and distribution is pretty straightforward as well, it's the record companies ability to manufacture CDs and get them into the hands of the music buying public. What's the endpoint in this case? Devices like CD players and other stereo equipment components that allow an end user to play music.
With PCs the endpoint is the machine itself. The content is the operating system and applications that rely on it. Distribution revolves around the ability of operating system and application vendors to get their software onto the device and into the hands of users. Microsoft managed to create an amazingly (economically) successful ecosystem around the DOS and Windows operating systems by making sure that PC vendors shipped it pre-installed. The mechanisms they used to make this happen have already been the subject of many column inches, so I won't go into them further here.
Domination in a market occurs if a single player (or group of players) manages to gain control over one or more of the three essential components, or if a player manages to commoditise one or more of the parts. This is best understood by example.
In the PC business, Microsoft's great innovation happened a long time ago - way back in the early days of DOS, and it was only partly technical. Whether or not it was Microsoft's intent at the time is another story altogether, but the the real innovation was that DOS commoditised the hardware platform. DOS created a nexus between hardware and applications that allowed the hardware vendors to ignore the application software, and software vendors to largely ignore the hardware. Consumers ended up with choice in hardware, and consequently, choice in application software. The creation of an intermediary "standard" was the thing that really allowed the PC market to explode. With this in place, there was proliferation of hardware vendors and a proliferation of software vendors too.
This is a classic case of commoditising the endpoint. They also managed to wrap up distribution by tying the sale of Windows to the sale of a new PC, rather than the sale of the operating system itself. Cleverly from Microsoft's point of view, it didn't matter whether the machine actually had the operating system installed because the deals that MS struck with Original Equipment Manufacturers (OEMs) were based on hardware sales. For each box they sold, they had to pay Microsoft a license, a trend that continued right through the transition to Windows.
It's worth considering the fact that while the price of PC hardware has dropped by more than an order of magnitude over the lifetime of Microsoft's operating system dominance, the cost of the operating system has increased by more than an order of magnitude. That makes it pretty clear which part of the network ended up being commoditised.
The music business is interesting because we can see the endpoint/content/distribution framework in action in the traditional physical music market as well as with digital music, but with some very different players. In the traditional music business, distribution is more or less completely controlled by the record companies. Up until the advent of the iTunes Music Store (and notwithstanding the small number of independent music stores) the vast majority of physical music sales occurred through large national or global chain stores, such as Sanity here in Australia, Virgin and, HMV globally, and Walmart in North America. The music played on radio stations is also heavily influenced by record companies, by legal means or otherwise. The subtlety of that part of the music business is beyond the scope of this post, but if you're interested, see Wikipedia for "payola".
The difference with digital music is not that the endpoint/content/distribution framework has changed, but rather that the players have changed. And if you have any remaining questions that Apple's iTunes Music Store has changed the game in the music business, then the fact the store sold its 5 billionth song in June this year should relieve you of any doubt.
What Apple managed to do to change the game is create a great endpoint in the iPod that consumers the world over just love, and a highly compelling distribution model in the iTunes Music Store that makes it so easy to buy digital music that it verges on the transparent. The end-to-end user experience enabled by the iPod and iTunes is so compelling that the iPod is now the most successful consumer product of all time. Tellingly, the company that Apple knocked off the perch for most successful product of all time (Sony, with the Walkman) is also one of the companies likely to experience some pain when their control over the distribution of music changes as consumer tastes switch from CDs to digital music.
In many ways, the change in the game that occurred in the music business has strong parallels in the PC business. The pattern is clear: a new player emerges on the back of a compelling endpoint, and then delivers a distribution mechanism that just blows away the competition. The iPod/iTMS combination is vastly superior in terms of the end-to-end experience (but arguably, not sound quality) than the CD/store combination. The Google user experience changed the game on search, which they then went on to overlay with an amazingly profitable advertising business model, as well as a variety of new user services which the competition just do not seem to be able to match.
In both cases, the incumbent didn't really see the change coming, and when they finally did, tried everything to ignore it or make it go away. By the time they reacted, it was just too late. Or at least, it looks like it was too late. Apple's success with the iPod and iTunes represents one of the most amazing turnarounds in corporate history, and although there is a lot of competition, both in terms of MP3 devices and distribution mechanisms for digital music, few apart from Apple seem to have any real traction.
In terms of the operating system market, we are probably a little further away from declaring such a convincing winner, but the signs are definitely there. They must be worrying for Microsoft as it continues to struggle for mind share with Vista. Perhaps more worrying is the fact that its online properties (with the exception of PhotoSynth - which is really brilliant) have little to recommend them. There is no question that the Microsoft business model generates staggering amounts of cash from operating systems and desktop applications, but the point here is simply that its not impenetrable.
What I find fascinating is that few seem to have noticed that Apple looks very likely to repeat the success of the iPod/iTMS combination with the iPhone and the iPhone App Store. All of the pieces are in place: a compelling endpoint in the iPhone and a distribution system that connects application developers with consumers like never before. Analysts have been quick to predict failure for Apple and the iPhone, not to mention the end of the run for the iPod. The reality is that Apple just keeps getting stronger, and if Mac sales continue this kind of growth, there may be some very different conversations about the power base of the PC industry in the future.
The amusing thing for an observer is that the role played by Big Music in the iPod/iTMS product mix is now being played by Big Telcos. They just do not seem to get what is going on. And if you need any clearer proof of this fact, check out the pricing plans for an iPhone on Telstra's NextG network here in Australia. Are they serious?
The risk for Apple is in maintaining this success without looking like its developing a monopoly that harms consumers. I don't think that they will have any problems maintaining this with the iPod/iTMS combination because there are many alternatives (just not very many good ones). Just because you have the most compelling product does not mean you are extracting monopoly rents. However, it might be different with the App Store. If its early success continues, then the 30% margin that Apple takes on all App Store sales might raise some questions. However, as with the iPod, no one is forcing you to buy an iPhone. Which is quite a different scenario to the PC world, where even if you do not want to run Windows on your machine, in most cases you still end up paying for it.
From a product perspective, the takeaway here is how powerful the combination of great endpoint, compelling distribution and engaging content can be. The advice to incumbents at risk of losing their endowments is to consider that all three parts of the platform need to be working effectively. When one leg weakens, the whole stool can fall down, but when all three are strong, then it forms the basis of a truly great product.
M@
That's because a successful, long-term product strategy involves a platform, not just a product. A platform has three essential components: an endpoint, some content and a distribution mechanism. Content and distribution are pretty much self explanatory. By endpoint, I mean a place for consumption to occur. In different markets and different products, the endpoint can be quite different, but its essential property is that it facilitates consumption by the end user.
For example, with cola-flavoured beverages, the content is the drink itself, the distribution mechanism is the fleet of vans and supporting warehouse infrastructure that get the soft drinks into stores, and the endpoint is the can or bottle. In the traditional (ie non-digital) music business, content is obvious - its the music itself - and distribution is pretty straightforward as well, it's the record companies ability to manufacture CDs and get them into the hands of the music buying public. What's the endpoint in this case? Devices like CD players and other stereo equipment components that allow an end user to play music.
With PCs the endpoint is the machine itself. The content is the operating system and applications that rely on it. Distribution revolves around the ability of operating system and application vendors to get their software onto the device and into the hands of users. Microsoft managed to create an amazingly (economically) successful ecosystem around the DOS and Windows operating systems by making sure that PC vendors shipped it pre-installed. The mechanisms they used to make this happen have already been the subject of many column inches, so I won't go into them further here.
Domination in a market occurs if a single player (or group of players) manages to gain control over one or more of the three essential components, or if a player manages to commoditise one or more of the parts. This is best understood by example.
In the PC business, Microsoft's great innovation happened a long time ago - way back in the early days of DOS, and it was only partly technical. Whether or not it was Microsoft's intent at the time is another story altogether, but the the real innovation was that DOS commoditised the hardware platform. DOS created a nexus between hardware and applications that allowed the hardware vendors to ignore the application software, and software vendors to largely ignore the hardware. Consumers ended up with choice in hardware, and consequently, choice in application software. The creation of an intermediary "standard" was the thing that really allowed the PC market to explode. With this in place, there was proliferation of hardware vendors and a proliferation of software vendors too.
This is a classic case of commoditising the endpoint. They also managed to wrap up distribution by tying the sale of Windows to the sale of a new PC, rather than the sale of the operating system itself. Cleverly from Microsoft's point of view, it didn't matter whether the machine actually had the operating system installed because the deals that MS struck with Original Equipment Manufacturers (OEMs) were based on hardware sales. For each box they sold, they had to pay Microsoft a license, a trend that continued right through the transition to Windows.
It's worth considering the fact that while the price of PC hardware has dropped by more than an order of magnitude over the lifetime of Microsoft's operating system dominance, the cost of the operating system has increased by more than an order of magnitude. That makes it pretty clear which part of the network ended up being commoditised.
The music business is interesting because we can see the endpoint/content/distribution framework in action in the traditional physical music market as well as with digital music, but with some very different players. In the traditional music business, distribution is more or less completely controlled by the record companies. Up until the advent of the iTunes Music Store (and notwithstanding the small number of independent music stores) the vast majority of physical music sales occurred through large national or global chain stores, such as Sanity here in Australia, Virgin and, HMV globally, and Walmart in North America. The music played on radio stations is also heavily influenced by record companies, by legal means or otherwise. The subtlety of that part of the music business is beyond the scope of this post, but if you're interested, see Wikipedia for "payola".
The difference with digital music is not that the endpoint/content/distribution framework has changed, but rather that the players have changed. And if you have any remaining questions that Apple's iTunes Music Store has changed the game in the music business, then the fact the store sold its 5 billionth song in June this year should relieve you of any doubt.
What Apple managed to do to change the game is create a great endpoint in the iPod that consumers the world over just love, and a highly compelling distribution model in the iTunes Music Store that makes it so easy to buy digital music that it verges on the transparent. The end-to-end user experience enabled by the iPod and iTunes is so compelling that the iPod is now the most successful consumer product of all time. Tellingly, the company that Apple knocked off the perch for most successful product of all time (Sony, with the Walkman) is also one of the companies likely to experience some pain when their control over the distribution of music changes as consumer tastes switch from CDs to digital music.
In many ways, the change in the game that occurred in the music business has strong parallels in the PC business. The pattern is clear: a new player emerges on the back of a compelling endpoint, and then delivers a distribution mechanism that just blows away the competition. The iPod/iTMS combination is vastly superior in terms of the end-to-end experience (but arguably, not sound quality) than the CD/store combination. The Google user experience changed the game on search, which they then went on to overlay with an amazingly profitable advertising business model, as well as a variety of new user services which the competition just do not seem to be able to match.
In both cases, the incumbent didn't really see the change coming, and when they finally did, tried everything to ignore it or make it go away. By the time they reacted, it was just too late. Or at least, it looks like it was too late. Apple's success with the iPod and iTunes represents one of the most amazing turnarounds in corporate history, and although there is a lot of competition, both in terms of MP3 devices and distribution mechanisms for digital music, few apart from Apple seem to have any real traction.
In terms of the operating system market, we are probably a little further away from declaring such a convincing winner, but the signs are definitely there. They must be worrying for Microsoft as it continues to struggle for mind share with Vista. Perhaps more worrying is the fact that its online properties (with the exception of PhotoSynth - which is really brilliant) have little to recommend them. There is no question that the Microsoft business model generates staggering amounts of cash from operating systems and desktop applications, but the point here is simply that its not impenetrable.
What I find fascinating is that few seem to have noticed that Apple looks very likely to repeat the success of the iPod/iTMS combination with the iPhone and the iPhone App Store. All of the pieces are in place: a compelling endpoint in the iPhone and a distribution system that connects application developers with consumers like never before. Analysts have been quick to predict failure for Apple and the iPhone, not to mention the end of the run for the iPod. The reality is that Apple just keeps getting stronger, and if Mac sales continue this kind of growth, there may be some very different conversations about the power base of the PC industry in the future.
The amusing thing for an observer is that the role played by Big Music in the iPod/iTMS product mix is now being played by Big Telcos. They just do not seem to get what is going on. And if you need any clearer proof of this fact, check out the pricing plans for an iPhone on Telstra's NextG network here in Australia. Are they serious?
The risk for Apple is in maintaining this success without looking like its developing a monopoly that harms consumers. I don't think that they will have any problems maintaining this with the iPod/iTMS combination because there are many alternatives (just not very many good ones). Just because you have the most compelling product does not mean you are extracting monopoly rents. However, it might be different with the App Store. If its early success continues, then the 30% margin that Apple takes on all App Store sales might raise some questions. However, as with the iPod, no one is forcing you to buy an iPhone. Which is quite a different scenario to the PC world, where even if you do not want to run Windows on your machine, in most cases you still end up paying for it.
From a product perspective, the takeaway here is how powerful the combination of great endpoint, compelling distribution and engaging content can be. The advice to incumbents at risk of losing their endowments is to consider that all three parts of the platform need to be working effectively. When one leg weakens, the whole stool can fall down, but when all three are strong, then it forms the basis of a truly great product.
M@
Monday, August 18, 2008
Update: iPhone arrives
Here's an update to my previous entry regarding the arrival of my new iPhone. The phone did eventually arrive, but not before about 4 visits to the Optus store to ask them where it was. I'm not sure who was telling stories in this process, Apple or Optus, but the bottom line was simply that the user experience of acquiring the phone was pretty crappy.
One good thing was that when the phone did arrive, the guys in the Optus store went out of their way to provision it for me, considering I walked into the store about 5 mins after it closed. It did require me to have a minor conniption first, but in the end they stayed around for an extra five minutes to make sure the phone worked.
As for the phone itself ... well, that's another story altogether. Apart from one freeze-up on the wife's phone (yet to be repeated so far), we've not had any of the problems that seem to have been reported elsewhere. Apparently, there will be a software update soon. We'll see.
One of the most impressive things about the phone is the AppStore. The ease with which I can get an app deployed to my phone as an end user, and the equal ease with which I can build a deploy an app to a ready marketplace as a developer are a truly remarkable bit of business building on the part of Apple.
M@
One good thing was that when the phone did arrive, the guys in the Optus store went out of their way to provision it for me, considering I walked into the store about 5 mins after it closed. It did require me to have a minor conniption first, but in the end they stayed around for an extra five minutes to make sure the phone worked.
As for the phone itself ... well, that's another story altogether. Apart from one freeze-up on the wife's phone (yet to be repeated so far), we've not had any of the problems that seem to have been reported elsewhere. Apparently, there will be a software update soon. We'll see.
One of the most impressive things about the phone is the AppStore. The ease with which I can get an app deployed to my phone as an end user, and the equal ease with which I can build a deploy an app to a ready marketplace as a developer are a truly remarkable bit of business building on the part of Apple.
M@
Moving to a new hosting provider
Today I kicked off the process of changing the company's hosting provider. What I initially thought was going to be a nightmare process, actually turned out to be pretty easy. I'm amazed at the level of sophistication of hosting providers these days, and the prices are pretty low as well. As expected, I'm still waiting for all of the domain transfers to happen, so we'll see if I'm still thinking this was good idea in two days time.
M@
M@
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