A common view of computer progress might go something like mainframe, PC, workstation, desktop publishing, email/web/internet, smart phone. But if you slice computing eras purely along the lines of human-computer user interface, ignoring everything else, you get Computing Interface Eras:
- Batch interface – punch cards in, punch cards out
- Command-line user interface – type text in, get text out
- Graphical user interface – add graphical windows/mouse to #2
- Tablet interface – fingers on glass: swipe, pinch, tap
What’s interesting is how much change #3 encompasses: workstations, PCs, Macs, Hyperlinks, browsers, spreadsheets, desktop publishing, facebook, email, twitter, video on demand, etc. All of it built on the same graphical window/mouse UI foundation. From narrow a UI point of view, the internet added nothing. In fact web applications can be a step backwards from usability point of view even to this day. It’s much harder to edit a photo on shutterfly than in a desktop application like photoshop. With that said, obviously this narrow UI focus misses most of the important computing progress of the past 30 years.
But that’s really the point here. By focusing only on major changes in basic computer-user interaction, we might see in a fresh way how radical the touchscreen-finger interface really is. In fact this approach let’s us properly recognize that all devices with this type of interface should be grouped into a single class. Paul Graham noted this in Dec 2010 when he said “If the iPad had come first, we wouldn’t think of the iPhone as a phone; we’d think of it as a tablet small enough to hold up to your ear.” Following Paul Graham’s lead, we’ll use “tablets” and “tablet interface” for entire set of devices whose primary interaction is finger touches on a flat glass surface.
As a thought experiment, suppose you transported someone from the Xerox PARC team from the early 1970’s, where with the Xerox Alto they had a computer with graphical windows, a mouse and ethernet. I think they would be delighted but not shocked to see where things stand today. The web, email, browsers, chat, etc, etc. They would be able to immediately understand how it all worked. The early 1970’s Alto to the 1984 Mac to the 1995 Win95 machines are all clearly derived from each other. And once the graphical windows/mouse interface was born, it was quite stable in how it looked and worked. So even though Windows 7 came over 15 years after Win95, it doesn’t look or work all that differently.
But if you showed the 1970’s Alto team a 2007 iPhone with a tablet interface, it would seem far more futuristic (or at least more novel) since it has a completely different interaction model. And as we saw with graphical interface/mouse, once a new interface is invented, it quickly hits its stride and locks in. Just fine tuning from that point onward. So today, 5 years after the tablet interface became a market success with the first iPhone, the tablet interface has already started to hit the limits of industrial design. And that’s fine. It also means people who complain about the lack of change in the recently introduced iPhone 5 lack a historical perspective on how new UI paradigms play out. Rapid innovation of the new, then stability with continued small refinements. After UI stability is reached, the innovation moves to the apps and ecosystem, not to the stable UI framework.
In fact, the UI frame allows us to see that the Nokia and Blackberry style “feature phones” with lots of physical buttons are a different class of device from tablets entirely. The very word “smartphone” is deeply flawed, mingling different classes of devices. It was Nokia’s mistake to not understand this until too late. Once you understand this frame, the rapid shifts in mobile leadership make more sense. It’s not that we’re seeing random leadership shifts in a single market. Rather we’re seeing three rapid waves of incompatible product classes successively overtaking each other. Basic mobile phones got overtaken by features phones got overtaken by tablet phones. Each new wave brought forth new sets of leaders, which is historically unsurprising from an Innovators Dilemma point of view. This means that the tablet-phone market currently owned by Apple, Samsung, Android, and Amazon Kindle is unlikely to introduce any new winners since the tablet-phone market is already at scale. To understand what scale means, first note that the graphical interface era stabilized on Win95 when Windows was shipping about 60 million units a year. By comparison smartphone shipments (nearly all touchscreen slabs) were nearly 500 million in 2011. So touchscreen slab phones are already shipping 8x the units beyond where the graphical interface market had sorted out winners from also rans.
One digression here. Tablets, like all new tech, are complementary NOT replacements for other classes of devices. So just as mainframes and command line interfaces are still going strong, we will continue to see growth of graphical interface/keyboard/mouse (PC) devices as well. A great example of old tech not going away is Mark Zuckerberg’s recent declaration that “The biggest mistake we made as a company was betting too much on HTML5 as opposed to native. It just wasn’t ready.” In English he’s saying that building the Facebook mobile app with web technology was facebook’s biggest mistake since that technology was created for the graphical interface/keyboard/mouse UI. And it’s not ready for a tablet interface. But of course old timers will recognize that native apps are just client-server tech resurrected from the grave it was supposed to be put in by Netscape 20 years ago. So tech like client-server and in particular laptops are not going away. With that said, it’s also clear we’re entering an era where a disproportionate amount of the growth in computing will be in devices with a tablet interface.
If Nokia’s great temptation was to confuse button phones with tablet-phones, then Microsoft’s great temptation was to confuse graphical windows/keyboard/mouse devices (PCs) with tablet-phones. The tragedy here is that Microsoft, an iconic American success story with deep pockets and an even deeper talent pool, understands all of this perfectly well. The proof is they not only built but shipped the wonderful Windows Phone 7, with an original pure tablet style UI to great reviews, even though not to market success. And that lack of market success has pushed them back from doing a pure Clayton Christensen Innovator’s Dilemma play, where Microsoft would set up an independent division for the Phone/Tablet business with carte blanche to fork their Phone OS into a separate code base. With that said, it looks like they will create a pure touchscreen version of Microsoft Office. And it will work not just on their own Phone OS but also on Google Android and Apple iOS as well. But the gravitational pull from their existing businesses has made them decide to sell Windows 8 next month in Oct 2012 as a compromised hybrid UI for both tablets and PCs. Going down the hybrid path is an ecosystem “Developers, Developers, Developers” play where Microsoft is attempting to leverage their deep Windows ecosystem to jump start their touchscreen business. Now of course it’s easy for me to sit here and write a blog post in my pj’s doing the Clayton Christensen spin. It’s much harder to create and execute a valid multi-billion dollar business plan. Nonetheless, Microsoft’s plans for Windows 8 show they believe at some level that touchscreen interfaces are a bolt on, not a new new thing. Or who knows, maybe they think that if they have tons of desktops running Windows 8, and Windows 8 also runs on tablets, then by some confused calculus they can declare they run more tablets than anyone else. Since the thrust of this entire post is about the disruptive nature of the tablet interface, it doesn’t bode well for Microsoft that they’ll ship a compromised hybrid UI. It will confuse everyone, even if they are doing it against their better judgement. The Apple approach is different because as a hard core design shop it’s more natural for them to split their devices by interface type. So while Apple does allow design elements of the their iPad/iPhone iOS to influence their Desktop Mac OS, they retain separate code bases for both. And of course Android is tablet only.
In fact, as has been much discussed, Android is the real and obvious threat to Apple. As Clayton Christensen himself says “The transition from proprietary architecture to open modular architecture just happens over and over again…..You also see modularity organized around the Android operating system that is growing much faster than the iPhone. So I worry that modularity will do its work on Apple.” My take is of course that this is strategically correct. So the tablet interface advantage has been competed away, or in the Samsung/Android case illegally copied away. So we shouldn’t expect much new in the way of updated iPhones or iPads versus Android devices. But we have to remember that tablet-phone business is already at scale, so network and ecosystem effects are now dominant. And Apple has a spectacular lead at an ecosystem level which will take at least a decade to burn down. The most dramatic way to understand this is by looking as operating system upgrades. From an MG Siegler post “it took 7 months to hit the same percentage adoption on Android that Apple accomplished in 19 hours.” So Android users upgrade their OS by buying brand new phones (!), while Apple iOS users just upgrade their old ones. The same thing will happen when Apple iOS 6 comes out shortly. The Apple ecosystem will get immediate OS adoption that will take years of new phone purchases to match on the Android side. And Apple is nearly there with a default update model, so software updates default to automatically pushing out rather than being pulled on request. This is really the holy grail for a software ecosystem, to autoupdate everyone. The ecosystem view means the most important announcement at the iPhone 5 event was not the iPhone 5 at all, but rather the pricing model for the iPhone 4, which is now free with contract. This shows Apple’s willingness to push downmarket with their brilliant approach of discounting older product models to drive ecosystem market share. And this is a strategy that your run of the mill MBA knows how to do, so Steve Job’s death doesn’t really impact Apple’s tablet-phone business as much as it might first appear. It can be run as a traditional business at this point if it has to be. The iPhone 4 strategy also keeps Apple’s total number of unique devices minimal in the market, which in turn keeps developers, developers, developers happy. Android’s fragmentation and openness is simultaneously a huge long term strategic advantage and a tactical ecosystem nightmare. Amazon is building their own ecosystem as a consequence. And the problems are so severe that Microsoft stands a chance of making a comeback competing at this level, though that chance is now reduced with their confusing UI approach of not one thing or the other for Windows 8.
So what’s the business take here? First we need to observe that despite Apple and it’s products being the most hyped things on the planet, as of mid-Sep 2012 their Price to Earnings P/E ratio is sitting at 16, while by comparison Microsoft’s is about the same at 15.5. The long term market average P/E for all companies runs about 10-17, and growth tech stocks typically run higher. So Apple has a P/E level forecasting that they will do about the same as the general market. Something’s out of whack. Perhaps it’s investor confusion in lumping disparate types of “phones” into a single bucket, so the simple and linear rise of tablet-interface leaders gets muddled under successive waves of innovation. Perhaps it’s missing that Android is now doing ecosystem competition, not device competition where Android has parity. Perhaps it’s the Steve Jobs mystique. Perhaps a reasonable extrapolation of the next fives years produces numbers so big no one can get their head around them. Or maybe I’m just way off base and missing something very basic that investors know. Hard to say.
To wrap up there are a few key takeaways from this UI frame on computing. First, we should expect the tablet form factor and associated touchscreen interface to be stable with only secondary refinements from now on. Ten years from now iPhones, iPads and Android devices won’t look that different. They will be thin rectangular slabs you control with finger swipes, pinches and taps. Second, while the UI frame remains stable, the app market and ecosystem will continue their explosive growth for a long, long time. Third, once we split out the rapid waves of disparate “phone” devices, we see that the tablet-phone market took off in a normal fashion with early tablet-phone leaders marching to control the market. And this market is already at scale, so the current leaders are already locked in, making network and ecosystem effects dominant. And while that dominance does have a long term push toward open Android (or outside chance Microsoft), it will take at least a 5 or 10 years for this to kick in. No other ecosystem is close to being competitive right now. And of course Apple’s P/E should NOT be at a run of the mill 16. Finally, from an adoption point of view it took almost 20 years for PCs to hit 50% of US consumers. And PCs will never cross the 80% mark since they haven’t already. On the other hand “smartphones”, aka tablets, hit 50% in about 6 years and will conservatively cross 80% of US consumers in 7 more years, which means they’ll be in nearly 100% of US households in far less time than it took PCs to reach 50%. Outside the US 87% of the people in the world have feature phones, but only 13% have tablet phones. As Moore’s law pushes the cost of tablet-phones inevitably downward, we’ll see all feature phones replaced by tablet-phones, so this means a staggering 3-4 billion additional people are going to buy tablet-phones in the next decade. And for many of those buyers the tablet computing interface will be the only one they’ll ever know.