Steve Jobs had a well documented 2008 tirade where he fired the MobileMe leadership team for their terrible product rollout. A good quote: “Can anyone tell me what MobileMe is supposed to do? So why the fuck doesn’t it do that?” This reminds us that Apple’s struggles with server side cloud services (MobileMe, email, iCloud, maps) far pre-date Jobs’ departure. People comment on this all the time. For example in this recent episode of the Accidental Tech Podcast Marco Arment, Casey Liss and John Siracusa repeatedly ask why Apple is so notoriously bad at services. They don’t reach any conclusions. I’ll argue Apple’s problems with services should be expected. Why? Because Apple pays a strategy tax on them.
Let’s start by recalling a strategy tax is defined as hindering one product in order to strategically further another. For example Microsoft Office is hindered in not being allowed to run on certain platforms to further the cause of Windows. So what product is constraining, say, iCloud? My answer: Apple’s approach of selling integrated systems limits iCloud, albeit indirectly.
To see why, let’s look at two keys to great services:
- Crossplatform. You want dropbox on all your devices and in every browser. And all operating systems. Similarly for email, maps, etc. And for developers the same. The best services are horizontal. This makes it easy for developers to support multiple clients for applications like Instapaper or Evernote.
- Corporate Priority. Services are very hard. Very few companies can do them at all, and only a handful can do them well at scale. Companies that do them well have to prioritize services above all other goals and align their culture and incentives accordingly. It’s not an accident that Google publishes search response times with every result. The response time is of course useless to users. It’s not placed there for them. It’s placed there to yell at every Google employee every single day about what’s important.
To be clear, for point #1 I’m not a partisan on open/closed in the Cathedral and the Bazaar sense. Likewise I think integrating up the stack and selling unified systems versus selling services horizontally is a market decision. Depending on the particular company, culture, business strategy and product, you need to pick the right approach for the job. What matters is that in this particular use case, services fit the crossplatform model better than Apple’s integrated one. This is arguable for any particular service, but broadly holds. Point #2 is a real issue for Apple from a company culture and execution point of view, though I’d concede it doesn’t fit exactly into the strict definition of a strategy tax. Nonetheless I think calling Apple’s problems with services a strategy tax fits well enough to justify the term, though you could arguably describe it as a problem of corporate and market alignment instead.
What’s important here is Google is fiercely aligned on both points above. Their entire business is built on selling ads and is directly aligned to top flight services. But of course Apple has their own strength. When you sell systems, all the parts add up to more than the whole. That’s a massive plus to the integrated model. With that said we should not be shocked to find Apple’s services stand alone are lessor than those of a company focused exclusively on doing services for a living. People should stop being surprised about Apple’s difficulties with services. It’s inherent in their business model. Some would argue that with enough cash on hand you can do everything. But in software development I’ve never had that experience. To do great work you have to prioritize and battle battle battle.
So what does Apple’s strategy tax on services mean long term? There are a couple of bear stories which John Gruber takes on and dismisses in a recent post. One is the old Steve Jobs is gone trope, so Apple can’t design or innovate anymore. I’m too tired to argue that again, but you can go read Gruber’s post. The second bear argument is more interesting, where smartphone design has reached “good enough” already. Gruber cites Ben Thompson’s post pointing out that when selling to consumers (unlike businesses) your experience can never be good enough. Completely agree. In short Apple’s doing fine. Their strategy tax on services is not going to hurt them as much as their strength at the system level helps them. Apple will obviously dominate the premium phone market for the next few years.
But longer term, say 5, 10 or even 15 years, the Apple services strategy tax creates a third possible Apple bear story. Phones are becoming more and more about services. Let’s say the phone-services split was 90-10 for the first iPhone. It was primarily about what you held in your hand, not what’s in the cloud. Let’s say it’s now at 50-50. You can see where this is going. It’s possible that in a world where the phone-services split is 10-90 the other way, a company which focuses exclusively on services could wind up with a better overall premium phone experience than a company which focuses on complete systems. The strategy tax could actually dislodge Apple from the premium end of the market. Clearly this is a long term speculative scenario, but it’s a plausible future. Especially if you segment the market, where segments focused more on services will reach their tipping point earlier.
Let’s use a couple of examples to make this more concrete. After I drop my kids off in the morning I use Siri to send a hands free text to my wife while driving. Typically it’s just a “drop off went fine” message. About 1/5 of the time the message gets messed up or I get a Siri not available. Using Siri to hands free text is a great feature all things considered, but I’m always double checking it. Another example. My son told me after watching Star Wars that the evil emperor Palpatine was also called Darth Sidious. I wasn’t so sure of his Sith name. Using a voice search on my phone should have been faster than thumb typing so we tried it. Compare the results below between Apple Siri and Google Voice Search.
I picked voice interaction as my example for a reason. Apple and Google are hugely ambitious, and skating to where the puck is going to be in 5-10 years, not where it is today. The strategic importance of voice interaction for phones can’t be overstated. By analogy, the Higgs boson was called the “God Particle” by journalists because of it’s importance (though particle physicists generally disliked the phrase). Long term, sometime in the next 5-15 years, I think voice interaction will become the “God Particle” of mobile. See more detail on the rational for voice’s huge upside in my previous post. Normal human beings who struggle with computers, even modern touch interfaces, would love the experience of workable voice interaction. People would connect with their phones on a visceral emotional level. If Google maintains their lead in voice, and voice interaction becomes as common as I expect, then Nexus Android becomes the de facto premium phone. Voice interaction as the “God Particle” of mobile is explicitly clear to anyone who talks to Google about it. Apple knows this of course. We should never expect Apple to be best in services across the board. Rather we should ask if Apple can overcome their general strategy tax on services to make an exception for voice interaction, making it competitively first class. It’s certainly possible. But it would require overcoming a structural weakness that currently shows no signs of easing. Bucking the strategy tax for Siri might require someone similar to, well, Scott Forstall. If I had to guess, it might turn out like maps, where Apple’s version is second best, but not by a huge enough margin to swing the complete experience. How big the market segment is that finds the premium service experience on Android decisive, especially around voice, only time will tell.
By the way, another aspect of living in a world where voice interaction is commonplace is Google will take back from OEMs a central interaction (and related advertising opportunity) of everyone using a stock Android device. Especially for the demographic that’s computer averse. What do you call it when people ask their phone “What’s the best used car?”, and get all the way to purchase decision just by talking? God particle. Competition in voice interaction will be fierce and fascinating to watch over the next decade. Plus, you know, talking to your phone and getting an answer right back is pretty awesome.