Sunday, March 28, 2010

The iPad: Apple Turns Back The Hands of Time

I remember 1995 and the rollout of the version of Windows that had a reference to that year in its product name. The demand for the then latest version of Windows was huge. Demand was huge less because of the benefits it brought to the computer user who chose to upgrade to Win 95 or who chose to purchase a new PC with it installed and more because of the economic benefits it brought to software makers, component and peripheral makers and Windows PC OEMs. There was a huge economic effort orchestrated by Microsoft to create demand for the OS upgrade and new PCs. It worked.
In one of the biggest blunders in Apple corporate history, Michael Spindler, Apple's CEO at the time, insisted on releasing premium-priced Macs with 680X0 Motorola processors at the expense of the new line of PowerPC Macs that were in strong demand. In my view Windows 95 was not a particularly good upgrade to Windows. But it was "good enough" to sell Windows PCs while the Mac products consumers wanted were in constrained supply. 
It's now fifteen years later and Apple is releasing the Apple iPad beginning Saturday. There are a variety of lessons that could have been learned from the rollout of Windows 95 and it appears Apple has learned the lessons that matter most. It was the "Performa blunder" that eventually led to the return of Steve Jobs to the company and with his return a renaissance for the company.
Among the first steps taken by Steve Jobs and his new management team at Apple in the one of the greatest turnarounds in US corporate history was the abandoning of projects that sapped resources and the elimination of shipping products that deviated from the desired core product competencies of the Mac maker. Apple made things much more simple. Gone were the three-page foldouts of Apple product choices that only confused consumers and gone were products that competed directly with offerings from potential eco-system partners. 
The Apple iPad is coming to market with consumer awareness of a new hardware device not seen since the release of the original Bondi blue iMac in August 1998. The iPad, though a new product line, is building on the success of the Apple iPhone and iPod touch. Unlike the original iPhone which debuted as a new competitor in an existing smartphone market, Apple is defining the tablet market and is pricing the iPad aggressively to thwart early competition. 
The iPad will leverage not only Apple's retail store infrastructure by increasing foot traffic to the retail stores and resulting increase is sales of Apple products, it will also leverage the developer investment in existing iPhone OS apps. Where the iPad will add new dimensions to the Apple product eco-system is through the expansion of that eco-system to include ebook publishers, magazine and newspaper publishers as well as game developers desiring to create product for the iPad's tablet-sized screen. The iPad is to the handheld device market what the home theatre concept was to the marketers of TVs and related products. The Apple iPad provides an immersive experience that can't be rivaled by today's smartphones or netbooks. The revenue streams the iPad will create for app developers and publishers of content for consumer consumption may eventually dwarf the revenue to Apple from iPad hardware device sales. Further, due to the nature of the iTunes sales environment, Apple will be increasing the flow of dollars to its own coffers from distribution fees.
Through the release of the iPad Apple is turning back the hands of time and delivering a product that is not only the foundation for the next generation of computing devices, it's eviscerating the last vestiges of one of Apple's biggest corporate blunders. In the absence of delivering to consumers the products consumers wanted at the time, the OS that was "good enough" by comparison created an economic empire for Microsoft and the company's OS product dependents. Fifteen years later Apple is positioned to create a dominant eco-system that will supplant the Windows PC and its related products and reign for at least the next few years as the driving force in the delivery of apps, games and content to consumers.
Next week I'll post my estimates of iPad unit sales for the balance of Apple's 2010 fiscal year and look at the expanding eco-system supporting and expanding the markets for iPhone OS-equipped digital devices. 

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