Horace Dediu

The Apple Watch continues to hold the top spot among products that will be hot this holiday season, as predicted by the IBM Trend app.

Source: Apple Watch Keeps Top Gift Spot Ahead Of Black Friday

The Apple Watch scored 100 out of 100 on the "IBM Watson Trend Scale". According to various surveys, about 100 million people will shop this Thanksgiving weekend in the US. One wonders how many purchases by 100 million shoppers merit a score of 100/100.

My estimate for units shipped has been 20 million in the first calendar year. About 7 million have been sold in the first two quarters. That leaves 13 for the holiday and Q1 (which includes Chinese New Year.) I still like these odds.

To learn more about the reasoning around this estimate and hear additional supporting data, join us at Glance conference.

Bernard Desarnauts had a great idea a few weeks ago: the world needs an event to discuss Apple Watch. After recovering from the shock of not thinking of it first and then from the shock that nobody else had either, I immediately agreed and along with Ben Bajarin and Farshad Nayeri, we quickly rallied to organize and anchor this event: Glance: A Deep Look at Apple Watch.

We had some big questions to answer:

• What is the strategy for Apple Watch? Is it an object of beauty and desire, placing Apple in the "luxury sector" or is it a computer infiltrating what is otherwise a technology-free zone with utility in an asymmetric attack?
• How can developers discover the killer jobs to be done? Beyond tentpoles what will the primary reasons people will use the watch? What does the data tell us so far? What can be observed from interviews?
• Given the sales performance to date, what can we expect from the product? What is the addressable market? What will be the installed base? How quickly will it grow?
• What is the platform strategy, especially with the cadence of OS releases? Is Apple treating this as a separate platform? Will it eventually become independent of the iPhone as the iPhone cast off its dependence on the Mac/PC?
• What is the hardware strategy? What are the constraints from manufacturing, materials, battery life and screen space? What will be the replacement schedule? What is the role of modular internal designs?

We realized that we did not have the answers. So we recruited a great cast of participants to help us:

• Bob Moesta, the founder and developer of the theory of jobs-to-be-done marketing agreed to do a live interview to understand what jobs watches, and in particular Apple Watches, are hired to do.
• Josh Clark, the premier UX designer who wrote Designing for Touch will explore the question of user experience in glanceable space.
• Liza Kindred is considered the top expert on fashion tech–she’s writing the book on the future of commerce–brings keen understanding of wearables.
• Abdel Ibrahim the most prominent blogger and writer on the topic of Apple Watch. Has forgotten more about the Apple Watch than you will ever learn.
• Carolina Milanesi one of the most respected technology market analysts, now at Kantar and often quoted on all things Apple.
• Greg Koenig, product designer at Atomic Delights will educate us on the atoms that make up the Watch.

Investors who will participate in panel conversations:

• John Lilly Venture Capitalist, Greylock Ventures.
• Mari Cross of AngelList
• Glenn Solomon  GGV Ventures.
• Josh Stein Draper Fisher Jurvetson.

Special guest: Jean-Louis Gassée, former head of Apple Engineering, current VC and everything in-between will have a fireside chat with Tim Bajarin Legendary technology analyst who has been around long enough to see furthest ahead.

We will explore Apple Watch as a very curious interaction between form and function, luxury and utility, exclusivity and ubiquity, tiny screens and big audiences, short attention spans, big data.

We have developers, designers, investors, marketers and analysts contributing to what could be the biggest leap in computing since the smartphone.

If you are interesting in becoming one of the innovators on this newest of platforms or planning a strategy to invest, or even (actually especially) if you are a skeptic, you can't miss this conference.

Join us for Glance, a deep look at Apple Watch, downtown San Francisco, December 10, 2015.

Early bird pricing is $495.

If you miss early bird, and you're an Asymco reader, there is still a 30% discount.

The new iPad is like nothing we've ever seen before.

On a future filled with autonomous Winnebagos.

Asymcar 26: The iPod

Since writing Peak Cable six months ago, surveys, research and analysis have contributed to the themes of unbundling the TV package. The data under scrutiny is, as usual, the data that can be gathered. Unfortunately the data that can't be gathered is where the insight into what is happening may lie. For instance, what matters for an entertainer is not how much you're watched but how much you're loved. Measuring love is done poorly with data on payment for subscriptions.

A better proxy might be time. Liam Boluk makes the point in his post that "focusing on cord cutting or even cord shaving largely misses the point." Don't follow the dollars, he says, follow the time or engagement. "Relevance" is what matters.

His data shows how linear TV has fallen by roughly 30% among the young (12-34) in the last five years. The trouble for the TV bundle (and advertisers) is that this is the most culturally influential group. They are also the group which will grow into the highest income group over the next decade. And this group does not love TV.

We have to remember that it was the youth who drove early radio, TV and consumer electronics markets. Those young are now the old which still cling to the old media, served by companies that grew old with them. They are the "high-end" customers with which Nielsen itself has grown. They have the most money to spend and they are the targets for the ads ((no longer the Pepsi generation, they are the Depend and Viagra and pharmaceuticals generation))

Paying $150/month to watch incontinence and erectile dysfunction ads—at a time not of your choosing—is preposterous for the young. They may like the programs but not the way they are packaged, delivered or interrupted. They are not smarter than their parents. They, like their parents, took to new technology more quickly. What makes the technology new is also what lets its makers separate the content from its delivery. These new technologies allow "modularizing" or unbundling that which was was integrated/bundled and thus allow their developers to focus on the customer's real jobs-to-be-done.

Unsurprisingly, incumbents have responded by throttling access to original programming–an asset over which they still exert influence as distributors. Netflix and Amazon are taking the path of responding with their own blockbuster productions. Although Silicon Valley has more capital to deploy than Hollywood  this battle of attrition is by no means one that incumbents will win, and generally, it's not going to be pretty.

Tweaking the nose of the incumbent might not be the way to establish asymmetry. The better tactic may be to help the system survive but offer a "short-term alternative". This is how iTunes took on and won Music. When Napster and file sharing created a clear and present danger to the industry, Apple's approach of a controlled alternative allowed the industry to finally move to a digital download model.

An observer in 2004 would have said that Apple was bowing to the industry and providing it sustenance against "disruptive" free music. However, as behavior shifted to an overwhelming preference of iTunes downloads over physical media, the music labels found themselves in an untenable negotiating position. They had to concede on DRM, pricing and bundling itself. The music disruption occurred with a tacit acceptance and collaboration by the incumbents.

Is history repeating? Looking at the situation around TV today, the strategies of the challengers can be summarized in a similar way:

1. The content low-end: Now, YouTube, Twitch. Then, Napster, Gnutella
2. The distribution low-end: Now, Netflix, Amazon. Then, incumbent music download sites.
3. The nominally sustaining: Now Apple TV. Then, iTunes

Apple cannot play an "ignore me" strategy because as much as investors think the company is irrelevant, everything it does is closely watched by anybody who might be even remotely touched by it. Especially in entertainment.

In addition, due to brand considerations, the company cannot ship low-quality or no-quality product, including material that sits on its platform.

They have to do something different. Something more complicated and something that takes much longer.

What Apple best contributes asymmetrically is a new experience. The experience allows new behavior, new usage models and hence new loyalties to emerge. The loyalties create affinity which shifts the "love interest" for the user. The new Apple TV attempts to provide such a contribution. Not only in terms of the experience but also for becoming, finally, a platform for developers, who will try to make the product itself better in collaboration with Apple. Thus the "new experience" flips when bits which are streamed cohabit a device with bits which expect a consumer response.

This "appification" becomes an interesting experiment in behavior alteration. Will "couch time" change from pure passivity to partial interaction?

To the orthodox adherents to the religion of linearity of immersive programming this sounds impossible. But why else should a product deserve to exist? A great product is one which changes the user and for Apple TV to become great it needs to engage us to do something different than we do today. It needs to make us feel we are better for using it.

Is this new Apple TV up to it? We'll have to wait and see. But then again, if not this one, then another one will. TV will not remain unchanged forever.

We welcome Henri Dediu for an advance look at technology and the world from the point of view of the latest generation. Insights from this unique perspective and your questions on this special episode of The Critical Path.

Source: The Critical Path #162

Eric spoke with Horace Dediu about how disruptive the new Apple TV will actually be, the nature of the media landscape, how Apple could draw viewers away over time, and the potential for live events and interactive apps. We also explore what would make a new car from Apple disruptive and why Apple didnt just buy Tesla.

 

Mathew Desmond of Capgemini joins us to discuss Cars Online 2015: “The Selfie Experience, The evolving power of the connected customer.”

We begin with the finding that “One-half of customers are interested in buying a car from a tech company like Apple or Google. This is true even of customers who are satisfied with their current brand and dealer experience. It is particularly true of young customers (65%) and those in growth markets (China: 74%; India: 81%).”

Backing up a bit, we discuss the automaker’s dilemma, that is the legacy manufacturing, distribution and support infrastructure and contrast that with the “clean slate” approach an entrant might enjoy.

The concept and inherent conflicts of a “Master Customer Record” fuels a deeper dive into “Continuity”, the buyer’s desire for a seamless experience.

Finally, we reflect on the perils that may lie ahead as the auto ecosystem attempts to improve the retail experience.

Listen via Asymcar.

My presentation at Aalto University in Helsinki on The Modular Revolution. This is what you get if you give me a whole hour to talk.

Executives at car companies have suddenly had to answer questions about potential entrants into their business. This is a big change. I don't recall a time when this was necessary for over 30 years. For decades the questions have been about labor relations, health care costs, regulation, recalls and competition from other car makers. To ask questions about facing challengers posing existential questions must seem terribly impertinent.

For this reason, Bob Lutz, in his dismissal of Apple's entry, is not alone. The industry has a century of history and has seen little disruption in the classic sense. I wrote a long piece on the fundamentals of the industry titled “The Entrant’s Guide to the Automobile Industry” which explained why this industry has been so resistant to disruptive change. At best a massive effort over multiple decades usually leads in a small shift in market share.

However, one should read that post as a thinly veiled threat. Just because disruption seems hard does not mean it isn't possible. Indeed, the better you understand the industry the more easily you can observe its vulnerability and the more rigid the industry seems the more vulnerable it may be to dramatic change.

The formula for successful entry is the same for all industries: compete asymmetrically. This means introduce products which change the basis of competition and deter competitive responses by making your goals dissimilar from those of the incumbents. This is classic “ju-jitsu” of disruptive competition.

Here’s how it would work.

Bob Lutz suggests that there is no profit to be gained from selling cars on the premise that costs are very high while pricing will be held down by competition. That may be true but entrants could deploy new processes that lower the costs of production. Traditional car making is capital intensive due to the processes and materials used. There are however alternatives on the shelf. iStream from Gordon Murray Design proposed switching to tubular frames and low cost composites.  BMW has an approach using carbon fiber and other composites. 3D printing is waiting in the wings. All offer a departure from sheet metal stamping.

With new materials, costs for new plants can be reduced by as much as 80% and since amortizing the tooling is as much as 40% of the cost of a new car, the margins on new production methods could result in significant boosts in margin.

There is a downside however. What is usually compromised when using these new methods is volume and scale of production. So that becomes the real question: how many cars can Apple target? 10k, 50k, 100k per year? Could they target 500k? That would be 10 times Tesla's current volumes but only a bit more than the output of the Mini brand.

Now consider that the total market is 85 million vehicles per year. For Apple to get 10% share would imply 8.5 million cars a year, a feat that is hard to contemplate right now with any of the new production systems. On the other hand selling 80 million iPhones and iPads in a single quarter has become routine for Apple and that was considered orders of magnitude beyond what they could deliver. Amazing what 8 years of production ramping can offer.

So the answer to the operating margin might be in a combination of new processes and new ramp strategies.

But there are more levers of change. Car making can be revolutionized through modularity: divide the car into subsystems and act as integrator. Electric cars have the benefit of few moving parts, smaller motors, fewer points of failure and wear, lower heat signatures and more interchangeable systems architecture. This allows companies to enter without needing to design their own engines or many other parts.

The fact is that engineering cars is actually fairly easy. Building them is the hard part and the costs of engineering new models that are cited as so extraordinary are because most of the effort is in engineering for production (The maxim is that it’s far harder to make a Ford than a Ferrari). You can see this in the proliferation of “boutique” supercars which have hyper performance but low volumes. McLaren, Bugatti, Pagani and dozens of others are all recent hypercars which show the power of engineering and design without worrying about volumes.

Apple could combine new production methods with modularity in engineering to bring design, integration of experience and iteration to the industry. Not to mention what software could add to that. Couple that with the brand value and Apple’s entry will very likely be hugely successful. I just don’t know if they can manage production at the level of demand that I expect them to create.