Theory

When I wrote my opinion on the future of publishing (Citizen Publisher), I focused my lens on books and magazines. Published works that have relatively low time-sensitivity and hence relatively long shelf life are quite different from newspapers which package material with very brief temporal relevance.

The print-based news industry has suffered much more than print-based books and magazines. The primary cause is that "print" plays a far larger role in newsprint-based newspapers than in books.

To give you an idea of how important the printing plant is, consider that a huge proportion of a newspaper's assets are tied up in its printing plant. That plant is so large and so demanding that it ends up causing the whole business to revolve around it: Print runs are done at night to make sure the product is delivered in the morning. That puts a hard deadline on the writers to submit stories before the product is "frozen" into a final edition. Writers and editors and advertisers need to march in lock-step to the cycle time of a big manufacturing operation.

There are 19 presses and 17 printing plants that print the two million copies of the U.S. edition of The Wall Street Journal. To make changes to the plant require large amounts of capital investment and that capital's depreciation is an integral part of the financial balance of the company. So much so that one wit remarked that a newspaper is nothing more than an instrument that permits the depreciation of a printing plant.

Costs of manufacturing have been slightly offset by better technology and distributed printing but newsprint itself has soared in price so the dependence on physical product has made the economics worse over time.

That's the cost side. But if you keep following the money from the revenue side, you realize that the situation is critical. In the US, a large part of the local paper's revenue base was wiped out by Craig's list. Classifieds are a fading memory. With respect to regular ads, the story is almost as bad. 26% of ad spend in 2009 was allocated to print, while only 12% of time spent consuming media was spent on it. In contrast, Internet use is at 28% of time where only 13% of ad dollars are allocated.

Source: Morgan Stanley Internet Trends Presentation.pdf

It's inevitable that advertisers will shift their budgets to follow where the attention is going. Potentially that's a $50 billion shift into Internet advertising. The number nearly matches the $47 billion loss from print.

This future is not far off. In fact, it's already happening. in recent years the number of newspapers slated for closure, bankruptcy or severe cutbacks has risen—especially in the United States, where the industry has shed a fifth of its journalists since 2001.

Once the printing plant is taken out of the equation, the raison d'être of the package itself ends. For this reason, the newspaper product cannot survive on-line. Reading news is still very popular, but newspapers aren't.

So will the iPad save this medium?

As in Citizen Publisher, I argue that for that to happen, the medium needs its Orson Welles. Furthermore, to have him emerge, the business must be architected as an integrated approach to solve a new job to be done.

The latest story from The Guardian suggests that Rupert Murdoch is working on just such an approach. In another interview Murdoch explained the project in more detail:

What is the biggest thing on your mind now?

...There are so many disruptive technologies coming all the time! [This in almost a whoop of excitement.] Pretty. Damn. Interesting! Just trying to stay ahead of the technology. I'm starting a paper in six weeks. A brand new paper. It will be a bit like the New York Post . But it will be national. Have that sort of humour and attitude like the Post . It will only be seen on tablets. It will only employ journalists - and maybe eight to 10 technicians.

What sort of circulation will you need?

At the price we are talking about, that's $1 a week - not a day, a week - we need 800,000. By the end of next year there will be 30 to 40 million iPads. I believe every single person will eventually have one, even children.

Via: afr.com

What's more, it's suggested that an unreformed disruptor is mysteriously involved.  One can only speculate, but the hints of autonomy, dedicated (and incentivized) creative professionals involved in a new (not re-purposed) publication with a low-cost structure bodes well.

The medium may get its Orson Welles after all.

When the iPhone vs. Android rhetorical war heats up, both sides bring up the history of Macs vs. Windows PCs. The commonly held thesis is that Windows triumphed as the PC was commoditized (and modularized). This triumph was at the expense of the over-serving and over-priced Mac.

This is a largely accurate view of what happened during the 90s. But the problem with this thesis is that (1) the PC's job has been slowly changing in the last decade (2) the Mac keeps growing faster than the PC and (3) Apple keeps capturing a vast portion of the profits in the PC industry.

These anomalies or contradictions to the thesis imply that something changed. What changed and can these changes turn the tables on the market and create an opportunity for a new computing disruption?

The PC of the 90s was hired first by companies as a productivity boosting tool and second by consumers as a way to duplicate their work productivity and communications in their personal lives.

However something changed with PCs when the laptop became "good enough". With portable computing, the job the PC was hired to do evolved. It was more important that the product be well designed (for aesthetic value, usability and reliability) than just fast and spacious. The microprocessors were plenty fast but what mattered more was low power consumption, a low profile and tighter integration with software.

The product was also purchased in a different way. A desktop could be purchased on specs alone, sight unseen, from a catalog. But a laptop had to be touched, hefted and the screen had to be observed and the whole design contemplated before a purchase decision was made. The product had an integrated keyboard, display, touchpad and storage. It was not easily serviced by end users. It was, in a word, re-integrated.

You can see how portability changed the job and therefore everything else as well. Consumer tastes became important, retail distribution became necessary and R&D resources had to be applied to solve what was no longer good enough: the whole package.

Vendors which did not prioritize design, retail and R&D were left flat-footed.

At the same time, systems software became more commoditized and productivity software became portable. The old measures of performance were being over-shot while the new measures of performance were under-served.

While this shift was underway on the hardware side, Microsoft continued to improve their product to serve more demanding business productivity jobs. Their software was not getting optimized for this new portable consumer job. They left the new market open to disruption.

In stepped the MacBook with good enough (and improving) office productivity. With excellent appeal along the dimensions of performance consumers demand most of all. It was priced higher than other laptops but the price points were affordable and, inflation-adjusted, lower than they'd ever been. It should not be a surprise that Apple was one of the first vendors to see its portables line become bigger than its desktop lines. The market evolved to the point where what Apple had was what the buyers needed.

The shift to portability is a compelling story for Apple as disruptor in the PC market. It may not result in a complete reversal of the PC hegemony but it allows Apple to grow a product line at triple the growth rate of the market. A market that was considered completely dominated by entrenched incumbents with an unbreakable profit formula.

But with the iPad Apple is clearly also aiming at disrupting the Mac (and, transitively, the PC as a whole.) The iPad can be seen as an evolution toward seamless portability; the mobile computing paradigm shift.

Apple has been contemplating a SIM card that would make carrier switching a lot easier. Sounds great, doesn't it?

"Apple is relenting," said Rodman Renshaw analyst Ashok Kumar. "They are now completely backing away from their plan to take the carrier out of the equation," said Kumar,.

via Apple to Kill Carrier-Irking iPhone Plan - TheStreet.

This brings to mind a recent article I wrote that any talk of mobile dominance by platform vendors is bunk.

... no single platform can win a disproportionate share because it would threaten the balance of control the operators require. So talk of “dominance” of one platform or another is hyperbole. The most likely scenario is an even distribution of share between 4 or 5 competitors.

The power of distributors in the mobile phone value chain cannot be ignored. It's not fair, it's not convenient and it's not consumer friendly, but as long as networks are not good enough for mobile computing, mobile computers cannot commoditize the network.

The consequence (for those of us who try to foresee the platform game) is that operators will continue to play platforms off against each other leading to the scenario I suggest above.

When I applied the modularity dichotomy to smartphone operating system there were several implications that came to light. One was the question of whether the market has reached the point where products were "good enough" and the speed of innovation became less important than price. Another was: will integrated vendors be able to hold on to a healthy share of growth against non-consumption?

Now I bring up another implication of modularity: the concept of "law of conservation of modularity".

Clayton Christensen illustrated this as follows[1]:

If you are writing a software application to run on top of a platform, are you permitted to modify the platform to make your application run better?

If the platform is interdependent, changing it could cause unintended side-effects and you will not be allowed to make them. If the platform is modular, changes are possible and you will have access to the code.

The reason is not not political. It's that in the case of interdependence, the application has to be suboptimized and conform itself to the platform so that the platform could remain optimized (to its goals). The platform needs to remain optimized is because it needs to keep improving (since it's not good enough).

In the case of modularity, the application can be optimized and the platform can conform itself to the application because the application needs to keep improving while the platform is good enough and does not.

Conformability is what constrains up-market progress.

This also holds in hardware architecture. This was plainly evident in the WinTel era. During that time the microprocessor and the operating systems had a proprietary and interdependent architecture even while Dell’s product has a modular architecture.

So the microprocessor wasn’t good enough. That meant that the desktop computer had to have a modular architecture to conform itself in order to allow this to be optimized because the line widths on the circuit were not good enough.

This is what is meant by conservation of modularity: one side or the other of an value chain boundary needs to be modular and conformable to allow what’s not good enough to be optimized. The key question is what's not good enough: the device or the platform (the whole or part?)

How does this apply today in the post-PC era?

If you think about it in a hardware context, because historically the microprocessor had not been good enough, then its architecture inside was proprietary and optimized and that meant that the computer's architecture had to be modular and conformable to allow the microprocessor to be optimized. But in a little mobile computer like the smartphone, it’s the device itself that’s not good enough, and you therefore cannot have a one-size-fits-all Intel processor inside of a BlackBerry or iPhone, but instead, the processor itself has to be modular and conformable so that it has on it only the functionality that the BlackBerry needs and none of the functionality that it doesn't need (hence the ARM modular architecture is dominant). So again, one side or the other needs to be modular and conformable to optimize what’s not good enough.

Now today (and, I believe for some time to come) in smartphones, or in any situation where logic gets embedded in a system it’s the device itself that is not yet good enough and, therefore, you cannot back off the frontier of what’s technologically possible. It has to be optimized with a proprietary interdependent architecture. That means that the processor and the operating system inside of a Smartphone has to be modular and conformable to allow that to be optimized.

In order for you to believe otherwise you have to convince yourself that smartphones, as a system, have reached the limit of what is technologically possible.

[1] The source is a presentation by Clayton Christensen at  Open Source Business Conference in 2004

In March this year Richard Stengel, managing editor of Time magazine, was speaking about the iPad.

For a while many movies were more like filmed plays, until directors really learned to take advantage of the opportunities of the medium. For the iPad “The medium is waiting for its Orson Welles.”

The idea that a new medium needs a new media is not novel. The implication that the new media needs a new genius to define it also follows naturally. However, the implications of new media for the creative industries that are built around them are more difficult to perceive. How are the structures of these industries shaped by disruptive innovations?

Disrupting theater

To see just how disruptive cinema was, consider the plight of acting talent. In the early years of the cinema (1890s–1900s), performers were not even identified in films. In other words, they were not in the "credits" and far from being "billed". The reason was that stage performers were embarrassed to be in film. Silent film was considered pantomime and since one of actors' main skills was their voice, they were concerned that appearing in films would ruin their reputations.

Early film was also designed for the working classes, not for intellectuals. With peep shows as the original presentation format, followed by nickelodeons, film was seen as only a step above carnivals and freak shows. Clearly not something that an aspiring actor would want to be associated with.

So here we have a classic disruption: The new medium was of a far lower quality than live theater. Even lower than the Vaudeville and Burlesque shows. It was, as many other disruptions are pronounced, a toy.

However, it had a market--a profitable market. Over time, the product improved and within a few decades completely drained the profits from theater, leaving it to serve only the most demanding customers willing to pay high ticket prices and satisfying only their high brow tastes.

So going from Theater to Cinema involved more than technological or technique innovation. It required business model innovation. Specifically, Cinema technology brought about the "Hollywood" industry, or more specifically, the Star System and the Studio System.

The Star System was a branding technique designed to signal quality to the public. It remains a basic and fundamental innovation: celebrity as product. The Studio System was a production and value chain innovation.

The integrated producer

By the 1930s technological change led to a new value chain: vertical integration, ownership and effective control of distribution and theaters.

During the Golden Age (early 20s to early 60s) eight companies constituted the Hollywood studio system. Of these eight, five were fully integrated conglomerates, combining ownership of a production studio, distribution division, and substantial theater chain, and exclusive contracting with performers and filmmaking personnel.

The studios’ efficient, top-down control over all stages of their product enabled a new and ever-growing level of lavish production and technical sophistication.

Readers may recognize this as the "inter-dependent" business architecture model.

The studio system allowed iteration and innovation and factory-like efficiency in production. This architecture held sway as the technology remained relatively stable and the market for content expanded to cover most of the world's population.

In the late 60s and 70s, modularity emerged as a more practical alternative and control over production was separated from distribution. (Theater ownership was removed by anti-trust action). The system that emerged gave more power to producers and directors (e.g. Kubrik) and the talent became independent of the studios.

The new Welles

Which brings me back to Orson Welles. Welles' masterpieces were the product of an industry that allowed innovation to happen. They were the product of an era. An era defined by integrated innovation and inter-dependent value-creating business with common ownership and control.

So when print publishers today think about their future in the era of the iPad, they should consider their value chains and business architectures. Could the new Welles create the new iPad genres to jump off the screen if he worked in a regular publishing firm that outsources practically everything? Or will he emerge from a firm that operates an integrated value chain. A firm like Amazon that owns the device, the publishing system, the retail store and maintains direct relationships with readers?

It's my opinion that before there is an Orson Welles of iPad there needs to be a Studio System and a Star System for iPad apps. The Star System is nearly there with the current App Store, but it needs discovery and a systematic way of promoting talent. The Studio System has yet to emerge.

This does not bode well for traditional publishing houses aspiring to embrace the iPad. They are not in a position to create these Systems around this new media and hence to nurture the next Orson.

It's perhaps ironic that Orson Welles' masterpiece "Citizen Kane" (1941) was the story of a publisher.

From Distimo (registration required):

• The number of applications in the Apple App Store has grown from just under 200,000 in April 2010 to over 300,000 in October 2010.
• The proportion of iPad only applications outgrew the proportion of universal applications during the second quarter of 2010.This trend reversed in July 2010 with the proportion of iPad and universal applications in November being equal (7%).
• The average price for an application in the Apple App Store for iPad increased from $4.34 in April 2010 to $4.97 in October 2010 (+14.5%). During the same period, the average price of an application in the Apple App Store for iPhone increased only slightly from $3.94 to $4.03 (+2.3%).
• The average price of the top 100 paid applications in October 2010 is 171% higher in the Apple App Store for iPad than in the Apple App Store for iPhone; $5.80 compared with $2.14, respectively.
• The lower average price of applications in the Apple App Store for iPhone is due to the fact that a large portion of paid applications are priced at $0.99 (45%), while only 24% of applications are priced at this price-point on the iPad.
• Angry Birds was the top paid application in both the Apple App Store for iPhone and Palm App Catalog in September 2010. Angry Birds HD was the number three paid application in the Apple App Store for iPad.

If we look at the growth of smartphones independently from all phones, the category looks impressive:

Smartphones are now almost 24% of all phones, up from 10% three years ago.

What's also impressive is all participants in the market grew their volumes. The rising tide did lift all the boats.

For this reason it's somewhat perplexing to hear absolute statements about the imminent death of certain smartphone competitors. The non-smartphone market is still 76% of the total phone market. And it's the biggest and easiest target for all smartphone competitors. The data shows that, for the time being, calling the end for vendors or platforms in a market that's doubling every three years is premature.

But what I really want direct attention to here is a subset of the market: modular platforms.

If you recall from the modular vs. inter-dependent dichotomy discussion, modular architectures are a way to implement products by licensing core components rather than keeping an integrated development model. I stated that modularity tends to be the better approach when markets are mature/over-serving and inter-dependency is the better approach when markets are young and the products not-good-enough.

Looking at the chart above you should note that the market is growing extremely quickly so it's not "mature" in that sense, implying a healthy future for inter-dependent players.

So how are modular vendors faring at this stage of the market and what are the prospects of module suppliers (i.e.  mobile operating systems).

To help clarify, rather than looking at vendors individually I grouped them by architecture. I took the charts above and changed the colors so that modular vendors (in shades of brown) are represented separately from inter-dependent vendors (in shades of green).

When looking at the market this way we can make some important observations:

1. Even though the overall market grew, the share of the market held by modular architectures is smaller than that for inter-dependent. It's also not increasing. In 2008 modular players held 36%, in late 2010, they held 35%.
2. The suppliers to the modular market changed over the same period, so to a large extent they are fungible. During 2007, the vast bulk of the brown area above was using Windows Mobile. The vast bulk in 2010 is using Android.
3. The addressable market for Android is constrained to the modular market. Therefore the growth potential depends on whether that brown area increases dramatically relative to the green.
4. Vendors don't change architecture easily. My knowledge of the competitors makes me believe that none of the green players will change from Inter-dependent to modular, and even if they wanted to change  it's not a simple thing to do. Conversely, changing from modular to inter-dependent is enormously challenging. Company processes, competencies and priorities must change dramatically.

So what's the bottom line?

For an Android dominant future, several conditions must be met; one will need to believe all of these to be true:

• The addressable market for modular solutions will have to grow much faster than that of inter-dependent vendors. [The chart shows in-line growth--again due to the overall growth of the market. The green guys above won't just roll over.]
• The split of licenses between Android and Windows Phone within the addressable market must favor Android. [Again, this is unlikely as "politics" will interfere. (I won't even touch IP issues.)]
• The current modular vendors will not become inter-dependent or the current inter-dependent vendors will become modular. [Now why would they tear themselves apart if they are growing?]
• The profitability of Android vendors must be high enough to make modularity sustainable [more about this later.]

Talk of Android (or iOS) "domination" is still wishful thinking. With the acceptance of Windows Phone within the value chain (device vendors, operators, developers), the brown area above will be served by two very powerful and motivated competitors. Politics and lawsuits will add drag on growth. Established brands are important to consumers and new brands (like ZTE and Huawei) will have a hard time joining the top tiers with or without Android. Established integrated vendors like Nokia, RIM and Apple don't have modular DNA but do have massive distribution.

In the end, the real limitation is that the brown area itself is not going to get disproportionately large. Android is limited by its addressable market and that market is a lot smaller than the whole market.

Looking at the world through modular/inter-dependent lenses lets you see that mobile platform dynamics will not evolve as they did in the PC era. At least not for the foreseeable future.

Google likes to market itself as "Open" in contrast to "Closed" alternatives.

Apple likes to market itself as "Integrated" in contrast to "Fragmented" alternatives.

These dichotomies are judgmental and meant to portray "us=good" vs. "them=evil". Neither gets to the point of how the two companies are structuring their businesses relative to the mobile computing value chains and clouds the judgement of observers.

I propose using a more informative and less judgmental distinction. It's a division defined clearly by Clayton Christensen in his classic "The Innovator's Solution" from 2003.

He introduced the concept of interdependent vs modular systems.

Interdependent systems have linkages between elements ranging from product components to the members of a product value chain. Essentially, the pieces communicate or interface via non-public or non-licensed protocols and have only specific partners (e.g. the iPod and iTunes).

Modular product architectures, on the other hand, are similar to the concept of plug-and-play and resemble building blocks, consisting of standardized interfaces, enabling parts to be easily swapped in and out and multiple suppliers or partners to compete.

Neither of these architectures is "good" or "bad". They are natural ways to organize according to what business model or point in the evolution of a technology you are at.

Interdependent architectures are the only way to rapidly and competitively improve the performance of not-good-enough systems. Modular architectures are the only way to squeeze profitability from more-than-good-enough commoditized technology.

Interdependent systems often lead to higher performance than modular systems because the system is optimized. Engineers can iterate more rapidly to squeeze the maximum performance from sub-systems by connecting them in ways that makes the best complete solution. In contrast, modular systems often lead to lower costs because there are a greater number of suppliers, since interfaces are standardized and pieces can be swapped in and out.

Interdependency is often required to raise the performance of a new solution. In contrast, modularity is required to lower the cost of an overserving solution.

Continued interdependency often drives the performance of that solution beyond that which the target market is willing to pay for. The target market then frequently turns to modular solutions which, at that point, often offer good enough performance along with modularity-driven advantages such as lower cost, convenience, or other benefits.

So the question is not whether one is better than the other but when either one should be used.

Modular architectures are often the solution when interdependent architectures prove too costly. Interdependent architectures are the solution when modular architectures are not good enough or can't solve new jobs that users discover they need to solve.

Apple's value systems, priorities and processes are all tuned to interdependent architectures. Google's value systems, business models and competencies are all tuned to modular architectures.

Apple solves the problems of new markets, Google solve the problems of over-served markets.

So the winning[1] strategy depends on detecting where a product lies in its march up the performance trajectory. Before it's good enough, interdependent systems win. After it's good enough, modular architecture wins.

So where is the smartphone on its evolution? If it's still early days, iPhone will keep growing. If it's saturating and improvements are neither valued nor used, then it's time for a modular approach.

Place your bets now according to your vision.

---

By winning, I mean capturing the bulk of the profits in the industry.

What is it that makes the iTunes App Store so compelling? Will the value the App store added to the iPhone be added by the Mac App Store to the Mac?

Here are the characteristics I think make the App Stores valuable:

1. They redefine software as content. The pricing, marketing, discovery and buying process is identical to that for content like music or video.
2. They redefine the skill required to create a relationship with customers. They allow a new class of less-skilled and less-capitalized developers participate in selling software directly to the buyer. By "skill" I don't mean engineering skill but marketing skill. A developer can create a product that can reach millions without having to acquire with channels and distribution skills.
3. From a consumer's point of view, they simplify purchasing and lower the price of software.

These three characteristics of app stores make them disruptive. The disrupted companies are the traditional software publishers. The response from game publishers to the App store were predictable: they condemned it for destroying value, "cheapening" their product, and creating a race to the bottom. They also predicted that it would all end badly as nobody would make any money.

The truth is that they were disrupted by different cost structures. The entrants did not need to spend on market development, and focused on innovating on the essential novelty of the user interface.

So the Mac App Store could be disruptive to traditional software vendors. A large new population of software developers could emerge targeting the Cocoa environment and they may bring new apps that move the jobs that the computer is hired for to appeal to new users.

However there is a problem. The Mac is a small target market relative to iOS. Apple announced that there are 50 million Mac users. This compares badly to the 130 million (or so) iOS users. It won't be long before 50 million iOS users will be added every three months.

So the first thing that Apple needs to do is grow the Mac installed base. Perhaps the new Air and following updated to the MacBooks will do just that. But the growth rate needs to be an order of magnitude faster. And I suspect price is an obstacle to this growth.

Regardless of this obstacle, the Mac App Store has the potential to change the appeal of the Mac. As the first personal computer with an App Store, new uses may emerge and create the same app-platform effect.

Apple's "Back to the Mac" was a clever play on words. Everyone expected it to mean that the event was going to focus back on new Mac products.  As we had been so steeped in iDevice news the Mac was feeling neglected. It was time to take the discussion "back to the Mac."

Instead Apple told us that the Mac and OSX were going to become more like Devices and iOS. iOS innovations were what's going "back to the Mac"

So it wasn't "back to talk about the Mac" it was "OSX went to iOS and iOS is going back to OSX." The strategic upshot of it is that "the Mac is an extension of the device portfolio." Heady stuff. We'll need to chew on this for a while.

But some implications are easy to foresee. For example, the consequences for competitors. When Apple launched the iPhone, competitors followed suit, powering their phones with a variety of "open" operating systems. When Apple launched the iPad, competitors followed suit, powering their devices with a variety of "open" operating systems. These reactions to Apple's initiatives by dozens of "open-wielding" competitors are all being touted as the inevitably winning strategies.

So, as we've observed all of Apple's strategies being copied, I can't wait to see the competitors follow its "back to the Mac" strategy:

• It won't be long before Dell takes UI and hardware design elements from the Streak "back to the PC." Think of the magic that will happen when Android Froyo "hooks up" with Windows 7.  Both Android and Windows being "open", if I squint hard enough I can just visualize the tweet from Andy Rubin of the command line to build a new Windows  8 with Android mojo. The Android Market selling Windows Apps. It will be beautiful.
• Or perhaps we'll soon see "back to the Blackberry" as RIM takes QNX interface elements back to their core business. Not so sure about the command line make statement there.
• Or maybe Nokia will announce "back to Symbian" as they take gestures from the ultra-open MeeGo to do an evolution of their majestically open Symbian.

These initiative will surely be helped by the vast community of open developers surging to support the great open merged PC/tablet/device future.

As a clue to the sarcasm challenged: The power of Apple's integrated approach across its product lines goes deeper than the user experience.

Before proclaiming the death of a company or product it's important to understand what makes it live. I'll illustrate with a personal experience.

I was once asked to comment on a product designed to be a "Blackberry killer". Much like the latest Droid Pro, the product looked like a Blackberry. It had a monoblock keyboard and a nearly square screen. It was, in other words, a product designed for thumb typing emails.

The backstory is that, like many phones, the requirements came from operators. At the time, RIM was growing extremely quickly and was causing some consternation at operators over an upstart's increasing reach into the relationship with end-users (sounds familiar?)

The rigidly predictable response was to call all phone vendors and task them with developing Blackberry alternatives (aka killers). Of course, each vendor was called independently so they all got excited about having this opportunity to be assassins.

So when I looked at the product my employer was building as a "killer" I asked: "Well, what makes Blackberry live?" This was not just rhetorical. I felt it was critical to the success of the product. Unfortunately it was not a question on anybody else's list. My cursory review of RIM's business would show that the product Blackberry was popular because it enabled a service, not because of the design of the device.

RIM was like a barkeeper who enabled socializing on his premises by selling beer. The product he sold was not really beer but meeting services. A brewer looking enviously at the high margin beer being sold there might try to compete by launching "Pub-style beer" but the product won't help people socialize any more if they drank it at home. Bar patrons were paying the high price of bar beer because it had an implicit rent attached for using the meeting site.

So no matter how much a brewer tried, unless they got into the business of managing taverns, they won't ever put the barkeeper out of business.

But the rush to copy the design was in full force. Not only Nokia (E 61), but HTC (T-Mobile Dash), Motorola (Q), Samsung (Blackjack) and even Sony Ericsson (M600) rushed similar products out. And they all reached the market at about the same time. (Evidence that not only were they all asked to make products by operators at the same time, but that their product development cycles were roughly the same.)

The deluge of keyboard monoblock Blackberry killers led to lots of comments predicting the imminent demise of RIM by way of powerful entrenched incumbent responses.

RIM's market share actually grew after these launches.

This is because none of the products addressed the real question of what makes Blackberry live and thrive. They were just pub-style beer, not thinly disguised meeting places.

So next time you hear about the imminent demise of an upstart due to the reaction of suddenly awakened incumbents, ask whether the reaction is to the product or to the way the product makes money.