How Apple Is More Authoritarian Than The Chinese Government

I am a fan of Apple’s products. I believe that the hardware is well-designed, and so is the software. In particular, I believe that the design philosophy behind Objective-C and Cocoa frameworks are the best thought-out and implemented tools for any developer looking for a strong and robust environment for object-oriented programming.

Like other Apple fans, I get excited at the new hardware the company puts out on a regular basis. I have reconciled myself to the fact that the top-of-the-line Macbook Pro I now use will shortly be replaced by a newly refreshed iteration of this line, and I will soon torment myself when I see others with their newer computers. The sames goes for my iPod touch.

I am also a fan of Steve Jobs; he shows what can be done by a very smart guy who has fallen down a few times in life who now has a good plan, and who just focuses on implementing his plan. The guy knows exactly what he wants, and doesn’t let anyone or anything get in the way of his plans. He is the poster boy for a smart authoritarian and autocratic management in an organization. I’m convinced that without a firm grasp of the challenges the company faced in 1997, Apple would have quickly gone into bankruptcy.

Steve Jobs saved Apple.

This is why I get upset with the company’s policies towards China. I mean, for Apple to criticize the Chinese government for not being open and nice to minorities is just completely wide of the mark.

With this in mind, let me show you how the Chinese government, in comparison to Apple’s management, is in fact much more open and democratic:

  • China now has a group leadership on the national level. Who is in the group leadership at Apple? And how much do you see others besides Steve Jobs talking about “different directions” at Apple?
  • Who is going to be the successor to President Hu Jintao. I can name several candidates including Xi Jinping, Bo Xilai, Zhou Yongkang, just to name a few. Who is going to succeed Steve Jobs? I can’t name any.
  • Leaking any information about any new products which have not yet been announced at Apple are grounds for immediate dismissal. Same goes for China.
  • Apple employees are not allowed to publish unofficial blogs without company permission. Doing so may be grounds for dismissal. China has 100 million blogs; all of them are unofficial.
  • In private meetings with Steve Jobs and Apple senior and executive management, the senior and executive management turn and look to Steve Jobs for permission to speak before speaking, even when they are addressed directly. The Chinese national government leadership is more relaxed than Steve about other senior officials speaking about national affairs.
  • For many Apple employees, the most dreaded moment is sharing the same elevator ride with Steve. If he talks to them and he asks what they do, and they go not give a good response, he just might terminate them.

Basically, Apple (the company) is an extension and implementation of one man’s (Steve Jobs) vision of what the consumer electronics and computing industry should look like. And ironically, laws in the US permit Steve Jobs to run his company in a very autocratic fashion. I have not yet heard of people being “dismissed” from China because they were not productive according to one ruler’s definition. On the contrary, the Chinese government goes out of its way to keep the Chinese economy on a growth track, creating more jobs. (I must admit that I think many of these jobs are of questionable value, but that’s another discussion.)

And yet, Apple doesn’t like things the Chinese government does because they are less than democratic and are autocratic? How many current Apple employees do you see protesting at the way the company is run? I’ll tell you how many there are.

Zero, nada, zilch.

Sure, Steve Jobs is running a company and the Chinese government is running a country, but is there anything to suggest that Steve would act any differently and suddenly become open and democratic if he were running a country?

Come on Steve, look in the mirror. When it comes to autocracy, the Chinese government can’t hold a candle to you.

I’m really trying to wrap my mind around this and am trying very very hard to understand Apple’s criticisms of China. If anyone can explain this to me, I’m all ears.

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Apple’s App Store Shows Early Financial Success for Devs

Several months ago I wrote about how Apple’s opening of the iPhone SDK and its App Store would create a whole new business ecosystem for application developers for that platform. Apple offers globally accessible hosting and payment clearance in return for a 30% cut of the app’s sales price.

Now, there are early signs that the strategy is paying off for some early application developers who have developed popular apps for the iPhone and iPod touch (which uses the same SDK as the iPhone) users. Eliza Block, who developed 2 Across, a word game for the iPhone platform, has reportedly cleared in the area of $2,000 a day according to this article.

The App Store is a new updated version of the shareware movement which took hold in the early 80s with the launch of the Apple Macintosh 128K. In those days, homebrew developers would develop games, apps and productivity tools which were distributed on floppy disks. (Remember those? If you do, you’re showing your age.) More often than not, these came with a message which went something like “If you liked this app, please show your appreciation by sending a contribution to this address.” More often than not, people just used the apps without sending money, although there were a few kind and generous souls who did.

Now, Apple has become the doorkeeper for these independent developers. There is no more reliance on the kindness of strangers; Apple takes care of global distribution and payment for new apps in return for 30% of the app’s sales price. For devs, the App Store is the perfect barometer for what’s hot and what’s not.

In contrast, Facebook and others have not been able to find the magic balance point between independent developers and their own corporate needs for revenue. When Facebook opened its platform to developers, it ended up enabling app developers to spam the FB audience, driving many away from Facebook. Now, with Facebook Connect, FB is trying to find that balance point.

Chinese social media companies are no better at finding the right balance between independent devs and their own need for revenue. While there has been talk about open systems in China, all of the competing business models in fact, are not open. Apple’s system is certainly not open. it’s just that Apple is willing to share in order to grow the pie.

Apple and Steve Jobs have successfully put themselves at the juncture of technology, business and hardware, and are willing to share a larger cut in order to drive up sales of a very attractive new hardware platform. With growing earnings from hardware sales, Apple can afford to be generous with devs, and is effectively subsidizing a new business ecosystem. By making some independent developers financially successful with App Store and getting that word out, they do something none of their competition have been able to do yet.

The question for Chinese companies such as Tencent is whether they are willing to use their high corporate earnings to subsidize their own independent developers’ business ecosystem as Apple has, and share some of the revenue in order to grow the pie for everyone? Or do they still think that they can own the whole pie? Tangos Chan says that they still believe that they can own the whole pie.

But Tangos believes that this will change in the future. In the meantime, more independent devs will gravitate to developing for the iPhone platform. It’s better to open up sooner while there is still interest in their platform because opening up later means that they will have to be that much more generous in order to attract developers away from Apple’s platform.

After all, that’s where the money is. And I’m sure that Steve loves how his competitors’ moves help his platform.

What more could he ask for?

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Apple and China: The American Media Ignorance Continues

Over the past year, the tone of coverage of many China-related topics in the US has improved. For the most part, writers covering China have tried to look past the generally-accepted stereotypes, and have tried to get a deeper understanding of what is going on in China.

But occasionally something finds its way through the cracks.

This article is really exemplary; it seems like the writer has taken all the stereotypes about Apple and China, and thrown them all together in one basket. Judging from the tone of the article, and what he professes to be truth, it seems like he has never set foot in China. Otherwise, how could be believe some of the things he writes?

Let’s take a look at some of the choice statements:

Apple has less than 8 percent market share in China for media players, and far less than 1 percent of either PC or cell phone market share.

Yes, so? I wonder if the writer has walked into any cafe in Shanghai, Beijing and Shenzhen, and looked around? Or has he taken any of the subways in any of those three cities and looked around for the signature white earbuds? The question should not be the percentage market share. It should be the trend, and whether it is tracking up or down.

Apple’s second biggest hit in China, the iPhone, isn’t authorized. One Chinese analyst estimates that some 1 million Apple iPhones are currently operating on just one Chinese carrier — China Mobile — with a smaller number on other carriers. Most Apple “Authorized Resellers” in China sell black-market iPhones, and many even offer illegal cracking services — a process that reportedly takes less time than activating an iPhone 3G in California.

Apple makes money off of every iPhone sold, whether it is through authorized or unauthorized channels. Sure, Apple would like to have a carrier agreement in China, but having a group of fans, even though it is relatively small percentage-wise, which is very enthusiastic about Apple products, is a good thing. Besides, there are a lot of people in China who pay even more for more expensive feature-packed mobile phones in China. In fact, the iPhone is not the most expensive phone in the market. Ask Nokia.

Apple succeeds because customers love the products and the brand. But in China, brands mean little to most potential customers, and hardware even less. Chinese consumers prize value above all.

This quote is a true gem and qualifies as one of the most ignorant sweeping statements about China for 2008, even though we are only halfway through the year. Obviously the writer has not been to China and walked in the downtown of any major city. Here is an article about the runup to the recent opening of the Sanlitun store in Beijing and another story about Chinese youth camping out in front of the Beijing Apple store, where they were behaving just like American Apple fans.
I guess that’s why there are no Mercedes Benzes, BMWs, and Chinese women don’t care about the labels they wear? Maybe he thinks that they still wear Mao suits?

The rest of the world’s love of the Apple brand has enabled Apple to get favorable terms with carriers around the world. But this hasn’t helped much in China. Apple initially demanded a big two-digit percentage of carriers’ wireless revenue as a condition for granting its coveted exclusivity deal, according to reports (one company says Apple demanded 30%). The Chinese carriers were apparently unimpressed by the value of Apple’s brand compared with the value to Apple of access to Chinese consumers. They appear to have forced Apple to drop its demand for any share of wireless revenues.

The reason Apple has not been able to get an agreement with China Mobile is because they are both big companies with very big egos who want to control everything. I would say that Apple and the carriers have trouble reaching an agreement because they are so much alike, and don’t believe in compromise.

One-party rule in China actually affects product quality. One example is that Apple will probably be required to disable the iPhone’s Wi-Fi feature in order to comply with the Communist Party’s strict Internet control and censorship rules.

The relationship between one-party rule and product quality is an arguable point. But if it is that simple, then why are ALL of Apple’s products made in China? As for the disabling of Wi-Fi on phones sold in China, that is a China Mobile requirement, not a State Council requirement. (If you think that the rulers of China don’t have better things to worry about than whether mobile phones in China have Wi-Fi functionality, you don’t know anything about the country and how it’s ruled.) Besides, with the recent re-arrangement of the Chinese telcos, it’s not as if China Mobile is able to control Wi-Fi as much as it would like.

China is number one in intellectual property theft

Apple’s whole business model is based on creating value through exquisite design, superior branding and the sale of creative intellectual property (IP) — then defending its rights against the IP thieves, pirates and counterfeiters.

How will this formula succeed if China doesn’t enforce intellectual property laws?

The music piracy rate in China is between 90 and 99 percent, depending on whom you ask. China is the global epicenter of intellectual property theft in general, and of Apple IP theft in particular — especially iPhones and iPods.

Fake iPhones, and phones that steal Apple branding; illegal iPhone unlocking services; trade in illegal movie and music files; all appear to be tolerated and even government-protected activities in China.

Oh yes, how can we talk about China without IP violations? Seriously though, this is an issue. The best way to fight IP though, is for a country to get more prosperous. As people become wealthier, they are more willing to spend money on software, music, etc. In China, it is also very important to explain the importance of IP to various government ministries, and even be flexible about how much you charge Chinese consumers. Many Chinese think that they should not have to pay as much for music as US consumers because they have a lower income and standard of living. Does that fit into any American companies’ equations? Up until four years ago, Microsoft had a very high level of illegally installed Windows licenses in China, and constantly lobbied with the US Congress to “punish” China. When Microsoft China changed tactics and chose to engage Chinese ministries, educate them, and lower the license fees (as China’s standard of living increased), first the ministries, then the schools, then the people started buying original software from Microsoft. Now Microsoft gets more revenue from China, and the relationship with the government is much less confrontational. Piracy of Microsoft software still exists, but again it’s about the trend, which is improving.

Steve Jobs is an exemplary business and marketing genius. But when it comes to learning about other markets, he is lazy. He would like nothing better than to set prices for all media products sold through iTunes himself, and he would like it to be the same all over the world. China is a major kink in his vision.

How many times has Bill Gates been to China? How many times has Steve Jobs been to China?

I rest my case.

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Back To The Mac!

macbook-pro-santa-rosa-revi.jpg

It has been some time since I last posted an article, so I thought I better give you a pretty good excuse.

Long story short: I have said goodbye to my old Windows (Averatec) laptop, and have bought and am using a brand new MacBook Pro 2.4G 2/250 15″ laptop running OS X (Leopard), which I bought directly from Apple. After buying the laptop, I swapped out the 2G RAM for 4G, so now I have one sweet top of the line Mac. Right now, I’m basking in the moment since I’m sure that Steve Jobs will introduce something more cool at Macworld 2008.

Oh well, that’s the Apple tax…

My first computer, bought in 1989, was a Macintosh SE 4/40, which had its operating system on a floppy disk. From 1989 to 1997, I used Macs, and owned about eight Macs. In 1997, when I moved from Taiwan to the US, I moved to the Windows platform because the Office suite on the Macintosh was not compatible with the Windows version. At the time, Steve Jobs had just returned to Apple as CEO (for several years he preferred using the term interim CEO, or iCEO, because the company was in such bad shape.)

For a long time, I was a satisfied user of Windows. Unlike many Mac users, I don’t think that Microsoft is evil, and overall, I believe that the company has tried to develop and launch decent products which bring value to their customers. But I think that there are problems.

First of all, Microsoft has too many product lines and business units. The end result: there are too many mini-business kingdoms fighting for their piece of the pie. Apple does not have this problem; it is run by only two people, Steve Jobs and Jonathan Ive. By any definition, they are very smart, even brilliant. Ultimately, they make the call about every product and service Apple ships. This means that there are no mini-business kingdoms at Apple.

Unlike Microsoft, Apple is run by designers. Engineers are interested in technology and features; designers are interested in how to make technology usable. For designers, user experience is everything. Jobs and Ive are designers, not engineers. Most people are excited by design and usability, not by technology and features. Since Apple controls the hardware and software, Jobs and Ive are in a unique position to control and shape user experience in a way no other company, not even Microsoft, can. This is why the iPhone has been a runaway success, not just in the US where it was first launched, but all over the world. When it comes to the space where technology and design meet, Apple is in a league all its own, and the market is now rewarding it.

But Jobs doesn’t just understand design, he also understands marketing, which is all about managing peoples’ expectations and perceptions. Even though he is widely respected, he never hogs the spotlight; by saying less, he puts Apple’s products and services in the spotlight where Mac aficionados can work themselves into an excited frenzy and become evangelists for the company. By saying and doing less, Steve Jobs does more for the company.

Enough big picture stuff; let’s talk about the experience. Long story short: I love it. The OS feels mature, and it does everything I want it to do, and fast. I tend to be a fast thinker with bad short-term memory; when I want something I want it to happen right away. There is a Chinese saying xinxiang shicheng which means “to get something as soon as you can think of it”. That was always the ideal when talking about computing for me; why couldn’t the computer do what I wanted it to do NOW? For the first time, I feel that I’m close to that goal.

While Windows has been generally satisfactory, I have never been satisfied with Windows registry. While a new Windows computer was snappy, it would quickly decay into molasses mode when the registry got all gooked up. During the ten years I have been using Windows, I have used several different versions of Windows (Windows 95, Windows 98, Windows 98 Second Edition, Windows 2000, and Windows XP). And this does not include the software patches for all the different versions. From a business and customer point of view, it makes no sense that Microsoft could not take care of the registry problem over the past ten years. During the same ten years, Apple has been able to shift to an all-new Unix-based operating system which is rock-solid and continues to improve in performance.

At the same time, with Windows I still have to put up with some DOS commands and foibles such as the backward slash for directory navigation, instead of the forward slash used by Unix, and Windows failure to differentiate between upper- and lower-case in naming conventions. (I have a real problem with the backward slash “\” even though Bill Gates invented it himself.) If I’m spending most of my time on the Internet, why not just deal with Unix on the computer’s OS, which is the native language of the Internet?

Microsoft should be more like Apple and just explain to their customers why they are phasing out a lot of the obsolescent stuff including DOS commands and navigation, and should bring Windows naming conventions in line with Unix.

I bought and installed a copy of Windows XP so that I could run my favorite Windows application, MindManager Pro 7. Since Mindjet also makes a Mac version, I have downloaded the trial version and have been using that. Result: I haven’t been running Windows XP at all.

I can see that I’ll be doing some prototyping and maybe even development on this computer. For this reason, I’m keeping the configuration relatively simple and clean. Web servers use port 80; since Skype uses port 80 too, I’m keeping it off this machine. I’m thinking of getting a new ASUS Eee PC to cover that.

But then, maybe not. I have also bought an iPod Touch and a Nokia e61i.

They should keep me busy for a while…

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Dell and WPP: Will DaVinci Work?

HP 2710p

When an ailing computer company which has lost a lot of its shine teams up with one of the leading ad agency groups, WPP, to form a new marketing agency called DaVinci to spend $4.5B in marketing money, I am, naturally, more than a little skeptical.

Consolidating adspend under one roof makes sense sometimes; it made sense for IBM in the nineties when it chose my former employer, Ogilvy, also a part of WPP, to handle all its accounts. IBM was able to consolidate its image, and Lou Gerstner, then IBM’s CEO was able to make a dramatic turnaround and a nice exit for himself.

More than 10 years later though, the challenge for Dell is more complex. Dell is a company which has surpassed at squeezing costs out of the system, making cheap computers for the office masses. The problem now for Dell is that it is getting challenged on this front by Lenovo, the Chinese computer manufacturing giant and Acer, the Taiwan company which has made a dramatic comeback after a near-death experience. And then there is the US giant, HP, which is doing some very interesting stuff.

When it comes to buzz, Apple sets the bar. After switching to Intel architecture, then using the iPod as a platform to generate buzz for the iPhone globally, Apple is on a roll. Dell has been left in the dust. Add to that recent customer complaints about quality, and Dell is not in a good situation.

So can DaVinci turn things around for Dell?

My initial reaction is that it doesn’t go far enough; it is made up of Dell and WPP people, and can serve as a buffer to any agency conflicts. But the problems which afflict Dell run much deeper than just quality problems.

They are management and perception problems.

One of the big problems marketing people run into is how to turn a product which is a stinker into something which people want to buy. The Internet has made the challenge even greater, because anyone who has the time, motivation and interest can find anything about a product.

It doesn’t matter how you spin a turd, when it stops spinning, it’s still a turd.

The problem is that once a company starts thinking that it’s all about an agency, or it’s all about the creative, the ground is set to place the marketing people and agency as the fall guys, when actually the problem is with bad management decisions. Then as the management panics because of falling share price, bad buzz, and everything else, their decisions get increasingly short-sighted and the options get worse and worse. When the management starts thinking in these terms, the company is basically in a death spiral; it’s all ends when it hits the ground and bursts into flames.

The problem with Dell is that they are very good at cutting costs, but they have not shown customers how they can ADD value. So naturally, Dell attracts the customers which are at the bottom of the value chain. Dell’s management has effectively commoditized their own product line. This is never a wise thing to do. If your own products have effectively become commodities, how do you position them against anything else?

The answer is you can’t.

Cutting internal manufacturing and component costs is something every computer maker should do internally, but you never want to make it the message you tell your customers and IT departments.

For the past several months, I have been debating what I should get for my next computer. It has been a match between the Santa Rosa Macbook Pro and the HP 2710p. The 2710p is a Tablet PC and has received some excellent reviews. It was the only PC I have been seriously considering.

Why? Because I have never owned a Tablet PC, and it looked like it had reached the right balance of functionality and design. Other HP lines, Dell and the other PC makers never entered the equation.

HP obviously likes the 2710p a lot, they have made it the centerpiece of a TV ad campaign in Asia.

That is why I say that the integration of Dell and WPP do not go deep enough. Instead of trying to flog a lot of commodity products which the market has tired of, instead they should think of how to come up with new products and a product line which actually make a person excited. We’re not talking about marketing anymore; we’re talking design marketing, the kind of stuff Apple excels at.

They should start with one product, then take it to a product line, then expand it, then kill all the boring stuff. Just like Apple did with the iPod, which expanded into the iPhone line.

Of course, in order to do all that, you need to be a dictator like Steve Jobs. The question is whether Michael Dell can be that kind of dictator, even if his own name is on the line.

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Apple’s iPhone Marketing in China Leverages Global Buzz

Apple’s iPhone

What do you call it when people pay nearly double current sales price to buy a product which is basically crippled of its most important function, and the maker has spent zero marketing dollars to sell the product?

I’d call that pretty powerful buzz marketing.

According to this USA Today story, some Chinese are willing to part with 8800 yuan to own an iPhone which doesn’t have working phone capabilities in China, because Apple has not yet signed a partnership agreement with a carrier. (Presumably, Apple would part with China’s leading mobile service provider, China Mobile, to launch iPhone service in China.)

Any way you look at it, Apple’s iPhone has had a successful launch in the US. Apple has taken its legendary experience in hardware/software design and integration and applied it to a whole new product, the mobile phone, bringing good design sense and functionality to a product which has confounded most users for years. On the marketing side, Steve Jobs has put the reality distortion field into overdrive, convincing many Americans who have never used smartphones before to part with their money. A few analysts have gone so far as to predict that Apple will replace Microsoft in the mobile space, becoming the leading player for a new category combining hardware and software design and integration in mobile computing. A report which came out on Sept. 4 has claimed that iPhone sales in the US in July have already beaten smartphone sales.

In China, mobile phones are very popular and are more than just communications devices. Often, with the Chinese concern for social rank, they are indicators of social status. On the business side, this translates into frequent replacements of handsets among China’s rising urban middle class as users want to have the latest devices. Mainly for this reason, handset makers have placed most of their research and development in China, to lower costs and to be close to trends for their single largest market.

But could Nokia, Motorola, Samsung and LG have missed something Steve Jobs and Apple saw, an opportunity which Jobs’ gang could not pass up? And could the high rate of handset sales belie not only a desire to have the latest mobile device, but be an indicator that Chinese users were not satisfied with any of the handsets made by any of the major hardware makers?

Moreover, could this represent an opportunity for Apple, which has never had major market presence in China for its computer business, but has made limited inroads with its iPod business? And is this a major opportunity for iPhone in a major emerging market?

First of all, let’s take a look at what Apple has done differently. In typical Steve Jobs style, Apple has played God, giving buyers a complete final sealed package and solution, including software (a version of OS X) by Apple, and a hardware design by Jonathan Ive, Apple’s superdesigner who has been largely responsible for the elegance factor in Apple’s products. To the consternation of a new generation of software developers, Apple has provided only very limited support and documentation for designers of third-party applications for the iPhone. But even with this very limited support, something interesting has happened: the developers have organized themselves to develop new apps for the iPhone.

When was the last time you heard of a large group of developers organizing themselves to develop and extend apps for new Nokia, Motorola, Samsung and LG phones? And for nothing?

While Apple and Steve Jobs try to create consumer reverence somewhere along the lines of Moses coming down from Mount Sinai with the Ten Commandments, the fact is that the first iteration of Apple’s products still are far from perfect. But the products always gets better. This reveals something about Steve Jobs which he strives to keep from the market: he listens and acts on intelligent customer input.

Uniquely among major hardware/software companies, Apple does not use focus groups. Designers design for Steve Jobs: designs and features Steve Jobs likes are kept; designs and features he dislikes are tossed away. There are no focus groups by marketing groups for senior management to use as crutches for their decisions.

If you look at it closely, what is happening with all the buzz for the iPhone is a mirror copy of what happened when the iPhone was announced on Jan. 7 at Macworld in San Francisco. The six month waiting period created a huge amount of pent-up demand and free buzz for the iPhone in the US, which translated into record sales for the product when it was launched on June 29.

Now, it’s happening even in China.

Genius. Pure genius.

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Apple On A Roll

Nothing succeeds like success.

Following on the successful launch of the iPhone, and surpassing HP in market cap, Apple is getting ready to announce new product/s on August 7.

Even in China, where the iPhone is not yet officially available, there has been a lot of enthusiasm for the Apple iPhone, and the halo is spreading to other Apple products too, starting with the iPod, and spreading to other computer products. However, if you visit Apple’s China website, there is no mention of the iPhone.

Apple should take a leaf from Hollywood, which over the past few years has shifted to a model of launching new movies in all major markets on the same day. This saves marketing costs and maximizes media and user buzz, which travels over the Internet and text networks at very fast speeds.

To Apple:

“Get your product marketing act together and your new product launches together guys! The US market is not the only market in the world. If you don’t, you are leaving money on the table! People in China and in other countries want new Apple products, and they want them NOW.”

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