“If it isn’t hurting, it isn’t working.”

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newton
So said John Major, as chancellor of the Exchequer, when he was talking about the harsh effects of Conservative economic policies in the late 80s/early 90s. Those words popped into my head today as I was reading some of the technology news related to new media companies. First of all, that long-term technology success story, Microsoft, have announced they’ll be cutting 5,000 jobs in the face of the global economic slump.

Meanwhile, the once-giant Sony has projected a record operating loss and Nokia have seen a 69% drop in profits.

Microsoft is a lot like an oil tanker – an enormous juggernaut so huge that it’s hard to turn around. If you’re in the business of writing operating systems for profit, one bad product can set you back for years. Such is the case with Vista, which is being hurried away with the forthcoming release of the so-called Windows 7; such was the case with Bill Gates’ strategic blunder in not spotting the importance of (a) the internet; and (b) search, which is why Google “won” the search market and Microsoft are an also-ran when it comes to online presence.

You’ll have noticed that Windows “7” is still several versions short of being on a par with Apple’s Mac OS X (for 10), which is currently on its fifth iteration.

Although Apple are in the operating systems business, they’ve always made most of their profits from hardware. And not just any old hardware: it’s prettier and it’s more expensive. Being more expensive gives you at least two key advantages over cheaper rivals. First of all, wealthy people tend to be more recession-proof than ordinary punters. Luxury brands might suffer a bit, but conspicuous consumption is always with us, even in a recession. The second key advantage lies in the fact that their target markets continue to produce stuff, which means that the technology refresh cycle continues.

What will almost certainly hurt Apple in the future is the death of the newspaper industry. This will also kill the desktop publishing market (e.g. Quark, some parts of Adobe), and if news goes online-only, a lot of the web scripting and code will be done on PCs, not Macs.

On the other side, Apple are getting stronger and stronger in the consumer gadget market. As John Gruber over at Daring Fireball points out, in spite of all the pundits who predicted otherwise, Apple have sold a devil of a lot of iPhones (11 million in the last six months!), and they’ve also sold a lot of the laptops (34% more than the previous year) that pundits said were too expensive, the wrong size/shape etc.

So, what’s working and who’s hurting? Given that they are hurting Microsoft with their computer and operating system sales, and they’re hurting Sony with their iPod and iPhone sales, and hurting Nokia with their iPhone sales, it’s not surprising that Apple have scored record revenues in the quarter just past.

This was the Christmas quarter, but at the same time, all the tech and business pundits love predicting that Apple’s recent run of success is going to end. Being a pundit must be great, because in spite of getting things wrong most of the time, this doesn’t seem to affect their willingness to pontificate the next time – probably on the basis that they’ll eventually be proved right.

One of the reasons the pundits were predicting Apple’s would have problems was their failure to announce a so-called “netbook”: the tiny, underpowered portable computers that are selling well at the moment because they do the job of connecting to the internet adequately. These, like iPhones and iPods, are lifestyle products. Apple are saying that they’re watching the market at the moment, and they don’t think these products are “good enough”. That seems like the kind of thing Apple say just before they announce something that completely revolutionises the market.

They did it – to an extent – with iPhoto, which revealed the software that came as standard with digital cameras to be the shoddy crap that it was. They did it with iTunes and the iPod, which (again) revealed how poorly served customers were with music playback devices and the software you used to copy music onto them. Even though BlackBerry seemed to “own” the smart phone market, the iPhone came along to prove that they could do better.

So now they’re looking at the netbook market and saying things like, “those products are based on hardware that’s much less powerful than what we think that customers want, software quality that is not good, cramped keyboards, small displays. So we don’t think people are going to be pleased with those products, but we’ll see…”

In other words, they’re (possibly) planning something more powerful, with some kind of full-sized keyboard, a bigger display, and (of course) better software. The iPhone is already a more powerful computer than one of the old black PowerBooks, so I think you’d be foolish to invest in a netbook at the moment, if what you really, really want is an Apple logo in your backpack.

The pattern here is interesting. In the 1980s and 1990s, Apple were often first to market with innovative products that were ahead of their time. The most remarkable of these was the Newton (see above, compared to an iPhone), a small hand-held computer with a stylus and handwriting recognition. It completely bombed, mainly because the world wasn’t ready for it. Apple later watched other companies (like Palm) enter the same market with similar products that succeeded. They also watched Microsoft rip off their operating system ten years late and conquer the world.

What did Apple learn? They learned that early adopters don’t make you rich. They learned to watch, and wait, and then pounce with a better product, aggressively priced. They learned that you make money from aspirers, succeeders, and mainstream customers, not from the demanding, short-attention-span children who are early adopters. (Explorers and reformers? pah!).

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5 thoughts on ““If it isn’t hurting, it isn’t working.”

  1. Chris H

    Hey….first comment in a while,

    Guess what operating system this comment is being sent from…..WINDOWS 7 BETA!!! For once i will agree that Windows Vista was more than a bit dissapointing however Windows 7 (was going to be called Windows M1, M1 standing for Milestone 1) is a huge improvement on the blunders of Vista. (by the way…what ever happened to XP, the greatest Windows ever, why wasnt that M1? I agree that Windows needs to catch up in some ways but its definately mac who will lose out in an internet based news system. Well done for apple for the iPhone and iPod, i’d sooner buy one of those than say a Sony….

    Am i being converted? Doubt it 😛

  2. Dan

    First of all Chris…. Windows 98 was the best Windows OS, not XP…And second of all. I don’t see the point in downloading a public BETA OS. The fact that it’s probably full of bugs and may crash at any moment. And the fact that Me, as a user of Vista, is currently very happy with the OS he is on at the moment.
    I never liked XP the lack of features frustrated me, and it looked too… (Eugh?) When I bought my current PC it came with the 32-bit version of Vista. I instantly got to grips with it, and if you know what to do with it, it is a very powerful OS… ok Mac OS X is better. But I don’t have a Mac, so it doesn’t matter to me.
    OK some admittance here. Vista was buggy for me for a few months. However, once Microsoft released all it’s patches and Service Packs, it no longer appears to have these bugs.
    As a user of Microsoft PC’s I know that Windows 7 will be ‘crap’ and won’t please near enough people to make it viable for me to get it (I need to be pushed by the public before I make a choice.)

    After a bit of researching I have found that the Public Beta Windows 7 Does not support google chrome, this is either a really bad joke… or, as I see it, Windows are starting their old IE ONLY game. It also appears ISO-Image mounting programmes do not work! OK this may seem a sensible to stop the ‘Pirates’ an all. But as I am myself a Gaming ‘Pirate’ I wouldn’t be able to live with this.

    Back on the subject of Mac. After helping my dad clear out our loft over the last few weeks. We uncovered my old eMac. But I can’t boot it up as I have no Keyboard or Mouse. So I guess it will just live to be a relic. Unless ofcourse anyone happens to have some spare Macboards and Macmice hanging around!

  3. Mike

    From what I’ve heard, Windows 7 has some pretty mixed reviews. Sure, it may be better than Vista. But remember, you’re comparing it to Vista.

    A lot of people really hate Vista, and I think Microsoft really needs to get it right this time.

    Oh and Dan, I rescued an old iMac g3 a while back, and while it only came with the original keyboard, a third party mouse worked fine.

    As far as I know, any usb keyboard and mouse will work fine, and are dirt cheap.

  4. Dan

    Ah perfect. Although, on closer inspection… there appears to be no power cable. Quite an over view on my behalf!

  5. Mike

    Again, I’m pretty sure it just takes a standard kettle lead.

    My old imac took a 5a/250v kettle lead, if that is any help.

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