So Who Are Apple and Google Really Competing Against ?

Let's be honest: there is nothing better than an epic hi-tech battle. If Gog and Magog were the warriors of choice in Biblical days past and future, then their equivalents today are Google, Microsoft and Apple. In particular, with the recent departure of Google CEO Eric Schmidt from the Apple board of directors in early August, all eyes are focused on the alleged structural conflict between these two hi-tech titans. Even if Apple and Google are notionally allied in common struggle against Microsoft, they will find themselves in direct conflict over supremacy in the high tech world. Or so it is claimed.

One view of this struggle was discussed in an August 17, 2009 article written by Peter Burrows for Business Week and entitled "Apple and Google: Another Step Apart". The focus of the article were the recurrent two-way hi tech struggles, first between Microsoft and IBM (control of the PC), then between Microsoft, on the one side, and Netscape and Sun, on the other (control of access to the internet) and, more recently, between Apple and Google (control of the multiplicity of connectivity devices and platforms).

There is something a bit artificial about the typology--where are Intel and HP, for example? Nevertheless, there is merit in considering what the article describes as the "cultural opposites" -- Apple ("closed, customer-oriented, quality-focused") versus Google ("open, cloud-oriented, quality-focused"). As stated in the article:

"Google is the chief advocate for a wide-open world of Web standards, in which programmers should be able to run just about any software on virtually any computing device ... [including] dozens of Android-based handsets [are you listening, Apple iPhone?]."

On the contrary, we have Apple, with an emphasis on

"applications ... designed to work only on Apple devices. The company's ultimate goal is create an alternative, more exclusive universe, where consumers gladly play by Apple's rules as they use its stylish, easy-to-use products."

From the point of view of innovation, which view is better placed to prevail? Per Professor Henry Chesbrough of University of California-Berkeley, if history is any guide, Google has the upper hand. According to the article, Apple lost out to Microsoft (perhaps more exactly, Wintel, being Microsoft Windows plus Intel chips) in the 1980s because Apple sought to maintain a closed hardware-software ecosystem while Microsoft relied on a legion of independent software developers and PC manufacturers.

Find the Closed System

Based on this community development model and using history as a guide, Apple would seem to be poised to suffer another long-term defeat. After all, the Android system is all about encouraging a community of developers and device manufacturers to base their developments around the open connectivity operating system, while cloud farms, be they of Google or others, will allow users to store and retrieve gobs of data off-site in a far-away cloud.

I am not totally convinced about this conclusion (although, to be fair, the article does conclude that "for now, at least, there's plenty of growing room for both"). Underpinning the analysis is the larger phenomenon whereby hi tech companies are seeking to integrate and consolidate, where software and hardware are increasingly being brought under one corporate roof (such as Oracle seeking to buy Sun). With respect to Apple and Google, however, this one-stop shop view does not quite ring true.

Apple may find its iPhone threatened by Android-based devices but, at the end of the day, if Apple is to succeed a decade hence, it will have to develop another world-beating device. It is just as likely that the Android threat will not be relevant to the success or failure by Apple of this new device, whatever it is. Google is still about leveraging "search", while Apple is still about the next great device and the software to support it. The ultimate struggle for both is not the existential threat posed by each of them for the other, but the ability of each to build on its strengths and to innovate successfully for another generation.

Something tells me that, no matter how attractive it might be journalistically speaking, to view the enfolding competitive challenges of Apple and Google as an updated two-way struggle redolent of the IBM-Microsoft (or Microsoft-Apple) struggles 25 years ago, the reality is fundamentally different. Success for Google and/or Apple will not be about vanquishing the other, but continuing to innovate in a way that makes sense for each particular company. History is not prescriptive but, at best, instructive. This observation applies equally to the hi tech world.

Hi Tech Consolidation?

Can Branding Save Motorola's Handset Business?

The handset, and more particularly, the smartphone industry, is particularly interesting from the IP point of view. I can think of no consumer hi tech industry in recent times where there is such a variety of competitors, and such an interdependency with third parties, all wrapped-up in a melange of various IP rights. "That all sounds nebulous to me", you might say. So let's try to give some focus to my thoughts, centering on a piece that appeared in the 3 August edition of Business Week entitled "Motorola Has One Bullet Left in Its Gun."

The Business Week article describes Motorola's almost desperate strategy to reinvigorate its mobile phone business. It is difficult to believe, but it was not that many years ago that the Motorola RAZR was all the rage, particularly due to the success of its slim, distinctive design. That seems to be the problem; the product was longer on design than on functionality. As the Mobile Gazette wrote on May 16, 2007 here,

"although the RAZR looked high-tech on the outside, the handset's specification was a straight copy of [models] ... which had been around since 2003. So it wasn't a very new phone underneath, even though it was still quite competitive. However other features proved to be a disappointment, such as the pretty-but-difficult keypad and the poor user interface. The RAZR also lacked an MP3 player, expandable memory or a decent camera which became more marked as the competition evolved ... and the RAZR did not."

Roughly speaking, when the design no longer conferred a market premium for the market, and with no discernible advantage in its product functionality, Motorola entered in an inexorable decline for that market.

Fast forward to 2009, and to the intensified efforts of Motorola to recapture its glory, in particular with respect to smartphones. Ah, but what a crowded field we find-- iPhones, Blackberrry, Palm Pre, HTC, Samsung, LG (have I listed them all?). These are not fungible products at the moment (although there seems to be greater convergence); so the iPhone has materially different features, and different types of users, from the Blackberry. And how will Motorola play this? According to Business Week, it has reached a strategic decision to develop a new generation of products that rely on the Google-supported Android operating system.

Remember that Android is an open source system, supported by Google, and was developed as an alternative to the proprietary operating systems available on the market. When launched, the rationale was that Android would increase search and other on-line usage on handsets for which Google could profit, while at the same time preventing anyone else from gaining proprietary control of the handset operating system. For whatever reason, perhaps cost, perhaps something else (the article does not specify), Motorola is prepared to adopt, indeed to be dependent upon Android, upon the development of a critical mass of Android-based applications (to compete with AppStore, the RIM equivalent and so on) even though the Android is itself a work in progress, and even though Android serves Google's broader business strategy, which might include direct involvement in the handset business at some future time. The harsh truth is that, while Motorola apparently has decided that it needs Google, Google scarcely needs Motorola, except as another cog in the Android network.


So what does Motorola bring to the table? It is not clear. The article states that the analysts, "briefed on Motorola's phones", are of the view that the phones are

"impressive. ... sleek touchscreen phone with qwerty keyboards that slide out of the body of the device for easier typing."

Those seem like nice features. Still, for Motorola's sake, I hope that there is meaningful protectable IP in these features. The article does not mention patents or even any indication that patent protection is part of the company's strategy with these products. As Motorola has learned, design itself won't do it and, unless Motorola obtains an exclusive IP position with respect to at least some of these features, any advantage in this direction would seem to be short-lived.

There is one ray of IP hope however--branding. Perhaps, just perhaps, Motorola might be able to successfully roll its new products out in a way that will capture the fancy of at least a commercially viable critical mass of handset users who will come to prefer the Motorola-branded products. This will then allow Motorola to be able to roll out new features on an incremental basis, rely on its burnished brand image (assuming that it can be reestablished) and thereby not have to seek some likely unattainable holy grail of IP exclusivity.

Something like that was suggested by the Apple presentation about the iPod product that took place several days ago. None of the features that Apple introduced for its iPod product seems to be a blockbuster. Indeed, some features, at least with respect to the Nano iPod, were described as common fare on many MP3 devices. No matter. The idea is that Apple is Apple, and it is enough that it continues to roll out incremental improvements for its flagship products.

Duplicating that dynamic will be ever so difficult for Motorola. The RAZR models were top of the class less than five years ago, but Motorola could not leverage that goodwill more generally, and the Motorola brand is light-years behind Apple in brand strength. But with the operating system in the hands of an open source developer community, behind which lies an 800-pound business gorilla with its own business agenda, with no apparent patents to rely on, with the awareness that designs are fleeting at best, brand development may be the last best IP hope for the company in the handset industry.

iPhone, G1 and the IP Angle

Those of you who been called upon to teach IP to MBA students come to understand, sooner rather than later, that the preferred course offering is not simply Introductory IP Lite. The challenge is to find a way of connecting between IP and the broader business concerns of the MBA curriculum.

With that in mind, I draw your attention to Stephen Wildstrom's article entitled "Nipping at IPhone's Heels", his Oct. 6th contribution to his weekly column in Business Week under the name of "Tech & You." The article is a review by Wildstrom about challenges to Apple since its summer 2007 launch of the iPhone. In particular, Wildstrom points to the announcement of the T-Mobile G1 in September 2008, based on Google's Android operating system (see my blog of October 15th, "Android Takes Form"), and new product offerings by Research in Motion, aka the purveyor of the BlackBerry.

In short, Wildstrom described the Apple-Google combat as follows:

"Apple set this whole competition in motion by building a single, excellent smartphone within an ecosystem that it controls totally, including the right to approve all third-party software. In contrast. Google is pushing an open platform, meaning any handset manufacturer can design hardware that runs Android."

Mortal Combat of Another Kind

Having an initial look at the G1, Wildstrom concluded that the hardware is a bit of a disappointment. The software, on the other hand, is the object of praise. He attributes this to the attempt by developers "to tear down the walls that divide applications." Not surprisingly, the notion of "search" plays a central role in the design of the G1. Thus, the notion of "search", which lies at the heart of the Google enterprise, appears to be brought together with a tendency of software developers to be responsive to users' need rather than providing a top-down approach that dictates the user experience.

I really cannot evaluate to what extent Wildstrom's observations are on point. More interesting for me is the question of whether the features of the G1 described by Wildstrom are a function of the IP, open source model adopted by the Android? Or, stated otherwise, is the design of the iPhone, hardware or software, a function of the IP model adopted by Apple?

G1 and the Android Platform: Does IP Matter?

I am trying to work out responses to these questions before I take to the podium in January for my next foray into the realm of MBA teaching. If any of you out there has any suggestions, I would be most welcome to hear them.

Android Takes Form as the H1 Handheld Device is Launched

Nearly a year after the announcement of the Open Handset Alliance, a consortium brought together by Google to advance open source standards for mobile devices, and, in particular, the adoption of the Android software platform, the first mobile handset using the platform has been launched by T-Mobile. Named the "G1" and made by HTC, a prominent Taiwanese manufacturer, the H1 product puts into motion Google's bold attempt to reform the mobile handset market.



Android then ....

The Open Handset Alliance is a consortium of over 30 hardware, software and telecon companies devoted to promoting the open source platform for media devices. The initiative took dead aim at the reliance of proprietary software programs that heretofore controlled the platform for handsets.

The launch of the G1 has been likened to the launch of the Apple iPhone, but the business interests of Apple and Google appear to be quite different. Apple has remade itself into a premier gadget company (I don't go anywhere without loading up at least 10 podcasts on my iPod). As such, Apple will be challenged to continue to come up with new products to maintain its position in the hi-tech marketplace.

Google, by contrast, receives no direct benefit from the sale of the mobile gadgets using the Android program. The common wisdom has been that Google's interest in the Android project is to increase the use of hand-held devices. And why? For the simple reason that Google apparently views the long-term potential for generating ad revenues and the like through the use of Google services on mobile devices to be greater than that of the PC market. If so, for a start, presumably it is Google's hope that other manufacturers and other cell phone operators will join the Android bandwagon.



Android now ...

Some criticism has been leveled at the extent to which the Android platform is truly open. In particular, complaints have been heard that the so-called Software Development Kit for Android applications is not fully open and in fact allows Google some control over the platform. Another criticism heard is that there are certain limitations and restrictions with respect to the use of the Java standard. For someone who last programmed in graduate school using BASIC (that was before Ronald Reagan was elected US President), I am not well-placed to opine on the validity of these claims. That said, they remind me of certain charges leveled against Microsoft regarding the development of applications for its operating software.

More interesting, perhaps, is the extent to which Google intends to enter the mobile handset market itself. There are reports that Google has files for several patents in the mobile telephony area. Further, as I recall, Google expressed an interest in obtaining several access or other rights to broadcasting bandwidth. If so, it will be interesting to see how the broad coalition of companies that have come together in the consortium to promote the open source platform will respond, in the event that Google is viewed as attempting to encroach head-on into their commercial turf.

One thing is for certain. We are viewing only the opening act of the Android saga.