Editor’s Note: Horace Dediu, one of the most well respected watchers of the mobile industry, and Apple in particular, is the founder and author of the market intelligence site Asymco.com. He is also an independent analyst and adviser to telecom incumbents and entrants on mobile platform strategy. Fortune Magazine declared him as the “King of Apple Analysts“.
Horace has eight years of experience as an industry analyst and business development manager at Nokia, preceded by six years of software development and management in a startup environment, two years of IT management and five years of computer science research in an industrial laboratory. As a business analyst he has a proven track record of achieving/exceeding predictive goals and objectives. He has been a resource for Bloomberg, The Financial Times, The Economist, Forbes and has been cited over 350,000 times.
Horace has an MBA from Harvard Business School and MS Engineering from Tufts University. To learn more about his work please visit Asymco.com. You can also find him on Twitter, LinkedIn and Wikipedia.
eTalk’s Niaz Uddin has interviewed Horace Dediu recently to gain insights about Asymco, Apple and Future of Computing which is given below.
Niaz: Dear Horace, thank you so much for joining us in the midst of your busy schedule. We are very honored and thrilled to have you at eTalks. At the beginning of our interview, can you please tell us more about Asymco?
Horace: Asymco is a web site where I write what I think and where people respond through comments. The idea is very simple and I find it useful because I received over 40,000 comments, something which would be hard to obtain through any other way of writing. Of course what matters is to have good comments, but good comments come if you have interesting things to say and you say them in a way that encourage discussion. The other aspect of Asymco is that the audience is mostly self-selected. They have not been enticed to visit via any incentives other than their interest in the material. That makes the audience more valuable to me than one which comes by way of being herded from another place.
Niaz: What do you do as an independent consultant and analyst? What is your future plan? And where will be position of Asymco after 10 years?
Horace: I read a lot and write a little. I have no future plans and could not presume to guess what Asymco will be in 10 years. I could not have predicted where it is now so my ability to make predictions on this topic is zero.
Niaz: You’ve declared as the “King of Apple Analysts” by Fortune Magazine. What does make you very passionate about Apple?
Horace: Apple is an interesting company to study because its success comes from being a serial disruptor. This is a very rare type of success formula. I am trying to “reverse engineer” its operating model and I hope that such a model is one which others might learn from if they were to emulate it. The trouble is that very few others seem to want to emulate Apple. Why that is also an interesting question.
Niaz: You’ve been resource for Bloomberg, The Financial Times, The Economist, Forbes and have been cited over 350,000 times. You’ve been analyzing Apple’s business strategy and predicting their financials for long time. So many people in the industry now believe that Apple has lost its image. Fundamentally, Apple is a company that was built to innovate and to make great products. What do you think about the current performance of the company? Do you think apple has lost its image that it has created over the years as a center of innovation and building excellent products?
Horace: I cannot comment on how Apple’s image is measured by people in the industry. I have been listening to commentary on Apple for about a decade and I have never seen any change in pattern. The company has always been perceived as a failure by a majority of observers. With respect to its products, I also do not see a change in the pattern established over the last decade.
Niaz: What’s your evaluation on the performance of Apple CEO Tim Cook? Do you think he is a visionary leader? Will he be able to keep running Apple as the way it should be run?
Horace: I think Tim Cook is the best CEO Apple ever had. During the period of Steve Jobs as CEO, Tim Cook was doing the work which might be considered CEO and Jobs was head of product, culture and many other details. The Jobsian approach of micromanagement is the antithesis of sustainable organizational management. The only reason Apple survived was that Jobs outsourced operations to Cook. Regarding Vision: Vision is not a function that needs to reside in one person and it depends greatly on the process for decision making and the organizational structure. Apple’s functional structure means that vision is developed through a coordinated weekly process. It’s a constant refinement of many ideas rather than a single target that’s set once.
Niaz: As you know, the biggest change in the history of iOS is iOS7. Apple has also launched iPhone 5C and 5S on Sept 10th event. As far as I believe iPhone 5S is the next big thing that will be the door of opportunities for the future of mobile computing, gaming, personal cloud and so on and on. What is your take on iOS 7, iPhone 5C and iPhone 5S?
Horace: The iPhone is maturing nicely and it seems to be entering a new phase of later adoption. It’s now clear to me that after 7 iterations, the iPhone business model is a part of a larger transition in how Apple is building a multi-modal platform with iOS. iOS has turned out to be a very flexible idea which is being adapted to many usage contexts. It is however only one piece of a far larger puzzle where services, devices, and ecosystems are inter-dependent.
Niaz: Over the last 12 months, Google Android devices have outsold iOS by about 3 to 1. There are now perhaps 775m-800m ‘official’ Android devices in use, versus perhaps 415m iOS devices. This is without counting sales of the Amazon Kindle Fire or the (very) many Android devices sold in China that are not connected to Google services – these may be a further 150-200m active devices now (or more). So, the Android install base is more than double the size of iOS. If you look just at phones, there are may be 250m iPhones in use and perhaps 700m ‘official’ Android phones alone. How do you see iOS vs. Android war? Is android is a threat for iOS (directly or indirectly)? Who is actually winning?
Horace: Those numbers are not exact. The numbers I use are: Google has reported 1 billion activations and Apple cited 700 million iOS devices will be sold by October with iTunes accounts (as a proxy of usage) totaling about 650 million. I consider both of these to be great performances especially since they happened in less than 7 years–a type of growth that is unprecedented even when considering many products which were free to use like Facebook. 700 million unit volume of sales, often under supply constraints, with an exceptionally high margins of near 40% is nothing short of amazing. That does not detract from Android however. Android has turned out to be a force which destroyed many businesses: Nokia, RIM, HTC, Microsoft. However, iOS has been contributing to this disruption as well. Android is a low-end approach and iOS is a high-end/new market approach. Both have squeezed almost all other platforms out of the industry. Android is a threat to iOS but it’s one of many. A few years ago the threat to Apple was Windows, or some iPod killer or many others long forgotten. Apple does not win by eliminating competition. It wins by creating new markets or re-defining the basis of competition where, at least initially, there is no competition.
Niaz: Are you optimist about the future success of Apple? Like after 10 years and then 20 years?
Horace: Let me put it this way: if there were no Apple then somebody will have to invent an Apple to do the same thing Apple does. In that sense I’m optimistic that there will be an Apple in some way in perpetuity.
Niaz: This is an interesting month. We have already seen so many things and we are also going to see so many things in this month. The company valuation from 2007 to today: Microsoft is down -1.5%; Nokia is down -82%; RIMM is down -78%; Apple is up +507%. In this situation what do you think about Microsoft-Nokia deal? And how should tech industry look at this deal?
Horace: The deal says more about Microsoft than about Nokia. Microsoft decided that they need to become an integrated hardware/software/services company and to organize itself functionally. This is an abdication of its role as the supplier of software modules to a complex value chain. To make such a huge concession says that we are really far into a new era. The problem for Microsoft is that it’s not clear that it can function as a completely new organism, especially one without any leader on the horizon.
Niaz: Can you please tell us about wearable technologies? How big is the market of wearable technology? What are the challenges for Apple to be the best player in the field of wearable technology?
Horace: The market for wearable technologies is very small, almost immeasurably small which is why it’s such an exciting area. It’s like a vast new continent with nobody living on it. There are challenges but they can be solved by having a development process that is guided by an understanding of what users need and how to deliver a workable solution. These were the same challenges in developing smartphones which were easy to use and making them affordable to many people. The answer is in an integrated approach to development.
Niaz: What will be the next big innovation from Apple?
Horace: I have no idea but it’s likely to involve refining new user interaction methods. Similar to the breakthroughs that came from the use of a mouse, a scroll wheel and a touch screen. It means making computers better at gleaning our intentions without our getting involved in explaining them.
Niaz: What do you think about the future of computing? What will be the most exciting and big thing in tech?
Horace: See above, new interaction methods.
Niaz: Will Apple, Google and Samsung be the major player for the future of computing? Or we can hope to see some new faces?
Horace: I am fairly sure Samsung will not be because they have not yet grafted software and services to their operating structure. I would give Amazon a higher probability in being a successful platform alternative.
Niaz: In 2011 you’ve written a blog post ‘Steve Jobs’ Ultimate Lesson for Companies’ on Harvard Business Review Blog and you have cited ‘A leader should aspire to do more. A leader should claim to have left a legacy not just on their company but on all companies.’ As you know Google, Amazon, Samsung, Facebook … all have learnt lifetime lessons from Steve Jobs. What do you think about the impact that Steve Jobs have created?
Horace: He led by example and like all great leaders sacrificed much as a way to inspire others to follow him. He also spent time in the wilderness and chose asceticism. This gave him authority. Many historical figures had the same quality. The problem is that few business leaders have it but I don’t see why they shouldn’t.
Niaz: Do you think it is possible to disrupt Google? How?
Horace: That’s easy. Google relies on keeping too many secrets. Giving away all that it holds dear will cause its business model to change. Let me put it this way: Google beat Microsoft because it developed and gave away that which Microsoft kept dear: source code to operating systems. (Microsoft finds it impossible to react unless it sells hardware–not easily done in volume and at a high premium.) Now turn the discussion around and ask what Google holds dear. The answer is the data which every consumer has to give. It’s now given freely in exchange for a service. But if that data were brokered by the user directly to the advertiser then Google has nothing to sell. For this to happen there must be a revolution in both the perception of what users give up when they use online services and in the ability of advertisers to act on their own to understand the mind of the consumer. If a consumer can become a free agent and an advertiser can do analytics then the economics of the internet (i.e. global information systems) will pivot yet again. Maybe Google will be flexible enough to pivot along but it will be a different company.
Niaz: Dear Horace, thank you once again for giving us time and sharing us your invaluable ideas, insights as well as knowledge. We are wishing you very good luck for all of your upcoming endeavors.
Horace: Thank you for having me.
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