Falling Giants
At a digital/media conference, a panel was asked a warm-up question about what major industry developments in the last ten years they had not seen coming.
Its a good question because it forces a degree of humility ("tell us something you don't know much about") — which is a good way to kick off a panel— but at the same time expecting an understanding of complex areas; you don't want to admit that you didn't see a technology/media giant like Google or Apple getting where they are today (or that if you did, you were too slow to think about investing in them), or that the growth of Facebook was a massive surprise (unless you want to admit to not understanding the 'Web 2.0' explosion that led up to it.)
The best answer I could come up with was that the most unforeseeable developments probably weren't the growth of a company, or the rise or emergence of a new consumer product, category or technology (as a smartphone user and amateur web developer/accessibility specialist in 2002, the potential benefits of non-PC web devices were already pretty clear to me— I know I wasn't alone.) The thing that was unthinkable to me at the time was that the clear leaders in technology – Microsoft in computers, Nokia in mobile phones, AOL in the consumer web/internet – would not be able to retain their obvious leadership positions.
The Fallen Giants
Nokia
Ten years ago, when your 12 month mobile contract came up for renewal and your network was tempting you with a free handset upgrade in exchange for signing up for another year, your priority was probably a phone you could use. In the days where people who were perfectly capable of using a traditional telephone were still getting used to dialling the full number, built-in phonebook and speed dial, voicemail (maybe even text messaging and ringtones), this was no mean feat – especially considering that different phones did all of these things in different ways.
In the UK, Nokia had the majority market share, and all of their phones had consistent menu structures, consistent key combinations (eg. for text messages, locking and unlocking the keypad etc.) and pretty consistent functionality. Because mobile phones were still a world of new technology and complexity, this familiarity and safety was hugely valuable. So, for "free" (or at least for very little cost, thanks to the mobile industry's format of subsidised handsets with costs absorbed by monthly contract fees), you would be getting a newer phone, with better battery life and new features. At the time, phones were getting significantly smaller with each generation, and although new features like cameras and colour screens were appearing, 'smartphones' were still some way off. Phones were still phones - not pocket computers. Small was good, big was bad, battery life was measured in days, and the measure of a phone was largely how it looked, rather than what it could do.
So it seemed unthinkable that the company who dominated the early smartphone market with the N95 would be forced to stand by and watch as the market was redefined and transformed. Not just once either; first by RIM (who changed the idea of 'smartphone' from 'feature phone with lots of features' to a much broader 'communications device'), then Apple (who first turned it into 'portable media device which happens to do emails and phone calls', and then turned the 'media device' into a 'computing device' with the App Store), and then Google (who brought the features and functionality of high-end smartphones to low-cost handset, hugely expanding the market.)
Microsoft
Ten years ago, buying a computer and buying a PC were synonymous. You bought a computer, which had Microsoft Windows. And you probably wanted to run Microsoft Office (or at least, Word and Excel) on it. Microsoft brands (liWindows and Office – which at the time for most people simply meant Word) provided familiarity and safety in a technological world of fear and complexity. (That theme again…) Their biggest problem seemed to be that they were too big – being run by the richest man in the world, and subject to years of anti-competition accusations, the threat seemed to be that regulators, rather than competitors, posed the greater threat.
Somehow, somewhere along the line, something changed. Microsoft are still a dominant force, but the idea that they – and they alone – are the 'leaders' of technology businesses is no longer true. I would say that ten years ago – maybe even less – the idea of that happening was unthinkable. They literally owned the PC (since IBM gave it away to them.) "Smartphone" and "Pocket PC" were Microsoft trademarks.
Now they are pressured on the one hand by keeping up with the 'Post-PC' world of smartphones and tablets (ie. Apple and Google), and on the other hand the pressure from those who feel that previous generations of their flagship products are 'good enough' – happy customers who feel no need to buy from them again.
Todays Giants
Looking at Microsoft and Nokia, its hard to see exactly what they did 'wrong' – even with the benefit of hindsight. The 'Personal Computer' has changed since Windows XP, but Microsoft has – arguably – not kept pace. Likewise, Nokia were leaders in mobile phones, even when the smartphone market started to develop. But they failed to keep pace as the smartphone market changed.
So – two technology businesses that were giants in their field, but brought down through significant changes in the broader technology landscape. It isn't that they lost the game – the game changed, slowly at first, then faster than they could keep up.
This isn't something unique to the last decade; we saw the mis-steps of Digital in the 1980s, or IBM's failure to capitalise on the PC in the 1990s. It would seem foolish not to expect similar stumbling in the next decade.
Obviously, trying to predict the changes that you won't see coming is impossible. But lets say that there is a pattern – that the big surprises won't be the appearance and/or growth of another Apple/Facebook/Twitter etc. but the surprising decline of a 'giant', then who might that be? And why?
The two most obvious of today's giants must be Apple and Google. One is a company selling hardware to consumers, using software (iOS, OSX) to help justify high markups on the hardware (iPhone, iPad, Mac.) The other is a media company, selling space to advertisers by creating media spaces (search results) that effectively target highly valuable audiences (people who have an express interest in a particular area at that very moment.)
At first glance, these are two very different businesses, with different products and different customers – but the potential threats that could unseat them illustrates exactly why there is such a friction between the two.
Apple
As a business, Apple is one of the biggest businesses in the world. While the Mac has grown into a strong competitor to the Windows PC, they became massive through first the iPod, and then the iPhone. The Mac would not be where it is today without Apple's success with the iPod. But Apple's business is about selling 'computing devices' – whether that is 'computers' like the Mac, 'mobile computers' like the iPhone and iPad, or accessory devices like the iPod, Apple TV (and routers, monitors etc.)
Of course, Apple sells its devices at a premium; its hard to see how selling high-end devices is a market that could be easily disrupted. But software like OSX, iOS, iLife and the App Stores help to sell them by making them 'premium' (ie. the reason the hardware can justify the high markup is the exclusivity of software.) So a shift that would threaten them is if the software became less relevant. That might be substantial competition that is less expensive (and at least good enough that the premium is no longer justifiable), or software that is unavailable on Apple's platforms (eg. Windows-only applications – as was a problem for the Mac some years ago) — or a shift to software that sits apart from the devices, as cloud-based services that function equally well on any device.
A threat that seemed apparent to Microsoft in the late 1990s was the growth of the web – a platform that was agnostic to hardware or operating systems, tied to a client-server model (where a cheap computer with a web browser could access the power of remote servers) posed a potential challenge to the standalone desktop PC. Perhaps the same threat will challenge Apple's integrated hardware, software and services model? iCloud is obviously Apple's response to the potential threat, but it is very much an 'all or nothing' solution; fine if you use OSX on your desktop, an iPhone in your pocket and an Apple TV in your living room – but throw in a single non-Apple device (say, a Windows PC, an Android smartphone or a games console like a PS3 or Xbox 360) and the 'everything, everywhere' promise of iCloud starts to crumble. Whether in the long term this is a selling point for Apple owners or a reason not to switch for those not yet converted is yet to be seen.
Google's rise came with the rise of the World Wide Web – effectively a massive collection of interlinked but disorganised information, while Google's mission was to 'organise and make accessible the world's information.'
Looking at books about 'e-media' or 'internet marketing' from the late 1990s/early 2000s, the most glaring omission is that they rarely foresaw the importance of Search. When they did talk about 'search', it was usually bundled in with 'portals', and talked about how consumers would use 'one of the search engines' to find the product or service that they were looking for. The idea of there being one clearly dominant search engine (and that a search engine would dominate the online advertising market) didn't seem to occur to them at the time; the vision for the "front page" of the web was similar to the front page of a newspaper or magazine — something that told you where to go, not asking you.
Its hard to see how any other company could find the resources necessary to build a better search engine – provided that your model/benchmark of a 'search engine' is Google. But a platform owner (like Microsoft or Apple) could provide their own default search engine for built-in services. We have seen this happen for specific services (Apple's apparent rejection of Google Maps), but not yet for a universal search engine. Today, Google Search is so popular that its hard to see a device that defaults to a Bing search being seen as anything but a negative (so equally hard to imagine anyone other than Microsoft attempting it.)
But if the IBM/Nokia/Microsoft pattern follows, then Google's downfall won't be the rise of a direct competitor (ie. a better search engine), but a fundamental shift in what a 'search engine' does.
Perhaps that will be the rise of 'vertical search' – search engines whose purpose follows a single function (eg. using Amazon to search for products to buy, eBay to search for cheap deals, Wikipedia to search for information, Wolfram Alpha to search for data, Facebook or LinkedIn to search for people etc.)
Another possibility is that there will be a change in the way information on the internet is published – Google can only index what it can see, so it is threatened by 'personal' content made private except to trusted friends/family, and by publishers putting content behind paywalls or pulling out of Google (such as the friction in France and Brazil between Google and publishers.)
Another possible threat is a change in the way that people 'search' – for example, asking Siri questions which it then uses one of a number of dedicated services to get the best information for.
Common Ground?
So, a significant threat to Apple's business is the growth of online services that supersede 'desktop' software (by which I'm also taking about iPhone/iPad apps.) While a threat to Google's business is the growth of services that offer an alternative to Search. Even though their customers and businesses are in very different areas, the one thing they have in common is being each other's greatest external threat.
Perhaps they will just be locked into a perpetual competition; the market of several gaming platforms led to years of intense competition and innovation, which was good for growing the wider market. If Coke and Pepsi didn't have each other to compete with, maybe we would be seeing a wider variety of soft drinks than cola everywhere. So maybe continued innovation into the next generations of computing technology will simply lead to faster innovation — Apple developing premium products, and Google disrupting the low end of the market so that nobody becomes dominant enough to block them.
To be honest, either alternative – one company getting big enough to suffocate the other – doesn't sound like as much fun to me.