Market Share, Profit Share, and Use Value

A lot of attention has recently focussed on Apple's success at gaining profit share despite its relatively small market share. For years, pundits were skeptical of Apple's ability to thrive with such low market share and prescribed various remedies which Apple mostly ignored. In this post, I will attempt to clarify these common mis-understandings of business objectives.

Back in the 1960s, when U.S. manufacturing was thriving, business studies showed that doubling production allowed one to reduce per widget cost by around 10%. If you were able to sell twice as many widgets as your next closest competitor, chances are you could produce them more efficiently and enjoy higher profits. The implication is that in each market or market segment, there is only room for a few producers with sufficient volume to be the most efficient and profitable manufacturers. The goal is to dominate your industry and outproduce others at low cost. Having made this connection, it was natural for the trade press to follow the market share leaders and expect them to be the most successful. Market share became king.

How High Tech Manufacturing Changed

By the 1990s, consumer electronics companies increasingly looked to move their high volume manufacturing off shore to take advantage of lower cost labor and efficient supply networks that had evolved to serve high volume consumer electronics production. Through various economic initiatives, China became the global center for manufacturing consumer electronics at low cost. The tight network of suppliers is hard to match anywhere else. In time, this network could even be rented in the form of contract manufacturing. Apple no longer manufactures its own computers, but relies on contract manufacturers in Asia.

Volume, Cost, and Efficiency

Production volume still plays a role in manufacturing cost, but the relationship is more complex. Apple is a fascinating case study. It deliberately produces fewer products that sell in higher volume. It aggressively limits inventory, shipping products directly from the factory to its own retail stores or customers. It contracts with key component suppliers (such as RAM or Flash memory) months or even years in advance to ensure stable supply at low cost.

Shortly after the return of Steve Jobs, Apple dramatically reduced its product line, got completely out of the manufacturing business, cut prices, and focussed on becoming an efficient producer. Long after Apple was selling nearly as many computers of any one model as Dell, HP, or Gateway, pundits still questioned the viability of Apple's low market share, completely missing the point that Apple had become an efficient PC maker.

While Apple has never competed at the low end of the PC market, its products are generally price competitive with PCs offering similar specifications. Apple profits not so much by charging more, but by operating efficiently, carefully considering what can be left out of each product, and using software to replace expensive hardware. Sometimes these decisions are unpopular, like leaving FireWire off the unibody MacBooks, or no camera on the iPod Touch G3. To be an efficient producer, you must focus on reducing cost and reducing waste over the lifecycle of a product. Apple is relentless about making sure each thing it does adds value, and is quick to abandon legacy technologies.

Some of Apple's best products succeed not by doing more, but by doing less really well and eliminating clutter. When Apple first introduced the iPod and later the iPhone, competitors were quick to point out all the things it couldn't do. No 3G, no multi-tasking, no user replaceable battery, no copy and paste, no figamajig. Even to this day, Verizon is running an "i Don't" campaign against the iPhone only a geek could love.

Use Value

The key to understanding any thriving business is how they create or add value for their customers. Apple consistently offers more in "use value" than it charges in "cash value". While pundits questioned the thinking behind a $399 MP3 player, high end consumers loved it because it offered a combination of user experience, convenience, and capability they couldn't get anywhere else. Apple's success with the iPhone has brought this point home.

If your only competitive weapon is low price, you are in a weak position because you don't have the resources to offer a dramatically better user experience that delights customers and builds brand loyalty. There are still pundits who argue Apple needs to cut prices or produce a Netbook to gain market share. While there's always room to improve, Apple is doing quite well with its customers, thank you.

There are others who think the bottom line is king, business only exists to make a profit. I respectfully disagree. The purpose of a business organization is to create value by serving customers. A company that overcharges or doesn't create value for its customers is a house of cards waiting to fall. Their customers are on the lookout for better value and will quickly move when opportunity appears.

If you over simplify the meaning of business to include any activity that makes money or profit, there are many destructive activities that will masquerade as business while actually undermining the public interest and economy. What they are really doing might more accurately be seen as fraud or theft (as in the case of Enron, or securitized subprime mortgage investments). It is our own lack of clarity that allows such activities to gain so much influence.

If I were to pick an area that needs more focus to build the best in class user experience Apple is known for, it would be the App Store and Apple's relationship with its iPhone developers. Apple is still ahead of its rivals, but there are some ways in which the app store business model is not working for some of Apple's long time friends and partners. Since it's easier to keep an existing customer or partner than gain a new one, this is an important signal.

Why Profit Share Matters (or Doesn't)?

Profit in any market is not a fixed pie, but a reflection of the value being created. When a company like Apple grabs a large profit share relative to its market share, it means the company has an effective business model that is creating value and generating the resources it needs to invest in improving its own products or entering new markets. This is the real world feedback that business provides.

Profit share can also reflect a monopoly or government policy. In my experience, the most successful businesses focus on creating value, serving customers, and being efficient at what they do. It's hard to steer a car forward while looking in the rear view mirror. Like a rear view mirror, profit alone does not provide the guidance business needs to succeed.

The Best Mouse I Ever Used

I began studying and designing computer mice at Digital Equipment Corporation about 18 years ago. While I no longer design mice for a living, I've tried a lot of mice over the years with an eye toward what offers the best user experience.

In order to track an object smoothly on a computer screen, you need to update the mouse position at least once per frame time. On an 80Hz screen, that means at least 80 updates per second for both the cursor position, and scrolling position. Apple's Mighty Mouse got this right. For the first time, many could scroll smoothly and effortlessly in any direction. But the Mighty Mouse has its limits.

As one of my own mice failed recently, I picked up a Logitech VX Nano. What a surprise, this mouse is amazing. It's quick, responsive, offers high precision tracking, and is smooth as silk. The nano USB receiver is so small you can plug it in once and forget it. There are no wires or dongles to get in your way, and battery life is a respectable 6 months.

The scroll wheel tilts for simple horizontal scrolling, which is not quite as elegant as Apple's omni-directional scroll ball, but let's face it, most of us don't use horizontal scrolling all that often, and a smooth responsive vertical scroll wheel is worth a lot. The tilt control is just enough to slide the part of a window that falls off the edge into view when you need it.

If this is all you want, the Logitech v450 Nano does this beautifully and provides a slightly nicer grip as well as the ability to run for over a year on a single set of batteries. The difference in shape is subtle, but the v450 Nano has a slighter wider rubberized indentation for your thumb and fingers to hold the mouse which I found pleasing. The scroll wheel itself acts as the center button. The v450 Nano also uses a pair of AA vs AAA batteries making the mouse feel slightly back heavy when you go to lift it.

The VX Nano on the other hand has a nicer scroll wheel and two extra buttons along the left top edge. Both mice are superb, but having found the VX Nano on sale for close to the same price, I prefer it slightly.

The scroll wheel on the VX Nano toggles between two modes when you press it down: click detent, and friction free. Both are smooth and comfortable, but when you want to scroll through a long document, friction free lets you flick the scroll wheel at whatever speed you want, and it just keeps going. Since pushing the scroll wheel switches modes, there's a separate center button just behind the scroll wheel.

The VX Nano also features two small buttons along the left top edge that are ideal for "forward" and "back" . If you are right handed, just slide your first finger over slightly to feel them. Otherwise the mouse is ambidextrous.

There are lots of little details that make this mouse a pleasure to use including the comfortable shape, rubberized texture, and balanced weight. The wireless is plug-and-play. I even plugged two mice into the same computer. They worked seamlessly except for getting the machine to sleep. Logitech's LCC software allows you customize the buttons and scrolling behavior while keeping things simple.

There you have it, the best mouse I ever used. It combines wireless portability with the responsiveness and comfort of a desktop mouse. There's no Bluetooth pairing needed, and no significant delays or drop outs. If you're in the market for a better mouse, check it out.

Logitech VX Nano

Logitech V450 Nano

Update: What about Apple's Magic Mouse?

I tried one of these at an Apple Store recently.

I really like that there are no moving parts to wear or collect dirt, and the touch surface recognizes some useful gestures. Certainly Apple's best mouse so far. The overall responsiveness did not feel quite as crisp to me as the Logitech VX Nano, but it wasn't bad (the Magic Mouse uses Bluetooth versus dedicated 2.1 GHz RF). For anything but gaming, this could be a decent mouse with some cool features.

Testing Notes:

I didn't find the shape quite as comfortable in hand. The edges feel low and hard when you go to pick it up.

There's no way to press two buttons simultaneously (a software issue that should be correctable).

The front-to-back orientation is not obvious, although this shouldn't be a problem in most cases.

Bluetooth Phone Tools for Mac OS X

In Mac OS X Tiger, Apple's Address Book had the ability to connect with a Bluetooth phone to provide two rather nice features:

1. It could display caller ID information for incoming calls and bring up the corresponding Address Book entry if any.
2. It could dial out by right clicking on a phone number entry and selecting "dial using name-of-device" from the contextual menu.

In Mac OS X Leopard, these features disappeared from Address Book with nary a trace. As I began looking at what other tools might be available, I was struck by their divergent focus. Each of these tools offers a Status Bar Item with a pull down menu.

ApiMac CallerID emphasizes Caller ID. It works with Bluetooth as well as landline phones connected via modem and networked caller ID servers. Download size is 5.8 MB. CallerID offers 4 panes of preferences. $19.95 for Mac OS 10.4 or newer.

BluePhoneElite 2 emphasizes Bluetooth phone integration. This is a respected app that supports hundreds of Bluetooth phones. Its most unique feature is support for sending, receiving, and archiving SMS (which is not supported on the iPhone). It can even pipe audio to your Mac for use as a handsfree device. Download size is 8 MB. BPE2 has 8 panes of preferences. $24.95 for Mac OS X 10.4.4 or newer.

Dialectic emphasizes dialing including Internet phone systems. Its most unique feature is that it works with so many VoIP phone services. Download size is 6.3 MB. Dialectic has more preference panels and sub-panels than one can easily count. $25 for Mac OS X 10.4 or newer.

Phone Amego emphasizes simple usability and uncluttered design. It provides on screen Caller ID, Address Book, Google Voice, and Bluetooth phone integration (including iPhone). SMS is supported through Google Voice. It also works with landline and VoIP phones.

Download size is 5 MB. Phone Amego has 5 preference tabs. $30 for Mac OS X 10.5 or newer.

 

Spotlight on Innovation

Phone Amego offers several features that have not been previously available in a single convenient package.

 

• Supports Caller ID, Dialing, and Address Book integration.
• Reports both inbound and outbound call status in a consistent heads up window. Can cancel a call in progress.
• A single uncluttered menu bar item. Phone Amego focusses on the basic things most users want without feeling like an overstuffed sack of features.
• One program to work with most common phones (Bluetooth cell phones, landlines, and VoIP).
• Augmented Caller ID (Internet lookups).
• iCal Logging. Track previous calls in your calendar.
• Google Voice integration. Dial from any GV connected phone (indirectly). Send SMS to multiple recipients (free).
• Easy to configure VoIP Caller ID.
• Easy to configure Caller ID sharing. See who's calling or dial remotely from any computer (running Phone Amego) on your LAN.
• Bluetooth Hands-Free speakerphone.
• Simple call screening can block unwanted calls based on their Caller ID.
• Keep notes about each caller.
• Displays phone numbers in Address Book format.
• Designed to maximize up time. In the rare event Phone Amego or some underlying system service crashes, Phone Amego's built-in crash reporter will display a dialog offering to send a detailed crash report to the developer, and then relaunch the application automatically after 30 seconds.

 

 

Fire Up the DC-to-AC Inverter

I recently took a family road trip and wanted a way to let my kids watch movies on DVD in the back seat. An old laptop makes a nice low cost DVD player, but the batteries are only good for a couple hours which doesn't cut it. We've all seen auto power adaptors, but with Apple's changing connectors and the need to plug-in additional devices, these can get expensive and awkward to deal with.

An elegant solution is a DC-to-AC inverter. I found a $40 inverter (Wagan Tech) that's compact, quiet, delivers 400 watts (or 150 from a cigarette lighter socket), and includes two AC receptacles that let you to plug-in whatever you want. This kept the laptop running easily, while charging a second small device as needed (Nintendo DS, cell phone, and so forth). I don't know why I didn't think of this sooner.

IPNetMonitorX Featured at TheMacBundles.com

IPNetMonitorX, my network troubleshooting tool kit for Mac OS X is one of 11 apps in the second bundle of themacbundles.com (expired 7/19/09). If you are in the market for some first rate apps, check out the list below (all for $50!)...

• Caboodle - A lean, clean, snippet machine.
• MailTags - Transform Apple's Mail into a powerful email organization system.
• PrintMagic - Easily select and print just the info you want to print from any program.
• ShutterBug - Easily share photos and stories with this easy-to-use website creation tool.
• Trampoline - Get to your most important apps and folders faster.
• Typinator - Automate inserting frequently used text and correcting errors.
• Voila - Capture, annotate, and share anything you see on your screen.
• World Clock Deluxe - Easily keep track of time anywhere in the world.

Plus these bonus apps:

• Dock Gone - Keep the dock out of the way when you don't need it.
• Smart Trash - Selectively delete just what you want deleted on each mounted volume.

Enjoy!

In Search of Affordable Tethering

My family and I are planning our summer vacation in an area that does not have immediate access to high speed internet. In the old days, I used to maintain a dial-up account so I could check my Email when I was traveling and couldn't find a convenient alternative. It was slow, but it worked. My last dial-up account was $5.00 per month, and I only kept it for a few months at a time.

My latest MacBook doesn't have a built-in modem, so I've been looking for something more convenient. I considered an iPhone, but I'm much more comfortable with a laptop keyboard and screen, AT&T hasn't delivered tethering yet, and I am not thrilled about a two year contract at $70/month for the two weeks a year I really want to use this. When it became time to look for a new cell phone, I was intrigued by reports of successful tethering with T-Mobile (my preferred carrier).

After some research, I've found a solution that works reasonably well, but there seems to be some deliberate obfuscation to keep others from finding it. Here's what I learned.

At the time of this writing, T-Mobile sells one phone that can take advantage of high speed 3G tethering, a Sony Ericsson TM506. Shortly after its introduction last September (2008), users got so excited about the tethering performance T-Mobile got cold feet. As the number 4 carrier, they are frequency constrained in some areas and didn't want power users sucking up precious bandwidth needed to serve more customers (unless they were paying for that privilege). They announced that tethering was not supported and modified the TM506 firmware to hide the tethering feature.

I've always liked the user interface and Mac support on SE phones, so I began reading the forums to see if there was more to the story. Indeed there is. Tethering works just fine on the Mac if you have a corresponding data plan and it was not terribly difficult to configure. Like so many things, there are many ways of looking at this.

1. T-Mobile lists "High speed data with EDGE" as a feature on many of their phones, and customers have been happily tethering for years. The word on the street is they wont block it but can throttle you to EDGE speeds if you exceed your data plan quota. T-Mobile cleverly redefined "unlimited web" to mean you can access any site on the web directly, but you still have a bandwidth quota depending on your plan.
2. Now that they are rolling out 3G, T-Mobile has begun offering a separate USB Laptop Stick with its own $60/month data plan (following their rivals), but this is serious overkill for my needs (plus 3G isn't widely available yet). I just want to get my Email on those rare occasions when WiFi isn't available. Perhaps 10 days a year.
3. T-Mobile is concerned that extensive 3G tethering could adversely effect their network, so does not want to encourage it. If you ask, they'll respond "not supported" or "don't do it."

There appears to be some deliberate obfuscation as carriers scramble to see what the market will bear. Nobody is likely to mind if you check your Email a few times a year and prefer the screen and keyboard of your laptop, but if you start pulling 100s of MB per day using 3G, this could be a problem they don't want to deal with.

The phone actually includes a T-Mobile Email client, but it's designed to charge you 20 cents per message like SMS unless you buy a messaging bundle. The phone also includes a built-in GPS receiver and Telenav service you can enable for $10/month. You are disabled from installing Google Maps or GMail for mobile directly, but you can download them to your computer, copy to your phone, and then use the File Manager to install them, or point your phones browser at wap.getjar.com and download the Java (J2ME) versions.

The SE TM506 lists for $160 (no contract price), and I added a $30/month voice plan, and $10/month unlimited web for phones data plan. T-Mobile gave me a 12% discount off my monthly plan for being a AAA member. I could have gotten the phone for $130 less by agreeing to a two year contract, but I prefer the idea that I'll keep the plan only if it's meeting my needs. I can cancel at any time and revert to pay-as-you-go for 10 cents a minute. Since I'm not under contract, T-Mobile has a little more incentive to keep me happy.

Anyway, here's what I did that worked. First, download the TM506 iSync plugin from here (this installs a Sony Ericsson modem script and iSync plugin). Next, I paired the phone over Bluetooth and selected the services I wanted (sync contacts, use phone as modem, etc.).

Network Preferences:

TM506 EDGE via Bluetooth

TM506 EDGE via USB

The drop in latency makes this noticeably faster. Adequate for checking Email or a few specific web pages, but not great for general surfing. This is what I expect to use on vacation.

TM506 3G via Bluetooth

TM506 3G via USB

The upload speed actually dropped a little possibly due to congestion. 3G tethering is quite usable in either case. Typical web pages are a few seconds slower, but not to the point of being bothersome. T-Mobile's 3G coverage is more limited than AT&T, but it's nice to see they are making progress (YMMV).

Regardless of whether you use the TM506 for tethering, it's not a bad phone. The call quality is surprisingly good, close to that of a conventional cordless phone. The screen is bright, sharp, and offers a reasonable user interface with only a modest lag in most cases. The keys are well spaced and easy to use. Reception seems good even in weak signal areas. Ring tones are loud and clear, and you can add your own by copying mp3 files to the phone.

Enjoy!

Welcome

Hello and welcome to the Sustainable Softworks blog. I started Sustainable Softworks in 1996 to build a software IP router for the Mac. At the time, it was a big leap. I'd been working at Digital Equipment Corporation for the past 14 years and had never developed for the Mac before. I fell in love with the Mac 10 years earlier, and was part of small increasingly marginalized group of Mac enthusiasts at Digital. I used my own Mac while working at DEC to thrive, developing user interface prototypes in HyperCard, and publishing technical documents, but Digital was shaking itself apart and I needed something to do.

I always wanted to run my own business, so somehow I convinced myself the experience would be worth it regardless of the outcome. Two years later, I shipped IPNetRouter which received a 1999 Macworld Editor's Choice Award and was licensed to Apple Computer as part of the original AirPort Software Base Station.

Much has happened since then, but this blog is still about using Macs, following your dreams, and one developers experience of technology from the inside out. Enjoy the ride!

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