Breaking Down Apple’s Special Event (9/12/17) – Part 5

5. iPhone

During his keynote, Tim Cook declared that the iPhone X “will set the path for technology for the next decade”. He’s embellishing.

While both the iPhone 8 and iPhone X have features that will be critical to the technology of the next decade – wireless charging, augmented reality applications and facial recognition/tracking – they aren’t the first.

He should have reserved that line for use if Apple ever releases augmented reality glasses –  which I hope they would call “iGlasses”.

All things considered, I would give the Apple Special Event on 9/12/17 a grade of “B”; good, but not what I would have expected of the world’s most valuable company.

 

Breaking Down Apple’s Special Event (9/12/17) – Part 3 & 4

I will be releasing my “Breakdown of Apple’s Special Event (9/12/17)” as a series of articles. Part 5 will cover iPhone. Enjoy!

3. WATCH

WATCH Series 3 has cellular! I have historically been an WATCH hater but not anymore; I knew that the vision for the product was to have cellular capability so I refused to buy hardware that didn’t support it.

So how did Apple enable cellular on WATCH? According to Chief Operating Officer, Jeff Williams, cellular was enabled by two space efficient innovations: embedded SIM (eSIM) and display-integrated antennas. These innovations allowed the casing of WATCH to remain unchanged from Series 2, except for a minimal depth increase of 0.25 mm.

WATCH Series 3 is a game-changer. I believe that the improved hardware will push WATCH into the early majority phase of its lifecycle. Increased demand will attract developers to create even more attractive apps, leading to an aggregation cycle that will be near impossible for any smartwatch, or watch for that matter, to compete with.

product-adoption-and-life-c

4. tv

tv can now support 4K and HDR. 4K is an image resolution; it defines the level of detail displayed in an image. HDR (High Dynamic Range) is a colour resolution, it defines the level of detail displayed in the colours within an image. For example, both sides of the image below feature the same image resolution but the left side has dramatically better colour resolution.

Screen Shot 2017-09-24 at 10.14.12 AM

The tv 4K alone will not allow you to watch 4K HDR content; you still need a 4K HDR display – typically priced upward of $1000. Even then, the only 4K HDR content you will get for free are Apple’s aerial screensavers and your own photos and videos – as long as they were shot on devices with 4K HDR resolution. Additional content will require subscriptions or iTunes purchases and a home internet package that will support the increased data of 4K HDR content.

Breaking Down Apple’s Special Event (9/12/17) – Part 1 & 2

I will be releasing my “Breakdown of Apple’s Special Event (9/12/17)” as a series of articles. Part 3 will cover the WATCH. Enjoy!

Over 10 years have passed since Steve Jobs first unveiled the iPhone on January 9, 2007. He was one of the great characters, and that was one of the great product launches, of all-time. Apple will never be the same without him.

That said, Apple is still Apple. To quote Jobs himself:

There’s lots of ways to be as a person. And some people express their deep appreciation in different ways. But one of the ways that I believe people express their appreciation to the rest of humanity is to make something wonderful and put it out there….So we need to be true to who we are, and remember what’s really important to us. That’s what’s going to keep Apple, Apple; if we keep us, us.

Last Tuesday, Apple kept being Apple; they made wonderful things and put them out there. Here’s a breakdown of what was announced:

1. Apple Park

The event was the opening of the Steve Jobs Theatre, the first building to be unveiled at the new Apple Park. Many have been quick to criticize Apple for spending approximately $5 billion on the new campus, but I am not one of them. Apple has been the source of a lot of good in the world – both directly, through their products and services, and indirectly, through what they have enabled artists and developers to create.  They deserve a beautiful and inspiring place to work that reinforces everything that makes Apple, Apple.

2. Retail

Apple’s Senior Vice President of Retail, Angela Ahrendts, emphasized that Apple’s flagship stores will increasingly become more like “town squares” – featuring public outdoor spaces in addition to indoor forums. Apple will not officially rebrand its “Stores” as “Town Squares” (What would they call Apple Town Square?). Truthfully, most Apple Stores will remain relatively unchanged from the first, which revolutionized tech retail in 2001.

Too Far Taylor

As I’m sure you’ve heard, Taylor Swift has started publicly promoting the release of her 6th studio album, reputation. In the process, she and her team have employed quite a few creative strategies to better sell her brand. Their most interesting development, in my opinion, is TAYLOR SWIFT TIXSM.

Taylor Swift is committed to getting tickets into the hands of fans…NOT scalpers or bots. So she’s collaborating with Ticketmaster #VerifiedFan to create an exclusive program to help YOU get the best access to tickets in North America, in a really fun way.

In recent years, scalpers have increasingly been using computer programs (bots) to sell out tour dates in seconds. They then sell those tickets on secondary markets for multiple times their face-value, profiting on the spread between their purchase and resale prices. Ultimately, the tickets end up in the hands of the fans but not before they have grossly overpaid for them. Obviously, this is an issue from a consumer prospective but it is an even bigger issue for artists and their investors. Sure, there is the ethical issue that scalpers are realizing the majority of the profit on an artist’s performance, but the real issues are multiple layers deeper. For the sake of brevity I won’t take you all the way down the rabbit hole but just think about this: if you didn’t have to pay $500 per ticket to sit in the nosebleeds at an artist’s show, but instead could pay $100 to sit in the lower bowl, would you be more willing to pay $15 for their record? How about $50 for their T-shirt?

10 months ago, Ticketmaster launched its VerifiedFan program. I used it to get tickets to an Ed Sheeran show in July. It works…for now. Essentially, Ticketmaster uses the personal information you provide when registering for your account to verify that you are a human and not a bot. It doesn’t stop a human scalper from signing up, getting VerifiedFan tickets and then flipping them on the secondary market. Fortunately for fans, this is a lot more work to get a lot fewer tickets if you are a scalper accustomed to purchasing tens or hundreds of tickets through a bot.

The innovative aspect of Taylor Swift Tix is the development of a way to ensure that the most enthusiastic fans receive priority tickets. That is an idea that I can get behind. Unfortunately, Taylor and her team got greedy in the execution.

After your registration is complete, you’ll officially join the line and unlock access to the Taylor Swift Tix portal. The portal will serve as your main destination to participate in boost activities. Activity boosts will come in all shapes and sizes. Watch the latest music video, purchase the album, post photos and engage on social media. Check the Taylor Swift Tix portal for the newest boosts and activities you can do everyday. When you participate, you may boost your opportunity to unlock ticket access in your selected city. Your standing may change as more fans join and participate in activities. You can participate in boost activities at the start of registration and continue until we lock the line on Nov 28.

If you register for Taylor Swift Tix (which I did, purely for research purposes of course…) you’ll notice that “boosts” are ranked based on their impact to your place in line for tickets:

Screen Shot 2017-09-03 at 3.09.46 PM

The greed lies in the “High” row. Boosts from album pre-orders are arbitrarily limited to 13 – Taylor’s birthdate and favourite number – and there are NO LIMITS on boosts for merchandise or album purchases. Since there are no monetary limits on the most impactful boosts, there exists a scenario where fans engage in an vicious cycle of spending until the November 28th deadline. Remember, there is no defined amount of money that a fan can spend to guarantee themselves tickets; that depends on how much money the other fans in their city are spending.

To make matters worse, tour dates, ticket sale dates, ticket costs and ticket limits have not yet been announced. Until they are, fans are spending an unbound amount of money to put themselves at the front of the line for an unknown number of tickets, at an unknown cost to be purchased at an unknown date for a show sometime in the future. What!?

In the existing system it is possible that a family could spend $400 on boost activities thinking that they will receive 4 tickets, each valued at $200. That equates to a cost of $300 per ticket. Taylor and her team could then set a ticket limit of 2 per account and announce that the cheapest ticket is $400. Now, 2 of the family members don’t have tickets and the remaining 2 tickets are valued at $600. In an even crueler world, they are going to be on vacation the day of the show. Now, they either sink the $400 they spent on boost activities or they purchase the tickets and sell them to friends or on the secondary market for at least $600 each to break-even. Neither of those options stop someone from reselling for a profit or ensure whoever gets the tickets is a fan.

The point is, this program is flawed. The good news is that it isn’t too late to improve it. Here’s what I would do:

  1. Tour dates, ticket sale dates, ticket costs and ticket limits need to be released.
  2. A monetary limit on merchandise boosts and a quantity limit on album boosts, regardless of type, need to be applied. I estimate appropriate limits to be 1 album purchase and around $100 in merchandise per ticket.
  3. A Taylor Swift Tix resale portal should be set up for verified fans. If a verified fan needs to sell their tickets, they can sell to another verified fan for face-value.
  4. Returns/refunds should be made available to those who would like to change how much they have already spent on boost activities given the new information.

This is a lot of work and expense. As a result, I don’t expect any of these changes to be implemented for the North American tour. However, if they are made for the world tour, which I am assuming will be announced shortly, we would have a much more equitable system and Taylor would still realize more revenue from each fan than she has in the past.

I give Taylor and her team a lot of credit for a solid idea and a lot of good work building out the infrastructure for Taylor Swift Tix. Unfortunately, it only takes a few bad decisions to derail a lot of good work.

Aside: I have already written too much for this week but it is curious that streaming was omitted as a boost activity; think about why that might be. Maybe I’ll publish my thoughts in a future post…

How I Would Structure a Public Company

Prior to the 20th century, companies were generally family owned and run; they were small and easy to direct. The evolution of public ownership changed all of that. It created a separation between ownership and leadership. In an attempt to ensure that public companies are driven by shareholder interest, a two-tier hierarchy was developed.

The first tier is the Board of Directors. The board is composed of two types of members: Internal Directors – from within the company – and External Directors – independent from the company. All members of the board are elected by the shareholders, including the Board Chair.

The second tier is the Leadership Team. Leadership is hired or approved by the board of directors to guide the daily operation of the company. The typical leadership team looks like this:

Screen Shot 2017-08-06 at 9.50.59 AM

I have a few issues with this structure:

  1. Why have “Chief Officers” if there are no “Officers”?;
  2. Why have “Vice Presidents” if there are no “Presidents”?; and
  3. The title of “Manager” has a negative connotation

I would execute this structure:

Screen Shot 2017-08-06 at 9.59.44 AMThe word “officer” is derived from the Latin word “officium” meaning “service”.  That’s a beautiful definition of what a “manager” should be – of service to their company and their employees. Anyone in a leadership position should be called an officer. As one rises through the ranks of a company, they take on greater responsibility and their title becomes more general. For example, the technical branch of a company could look like this:

Screen Shot 2017-08-06 at 10.30.54 AM

I think that is a better way of doing things. What do you think?

Alright…I’ll Write About Uber

Until now, I have resisted writing about Uber because their issues have been well-documented without my help, but last night Travis Kalanick resigned as CEO, seemingly leaving “his” company without a leader.

Though he did lead the company’s growth for the last 7 years, Travis Kalanick did not create Uber. The idea for Uber was conceived by Garrett Camp, the current Chairman of Uber’s board of directors. Camp is a 38 year old, Canadian software engineer turned entrepreneur. He founded his first company, StumbleUpon, in 2001 while earning a Master’s degree in software engineering from the University of Calgary. He sold StumbleUpon to eBay in 2007 for $75 million but remained CEO until stepping down to “work on other ventures” in 2012. Those other ventures are Expa and Uber.

Camp hired a private driver while CEO of StumbleUpon. He developed Uber in 2009, as a way to make the service more affordable – sharing the car, and the cost, between a number of his friends. Because he was committed to StumbleUpon at the time of Uber’s founding, Camp brought on Kalanick as an “advisor”. To that point, Kalanick had dropped out of a computer engineering and business economics degree at UCLA and co-founded two peer-to-peer file sharing businesses – Scour.net, which filed for bankruptcy to protect itself from a lawsuit, and Red Swoosh, which was acquired in 2007 by Akamai Technologies for $19 million. Although he served as CEO of Red Swoosh, Kalanick did not become Uber’s first CEO. He hired a seemingly less qualified candidate, Ryan Graves, who he then replaced less than a year later.

Now, Uber is looking for its third CEO. This might be an opportunity for Garrett Camp to step into an acting role while the board searches for the right hire. They are reportedly also searching for a COO (Chief Operating Officer), CMO (Chief Marketing Officer) and independent board members. Marissa Mayer would be an interesting hire as COO – bringing another woman, but more importantly, more technical and managerial experience to the boardroom table.

Although he has resigned as CEO, Kalanick has not resigned from Uber. He retains his seat on the Uber board, his super-voting shares (giving him, Camp and Graves additional influence) and his 12 percent financial stake in the company. This resignation could end up being more like the leave of absence announced on June 13 if Kalanick can recover from his disastrous year, both personally and professionally.

Whole Foods Market: Past, Present, and Future?

In 1976, Whole Foods Market co-founder, John Mackey, dropped out of college and moved into a vegetarian co-op in Austin, Texas. Two years later, at the age of 25, he raised $45000 from friends and family to open his own natural foods store. The original store was called “Safer Way” – a deliberate attack on the grocery giant Safeway. The store was on the main floor of an old house that John bought with his then girlfriend and co-founder Renee Lawson Hardy.

In 1980, Safer Way partnered with competitor Clarksville Natural Grocery to open the first “Whole Foods Market”. From 1984 to 1992 Whole Foods took on venture capital to fuel expansion to Dallas and Houston. Then in 1992, Whole Foods Market went public, giving them the capital to expand across the United States, Canada and the U.K. through acquisitions, while continuing to open new stores from the ground up.

Today, there are 465 Whole Foods Markets across the United States accounting for just 1-2% of the nation’s grocery revenue.

On June 16, it was announced that Amazon will acquire Whole Foods Market in an all-cash transaction valued at approximately $13.7 billion. For the time being, Whole Foods Market will continue to operate stores under their brand and John Mackey will remain as CEO.

Amazon’s mission statement reads: “We seek to be Earth’s most consumer-centric company”. Arguably, their actual mission is to be Earth’s most consumer-dominant company. If you want to take a cut of all economic activity, you need a foothold in groceries as the category accounts for about 20% of consumer spending. That is why Amazon has been experimenting in the space for over a decade, first with Amazon Fresh and more recently with Amazon Go.

Amazon’s key to control the consumer market though is Prime. With Prime’s reliability and convenience, Amazon has created a moat around consumer goods that doesn’t depend on price because customers don’t even bother to check anywhere else – that is except, maybe, the grocery store. Eliminating the opportunity for Prime customers to be reminded that other retailers sell consumer goods, potentially at lower prices, is just another reason for Amazon to get into the brick-and-mortar grocery game.

The Amazon acquisition is almost certainly the unfortunate death of Whole Foods Market. Amazon has no passion to be a grocer let alone a natural foods grocer. They are a services company that is purchasing a $13.7 billion tactic and they aren’t done yet.

Let’s decompose the process a consumer goes through to purchase groceries:

  1. They must decide what they want to eat
  2. They must create a list of the required ingredients
  3. They must take stock of what they have in their pantry
  4. They must purchase the list of outstanding items
  5. They must transport the groceries from the retailer to their home

Even with the purchase of Whole Foods, Amazon has only addressed the last 2 elements of the consumer process. I’m interested to see if they target a meal planning company like Platejoy, to control the remainder. After all, if your mission is to be “Earth’s most consumer-centric company” you might as well own it all.