answer the 3 questions of case analysis

Headais - -- - hta, --- Case for Analysis ACB | 1:20 " ral iss - . Ca hot real Mut ur has hoomaiah condemn, There I pharna API - ummal 1001. her, (TMTMum Na sharitimate Jaring the lot 1 - , - tee ATKT - at a a THOR NO | Hin, Scanned with CamScanner TAL Calar - , pi mal - Imas - at ty the Arts OH "te II - , - , y Pur ore, tas, 4 - we in the tal DatIS Hi Ladder -he mAHHH > Learning Activity 4 -.... - trial h Ads - -tata 10:27 * 182% tal Galat ' at HTA they Mamy ram Me - .hero, - - IV - , , - MA , TN | " y - HD Tara Masi payms Dasis. les Haiti The Completter TM - , , - M Aa Scanned with CamScanner - kuingia kwa Salai - . IIIL N | Clip MANY - - is an -- Mata ED - ORANE ainthams --- -SAARA --IN lail. ATHIN AA- AradA AATAMINDA etty Tertiar - MAT ( , tran, I - M - Thai - , palan . --, Scanned with CamScanner - - , , TI AT&T A ----- " at Aran - - - , - - - - - - Scanned with CamScanner of everything from silicon chips to Hollywood flicks will As long as Apple stays on its game, leading providers feel pressure to strike deals to Jobs' liking. Apple can confer brand hipness on its partners. And its ascendent in markets like cell phones and who knows what else in the future may impose a new focus on more comme friendly parts, software, and services. But to be part of the Jobs club, you give up a certain amount of independence on everything from design to identity to pricing. wisdom about the nature of competition in digital mar Jobs is upending two decades of conventional kers. Since the rise of Microsoft and Intel's "Wintel PC standard in the 1980s, the assumption has been that man kets would be dominated by those that could set technical standards-say, Microsoft in operating systems or Intel in microprocessors-and then benefit as thousands of others competed to build products on top of these platforms." the best product, and rewards will follow. In fact, Apple's Case for Analysis: Apple* July 9, 2007 Steve Jobs had plenty of problems to contend with as he sauntered onstage for his first speech after returning to the top of Apple in 1997. He faced a shrinking market for his Mac computers, bloated costs, and a severe shortage of cash. But on that day, Jobs chose to talk to the Mac faithful mostly about another problem. Apple's growing isolation. Despite the company's reputation for making the world's finest PCs, very little software or add-on gear worked with the Mac Apple lives in an ecosystem, and it needs help from other partners," said Jobss. And it needs to help other partners." Jobs then did the unthinkable, inviting arch-nemesis Bill Gates to join him on stage via videoconference to announce details of a deal to forget any patent claims in exchange for $150 million, and a promise by Microsoft Corp. (MSFT) to continue making a Mac-compatible ver. sion of its ubiquitous Office software. Today, that Apple Inc. (AAPL) ecosystem has morphed from a sad little high-tech shtetl into a global empire. Once known for defining the digital future but never fully capitalizing on it, Apple has been transformed into tech's most influential hit-maker. More than 200,000 companies have signed on in the past year to create Apple- compatible products, a 26 percent increase from the year before. That includes software makers such as gamemaker Electronic Arts Inc. and corporate supplier VMware, drawn by Mac sales that are growing three times faster than the overall PC market. A cottage industry of iPod accessories continues to blossom into something far more substantial. Consider that this year, some 70 percent of new U.S.-model cars have iPod connectors built in, and abour 100.000 airline seats will have the same. And Apple's online iTunes Music Store has become the world's third-largest music retailer after Wal-Mart Stores Inc. (WMT) and Best Buy Co. (BBY) Joining the Jobs Club With the June 29 debut of the iPhone, Apple seems poised to extend its reach even further. A new flock of partners, from AT&T Corp. to Salesforce.com Inc. (CRM), is set to jump on the bandwagon for the slick phone/Web browser/music player/camera. Sure, the hype prior to iPhone's launch bordered on ridiculous: (Comedy Central IVIAI Stephen Colbert joked that the iPhone launch is the second most important event in human history, after the birth of Christ). But phonemakers such as Nokia (NOK) and Motorola (MOT), and carriers like Verizon (VZ), are waiting nervously to see if Apple can remake the U.S. cel- lular business by determining what services consumers get and leaving the carriers out of the loop. But Apple's strategy is far simpler: Focus on makine new partners are signing up in spite of, rather than because of, Jobs' rules of engagement. Apple makes little pretense of building a level playing field, but routinely picks favorites-such as Google for building mapping and video applications for the iPhone. And rather the aim for the most partners, Apple focuses on attracting the best ones. As a result, the Mac and iPod feel more like a gated, elitist community, with Apple keeping close watch over who gets in. "The notion of a platform is a very PC oriented way of looking at the world," says Silicon Valley financier Roger MeNamee. "Consumers just want a great experience. They don't buy platforms." Consider how Apple changed expectations about portable music devices. There were plenty of MP3 players around before the iPod arrived in 2001. Now, if the iPhone works as advertised, it could similarly redefine the mobile phone experience. As any BlackBerry or Treo owner knows, all of the 25 million smartphones sold last year offer similar capabilities, such as Web browsing and e-mail. But none has captured the heart of the main stream consumer. And on paper, at least, the iPhone erases myriad frustrations faced by hundreds of millions of phone users--from maddeningly complex menus, to the inability to find a contact while on a call. Spin it out a few years, and it's not hard to see why many companies want to be on Apple's side. [U.S.) iPhone buyers now sign up for an AT&T cellular package vi iTunes. In the future, maybe they'll also be able to sign up for all the broadband and data services needed to power their Macs, iPods, and future Apple products can you say: "I want my Apple iHome Theater") and make them Mh real wi wurk together. That would play to Apple's strength in the complex simple. What you end up with is a And of Apple archipelago-this cluster of islands in this s dial sou that are great places to hang out, says Shen Valley fist and consultant Paul Saffo. Of course. Apple's products have to continue to be a physical keyboard. But if Apple succeeds, it are itselt and its ecosystem above the cacophony of gants battling to own the digital consumer. The relephone and cable companies try to take advantage of ser control of customers' access to video, data, and voice . Google Inc. (GOOG) and Yahoo! Inc. (YHOO) want to leverage their power as online concierge for millions consumers. Apple comes at it from the device perspectives can control the adget you use to connect with all those her platforms, it increases its control over what you do, Consider the perspective of one big video-game pro ducer, Electronic Arts. In the early 1980s, about half of the people working at EA's Redwood City (Calif.) campus were Apple alumni. Yet EA stopped making Mac compatible games later in the decade, when Apple turned question for the iPhone, which doesn't its attention to corporate markets. EA co-founder Bing Gordon recalls his shock when Apple's then CEO John Sculley said in 1987 that there is no home-computer market." Says Gordon: "They were working so hard to get respect, the last thing they wanted was for people who wore suits to think of the Mac as a toy." Predictably, game sales on the Mac plummeted, making it even less worthwhile for EA to make the big investments to adapt its PC games to run on the Mac's unique innards. But because today's Intel-based Macs don't look much different from any Windows PC from EA's perspec- and how much you pay (99 cents a song, for example). tive, Gordon says it should be cheaper to churn our Mac There are lots of phone carriers and cable companies, games than, say, adapting them to game consoles like the Sony (SNE) PlayStation or Nintendo NTDOY) Wii. With cact with fairly similar offerings. Google and Yahoo are the Mac rapidly gaining share with younger shoppers, EA powerful in their own right, but they can't totally control has announced plans to release its new Harry Potter hair destiny since Web users are a click away from using game and three other titles on the Mac this summer. sohet search engine of portal. For now, though, Apple Another rarely mentioned advantage is Apple's 50- shead and shoulders above others in making the actual called developer program. Once iPod sales began skyrock- machines you use to pull up Web pages, music, TV shows, eting in 2003, the company worked with makers of portable movies, and soon, perhaps, phone conversations. Says speakers, music player cases, and other add-on gadgets. David Sanderson, head of Bain & Co.'s global media prac And Apple is working on the most mobile platform of all. bit: "We're moving from a distributor-driven paradigm to Since BMW first added an optional iPod connector in the consumer-driven paradigmand Apple gets consumers." glove compartment of many of its 2004 models, carmakers And not just any consumers, but those who will pay including Chrysler (DCX), Ford (F), and Honda (HMC) have a premium. The Mac is gaining share despite an average followed suit. General Motors Corp.'s (GM) 2008 Cadillac price tag of $1,400, nearly twice that of the typical PC. CTS will come with a center console that features the iPod's Pod shoppers still paid an average price of $181 in May, rotate and click" interface, not only for pulling music off 15 percent above other music players. The iPhone is even an iPod but also for playing the radio or listening to CDs or note audaciously priced. The (US$499 base price com satellite radio. "It's about getting to your music, not having pures with an average $66 for a regular phone, or $160 to learn a new set of tricks for each service," says James fue a smartphone such as a BlackBerry or Treo, says NPD Grace, the 27-year-old GM manager who leads the project. Group Inc. analyst Stephen Baker. With the iPhone, Apple seems ready to open up oppor- tunities for software developers who were mostly shut out The Compatibility Factor from the iPod. On June 11, it announced that any Web None of this would have come about if Jobs hadn't had 2.0 program designed to work with Apple's Safari browser his epiphany about reaching out beyond the insular world would work on the iPhone. That means such popular sites of the Mac. The Office deal was a symbolic first step, but as MySpace Digg, or Amazon.com will be able to adapt the real wake-up call came with the 2003 decision to do a their services to take advantage of the device-say, by Windows-compatible version of iTunes. Rather than hurt adding a virtual button on their sites so thar iPhone users Mac sales, as some feared, this opened the floodgates on could actually place a phone call with a fellow Netizen, iPod sales by making the device usable by the 98 percent rather than just trade e-mails or post messages. of computer users who ran Windows. Another milestone To be sure, many developers gripe that this approach came when the company switched from PowerPC pro is a far cry from letting them create applications designed tisos made by IBM (IBM) to Intel's far more popular from the ground up to work directly with the iPhone. chips. This made it possible for Macs to run Windows (an That's a privilege Apple has conferred on only a few inportant insurance policy to many Mac newbies) and partners, such as Google. But it's a good first step." made it far casier for software developers to adapt their says Digg Chairman Jay Adelson, who expects Apple to Programs for Apple's products. become more inclusive as time goes by. "For now, it's a the $500 devices. AT&T is offering a $59 base plan for taking a bite out of AT&T's margins, this could cause it movies to iTunes. The 52 million TV shows and moves so far by Apple amounts to fewer than two videos period This makes Apple's newest partnership with AT&T iPhone was announced in January, many observers have (T) for iPhone service all the more intriguing. Since the wondered if Jobs pulled another fast one, using his coe sumer cred to win unprecedented influence over the $140 billion cellular-phone business. Normally, carriers in the U.S. control how cell phones are priced and marketed, right down to deciding whether they will turn on capabili ties built into the phones, such as wireless asic dow loading. But that's not how Apple rolls. Apple defined the 16 services that are highlighted on the iPhone homepage and users Sign up for them via iTunes, not on AT&T's Has AT&T set itself up to be marginalized? The car rier stands to steal subscribers from its rivals, CEO Randall L. Stephenson said on June 19 that of the 1.1 million people who had inquired about the iPhone, 40 percent Wet TIGE currently signed up with AT&T. But analysts say Apple "Burrows, P. (2007) Welcome to Planet Apple, www.busin commagazine content/ 07 28/64042058.html homepage or in its stores, very strange kind of controlled system--because they have these insanely high bars for reliability and user experi- ence that they want to hit." Many partners won't wait for a formal invite. Despite doubes about the iPhone's usefulness to serious business people, Salesforce.com is working on an iPhone version of its sales management software. It's not just about market share, it's about showing what is possible and what is cool," says CEO Marc Benioff. And more than 150 devel opers have registered to attend an ad hoc iPhone Devel- opers Camp in San Francisco on July 6, to trade ideas and create new applications. But if the Apple orchard is growing, it is still no Eden. For those partners that make the cut, Apple enforces a brutal perfectionism. "The stereotype is that they're this loosey goosey California company, but nothing could be further from the truth," says Gary Johnson, the former CEO of chipmaker Portal Player Inc., which roared to pros perity by providing the electronic brains of the first genera- tions of iPods. Johnson says that whenever a project fell off track or a part fell short of Apple's needs, its engineers will earn a luxurious 35 percent gross margin on each of were demanding root cause analysis" and explanations within 12 hours. "You could pacify other customers by phone and data services-coughly $20 less than the core putting 10 engineers on a plane to see them. Not Apple. "An Unreasonableness" other handset makers to demand sweeter deals, too, Working with Apple can be exhausting. Johnson says the But the real test will be whether Jobs can change the company almost never issued documents outlining its tech way consumers think about a phone. This is Apple's firs nical requirements, preferring to keep things oral to avoid entry into a preexisting mass market, and those other phone a paper trail that might be leaked. And no supplier was manufacturers can't afford to let Jobs rewire things to suit given a full picture of what exactly Apple was working Apple's strengths. Some already have rolled out cheaper on: Everything was on a "need to know basis. "There's products that, if not exactly as capable as the iPhone, may an unreasonableness," says Johnson. "It's as though your be close enough. Will most consumers eventually choose to entire reason for being is to serve them." Yet he adds he has save money, even at the expense of a bit of elegance? no hard feelings: "It wasn't a malicious thing. It's almost tory says they will, according to Harvard Business School machine-like. You may have friendships or business rela professor Clayton M. Christensen: "The world always tionships, but they don't really count. Johnson found that ends up thanking innovators for their cool products-but out on an April morning in 2006, when be learned Apple won't pay for them. There are forces of gravity at work." had decided not to use a chip that had been under develop Now there's a matchup worth watching: Steve Jobs ment for more than a year and was expected to bring in vs. gravity, half of PortalPlayer's sales. The company's stock crashed 50 percent when Johnson told Wall Street a few days later. Assignment Questions Seven months later, it was purchased by Nvidia Corp (NVDA) for $357 million-half of its peak market cap. 1. Why would Steve Jobs want to partner with Bill Gates! 2. What is Apple's strategy? Is it effective? Suppliers of TV shows, movies, and other video con- tent have their own reasons for being wary of joining the 3. According to Christensen, in his book The Iron Apple ccosystem. They know what happened in the music tor's Dilemma, the world thanks innovators formes industry. Jobs created a kind of reverse razor-and-blades products but won't buy them. Does his statement hold model with the iPod, where Apple sells lucrative razors for Apple in general and for its iPhone, in particular (music players) and the studios are stuck selling cheapo blades (music). Hollywood has resisted Jobs' vision for placing movies on the iPod and iPhone. Only movies from Walt Disney Co. (DIS) (where Jobs is the largest individual shareholder) and Paramount Pictures (VIA) have licensed All in 2007. Used with simi of everything from silicon chips to Hollywood flicks will As long as Apple stays on its game, leading providers feel pressure to strike deals to Jobs' liking. Apple can confer brand hipness on its partners. And its ascendent in markets like cell phones and who knows what else in the future may impose a new focus on more comme friendly parts, software, and services. But to be part of the Jobs club, you give up a certain amount of independence on everything from design to identity to pricing. wisdom about the nature of competition in digital mar Jobs is upending two decades of conventional kers. Since the rise of Microsoft and Intel's "Wintel PC standard in the 1980s, the assumption has been that man kets would be dominated by those that could set technical standards-say, Microsoft in operating systems or Intel in microprocessors-and then benefit as thousands of others competed to build products on top of these platforms." the best product, and rewards will follow. In fact, Apple's Case for Analysis: Apple* July 9, 2007 Steve Jobs had plenty of problems to contend with as he sauntered onstage for his first speech after returning to the top of Apple in 1997. He faced a shrinking market for his Mac computers, bloated costs, and a severe shortage of cash. But on that day, Jobs chose to talk to the Mac faithful mostly about another problem. Apple's growing isolation. Despite the company's reputation for making the world's finest PCs, very little software or add-on gear worked with the Mac Apple lives in an ecosystem, and it needs help from other partners," said Jobss. And it needs to help other partners." Jobs then did the unthinkable, inviting arch-nemesis Bill Gates to join him on stage via videoconference to announce details of a deal to forget any patent claims in exchange for $150 million, and a promise by Microsoft Corp. (MSFT) to continue making a Mac-compatible ver. sion of its ubiquitous Office software. Today, that Apple Inc. (AAPL) ecosystem has morphed from a sad little high-tech shtetl into a global empire. Once known for defining the digital future but never fully capitalizing on it, Apple has been transformed into tech's most influential hit-maker. More than 200,000 companies have signed on in the past year to create Apple- compatible products, a 26 percent increase from the year before. That includes software makers such as gamemaker Electronic Arts Inc. and corporate supplier VMware, drawn by Mac sales that are growing three times faster than the overall PC market. A cottage industry of iPod accessories continues to blossom into something far more substantial. Consider that this year, some 70 percent of new U.S.-model cars have iPod connectors built in, and abour 100.000 airline seats will have the same. And Apple's online iTunes Music Store has become the world's third-largest music retailer after Wal-Mart Stores Inc. (WMT) and Best Buy Co. (BBY) Joining the Jobs Club With the June 29 debut of the iPhone, Apple seems poised to extend its reach even further. A new flock of partners, from AT&T Corp. to Salesforce.com Inc. (CRM), is set to jump on the bandwagon for the slick phone/Web browser/music player/camera. Sure, the hype prior to iPhone's launch bordered on ridiculous: (Comedy Central IVIAI Stephen Colbert joked that the iPhone launch is the second most important event in human history, after the birth of Christ). But phonemakers such as Nokia (NOK) and Motorola (MOT), and carriers like Verizon (VZ), are waiting nervously to see if Apple can remake the U.S. cel- lular business by determining what services consumers get and leaving the carriers out of the loop. But Apple's strategy is far simpler: Focus on makine new partners are signing up in spite of, rather than because of, Jobs' rules of engagement. Apple makes little pretense of building a level playing field, but routinely picks favorites-such as Google for building mapping and video applications for the iPhone. And rather the aim for the most partners, Apple focuses on attracting the best ones. As a result, the Mac and iPod feel more like a gated, elitist community, with Apple keeping close watch over who gets in. "The notion of a platform is a very PC oriented way of looking at the world," says Silicon Valley financier Roger MeNamee. "Consumers just want a great experience. They don't buy platforms." Consider how Apple changed expectations about portable music devices. There were plenty of MP3 players around before the iPod arrived in 2001. Now, if the iPhone works as advertised, it could similarly redefine the mobile phone experience. As any BlackBerry or Treo owner knows, all of the 25 million smartphones sold last year offer similar capabilities, such as Web browsing and e-mail. But none has captured the heart of the main stream consumer. And on paper, at least, the iPhone erases myriad frustrations faced by hundreds of millions of phone users--from maddeningly complex menus, to the inability to find a contact while on a call. Spin it out a few years, and it's not hard to see why many companies want to be on Apple's side. [U.S.) iPhone buyers now sign up for an AT&T cellular package vi iTunes. In the future, maybe they'll also be able to sign up for all the broadband and data services needed to power their Macs, iPods, and future Apple products can you say: "I want my Apple iHome Theater") and make them Mh real wi wurk together. That would play to Apple's strength in the complex simple. What you end up with is a And of Apple archipelago-this cluster of islands in this s dial sou that are great places to hang out, says Shen Valley fist and consultant Paul Saffo. Of course. Apple's products have to continue to be a physical keyboard. But if Apple succeeds, it are itselt and its ecosystem above the cacophony of gants battling to own the digital consumer. The relephone and cable companies try to take advantage of ser control of customers' access to video, data, and voice . Google Inc. (GOOG) and Yahoo! Inc. (YHOO) want to leverage their power as online concierge for millions consumers. Apple comes at it from the device perspectives can control the adget you use to connect with all those her platforms, it increases its control over what you do, Consider the perspective of one big video-game pro ducer, Electronic Arts. In the early 1980s, about half of the people working at EA's Redwood City (Calif.) campus were Apple alumni. Yet EA stopped making Mac compatible games later in the decade, when Apple turned question for the iPhone, which doesn't its attention to corporate markets. EA co-founder Bing Gordon recalls his shock when Apple's then CEO John Sculley said in 1987 that there is no home-computer market." Says Gordon: "They were working so hard to get respect, the last thing they wanted was for people who wore suits to think of the Mac as a toy." Predictably, game sales on the Mac plummeted, making it even less worthwhile for EA to make the big investments to adapt its PC games to run on the Mac's unique innards. But because today's Intel-based Macs don't look much different from any Windows PC from EA's perspec- and how much you pay (99 cents a song, for example). tive, Gordon says it should be cheaper to churn our Mac There are lots of phone carriers and cable companies, games than, say, adapting them to game consoles like the Sony (SNE) PlayStation or Nintendo NTDOY) Wii. With cact with fairly similar offerings. Google and Yahoo are the Mac rapidly gaining share with younger shoppers, EA powerful in their own right, but they can't totally control has announced plans to release its new Harry Potter hair destiny since Web users are a click away from using game and three other titles on the Mac this summer. sohet search engine of portal. For now, though, Apple Another rarely mentioned advantage is Apple's 50- shead and shoulders above others in making the actual called developer program. Once iPod sales began skyrock- machines you use to pull up Web pages, music, TV shows, eting in 2003, the company worked with makers of portable movies, and soon, perhaps, phone conversations. Says speakers, music player cases, and other add-on gadgets. David Sanderson, head of Bain & Co.'s global media prac And Apple is working on the most mobile platform of all. bit: "We're moving from a distributor-driven paradigm to Since BMW first added an optional iPod connector in the consumer-driven paradigmand Apple gets consumers." glove compartment of many of its 2004 models, carmakers And not just any consumers, but those who will pay including Chrysler (DCX), Ford (F), and Honda (HMC) have a premium. The Mac is gaining share despite an average followed suit. General Motors Corp.'s (GM) 2008 Cadillac price tag of $1,400, nearly twice that of the typical PC. CTS will come with a center console that features the iPod's Pod shoppers still paid an average price of $181 in May, rotate and click" interface, not only for pulling music off 15 percent above other music players. The iPhone is even an iPod but also for playing the radio or listening to CDs or note audaciously priced. The (US$499 base price com satellite radio. "It's about getting to your music, not having pures with an average $66 for a regular phone, or $160 to learn a new set of tricks for each service," says James fue a smartphone such as a BlackBerry or Treo, says NPD Grace, the 27-year-old GM manager who leads the project. Group Inc. analyst Stephen Baker. With the iPhone, Apple seems ready to open up oppor- tunities for software developers who were mostly shut out The Compatibility Factor from the iPod. On June 11, it announced that any Web None of this would have come about if Jobs hadn't had 2.0 program designed to work with Apple's Safari browser his epiphany about reaching out beyond the insular world would work on the iPhone. That means such popular sites of the Mac. The Office deal was a symbolic first step, but as MySpace Digg, or Amazon.com will be able to adapt the real wake-up call came with the 2003 decision to do a their services to take advantage of the device-say, by Windows-compatible version of iTunes. Rather than hurt adding a virtual button on their sites so thar iPhone users Mac sales, as some feared, this opened the floodgates on could actually place a phone call with a fellow Netizen, iPod sales by making the device usable by the 98 percent rather than just trade e-mails or post messages. of computer users who ran Windows. Another milestone To be sure, many developers gripe that this approach came when the company switched from PowerPC pro is a far cry from letting them create applications designed tisos made by IBM (IBM) to Intel's far more popular from the ground up to work directly with the iPhone. chips. This made it possible for Macs to run Windows (an That's a privilege Apple has conferred on only a few inportant insurance policy to many Mac newbies) and partners, such as Google. But it's a good first step." made it far casier for software developers to adapt their says Digg Chairman Jay Adelson, who expects Apple to Programs for Apple's products. become more inclusive as time goes by. "For now, it's a the $500 devices. AT&T is offering a $59 base plan for taking a bite out of AT&T's margins, this could cause it movies to iTunes. The 52 million TV shows and moves so far by Apple amounts to fewer than two videos period This makes Apple's newest partnership with AT&T iPhone was announced in January, many observers have (T) for iPhone service all the more intriguing. Since the wondered if Jobs pulled another fast one, using his coe sumer cred to win unprecedented influence over the $140 billion cellular-phone business. Normally, carriers in the U.S. control how cell phones are priced and marketed, right down to deciding whether they will turn on capabili ties built into the phones, such as wireless asic dow loading. But that's not how Apple rolls. Apple defined the 16 services that are highlighted on the iPhone homepage and users Sign up for them via iTunes, not on AT&T's Has AT&T set itself up to be marginalized? The car rier stands to steal subscribers from its rivals, CEO Randall L. Stephenson said on June 19 that of the 1.1 million people who had inquired about the iPhone, 40 percent Wet TIGE currently signed up with AT&T. But analysts say Apple "Burrows, P. (2007) Welcome to Planet Apple, www.busin commagazine content/ 07 28/64042058.html homepage or in its stores, very strange kind of controlled system--because they have these insanely high bars for reliability and user experi- ence that they want to hit." Many partners won't wait for a formal invite. Despite doubes about the iPhone's usefulness to serious business people, Salesforce.com is working on an iPhone version of its sales management software. It's not just about market share, it's about showing what is possible and what is cool," says CEO Marc Benioff. And more than 150 devel opers have registered to attend an ad hoc iPhone Devel- opers Camp in San Francisco on July 6, to trade ideas and create new applications. But if the Apple orchard is growing, it is still no Eden. For those partners that make the cut, Apple enforces a brutal perfectionism. "The stereotype is that they're this loosey goosey California company, but nothing could be further from the truth," says Gary Johnson, the former CEO of chipmaker Portal Player Inc., which roared to pros perity by providing the electronic brains of the first genera- tions of iPods. Johnson says that whenever a project fell off track or a part fell short of Apple's needs, its engineers will earn a luxurious 35 percent gross margin on each of were demanding root cause analysis" and explanations within 12 hours. "You could pacify other customers by phone and data services-coughly $20 less than the core putting 10 engineers on a plane to see them. Not Apple. "An Unreasonableness" other handset makers to demand sweeter deals, too, Working with Apple can be exhausting. Johnson says the But the real test will be whether Jobs can change the company almost never issued documents outlining its tech way consumers think about a phone. This is Apple's firs nical requirements, preferring to keep things oral to avoid entry into a preexisting mass market, and those other phone a paper trail that might be leaked. And no supplier was manufacturers can't afford to let Jobs rewire things to suit given a full picture of what exactly Apple was working Apple's strengths. Some already have rolled out cheaper on: Everything was on a "need to know basis. "There's products that, if not exactly as capable as the iPhone, may an unreasonableness," says Johnson. "It's as though your be close enough. Will most consumers eventually choose to entire reason for being is to serve them." Yet he adds he has save money, even at the expense of a bit of elegance? no hard feelings: "It wasn't a malicious thing. It's almost tory says they will, according to Harvard Business School machine-like. You may have friendships or business rela professor Clayton M. Christensen: "The world always tionships, but they don't really count. Johnson found that ends up thanking innovators for their cool products-but out on an April morning in 2006, when be learned Apple won't pay for them. There are forces of gravity at work." had decided not to use a chip that had been under develop Now there's a matchup worth watching: Steve Jobs ment for more than a year and was expected to bring in vs. gravity, half of PortalPlayer's sales. The company's stock crashed 50 percent when Johnson told Wall Street a few days later. Assignment Questions Seven months later, it was purchased by Nvidia Corp (NVDA) for $357 million-half of its peak market cap. 1. Why would Steve Jobs want to partner with Bill Gates! 2. What is Apple's strategy? Is it effective? Suppliers of TV shows, movies, and other video con- tent have their own reasons for being wary of joining the 3. According to Christensen, in his book The Iron Apple ccosystem. They know what happened in the music tor's Dilemma, the world thanks innovators formes industry. Jobs created a kind of reverse razor-and-blades products but won't buy them. Does his statement hold model with the iPod, where Apple sells lucrative razors for Apple in general and for its iPhone, in particular (music players) and the studios are stuck selling cheapo blades (music). Hollywood has resisted Jobs' vision for placing movies on the iPod and iPhone. Only movies from Walt Disney Co. (DIS) (where Jobs is the largest individual shareholder) and Paramount Pictures (VIA) have licensed All in 2007. Used with simi Headais - -- - hta, --- Case for Analysis ACB | 1:20 " ral iss - . Ca hot real Mut ur has hoomaiah condemn, There I pharna API - ummal 1001. her, (TMTMum Na sharitimate Jaring the lot 1 - , - tee ATKT - at a a THOR NO | Hin, Scanned with CamScanner TAL Calar - , pi mal - Imas - at ty the Arts OH "te II - , - , y Pur ore, tas, 4 - we in the tal DatIS Hi Ladder -he mAHHH > Learning Activity 4 -.... - trial h Ads - -tata 10:27 * 182% tal Galat ' at HTA they Mamy ram Me - .hero, - - IV - , , - MA , TN | " y - HD Tara Masi payms Dasis. les Haiti The Completter TM - , , - M Aa Scanned with CamScanner - kuingia kwa Salai - . IIIL N | Clip MANY - - is an -- Mata ED - ORANE ainthams --- -SAARA --IN lail. ATHIN AA- AradA AATAMINDA etty Tertiar - MAT ( , tran, I - M - Thai - , palan . --, Scanned with CamScanner - - , , TI AT&T A ----- " at Aran - - - , - - - - - - Scanned with CamScanner of everything from silicon chips to Hollywood flicks will As long as Apple stays on its game, leading providers feel pressure to strike deals to Jobs' liking. Apple can confer brand hipness on its partners. And its ascendent in markets like cell phones and who knows what else in the future may impose a new focus on more comme friendly parts, software, and services. But to be part of the Jobs club, you give up a certain amount of independence on everything from design to identity to pricing. wisdom about the nature of competition in digital mar Jobs is upending two decades of conventional kers. Since the rise of Microsoft and Intel's "Wintel PC standard in the 1980s, the assumption has been that man kets would be dominated by those that could set technical standards-say, Microsoft in operating systems or Intel in microprocessors-and then benefit as thousands of others competed to build products on top of these platforms." the best product, and rewards will follow. In fact, Apple's Case for Analysis: Apple* July 9, 2007 Steve Jobs had plenty of problems to contend with as he sauntered onstage for his first speech after returning to the top of Apple in 1997. He faced a shrinking market for his Mac computers, bloated costs, and a severe shortage of cash. But on that day, Jobs chose to talk to the Mac faithful mostly about another problem. Apple's growing isolation. Despite the company's reputation for making the world's finest PCs, very little software or add-on gear worked with the Mac Apple lives in an ecosystem, and it needs help from other partners," said Jobss. And it needs to help other partners." Jobs then did the unthinkable, inviting arch-nemesis Bill Gates to join him on stage via videoconference to announce details of a deal to forget any patent claims in exchange for $150 million, and a promise by Microsoft Corp. (MSFT) to continue making a Mac-compatible ver. sion of its ubiquitous Office software. Today, that Apple Inc. (AAPL) ecosystem has morphed from a sad little high-tech shtetl into a global empire. Once known for defining the digital future but never fully capitalizing on it, Apple has been transformed into tech's most influential hit-maker. More than 200,000 companies have signed on in the past year to create Apple- compatible products, a 26 percent increase from the year before. That includes software makers such as gamemaker Electronic Arts Inc. and corporate supplier VMware, drawn by Mac sales that are growing three times faster than the overall PC market. A cottage industry of iPod accessories continues to blossom into something far more substantial. Consider that this year, some 70 percent of new U.S.-model cars have iPod connectors built in, and abour 100.000 airline seats will have the same. And Apple's online iTunes Music Store has become the world's third-largest music retailer after Wal-Mart Stores Inc. (WMT) and Best Buy Co. (BBY) Joining the Jobs Club With the June 29 debut of the iPhone, Apple seems poised to extend its reach even further. A new flock of partners, from AT&T Corp. to Salesforce.com Inc. (CRM), is set to jump on the bandwagon for the slick phone/Web browser/music player/camera. Sure, the hype prior to iPhone's launch bordered on ridiculous: (Comedy Central IVIAI Stephen Colbert joked that the iPhone launch is the second most important event in human history, after the birth of Christ). But phonemakers such as Nokia (NOK) and Motorola (MOT), and carriers like Verizon (VZ), are waiting nervously to see if Apple can remake the U.S. cel- lular business by determining what services consumers get and leaving the carriers out of the loop. But Apple's strategy is far simpler: Focus on makine new partners are signing up in spite of, rather than because of, Jobs' rules of engagement. Apple makes little pretense of building a level playing field, but routinely picks favorites-such as Google for building mapping and video applications for the iPhone. And rather the aim for the most partners, Apple focuses on attracting the best ones. As a result, the Mac and iPod feel more like a gated, elitist community, with Apple keeping close watch over who gets in. "The notion of a platform is a very PC oriented way of looking at the world," says Silicon Valley financier Roger MeNamee. "Consumers just want a great experience. They don't buy platforms." Consider how Apple changed expectations about portable music devices. There were plenty of MP3 players around before the iPod arrived in 2001. Now, if the iPhone works as advertised, it could similarly redefine the mobile phone experience. As any BlackBerry or Treo owner knows, all of the 25 million smartphones sold last year offer similar capabilities, such as Web browsing and e-mail. But none has captured the heart of the main stream consumer. And on paper, at least, the iPhone erases myriad frustrations faced by hundreds of millions of phone users--from maddeningly complex menus, to the inability to find a contact while on a call. Spin it out a few years, and it's not hard to see why many companies want to be on Apple's side. [U.S.) iPhone buyers now sign up for an AT&T cellular package vi iTunes. In the future, maybe they'll also be able to sign up for all the broadband and data services needed to power their Macs, iPods, and future Apple products can you say: "I want my Apple iHome Theater") and make them Mh real wi wurk together. That would play to Apple's strength in the complex simple. What you end up with is a And of Apple archipelago-this cluster of islands in this s dial sou that are great places to hang out, says Shen Valley fist and consultant Paul Saffo. Of course. Apple's products have to continue to be a physical keyboard. But if Apple succeeds, it are itselt and its ecosystem above the cacophony of gants battling to own the digital consumer. The relephone and cable companies try to take advantage of ser control of customers' access to video, data, and voice . Google Inc. (GOOG) and Yahoo! Inc. (YHOO) want to leverage their power as online concierge for millions consumers. Apple comes at it from the device perspectives can control the adget you use to connect with all those her platforms, it increases its control over what you do, Consider the perspective of one big video-game pro ducer, Electronic Arts. In the early 1980s, about half of the people working at EA's Redwood City (Calif.) campus were Apple alumni. Yet EA stopped making Mac compatible games later in the decade, when Apple turned question for the iPhone, which doesn't its attention to corporate markets. EA co-founder Bing Gordon recalls his shock when Apple's then CEO John Sculley said in 1987 that there is no home-computer market." Says Gordon: "They were working so hard to get respect, the last thing they wanted was for people who wore suits to think of the Mac as a toy." Predictably, game sales on the Mac plummeted, making it even less worthwhile for EA to make the big investments to adapt its PC games to run on the Mac's unique innards. But because today's Intel-based Macs don't look much different from any Windows PC from EA's perspec- and how much you pay (99 cents a song, for example). tive, Gordon says it should be cheaper to churn our Mac There are lots of phone carriers and cable companies, games than, say, adapting them to game consoles like the Sony (SNE) PlayStation or Nintendo NTDOY) Wii. With cact with fairly similar offerings. Google and Yahoo are the Mac rapidly gaining share with younger shoppers, EA powerful in their own right, but they can't totally control has announced plans to release its new Harry Potter hair destiny since Web users are a click away from using game and three other titles on the Mac this summer. sohet search engine of portal. For now, though, Apple Another rarely mentioned advantage is Apple's 50- shead and shoulders above others in making the actual called developer program. Once iPod sales began skyrock- machines you use to pull up Web pages, music, TV shows, eting in 2003, the company worked with makers of portable movies, and soon, perhaps, phone conversations. Says speakers, music player cases, and other add-on gadgets. David Sanderson, head of Bain & Co.'s global media prac And Apple is working on the most mobile platform of all. bit: "We're moving from a distributor-driven paradigm to Since BMW first added an optional iPod connector in the consumer-driven paradigmand Apple gets consumers." glove compartment of many of its 2004 models, carmakers And not just any consumers, but those who will pay including Chrysler (DCX), Ford (F), and Honda (HMC) have a premium. The Mac is gaining share despite an average followed suit. General Motors Corp.'s (GM) 2008 Cadillac price tag of $1,400, nearly twice that of the typical PC. CTS will come with a center console that features the iPod's Pod shoppers still paid an average price of $181 in May, rotate and click" interface, not only for pulling music off 15 percent above other music players. The iPhone is even an iPod but also for playing the radio or listening to CDs or note audaciously priced. The (US$499 base price com satellite radio. "It's about getting to your music, not having pures with an average $66 for a regular phone, or $160 to learn a new set of tricks for each service," says James fue a smartphone such as a BlackBerry or Treo, says NPD Grace, the 27-year-old GM manager who leads the project. Group Inc. analyst Stephen Baker. With the iPhone, Apple seems ready to open up oppor- tunities for software developers who were mostly shut out The Compatibility Factor from the iPod. On June 11, it announced that any Web None of this would have come about if Jobs hadn't had 2.0 program designed to work with Apple's Safari browser his epiphany about reaching out beyond the insular world would work on the iPhone. That means such popular sites of the Mac. The Office deal was a symbolic first step, but as MySpace Digg, or Amazon.com will be able to adapt the real wake-up call came with the 2003 decision to do a their services to take advantage of the device-say, by Windows-compatible version of iTunes. Rather than hurt adding a virtual button on their sites so thar iPhone users Mac sales, as some feared, this opened the floodgates on could actually place a phone call with a fellow Netizen, iPod sales by making the device usable by the 98 percent rather than just trade e-mails or post messages. of computer users who ran Windows. Another milestone To be sure, many developers gripe that this approach came when the company switched from PowerPC pro is a far cry from letting them create applications designed tisos made by IBM (IBM) to Intel's far more popular from the ground up to work directly with the iPhone. chips. This made it possible for Macs to run Windows (an That's a privilege Apple has conferred on only a few inportant insurance policy to many Mac newbies) and partners, such as Google. But it's a good first step." made it far casier for software developers to adapt their says Digg Chairman Jay Adelson, who expects Apple to Programs for Apple's products. become more inclusive as time goes by. "For now, it's a the $500 devices. AT&T is offering a $59 base plan for taking a bite out of AT&T's margins, this could cause it movies to iTunes. The 52 million TV shows and moves so far by Apple amounts to fewer than two videos period This makes Apple's newest partnership with AT&T iPhone was announced in January, many observers have (T) for iPhone service all the more intriguing. Since the wondered if Jobs pulled another fast one, using his coe sumer cred to win unprecedented influence over the $140 billion cellular-phone business. Normally, carriers in the U.S. control how cell phones are priced and marketed, right down to deciding whether they will turn on capabili ties built into the phones, such as wireless asic dow loading. But that's not how Apple rolls. Apple defined the 16 services that are highlighted on the iPhone homepage and users Sign up for them via iTunes, not on AT&T's Has AT&T set itself up to be marginalized? The car rier stands to steal subscribers from its rivals, CEO Randall L. Stephenson said on June 19 that of the 1.1 million people who had inquired about the iPhone, 40 percent Wet TIGE currently signed up with AT&T. But analysts say Apple "Burrows, P. (2007) Welcome to Planet Apple, www.busin commagazine content/ 07 28/64042058.html homepage or in its stores, very strange kind of controlled system--because they have these insanely high bars for reliability and user experi- ence that they want to hit." Many partners won't wait for a formal invite. Despite doubes about the iPhone's usefulness to serious business people, Salesforce.com is working on an iPhone version of its sales management software. It's not just about market share, it's about showing what is possible and what is cool," says CEO Marc Benioff. And more than 150 devel opers have registered to attend an ad hoc iPhone Devel- opers Camp in San Francisco on July 6, to trade ideas and create new applications. But if the Apple orchard is growing, it is still no Eden. For those partners that make the cut, Apple enforces a brutal perfectionism. "The stereotype is that they're this loosey goosey California company, but nothing could be further from the truth," says Gary Johnson, the former CEO of chipmaker Portal Player Inc., which roared to pros perity by providing the electronic brains of the first genera- tions of iPods. Johnson says that whenever a project fell off track or a part fell short of Apple's needs, its engineers will earn a luxurious 35 percent gross margin on each of were demanding root cause analysis" and explanations within 12 hours. "You could pacify other customers by phone and data services-coughly $20 less than the core putting 10 engineers on a plane to see them. Not Apple. "An Unreasonableness" other handset makers to demand sweeter deals, too, Working with Apple can be exhausting. Johnson says the But the real test will be whether Jobs can change the company almost never issued documents outlining its tech way consumers think about a phone. This is Apple's firs nical requirements, preferring to keep things oral to avoid entry into a preexisting mass market, and those other phone a paper trail that might be leaked. And no supplier was manufacturers can't afford to let Jobs rewire things to suit given a full picture of what exactly Apple was working Apple's strengths. Some already have rolled out cheaper on: Everything was on a "need to know basis. "There's products that, if not exactly as capable as the iPhone, may an unreasonableness," says Johnson. "It's as though your be close enough. Will most consumers eventually choose to entire reason for being is to serve them." Yet he adds he has save money, even at the expense of a bit of elegance? no hard feelings: "It wasn't a malicious thing. It's almost tory says they will, according to Harvard Business School machine-like. You may have friendships or business rela professor Clayton M. Christensen: "The world always tionships, but they don't really count. Johnson found that ends up thanking innovators for their cool products-but out on an April morning in 2006, when be learned Apple won't pay for them. There are forces of gravity at work." had decided not to use a chip that had been under develop Now there's a matchup worth watching: Steve Jobs ment for more than a year and was expected to bring in vs. gravity, half of PortalPlayer's sales. The company's stock crashed 50 percent when Johnson told Wall Street a few days later. Assignment Questions Seven months later, it was purchased by Nvidia Corp (NVDA) for $357 million-half of its peak market cap. 1. Why would Steve Jobs want to partner with Bill Gates! 2. What is Apple's strategy? Is it effective? Suppliers of TV shows, movies, and other video con- tent have their own reasons for being wary of joining the 3. According to Christensen, in his book The Iron Apple ccosystem. They know what happened in the music tor's Dilemma, the world thanks innovators formes industry. Jobs created a kind of reverse razor-and-blades products but won't buy them. Does his statement hold model with the iPod, where Apple sells lucrative razors for Apple in general and for its iPhone, in particular (music players) and the studios are stuck selling cheapo blades (music). Hollywood has resisted Jobs' vision for placing movies on the iPod and iPhone. Only movies from Walt Disney Co. (DIS) (where Jobs is the largest individual shareholder) and Paramount Pictures (VIA) have licensed All in 2007. Used with simi of everything from silicon chips to Hollywood flicks will As long as Apple stays on its game, leading providers feel pressure to strike deals to Jobs' liking. Apple can confer brand hipness on its partners. And its ascendent in markets like cell phones and who knows what else in the future may impose a new focus on more comme friendly parts, software, and services. But to be part of the Jobs club, you give up a certain amount of independence on everything from design to identity to pricing. wisdom about the nature of competition in digital mar Jobs is upending two decades of conventional kers. Since the rise of Microsoft and Intel's "Wintel PC standard in the 1980s, the assumption has been that man kets would be dominated by those that could set technical standards-say, Microsoft in operating systems or Intel in microprocessors-and then benefit as thousands of others competed to build products on top of these platforms." the best product, and rewards will follow. In fact, Apple's Case for Analysis: Apple* July 9, 2007 Steve Jobs had plenty of problems to contend with as he sauntered onstage for his first speech after returning to the top of Apple in 1997. He faced a shrinking market for his Mac computers, bloated costs, and a severe shortage of cash. But on that day, Jobs chose to talk to the Mac faithful mostly about another problem. Apple's growing isolation. Despite the company's reputation for making the world's finest PCs, very little software or add-on gear worked with the Mac Apple lives in an ecosystem, and it needs help from other partners," said Jobss. And it needs to help other partners." Jobs then did the unthinkable, inviting arch-nemesis Bill Gates to join him on stage via videoconference to announce details of a deal to forget any patent claims in exchange for $150 million, and a promise by Microsoft Corp. (MSFT) to continue making a Mac-compatible ver. sion of its ubiquitous Office software. Today, that Apple Inc. (AAPL) ecosystem has morphed from a sad little high-tech shtetl into a global empire. Once known for defining the digital future but never fully capitalizing on it, Apple has been transformed into tech's most influential hit-maker. More than 200,000 companies have signed on in the past year to create Apple- compatible products, a 26 percent increase from the year before. That includes software makers such as gamemaker Electronic Arts Inc. and corporate supplier VMware, drawn by Mac sales that are growing three times faster than the overall PC market. A cottage industry of iPod accessories continues to blossom into something far more substantial. Consider that this year, some 70 percent of new U.S.-model cars have iPod connectors built in, and abour 100.000 airline seats will have the same. And Apple's online iTunes Music Store has become the world's third-largest music retailer after Wal-Mart Stores Inc. (WMT) and Best Buy Co. (BBY) Joining the Jobs Club With the June 29 debut of the iPhone, Apple seems poised to extend its reach even further. A new flock of partners, from AT&T Corp. to Salesforce.com Inc. (CRM), is set to jump on the bandwagon for the slick phone/Web browser/music player/camera. Sure, the hype prior to iPhone's launch bordered on ridiculous: (Comedy Central IVIAI Stephen Colbert joked that the iPhone launch is the second most important event in human history, after the birth of Christ). But phonemakers such as Nokia (NOK) and Motorola (MOT), and carriers like Verizon (VZ), are waiting nervously to see if Apple can remake the U.S. cel- lular business by determining what services consumers get and leaving the carriers out of the loop. But Apple's strategy is far simpler: Focus on makine new partners are signing up in spite of, rather than because of, Jobs' rules of engagement. Apple makes little pretense of building a level playing field, but routinely picks favorites-such as Google for building mapping and video applications for the iPhone. And rather the aim for the most partners, Apple focuses on attracting the best ones. As a result, the Mac and iPod feel more like a gated, elitist community, with Apple keeping close watch over who gets in. "The notion of a platform is a very PC oriented way of looking at the world," says Silicon Valley financier Roger MeNamee. "Consumers just want a great experience. They don't buy platforms." Consider how Apple changed expectations about portable music devices. There were plenty of MP3 players around before the iPod arrived in 2001. Now, if the iPhone works as advertised, it could similarly redefine the mobile phone experience. As any BlackBerry or Treo owner knows, all of the 25 million smartphones sold last year offer similar capabilities, such as Web browsing and e-mail. But none has captured the heart of the main stream consumer. And on paper, at least, the iPhone erases myriad frustrations faced by hundreds of millions of phone users--from maddeningly complex menus, to the inability to find a contact while on a call. Spin it out a few years, and it's not hard to see why many companies want to be on Apple's side. [U.S.) iPhone buyers now sign up for an AT&T cellular package vi iTunes. In the future, maybe they'll also be able to sign up for all the broadband and data services needed to power their Macs, iPods, and future Apple products can you say: "I want my Apple iHome Theater") and make them Mh real wi wurk together. That would play to Apple's strength in the complex simple. What you end up with is a And of Apple archipelago-this cluster of islands in this s dial sou that are great places to hang out, says Shen Valley fist and consultant Paul Saffo. Of course. Apple's products have to continue to be a physical keyboard. But if Apple succeeds, it are itselt and its ecosystem above the cacophony of gants battling to own the digital consumer. The relephone and cable companies try to take advantage of ser control of customers' access to video, data, and voice . Google Inc. (GOOG) and Yahoo! Inc. (YHOO) want to leverage their power as online concierge for millions consumers. Apple comes at it from the device perspectives can control the adget you use to connect with all those her platforms, it increases its control over what you do, Consider the perspective of one big video-game pro ducer, Electronic Arts. In the early 1980s, about half of the people working at EA's Redwood City (Calif.) campus were Apple alumni. Yet EA stopped making Mac compatible games later in the decade, when Apple turned question for the iPhone, which doesn't its attention to corporate markets. EA co-founder Bing Gordon recalls his shock when Apple's then CEO John Sculley said in 1987 that there is no home-computer market." Says Gordon: "They were working so hard to get respect, the last thing they wanted was for people who wore suits to think of the Mac as a toy." Predictably, game sales on the Mac plummeted, making it even less worthwhile for EA to make the big investments to adapt its PC games to run on the Mac's unique innards. But because today's Intel-based Macs don't look much different from any Windows PC from EA's perspec- and how much you pay (99 cents a song, for example). tive, Gordon says it should be cheaper to churn our Mac There are lots of phone carriers and cable companies, games than, say, adapting them to game consoles like the Sony (SNE) PlayStation or Nintendo NTDOY) Wii. With cact with fairly similar offerings. Google and Yahoo are the Mac rapidly gaining share with younger shoppers, EA powerful in their own right, but they can't totally control has announced plans to release its new Harry Potter hair destiny since Web users are a click away from using game and three other titles on the Mac this summer. sohet search engine of portal. For now, though, Apple Another rarely mentioned advantage is Apple's 50- shead and shoulders above others in making the actual called developer program. Once iPod sales began skyrock- machines you use to pull up Web pages, music, TV shows, eting in 2003, the company worked with makers of portable movies, and soon, perhaps, phone conversations. Says speakers, music player cases, and other add-on gadgets. David Sanderson, head of Bain & Co.'s global media prac And Apple is working on the most mobile platform of all. bit: "We're moving from a distributor-driven paradigm to Since BMW first added an optional iPod connector in the consumer-driven paradigmand Apple gets consumers." glove compartment of many of its 2004 models, carmakers And not just any consumers, but those who will pay including Chrysler (DCX), Ford (F), and Honda (HMC) have a premium. The Mac is gaining share despite an average followed suit. General Motors Corp.'s (GM) 2008 Cadillac price tag of $1,400, nearly twice that of the typical PC. CTS will come with a center console that features the iPod's Pod shoppers still paid an average price of $181 in May, rotate and click" interface, not only for pulling music off 15 percent above other music players. The iPhone is even an iPod but also for playing the radio or listening to CDs or note audaciously priced. The (US$499 base price com satellite radio. "It's about getting to your music, not having pures with an average $66 for a regular phone, or $160 to learn a new set of tricks for each service," says James fue a smartphone such as a BlackBerry or Treo, says NPD Grace, the 27-year-old GM manager who leads the project. Group Inc. analyst Stephen Baker. With the iPhone, Apple seems ready to open up oppor- tunities for software developers who were mostly shut out The Compatibility Factor from the iPod. On June 11, it announced that any Web None of this would have come about if Jobs hadn't had 2.0 program designed to work with Apple's Safari browser his epiphany about reaching out beyond the insular world would work on the iPhone. That means such popular sites of the Mac. The Office deal was a symbolic first step, but as MySpace Digg, or Amazon.com will be able to adapt the real wake-up call came with the 2003 decision to do a their services to take advantage of the device-say, by Windows-compatible version of iTunes. Rather than hurt adding a virtual button on their sites so thar iPhone users Mac sales, as some feared, this opened the floodgates on could actually place a phone call with a fellow Netizen, iPod sales by making the device usable by the 98 percent rather than just trade e-mails or post messages. of computer users who ran Windows. Another milestone To be sure, many develo