Dell’s University College Gaming League

IMG_0354
Spotted around the Northwestern university campus

It seems that Dell has organised a computer gaming league for titles like COD4, WOW, Counterstrike and Forza, along with less traditional titles like Guitar Hero 3.

It makes sense from the larger perspective – it’s clear that hardware has become a commodity in the PC market, and margins are pretty thin *except* in the case of high powered PCs. One way for Dell to raise revenue is to raise demand for higher end gaming hardware, and this seems like a nice way to stimulate demand.

However – it’s not all roses, and creating college based online teams can have its drawbacks. With physical sports, bonding groups at the campus level works well – college “jocks” are a familiar sight on the American football field, and tailgating is a tradition. Could it be the same for online gaming?

  1. It’s not as easy to watch an online game
  2. It’s certainly not a traditional sport or pasttime
  3. Online gamers might feel ambivalent about the association with other college sports

The fact is that online gaming is starting to turn into a sport. It remains to be seen whether the models applied to physical support apply here too.

Hanspree in San Francisco

I often walk down Stockton to town, and I’ve passed by this shop many times.

DSCF1617

I’ve popped in a couple of times – it’s a gadget shop, I’m a nerd – but I’m still absolutely confused as to what the store’s purpose is.

You’ve probably seen the products before. If not, I offer you this link. Hanspree products are all pretty much the same – slightly crappy LCDs with a novelty surround.

IMG_0319
Yes, that’s a box of chips. No, the other chips.

IMG_0320
Like a lion in Zion

So where might you actually find something like this being used? Here’s our best guesses:

  • A kids bedroom
  • A themed environment (like a baseball fanatic’s recreation room, or a shop)

Perhaps I’m being a little pessimistic, but I don’t think these are huge segments in the US.

Driving Footfall

It seems to make sense to design the store to appeal to the same people that might buy the products. So here’s what the store looks like:

IMG_0323
That’s right – it looks just like the Apple store, except it’s empty

Again, I’m going to stab in the dark and guess that a store that looks like this would appeal to trendy 20 – 30 year olds or roll-neck, designer glasses wearing 50 year olds, both of them fresh from the Apple store.

What I can’t work out is where the crossover between these two segments lie. It’s possible that they are going for trendy designer parents with young kids who have themed bedrooms. That strikes me a pretty narrow segment for a significant investment.

The other possibility is that this store is a cock-up of sorts. There are plenty of reasons why it might have happened – the store looked that way before they got there and they didn’t want to change it, the store designer is being inspired by Apple rather than the customers, and so on. I think it’s most likely that Hanspree HQ have had success with this format overseas, and didn’t want to modify it for the US market.

I don’t have enough data to say either way – but if I had to guess, that’s the one I’m going with.

Professor Tedlow at the Computer History Museum

Learning about the birth of the IBM S/360 while at the Computer History Museum is like eating chocolate biscuits wrapped in chocolate as far as I’m concerned. Last week I tasted the goodness.

What’s the System/360?

Back in the day, you bought a computer and programmed for that computer alone. If you bought another one, this ran a different way and you had to program it differently. Now imagine how many PCs you’ve been through, and imagine how it feels for a company that wants to buy a computer, then grows and needs a bigger one. It sucks, and every time you switch it doesn’t matter if you buy an IBM, a Fujitsu or whatever – you have to rewrite everything anyway.

The S/360 was the first line of computers where architecture and hardware were separated. That meant that you could buy a little one, write programs for it, then buy a bigger one when the time came to upgrade. It meant less of a pain in the arse for customers, and a lock-in for IBM. Kerching!

The only problem was that the project was planned to cost $5bn over four years, which was way over IBM’s annual revenue at the time. They went ahead with the project – but why? They answer, as usual, is a bunch of different reasons.

IBM, the organisation

Tom Watson Sr, who pretty much started IBM from scratch, was a Victorian, moral, old guy. This song probably helps explain better than I can. His son, Tom Watson Jr., was handed the reins just as Sr was shuffling off his mortal coil. They didn’t get on. The father never trusted the son.

Watson Sr
This is Watson Sr. Definitely a crusty old dude.

So the son, we suppose, wanted to do something to make IBM his own. But there’s more.

Fear

It seems that there was a culture of fear at IBM at the time. Fear of competitors, sure – but also fear of doing nothing and being squashed as a result. People argued with each other all the time, but the strong culture that Watson Sr. had installed kept the company together and working. This is the amazing part – the agitation that people felt was what drove them to win.

Andy Grove describes some similar stuff in his book about his time at Intel.

"Fear is powerful in creating and maintaining passion. Fear of competition, fear of bankruptcy, fear of being wrong and fear of losing can all be powerful motivators."

The strange part for me is that history repeated itself. There’s a formula for a successful culture here, but certainly not a comfortable one.

Here’s another one:

"Success breeds complacency. Complacency breeds failure. Only the paranoid survive."

You’ve probably heard that one before, but it’s fascinating. Any successful company’s first instinct is to recognise what they did that was successful and repeat it. As time goes on, they become resistant to doing anything else – I mean, it seems completely illogical. Why would Microsoft do anything to endanger Office or Windows? Why would IBM leave hardware and turn into a services company? But the problem is that it leaves you completely open to attack by a competitor who is free from this way of thinking.

Lots of companies have thought a little further ahead, and released products that cannibalised their own – it’s better to do that to yourself than let someone else do it for you.

The S/360 was one of those projects, and IBM was one of those companies.

The Tutor

The class was taught by Prof Tedlow, who is one of the superstar professors at HBS, and a specialist in business history. It’s unexpected to see someone that skinny fill a stage, but that’s exactly what happened. He had help – the room was littered with old-school IBMers, including a couple of superstars.

Tedlow at the Computer History Museum

That gentleman on the left is Tedlow. And on the right, Gene Amdahl, the chief architect of the S/360. (Oh – and he quit IBM, started Amdahl computers, which flopped and got bought by Fujitsu, to the amusement of the chap now working at Fujitsu who was sitting to my left.)

One more that I didn’t manage to get a picture of – Bob Evans, the S/360 project lead (hat tip to Karae in the comments).

The more things change

There’s nothing really new that happens in business – culture changes, products that change the industry, engineering versus sales and so on.

I thought that technology was an exception.

Maybe not so much.

Linuxworld in San Francisco

DSCF1619

Linuxworld is a meeting place between corporate IT departments and businesses trying to make a buck with Linux / Open Source.

I had the chance to attend Simon Crosby’s keynote – he’s the CTO of Citrix, and used to be the CTO of Xensource before it was gobbled up. Although I was disappointed to hear the words “drive innovation”, the kernel of his talk highlighted an interesting trend – the migration of large corporate IT to cloud computing.

It’s an old story. (Remember the NC?) Unsurprisingly for a Citrix guy, he talked a lot about thin client computing. As anyone who’s used a corporate thin client knows, it’s kinda slow, printing to a local printer / reading from local drives is a pain, and so on. (From the IT side, licensing is a pain in the arse, you have a central point of failure, and you need to find a bunch of people with more expensive skill sets to get it working.) One hopes that bigger pipes will make it workable, but it’s anyone’s guess as to when the tipping point on generally available bandwidth is reached to make this type of stuff truly practical. There is a pot of gold here – centralising IT infrastructure makes sense to a lot of corporate IT departments. Companies with a large mobile sales force and minimal applications spring to mind.

More widely, he talked about the advantages of bringing cloud computing into a data centre. I suppose that means using your browser to get at web-based corporate stuff rather than a Citrix / RDP client to get at a virtual desktop. The line is fuzzy somewhere. Here’s the Xen angle – he can get the requests for computer power abstracted from the hardware, just like in a cloud like EC2. (It turns out that Amazon use Xen all over the shop for EC2.)

Isn’t EC2 neat?

One interesting case study: it turns out that the NY Time “time machine” was constructed by converting their old TIFFs to PDFs and doing OCR, and it cost $240. Here’s how: they outsourced the horsepower to EC2. (Of course, I imagine they spent a hell of a lot more than that setting the run up.)

Is that really relevant?

Probably not. But here’s the bit that I think is important.

As clouds wander into the corporate data centre, they give us the opportunity to centralise a bit more of the computing stack. Right now, we usually centralise files, emails, printing queueing and that sort of thing. These things enable us to also centralise processing power & storage. Granted, it’s not for everyone, but I can see it making sense for some folks. (Banks and academia spring to mind, as they both routinely solve computationally hard problems.)

HBR Case Study on Open Source

In this month’s Harvard Business Review, a case study takes a look at how a company tussles with open source. In this post, I shall try to save you the $17 required to buy the magazine and talk about what open source is, why it’s so powerful, and why to be careful with it.

What is Open Source exactly?

If you’re that way inclined, you can read the official definition. Here’s the short version.

  • Open Source is “free as in beer”. This means that you don’t have to pay for it. You may have to cover the cost of distribution – e.g. the cost of getting a CD burned and mailed to you – but most people who are in this century use the internet to distribute software. So, you can go to a website and download a full working version of an operating system, an office suite, a browser, and so on.
  • Open Source is “free as in freedom”. The Open Source movement is full of, and was founded by, lots of suspicious looking bearded people like this one. These folks say that when an open source program is distributed, you must also distribute the source code (hence the name). You also give away the right to modify and redistribute your software, and you keep the right to get props for your code.

The second part of that definition is probably more important. People in Open Source believe that innovation is so important for society that we shouldn’t restrict it in any way by keeping it proprietary. People in business believe that they can innovate, and make money from those ideas.

Both are right. This is the basic conflict inherent with Open Source.

The Open Source case study in HBR

The HBR study illustrates a very simple situation. In a nutshell, a computer game company’s star product, which includes both software and a hardware controller, has become aware of two open source projects which replicate both of these elements.

As is usual in HBR, four experts weigh in with their opinions. Some write adverts for their own companies, some give warnings without a plan, and some answer the problem. I’ll break down the main points for consideration.

The Open Source Community

If you’re getting open source replicas for your product, this should tell you something – there is a reasonable sized community of technology badasses who love your product. You probably know about user communities already, but be aware that user communities are full of segments just like anything else. A basic segmentation might look like this:

  • I just want to play the game, and then leave.
  • I like this game! I’ll chat about it on a web forum.
  • I’ll skin my MySpace page! I might also download a mod for the game to see if I can get more play out of it, or explore hidden areas!
  • I love this thing. I’m going to spend hours tinkering with the hardware or hacking the software just because I can. Maybe another little community will build up around my efforts.

This list is roughly in order, from zero to hero. You need to figure out where your user community lies, and then think about how to engage them. If you have a bunch of open source people all over your product, they will not be satisfied with skins and a user forum. They believe in free, and are willing to pay anything in time and effort to make it so.

Using Open Source

There are a pretty dry set of pros and cons for having an open source user community.

The Good:

  • Faster development: You have access to more developers, so your product development curve can go up sharply. This depends on you being able to bring enough good people to the project. If you have open source copy projects already, you know this is the case.
  • Love: Open Source developers are spending their spare time on the project, and they’re probably seriously geeky. They do it because they love it. This means that it’s likely you’ll be able to create high quality code. This is a fine balance, and depends on the community being managed well, and is also affected by your branding. For example, Apple’s hacking community are phenomenal at what they do, because they love Apple products. Apple don’t clamp down too hard, because they don’t want to sue their biggest fans for the negative network effects.
  • Product Direction: Most Open Source developers become that way simply to scratch an itch of their own. This means that you’re getting the best type of connection between consumer insight and product development, as both are coming from the same person. Isn’t that cool? A caveat – you do need to be careful that your developer is writing something that’s generally useful and not too specific.

The Bad:

  • Product Direction: You’re trying to make cash, they’re just having fun. Make sure one doesn’t kill the other. Also, because they’re volunteering their time to code, they can be tough to steer in your direction. Think about why they’re coding – to scratch an itch, or just because they love you?
  • Kissing in the Ear: If your brand isn’t strong enough for them to just code for the love (Apple, Google) then you’ll need to kiss up to them a little. Developer conventions, invitations to visit company people and so on.
  • History: If you have a bad rep, you may have a very tough time convincing people to love you. It’s highly unlikely Microsoft will go big on Open Source for this reason (amongst many others).

The Ugly:

  • Patent trolls: These companies can just be watching for your source to come out and then sue you for infringement on some broad patent they hold. It has happened before, but also some large companies (Sun) have managed to open a lot of code without incident. Solution: make sure you’re lawyered up, prepared to use them, and everyone else knows it.

Models for interaction

So what’s the solution? To the surprise of absolutely noone, the answer is “it depends”. Here are your options.

  • Sue them, and throw resource at keeping your system proprietary and protecting your IP. This is the default choice for many business types. Pros: you’ll be in a stronger position if you ever get into IP litigation with another company or a patent troll. Cons: you’re suing your biggest fans. This should be an absolute last resort.
  • Open up a little way. Cons: you need to ensure your code is modular, and the user created modules are prevented from misbehaving. An example might be allowing VST or AU processing plugins into an audio sequencing application.
  • Open source most of the way, but keep an essential part of your product closed. Google’s a reasonable example of this – the search algorithm is proprietary, but the backend is all running on a customised version of Linux.
  • Open source the whole shebang, and forget completely about getting value from the product. If you’re all open source, everyone and their mother can copy your product, fork the code and compete with you. You can trademark things (e.g. Linux is a trademark) but in terms of functionality, you no longer have a source of advantage there. The only way to make cash here is complementary products or services. IBM supports Linux in a big way, because it’s now a services business. Perhaps a better example is Canonical, the business behind Ubuntu. It gives away an open source operating system, but makes money from support and similar services.

The Special Case of Sysadmins

We’ve talked a lot here about a straight Company -> Consumer B2C chain. What happens if you have a Company -> Expert -> Consumer B2B chain?

Let’s consider an example – network management applications. Let’s say you have a data centre and you want to monitor whether everything is staying online. You can go and buy a monitoring application from someone like Symantec, or you can download something from Open Source – nagios might be a good example.

From the company’s point of view, they just want the data centre to stay online, they don’t care how. They are offering a pile of cash, and they want a solution.

The cool part is considering the expert’s point of view. After all, this is either the purchase decision maker or influencer. If they are skilled up in using a proprietary product, some of that pile of cash will go towards product licensing, and some will go to the expert salary. If they are skilled up in using a free product that’s just as effective, all of that pile of cash will go to the expert salary. The solution is delivered either way.

So that gives experts like sysadmins real incentive to skill up on free or open source products. This is the kind of bet that Sun is making, and the kind of bet Symantec is making against. Time will tell!

Creative Business

During my latest trip into Silicon Valley, I had the pleasure of speaking to a couple of the gentlemen responsible for the Sound Blaster. One of them was kind enough to share an instructive insight into how this product became one of biggest hardware successes of the 90s.

How It Began

Back when PCs ran at 12MHz, they didn’t usually have anywhere to plug your headphones in, or any way of really playing music, or making sound effects. They mostly had an internal speaker designed to bleep on demand, and that’s about it. There was a few rare and expensive expansion boards called sound cards which let the computer make music roughly equivalent to a cheap Casio synthesiser. (Do you remember when polyphonic ring tones came out? This is similar.)

After a little while, two products came to the fore to provide sound functions, giving software (mainly games) the ability to play music and sound effects. These were:

  • Creative Labs Sound Blaster [WP]
  • Gravis Ultrasound [WP]

Of these two, the Ultrasound was the superior product. But it didn’t win.

How the better product lost

The difference in product quality between these two was significant. The Ultrasound was years ahead of the Sound Blaster in technology terms – some could argue that the Sound Blaster never really caught up. But while Gravis was busy building product, Creative made two clever moves.

  • Creative realised that people don’t buy sound cards, they buy a better gaming experience. Hence, whenever a game developer came to Creative for a driver for their particular title, Creative turned it around. This focus drove an important network effect – customers knew that if they bought Sound Blaster, their card would work with most games.
  • When Windows 3.1 was released, Microsoft built multimedia support into the OS for the first time. They approached Creative for a driver, but didn’t want to pay for it. Creative agreed, but with a caveat. If Windows tried to play a sound when no sound card was present, Windows would inform the user that a Sound Blaster or Sound Blaster compatible card was needed for audio.

So, suddenly, your operating system is telling you to fix an error by going out and buying something. That ended up being worth a lot more than a driver development fee to Creative – in their droves, people obeyed their computers.

If you’re walking on eggs, don’t hop

The moral of this story is this: if you build it, they will not necessarily come. It’s useful to think more deeply about what drives a customer to purchase, and figure out how to attack those consumer insights.

Addendum

If you’d like to read a little more about the sound card battles of the 90s, this page is an excellent resource. Try listening to how the music from Descent rendered on the Gravis versus the original Sound Blaster.

While you’re there, also listen to the AWE32, a successor Creative launched in 1994. You’ll find that it’s better, but still muddy. Bear in mind that the Gravis released in 1992, while the technology behind the AWE32 drove the Sound Blaster product line until the Live! was released in 1998 – six years later.

Mike Shaver at the Kellogg Technology Conference

IMG_0130

This afternoon, I had the pleasure of introducing Mike Shaver, Chief Evangelist for the Mozilla Foundation (above) as a keynote speaker for the 2008 Technology Conference here at Kellogg. In addition, we welcomed Jeff Bell, Marketing VP from Microsoft, Satjiv Chahil from HP.

When we originally put the speaker lineup together, I wanted to introduce someone from the open source world, and someone who could remind us about the cool, world changing part of being involved in technology. Mike did just that.

O RLY?

It’s clear that a pretty small percentage of open source applications are highly successful – Firefox, Samba, GNU, Linux, PHP, and so on. A small number in total. Now just searching for broad categories on Sourceforge, and then divide one number by the other.

It’s also clear that there were a few obvious flavours in the success of Firefox – namely, a push away from IE 4 / 5 / 6 from web developers (who hated the non-standardness) and a pull towards FF from users (who could use cool things like addons and tabbed browsing).

But it seems like the coolest part of the Mozilla recipe isn’t the product, but the organisational structure and internal processes. Mike illustrated this by showing us the chaotic bug reporting process – you can check them out here – and contrasting that with how patches are integrated into the main branch. Anyone can file a bug – only certain participants can approve code changes. Understanding the balance between encouraging community support and controlling product quality has been critical to the success of Mozilla.

Remixing the Technology Adoption Lifecycle

It’s clear that the music industry has had a tough time in the last few years, and there are two reasons for it.

  1. We’ve gone from an era where you needed serious investment to produce a record properly to one where most professionals use the same tools as bedroom musicians.
  2. The internet has taken distribution costs down to pretty much zero.

What this means is fragmentation.

Where before you had a few content producers pushing over a few distribution channels – so, The Monkees selling CDs through HMV or Tower Records – now you have a huge number of bedroom musicians (like myself) distributing over plain HTTP, or iTunes, or Magnavox, or whatever.

(Please note that “bedroom musician” is not a euphemism.)

Simply, the musicians don’t need record companies any more. They’re out of the loop, and they can’t make money doing things the old way. Thankfully, they are all starting to realise that – the agreement with Amazon to create a DRM free store containing all four major labels was a landmark, and should be the first of many.

If the internet has a message for business, it is this: don’t give up. The internet invalidates some business models, but creates new ones at the same time. You need to join the change.

ccMixter is a great example of how that has applied to the music business. It’s a remix site, where you can take samples that someone has previously uploaded, and produce a music track.

Show me whatcha got

Here’s an original track from Fort Minor. The reason you recognise the voice is that this is the vocalist from Linkin Park.

Fort Minor, being a strangely named but forward thinking individual, split out the samples of his track, and threw them into the pool at ccMixter.

People got to work.

There are a lot of remixes available – this is my favourite.

Are you frontin’?

So we’ve gone from a situation where new production and distribution models are a problem, to a case where we’re using that talent to do something that wasn’t possible before. Here’s what that is – I prefer this version to the original.

Here’s what I mean by that. One of the things internet people talk about a lot is the possibility of offering customised content. What that really means is segmenting your market, and then creating multiple products based on that segmentation. For example, I like melodic electronic beats, and that’s just what this remix is. It’s customised content for my segment.

Where’s the green, fool?

Most businesses, at some point, need to think about monetisation. Is Fort Minor just giving money away to people? In a sense, sure. I don’t need to pay to hear an awesome version of this song.

But bear in mind two things. First of all – this is an industry where there are more and more artists available across more and more channels. The trick is no longer getting signed with a label, and into the game. The game is open – the only trick is getting people to listen.

Now bear in mind the classic adoption model – Innovators to Early Adopters to Early Majority to Late Majority to Laggards. That’s who those remixers are – innovators. They are DJs. They set up websites featuring their remixes.

The Early Adopters listen to what Innovators have to say about music.

The Early Majority will listen if the music fits what they’re looking for. If it’s practical.

The Late Majority will listen if everyone else thinks they are crazy for NOT listening.

The Laggards will close their ears, and not listen. But by this point you have diffused your track way past where it needs to be successful.

Sure, this isn’t a perfect model. I haven’t addressed segmentation in taste / distribution, I haven’t mentioned cost, promotions or interactions with traditional media. There’s a lot missing here.

But it’s a start.

Kellogg Directory Search Plugin

For those of us at Kellogg, we search for people in our online photo directory a LOT. So, I’ve found a way to create a search plugin for those of us using Firefox 2+. Here’s how to do it:

  • Click this link
  • This will generate a plugin on the searchplugins.net site.
  • In the middle of that site, you will see “Kellogg Last Name: Install”. Click on “Install”.
  • Robert is your father’s brother.

This raises an interesting few notes on coopetition. Coopetition is the idea that competing firms may wish to collaborate in some way to create an environment they can both benefit from. The obvious example is industry standard – for example, many competing companies came together to create the DVD format, even though they were in direct competition.

How is this relevant, exactly?

I’ll tell you. Both Internet Explorer 7 and Firefox use OpenSearch for their search plugins. Each plugin is just a little XML file that contains the details of how to kick off that search. OpenSearch is a file format standard for that little XML file. Oddly, it was actually created by Amazon.

So now we have three companies that compete in search (Amazon A9, Google and Microsoft) using a common file format.

Isn’t that nice?

Yes it is – it’s entirely beneficial for the writers of those XML files, and the end users.

So what do the companies get out of it?

It makes it more likely that the format will become widespread.

So why can’t I use the plugin above with IE7?

Well, that illustrates one of the wonderful things about negotiating a common standard across companies. Some of them want to do more than the standard allows, and hence will extend the standard without negotiating the extension.

Doesn’t that defeat the point of a standard?

Yes, it does. There are two possibilities that can follow:

  • The extensions are taken into the body of the standard, and all companies involved use this new, revised standard
  • Everybody uses the new extension and ignores the standard, perhaps because the naughty company involved is the market leader. The extended standard is now proprietary, creating value for the leader through switching costs.

Does that second option really happen?

Well, you can see it above with Mozilla, though I would hope the extension will be rolled into the next version of OpenSearch.

Another good example is Microsoft, with their latest revisions to the Office file format, and the ensuing spat. (The situation isn’t that simple here, but it’s a really interesting example.) Here’s the Rolo Tomasi – as a market leader in many of their markets, they have some strong incentives to follow this second path.

Apple Retail

Those familiar with the UK’s PC World store chain will probably suppress a groan at its mention. It’s a box-shifter store aimed squarely at the masses. However, while there this afternoon, I was floored to see an Apple store-in-store inside.

In a sense, it’s not a surprise. PC world drives a lot of footfall, and any manufacturer would want in on that. The shocking part is the difference between the two.

PC World:

  • Stores are huge, and contain all the big brands. Hence, a certain level of knowledge is required on the customer’s part to make sure everything works together.
  • Customers, on average, have no knowledge whatsoever.
  • Sales assistants generally hate their jobs and the general public.
  • One of the most fun games you can play, besides trying to FDISK all the Windows machines, is Find The Sales Assistant. PC World TV ads usually contain three sales assistants in one place chatting about the deals, which is how I know the ads were not shot in store.
  • Customers hate sales assistants and get the impression that they don’t know anything. In my 15 minute visit, someone managed to direct me towards getting a firewire cable for connecting my USB camera. PC World’s staff turnover is pretty high, and high turnover means short training periods.

That all happened because PCs and high tech contains a consumer segment, and it’s not necessary to invest in better training / pay in order to generate turnover.

Apple retail:

  • Stores are a set of big rooms rather than a big warehouse, as the product line is pretty small. Apple designs to make things easy to use, and assumes little knowledge on the part of the consumer to make sure things work together.
  • Customers exist in two distinct sets – the straight Mac faithful who know everything about their beloved, and those best described as “Apple curious”.
  • Sales assistants generally love their Jobs (geddit? I’ll get my coat) and want to do everything they can to convince the general public that Apple is a good idea.
  • Sales assistants aren’t too pushy, but at the click of a button they appear like Aladdin’s genie. They have business cards they give to you if you’re going to come back.
  • Customers love sales assistants because it’s such a relief to talk to someone in a computer store who wants to talk to you and knows what they’re doing.
  • Although I don’t know about Apple Retail’s staff turnover, I’d expect it to be relatively low, as it’s a pretty prestigious job if you’re already a Mac nerd.

That all happened because Apple PCs and high tech appeals to the premium consumer segment, meaning much better product margins, but customers expect “value added”, i.e. better product quality, and marketing-assisted cool.

So why did they do it?

My conjecture is that it’s all about segmentation. I’d guess that their segmentation strategy looks like this over time for the Mac:

  1. Those working in graphics: Happy accident due to better graphics, screen and tight integration with Adobe products
  2. Student demographic: Cooler, multimedia focus, and appeals to this segment’s need for differentiation
  3. Black roll-neck psychographic: Those types of people who want to be associated with good aesthetic design

It’s logical that when the segment they’re targeting becomes saturated, they need to create products or brand images that appeal to broader segments so that they can maintain growth. It’s difficult for me to substantiate that without any data, but here’s a picture of the University of Missouri:

clip_image001

So we can guess that Apple are starting to saturate their latest targeted segment, and are now looking to move into a larger one. That segment could well be the average Joes that shop at PC world.

Does Apple Retail work?

To quote Will Smith, hell yes. I’d love to quote some proper figures to you, but I don’t have any, so I’ll be hand waving and anecdotal instead. There’s a Sony Ericsson store on Kensington High Street right here. If you’re ever in Kensington, go in – it’s a great location, and the store itself is laid out neatly and sparsely, showcasing each of the pretty decent SE Walkman phones. But it’s empty. All the sales advisors will be standing around discussing last night’s football. The brochures will look pristine, as if they have never been touched. And you will be the only customer in there.

Clearly, Apple has a secret sauce in their retail mix.

Inevitably, clueless PCW customers will wander up to the Apple people asking where they can find printer paper, or AAA batteries. Apple’s sales people will go for a beer at the end of a long day of evangelism with their purple-shirted PCW colleagues. Cross pollination is inevitable.

Looking at Apple’s oasis of … sauce … inside PC World’s warehouse of suck, one wonders how such dissonant cultures will be able to work alongside each other.