Thursday, 8 March 2012

The tech Cold War hots up - what we learnt from the iPad launch

So now we know. The iPad 2 is dead – long live the iPad! Amidst the disappointment that we didn’t get super-Siri, haptics, a button-free fascia or even just a “3”, the iPad launch actually taught us a lot about Apple’s future strategy and marks a new phase in the growing war between the West Coast tech superpowers.

For the first time, Apple have not just produced a beautiful-looking “wow” device, they have also created a new baseline for technical specifications. The combination of A5X, quad core graphics, LTE and Retina display is a leap ahead of the competition and demonstrates how Apple’s spending power on talent and IP are giving them the ability to out-design the competition in silicon as well as in user experience. Google, Microsoft and now Amazon will have to respond, and fast.

This all reminds me of the multidimensional competition between the USA and the Soviet Union during the Cold War. This too is a global conflict, fought indirectly through proxies, rather than face to face. Apple doesn’t overtly take on Microsoft in the enterprise, but it enables application companies to do so, backed by the strength of its platform investment. Neither Google nor Microsoft take on Apple directly in mobile devices or in PCs, choosing to do so indirectly through proxies like Motorola and Nokia, backed too by platform investment.

And underpinning this conflict is an ideological battle of ecosystems; between closed and open, local and cloud. Each participant has its ethos and is ruthless in stamping that ethos onto everything it does.

So what does this mean for the next years of this Cold War. History suggests one scenario. During the 1980s, the USA embarked on a strategy of unbalancing the Soviet Union by ruthlessly competing with it from so many axes that eventually its rigid leadership collapsed from the strain of responding. This strategy – related in David Hoffman’s outstanding book, The Dead Hand – is also one that is being pursued by each of the 4 tech superpowers. Through acquisition of talent and technology they are entering each others’ spaces. Their power bases and cash cows remain the same as they’ve always been – Microsoft in software, Apple in hardware, Google in search and Amazon in retail – but each is prodding the others, launching competitive products that may not succeed, but focus management attention away from their own strategy and thereby protect their core; their ethos. They disrupt, but not in the pervading management theory sense, but in a psychological one.

For the superpowers, I expect a wave of acquisition over the next 2 years as they use cash as their weapon to out-invest and out-innovate their rivals.

There are consequences too for the rest of the market, which, let’s not forget, contains some monolithic corporations – Sony, Samsung, Verizon, NTT, AT&T & Vodafone, to name but a few. For me, their future is safety in consolidation. By creating their own superpowers in mobile or in hardware, they too can have a place at the top table, rather than being pawns and proxies by which strategy plays out. Today they are local players in a global game. That is not a sustainable position and I really do expect a major global telecoms group to emerge through acquisition in the next 2-3 years.

For hardware, the world is a harder place as cultural identity would make a massive merger hard to bring off. Their roles as puppets is looking more and more likely every day. Being outgunned by Apple in their core competency will require a vigorous response from Samsung, HTC, LG, Nokia et al, but it may be that they will once again rely on their superpower supporters to prop them up.

If one of them is unable to respond fast enough and falls by the wayside, the scramble for their assets amongst the superpowers may lead to a hotter war – imagine the value of Nokia’s patent portfolio in the only theatre that they overtly engage each other.

Anyway, I hope this is at least an interesting perspective – I found the parallels entertaining!

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