Mobile Opportunity - News And Views from Google MO

Okay, I’ll admit in advance that this is going to be a pretty snarky post, but it never ceases to amaze me how badly Nokia handles itself in the US market. In Europe and most of the rest of the world, Nokia operates like a fighter jet, incredibly nimble and powerful. But in the US, it’s more like a biplane. An old biplane. With holes in the wings. Nokia’s market share in the US has dropped from 20% to 7% in the last two years (link), and sometimes I wonder if it’s trying for 1%.

Case in point: Nokia’s “Open to Anything” ad campaign featuring people who have created software for Nokia N95 smartphones (link).

It features, swear to God, a guy who created a self-hypnosis application for the N95, someone who created a bad breath detector, a man in the Witness Protection Program who created a location-aware app to track the hit men chasing him, a ditzy woman who uses the phone to track fertilizer schedules for her plants, a jealous wife who created a lie detector, and a flake Jewish photographer who glued together two n95s to create a 3D camera.

“You’ve never really seen a bris until you’ve seen a bris in 3D.” –Nokia’s website

They’re all fantasy applications from obviously fake people, but beautifully animated in an elaborate Flash-driven site.

From time to time, I’ve talked with Nokia employees who were confused about why people don’t buy more application software for their Nokia S60 smartphones. There are a lot of reasons — lack of awareness that they can do it, lack of a built-in software store on the device, incompatibility between various versions of S60, etc. But one huge reason is because no one has ever made a compelling case to most users on why they should care about smartphone software.

The triumph of creativity over business sense

The Open to Anything campaign is a great example of how Nokia’s hurting itself in the applications business, and in the US market in general. I’m sure Nokia’s intent was to do something light-hearted to draw attention to the N95, and if you view the ads as standalone short films they are moderately witty. You see this a lot in online marketing lately — a creative agency will create humorous websites (often with video) designed to draw traffic from bored web surfers. But unless the ads also align with your strategy, they don’t drive sales. In Nokia’s case, they actually do harm:

–Once again, Nokia is communicating that its users are freaks and morons, which in the US is not the way to build a loyal following. Nokia has a long habit in the US of positioning itself as the preferred phone of people who lack social skills. At least this time there aren’t any sluts in the ad (link).

–The benefit of an open phone is not that you can write your own apps, it’s that you can buy applications created by others. Almost no one wants to create their own apps. So we’re being told that N95 users are not only freaks and morons, but they are freaks and morons who have programming skills — an even narrower demographic.

–Since the argument for why users should care about applications has not been made, showing a bunch of nonsensical applications actually makes people less likely to take an interest in mobile apps at all. It trivializes the whole idea of mobile software, at a time when Nokia claims it is trying to make itself into a computing company that can compete with Apple and Google.

Meanwhile, Apple’s ads depict its users as smart and hip, it puts its CEO on stage with real developers showing lustworthy iPhone applications, and it plans a built-in software store for the iPhone. Care to guess which platform is going to get more user and developer loyalty?

I’m tempted to start taking bets on when the iPhone application base will be larger than S60’s. Unless Nokia wises up quickly, it won’t take long.

Today Adobe announced a series of changes to its emerging web applications platform. The changes include:

–The next version of the mobile Flash runtime will be free of license fees. Adobe also confirmed that the mobile version of the Air runtime will be free.

–Adobe changed its licensing terms and released additional technical information that will make it easier for companies to create their own Flash-compatible products.

–The company announced a new consortium called Open Screen supporting the more open versions of Flash and Air. Members of the new group include the five leading handset companies, three mobile operators (including NTT DoCoMo and Verizon), technology vendors (including Intel, Cisco, and Qualcomm), and content companies (BBC, MTV, and NBC Universal). Google, Apple, and Microsoft are not members. It’s not clear to me what the consortium members have actually agreed to do. My guess is it’s mostly a political group.

Adobe said that the idea behind the announcements is to create a single consistent platform that lets developers create an application or piece of content once and run it across various types of devices and operating systems. That idea is very appealing to developers and content companies today. It was equally appealing two years ago, when then-CEO of Adobe Bruce Chizen made the exact same promise (link):

If we execute appropriately we will be the engagement platform, or the layer, on top of anything that has an LCD display, any computing device — everything from a refrigerator to an automobile to a video game to a computer to a mobile phone.

If Adobe had made the Open Screen announcement two years ago, I think it could have caught Microsoft completely flat-footed, and Adobe might have been in a very powerful position by now. But by waiting two years, Adobe gave Microsoft advance warning and plenty of runway room to react — so much so that ArsTechnica today called Adobe’s announcement a reaction to Microsoft Silverlight (link).

Also, the most important changes appear to apply to the next version of mobile Flash and the upcoming mobile version of Air — meaning this was in part a vaporware announcement. Even when the new runtime software ships, it will take a long time to get it integrated into mobile phones. So once again, Microsoft has a long runway to maneuver on.

Still, the changes Adobe made are very useful. There’s no way Flash could have become ubiquitous in the mobile world while Adobe was still charging fees for it. The changes to the Flash license terms remove one of the biggest objections I’ve seen to Flash from open source advocates (link). The Flash community seems excited (link, link). And the list of supporters is impressive. Looking through the obligatory quotes attached to the Adobe release, two things stand out:

–Adobe got direct mentions of Air from ARM, Intel, SonyEricsson, Verizon, and Nokia (although Nokia promised only to explore Air, while it’s on the record promising to bundle Silverlight mobile).

–The inclusion of NBC Universal in the announcement will have Adobe people chuckling because Microsoft signed up NBC to stream the Olympics online using Silverlight. So NBC is warning Microsoft not to take it for granted, and Adobe gets to stick its tongue out.

What does it all mean?

Nothing much in the short term. As I mentioned earlier, this is mostly a vaporware announcement (other than the license changes). Some people are speculating that this will put pressure on Apple to make Flash available on the iPhone (link). That’s possible, if Apple’s real concern was that they didn’t like Flash Lite. Now they can port full Flash, or someone else can do it. But if Apple is in reality unwilling to let anyone else’s platform run on the iPhone then we’ll see other objections to Flash emerge.

The marketing competition to control the future of web apps is continuing to heat up. Microsoft is trying to take the whole thing proprietary by creating a comprehensive architecture, Adobe is trying to drive its own platform, Sun is trying to re-energize Java, Google is making its own moves, and so on (link). Plus, of course, most web app developers today are happy with what they’re using now and have little interest in switching to any of the new architectures (check out the dandy commentary by Joel Spolsky here).

It’s an enormously complex situation, and it’s going to take months, if not years, before we can start to see who’s winning and who is losing. Rubicon is working on a white paper that will try to clarify the situation a bit. I’ll let you know when it’s published.

In the meantime, enjoy the marketing fireworks. The intense competition is forcing companies to innovate faster and open up their products, as Adobe did today. I think that process is good for just about everyone in the industry.

There’s so much hype in the mobile industry that I’m always reluctant to use a word like “shocking,” but nothing else fits Nokia’s announcement today that it will support Microsoft Silverlight.

If you missed the press release (link), Nokia said that it’s going to make Microsoft Silverlight available for all of its mobile platforms — Series 40 (the low-end phone OS), S60 (the high-end OS), and its Maemo Internet tablet. (It’s not clear if Silverlight will be bundled or just offered as a download.) Silverlight is a web app graphics and interface layer, intended to displace Adobe Flash.

The announcement was shocking for several reasons:

–Up until now, Nokia and Adobe had worked together closely. Nokia is one of the few companies paying to bundle Flash on its phones, and Nokia had featured Adobe prominently at some of its developer events in Silicon Valley. So the announcement I was expecting was that Nokia would bundle Air, the next evolution of Flash, rather than its competitor.

–Nokia has generally treated Microsoft as the spawn of the devil. The whole Symbian OS consortium was designed primarily as a way to prevent Microsoft from getting a controlling role in mobile software. Now Nokia gives Microsoft’s software layer a huge boost?

–Although Microsoft had hinted vaguely about taking Silverlight mobile, it had given no definite plans at all. So this is a huge step forward for Silverlight.

–Just a few weeks ago, Nokia bought TrollTech and announced that its software was going to unify development across Series 40 and S60. Now Nokia endorses Silverlight, which will also run across Series 40 and S60. Which one are developers supposed to focus on?

What in the world is going on?

I don’t know. Nobody from Nokia has explained it to me, so I have to read between the lines. Nokia says in the press release: “Nokia aims to support market leading and content rich internet application environments and to embrace and encourage open innovation. By working with Microsoft, we are creating terrific opportunities and additional choices for the development community.” Okay, so I guess what they’re saying is that they want to support every platform and development option out there. Presumably the benefit to them is that they can claim their phones support more software than anyone else.

I doubt that’s the only motivation, though. By supporting numerous platforms, Nokia reduces the possibility that any one of them can dominate the market and push around Nokia. It also lets Nokia play the sides off against one another. I’m sure the threat of embracing Air made Microsoft give Nokia a very good deal on Silverlight, and no doubt Nokia will now use its Microsoft relationship to get business concessions from Adobe (assuming that Nokia still plans to work with Adobe at all; that’s not entirely clear).

Anyway, I can sort of see how this all works for Nokia strategically, although it feels like Nokia is trying too hard to be clever. I’m not as clear on the benefits of all this for mobile developers and users. As was covered in last week’s post on mobile apps (link), many developers view the proliferation of platforms as a problem, not a benefit. Microsoft itself said in the Nokia press release:

“We want to make sure developers and designers don’t have to constantly recreate the wheel and build different versions of applications and services for multiple operating systems, browsers and platforms.”

That’s a pretty danged funny quote coming from a company that now offers at least four mobile platforms (two versions of Windows Mobile, Silverlight, Tablet PC, and does .Net CF count as a fifth?), in a press release from a company that apparently wants to support every platform available. If you really think platform confusion is a problem, guys, look in a mirror.

For users, the benefit of all this deal-making is unclear. We’re stumbling into a world where you’ll need to know details of which platforms are loaded on a particular phone in order to know which apps it can run. I can’t think of a better way to discourage use of mobile applications.

Nokia bought Trolltech for about $150 million, and there’s all sorts of speculation online about what it means. Before I get to that, let me quickly summarize what Trolltech does:

Trolltech is a Norwegian company that makes development tools and Linux software. Its best-known products are Qt (a software layer and development tools for writing applications that run across multiple operating systems, including Windows, Mac, and Linux), Qtopia (a user interface and applications layer for Linux), and Qtopia Phone Edition (a Linux software environment for mobile phones).

In the mobile world, Qtopia Phone Edition has been the company’s best-known product, although it hasn’t exactly been a commercial success. Motorola uses a version of Qt in its Linux mobile phones, but not all of Qtopia. The Sony Mylo mobile device uses Qtopia, as did the Sharp Zaurus PDAs. But Trolltech had so much trouble getting a mainstream phone licensee for Qtopia that it created its own hardware prototype, the Greenphone. (Out of fairness, I should add that Trolltech has a lot of other tiny licensees you’ve never heard of; you can see the full list here.)

The obvious assumption would be that Nokia bought Trolltech for its phone technology, but that’s not what Nokia says. The company’s press release says Trolltech will help advance its “cross-platform software strategy for mobile devices and desktop applications, and…Internet services business. With Trolltech, Nokia and third party developers will be able to develop applications that work in the Internet, across Nokia’s device portfolio and on PCs.”

All About Symbian reinforced that message, reproducing a slide from the Nokia press briefing that showed Qt layered on top of Nokia Series 40, S60, and a variety of desktop PC operating systems (link). The Guardian quoted a Nokia spokesperson as saying the emphasis of the deal is development tools: “This is about Trolltech’s fantastic tools. You can much faster develop programmes which can work on multiple platforms.” (link).

Vnunet quoted an analyst saying that Nokia will use Qtopia to help deploy its Ovi Internet services cross-platform (link). I don’t really see the Internet connection; Qtopia has not been a contender in the net applications world the way that Flash and Silverlight are. But maybe Nokia wants to build it into a contender.

Other analysts suggested other motivations for the purchase. Some of the commentary on Slashdot suggested that Nokia is investing in Linux to counter Google Android (link). ArsTechnica suggested that Nokia might be planning to replace S60 with Qt (link), while others suggested that Nokia plans to use Linux instead of Symbian. Richard Windsor of Nomura pointed out in an e-mail analysis that the purchase of Qt rips the guts out of Motorola’s Linux plans, although he guesses that’s more of a happy side effect for Nokia than the primary motivation.

But an unsigned article on ZDNet UK had the most sweeping interpretation, basically saying that this spells certain death for all proprietary operating systems (link):

Nokia’s bet is that the sheer size of the Qt 4-based market will be a decisive inducement for everyone else, handset makers, operators, and pure applications players alike, and that the explosion in compatibility will amplify the market for everyone much as happened on the desktop when MS-DOS anointed the PC architecture. But unlike then, Qt 4 will break forever the idea that one part of the market can seal itself off as a profitable mini-universe, an idea as archaic in the 21st century as the feudalism it so closely resembles.

As we say here in California, I want some of what he’s been smoking.

What does it really mean?

We’re all assuming that Nokia actually has a coherent master plan here. Although $150m is a lot of money to me personally, it’s mouse nuts to Nokia. Maybe Nokia bought Trolltech just as an experiment, or to keep it from falling into some other company’s hands. The fact that Nokia’s going to continue to develop its Maemo version of Linux, which is not based on the Trolltech technology, suggests a certain amount of incoherence.

If you want to be really Machiavellian, you could speculate that this purchase is the Nokia mobile phone organization’s answer to Maemo — “you tablet guys keep your version of Linux, now we have our own.”

But let’s assume there really is a plan, and it’s aimed at competitors. About six months ago, I wrote about Nokia’s ambitions to be a computer company (link). Now we see them dealing themselves into the operating system competition as well. No matter what you think Nokia’s motives are, the fact is that it’s now the owner of a respectable cross-platform software layer that runs on PCs and mobile devices. Nokia is now a software layer company, in very direct competition with other layer companies like Microsoft and Adobe and Sun. The deal also makes Nokia a much more important player in the open source community. And it puts Nokia in more direct opposition to the companies with their own operating systems — Apple and Google and (once again) Microsoft.

That’s a huge potential change. I say “potential” because Nokia has a lot more to do if it really wants to compete. The Trolltech team will need more investment (they have been losing money) and Nokia has a lot of work to do in developer evangelism and support to make the challenge real. But the potential is there.

I think that as the implications of the deal become clear, Nokia may have trouble continuing to partner with some of its new competitors. For example, it has spent a lot of time positioning itself as a partner to Adobe Air, but it’s hard to see the evolved Qt as anything other than a competitor. Same thing for Google.

As for how this fits with all of Nokia’s other products, I’m having a lot of trouble understanding how Qt will cohabit with S60 and Series 40. What exactly are developers supposed to develop for, and which user interface will the phones feature? If Nokia tries to keep all of them going, its phone software is going to look like a petit four, with layers stacked on layers stacked on layers. That makes for a nice pastry, but in a mobile phone it’s a recipe for bad performance and short battery life. It’s also a certain way to confuse developers.

So a lot depends on Nokia’s next steps. Does Qt replace Series 40 and S60? I don’t know which group within Nokia made the Trolltech deal, but I wonder if the biggest competitive battle might end up being the one inside the company, between its competing software standards.

It’s very difficult to say what’s the best mobile device in a given year, because different people have different needs and desires. The ideal device for me might be repulsive to you, and vice-versa. But most of the computer publications try to make a call anyway. If you read the end-of-year reviews online, you’ll probably conclude that the best mobile product of the year was the iPhone. It was cited by the Washington Post, Wired, Business Week, and Tech Republic (which strangely listed it as a business technology product, alongside Salesforce.com and LinkedIn).

Other mobile products getting mentions from major publications included the Nokia n95, iPod Touch, Razr 2, and Blackberry 8800. Amazon’s Kindle was the only one that showed up on both best-of and worst-of lists. The best-ofs generally liked the wireless features and screen, while the worst-ofs disliked the closed business model and “eye-poking” industrial design.

I don’t agree with any of those choices.

Since people have different needs, I think the best product of the year ought to be the one that best meets needs the needs of a particular group of users. It should be utterly compelling to its own audience. There are several questions to ask:

How efficient is it? Since people use mobile devices on the go, it should do just what the user needs, without any confusion or unneeded features. But there can’t be any critical features missing, either.

How well does it trade off size vs. power? Because it’s carried on your person, where size and weight are at a premium, it should balance tiny size with reasonable battery life.

How does it look? Because it’s effectively a part of your wardrobe, it must look great (or whatever the target customer thinks of as great).

By that standard, I think the best mobile device of 2007 — in fact, one of the best mobile products of all time — was the third generation iPod Nano.

Don’t get me wrong, iPhone fans. The iPhone is a very interesting and provocative device. There are some beautiful features in the user interface, and I love the turmoil it’s causing in the industry. Several years from now we may look back on it and call it the most influential mobile device of its time. But that doesn’t mean it’s the best product.

To me, the iPhone is more an intriguing statement of direction than a completed product at this point. The lack of 3G is a huge compromise, and Apple obviously didn’t think through the third party application thing. If you want a slow mobile browser that also plays music and videos and doubles as a somewhat awkward phone, then the iPhone is great. But for all of the cool highlights in the iPhone, I don’t think it’s enough to crush the phone industry in its current version. Future versions, maybe. We’ll shortlist the iPhone III for product of the year in 2010.

The n95 is also a remarkable product in its own way, and I know it inspires a lot of technolust, especially in Europe. But in my opinion, it’s just the latest Swiss Army Knife of the mobile world. Next year there will be another one from Nokia or Samsung or somebody else that has an even higher-resolution camera or maybe an electric toothpick or something, and people will be fawning all over that one. Like a lot of Japanese consumer electronics products, it’s not a marvelous product as much as it is a marvelously ingenious bag of features.

By contrast, in third generation Nano is not just the latest model from Apple, it’s an elegant culmination of the design work they’ve been doing for years.

The Nano doesn’t look all that great in photographs. It’s wider than its predecessor, which produced some criticism when it was announced (Engadget nicknamed it “fatty,” which is asinine when you see it in person). In real life, the Nano’s shape is compelling. It’s much thinner than you’d expect from the pictures — shockingly thin for something that has a color screen and plays videos. With its heavily rounded corners and brightly colored case, it feels a bit like a high tech chocolate wafer. You’re almost tempted to take a bite out of it.

Physically, the Nano is almost all user interface — the screen and thumbwheel take up the entire front of the device. Until we get flexible screens, the Nano is about as small as you can possibly make a device with its features. This is the endpoint, a form factor that’s going to be with us for a while.

The biggest surprise to me about the Nano is the usability of video on it. When it was announced, I thought video was a throwaway feature — who would ever want to watch video on a screen that small? But the reality is that when you’re sitting down, you’ll hold a Nano about 18 inches (45 cm) away from your face. At that distance, the screen is about the same apparent size as a 20-inch television (50 cm) at the other side of the living room. It’s not like watching a flat panel monster screen, but it’s very usable.

I’m not sure yet how much video will be used on the device, or what sorts of video, but that’s a general question about mobile video rather than anything specific about the Nano. What I’ve observed so far is teenage girls using the Nano to watch music videos together, commenting on how cute the drummer is.

And that’s just another sign that Apple made a great design for its target audience.

The new Nano doesn’t have Bluetooth built into it, or Wi-Fi, or a camera, or a phone, or a hard drive. That probably accounts for why the technophiles online have been so dismissive of it (link). But to me, it’s an almost perfect balance of functionality and art. Come back in ten or twenty years and I think you’ll find it in design museums, when most of today’s mobile devices will be long-forgotten and mildly embarrassing.

What do you think? Do you agree with my choice? If not, what do you think was the best mobile device of 2007?

The bottom line: Google is now an OS company.

The fact that Google’s recently-announced OS products are aimed at mobile devices and social networking sites is interesting, and I’ll talk about the impact of that below. But it’s secondary. I think the big, really important change is that Google has now jumped with both feet into the middle of the operating system world. That potentially has huge implications for the industry.

The impact will depend a lot on how Google follows up. If it pours substantial energy and resources into its OS offerings, it will be extremely bad news for Microsoft and other companies trying to charge money for their own platforms. On the other hand, if Google doesn’t make a serious long-term commitment, it will embarrass itself deeply. This isn’t like launching a new web application — an OS has to be complete, and it has to work properly in version 1, or there won’t be a version 2.

What they announced

It’s kind of ironic. For years after Google became a prominent web company, people speculated about whether or when it would create its own OS. The logic was that Microsoft has its own OS, and Google was challenging Microsoft, so Google would create its own OS too. But then as the years went by and it didn’t happen, people moved on to other subjects. The speculation died out. But one of my rules about the tech industry is that “obvious” things happen only after everyone in the industry has written them off. So I guess Google was due.

The company has been creeping toward the OS space for a while. Google Gadgets is an API to create small applications that run in web pages, and Google Gears is code that lets web apps run offline, making it easier for them to challenge desktop applications. But they were both relatively low-profile (or as low profile as anything Google ever does). But in the last couple of weeks, Google made two much more assertive announcements:

–OpenSocial is an effort to create a shared platform for applications that can be embedded within social websites (link).

–The Open Handset Alliance is an effort to create a shared platform powering mobile devices (link).

Although they’re aimed at very different parts of the industry, they’re both efforts to create a standard platform where there was fragmentation; and they’re both alliances of numerous companies, with Google providing most of the code and the marketing glue. I think there’s a recurring theme here.

Details on the Open Handset Alliance

Open Social was covered very heavily when it was announced a couple of weeks ago, so I won’t recap it all here. If you want more details, Marc Andreessen did an enthusiastic commentary about it on his weblog (link).

The OHA announcement was today, and I want to call out some highlights:

–It’s built around a Linux implementation called Android. Android will be free of charge and open source, licensed under terms that allow companies to use it in products without contributing back any of their own code to the public. This will probably annoy a lot of open source fans, but it’s important for adoption of the OS, as many companies thinking about working with Linux worry that they will accidentally obligate themselves to give away their own source code.

–Google is creating a suite of applications that will be bundled with Android, but they can be replaced freely by companies that want to bundle other apps, according to Michael Gartenberg (link). There is a lot of speculation, though, that if you bundle the Google apps you’ll get a subsidy from Google. The folks over at Skydeck estimate the subsidy could be about $50 per device (link). That might not sound like huge money to you and me, but keep in mind that mobile phone companies routinely turn backflips to squeeze 25 cents out of the cost of a phone. When you sell millions of phones a year, it adds up.

–A huge list of companies participated in the announcement. That’s not as impressive as it sounds; when you have a well-known brand, a lot of companies will do a joint press release with you just for the publicity value. But a few stood out:

Hardware vendors. Samsung, Motorola, LG, and HTC all endorsed the OS. HTC and LG gave particularly enthusiastic quotes. The first three companies have all been playing with Linux for some time, so I wasn’t surprised. But HTC is another matter — it is the most innovative Windows Mobile licensee, and Microsoft must be very disturbed to see it blowing kisses at Google.

(A side comment on Motorola: For a company that said it wanted to consolidate down on a small number of platforms, Motorola is behaving strangely — it jumped all over Symbian a couple of weeks ago, and now is supporting Android as well. I think it has now endorsed more mobile operating systems than any other handset vendor.)

Operators. Participants in the announcement included NTT DoCoMo (a long-time Linux lover), KDDI, China Mobile, T-Mobile, Telecom Italia, Telefonica, and Sprint. That’s a very nice geographic spread, and ensures enough operator interest to make the handset vendors invest.

–Google claims all Android applications will have the same level of access to data on the phone. That’s pretty interesting — most smartphone platforms have been moving toward a multiple-level approach in which you need more rigorous security certification in order to access some features of the phone. I’ll be interested to see how the security model on Android works.

–We’ll get technical information on the OS November 12, and the first phones based on Android should ship in the second half of 2008.

–Although Android’s first focus is mobile phones, the New York Times reports that it can be used in other consumer devices as well (link).

What it means to the mobile industry

It all depends on the quality of Google’s work and the depth of its commitment. If Android has technical or performance problems, it could sink like a stone. If it doesn’t have enough drivers or has poor technical support, the handset vendors will avoid it. If the developers can’t create good applications, users won’t want it. This is a very different business for Google — handset vendors and operators will not tolerate the sloppy, indifferent technical support that Google provides for its consumer web apps.

If, on the other hand, Google’s platform really works and the company invests in it, I think it could have some very important impacts.

Impact on Windows Mobile: Ugliness. The handset companies endorsing Android are also Microsoft’s most prominent mobile licensees. I doubt any of them are planning to completely abandon Microsoft (they don’t want to be captive to any single OS vendor), but any effort they put into Android is effort that doesn’t go into Windows Mobile. So this is ominous.

The whole mobile thing just hasn’t worked out the way Microsoft planned. First it couldn’t get the big handset brands to license its software, so it focused on signing phone clone vendors in Asia, thinking it could use them to pull down the big guys. But Nokia and the other big brands used their volume and manufacturing skill to beat the daylights out of the small cloners.

Now Google is coming after the market with an OS that’s completely free, and may even be subsidized. This will put huge financial pressure on not just Windows Mobile, but all of Windows CE. Even if Microsoft can hold share, its prospects of ever making good money in the sub-PC space look increasingly remote.

Impact on Access: Ugly ugliness. How do you sell your own version of Linux when the world’s biggest Internet company is giving one away? I don’t know.

Impact on Symbian: Hard to judge. Symbian is the preferred OS of Nokia. As long as Nokia continues to use Symbian, it stays in business. The question is how much it’ll grow. After years of painful effort, Symbian just managed to get increased endorsements from Motorola and Samsung. Now Google is messing with both of them. Japan has been a very important growth market for Symbian, now Android is endorsed by both DoCoMo and KDDI. All of that must feel very uncomfortable. If nothing else, it’s likely to produce pressure on Symbian to lower its prices. And Symbian should be asking what happens if Android turns out to be everything Google promises — a free OS that lets handset vendors create great phones easily. It’s not fun competing against a free product that’s been subsidized by one of the richest companies in the world (just ask Netscape).

Maybe if Symbian agrees to enable Google services on its platform it can get the same subsidies as Android does. It’s worth asking. If not, maybe Symbian should be looking for other places where it can add value in the mobile ecosystem.

Impact on mobile developers: Potentially great. Mobile developers have suffered terribly from two things: They have to work through operators to get their applications to market, and they have to rewrite their applications dozens of times for different phones. If Android produces a single consistent Java environment for mobile applications, that would be a big win. And if it can open up the distribution channels for mobile apps, that would be great as well. We don’t have enough details to judge either outcome yet, and the app distribution one depends on business arrangements that may be outside Google’s control.

Impact on Apple, RIM, and Palm: Probably none at all. A lot of the coverage of Android is positioning it as some sort of challenger to iPhone and RIM.

I don’t buy it.

Apple, RIM, and Palm all make integrated systems in which the software and hardware are coordinated together to solve a user problem. Android, by contrast, is only an operating system. It’s plumbing, not the whole house. Unless Google’s handset licensees magically develop the ability to design for users — a feat equivalent to a giraffe sprouting wings — their products won’t be any better as systems solutions than they are today. The OS hasn’t been the thing holding them back, and changing OS won’t alter the situation.

Android puts interesting financial pressure on Microsoft, but it doesn’t directly solve any compelling user problems. If it eventually drives a great base of mobile applications, that might eventually be attractive to some users. But in that case the systems vendors could just add a copy of Google’s application runtime (it’s open source, they can grab it anytime they want). Or they could host their devices on Google’s plumbing. Palm and RIM might both benefit if they could transfer engineers away from core OS and toward adding value that’s visible to users.

Impact on the tech industry: This isn’t just about mobile phones

I have no access to Google’s internal thinking, but even if it sincerely believes it’s only doing a mobile phone OS, I don’t think it can or will stop there. Technology products often develop a momentum of their own, no matter what was intended at the start. The lines between the computing and mobile worlds are breaking down already, and if Google creates an attractive software platform that’s free of charge, that platform will inevitably get sucked into other types of devices. I’m not saying that Android is going to end up in PCs, but if it’s functional and well supported I think it could end up running on just about everything else that has a screen.

Besides, if you look across all of the recent Google announcements, I think it’s clear that Google has a larger agenda: It wants to break down walled gardens, because they interfere with Google’s ability to deliver its services. It has even developed a standard methodology for attacking them: Create a consortium so you don’t look like a bully, and fund an “open” alternative to whatever is in the way. They are doing it to Facebook, and they’re doing it to Windows Mobile. Google doesn’t even have to make money from the consortium, as long as it clears the ground for its services to grow.

Take a lesson from evolutionary history. The most successful animals are not those that adapt to the environment; they are the ones that reshape the environment to match their needs. I think that’s what Google is doing. It’s going to use open source and alliances to suck the profitability out of anybody who creates a proprietary island that it can’t target.

It’ll be interesting to see if and how Google applies this principle to the upcoming frequency auction in the US.

Or to anyone else who gets in its way.

“When two elephants fight, the loser is the jungle.” –Ancient proverb

And so it begins.

The Apple-Nokia war finally got underway on August 29, when Nokia announced an array of new music-capable phones and an online music store. The two companies had been eyeing one-another like wrestlers outside the ring for more than a year. Apple entered the mobile phone market, but only in the US, where Nokia is a non-factor. Nokia openly declared that it’s a computing company (link), but its non-phone products so far have been different flavors of lame.

But the August 29 announcements put Nokia and Apple on a path to direct confrontation. I haven’t seen a lot written online about the importance of this conflict. I think that’s probably because many of the people who follow Apple’s business closely are based in the US and have trouble taking Nokia seriously because it’s a secondary player here. Meanwhile, Nokia’s most ardent followers are in Europe, and look at Nokia’s actions in light of its regional conflicts with SonyEricsson and the European mobile operators.

But when you stand back and look at what’s happening in the industry worldwide, it’s clear that Apple and Nokia both want very badly to be the dominant mobile computing company for young adults. That makes a huge, relentless conflict between them inevitable. They’re like two armies trying to take the same hill. One’s coming from the west, the other from the east, so there’s not a lot of fighting at the moment. But as soon as they reach the hill, there’s going to be an explosion.

I don’t know who will win, but I’m pretty sure that the main losers will be all of the other device companies and mobile operators who happen to be hanging around on the hill.

My advice to them: Run.

What Nokia announced, and why it matters

On the 29th, Nokia announced four phones, two new data services for its phones, and a new brand. Let’s start with the services.

The Nokia Music Store is just what the name says, an online music store run by Nokia. It’ll be accessible by both PC and selected Nokia phones. The N81 and N95 will be able to talk to the store directly, while for a number of other Nokia phones you’ll be able to buy music on your PC and sync it to your phone (Nokia calls this process “sideloading”).

Nokia will offer more purchase options than iTunes does. You can either buy and download individual titles (for one euro a song, a euro cent above iTunes), or you can subscribe to the store and stream all the music you want to your PC (but not save it) for ten euros a month.

Nokia positions the streaming service as a way to discover new tunes, after which you’re supposed to buy and download the ones you want to keep. I can understand the practical reasons for not streaming from the store directly to phones — there would be issues with data charges, network capacity, latency, and so on. But I don’t know how users will feel about that. If I had a streaming account on my PC, I think I’d expect to have the same service on my Nokia phone. And why wouldn’t you want to discover new music while you’re on the go?

The bigger problem is that the 120 euros you pay a year for a streaming service is 120 songs you could have bought and kept forever. That’s one new song every three days. For comparison, the average iTunes user buys three songs a month. A music subscription service is a great way to get access to a lot of music quickly, but unless you want a colossally large music collection, it’s a huge financial drain in the long run (I wrote more on the economics of it here). No wonder the music industry loves the idea of subscriptions (link).

The re- rebirth of nGage. The other new service Nokia announced was a mobile game store. You’ll be able to try games for free on your Nokia mobile or PC, and then after purchase you can use them on the PC or sync them to your phone (curiously, Nokia calls this process “installation.”) Nokia also promises multiplayer and community features.

Price per game will be six to ten euros, and Nokia says you’ll be able to pay by credit card or through your phone bill if the operator enables that. No word on what the revenue split is.

The service sounds pretty interesting to me. The most confusing thing about it is the name. The nGage service won’t work with all of Nokia’s N-series phones. I know there’s no official tie between N-series and nGage (the names were apparently chosen separately), but try explaining that to a typical customer in a store. Nokia has struggled and failed for years to explain to customers the S60 platform that it uses in a lot of its phones; picture adding yet another layer of confusion on top of that (link).

I think the other important challenge to nGage is flash. There’s a huge supply of free flash-based games on the web, and a lot of them are the sort of quick-reward, easy to use games that seem to do well on mobile devices. The biggest barrier to using them on mobiles is that Adobe charges for the mobile flash player, and so relatively few mobile phones have it installed. A small installed base of phones means that most developers don’t target mobile flash. If Adobe ever drops the charge for the flash player, or if a free flash-equivalent comes along (perhaps a mobile version of Microsoft Silverlight), it might become very difficult to convince people to pay for nGage games.

I know nGage provides a higher-quality gaming experience than flash, but I’m not sure most mobile users will care enough to pay.

Ovi is a new brand that Nokia will use as a wrapper for all of its mobile services, including games, music, maps, photo sharing, and presumably more to come (link). I guess that makes sense from a convenience standpoint — there will be one website (ovi.com) where you can go to discover all of the Nokia services (Nokia employees say that it will also be a gateway to the services of other companies as well ). Unfortunately, Ovi apparently won’t work as a compatibility mark: the phones that can use one Ovi service can’t necessarily use another. For example, many of the phones that can run nGage games can’t directly connect to the music service. A brand is most effective when it represents a coherent idea or consistent product. I think Ovi creates an expectation of coherence but doesn’t deliver it. It just says that Nokia’s in the service business, which Nokia cares about but is not something that concerns users

If Nokia doesn’t make all the Ovi services work on all its data-capable phones quickly, I think the varied incompatibilities between the Nokia services and devices are going to be a nightmare to explain at retail.

The four new phones
The N95 8GB adds more memory to Nokia’s flagship Swiss army knife phone, which includes a 5 mp camera, improved 3G, WiFi, and GPS. This is the one that online reviewers always compare to the iPhone. It works with both nGage and the music store, and its base price is 580 euros before subsidy.
The N81 is a slider phone with WiFi and 3G, and has dedicated buttons to access both nGage and the music store. It’ll sell for 430 euros pre-subsidy.
The 5310 is a slimline candybar phone that can play music synced from the Nokia music store. It cannot access the music store directly. It has dedicated music controls next to the screen, and its base price is 225 euros.
The 5610 is similar to the 5310, but adds a slider and built-in camera. Its base price is 300 euros. A lot of online reviewers have been comparing this and the 5310 to the SonyEricsson Walkman phones, and I think that was probably Nokia’s thinking. But hold that thought because it’s not necessarily how things will work out.

What’s the impact? A huge amount depends on execution. How well will Nokia’s new services integrate with the phones? How easy will it be to play songs and games? How many titles will be in the Nokia stores, and how good will they be? Services and mobile devices often live or die on the little details of usability, and we can’t judge that for Nokia yet because we can’t play with the new products and services.

But Nokia’s direction is very clear. It wants to be in the mobile Internet services business, as both a developer and publisher of content and services. It’s going to tie those services directly to its phones. And knowing Nokia, it’ll keep iterating on both the phones and the services until it gets them right.

That’s why Apple and Nokia are now at war. Even if Nokia’s current products turn out to be lame, it’s going straight into the territory that Apple has been pursuing ever since the first iPod shipped.

Apple’s new products. I should add a little context on Apple’s recent product announcements. In September, Apple made a lot of changes to the iTunes and iPod lineup. The move that got the most attention was the price cut of the iPhone from $599 to $399. I’ll write more about that below. The other changes that stood out to me were:
–iTunes can now be accessed via WiFi on the iPhone and iPod Touch. This corrects a glaring weakness in the original iPhone. It’s interesting that Apple apparently hasn’t enabled the iPhone to talk to the store over a cellular connection. That may be because the network the iPhone uses in the US is too slow to easily download music, or it may be that AT&T doesn’t want a lot of data traffic going over its network when the phone’s data plan is flat-rate.
–The video version of the Nano, starting at $199, is a heck of a lot of technology in a very cute little package.
–The iPod Touch is basically an iPhone without the microphone and cellular radio. It makes a really interesting PDA for people who want to buy a basic voice phone and carry their entertainment separately. It’s priced at $299.

(As an aside, I have a request: Once the iPod Touch starts selling like gangbusters, would someone please go find the person at Sony who decided the Clie handheld business was a dead end, and kick them in the shins?)

Relative strengths of the competitors

Or, how to piss off both Apple fans and Nokia fans in the same post.

Apple and Nokia are very different companies. Here are their relative strengths:

Resources. No contest. Although Apple is a very successful company, Nokia has vastly more financial resources.

Logistics. Nokia is one of the greatest logistics companies on the planet. It churns out hundreds of millions of phones, changes models frequently, and almost everything works properly. If Nokia were running the US Federal Emergency Management Agency, New Orleans would be 20 feet above sea level by now. Apple, by contrast, does a very competent job of managing contract manufacturers in Asia. Advantage Nokia.

Telephony experience. Another huge Nokia advantage. Designing phones and getting them qualified on networks is really tricky, and Nokia knows how to do it better than anyone else.

System design skill. This is Apple’s core competence; it knows how to design hardware and software together to create a beautifully integrated system. Nokia’s phones often appear as if their hardware and software were designed by completely different groups and slapped together at the last minute (because, in many cases, that’s exactly what happened). This works great in commodity phones, but if the competition is for who can create the most elegant data experience, Nokia is at a huge disadvantage.

Brand power. Wow, this is a tough one. Apple has one of the coolest brands on the planet. Nokia’s brand is beloved in Europe, and in most of the world it personifies upward mobility (except in the US and Japan). I call this one a tie.

User interface. Apple knows how to design these. The kindest thing you can say about Nokia’s interface designs is that they’re better than many other phone manufacturers. But that’s like comparing a three-legged dog to a two-legged dog. Nokia’s trying to get better — at the announcement event, it showed video of a forthcoming device with an iPhone-style touchscreen (link). But for now, this one’s clearly a strong Apple advantage.

Cleverness. Hey, it’s Steve. Nokia’s management is extremely smart, but you look to them for great operational execution, not brilliant strategy. After all, this is the company that brought us the original nGage.

Industrial design. I’m going to get flamed by the Nokia fans for this, but Apple has a clear advantage in design. The comparison: Nokia sometimes creates a great design. Apple rarely creates anything less than a great design.

Music solution. You’d think this would be an overwhelming advantage for Apple, but its arrogant handling of the music companies has made them even more desperate to tear Steve Jobs’ throat out. They’re anxious to work with someone like Nokia. Apple still has an advantage, but it has opened the door to competitors more than it had to.

Breadth. Nokia can fight on more fronts, and might be able to outflank Apple. For instance, Nokia’s revived nGage game service gives it a second interesting offering for young people, whereas Apple is limited to just music and video. This is why I think Apple’s decision not to open the iPhone to third party app developers is a huge mistake. If Apple had the help of third party developers, it could more easily fill out its software portfolio.

How they’ll fight

Nokia wants a war of attrition. It will try to force Apple to compete on more fronts than it can afford to cover. I think we should expect to see a broad array of services added to Ovi quickly, aimed at enticing young adults in all sorts of different ways. Nokia will probably also launch a blizzard of media and entertainment phones with varied features, in the hope that a couple of them will hit sweet spots in the market.

Apple’s game is to keep Nokia off balance and grab the most important opportunities. Think of a fencing expert: dodge, feint, and then stab the other guy in the heart. Apple currently has a product advantage — its music service is already working. So it will try to capture as many customers as it can before Nokia gets its act together.

Apple can also use Nokia’s size against it. Nokia has a huge product line and has to position each product carefully within it. Apple has only one phone, so it doesn’t have much to protect. That’s where the iPhone price cut comes in. The iPhone had been positioned against the n95, at the top of Nokia’s product line. With the price cut, the iPhone is now looks much closer to the middle of Nokia’s line, the phones that were supposed to be aimed at SonyEricsson.* Nokia can’t slash the pricing of the n95 without screwing up the prices of its entire line, so with one price action Apple accomplished two things — it can reach a lot more customers, and it forced Nokia to go back and rethink its competitiveness.

We should expect more surprise moves from Apple. It’s more important for them to keep Nokia off balance than it is to please every customer. I think that’s why Apple was willing to piss off the iPhone loyalists with a sudden, large price cut.

*Because of varying subsidies, it’s hard to tell what the actual street price comparison between the new n95 and iPhone will be. The current n95 sometimes gets subsidized down by several hundred dollars if you buy a multiyear service contract. Maybe the new n95 will be subsidized down below iPhone prices. Maybe the iPhone will be subsidized too. Or maybe now that Nokia’s offering its own services the operators will refuse to keep subsidizing the n95. We need to wait until the iPhone and Nokia’s new services premiere in Europe this fall.

Impacts of the war: Alas, the innocent bystanders

The common denominator between Apple and Nokia is the imperative to move quickly. Nokia wants to broaden the competition fast, Apple wants to keep surprising Nokia with new features, products, and other changes. That’s going to accelerate the pace of change in the mobile industry. And the accelerating pace of change, rather than anything in particular that Apple or Nokia have done today, is the biggest challenge to the rest of the industry. The other players have been struggling to keep up with the current rate of change; what will they do when Apple and Nokia step on the gas?

I’ve seen these situations before. You think you’re just about keeping up with a competitor, and suddenly they disappear in a cloud of dust. I believe that’s about to happen in mobile phones.

A shift from hardware design to systems design. Let’s look at which companies have been most successful in smartphones: RIM creates e-mail phone systems that combine hardware, software, and services. DoCoMo and the other Japanese operators drive systems designs that combine hardware, software, and services. The iPhone does the same. Previously, those competitors were confined to particular countries or relatively small vertical markets, but now the world’s biggest phone company is trying to do the same thing. That raises the competitive bar for everyone else in the industry.

What are companies like Samsung and Motorola supposed to do? They don’t know how to create their own services, let alone integrate one well with a phone. In the music market, there are a lot of third party services out there, but none of them have been effective so far at challenging iTunes. I think they’re not strong enough to change the competitive situation. Same thing for the operator services.

So the music phone market looks ugly. What’s worse, if Nokia and the systems companies extend their new design approach to other data markets, the traditional mobile phone companies might be cut out of most of the big growth opportunities. They need to learn a new set of skills instantly, and they’re far behind the curve.

The interesting potential exception to this situation is SonyEricsson, the leading vendor of music-enabled phones in Europe. Their hardware’s nice, and they have a clean user interface that looks inspired by the iPod. Because I’m in the US, I don’t have a good read on how smoothly the SonyEricsson phones integrate with operator and third party music stores. Is the experience as easy as using iTunes?

The Register says that Omnifone’s Music Station is a promising possibility (link), but it’s a subscription service costing 3 euros ($4.11) per week. For that same price you could buy 216 songs on iTunes per year, and at the end of the year you’d actually own something.

I really have trouble seeing the long-term economic benefit of a music subscription service for a user. If you subscribe to one, please post a comment and educate me.

SonyEricsson’s management hinted to Time Magazine that it may create its own music service (link). If so, it had better hurry up. I have a lot of respect for SonyEricsson’s hardware designs, but if it’s limited to music stores with weird business models and ones that don’t integrate seamlessly with its phones, it’s going to have a very hard time outcompeting an accelerating Apple and a Nokia that’s learning to integrate solutions.

Microsoft: Reverse course, again. This is the situation in which Microsoft could have stepped in to offer a music service to the phone companies challenged by Nokia. But in an exquisitely ironic move, Microsoft basically shot its licensed music store initiative last year in order to support the proprietary Zune. Now it can’t step up to the opportunity.

Oops.

Microsoft is probably too late to recover in music, but as Nokia adds new services there should be a lot of opportunities to license equivalents of them to Nokia’s competitors. Microsoft should focus less on selling its own OS, which scares the phone companies, and more on delivering services they can build into their phones.

And oh by the way, it’s time to bury Zune. The iPod Touch just lapped it. If Microsoft wants to lose money on proprietary hardware, it should focus on Xbox. At least there it’s buying market share for its money.

The operators lose control. They were struggling to establish their own services suites back when things were moving slowly. Now that Apple and Nokia are shifting into high gear, I don’t see how the operators can keep up.

You can find very different scenarios online for where this will lead. Andrew at the Register predicts that the operators may strangle Ovi by refusing to sell any phones that support it (link). He has a good quote from someone who knows both Nokia and the operators:

The operators own the relationship with the customer. They’re not going to allow Nokia to own it.

On the other hand, Richard Windsor, the excellent telecom analyst working for Nomura Securities in London, said in an e-mail brief that the operators are doomed:

Through their inaction, mobile operators have squandered the opportunity to be the service integrator for mobile and are left with the prospect of offering nothing to users except commodity data packets.

Who will be right? It depends on Nokia’s ability to generate user demand for its services. If the users want the services, the operators will have to go along with it. I assume Nokia understands this and is prepared to do a big marketing push. Unlike Nokia’s previous efforts to set up content portals, this time it has to succeed or it surrenders the future to Apple. So the conflict with Apple also locks Nokia into a war with the operators.

Isn’t this fun?

If I were running a mobile operator, I’d stop trying to create my own services bundle, and focus on enabling as many Internet companies as possible to deliver services on my network, in exchange for a small cut of their revenue. An operator with the innovation of the open Internet behind it might be able to keep up with Nokia and Apple. But an operator working alone will be very lonely indeed.

What does it mean for users? You’d think that all this new competition would be good for users, and in many ways I’m sure it will be. But Apple and Nokia are both showing a disturbing tendency to keep everything proprietary. The iPhone is not open to third party developers, and at this point Ovi appears to be about marketing Nokia services, not opening up the richness of the Internet. (To be fair, Nokia employees say that will change, but I’m not sure if they mean that they’ll offer access to any Internet service, or just to some selected ones that they cut a deal with. I suspect it’ll be the latter.)

Welcome our new Apple and Nokia overlords. There’s a disturbing possibility that we may end up exchanging one set of walled gardens for another. They’ll be lavish, beautiful gardens, far better than the operators’ truck farms for data. But we may not get the open data marketplaces that a lot of people have been hoping for.

If you want to read other perspectives on Nokia vs. Apple, check these out:
-A confident view from Finland (link)
-A cautious view from Jupiter Research (link)
-An outstanding article by Mark Halper at Time, with quotes from Nokia and SonyEricsson (link).

I want to write some more about all the recent mobile product announcements when I get more time, but tonight I have a chance for only a brief comment on Apple. I can’t speak for Apple’s motivations, and I know they pride themselves on thinking different, but no one I know in the tech industry — and I mean no one — cuts the price of a consumer tech product two months after launch unless they’re seriously worried about demand. It’s just not done, because it pisses off your early buyers, trains customers to wait a few months before they buy, upsets the channel, produces a lot of returned products, and distracts people from your other announcements.

If current iPhone sales are okay, the only other reason I can think of to cut prices this soon would be if you’re worried about a competitive situation. Let’s see, what competitive announcement could have possibly spooked Apple? Could it be Nokia’s announcement last week of a music phone priced at 225 euros ($306)? (Link)

Several people have asked what I thought of the recent change in ownership at Palm. I don’t have any inside information, so all I can do is speculate like everyone else, and try to apply the lessons I’ve learned from working at other companies.

Overall, I’m very happy for the folks at Palm, and cautiously hopeful about what this might mean for the company’s prospects. I think this outcome is a lot more encouraging than any of the buyout rumors that were floated in the last few months. Palm’s new part-owners clearly understand the value of systems design, which is Palm’s biggest potential advantage in the market. I think we really need another great systems company to challenge Apple, and I would love to see Palm step up to that task.

Although a purchase by a Motorola or Nokia would have been very entertaining from a soap opera perspective, they don’t really understand systems design, and it’s very likely that they would have digested Palm without a trace. I’m reminded of a joke we used to tell at Apple in the 1990s when there were rumors that IBM would buy the company:

Q: “What do you get when you combine Apple and IBM?”
A: “IBM.”

The other buyout option what was circulating, a full purchase by private capital, would have left the company independent, but with a load of debt that might have been crippling. Hardware companies must have a big reserve of cash to fund inventory and tide them over if they launch an unsuccessful product. I don’t pretend to understand all the terms of the Elevation deal (they’re wickedly complex), but from my perspective it looks like the financials aren’t crippling. I am a little worried about Palm’s cash levels, though; a lot of their current cash is going into the stockholder payout.

A couple of other thoughts on the impact of the deal:

Bye-bye 3Com. Palm gets three very well respected people for its board, and removes Eric Benhamou, the last vestige of the 3Com legacy. Somewhere I have a photo of the Palm and PalmSource combined management teams from just before the two companies were separated. The photo includes everyone in the company from Mr. Benhamou down to senior directors. That was about 30+ people. Every single one of them is now gone. So if you didn’t like Palm’s management back then, you should take another look at the company because it’s now 100% different.

Irresponsible speculation about politics. After a change like this, the standard sport in Silicon Valley is to speculate about what it means for the job status of the people involved. In that vein, the thing to ask is, “Who’s running Palm in the long run?” The weirdest part of the whole Elevation deal is the arrival of Jon Rubinstein as both Chairman of the Board of Palm and head of product development. As Chairman, Jon is technically the boss of Palm CEO Ed Colligan. As head of product development, Jon technically reports to Ed. So Jon is kind of his own second-level manager.

That feels…unstable.

Palm seems to now have a surplus of product leaders. Jon is in charge of product development, Jeff Hawkins is the designated product visionary, and marketing SVP Brodie Keast is supposed to control the product road map, according to the press release Palm issued when he was hired. It’s hard to picture a car with three steering wheels. Who will really be in charge? In the conference call Palm said that Jon would be the execution guy and Jeff the visionary. “The combination of those two guys is one of the most dynamic… combinations on the planet.” Maybe. Any organization structure can work if the people involved get along well, and I presume they would not have made this arrangement unless they were all comfortable they could work together. So good for them and best wishes.

But if you want to be a cynic, you’d speculate that Jon probably didn’t leave Apple just to be the head of engineering execution at a much smaller company. You wonder if the current situation is just a stage in a longer-term changing of the guards at Palm. I don’t have any evidence that’s the case, and I am not trying to start any rumors. But when you see a nonstandard reporting structure like this, it usually triggers speculation that another shoe is going to drop later.

Only time will tell.

What’s the effect on products? That’s the most important question, and it’s impossible to answer at this time. Hardware product development usually takes 18-24 months, so the earliest Jon could change the Palm road map would be very late 2008. But that’s the middle of the Christmas selling season, and you can’t announce products then. So realistically, the Rubinstein product era doesn’t start until spring 2009.

In the meantime, there’s a lot he can do to make the development of the currently-planned products be more efficient and predictable. Palm has said publicly on numerous occasions that its on-time product delivery needs to improve, and presumably Jon can help with that.

But personally, I think Palm’s bigger problem has been its lack of innovative new product designs. Unless Palm has a bunch of surprise products already in development, it will take quite a while to turn around the product road map.

_____________________

Thanks to Twofones for including last week’s post on the Palm Foleo in the latest Carnival of the Mobilists (link).

Ten years from now, Nokia’s going to be the subject of an interesting business case study. It’ll either be the stirring story of a company at the height of its power that had the courage to challenge its deepest beliefs. Or it’ll be the cautionary tale of a company that had it all and blew it.

Nokia says it’s planning for what comes after the mobile phone.

I’ve heard this from Nokia before, but I always used to think it was posturing. Companies say that sort of thing all the time — “we’re looking for the next big growth driver” or something like that, meaning they plan to keep doing all the same stuff they do today but also desperately hope they can grow another line of business alongside it. That’s typical in business; you try to have your cake and eat it too.

But after hearing several senior Nokia people repeat the message over the last couple of months, I’ve started to believe they’re saying something different. Don’t get me wrong, I’m not trying to say they are about to abandon mobile phones. But I think they sincerely believe that business won’t last forever, and they’re starting to lay the groundwork for what will replace it.

The message really hit home last month, when I heard it from Nokia CTO Tero Ojanpera and Bob Iannucci, head of Nokia Research Center, at a Nokia strategy briefing in Silicon Valley. Iannucci pointed out that Nokia started as a paper mill and has a history of completely changing its industry from time to time — from rubber boots to monitors to mobile phones. He said it is once again “a company in transition to the next phase.” That next phase is mobile computing.

Not smartphones, not converged devices, but full-on mobile computers intended to replace both PCs and mobile phones. Nokia says it expects these devices to eventually sell in the billions of units, and to become the world’s dominant means of accessing the Internet.

Even though these future devices will still be mobile, if you take all of Nokia’s statements at face value the changes from mobile phones will be so extensive that it’s fair to call it a new business.

The fact that Nokia’s even talking about this is a remarkable change. Five years ago, Microsoft was charging hard in mobile and the big topic of discussion was how could a company like Nokia possibly defend itself. Now Nokia’s talking about how it will put the PC industry out to pasture, and oh by the way take over the Internet as well.

Although the goal is almost insanely ambitious, I can’t say that Nokia is wrong to try. Mobile phones are gradually becoming a commodity. The biggest unit growth is in low-end phones, a strength for Nokia because of its volumes and efficiencies. But even Nokia managers will tell you that creating low-end products in a saturating market is not a fun business. It certainly won’t produce the sort of growth and margins that investors expect.

Nokia’s not predicting the instant death of the mobile phone business. It’s a very large and divisionalized company, and I’m sure big chunks of Nokia are hell-bent on staying a mobile phone company forever. But it sounds like the senior management feels the mobile phone business is becoming uninteresting, and they want to get started on the next thing before the current business rides off into a long Nordic sunset.

The hard part is implementing

Becoming a mobile computing company is a lot harder than talking about it. The mobile phone world is based on managed competition, in which operators, handset vendors, and governments create shared standards even as they compete. It’s a closed circle in which new features flow down from the top like molasses running down a cake of ice, driven by fiat from the leading vendors.

The computing world is much more Darwinian. Barriers to entry are lower, and innovation often flows up from the smallest players. Companies compete in something that resembles a free-for-all, with the marketplace choosing winners.

So what Nokia’s talking about is not just a change in product design. It’s more like a wholesale remaking of the company’s culture, processes, and partnerships. The advantage of this for Nokia is that if it successfully makes the transition, it will have put everyone else in the mobile phone industry — handset vendors and operators — at a permanent disadvantage, unless they can make the same wrenching transition.

The disadvantage is that the change is pretty darned wrenching for Nokia as well.

Nokia seems to understand at least some of the changes it has to make in order to be a computing company. Iannucci acknowledged that the “Internet model” of product development is to create and ship products first, and then bother about standards later (if at all).

He said Nokia’s research labs, formerly fairly closed, have re-oriented themselves to work collaboratively with universities and other parties in the industry. The collaboration part is essential because “we can no longer fuel…internally” the amount of technology the company has to develop now that it wants to be a computing company.

Thus the briefing in California — they want to be a part of the peculiar hive mind we call Silicon Valley.

The transition will be awkward

One amusing example was when a Nokia speaker solicited feedback from the audience on what barriers to success they see in the mobile marketplace.

A VC shot up his hand: “Operators.”

Dead silence for a second. Then the Nokia speaker asked uncomfortably, “what in particular about operators?”

And you had to laugh a bit, because the question didn’t really need to be explained. What the questioner meant was: “we want the operators dead; are you going to help make that happen?” Everyone in the room knew that. Nokia knew that. The question was a test of Nokia’s seriousness.

Nokia didn’t exactly pass the test. They won’t answer that question on stage because it creates too many political issues for the current mobile phone business. So what could have been a nice bonding moment between Nokia and the Silicon Valley folks degenerated into a carefully nuanced spiel about “we’re working together to address many issues” and bland verbiage like that. They ended the Q&A soon after.

Lesson: If you want to bond with somebody, be prepared to discuss the issues they care about. And don’t ask for feedback unless you’re prepared to answer tough questions.

Next steps

Here are some other issues that I think Nokia will need to work through if it really wants to bond with Silicon Valley.

Get real about the role of mobile computing. As far as I can tell, Nokia’s hoping that the mobile computer will literally replace PCs. I think that’s both naive and unnecessarily limiting to Nokia’s prospects. Mobile usage is a different paradigm from personal computing. You use a PC in a long sessions at a static location; you use a mobile while on the go, in places where a PC isn’t convenient. That different usage pattern means the users are likely to have different requirements and different expectations for mobiles than they have for PCs. If Nokia tries to just make mini-PCs, it’s probably going to end up with products that don’t deliver on the great new stuff that mobile computing can really do.

To give a rough analogy, if the mobile phone companies had focused only on making land lines mobile, would they have ever invented SMS?

Nurture developer communities. Nokia has a very extensive developer support organization, but I’m not yet seeing the sort of broad-scale evangelism — developer recruitment — that an Apple or Microsoft practices. To really win over the best developers, it’s not enough to just make their development tasks easy, you have to make sure they have the opportunity to make money. No one’s doing that well in the mobile space today. Including Nokia.

The mobile software companies continue to flail around trying to figure out which company can build a business opportunity worth committing to. The opportunity is there for Nokia, but it has to invest in building the market.

Manage Adobe vs. Microsoft vs. Sun. Nokia said it’s working very closely with Adobe on Apollo, the new software operating layer derived from Flash and Acrobat. The implication is that Nokia will distribute the mobile version of Apollo on its phones, just as it distributes Flash today.

There are two potential downsides to this. The first is that Adobe might lose — it’s facing strong competition from Microsoft’s Silverlight, and apparently from a revamped version of mobile Java from Sun (I’m planning to write about that one in the future). If one of the others wins, Nokia might end up deeply committed to a failing standard.

The second danger is that Adobe might win, leaving Nokia at the mercy of a mobile software standard controlled by a different company. Replacing the Microsoft monopoly with an Adobe monopoly would be delightful for Adobe, but it isn’t going to feel like much of a win for Nokia.

Learn to design solutions, not gadgets. I think this is Nokia’s biggest challenge. The most popular mobile computing products so far have been integrated hardware-software systems aimed at a single usage: GameBoy, iPod, BlackBerry, and of course the mobile phone itself. Nokia hasn’t been notably good at designing this sort of integrated system. In fact, its most prominent effort so far, the nGage, was an epic failure on the scale of the Edsel and the presidential campaign of Michael Dukakis.

But if Nokia really wants to be a mobile computing company, this is a skill it absolutely must learn. It is an incredibly hard change for Nokia, because computing systems design requires a very strong culture of product managers who understand the customer and have dictatorial control over the features and interface of the product. A good computing system is a product of idiosyncratic vision. Collectivist Nokia, with its endless conversations and responsibility fragmented across dozens of teams, is in a terrible situation to pull this off. Frankly, I’m skeptical that they can do it.

But on the other hand, if they can turn a pulp mill into a mobile phone company, would you really bet against them?