Here’s an interesting business lesson:
Apple Computer Chief Executive Steve Jobs has a reputation for thinking different. But now he might be planning a move for Apple that will leave even his biggest fans surprised–becoming a phone company.
It might sound far-fetched, but the pieces are in place for it to happen later this summer. Apple is already developing a hybrid iPod/cell phone with handset maker Motorola. And companies ranging from the Virgin Group to The Walt Disney Co. are proving that a new network model can allow all kinds of businesses to easily enter the mobile market.
Essentially, this entails Apple releasing an iTunes-branded cell phone, with the cellular network leased from an existing company such as Sprint or Cingular. The startup cost is minimal compared to the early days of cell phones because the network infrastructure is already in place. And Apple benefits from popularity currently unparalleled in customer electronics. It seems like a reasonable idea. But why would Apple want to go through the trouble when it could simplify this opportunity with an iTunes application for mobile phones?
But Apple might have a problem getting the devices into customers’ hands. Carriers will probably be loath to sell and support it, since they want to sell their own music downloads–not have customers upload tunes from home. “The carriers don’t like it,” says analyst Rob Enderle, head of The Enderle Group. “They want Apple to change the design so the phone has to sync through their networks, not with a PC.”
Of course the carriers don’t like it. They want to pretend that customers care more about the gatekeeper than what comes through the gates. customers may like the gatekeeper (Apple is the perfect example), but content is more important. Where the carriers go wrong is believing that exclusivity and control of content aren’t important. If customers thought the way carriers believe they think, AOL would still dominate.
Perhaps an example… Last year I decided to switch cell phone carriers. I’d had minor issues with Sprint so I opted to transfer my phone number to Verizon. After purchasing a new phone with exciting features, I impatiently waited for the phone to charge so I could upload my unique ringtones. Reading through the instruction manual, I found no references to uploading ringtones. I searched the internets to figure out how to do it. And that’s when I found out Verizon’s little secret. Despite all the nice features of the phone, I was beholden to their wishes. I could have any content I wanted as long as Verizon sold it. No personal ringtones, no fancy pictures, no diversionary games.
Five days later I returned the phone to Verizon and became a Sprint customer again because Sprint allowed me to use the phone I purchased in the way I wanted to use it. Today, when my brother calls me, a Hokie gobble announces the call.
Customers aren’t always rational, but they’re not stupid. If the customer has an iTunes account, why would Verizon think she wants a middleman to sell her music from iTunes? The existing carriers imagine monopoly powers where they don’t exist. They will learn the lesson, but as the lesson often is for large companies, the lesson probably won’t be pleasant. Competition dictates an adapt or die mentality; Apple understands this better than most.
Although an Apple phone may not happen, some form of an iTunes-capable phone will. It makes too much sense and Apple has the clout to make it happen. In the scenario I imagine, Verizon, Sprint, Cingular, and every other cellular carrier should not be surprised when cell phones show up next to iPods and PowerBooks in every Apple retail store.
(Link via Slashdot)