Christian Renaud's Blog

Apple fumbles 3G iPhone Launch?

Let me get in my time machine for a second.....

Apple predicts that it will ship 10M iPhones within a year from it's July 2007 launch.

Apple ships about 5.7m iPhones (by multiple analysts conclusions) before supplies mysteriously begin to dry up in late March. By early May, even New York City has no inventory and a line for iPhones starts forming.

April 2nd, Henry Blodget at the Alley speculates that non-authorized international demand is consuming 'buffer inventory' and driving the shortage.

When Apple first introduced the iPhone 1.0, they could ship it 30/60/90 days post-announce because they had no shipping revenue product to stall.  You really don't want to induce a revenue stall in a shipping product if you can avoid it, however Apple learned the hard way that you also don't want to anger your installed base of loyal/feral customers as they discovered with the iPhone price drop.  So, you end up walking a fine line between angering your customers with lack of supply (or over-supply of new models) and angering Wall Street with periodic flatlines in your revenue stream.

The answer is to gracefully manage product transitions.  This is an art form in itself, in the timing of messaging transitions, moving manufacturing lines, selling off inventory, upgrade and price protection programs, and the like.

Apple seems to have been caught in a perfect storm of unanticipated demand (Blodget's article about Europe) that they needed to quickly react to in the form of temporarily increasing the production line of iPhones so they could gracefully trickle out of them about May 30th....just in time to release the iPhone 3G and open up the larger price-sensitive and 3G-hungry market, and a new product introduction when they need to ramp down production of the older model in favor of the newer one.

So, do you ramp up or ramp down?  Do you flatline sales of your iPhone line for 75 days during a key fiscal quarter (Summer/graduate presents) or do you enable your overflow production lines and meet demand at the risk of price-protection/exchange/returns exposure on your bottom line for a percentage of the customers who buy in May?  It reads like a loaded MBA mid-term question from a sadistic professor who enjoys handing out 'C' grades to all students.

It appears Apple chose to flatline.  I don't envy the beating they will take from Wall Street for this fumble, even though every Wall Street Analyst is slobbering over themselves today to say how much of a fait accompli the 3G iPhone is to wrest the title from the Blackberry for #1 in sales.  I wonder how they will balance the stick and carrot of beating them for the quarter stall while praising them for the new product.

And it isn't an inevitability that Apple will more than address the revenue shortfall with the 3G iPhone.  Even if Foxconn can overcome their initial production issues and achieve their 10M unit number, the revenue and profit per unit of the $199/$299 iPhone 3G are abysmal compared to the initial 1.0 iPhone at $499/$399.  We used to have a sarcastic punchline back in the early Cisco IP Phone days..."We'll sell it at a loss but we'll make it up in volume!"

It could be worse, you could be the product manager at eTrade who announced yesterday the new eTrade Mobile Pro trading platform for mobile devices, exclusively for the BlackBerry.

One more time, with feeling!

I have received a number of responses to my prior post regarding the future of the virtual world space.  Although I stand by each prediction I made, there was one clarification that I wanted to make.

There is a need for shared virtual spaces for events, specifically events where the participants do not know each other a priori and this is a particular strength of the Second Life model.  You have the network effect of many people combined with a shared virtual space.  At Cisco, we use this function frequently to have focus groups, product launches, and press conferences.  This allows for a bi-directional exchange of ideas from an ad-hoc group of attendees in a manner that you cannot achieve with other technology solutions.  If we use traditional voice bridges, then you need to mute the participants during the 'presentation', and the experience is pretty spartan......if you use web conferencing, you achieve a richer media experience but lose the intimacy of horizontal interaction (where the speaker to attendee is 'vertical interaction', but attendee to attendee is 'horizontal interaction', like students passing notes and whispers in undergraduate Biology class lecture).  This is where shared virtual spaces shine.

I still believe that there needs to be widespread deployment of standard protocols, like COLLADA, however am skeptical that the business rationale is there for anyone to abandon the walled-garden model we see in current virtual world implementations (OpenSIM excluded).  The wildcard is if the 3D conferencing and small event space vendors, led by companies like Transmutable and Qwaq, end up stealing the aforementioned (juicy/lucrative) shared virtual spaces business from public social worlds.

The Maturing of the Virtual Worlds Industry

2007 was unquestionably a significant year in the development of the Virtual Worlds industry. It went from a mocking human interest story at the end of the nightly news to the covers of prominent business magazines. As the proverb says however, 'Be careful what you wish for....'

There have been prior attempts at a 3D Internet, particularly around the Virtual Reality Modeling Language (or VRML). There were a number of market reasons that VRML never reached widespread adoption that were independent of VRMLs technical merits. In contrast 2007 featured the ramp of Second Life for public social collaboration and visibility for companies such as Forterra Systems for intraverse simulation and training.

The questions that we were asked during the 'New Ways of Working' panel at the Virtual Worlds 2008 conference last week in New York all seemed to be searching for the elusive initial proof-points to justify and quantify the benefit of virtual worlds in the enterprise. This is not unique to virtual worlds, and is a recurring theme in all of the emerging technology trends I have participated in. Early adopters attempting new projects within their organizations fortify themselves with metrics and other case-studies of successful deployments to demonstrate to their management the benefits of the technology in question, and virtual worlds are certainly no exception.

The current proof-pillars of this industry, however, are still scarce, with elaborate simulations being performed by the U.S. Government within Forterra Olive, as well as the Stanford SUMMIT medical simulations on the same platform. In the consumer area, there have been numerous examples of training and education within Second Life (including my employer) and isolated non-self-referential instances of collaborative design projects (most notably Wikitecture). What has not happened yet are the secondary ripples of these initial 'It can be done' proofs-of-concept, which will begin the snowball effect of more examples feeding more deployments which become examples for subsequent projects. It will take some sobriety on the part of marketing departments throughout industry, making sure to identify real value and not hand-waving, and it will take more time for the existing trials being conducted to bear fruit.

Two negative side effects of the excess of positive press in 2007 were that (1) each vendor in the 3D simulation area became an overnight sensation while many of their platforms were not ready for mainstream deployments, and (2) the peripheral/adjacent markets in this space (3D rendering engines, virtual economies, etc.) stampeded over to participate in the virtual gold rush, which made it harder for non-industry customers to get a bead on what this space actually is and how it benefits their organizations.

What this market pressure has exerted is a degree of speciation, in that companies are beginning to polarize into platform providers (intraverse or metaverse?), and component technology providers. An impacting externality to this is the emergence of the 'software as a service' business model within companies, who are evaluating these new virtual worlds not only from a 'should we/shouldn't we' decision, but also from a 'hosted/service' decision as well. One more barrier to adoption.

Speaking of barriers, if you ask most virtual world platform vendors what their top five barriers to adoption are, inevitably one of them will be the issue of 'corporate firewalls'. Given the immaturity of the technology, the non-standardization of ports and protocols used across vendors (which, admittedly, will be the case for some time as is the case in each new technology cycle), and the absence of overwhelming-demand on the part of major corporate clients, the corporate information-security technology departments will be in no hurry to poke holes in the corporate firewalls for a currently unproven application. It will happen over time, or the protocols used may render the discussion moot by leveraging lessons learned by companies like Skype in the VoIP space.

You see the initial furtive steps of companies to offer both a SaaS or Hosted model of their collaboration environments (such as the IBM/Linden Lab announcement) as well as overtures in that direction by companies like Qwaq. That will remove one barrier to adoption.

There have been the overtures towards data standardization with Multiverse and Google embracing COLLADA (and Intel hiring COLLADA people as part of their strategy) and the Virtual Worlds Interoperability Forum (of which I am a member). These efforts will initially focus on interoperability between virtual worlds and Internet data sources (like COLLADA files) rather than avatar portability. In contrast to my prior post about the future of virtual worlds, this degree of interoperability will be sufficient for some time as the broader Internet identity problem is resolved, as a choice of 'presentation layers' (in the form of virtual worlds) of a common dataset will be functional enough to limp along. The difficulty in that scenario will be in cross platform meetings.

The next post will posit some paths that the industry can take at this juncture, and if it will continue to be rather boutique, or will move into mainstream deployments.

The Workplace/Workspace Shift

Last week I had the honor of keynoting the Friday session at the CMP Metaverse Life 2.0 conference.  During the presentation, I mentioned the multiple points of evidence that I had encountered of the evolution underway from traditional workplaces to geographically-independent workspaces.  The summary of the argument is:

We have been gradually migrating from a traditional industrial-age workplace metaphor of individual work tasks performed in a shared setting (think of a cubicle-farm of either call-center representatives or engineers occupying three floors of a building) to a Knowledge-age metaphor of more collaborative, integrated tasks that are performed by virtual, geographically dispersed teams.  So, instead of doing autonomous work in a collaborative setting, we are doing collaborative work in more and more autonomous (or at least geographically distinct) settings. This is the Shift.

As far as proof points for the arguments, consider the trends towards globalization of industry (and therefore a more distance-collaboration-sensitive market) that are an inevitability of the flattening effect of world commerce, outsourcing and off-shoring of labor and other tasks, and an increasing trend towards telecommuting, flexible work arrangements and work-at-home roles. JetBlue stay-at-home call center agents come immediately to mind.

A factor (that I hadn’t really considered until recently reading more about the major impact on the global workforce composition by the retirement of the baby-boomer generation) is that there will be a shortage of skilled labor in many areas that will mandate new tools to allow retired boomers to selectively participate in the workforce.  If these gainfully-unemployed retirees are to be courted in this soon to be ‘sellers market’, the successful ‘buyers’ will be those that provide the tools for frictionless distance collaboration from their balmy retirement locations.

Having recently ‘pitched’ a room full of senior citizens on new technology trends, I can assure you that they are disinclined to buy a computer (if they do not already have one), much less create an avatar.  They are comfortable with the traditional workplace metaphor described above, with autonomous-work/shared-environment, so any tools that are developed for them must be painfully easy-to-use and consistent with their ingrained habits.

(addendum- Some people have mis-interpreted this prior paragraph to imply that I am making some ageist comments about the technical abilities of people older than my 40-year-old-self.  Before everyone gets more fired up than they already are, let me assure you that I have worked for/with/managed young and old alike who are technophilic or technophobic, and that age has little to do with it.  I will say, and gladly stand by, that my six and three year old daughters are more inclined to go-to-work as avatars than nearly all people I work with regularly in Silicon Valley.  The point being, we need easier to use tools that leverage workplace metaphors we are all familiar with, not something orthogonal and disruptive. Unless you are three or six years old, at which point, 'disrupt away')

To return to the Shift, what tools will we need to develop to enable technophobic retirees to participate in a Hollywood-style of work?  Is it easy video-conferencing, shared whiteboarding, avatars?

Suggestions welcome and encouraged.

[Mirror post from Cisco Blog] Metaverse Roadmap and MetaverseU

From February 15th through February 17th, people from industry and academia gathered at Stanford University to participate in two events.

The first was a continuation of the excellent Metaverse Roadmap work that had started two years ago, which is an attempt to capture and forecast the coming changes in the user interaction model with the Internet.  If you haven't read the original MVR, you can find it here.

The second event was (or rather 'is', as it is still underway) the MetaverseU, which is a combination of presentations and open discussion covering various facets of the virtual worlds, augmented reality, and lifelogging, with a particular focus on the human factors and societal impact of an idealized Metaverse.

The event is being streamed live (and freely) into Second Life here, and Henrik Bennetsen has taken a further step of creating a time capsule of where we are in this technology cycle by interviewing all of the participants and attendees with four questions regarding the best and worst things of current technology, and the opportunities and unforseen downsides of the future adoption of same.  His interviews will be published on YouTube under the group 'MetaverseU', as well as tags on Flickr and elsewhere tagged 'MetaverseU' Henrik has also blogged about what he is doing on the MetaverseU blog here. 

It think this is a good example of forward thinking in being able to tag content distributed around the Internet as a distributed transcript and record of the event.  Consider it 'Distributed Lifelogging'.  Now, if we could incorporate Twitter and Second Life chat transcripts.....in one portal.........