Total Pageviews

Sunday, September 8, 2013

Disruptions: Apple’s Next Unveiling Could Make or Break a Business

On Tuesday morning, about 200 people â€" most of them from the news media â€" will gather in a Cupertino, Calif., auditorium to watch Timothy D. Cook, Apple’s chief executive, unveil new iPhones.

The people who make it their business to know these things say they expect Apple to reveal a long-awaited, less-expensive iPhone to woo buyers in emerging markets; a few brightly colored alternatives â€" yellow, blue and even pink â€" to entice teenagers; and a higher-end, gold-and-graphite model to draw those who enjoy spending lots of money.

Of course, the news coverage will be comprehensive. And you will be able to split the followers of the reporters’ blogs from the event into three categories: Apple fans; entrepreneurs who hope they can take advantage of new phone features; and rival technology executives worried that Apple could render their businesses irrelevant in one move.

These annual iPhone unveilings have become a sort of Creative Destruction Day in Silicon Valley. Remember all those companies that were making nifty little digital video recorders? There aren’t many of them left, after Apple added video recording to the iPhone in 2008. And with every even slightly improved iPhone that adds features or services offered by others, Apple has tightened the screws on a long list of companies, including other smartphone makers like Nokia and BlackBerry and gaming companies like Nintendo.

The economist Joseph Schumpeter coined the phrase “creative destruction” in 1942 to describe the less-than-tidy way free markets lead to progress: the telephone replaced the telegraph; the cellphone replaced the telephone; the smartphone (we’re still in the middle of this one) is replacing the cellphone; and so on. Something gets destroyed and something new and exciting is built on top of it.

Perhaps no other recent product has been quite as much an agent of destruction and renewal as the iPhone, with its long list of features and access to a store of nearly a million apps that can handle thousands of functions.

Need a calendar, a phone book or even a notepad? The phone will do it for you. Forget those pesky paper varieties. Want to take a high-definition photograph, record an interview or play a video game? All you need is your phone. No need for any other single-serving cameras or video recorders.

“By the time it’s become obvious to competitors, once Apple has taken the world by storm, then it’s a little late to start mounting a response,” said Rita Gunther McGrath, a professor at Columbia Business School who studies innovation at big companies and is the author of the book, “The End of Competitive Advantage.”

So what else is likely to be disturbed by the iPhone and other smartphones? Expand the question beyond technology and think about smartphones competing for all kinds of consumer dollars. Ask some 20-somethings if they would rather own a cool new car or a cool new smartphone. They’ll pick the latter, as car manufacturers are learning.

“The iPhone is the Ford Mustang of today,” said Thilo Koslowski, lead automotive analyst for Gartner Research. “These devices offer a degree of freedom and social reach that previously only the automobile offered.”

While some might see the iPhone as a destroyer â€" if you work for Nokia or BlackBerry, for example, you will most likely share this view â€" there are others that see it as a creator. The apps store connected to the iPhone has allowed thousands of small businesses to thrive. And a handful of them, like Rovio, the maker of the Angry Birds game whose headquarters is not far from Nokia in Espoo, Finland, have become large companies.

“Competing has become so cheap and has been pushed down to such individual units, like app makers” that “what formerly required significant overhead to be successful is now trivial,” said Nicco Mele, who teaches classes on the Internet and politics at the Kennedy School of Government at Harvard, and the author of the book, “The End of Big: How the Internet Makes David the New Goliath.” “The rise of app makers has allowed anyone to compete with a corporation from home.”

There is a scary side to that, of course. The destruction and renewal upon which the tech industry has thrived has accelerated thanks to the Internet, cheap smartphone apps and lower costs of doing business. Facebook, for example, which in just a few years has gone from a start-up to one of the most powerful companies in Silicon Valley, has to constantly be on the lookout for the next big threat. And when it can’t take those competitors out at the knees, it buys them, like the photo-sharing service Instagram.

So who is safe from the perils of the smartphone? No one, it seems. Not even Apple.

The company is no longer the king of the hill in smartphones. Sure, when a new iPhone is unveiled on Tuesday, it will get outsize attention, and competitors will scramble to copy its latest features.

But these days, Samsung sells the most smartphones, and up-and-coming manufacturers like Huawei and ZTE are nipping at Apple’s heels. The new iPhones â€" at least the ones being spun from the rumor mill that claim color as the big innovation â€" do not exactly sound like great leaps in technology.

That is the thing about this notion of creative destruction: You never know quite know when you stop creating and get destroyed.