This Week in Tablets: Tim Cook and Apple reinforce a time-tested business lesson with the new iPhone

September 28, 2013
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This is the obvious-but-not-always duplicable lesson of the last two weeks, rendered in crystal-clear fashion by two companies, each operating at the height of their capabilities.

In a single week, three products—Grand Theft Auto 5, the iPhone 5c, and the iPhone 5s—collectively generated well over $4 billion in revenue.

Sometimes, the scale of the economy we live is simply mind-boggling. GTA 5 sells 17 million copies. Consumers buy 9 million iPhones. These are literally crazy numbers. What’s even crazier is that the numbers for Rockstar and Apple are going to get even bigger as we move into the holiday season. And we haven’t even factored in the new iPad(s) yet.

In the case of Rockstar and GTA, the game developer delivered exactly what gamers—mainstream, core, and everyone in between—wanted: Controversy, freedom, and a violent, mature, and authentic-feeling experience. (And an iOS app).

In the case of Apple, the company turned a potentially bad situation—no one buys the new iPhone because iOS 7 essentially turns your old iPhone into a new one—into a winning hand. The vector? Appealing to the mainstream masses with a colorful marketing hook while simultaneously commanding the core geeks’ attention with power, speed, a better camera, and increased password management in the form of fingerprinting. These are the major touchpoints of smartphone usage.

At the same time, Apple also created a reason for all the people who didn’t buy a new iPhone (like me) to stick around for a while. I don’t think it’s going out on a limb to say that Apple CEO Tim Cook just passed his first big test.

Again, we haven’t even gotten to the new iPad yet. Given the above, it’s no wonder Apple was forced to reiterate its Q4 earnings forecast, with an emphasis on coming in at the high end of the revenue targets. It’s also no wonder that, if you counted Apple’s iPhone business by itself, it would make more money than Procter & Gamble, Coca-Cola, and even Google.

Simultaneously appealing to both the mainstream masses and phone geeks is a big part of the reason Android has succeeded. It’s also been a key part of Apple’s success. Even if the company does position itself as a more premium-tier product, mainstream buyers are perfectly willing to shell out dollars for premium products.

In an established position of authority, meeting demand with an excellent product is always a winning formula.

Microsoft goes the other way

This is one of Microsoft’s biggest challenges in the changing world it computes in. Xbox notwithstanding, Microsoft has traditionally relied on brute force, necessity, and exposure in the workplace to fuel sales of its products. If you have Windows and MS Office at work, you’ll probably buy it at home, the logic goes.

It’s why when I read stories about Delta Airlines agreeing to buy thousands of Microsoft’s newly announced Surface 2 tablets for its pilots and employees, I can’t help but wonder whether a tactic that worked so well with Windows and Office will work again now that consumers have such great alternate choices in the form of Android and iOS devices, and—more importantly—experience satisfying levels of interoperability thanks to third-party apps and the cloud.

As an aside, Microsoft did a lot right with its announcement of the Surface 2 and Surface 2 Pro earlier this week. There’s a lot to like here, and the leaner, lighter Surface 2 Pro in particular feels like ready for corporate deployment. The Surface 2 RT? I’m not convinced, particularly at almost $500.

This week’s loser: Los Angeles Unified School District

The same lesson applies to this week’s loser. Months ago, I lauded L.A. Unified for buying iPads for all of its students. Unfortunately things unraveled a bit this week. A number of high school students in the first wave of iPad recipients apparently altered security settings on their school-supplied iPads in order to visit sites like Facebook and YouTube.

As a result, the school district has halted all off-campus use of these iPads. It’s a losing maneuver, and not only because kids are already using Facebook and YouTube and just about everything else under the sun.

No, it’s a losing maneuver because by restricting what these kids can do on their iPads, administrators are restricting the educational possibilities as well. The ability to browse and discover things across the vastness of the Interweb is mind-expanding all by itself.

It may also be a losing maneuver because now people are beginning to question how well thought-out this tablet deployment was in the first place. Friday’s Op-Ed section of the Los Angeles Times issued a scathing criticism of the lack of planning on the school district’s part.

Regardless of all of the above: Giving kids what they want here—and yes, some of it is non-productive fun time—will pay off in the long run regardless. Preventing kids from using them after school isn’t going to help anyone.

(Caveat: I have no problem blocking access to adult sites, but I also know that kids will circumvent whatever measures anyone puts into place, and they have phones and computers as well.)

This week’s winner: Air travelers

We’re that much closer to being able to read our tablets and ebooks, and work on our laptops during take-off and landing. This week, a 28-person committee acting on behalf of the FAA recommended that passengers should be allowed to watch videos, work on documents, and listen to music when their planes take off and land.

The only recommended restrictions for these launch/landing windows is that data-serving and voice calls should continue to be prohibited.

If the FAA takes these recommendations, it means we could experience these new freedoms as soon as 2014.

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