Little Brother. All Grown Up.

My how times have changed. Apple, the once rebellious younger sibling of the digital revolution has grown up, and finds itself now the leader of the industry. Apple is now the most valuable American tech company, with the market cap being raised higher with the successful launch of the iPad, and the massive quantity of orders for the iPhone 4. Hard to believe only a decade only, Apple's market cap was a meager $20 billion, compared to Microsoft, topping out at over $500 billion. It seems today they've split the difference, with Apple trending upward, and Microsoft struggling to pull itself from its current downward spiral.

The good news for Apple doesn't stop there. Apple is now also the #2 e-retailer, behind only Amazon. The wild success of iTunes and their app-based software model has been so great that it's spawned an entirely new niche in the design community, and has given Apple an exclusive, captive revenue stream.

While all this news is great for Apple, it has seemingly begun to cost them their reputation as the 'little guy', and has seen them adopt some business practices that would make Bill Gates proud. From barring Flash on their hand-held devices, to their strict control over the App marketplace, to the increasingly secretive nature of the company, it's clear Apple has closed ranks around their products and software. While these moves have been extremely unpopular, especially among the tinkerers, hobbyists, and of course, fanboys, they make a great deal of sense -- from a corporate perspective.

Parity in the Marketplace

While the perception of Apple has always been that of openness and transparency, their practices have always shown something quite different. Whereas Microsoft focused on software, Apple only allowed their software to run on their hardware -- a surprisingly odd move that has both helped and hindered Apple's growth throughout the years. The high cost of their hardware, when compared to plenitude of cheap PCs available, cost them many potential customers, particularly in the business sector. The widespread adoption of Windows, and the compatibility difficulties between platforms relegated Apple to the design community, who benefited greatly from Apple's smooth performance and speed running design software. Lucky for Apple, this small but dedicated community kept Apple afloat during the Jobs-less years of the 90s. Indeed, Apple's recent jabs at Adobe seem hardly any reward for the huge part Adobe played during Apple's leanest years.

When Jobs returned to Apple, so did his pioneering vision and his love for gorgeous hardware. His first move was to ban the beige. Banished were the beige boxes that dominated desktop design, and in their place came a Skittles bag of smooth, plastic, candy-coated computers. That playfulness evolved into professional-ness with the sleek grey G4 and the later the hardcore, heavy-metal industrialism of the G5. Not only were these some of the fastest computers of their day, they were also seriously cool. And cool reached new heights with the iPod and iPhone. Indeed, i remember the day when one couldn't pull out one of these devices without being swarmed by gawkers, all wanting to touch these new gadgets.

Just as these devices have catapulted Apple to the top of the market, they've also shown the way to the competition. While it still has a cool factor, the iPhone is no longer the only, or even the best smartphone on the market. HTC in particular has garnered a great deal of press with their smart design and excellent performance. The same can be said of the PC market, which has followed Apple's lead and put a greater emphasis on design and performance, and has produced machines that are not only more powerful than Apple's, but thousands of dollars cheaper. Even Windows has gotten smarter, and has produced a lighter-weight, better performing operating system (after 2 lackluster attempts) with Windows7.

These facts would all seem to bode poorly for Apple, yet this news comes when they've reached a Zenith in both market share and market cap. Some forecasters have seen these trends as a reason to short Apple, but Apple is banking on something other than hardware performance to drive the market. They are banking on the importance of User Experience

Shaping the Digital Landscape

Apple broke new ground with both their device and the software model they created with the iPhone. While Blackberry was first to capture this market, their devices never had the cool factor, and the OS was merely a stripped down web browser and email client. By creating this app-based model, Apple opened up their marketplace to developers seeking to provide application for users on the go. They threw the doors wide open, and even Google was quick to adopt a similar model with their Android platform. The main difference, however, between the two, is Control.

And one place Apple couldn't control was the web. Flash, in particular, posed a problem. Since Apple couldn't control the security, performance, or capabilities of Flash websites, they needed to change the landscape. Many complicated, application-based websites (like Basecamp or Facebook) involve Flash or a more complicated user interface that is difficult to use on the iPhone. The need for Apple to ensure a better user experience led them to their app-based business model. While Flash was a natural choice to be the main authoring platform for Apps, and such was the case, Apple didn't want Adobe to have so much control over it's devices. When Apple made this impossible, they also removed Adobe from the food chain.

In his open letter to Adobe, Steve Jobs stressed the importance of the user experience. He notes than an App which performs poorly on the iPhone and causes the device to crash, would reflect poorly on Apple -- quite a legitimate concern. The incongruity between touch and mouse-based interaction aside, Flash often does perform poorly on Apple devices, and this would be particularly frustrating in a mobile platform where one cannot multitask. If such frustrations were widespread, the iPhone would have flopped. When considering these factors, Apple's control over the development and distribution of their Apps makes a great deal of sense.

Experience is Everything

With their control of both the hardware and the software, Apple has complete control of the user experience. In a market where their hardware no longer stands out (quite) as much, Apple is banking that a superior user experience will be the driving force behind their sales. This philosophy has been with Apple since the beginning, and places Apple in a unique position in the marketplace -- one that let's them maintain this huge level of control. Apple's control of the process, from the languages and tools the developers uses to the closed marketplace in which the apps are sold, is what makes their experience more unified and simple. Their control of the marketplace allows Apple to set the price and the content, while simplifying the end user's shopping experience through the use of their Apple ID. As any web developer will tell you, a great deal of users add items to their cart, but fail to complete the checkout process. By practically removing the checkout process, Apple's centralized approach undoubtedly increases conversion rates and ultimately produces more sales. If mobile users were forced to repeatedly enter credit card and personal details, not only would their satisfaction with the shopping experience decline drastically, but their data would be much less secure.

While Google has similar control with the Nexus phone, allowing Android to be used on any device means they can't control it's performance from device to device. The same can be said of the Apps built on Android, which don't need to follow such a rigorous approval process, or have a centralized marketplace. Failures along any of these paths hurt the perception of Android. In the end, Google's 'open' philosophy will lead to a less consistent, less satisfying UX. Apple makes note of this in the video below.




In the end, the user experience will trump all. People already pay a premium for Apple products because of their performance and reputation, and Apple knows that only by controlling the entire chain can they guarantee this high level of performance... and their margins. For indeed, selling 2 million iPads and a further half million pre-orders for the new iPhone means a great deal of revenue, but making yourself the exclusive provider of apps for those devices is the real genius of Apple's strategy. While it makes Apple harder to like as a company, it will hopefully help ensure that we'll continue to enjoy using their products.