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As usual, January’s MacWorld crowd was abuzz with giddy excitement about Steve Jobs’ latest announcement. This time it was the iPhone, a stunning and potentially revolutionary phone/computer combination. What was Jobs up to with this latest offering?

Details about this revolutionary new “smart” phone were strategic and somewhat scarce. The iPhone would connect exclusively to Cingular, one of the prominent carriers in the United States. It would be available in June, following FCC approval.[1] Jobs specified target sales of 10 million units sold by the end of 2008.[2]

Amidst the media frenzy came the grumblings. Among them: iPhone is not usable as a modem, the battery is not replaceable by purchasers, the “computer” part of the smart phone doesn’t have much internal storage and does not connect to an external storage device, and the device has not been–and may not be–opened for development of third-party applications.[3]

The nature of the “revolution” that this new device represents is also a subject of some speculation. Dreams by industry analysts of Apple becoming a competitive cell phone carrier (or MVNO, a mobile virtual network operator)[4] may have been dashed by Apple’s five year partnership with Cingular. However, details of the relationship are beginning to float to the surface. The traditional model of current cell phones, subsidized by the network carriers, is not present in the deal between Cingular and Apple. This gives hope to some phone and device hardware manufacturers.[5] The trade-off is that Apple is demanding a much higher level of interaction with, and control over, its customers. This includes “a percentage of the monthly cell phone fees, …how and where iPhones could be sold, and control of the relationship with iPhone customers.”[6] Apple is proposing a similar deal with Rogers in Canada.[7]

What exactly is Apple’s business model behind their “revolutionary” new device? What does this mean for the cell phone-toting business community of the future, if anything?

Two major concerns have come to the fore, related to Apple’s history and established practices. First, Apple has indicated that they want a role in managing network safety and security. “You don’t want your phone to be an open platform,” meaning that anyone can write applications for it and potentially gum up the provider’s network, says Jobs. “You need it to work when you need it to work. Cingular doesn’t want to see their West Coast network go down because some application messed up.”[8] What this really means to the Apple iPhone business model is as yet unknown.

Second, Apple’s version of DRM continues to control what goes in and out of this new device. This level of control has two vectors: control of content to external, non-Apple devices and a lock on the network between Apple and Cingular.[9] Dubbed “the roach motel business model,”[10] commentators have noted that “customers check in, but they can’t check out.” Apple continues to “lock” content to their devices. With respect to the first vector, the ability to lock a device to a network is currently under scrutiny in several district courts across the nation. With respect to the second vector, the jury of public opinion is still hearing the case for DRM.

What the future business model of Apple’s iPhone will be is, on many levels, up in the air. Steve Jobs may be certain, but his official future is not yet written in stone.

FOOTNOTES:
[1] See iPhone Introduction video with Steve Jobs; also bits of transcript from the keynote floor.
[2] ibid.
[3] How Steve Jobs blew his iPhone keynote
[4] Tech Trader Daily – Barron’s Online : Apple To Introduce MVNO Wireless Service In ‘07, UBS Says
[5] How Apple could rock wireless
[6] Verizon rejected Apple iPhone deal
[7] Cingular/Rogers Not Subsidizing iPhone Cost?
[8] Apple Computer Is Dead; Long Live Apple
[9] Want an iPhone? Beware the iHandcuffs
[10] iPhone – the roach motel business model

Network Apple, closed network, iphone

When I think of “boundary spanner”, I think of my days as an R&D engineer n the 1980s and 1990s. At Plantronics, the design department would often come up with engineering change orders (ECOs). I know that sounds bad, but we had to do it. I preferred designing microphones, but the sexy part of the job is only about 10%. The rest of the time, you have to respond to day to day reality. Management wants you to reduce costs. Quality control wants you to reduce defects. Suppliers come up with innovations that you need to adopt to stay competitive. Suppliers flake out and deliver reject parts and you have to find substitutes… there are all sorts of reasons. So when we needed to push through an ECO, lots of people in the organization had to sign off. This was before ISO 9000 but I believe the big customers demanded that our operational procedures were orderly and well documented. I’m pretty sure it’s the same way in electronics companies today. Want a tangle-resistant curly cord? The new cable uses a slightly different color jacket; marketing has to see a sample before they sign off. Oh, the connector is slightly different? Manufacturing needs to try it out. Did you check if you can flex that cable a zillion times? There’s a box on the drawing where someone with a thankless “quality police” job has to make their mark. One day my boss asked about my weekly “done/to-do” list. What’s this item, “persuaded manufacturing to sign off on ECO”? “Well”, I replied, “they weren’t sure they could make it work; I had to step them through how to finish those headsets for the German telco”, The boss was visibly unhappy with me. “I don’t understand, you’re supposed to do your job and you shouldn’t be spending time persuading anybody of anything.” But the design wasn’t done until everybody signed off on it. I could never figure out why he reacted that way. Anyway, presumably, our salesfolk and their customers in Germany ended up happy.

Another adventure in boundary spanning was when I worked for the electromagnetics lab at SRI International in the 1990s. Honestly, I could never compete with all the superstar programmers and PhDs. So I was always multi-tasking, working on projects while eking out funding for the next one. One day, a request for proposal came in from an oil company that wanted to know if they could use microwaves to clean up oily drill cuttings and recover the oil. (Short answer: You can, but it’s not necessarily safer or more cost-effective than using an open flame.) Anyhow, the oil company didn’t want to foot the entire bill by themselves, so their lead person and I put together a mini-consortium with three other oil companies and a maker of huge microwave ovens. Flying to Kentucky to crawl into giant ovens was the easy part, compared to getting a bench in a chemistry lab. I needed to do it in a test tube before we could estimate the throughput at full scale power. Someone suggested “just go through channels”. Forget it. My executive vice-president (four levels up from me) and the chemistry lab’s EVP (four levels up from them) were two different people. An official decision was going to have to come from the CEO! Give me a break. That guy never heard of me, and pretty much anybody at any level could object. Anyhow, I wandered around the chemistry department and found an empty bench, and managed to persuade (there’s that word again) a director-level chemist who had the keys to that room. There wasn’t really anything in it for him. I think I told him “you can write in your departmental annual review that you encouraged interdisciplinary research by facilitating cross-organizational cooperation”. It worked. I think he might have winked at me when I said that. I don’t know if he ever bothered telling his VP about it, but he made sure that an admin would let me into the lab when I needed it. I doubt if anybody but me remembers the whole affair. But I made sure there was money to pay my salary, plus a bit more for the chem lab’s expert glassblower, without dipping into anybody else’s budget. And the oil company engineers got their answer.

post by Michael Gold, Senior Research Engineer, SRI Consuting Business Intelligence

Identity boundary spanner

A boundary spanner is variously defined as one who blurs, disregards, reaches across, and otherwise “spans” the edges or “boundaries” of concepts, departments, programs, jobs, roles.

Rarely does management appreciate the strengths and skills of their boundary spanners. Too bad. The spanners are the oil in the machine.

Here’s a good description.

Identity, Life boundary spanner