Good Morning, today week 3 begins. Posting my study done
NEGOTIATIONS WITH TELEPHONE CARRIERS RELATED TO APPLE PHONE
1. Steve’s impression of telephone carriers, much before Apple phone was conceptualized: Steve discussed “stupid phone carriers” with the author way back in 1997. He mentioned they were so bad that he will never do business with them.
But he was also aware that working with them was the only option to get phone handset in the market. And it was the market that could not be ignored. By 2004, worldwide unit sales of cellphone handsets were around 500 million units a year and growing – much more than PCs, iPods and PDAs combined.
2. Alternative to dealing with carriers, considered and rejected: It was possible for Apple to operate its own carrier network by using “mobile virtual network operator”(mvno) technology. This could be done by integrating technology after leasing wholesale wireless capacity from telecom giants. When company called “Sprint”, with expertise in this technology, approached Steve, he rejected the proposal however. Operating a network was a complex and transaction intensive business. Operating this kind of business was way outside Apple’s area of expertise. So finally Steve asked Eddy Cue (person responsible for Apple’s online businesses like iTunes) to start knocking on doors of carriers.
3. Major obstacles in negotiating a successful deal with carriers: Steve wanted Apple to have complete control over handset. User experience for the mobile phone involved iPod functionality and Internet client functionality, all using multi-touch screen. Further, good internet client required that screen would take up entire front surface of phone.
These functionalities were utterly different than anything consumers had experienced before. Despite novelty, Steve thought this was doable [based on iPod experience and phone related prototypes]. However, since it would take few iterations before reaching perfection, so he wanted carriers to have their hands off the design process. This would give Apple freedom to experiment, without its engineers being second guessed. So in the nutshell, carrier had to commit to a deal without knowing all specifics of the kind of phone Apple would finally deliver.
4. Failed negotiations with Verizon [iPhone was first sold through AT&T]: Apple knew Verizon through consulting they did with them, related to Motorola’s ROKR (though Verizon didn’t end up selling ROKR phone).
Verizon however was very tough, and considered cellular as their playground. And therefore wanted Apple to play by their rules. This completely eliminated the option for Apple to control phone’s UI.
5. Overview of negotiations with AT&T: They weren’t as tough. Compared to Verizon they had more customers, but their network had spotty coverage. In their first discussion Jobs and Cue spent 4 hours with Ralph de la Vega and Glenn Lurie in AT&T. They liked them right away.
They were hungrier and wanted to show what they were capable of. And so the relationship was started that same day.
6. Further details of iPhone related discussions with AT&T: Steve showed AT&T folks that iPhone would increase the consumption of wireless data bandwidth. Reason for spike was given as very good browsing interface being planned for iPhone. It would have made mobile do almost anything that could be done with Desktop browser. Touch screen making unmodified, full featured Internet websites usable anywhere.
Other possibilities included download and sharing of photos, email, editing and managing of documents like sales contacts, etc. Of course, they could purchase and download music from iTunes stores, send or receive text messages, make video calls, see videos and movies online etc. For last, reference of YouTube was used.
Plus, according to experience of Steve with technology, there can be possibilities that were not even being imagined right now [in retrospect Uber]. The possibility of huge spike in data led Steve to ask for cut from AT&T’s data revenue of iPhone. He wanted to be compensated for bringing extra business. Giving example of 30% being taken from music sales, this compensation plan was proposed.
7. Analyzing the Apple-AT&T deal: Apple’s demands were very bold. And AT&T in return could boast of a phone from hottest gadget manufacturer in the world, something none of the other competitors could.
In retrospect, Steve got what he wanted, perhaps a little bit more than what he should have got.
- Unprecedented freedom to produce, almost unseen till the very end.
- Apple could set the prices of new phones, and AT&T could not change or discount.
- 10% of data carriage revenue, since iPhone will drive data usage. Revenue applicable till the duration of iPhone service contract.
For the first time here, handset maker could receive percentage of fees from carrier.
Later however the carrier plan was changed, and Apple got full price of phone, even though AT&T sold $200 below retail. But with this AT&T could keep all the data usage fees. Since the handset payments were spread over two years by accounting rules, Apple was able to buffer ups and downs of data usage and smoothen out its revenue streams.
Some analysts are of the opinion that this deal was even better than the original deal.
8. Learnings from iTunes development, that were applied to AT&T negotiations: From iTunes negotiations [with music companies], Steve was able to understand the extent of power Apple commanded. .
Even though he could provide AT&T what no other handset maker could, he did not overreach. He gave them what they wanted, but in terms which made Apple very, very, rich.
Cue was handling day-to-day business of the relationship. To prevent Motorola like experience, he was in touch with AT&T’s Glenn Lurie on day-today basis.
This deal has worked so well for Apple that by estimates of some analysts Apple now pockets 80% of entire cellphone handset business.
ROLE OF WORK RELATIONSHIP BETWEEN STEVE JOBS AND JONATHAN IVE IN iPHONE DEVELOPMENT
9. **Priorities of Steve in the most productive period of his life (2004 - 2008): **Priorities included family, small group of friends, and people in work who could abet company’s mission. Most importantly, he pared down his life so that he could devote maximum time to specific aspects of his work. Steve was deeply focused during these years.
10. Summary of the work relationship with Jonathan: Much of Steve’s work life in last decade was around his collaboration and deep friendship with Jony Ive. They were extremely productive, and got along even when they disagreed. And unlike previous work relations, this relationship was not roller coaster.
It was unlike anything the two had experienced before. Plus it weathered Steve’s illness and also transitions in company.
18. Beginning part of relationship: First time they met in 1997. At that time when Steve walked in, Jony thought Steve had come to fire him. Later however, Steve told author that he immediately liked Jon for his taste, judgment, and ambition. Jony on the other hand remained intimidated during that first year. Reputation of Steve was that he fired employee for doing a single thing wrong.
Overall, Jony enjoyed working with Steve on very first iMac, but always felt self-conscious when describing design decisions to Steve. This mindset of Jony changed after their first visit to Pixar. In Pixar Steve introduced Jony to all Pixar employees. And from that introduction Jony realized that Steve and him were at same wavelength. Basically, Steve could articulate what Jony understood only at an emotional level.
19. Elaborating on the commonality between Jony and Steve: Over a period of time, it became clear to Jony that Steve had even more sophisticated and intuitive sense of why unusual design made sense. And this too at a very early stage of product, before it was announced or shown to anyone outside Apple.
Jony on the other hand could feel design related things intuitively, but could not articulate that intuitive feeling. The fact that he did not have to explicitly justify his decisions to Steve, made it very easy for him to collaborate with Steve Jobs.
Steve would get Jony’s idea, which latter communicated in somewhat unclear terms, and then re-articulate same idea in a way Jony could not. While Jony got better at articulation, he thinks he never reached same league as Steve.
20. Opportunities two had to collaborate on various products: Moore’s law made electronic components more and more capable. This created the need to redesign Personal Computers constantly. And this improved Apple’s metabolism, since Personal Computers were always work in progress. iPod accelerated that cycle.
Because of this rapid growth, Jony and Steve could never pause for long after shipping. Instead they constantly collaborated, and as a result their work relationship deepened. While they created a product, they learned many things in the process of creation. And new cycle gave them opportunity to apply these learnings for next release. Integrating and applying ideas into these faster cycles was deeply satisfying challenge for Jony.
They considered learnings even more valuable than the product. These learnings creating the need to demand more from yourself and others, and that in turn yielding amazing results.
21. How this incremental product development impacted Steve: Ive believes each successive product development cycle fuelled Steve’s unquenchable restlessness. Due to the learning curve during development, each product somehow fell short. So Steve turned the incremental development into ongoing quest for perfection. What was left behind [in development] being used as a basis for next improved edition.
22. Exploring causes of increased restlessness in Steve during the most productive period of his life: Ive, Tim Cook, and Steve’s wife Laurene believe that Steve came back from 2004 operation [of Pancreatic cancer], with “more focused that ever” outlook. There were discussions around seeing Reed [Steve’s son] graduate, and how the medical tests were. But Ive does not think illness can motivate a person to such an extent. His opinion is that iPhone created the prospect of selling hundreds of millions of units on a single product. And this prospect was a huge change for Apple, given its mostly turbulent past. He thinks that this prospect is what motivated Steve Jobs.
Ultimately though one factor of success was even greater than number of units sold, share price etc., because those factors were greater for Windows . Personally for Steve and Jony, it was the pride in designing and building great products that mattered.
23. Facts that created pride Jony and Steve could cherish: It wasn’t about numbers of units or “I told you so” type validation. It was a sense of trust in humanity which success of iPhone and iPod created. Trust derived from the fact that when people were given choice, they are able to discern and value quality. And through this interpretation of their mass product market, they were able to feel connected to all of humanity.
So to summarize, illness was only a small part of motivation. Momentum that Apple had gained was the greater motivation for creativity and success.
24. Their work relationship when design and development of iPhone was started: At the time Steve and Jony were closer than anyone they had worked with before. They became straightforward, and often did not articulate reasons as to why particular idea is valuable or terrible. They did not worry about each other’s feelings so much.
25. Reaction of colleagues to the growing closeness between the two, and the truth: Some in the executive team thought that Jony had unwarranted sway over Steve. After Steve’s death there were more and more unaccredited stories like Jony was the one who decided who got fired or promoted.
Truth however was that Steve prioritized every aspect of his life ruthlessly. He made clear decisions about what mattered, and what did not. And for reasons already mentioned (23. Of Week1), friendship with Jony mattered. This relationship in retrospect proved to be as big as Steve’s ambition.
26. Further elaboration of the close work relationship: Jony thinks it was more than just their shared views on design. They actually viewed objects in environment, people, and organizational structures in the same way. Beauty for them was not just symbolic, or even conceptual, it represented progress.
Only for design, Steve a CEO would not have spent so much time with Jony.
For Jony loveliest memories are talking at a very abstract level. Talking very philosophically about the aspects of designs. That is, in ways most people do not talk. With engineers who were otherwise brilliant, he could not talk in such philosophical terms, since this was not their focus. In fact, when they talked in such terms in front of other people, “there they go again” was the kind of reaction Jony saw in their eyes.
27. Examples of their interactions on particulars of iPhone: When Jony showed his design of bracket [here meaning phone’s back casing], Steve would watch it very carefully by removing his glasses. Noticing even things like special screws. iPhone had flattened screws, and such hardware components made it almost like a piece of jewelry.
Examples like these, make iPhone as the physical manifestation of friendship between Steve and Jony.
29. Concluding on the impact Steve and Jony had on iPhone: The contributions to iPhone development ranged from people like Tony Fadell to Greg Christie to Foxconn workers in China. The inventions and engineering breakthroughs are also too numerous to count. But the fact is that it could not have been made or even imagined, without Steve and Jony working closely together.