Apple: 10 Things It Needs To Do In 2009

Like the rest of the business world, Apple is embarking on treacherous times in 2009. But Apple faces special challenges: It sells boutique products that cost more than the competition.

However, Apple also has special strengths: Those same products cost more because they're better, and Apple has a fiercely loyal customer base.

To help Apple successfully navigate the turbulent financial waters, here are 10 pieces of advice on what the company needs to do with its operating system, iPhone, App Store, hardware, marketing, and more.

1. Build A Moat Around Apple Headquarters, Fill It With Crocodiles

Apple set off a bit of a foofaraw in December when it announced it was pulling out of the Macworld conference. The decision set off a wave of theorizing why they were doing it. But the real reason is pretty simple.

CEO Steve Jobs's role model is Willy Wonka. He wants to lock himself up in Apple's Cupertino headquarters and not have to talk to people anymore.

Macworld Expo is expensive, and Apple just wasn't getting the payback for it.

More importantly, Macworld Expo is outside of Apple's control; it's run, not by Apple, but by International Data Group (which competes with InformationWeek's parent company, United Business Media). The Apple community expects a big announcement out of the conference, and Apple would rather roll out announcements on its own schedule.

Moreover, Macworld gives customers and developers Uncontrolled communication with Apple, and Apple hates that, says John Welch, an IT manager, blogger, and sometime InformationWeek contributor, in a profanity-laced blog post. Apple "HATES unmanaged random customer contact," Welch says, and clarifies: "Apple doesn't want to talk to you. Apple has never wanted to talk to you."

Apple wants to limit its contact with customers to the Internet and to the Apple Stores, which are as orchestrated as Disneyland, Welch says. Developers get access to Apple at the Apple-run Worldwide Developers Conference in the summer.

Welch is right -- but I don't think he goes far enough. Apple doesn't just want to control contact with customers and developers, it wants to eliminate that contact entirely -- except for the contact involving customers handing over their credit cards and walking off with merchandise.

Indeed, Steve Jobs doesn't want contact with anyone -- not even Apple employees.

And that's the real reason Steve Jobs didn't attend Macworld this year. He hinted he skipped it for health reasons. But the real reason is that he's on an overseas excursion, looking for Oompa Loompas he can replace Apple's employees with.

Then, Jobs can build a big, wrought-iron fence around Apple's headquarters and chain and padlock the gate shut. After that, nothing will ever be seen going into Apple headquarters, and the only things that'll come out are Wonka Bars and Everlasting Gobstoppers Macs, iPhones, and iPods. Forever. 2. Give Users Something Shiny In Snow Leopard

Apple plans this year to introduce its next significant operating system update -- "Snow Leopard," a follow-up to the Mac OS X 10.5 "Leopard" operating system introduced in fall 2007. Apple's been making a big deal about how Snow Leopard won't have new features. Instead, they're focusing on performance and connectivity.

Snow Leopard will endear itself to IT managers by including out-of-the-box support for Microsoft Exchange 2007 built into Mail, Address Book, and iCal. It supports new standards for multicore processors, increased memory, and faster performance of media and Web applications. And Snow Leopard is designed to be slimmer than previous versions of Mac OS, creating more room on hard drives for documents, photos, music, and other data.

But performance improvements are boring. Fast performance is impressive for about a week. Then we just take it for granted.

Users don't just want performance out of an OS upgrade -- they want features. New, bright shiny things to play with.

Fortunately, I expect that Apple will include new features in Snow Leopard. Sure, they're saying now that Snow Leopard is just a performance upgrade. But this is exactly the kind of little white lie that Jobs loves to tell -- he'll go on and on about how Snow Leopard is just a performance upgrade, end-users will be bored by it, nothing to see here, move along, move along ... and then on the day of the announcement, he'll say, "One more thing..."

And if Apple can't deliver new features, at least it can cut down on the bugs. In the months following the Leopard upgrade, Mac users got hit with the "blue screen of death" and "green screen of death." When Apple upgraded to 10.5.6 in mid-December, users reported widespread crashes and blue-screens of death.

Mac OS X upgrades seem to be like Let's Make A Deal' -- sometimes you get a valuable prize; sometimes you get a live chicken. You run the "Software Update" utility and hope for the best.

3. Add Basic Features To The iPhone

The iPhone is like a brilliant genius who can perform calculus in his head but can't tie his own shoes. I like my iPhone a lot -- it lets me access most Web pages, do e-mail, keep up with Twitter and other social networks, take notes, keep a calendar, manage to-dos, take pictures, read magazine articles, manage my passwords, check the weather, listen to music, and watch videos. It's a pocket-sized miracle device.

It does all those amazing things really well -- so it's amazing that there are simple things it can't do.

The iPhone needs a clipboard, so you can cut and paste text and images between documents.

It needs

A few other features seem a little trickier to implement, but competing products have them, so why doesn't the iPhone?

Finally, the iPhone needs better battery life.

The iPhone does so many difficult things so well, why does it fall down on these apparently easy things?

4. Come Out With A Netbook

The iPhone demonstrates the value of a relatively inexpensive device that's easy to carry with you and gives you wireless access to the Internet and productivity and entertainment apps. It would be an even better device if the screen were a few inches bigger, and if it had a 10-finger hardware keyboard. It'd probably cost a few hundred dollars more than the iPhone, but it would be worth it for the added usability.

The machine we're describing here would be an Apple netbook. It'd be bigger and heavier than an iPhone, but smaller and more lightweight than the MacBook Air (which has a 13" display and weighs in at 3 pounds). It would have a 7-10" display, touchscreen and hardware keyboard, and be about the size and weight of a hardcover book. It'd be the kind of thing you could tuck into a gear bag and take with you everywhere you go.

The price would be between the iPhone, which sells for $299 maximum, and the $1,000 low-end MacBook. That relatively low price would be a factor in the device's portability. It would be priced low enough so that if it got lost, stolen, or run over by a truck, you'd be disappointed but you wouldn't have a heart attack, and therefore you'd be more likely to take it with you more places.

Jobs seemed to dismiss netbook plans in October, saying, "We don't know how to make a $500 computer that's not a piece of junk, and our DNA won't let us do that." But that statement leaves wiggle room. A netbook doesn't have to be $500 or less.

And a netbook doesn't have to be junk -- although it is, by most definitions, underpowered compared with a conventional notebook computer. A smartphone, like the iPhone or RIM BlackBerry, is underpowered compared with a notebook, but smartphones aren't junk. Like a smartphone, a good netbook trades performance for low cost and portability.

The Mac community has been buzzing with rumors and speculation about an upcoming netbook. Apple analyst Gene Munster of Piper Jaffray said he thinks Apple would do well to release an 11" MacBook Air priced at $800-$1,000 in 2009, followed by a similarly priced tablet Mac in 2010. Technology Business Research analyst Ezra Gottheil predicted that Apple will introduce a netbook at Macworld in January, although that prediction seemed unlikely, and turned out to be wrong.

A netbook would fill a hole in Mac users' gear bags, and in Apple's product line. Its relatively low price would be especially attractive in this tight economy. Apple needs to come out with a netbook this year. 5. Establish A Clear Path Of Succession.

Following his cancer treatment in 2004, rumors of Jobs's impending death pop up every few months. The latest round of rumors were kicked off by Jobs's announcement in December that he planned to skip this year's Macworld. Later on, Jobs disclosed that he is sick after all, but it's apparently not life-threatening).

Last summer, a hoaxter posted a report that Jobs had had a heart attack, and the stock price plummeted.

So far, most of the talk about Jobs's health has been rumor and speculation. However, one thing is for certain: Everybody dies. Including you, me, and Steve Jobs.

Also, Jobs might simply decide to retire one day. What then?

Every business needs a plan of succession for its leadership. That's especially true of Apple, which as a company is an extension of Jobs's vision. Apple needs to publicize a plan for what the company will do when -- not if -- Jobs is unable, or unwilling, to lead.

Jobs's decision to step aside from this year's Macworld keynote might be the first signal that Apple is drawing up a succession plan, says Vijay Rakesh, a ThinkPanmure analyst, according to Wired. In Jobs's place, Philip Schiller, senior vice president of marketing, delivered the keynote. Rakesh says there'll be a transitional period of six months until the new team takes over.

Jobs's life work is a great American success story. It would be tragic if it failed to survive him. Apple needs to disclose a clear plan of succession for Jobs.

6. Develop Low-power, High-performance Processors For Portable Devices.

Apple bought PA Semi, which makes low-power PowerPC processors that could be used in an iPhone or iPod, for $278 million in cash in April. Later in the year, Apple hired Mark Papermaster, a top IBM microprocessor engineer, to head up iPhone and iPod development at Apple, a move that got bogged down in court. Apple followed up in December by buying a $4.8 million stake in mobile chip maker Imagination Technologies Group, roughly a 3.6% stake in the UK company. Apple licenses Imagination's technology for making semiconductors for multimedia and communications devices.

What's Apple doing with all that microprocessor intellectual property and brainpower? Developing a high-performance, power-efficient, ARM-based system-on-a-chip, says the Apple blog 9to5 Mac. The chip would power a netbook, or similar device, with enough performance to run full-scale Mac OS X and with enough power to run for days on a charge. It could also find a home in the AppleTV.

Power consumption, and the need to recharge frequently, are obstacles to getting the most from mobile computing. A new line of homebrewed mobile processors could help Apple get a bigger place in users' pockets and gear bags. 7. Clarify Policies In The App Store.

The iPhone App Store is a smash success. Introduced in the summer, the App Store opened the iPhone and iPod Touch to sanctioned third-party applications for the first time. Until then, users who wanted to add additional applications to their iPhones and Touches had to either use limited, JavaScript apps that ran in the device's mobile Web browser, or hack their devices by "jailbreaking" them, a risky process which Apple fights with every firmware update.

But the App Store opened the iPhone and Touch, and users and developers responded in a stampede. By December, users had downloaded 300 million apps out of the 10,000 available in the App Store, according to ads placed in the Wall Street Journal and New York Times by Apple.

The App Store is a trade-off for developers. On the one hand, developers get access to Apple's sophisticated online sales and distribution system. No need to set up their own Web stores and provide installation instructions, Apple handles all that. But that access comes at a price; Apple takes a 30% cut of sales off the top.

And Apple places restrictions on the kinds of applications it will distribute. For example, Apple rejected Podcaster, an app for automatically downloading podcasts wirelessly, saying it duplicates the functionality of the desktop version of iTunes, according to the developer writing on his own blog. He added:

The developer noted that Apple allows many other applications that duplicate functionality available in the iPhone -- calculators, weather apps, even other applications that download podcasts -- and accused Apple of being unfair and inconsistent.

Likewise, Apple rejected MailWrangler, a dedicated Gmail client for the iPhone, because it duplicated functionality available in the built-in Mail client.

The seemingly-arbitrary rules for screening apps makes it a gamble for professional developers to work on software for the App Store, said John Gruber at his Apple blog Daring Fireball. Developers can't trust Apple, he said.

Apple changed controversial developer policies at the app store before, in October, when it dropped an NDA requirement that developers said prevented them from sharing tips even with other developers bound by the NDA.

The company has done a fantastic job with the App Store, so much so that competitors Research in Motion, Microsoft, Google, and Palm are imitating the strategy. But success carries with it a unique risk -- that you'll think you're perfect, you're doing everything right, and resist change and new ideas. Apple needs to make the policies at the app store fair and transparent to developers. 8. Improve Enterprise Support

Apple isn't an enterprise company -- it's a company that happens to sell a significant amount of product into the enterprise. Welch, the Apple enthusiast, IT manager, and blogger and journalist, lays out the strange-bedfellows relationship between Apple and the enterprise.

IT managers demand that their vendors are predictable. They demand to be able to sit down with their vendors and get detailed briefings on product plans, months and years ahead. IT managers demand that vendors never stop supporting features once supported, and they demand to collaborate with vendors on designing upcoming products

That's not how Apple works. Apple likes to surprise and dazzle customers, keeping products secret until they're ready to ship. Apple drops features immediately when the company feels those features are obsolete, from the missing floppy drives on the first iMac, a decade ago, to the missing optical drive on the MacBook Air last year.

Apple will never go along with the changes needed to become a true enterprise company.

Nor should it. Apple's ruthless design and secretive marketing philosophy are essential to its corporate identity.

Nonetheless, it's clear from the inclusion of Microsoft Exchange support in the iPhone and upcoming Mac OS X Snow Leopard operating system, and from the fact that Apple has a server product line, that Apple does want to sell products into the enterprise. And Welch has ideas how Apple can do that without losing its corporate identity. They're simple things, like clarifying policies on when products will cease to be supported, making it easier to get site licenses, and improving documentation and support. None of these things would require Apple to change its corporate culture.

Apple has a long, proud history of improving users' lives by giving them better tools. Workplaces need the kinds of elegant tools Mac offers. Apple needs to improve enterprise support without fundamentally changing its corporate culture.

9. Continue The Fight Against DRM

Copyfighters have been saying it for years, but now it's becoming apparent to everyone: As a means of combatting piracy, Digital Rights Management(DRM) just doesn't work.

After a decade of fighting piracy with a combination of DRM and bullying litigation, media companies have, at best, managed to fight file-sharing to a standstill. The number of people sharing music on peer-to-peer filesharing networks held steady year-over-year at 14% of Internet users. But even that statistic isn't clear-cut -- the number of shared tracks increased year-over-year by 23%.

In other words, after all this time spent inventing and deploying DRM, and fighting lawsuits, media companies can't claim to have won against piracy. They can't even claim to have held the enemy to a standstill.

If DRM isn't good for protecting media users against piracy, what's it good for? Well, it limits how users can play their legitimately purchased media. Getting your iTunes tracks to a non-Apple device is a cumbersome process, involving manually exporting individual files (or downloading utilities of questionable legality to strip DRM from iTunes files). Likewise, DRM-protected media will only play on certain, approved displays.

And DRM encourages people to become pirates. You can buy the legal, digital version of media -- assuming it even exists -- or go download an easy-to-find pirated file, which has none of the restrictions of the legal variety.

Apple has long had an ambivalent relationship with DRM. Jobs called for an end to DRM in a manifesto published on Apple's Web site in February, 2007. On the other hand, iTunes continues to be the leading supplier of DRM media. This month, Apple took a big step, announcing that it's eliminating DRM from its music store. But that still leaves video and audiobooks. And for consumers who've already bought DRMed music, upgrading is costly -- Apple will collect a $1.8 billion music tax if consumers upgrade all the DRMed iTunes music that's been sold -- and it's a hassle.

Apple needs to take a stand and eliminate DRM from its products, and provide people who've already bought DRMed products a cheap and easy way to upgrade.

What does Apple stand to gain from it? They'll give up the cost of developing and supporting cumbersome and useless DRM technology, and the time, money and hassle spent on having to update the technology when the inevitable bugs appear.

And they also avoid a potentially catastrophic customer-service problem. For now, only a tiny fraction of the public cares at all about DRM. Why should they? Apple has a monopoly on the media market, which makes Apple's DRM mostly invisible. "But if somehow the iPod ever falls out of favor with the general public there will be an outcry like no other when they realize they can't play any of their songs on the new player of choice," writes MG Siegler in a FriendFeed discussion.

He adds that Apple is doing whatever it can to kill DRM. They need to keep it up.

10. Stay Classy, Apple

Apple's products beats the competition on quality across the board. Even as the economy slid downward Apple reported profits rose to $1.14 billion in the fiscal fourth quarter ended Sept. 27, as sales increased 27%, driven primarily by iPhone and Mac computer sales, according to an October earnings statement. The company also said that it had surpassed during the quarter its goal of selling 10 million iPhones this year. While overall Mac sales fell behind sales of PCs running Windows in November, MacBook sales outstripped Windows notebooks, increasing 22% year-over-year, compared with 15% for Windows.

The iPhone alone is a smash it, the most popular phone in the US, according to market researchers NPD.

To be sure, the outlook for 2009 is sober for Apple -- but what company doesn't have a sober outlook for 2009?

Apple's success comes from a couple of defining characteristics.

The company often succeeds by defying popular opinion and expert wisdom -- things that "everybody knows" Apple needs to do. The blog CounterNotions has a list of 10 blunders Apple avoided over its history, decisions that made the company great. Many of the mistakes required Apple to defy expert advice, including avoiding licensing Mac OS X to clone vendors, and refraining from selling a Tablet PC before its time.

Another defining characteristic of Apple: The company embraces change -- indeed, it's afraid of not changing, Daring Fireball's Gruber writes. "Where other CEOs can't bring themselves to do something different, Jobs can't bring himself to keep doing the same thing," Gruber says.

So the final bit of advice for Apple is to continue to trust its own judgment, and prosper by selling great products.