stratechery
stratechery

Digital Hub 2.0

My question last week – How Much Will CarPlay Cost – was not an idle one. Most readers – and I include myself in this group – presume that CarPlay is, as I wrote, “a strategy that is based more on propping up the iPhone than on building a separate revenue stream.”

Another way of putting it is that Apple is constructing a world with accessories that connect with and are powered by their flagship device. Call it Digital Hub 2.0.

Digital Hub 1.0

The articulation of the original “Digital Hub” strategy remains one of my favorite Steve Jobs keynotes. Jobs began by recounting the conventional wisdom about the PC – boring and dead:

This is what everybody else is telling us: that our PC is waning, if not the hole being dug. One of the smartest journalists in our business, this guy named Walt Mossberg, somebody I admire because he cares about the same things we do. And even Walt, a few weeks ago said, “The PC, which has carried the digital revolution for the last 24 years, has matured into something boring.” That hurt, but Walt’s really smart, and we listen to him very carefully. Mike Capellas, who runs Compaq, “We don’t think of it in terms of the PC business anymore.” Hm. And Jeff Weitzen, who runs Gateway, “We’re clearly migrating away from the PC as the centerpiece.”

An animated Jobs adamantly disagreed:

We are living in a new digital lifestyle with an explosion of digital devices. It’s huge. And we believe the PC, or more importantly the Mac, can become the digital hub of our new emerging digital lifestyle, with the ability to add tremendous value to these other digital devices.

Jobs’ prime example was the effect iMovie had on your camcorder, making it worth 10x as much:

And we saw that the benefit here was a combination of a bunch of things. It was hardware, the computer and other hardware, the operating system, the application, the Internet, and marketing to create this solution…So we thought this was very important and it took all these components and we realized that Apple is uniquely suited to do this because we’re the last company in this business that has all these components under one roof. We think it’s a unique strength. And we discovered this with iMovie 2, that it could make a digital device called the camcorder worth 10x as much. It’s 10x more valuable to you.

The parallels to today should be obvious. The consensus from this year’s Mobile World Congress was that smartphones are boring now, innovation has peaked, even as Apple remains the sole vendor in control of the entire stack. So why not Digital Hub 2.0?

Whither iCloud

It was Steve Jobs himself who, in his final keynote, declared that the Digital Hub strategy had run its course:

About ten years ago, we had one of our most important insights. And that was that the PC was going to become the digital hub for your digital life…but it’s broken down in the last few years. Why? Well, because the devices have changed…

So, we got a great solution for this problem. And we think this solution is our next big insight. Which is we’re going to demote the PC and the Mac to just be a device, just like an iPhone, an iPad, or an iPod Touch, and we’re going to move the digital hub, the center of your digital life into the cloud, because all these new devices have communications built into them, they can all talk to the cloud whenever they want…we call it iCloud.

Apple’s shortcomings with cloud services are well-documented (even Jobs cracked a joke about MobileMe while introducing iCloud), and iCloud hasn’t improved things much. And, frankly, no wonder:

  • Apple, which prides itself on perfection and big releases, isn’t well-suited culturally to building cloud services that depend on iteration and failing gracefully.
  • Apple’s business model is about selling devices, not monetizing cloud services
  • Apple won’t lose customers if their cloud services are subpar (the flipside of the previous point)

In other words, were iCloud truly the center of Apple’s strategy going forward, they would be at a disadvantage. I think, though, that while iCloud did indeed supersede the old Digital Hub strategy, it’s not the end-all-be-all.

The Three Types of Services

“Services” is a word that is well on its way to being meaningless; you might as well ask what isn’t a service. I think it makes more sense to consider three clear categories:

  1. Device-agnostic services – These services are native to the web, and work the same everywhere. Think email, calendar, search, etc. In the consumer market, these are primarily funded through ads, and while iCloud provides things like Mail and Calendars, it’s not a differentiator, and hasn’t been for many years now.

  2. Content services – Content was at the heart of the old Digital Hub strategy: things like movies, videos, music, etc. Apple has long been exceptionally strong here, and iCloud is actually a continuation of that strength. iTunes Match, for example, is a great service, and Photo Stream, for all its limitations, works well, particularly when it comes to private sharing. The cloud is clearly superior to the old sync model at the heart of Digital Hub 1.0.

  3. Device services – This is new, and it’s a place where Apple has a significant opportunity. Device services are physical devices that are improved by means of your primary device. Think Nest, the Nike Fuel Band, or Sonos. In fact, you’ve almost certainly encountered the other name for device services: the “Internet of Things.”

A computing company that manages the entire stack around their device almost certainly has an advantage in this new services frontier.

Digital Hub 2.0

Think again about the CarPlay announcement. Your iPhone plugs into the car, and projects a control surface onto the dash; nothing is done by the car, it’s simply a conduit. It is, in fact, rather like an Apple TV with a car-specific UI. Again, a passive screen, effectively rendered an extension of the device in your hand. Were I to illustrate, it might look something like this:

The iPhone as a new kind of digital hub

The iPhone as a new kind of digital hub

What is your iPhone if not a digital hub? And, if that is true, might we be entering a new smartphone golden age?

iWatch

It’s true, of course, that the “Digital Hub” was the last golden age of the PC; one of the digital accessories for the PC was the iPod, which led the way to the iPhone and iPad, which relegated the PC to a specialized device. It wouldn’t surprise me if, over the course of the next decade, the alleged iWatch follows a similar path with regards to the iPhone.

Imagine a device that initially launches with limited functionality and is dependent on an iPhone (similar to the iPod, or the first iPhone). Perhaps it monitors fitness and health, and slowly, year-by-year, adds additional functionality. More importantly, assume that Moore’s Law continues, batteries make a leap forward, flexible displays improve, etc. Suddenly, instead of a phone that uses surrounding screens, like the iPhone does in the car and the living room, why might not our wrist project to a dumb screen (with a phone form-factor) in our pocket as well? Imagine all of our computing life, on our wrist, ready to project a context-appropriate UI to whichever screen is at hand. Moreover, by being with us, it’s a perfect wallet as well.

To be clear, this is certainly years off, but then again, the iPhone was decades off when NeXT was founded in 1985. The NeXTStep operating system is at the heart of iOS, and the iPhone wouldn’t be possible without it, or without OS X in 2001, iTunes and the iPod in 2001, or the App Store in 2008. Innovation is not the result of a moment in time, but of painstaking progress over years, even decades, and to my eyes, Apple is building something really interesting.